ALS LIMITED — Annual Report 2019

May 20, 2019

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Appendix 4E

Full year report for the Year Ending 31 March 2019

(the previous corresponding period is the Year Ended 31 March 2018) Results for announcement to the market

				$A millions
Revenues from ordinary activities	Up	11.9%	to	1,672.5
Revenues from continuing operations	Up	15.1%	to	1,664.8
Underlying net profit after tax * from
continuing operations attributable to
members	Up	27.3%	to	181.0
Net profit (loss) from ordinary activities after
tax * attributable to equity holders	Up	196.9%	to	153.8
Net profit (loss) for the period * attributable to
equity holders	Up	196.9%	to	153.8
Basic underlying * earnings per share from
continuing operations attributable to
members	Up	30.6%	to	37.1¢
Basic earnings per share	Up	206.8%	to	31.6¢
Total dividend per share for the year (partly
franked)	Up	32.4%	at	22.5¢
ALS Limited (ASX Code: ALQ) today announced an underlying net profit after tax				from
continuing operations of $181.0 million for FY2019, above the previous guidance range of
$170 million to $175 million provided to the market.
The result was 27.3% higher than the $142.2 million comparative underlying net profit after
tax earned in the previous corresponding period (pcp).
The FY2019 statutory result from all operations was a net profit after tax attributable to
equity holders of the Company of $153.8 million, compared with a net profit of $51.8
million recorded in FY2018.
*Refer to page 8 of the attached Annual Financial Report for a reconciliation of				Underlying
net profit after tax to Statutory net profit after tax.

Dividend Disclosures

Dividends (distributions)	Amount per security	Franked amount per security
Final dividend	11.5¢	4.0¢
Interim dividend	11.0¢	2.2¢

• See chapter 19 for defined terms

Appendix 4E Page 1

Results for announcement to the market for the year ended 31 March 2019

ALS Limited

Date the final dividend (distribution) is payable

1 July 2019

+Record date to determine entitlements to the dividend (distribution) (i.e., on the basis of proper instruments of transfer received by 5.00 pm if +securities are not +CHESS approved, or 4 June 2019 security holding balances established by 5.00 pm or such later time permitted by SCH Business Rules if +securities are +CHESS approved) DRP election date N/A

Dividend - Amount per security

	Amount per security	Amount per security of conduitforeign income
Final dividend:Current year Previous year	11.5¢ 9.0¢	7.5¢ 5.4¢
Interim dividend:Current year Previous year	11.0¢ 8.0¢	8.8¢ 4.8¢

Total final dividend (distribution) on all securities

+Ordinary securities (each class separately) Preference +securities (each class separately) Other equity instruments_(each class_ separately) Total	Current period $A millions	Previous corresponding period -$A millions
	55.8 - -	44.0 - -
	55.8	44.0

The 2019 final dividend will be franked to 35%. Subsequent dividends will be franked at the maximum level possible.

The Company’s dividend reinvestment plan has been suspended and will not be in operation for the final 2019 dividend due to the Company’s on-market share buyback program.

• See chapter 19 for defined terms

Appendix 4E Page 2

Results for announcement to the market for the year ended 31 March 2019

ALS Limited

NTA backing

NTA backing
	Current period	Previous corresponding period
Net tangible asset backing per ordinary security	$0.12	$0.29

Audit

The report is based on the attached accounts which have been audited.

Signature: Print name: Michael Pearson Company Secretary

Date: 21[st] May 2019

• See chapter 19 for defined terms

Appendix 4E Page 3

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Right Solutions • Right Partner alsglobal.com

ALS Limited ABN 92 009 657 489

ANNUAL FINANCIAL REPORT

for the Year Ended 31 March 2019

FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Contents

Contents

Contents	Contents
Directors’ report .............................................................................................................................................................. 5
•	Directors ................................................................................................................................................ 5
•	Company Secretary ................................................................................................................................ 7
•	Principal activities .................................................................................................................................. 7
•	Review of results and operations ............................................................................................................ 7
	Group business summary ................................................................................................................. 7
	Divisional reviews ............................................................................................................................ 9
•	Dividends ............................................................................................................................................. 12
•	Debt profile .......................................................................................................................................... 12
•	Financial position ................................................................................................................................. 13
•	Cashflow .............................................................................................................................................. 13
•	Material business risks ......................................................................................................................... 14
•	State of affairs ..................................................................................................................................... 14
•	Remuneration report ............................................................................................................................ 15
	1. Operational Performance Context 2018-19 — unaudited ............................................................... 16
	2. Key Management Personnel — audited .......................................................................................... 17
	3. Executive Remuneration Strategy — Summary 2018-19 — audited ................................................ 18
	4. Non-Executive Director Remuneration — audited ........................................................................... 19
	5. Actual Remuneration — FY 2018-19 — audited ............................................................................. 20
	6. Short Term Incentive Plan — audited ............................................................................................. 23
	7. Long Term Incentive Plan — audited .............................................................................................. 26
	8. Company Performance and Link to Shareholder Wealth — audited ................................................. 30
	9. KMP Equity Instruments and Transactions — audited ..................................................................... 31
	10. Outlook for 2019-20 FY Remuneration — unaudited ...................................................................... 34
•	Environmental regulation ..................................................................................................................... 35
•	Events subsequent to reporting date .................................................................................................... 35
•	Likely developments ............................................................................................................................ 35
•	Directors’ interests .............................................................................................................................. 36
•	Directors’ meetings .............................................................................................................................. 36
•	Indemnification and insurance of directors and officers ....................................................................... 36
•	Non-audit services ............................................................................................................................... 37

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2019 | Annual report

FOR THE YEAR ENDED 31 MARCH 2019 | Contents

ALS LIMITED AND ITS SUBSIDIARIES

Financial statements ................................................................................................................................................... 38	Financial statements ................................................................................................................................................... 38
•	Contents............................................................................................................................................. 38
•	Consolidated statement of Profit and Loss and Other Comprehensive Income ..................................... 39
•	Consolidated balance sheet ................................................................................................................. 40
•	Consolidated statement of changes in equity ....................................................................................... 41
•	Consolidated statement of cash flows .................................................................................................. 42
•	Notes to the financial statements ......................................................................................................... 43
	1. FINANCIAL OVERVIEW .................................................................................................................... 43
	1a. Operating segments ................................................................................................................. 43
	1b. Earnings per share ................................................................................................................... 46
	1c. Revenue ................................................................................................................................... 47
	1d. Expenses (Continuing operations) ............................................................................................ 47
	1e. Discontinued operations and assets held for sale ..................................................................... 48
	2. CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS .............................................. 49
	2a. Trade and other receivables ..................................................................................................... 49
	2b. Related party transactions ........................................................................................................ 50
	2c. Inventories ............................................................................................................................... 50
	2d. Trade and other payables ......................................................................................................... 51
	2e. Property, plant & equipment .................................................................................................... 51
	2f. Investment property ................................................................................................................. 52
	2g. Intangible assets ...................................................................................................................... 53
	3. NET DEBT ....................................................................................................................................... 55
	3a. Cash and cash equivalents ....................................................................................................... 55
	3b. Reconciliation of operating profit to net cash ........................................................................... 55
	3c. Reconciliation of liabilities arising from financing activities ...................................................... 55
	3d. Loans and borrowings .............................................................................................................. 56
	4. RISK & CAPITAL MANAGEMENT ...................................................................................................... 56
	4a. Financial & capital risk management ........................................................................................ 57
	4b. Capital & reserves .................................................................................................................... 58
	4c. Financial Instruments ............................................................................................................... 59
	4d. Contingencies .......................................................................................................................... 62
	4e. Capital commitments ............................................................................................................... 62
	4f. Operating leases ....................................................................................................................... 62
	5. GROUP STRUCTURE ........................................................................................................................ 62
	5a. Acquisition of subsidiaries ....................................................................................................... 62
	5b. Consolidated entities ............................................................................................................... 64
	5c. Deed of cross guarantee........................................................................................................... 64
	5d. Parent entity disclosures .......................................................................................................... 66

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2019 | Annual report

FOR THE YEAR ENDED 31 MARCH 2019 | Contents

ALS LIMITED AND ITS SUBSIDIARIES

1. TAXATION ...................................................................................................................................... 67 6a. Income taxes ............................................................................................................................ 67 6b. Deferred tax assets and liabilities ............................................................................................ 68 7. OTHER INFORMATION .................................................................................................................... 69 7a. Basis of preparation ................................................................................................................. 69 7b. Significant accounting policies ................................................................................................. 70 7c. Determination of fair value ....................................................................................................... 74 7d. Auditors’ remuneration ............................................................................................................ 75 7e. Events subsequent to balance date .......................................................................................... 75 8. EMPLOYMENT MATTERS ................................................................................................................. 76 8a. Share-based payments ............................................................................................................. 76 8b. Key management personnel disclosures .................................................................................. 79 Directors’ declaration ................................................................................................................................................. 80 Independent auditor’s report to the members of ALS Limited .............................................................. 81 • Report on the financial report .............................................................................................................. 81 • Report on the remuneration report ...................................................................................................... 85 Lead auditor’s independence declaration ........................................................................................................ 86

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2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Directors |

Directors’ report

For the year ended 31 March 2019

The directors present their report together with the financial report of the Group, comprising ALS Limited (“the Company”) and its subsidiaries, for the year ended 31 March 2019 and the auditor’s report thereon.

Directors

The directors of the Company at any time during or since the end of the financial year are:

BRUCE PHILLIPS

B Sc (Hons) (Geology) Chairman and Independent Non-Executive Director Age 64

Bruce Phillips was appointed a non-executive director of the Company on 1 August 2015 and became Chairman on 26 July 2016 following the 2016 Annual General Meeting. Bruce is a qualified geophysicist with more than 35 years of technical, financial and managerial experience in the energy sector.

He founded Australian Worldwide Exploration Limited (ASX: AWE) in 1997 and was its Managing Director until his retirement in 2007. He re-joined as a non-executive director in 2009 and held the position of Chairman until his retirement from the Board in November 2017. He was previously Chairman of Platinum Capital Limited (October 2009 – June 2015) and a non-executive director of AGL Energy Limited (August 2007 – September 2016) and Sunshine Gas Limited. In January 2019 Bruce was appointed as a non-executive director and Chairman of Karoon Energy Limited.

He is a member of the People Committee.

RAJ NARAN

B Sc (Chemistry), B A (Mathematics) Managing Director and Chief Executive Officer Age 57

Appointed Managing Director and Chief Executive Officer on 20 July 2017.

Raj founded e-LabAnalytical Inc which operated an environmental analytical testing business in Texas and Michigan until it was acquired by ALS in 2007. He was appointed to lead ALS’ USA

Environmental business at that time and grew his role over the subsequent years to lead the global Life Sciences Division until his appointment to CEO in 2017. In December 2018 Raj was appointed as a non-executive director to Redeye Apps Limited.

MEL BRIDGES B AppSc, PhD, FAICD Independent Non-Executive Director Age 68

Mel Bridges was appointed a non-executive director of the Company in 2009. He has over 35 years’ experience founding and building international life science, diagnostic and medical device companies and commercialising a wide range of Australian technology. He is Chairman of Oventus Medical Limited (appointed October 2015).

Mel was previously Chairman of Alchemia Limited (September 2003 – July 2013) and Anatara Lifesciences Limited (October 2014 – 16 May 2018) and a non-executive director of Tissue Therapies Limited (March 2009 – November 2015), ImpediMed Limited (September 1999 – November 2013) and Benitec Limited (October 2007 – June 2014).

He is a member of the Audit and Risk and Sustainability Committees.

GRANT MURDOCH

M COM (Hons), FAICD, FCA

Independent Non-Executive Director Age 67

Grant Murdoch was appointed a non-executive director of the Company in 2011. He was formerly a Partner of Ernst & Young and Divisional Director of Ernst & Young Transaction

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DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Directors |

Advisory Services Limited in Queensland. He has more than 37 years of chartered accountancy experience, specialising in mergers, acquisitions, takeovers, corporate restructures and share issues.

Grant is a non-executive director of Redbubble Limited (appointed February 2016), OFX Group Limited (formerly OzForex Limited) (appointed October 2013) and Lynas Corporation (appointed October 2017). He is Chairman of the Endeavour Foundation Challenge Fund, a senator of the University of Queensland, an Adjunct Professor at the University of Queensland Business School and a director of UQ Holdings Ltd. Grant is a member on the Queensland Council of the Australian Institute of Company Directors. He was previously a non-executive director of Queensland Investment Corporation until his retirement in September 2017 and Cardno Limited (January 2013 – November 2015).

He is Chairman of the Audit and Risk Committee.

JOHN MULCAHY PhD, B E (Civil Eng) (Hons), FIE Aust Independent Non-Executive Director Age 69

John Mulcahy was appointed a non-executive director of the Company in 2012. He is Chairman of Mirvac Group Limited (appointed November 2009 and Chair September 2013) and Orix Australia Corporation Limited, an unlisted public company (appointed March 2016), and Deputy Chairman of GWA Group Limited (appointed November 2010). In August 2017 he was appointed a non-executive director of Zurich Australia Insurance Limited and Zurich Financial Services Limited. John was previously a director and Chairman of Coffey International Limited (September 2009 – January 2016). He is a former Guardian of the Future Fund of Australia and former Managing Director and Chief Executive Officer of Suncorp-Metway Limited. Prior to Suncorp, John held a number of senior executive roles at the Commonwealth Bank and Lend Lease Corporation.

He held the role as Chairman of the People Committee until January 2019 and remains a member of the Committee.

CHARLIE SARTAIN

B Eng (Hons) (Mining), FAusIMM, FTSE Independent Non-Executive Director Age 58

Charlie Sartain was appointed a non-executive director of the Company on 1 February 2015. He spent more than 30 years with MIM Holdings and then Xstrata after it acquired MIM. He led Xstrata’s global copper business as Chief Executive of Xstrata Copper for nine years from 2004 and prior to that held senior executive positions with the company in Latin America and Australia.

Charlie is currently a non-executive director of Oz Minerals (appointed 1 August 2018), Chairman of the Advisory Board of the Sustainable Minerals Institute at the University of Queensland and a Board Member of Wesley Medical Research. His previous roles included Chairman of the International Copper Association, a Member of the Department of Foreign Affairs and Trade¹s Council on Australian Latin American Relations and a Director of Xstrata Schweiz Limited. He also served as a non-executive director of Austin Engineering Limited (April 2015 – March 2018), Goldcorp Inc. (January 2017 – April 2019) and as a Member of the Senate of the University of Queensland from 2010 until December 2017.

He is Chairman of the Sustainability Committee and a member of the Audit and Risk Committee.

TONIANNE DWYER

B Juris (Hons), LLB (Hons), GAICD Independent Non-Executive Director Age 56

Tonianne Dwyer was appointed a non-executive director of the Company on 1 July 2016. She has significant experience as a company director and executive working in finance, corporate strategy and mergers and acquisitions across a variety of sectors and international markets.

She is an internationally experienced independent company director, having had a 25-year executive career in investment banking during which she held roles with Hambros Bank Limited and Societe General in the UK and Europe.

Tonianne currently holds non-executive directorships on ASX-listed companies OZ Minerals Limited (appointed March 2017), Metcash Limited (appointed June 2014), DEXUS Property Group and DEXUS Wholesale Property Fund (appointed August 2011). She is also a nonexecutive director of Queensland Treasury Corporation and is Deputy Chancellor of the Senate of the University of Queensland. She was previously a non-executive director of Cardno Limited (June 2012 – January 2016).

She is a member of the Sustainability Committee and was elected Chair of the People Committee in January 2019.

SIDDHARTHA KADIA PhD, MS (Biomedical Engineering), BE (Electronics)

Independent Non-Executive Director Age 49

Siddhartha Kadia was appointed a non-executive director of the Company in January 2019. Siddhartha was formerly President and CEO of EAG Laboratories, a global scientific testing company headquartered in San Diego. He has also been a Director of USA-listed companies Newport Corporation (NSDQ: NEWP) and Volcano Corporation (NSDQ: VOLC). Prior to EAG, Siddhartha served as President of the Life Sciences Division at Life Technologies

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2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Company Secretary |

Corporation (NSDQ: LIFE), a publicly-traded Life Sciences tools company. Siddhartha was also a management consultant at McKinsey & Company where his work focused on various life sciences and healthcare related engagements.

Siddhartha has a PhD in Biomedical Engineering from Johns Hopkins School of Medicine. Siddhartha has lived and worked in the US, Japan, China and India and has more than 20 years of international experience as a company director, executive and technical leader in the Life Sciences and TIC (testing, inspection and certification) sectors.

He is a member of the Sustainability Committee.

Principal activities

The principal activities of the Group during the course of the financial year were the provision of professional technical services, primarily in the areas of testing, measurement and inspection, supporting:

• environmental monitoring

• food and pharmaceutical quality assurance

• mining and mineral exploration

• commodity certification

• equipment maintenance and

• asset care operations.

Company Secretary

MICHAEL PEARSON LLB, B A, GAICD, GCIS, Dip Inv Rel (AIRA)

Michael Pearson is a member of the Governance Institute, Australian Institute of Company Directors and Queensland Law Society. Mr Pearson is an experienced lawyer and corporate governance professional with over 15 years of experience as a Company Secretary and General Counsel with other ASX listed companies such as Cardno Limited and the Aveo Group.

During the year the Group expanded and diversified its technical service capabilities through acquisitions in food, pharmaceutical, environmental and commodity inspection testing in mainland Europe and North and South America.

Otherwise there were no significant changes in the nature of the activities of the Group during the year.

Review of results and operations

Group business summary

The Group is committed to maintaining the strong and sustainable growth strategies which have made it a successful global company. ALS aims to be a leading provider of services to clients across the broad range of industry sectors covered within the Principal Activities in the previous section. We seek to build strong partnerships with our clients by delivering cost-effective solutions backed by the best in quality, service and technical capabilities.

FY2019 can be summarized as a year of strong performance given the continued improvement in market conditions for those businesses exposed to the mineral commodities cycle, and a year of further expansion in the less cyclical Life Sciences and Industrial operations.

The Commodities division benefited from stronger market conditions and its scalable business models drove significant improvements in the division’s financial results for the year. Geochemistry sample flows increased globally as both established mining clients and junior explorers continued to lift their activity spending levels, particularly in the H1 FY2019. While cost management remained a focus for the Commodities division, equal attention was paid to productivity and the timely injection of human and capital resources to service the increasing workloads.

The Life Sciences division continued to show revenue growth both from organic expansion and from acquisitions, having completed acquisitions in Europe, South America, and North America. FY2019 was also an important year in terms of margin improvement, as the initiatives around cost management and rationalization drove a solid increase in margins, having all regions contribute positively to this outcome.

The Industrial division delivered strong growth in revenue, driven by successful business development, but amid continuous price pressure in key markets and change in the mix of services in the Asset Care business, experienced a reduction in overall margin. The Company remains supportive of the strategic growth plans of the Industrial division, including continued capital investment, geographic expansion and further development of technical and systems capabilities.

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2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Review of results and operations |

As was previously announced in March 2018, following a review of the Group’s presence in the sector, Directors decided to exit the Oil & Gas laboratories business. Considering the continuous challenges faced by this business and absence of any suitable divestment alternative, Directors have further determined to close this operation in March 2019. Refer Financial Statement note 1e.

The Group is confident that the quality of its assets, its operating model, and its disciplined strategic focus, will see it continue to increase market share and deliver growth outcomes for its shareholders. ALS continues to pursue growth opportunities within the Life Sciences and Industrial divisions; particularly in the food safety, pharmaceutical and tribology sectors where it is evaluating a select number of high-quality acquisition targets.

The Group’s financial performance for the year to 31 March 2019 is summarised as follows:

Underlying results¹ Restructuring & Amortisation Divestments¹	Statutory
2019 ($m) Continuing Discontinued other one-off of and	result
operations operations² items¹ intangibles Write Downs
Revenue 1,664.8 7.7 – – –	1,672.5
EBITDA³ 352.9 (4.1) (17.6) – (9.9) Depreciation & amortisation (71.8) (1.5) – (3.0) –	321.3 (76.3)
EBIT³ 281.1 (5.6) (17.6) (3.0) (9.9) Interest expense (32.0) – – – – Tax expense (67.1) 1.2 4.7 – 3.0	245.0 (32.0) (58.2)
182.0 (4.4) (12.9) (3.0) (6.9) Non-controlling interests (1.0) – – – –	154.8 (1.0)
Net profit / (loss) after tax (NPAT) 181.0 (4.4) (12.9) (3.0) (6.9)	153.8
Basic EPS (cents) 37.1 – – – – Diluted EPS (cents) 37.0 – – – –	31.6 31.5
Underlying results¹ Restructuring & Amortisation Impairment	Statutory
2018 ($m) Continuing Discontinued other one-off of charges	result
operations operations² items¹ intangibles
Revenue 1,446.9 48.2 – – –	1,495.1
EBITDA³ 289.3 0.3 (15.1) – 0.9 FX losses transferred from FCTR – – – – (11.1) Impairments – – – – (63.0) Depreciation & amortisation (68.0) (4.9) – (2.6) –	275.4 (11.1) (63.0) (75.5)
EBIT³ 221.3 (4.6) (15.1) (2.6) (73.2) Interest expense (25.8) – – – – Tax expense (51.7) 1.2 3.9 – –	125.8 (25.8) (46.6)
143.8 (3.4) (11.2) (2.6) (73.2) Non-controlling interests (1.6) – – – –	53.4 (1.6)
Net profit / (loss) after tax(NPAT) 142.2 (3.4) (11.2) (2.6) (73.2)	51.8
Basic EPS (cents) 28.4 – – – – Diluted EPS(cents) 28.3 – – – –	10.3 10.3

• ¹ The terms ‘Underlying result’, ‘Restructuring & other one-off Items’ and ‘Divestment and Write Downs’ are non-IFRS disclosures. They have been presented to assist in the assessment of the relative performance of the Group from period to period. The calculations thereof are based on non-IFRS information and are unaudited.

• ² In March 2018, following a further review of the Group’s presence in the Oil & Gas sector, Directors decided to exit the remaining business – Oil & Gas laboratories. Refer financial statements note 1e – Discontinued Operations.

• ³ EBITDA = EBIT plus depreciation and amortisation. EBIT = Earnings before interest and tax. The terms EBITDA and EBIT are non-IFRS disclosures. They have been presented to provide a measure of the Group’s performance before the impact of depreciation and amortisation (i.e. non-cash items) as well as that of interest and tax expenses. The calculations thereof are based on non-IFRS information and are unaudited.

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2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 | Review of results and operations |

ALS LIMITED AND ITS SUBSIDIARIES

The Group achieved underlying net profit after tax from continuing operations (attributable to equity holders of the Company, and excluding all Oil & Gas operations, restructuring and other one-off items, amortisation of acquired intangibles, divestments and write downs) of $181.0 million for FY2019. The result was 27.3% higher than the $142.2 million underlying net profit after tax measured comparably for FY2018. Revenue from continuing operations of $1,664.8 million was 15.1% up on the $1,446.9 million recorded from the same businesses in FY2018.

The result represented a strong performance and was due primarily to improvements delivered by the Life Sciences and Commodities divisions.

Life Sciences delivered revenue growth and margin improvement across all regions, with total revenue up 13.3% and margin up +110 bps.

The Commodities division’s underlying contribution was up 35.8% with higher revenue and EBIT coming across the board from the geochemistry, coal, inspection and metallurgy businesses. Commodities total revenue was up 19.5% and margin up +320 bps.

The Industrial division revenue was up 9.9%, with positive revenue organic growth in both Asset Care and Tribology businesses. The Asset Care business delivered strong growth in revenue driven by successful business development efforts focused on maintenance related services but had a reduction in margins associated with the change in the mix of services and price pressure, particularly in Australia.

The FY2019 statutory result from all operations was a net profit after tax attributable to equity holders of the Company (including all Oil & Gas businesses, restructuring and other one-off items, amortisation of acquired intangibles, divestments and write downs) of $153.8 million compared with a net profit after tax of $51.8 million recorded in FY2018. Total revenue from all operations was $1,672.5 million, up 11.9% on the $1,495.1 million generated in FY2018. A detailed summary of the results is set out on page 8.

Directors have declared a final partly franked 35% dividend for the year of 11.5 cents per share (2018: 9.0 cents, 40% franked). Together with the interim dividend of 11.0 cents per share (20% franked) the total partly franked dividend for the year will be 22.5 cents per share up 32.4% on pcp (2018: 17.0 cents). In light of the Company’s current on-market share buyback program, the dividend reinvestment plan will not operate for the FY2019 final dividend.

The Group has three reportable operating segments as of 31 March 2019: Commodities, Life Sciences, and Industrial. Following a decision by Directors in March 2018 to exit the Group’s Oil & Gas laboratory business, a fourth segment – Oil & Gas Laboratories – has been re-classified together with the other Oil & Gas services business sold in July 2017 as “discontinued operations".

Contributions from business segments are set out below.

Divisional reviews

Commodities

The Commodities division is a leading full-service provider of testing services for the global mining industry in four key service areas – Geochemistry, Metallurgy, Inspection and Coal Quality – with an extensive client base of explorers, miners and traders. Its testing and consulting services cover the entire resource life-cycle from exploration, feasibility, optimisation, production, design, development through to trade, and finally rehabilitation. The integrated field and laboratory services of the Coal business cover exploration, bore core, testing, consulting, quality management and superintending services

The division’s strategy is to ensure all its business streams are equipped with the technical expertise and operational capacity required to provide its clients with a seamless suite of integrated services throughout market cycles. In particular, the division is working hard to grow organically in the Commodity Inspection service sector by delivering

quality, innovation, and value to new and existing clients.

	Commodities – Financial performance	2019 ($m)	2018 ($m)	Variance
	Revenue	620.3	518.9	19.5%
	Segment contribution	158.6	119.4
	Restructuring and related costs	9.1	4.1
	Underlying segment contribution	167.7	123.5	35.8%
	Margin (underlying
	segment contribution	27.0%	23.8%
	to revenue)
	Underlying segment EBITDA	189.6	146.3	29.6%
	Margin (underlying
	segment EBITDA to	30.6%	28.2%
	revenue)

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2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Review of results and operations |

Stronger market conditions and scalable business models drove significant improvements in the Commodities division’s financial results for the year. Geochemistry sample flows increased globally as both established mining clients and junior explorers continued to lift their activity spending levels.

Sample flow into the Geochemistry business stream was 7% higher than FY2018 which translated into a 31% improvement in underlying contribution at an underlying margin of 30%. While cost management remained a focus for the Geochemistry business, equal attention was paid to productivity and the timely injection of human and capital resources to service the increasing workloads.

Although the FY2019 sample volumes were up 7%, H2 2019 volumes were flat compared to the prior year. While the long term drivers for the commodities market remain strong, the uncertainty in global trading conditions seems to be temporarily reducing the investor’s interest for the sector.

ALS Coal continues to operate well in what has been historically a constrained environment. Important wins in mine site services and market share gains, particularly in Australia, drove growth in revenue above 10%. The business continued to manage its cost base and productivity well, translating into a 25% improvement in underlying contribution.

The increase in regulatory requirements and in demand for high-quality coal in international markets have been strong drivers for the significant growth of analytical and testing services. This dynamic coupled with the execution of the strategy aiming expansion of mine site activities has led to a change of the mix of services in the last years, reducing the exposure to exploration services.

Life Sciences

The Life Sciences division provides analytical testing and sampling services and remote monitoring for the Environmental, Food, Pharmaceutical and Consumer Products markets. It is a leader in global comprehensive analytical testing, demonstrating expertise in microbiological, physical and chemical testing services. The division continued to grow during FY2019, by strengthening its leadership position in existing markets. A strong strategic growth focus (both acquired and organic) continues to be placed on the food and pharmaceutical components of Life Sciences. Key building blocks to accommodate these newer businesses are in place ready for future growth.

	Life Sciences – Financial performance	2019 ($m)	2018 ($m)	Variance
	Revenue	831.4	734.1	13.3%
	Segment contribution	120.9	95.5
	Restructuring and related costs	3.5	6.6
	Underlying segment contribution	124.4	102.1	21.8%
	Margin (underlying
	segment contribution	15.0%	13.9%
	to revenue)
	Underlying segment EBITDA	166.8	140.7	18.6%
	Margin (underlying segment EBITDA to	20.1%	19.2%
	revenue)

The Division’s financial performance for FY2019 was above expectations, with total revenue growth of 13.3% driven by organic expansion and new acquisitions, and with margin improvement of 110bps.

It is pleasing to note that all regions within the Life Sciences Division improved margin. This improvement is a result of the continuous implementation of the initiatives around cost management and rationalization, and the positive results obtained after the full integration of the Alcontrol business in the UK (acquired in December 2016).

Both of the key Life Sciences business streams (Environmental and Food/Pharmaceutical testing) delivered solid revenue gains during the year. The Environmental business recorded an underlying EBIT improvement of 21%, while the

Food/Pharmaceutical business EBIT contribution grew by 5.1%.

All regions of the Food/Pharmaceutical, and Environmental testing business delivered revenue gains. Further food testing acquisitions in Europe and the Americas are planned for FY2020.

The general economic environment continues to be price-sensitive requiring the business to make the cost adjustments necessary to continue its growth in existing markets. ALS Life Sciences is enhancing its capabilities to provide clients with a broad range of solutions and services, delivered with the superior turnaround time and quality on which ALS has built its reputation.

Page 10 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Review of results and operations |

Industrial

Industrial is a leading provider of diagnostic testing and engineering solutions for the energy, resources, transportation and infrastructure sectors. The division’s international client base includes asset owners, operators, constructors and equipment manufacturers in the power, petrochemical, mining, minerals processing, water, infrastructure and transportation industries. It is comprised of two complementary business streams: Asset Care and Tribology.

Industrial – Financial performance	2019 ($m)	2018 ($m)	Variance
Revenue	213.1	193.9	9.9%
Segment contribution	22.4	25.2
Restructuring and related costs	(1.0)	1.0
Underlying segment contribution	21.4	26.2	(18.3%)
Margin (underlying
segment contribution to	10.0%	13.5%
revenue)
Underlying segment EBITDA	27.7	32.1	(13.7%)
Margin (underlying
segment EBITDA to	13.0%	16.6%
revenue)

The Industrial division recorded a total revenue growth of 9.9%, delivered by increased work volumes by new contract wins in both the USA and Australia.

The Asset Care revenue delivered total growth of 11.5%. Significant investment in business development efforts focused on maintenancerelated services solidified the partial replacement of revenue shortfalls in reduced activity in LNG construction and power station outage programs in Australia and materialized significant growth in the USA.

Discontinued Operations (Oil & Gas)

The Group divested the majority of its assets in the Oil & Gas technical services sector in July 2017 and in March 2018 decided to exit the remaining laboratory services component. A number of options were considered in this regard and a final decision to close this business was reached in March 2019.

Oil & Gas
Laboratories – Financial	2019 ($m)	2018 ($m)	Variance
performance
Revenue	7.7	8.4	(8.3%)
Segment contribution	(17.3)	(5.4)
Restructuring and related costs	11.7	0.5
Underlying segment contribution	(5.6)	(4.9)	14.3%
Margin (underlying
segment contribution	(72.7%)	(58.3%)
to revenue)
Underlying segment EBITDA	4.1	3.5	17.1%
Margin (underlying
segment EBITDA to	53.2%	41.7%
revenue)

Oil & Gas (non-laboratories) –	2019	2018
Financial performance	($m)	($m)
Revenue	–	39.8
Segment contribution	–	0.3
Restructuring and related costs	–	–
Underlying segment contribution	–	0.3
Margin (underlying segment contribution to revenue)	–	0.8%
Underlying segment EBITDA	–	3.8
Margin (underlying segment EBITDA to revenue)	–	9.6%

Despite the continuous focus on cost base discipline, the Asset Care business had a decrease in margin driven by a significant change of mix of services, and continuous price pressure, particularly in Australia.

The Tribology business stream continued to deliver solid growth and yield strong profitability, with underlying contribution margin at 21%, compared to 24% in FY2018. The reduction in margin in FY2019 is primarily driven by significant investments in sales organization and in the development of new services and capabilities linked to IoT and data analytics.

Revenue grew 7% across the global operations as a result of improved conditions in the Australian mining sector and increased business development activities in the USA.

Page 11 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Dividends |

Dividends

Dividends paid or declared by the Company since the end of the previous financial year are:

	Cents per share	Franked amount (cents)	Total $m
Ordinary dividends declared and paid during the
year:
Final 2018, paid 2 July 2018	9.0	3.6	44.0
Interim 2019, paid 18 December 2018	11.0	2.2	53.5
Total amount			97.5
Ordinary dividend declared after the end of the
financial year:
Final 2019, to be paid 1 July 2019	11.5	4.0	55.8

The financial effect of this dividend has not been brought to account in the financial statements for the year ended 31 March 2019 and will be recognised in subsequent financial reports. The franked components of all dividends paid or declared since the end of the previous financial year were franked based on a tax rate of 30%.

Debt profile

The Group’s policy of ensuring a diversity of funding sources and maturities is a key element of its management of re-financing and liquidity risks and is reflected in the table below:

In millions of AUD Source Maturity	Facility Drawn Limit
Bank facilities October 2021 US Private Placement Market July 2019 US Private Placement Market December 2020 US Private Placement Market July 2022	31.0 423.7 266.3 266.3 212.4 212.4 267.8 267.8
	777.5 1,170.2

In October 2018 the Group renegotiated its bank facilities, entering into new revolving multicurrency facilities with a group of five banks totalling USD$300 million. These new bank facilities will mature in October 2021. Funding available to the Group from undrawn facilities at 31 March 2019 amounted to $392.7 million.

Subsequent to year end, the Group has also announced that it has successfully entered into new long term USPP senior notes totalling AUD$252 million equivalent. The new USPP issuance, comprised of three tranches each of 15 years tenor, denominated AUD$125 million, EUR €40 million and STG £35 million. The weighted average cost of funds in relation to the new 15year fixed rate USPP notes is 3.3%. The mix of currencies sought via the new issuance allows the Group’s global cashflows and operating asset mix to be appropriately balanced by funding similarly denominated. It is anticipated that these funds will be used to refinance the upcoming July 2019 note maturity.

Page 12 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Financial position |

Financial position

The major changes in the Group’s financial position during the year (refer summarised balance sheet below) were the result of:

• expansion and diversification of technical service capabilities through acquisitions in food, pharmaceutical, environmental and commodities inspection in mainland Europe and North and South America for a total consideration of $66.3 million which were financed from cash holdings;

Net assets Total equity Gearing:Net debt to Net debt + Equity Leverage:Net debt to EBITDA**	1,103.2 1,122.0
	1,103.2 1,122.0
	36.3% 31.1% 1.8 times 1.7 times

• References are to Notes to the Financial Statements

• ** EBITDA = Earnings before interest, tax, depreciation and amortisation, and impairment losses. The calculation of EBITDA is unaudited.

• on-market share buyback activity of $24.6 million to date; and

• total cash dividend payments to shareholders of $97.5 million.

The overall effect of these transactions was:

• an increase in net debt of $122.3 million;

• intangible assets increased to $1,046.0 million; and

• total equity decreased by a net $18.8 million.

The Group remains committed to its strategy of maintaining a strong balance sheet throughout economic cycles as evidenced by the gearing (36.4%; 2018: 31.1%) and leverage (1.8 times; 2018: 1.7 times) measures noted below.

In millions of AUD Note* Trade and other receivables 2a Inventories 2c Other current assets Trade and other payables 2d Total working capital Cash and cash equivalents 3a Loans and borrowings 3c Fair value derivatives (non- current) Net debt Property, plant and equipment 2e Intangible assets 2g Net deferred tax assets 6b Other assets Employee benefits Other liabilities Net assets held for sale	Consolidated
	2019 2018 314.1 278.3 71.8 75.8 43.1 35.2 (200.4) (169.8)
	228.6 219.5
	148.2 187.2 (780.1) (697.1) 2.3 2.6
	(629.6) (507.3)
	438.4 400.0 1,046.0 980.6 15.6 12.5 58.4 50.9 (59.7) (53.3) (14.8) (5.5) 20.3 24.6
	1,504.2 1,409.8

Cashflow

The Group’s operating cashflow was characterised by a solid conversion of earnings into cash with working capital being closely monitored and managed. At 93.7% the FY2019 ratio of cash from operations (before interest and tax) to EBITDA was pleasing and in line with expectations considering the growth the Company is presently experiencing within its major operating segments, and within an environment where clients are also seeking to extend payment terms. EBITDA interest cover was 10.9 times (2018: 11.3 times).

Capital expenditure of $108.9 million, acquisitions of $66.3 million, on-market share buyback activity ($24.6 million) and dividends to shareholders ($97.5 million) drove investing and financing outflows during FY2019.

In millions of AUD Net cash from operating activities Net cash from investing activities Net cash from financing activities Net movement in cash and cash equivalents Cash and cash equivalents at 1 April Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 31 March Cash conversion: Cash from operations to EBITDA_ Interest cover: _EBITDA to Net finance expense	Consolidated
	2019 2018 218.8 185.8 (166.1) (17.1) (93.0) (227.0)
	(40.3) (58.3) 187.2 248.9 1.3 (3.4)
	148.2 187.2
	93.7% 94.2% 10.9 11.3

• EBITDA = Earnings before interest, tax, depreciation and amortisation, and impairment losses. The calculation of EBITDA is unaudited.

Page 13 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Material business risks |

Material business risks

The Group has an enterprise wide risk management framework that is structured to ensure its material business risks and controls are captured, assessed and regularly reviewed in a consistent manner.

The key material business risks and associated mitigation controls identified include:

• ALS is exposed to financial risks such as liquidity risk, interest rate risk, foreign exchange risk, and credit risk (counterparty exposure). Group treasury and cash management policies are in place to mitigate these risks, and key indicators are monitored monthly including gearing and leverage ratios, interest cover by EBITDA, minimum liquidity reserves, weighted average debt maturity, and earnings at risk monitored by the Board Audit and Risk Committee.

• The Group’s success is dependent upon attracting and retaining staff in key technical and management roles. ALS mitigates this risk by striving to be an employer of choice, implementing its organisational development programs, monitoring and benchmarking its employee benefits, career progression and succession planning, and oversight by the Board People Committee.

robust quality control policy and procedures, requiring its businesses to obtain third party accreditation to international quality standards where available, and investing in custom built laboratory information management systems.

State of affairs

Changes in the state of affairs of the Group during the financial year resulted from its continued strategy of business expansion and diversification in Life Sciences and Industrial testing services. Specifically, the Group expanded and diversified its technical service capabilities through acquisitions in food and environmental testing, and commodities inspection businesses in mainland Europe, and North and South America.

In the opinion of the Directors there were no other significant changes in the state of affairs of the Group that occurred during the financial year under review not otherwise disclosed in this report or the consolidated financial statements.

• The ALS Commodities business stream operates in a cyclical resources sector with fluctuations in commodity prices and global demand. ALS mitigates this risk by ensuring the Group has a diverse testing and inspection service offering across a range of industry sectors and geographies. Other controls include a business model that allows for scalability of services, a disciplined focus on operational costs, and close monitoring of economic trends.

• ALS has a reliance on IT systems and infrastructure to manage and store its data. ALS mitigates this risk by having back-up systems and redundant servers located at offsite data centres, disaster recovery plans, and information management policies in place.

• The Group operates across a number of industries that have inherent safety risks. ALS mitigates this risk by making “Safety is a priority” a core value of the Group. Management have implemented a robust safety management system, employed significant HSE resources, and through their strong leadership are developing a culture of safety within their businesses, overseen by the Board Sustainability Committee.

• ALS is a market leader in testing and inspection services. A loss of reputation due to poor quality service would erode market share. This risk is mitigated by implementing

Page 14 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report |

Remuneration report

A letter from the Chairman

Dear Shareholders

On behalf of the ALS Limited Board, I am pleased to present the FY19 remuneration report outlining the Group’s remuneration strategy, the performance outcomes of the past year, and how they relate to the associated remuneration outcomes for the Group’s Key Management Personnel (“the KMP”) including executive management, the Managing Director & CEO (the “Executives”). This report also covers the fee arrangements for Non-Executive Directors (the “Directors”).

The Group delivered another strong financial performance for the year, even after the good performance in FY2018, Underlying Net Profit After Tax (UNPAT), Underlying Earnings Per Share (EPS) and Dividends for FY2019 increased by 27.3%, 30.6% and 32.4% respectively.

The strong corporate performance both in absolute terms and relative to our industry peers has resulted in our executives achieving most of their at-risk remuneration, including an outperformance component. The short term incentive (“STI”) Plan continued to emphasise Financial (70%), Strategic (20%) and HSE (10%) KPIs, and to penalise poor debtor collection. The outperformance payments earned by certain Executives will be deferred into equity. From a shareholder perspective, the outcomes ensure alignment of executives’ payments to overall financial performance of the Company. Examples of the executive KMPs’ STI Plan KPIs are included in the report.

The executives’ 2016-19 long-term incentive (“LTI”) award which will vest on 1st July 2019 was achieved at the overall rate of 85.7% of the maximum potential as three of the four performance hurdles (EPS, TSR relative to the ASX100 and EBITDA relative to industry peers) were fully achieved. The ROCE performance hurdle was partially achieved at 10.7% of a potential total of 25% for that hurdle.

Executive pay outcomes for FY2018-19 align with shareholders’ outcomes and demonstrate that the Group’s at-risk remuneration programs and our policies function well and correlate with company performance. During the year KMP fixed remuneration was reviewed and increased on average by 9% reflecting increased scope and responsibilities following the executive restructure and to align to market conditions in the TIC industry.

Upon approval by shareholders, the Directors’ fee pool was increased by 10% during the year taking into account the increased business size and complexity. Importantly, this increase also provided the flexibility to recruit ALS’ first internationally based non-executive director (Dr Siddhartha Kadia) who brings more diverse experience and expertise to our board. After external benchmarking Non-Executive Directors fees, previously unchanged since 2012, were also increased by 5% and the Chair fee by 10%.

The 2018-21 LTI Share Rights awards continued to include the four hurdles of TSR, EPS, EBITDA and ROCE. The EPS and EBITDA hurdles both received adjustments during the year to increase the challenge to achieve payout. The current mix of performance hurdles ensures active capital management and will drive sustainable financial performance and ensure a fair outcome for both shareholders and executives.

The Board remains committed to a strong growth focus and designs its executive remuneration strategies to direct behaviours towards achieving growth in shareholder value over the long term. Whilst no significant changes have been planned for FY2019-20, it should be noted that a review is underway in relation to the Group LTI and STI Plans to enable the Company to attract, motivate and retain high performing executives across many global locations in a dynamic and competitive environment over the medium to long term.

The Board believes its approach to NED and KMP remuneration remains balanced, fair and equitable and that it rewards business growth whilst balancing against risk and unintended consequences, to meet the expectations of shareholders over the longer term.

Yours faithfully,

==> picture [78 x 43] intentionally omitted <==

Bruce Phillips Chairman

Page 15 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Operational Performance Context 2018-19 — unaudited

Table of contents

1. Operational Performance Context 2018-19 — unaudited ............................................................... 16 2. Key Management Personnel — audited .......................................................................................... 17 3. Executive Remuneration Strategy — Summary 2018-19 — audited ................................................ 18 4. Non-Executive Director Remuneration — audited ........................................................................... 19 5. Actual Remuneration — FY2018-19 — audited .............................................................................. 20 6. Short Term Incentive Plan — audited ............................................................................................. 23 7. Long Term Incentive Plan — audited .............................................................................................. 26 8. Company Performance and Link to Shareholder Wealth — audited ................................................ 30 9. KMP Equity Instruments and Transactions — audited..................................................................... 31 10. Outlook for 2019-20 FY Remuneration — unaudited ..................................................................... 34

1. OPERATIONAL PERFORMANCE CONTEXT 2018-19 — UNAUDITED

The implementation of the five-year strategy progressed with the Group demonstrating robust organic growth and strong overall financial performance. During the year the Group made strategic acquisitions of new Food and Pharmaceutical businesses in both Europe and North America, and Commodities Inspection in South America.

The Group’s Commodities and Life Sciences divisions delivered strong financial performance. A summary of our financial performance from continuing operations is provided below and in more detail on page 8:

Revenue ($m) Underlying NPAT ($m) Underlying EBIT ($m) Underlying EPS Underlying EBIT margin Dividends per share	FY18-19 FY17-18
	1,664.8 1,446.9 181.0 142.2 281.1 221.3 37.1 28.4 16.9% 15.3% 22.5 cents 17.0 cents

In March 2019 the decision was made to close the remaining Oil & Gas business laboratories. These operations are reflected as a discontinued operation.

Changes impacting Remuneration

The organisational restructure that commenced following the appointment of Mr Naran was continued. The new Operations Head Office was set up in Houston in July 2018 and a new Houston based Chief Financial Officer was appointed replacing the former Brisbane based Chief Financial Officer. The General Manager Life Sciences Americas also ceased employment with the Group in December 2018.

Following the restructure, the Board engaged Korn Ferry to benchmark executive remuneration and a number of adjustments were required for the new KMPs’ remuneration to ensure remuneration was aligned to their businesses size, growth and profitability. Fixed remuneration for executive KMP was increased by an average of 9% with the Managing Director receiving a 3% increase.

Maximum potential STI was increased during the year enabling executives to earn up to 150% of STI opportunity for exceptional financial outperformance

Short term incentives earned by executives for FY2019 reflect strong financial outperformance and the achievement of other key performance indicators (“KPIs”) demonstrating an alignment with outcomes for shareholders.

LTI components as a percentage of fixed pay were unchanged however the EPS and EBITDA hurdles were adjusted following feedback from shareholders.

The 2016 LTI awards will vest at 85.7% on 1st July 2019 as three of the four performance hurdles were fully achieved, and one was partially achieved.

As approved at the AGM, the Non-Executive Directors fee pool was increased to $1.65 million. The Chair’s fees were increased by 10% with the rest of the directors receiving a 5% increase. A new United States based Director joined the Board on 15 January 2019.

Page 16 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Key Management Personnel — audited

2. KEY MANAGEMENT PERSONNEL — AUDITED

Name	Position	Term as KMP in 2018-19
Non-executive directors
Bruce Phillips	Chairman
	Member of People Committee	Full year
Mel Bridges	Member of Audit and Risk Committee
	Member of Sustainability Committee	Full Year
Grant Murdoch	Chairman of Audit and Risk Committee	Full Year
John Mulcahy	Chairman/Member* of People Committee	Full Year
Charlie Sartain	Chairman of Sustainability Committee
	Member of Audit and Risk Committee	Full Year
Tonianne Dwyer	Member/Chair* of People Committee
	Member of Sustainability Committee	Full Year
Siddhartha Kadia	Member of Sustainability Committee	Apptd 15 January 2019
Executive KMP
Raj Naran	Executive Director
	Managing Director and Chief Executive Officer	Full Year
Bruce McDonald	General Manager, Geochemistry	Full Year
Andreas Jonsson	General Manager, Life Sciences Europe	Full Year
Tim Kilmister	General Manager, Life Sciences APAC	Full Year
Kristen Walsh	General Manager, Industrial	Full Year
Luis Damasceno	Chief Financial Officer	Apptd 17 September 2018
Former Executives
Richard Stephens	Former Chief Financial Officer (until 30 November 2018)
David Prince	Former General Manager, Life Sciences Americas (until 27 December 2018)
Greg Kilmister	Former Managing Director and Chief Executive Officer (CEO) Retired 20 July 2017
Brian Williams	Former Group General Manager Commodities (until 3 July 2017)

Table 1

Note: references in this remuneration report to “Executives” are references to those executives who are KMP as listed above, including where relevant, the CEO

* Ms Dwyer was appointed to Chair of the People Committee effective 30 January 2019 with Mr Mulcahy stepping back to member of the Committee on the same date.

Service Contracts

The Group has formal service agreements with its non-executive directors. Non-executive directors are not entitled to any retirement or termination benefits.

Executives have continuous service agreements that can be terminated by either party. In the event of termination without cause, the Group is required to pay Executives between three and twelve months of salary.

Unvested equity grants may lapse, remain on foot, or vest on termination, depending on the circumstances, in accordance with the LTI Plan Rules, at the Board’s discretion and in accordance with section 200B and section 200E of the Corporations Act. Termination on the basis of redundancy, death or from an age or illhealth retirement allows for proportionate vesting of the grants. Grants do not vest in the event of voluntary termination or termination with cause.

Page 17 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Executive Remuneration Strategy — Summary 2018-19 — audited

3. EXECUTIVE REMUNERATION STRATEGY — SUMMARY 2018-19 — AUDITED

To provide assurance to our clients through the advancement of science and relevant ALS Group technologies. Our goal is to develop our staff and to protect them, the environment and our Vision stakeholders from harm that might result from our activities. With this approach we envision sustainable growth and consequent shareholder value creation.

Translated into Group Strategy and developed into group structure, plans and policies:

Group Strategy

The Group’s five-year Strategic Plan drives all activities in the business. Each year an annual business plan is prepared for each Business Unit which examines the components that will need to be achieved during the year; and longer term goals are recalibrated and adjusted as required.

Executive Reward Strategy Remuneration Components Managing Risk	The Group’s five-year Strategic Plan is translated to the remuneration strategy that will assist the Group in achieving its financial and other business goals
	• Transparent link to individual performance • Adjusted annually in response to external changes • Reasonable, fair and equitable • Provides sustainable platform forgrowth
	Delivered through the remuneration components of Fixed and Variable remuneration (at target):
	Managing Director Executive KMP (Average) Fixed Remuneration (including cash, pension and benefits) 45.5% 56.9% Short Term Incentives – cash based, at target 27.3% 21.6% Long Term Incentives – equity based, at target 27.3% 21.6%
	Operational Risk Management is built into the remuneration policies:
	• STI forfeiture, deferral and clawback provisions • Board discretion for unforeseen conditions • KPIs include safety • Financial gateways ensure affordability • Aligns to external peer pay levels for executive attraction and retention

Remuneration is designed to align executive reward to growth in shareholder value:

Alignment with Shareholders

Short Term Incentives

Long Term Incentives

• STI Financial KPIs require financial growth against last year’s performance to pay out at target • Use of four balanced LTI Plan measures: TSR, EBITDA, EPS and ROCE – promotes sustainable performance. • Global and local Peer performance comparisons for fair assessment • Remuneration partly received in equity STI KPIs reward improved financial and HSE outcomes: • 1 Year performance Period | Potential value: 150% of the executive’s STI quantum • 70% of the reward is set against Financial KPIs, with an “outperformance” KPI of up to an additional 50 % deferred to equity • 10% of the reward is set against Health, Safety & Environment KPIs • 20% is reserved for strategic initiatives and other KPIs and to allow for Board discretion

	The	LTI is contingent on multiple performance measures to ensure sustainable
	performance and aligns key executives’ financial outcomes with Shareholder interests:
	• •	3 Year performance Period • Hurdle 3:Relative EBITDA margin – against industry peers Hurdle 1:EPS Growth
	•	Hurdle 2:TSR – against ASX100 peers • Hurdle 4:ROCE

Strengthened through robust governance:

• Independent Directors

Governance

• Board has ultimate discretion over all reward components • External remuneration advisors are appointed and report to the Board

Table 2

Page 18 of 86

2019 | Annual report

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Non-Executive Director Remuneration — audited

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

People Committee

The Board operates a People Committee which consists of three independent non-executive directors. The committee considers all aspects of remuneration strategy, policy and process for executive key management personnel and nonexecutive directors. The committee also considers broader remuneration strategy and has oversight of key remuneration programs for the Company globally. Remuneration changes for all nonexecutive directors, the Managing Director and executive KMP are considered and approved by the Board after receiving recommendations from the committee.

The committee remit also includes performance management for the Managing Director and oversight of executive management, workplace culture, key talent development and succession planning, diversity and broader human resources risk management.

The committee conducts annual reviews of its charter, the Group remuneration and benefits policies and plans, the structure and details of all Directors’ fees, remuneration packages, market and industry sector trends in relation to Director and executive remuneration practices and remuneration levels.

Fixed versus Variable Remuneration

The breakdown of the fixed remuneration and atrisk remuneration for the Managing Director and Executive KMP, is shown in Table 2 above. The

components of variable remuneration show maximum potential outcome for target performance. 40 percent or more of pay is at risk to ensure that executives will benefit from achieving strong company performance but receive less pay if company performance falls below expectations.

External Remuneration Consultants

ALS engages with Korn Ferry to provide benchmark data, as well as market practice input to remuneration strategy and mechanisms from time to time.

Korn Ferry also provides job evaluation and global remuneration data for middle manager up to Chief Executive Officer level roles; their PayNet (remuneration) database is used across key geographies where advice is sought. To ensure their independence from executive management, Korn Ferry is engaged directly by the Board for CEO and KMP remuneration advice.

EY (Australia) provide valuation services in respect of our Long-Term Incentive Plan.

Fees paid for remuneration advice during the financial year were: Korn Ferry – $29,680 (2018: $152,029), EY (Australia) – $93,500 (2018: $56,900) and Godfrey Remuneration $1,800 (2018: $0).

Fees paid to these providers for other services during the year: Korn Ferry – $880 (2018: $120,803) and EY (Australia) – $0 (2018: $75,000).

4. NON-EXECUTIVE DIRECTOR REMUNERATION — AUDITED

With six new Directors appointed in the last seven years, the Company is satisfied that the Board is independent.

Key Components of Non-Executive Director Remuneration

No element of Non-Executive Director remuneration is ‘at risk’. Fees are fixed and not based on the performance of the Company or equity-based. Directors’ fees are reviewed annually and increased if appropriate. Directors are paid base fees and if applicable, a fee for membership of a committee. The Chairman does not receive committee fees.

The fee structure is set out in Table 3. Fees and the pool are inclusive of mandatory superannuation contributions.

Non-Executive Director – Fee Structure	* Fixed Pool: $1,650,000	per annum
Base Director Fees
Chairman	Annual fee compensates for all Board & Committee activities	$353,100
Non-executive directors	Annual fee	$173,250
Committee Fees
Chair of Audit & Risk Committee		$25,000
Chairs of People Committee and Sustainability Committee		$12,500
Committee Fees	Flat fee for each Committee membership	$6,000
* Pool and fees include superannuation benefits		Table 3

Page 19 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Actual Remuneration — FY2018-19 — audited

5. ACTUAL REMUNERATION — FY2018-19 — AUDITED

Non-Executive directors

The current remuneration pool, including superannuation, for all non-executive directors is $1,650,000 per annum as approved by shareholders at the 2018 AGM. Currently less than 80% of the pool is actually being paid in fees. Non-executive directors are paid base and committee membership fees only, which are fixed by the Board. The directors are entitled to be reimbursed for all travel and related expenses properly incurred in connection with the business of the Company.

During 2016 the Company introduced minimum shareholding guidelines for non-executive directors who are expected to build a minimum shareholding of the equivalent of one year’s after-tax fees accumulated over a three-year period from date of commencement. The quantum of the shareholding will be based on cost outlay made to acquire the shares and the fees quantum will be based on net fees assuming the top marginal Australian PAYG Taxation rate. This requirement is monitored annually.

The Directors’ remuneration is set as of 1 July every year, following reviews of publicly available information about fees paid to non-executive directors in comparable sized, global companies including international competitors. Details of the nature and actual amount of each element of remuneration of each nonexecutive director are set out below.

Directors: In AUD Short-term (Salary & fees) $ Long term (D&O insurance premiums) $ Post-employment (Superannuation benefits) $ Total $	Directors: In AUD Short-term (Salary & fees) $ Long term (D&O insurance premiums) $ Post-employment (Superannuation benefits) $ Total $
Non-executive directors
Bruce Phillips 2019 316,688 852 25,712 2018 293,151 686 27,849 Mel Bridges 2019 166,667 852 15,833 2018 161,644 686 15,356 Grant Murdoch 2019 178,539 852 16,961 2018 173,516 686 16,484 John Mulcahy 2019 166,112 852 15,781 2018 162,100 686 15,399 Charlie Sartain 2019 172,603 852 16,397 2018 167,580 686 15,920 Tonianne Dwyer 2019 167,677 852 15,929 2018 161,644 686 15,356 Siddhartha Kadia 2019 36,832 213 - (appointed 15 January 2019) 2018 – – –	343,252
	321,686
	183,352
	177,686
	196,352
	190,686
	182,745
	178,185
	189,852
	184,186
	184,458
	177,686
	37,045
	-
Total: 2019 1,205,118 5,325 106,613 1,317,056
Non-executive directors 2018 1,119,635 4,116 106,364 1,230,115
Table 4

Executive KMP

Executives receive fixed remuneration, an STI paid in cash and where earned, the outperformance element is deferred into share rights for two years – refer section 6 of the Remuneration Report – and an LTI in the form of performance rights that vest three years later, subject to meeting performance hurdles and continued employment conditions. Remuneration is set as of 1 July every year.

Table 5.1 below lists the remuneration actually received in relation to the financial years ending March 2018 and 2019, comprising fixed remuneration, cash STIs relating to each year and the value of LTI grants that vest during each year. This information differs from that provided in the statutory remuneration Table 5.2 which shows the accounting expense of remuneration in respect of each year, determined in accordance with accounting standards rather than the value of remuneration (including LTI grants that vested) received during the year.

Page 20 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Actual Remuneration — FY2018-19 — audited

Remuneration actually received:

Directors: In AUD Fixed remuneration (Salary, allowances and superannuation / pension benefits) $ STI (a) $ Termi- nation benefits $ Total cash payments received $ Equity vested during year (b) $	Directors: In AUD Fixed remuneration (Salary, allowances and superannuation / pension benefits) $ STI (a) $ Termi- nation benefits $ Total cash payments received $ Equity vested during year (b) $	Total remune- ration received $
Executive director:
Raj Naran(c)	2019 1,541,749 816,270 – 2,358,019 206,561	2,564,580
	2018 1,267,418 728,888 – 1,996,306 65,013	2,061,319
Executives:
Bruce McDonald(d) Andreas Jonsson(d) Tim Kilmister (d) Kristen Walsh Luis Damasceno(e)	2019 629,958 240,068 – 870,026 189,584	1,059,610
	2018 576,793 231,621 – 808,414 63,631	872,045
	2019 479,251 197,764 – 677,015 90,735	767,750
	2018 438,029 50,372 – 488,401 25,179	513,580
	2019 442,923 164,496 – 607,419 82,622	690,041
	2018 388,615 140,000 – 528,615 29,256	557,871
	2019 579,095 14,200 – 593,295 183,610	776,905
	2018 575,000 116,620 – 691,620 48,758	740,378
	2019 494,773 128,707 – 623,480 –	623,480
	2018 – – – – –	–
Sub-total: Continuing Executives	2019 4,167,749 1,561,505 – 5,729,254 753,112	6,482,366
	2018 3,245,855 1,267,501 – 4,513,356 231,837	4,745,193
Former Executive	director:
Greg Kilmister (c)	2019 – – – – –	–
	2018 1,324,904 – 1,576,451 2,901,355 274,677	3,176,032
Former Executives:
David Prince(f) Richard Stephens(g) Brian Williams (h)	2019 382,079 – 8,166 390,245 –	390,245
	2018 194,074 6,778 – 200,852 –	200,852
	2019 544,714 – 425,254 969,968 126,228	1,096,196
	2018 574,998 130,012 – 705,010 40,634	745,644
	2019 – – – – –	–
	2018 374,906 – 552,673 927,579 71,514	999,093
Total: All executives	2019 5,094,542 1,561,505 433,420 7,089,467 879,340 7,968,807
	2018 5,714,737 1,404,291 2,129,124 9,248,152 618,662 9,866,814
	Table 5.1

• (a) Accrued STI cash component which is paid following the end of the financial year to which it relates. Service rights are separately awarded for outperformance of STI KPI’s (refer Table 7).

• (b) Performance rights are granted annually under the LTI Plan to executives – refer note 8a for details. The amounts above represent the value of performance rights granted in previous years which vested and were exercised during the year. It is calculated as the number of shares allocated to executives multiplied by the closing market price of ALS shares on the vesting date.

• (c) Raj Naran was appointed Managing Director and CEO on 20 July 2017 replacing Greg Kilmister who retired on that date. He held the positions of Deputy CEO and Group General Manager Life Sciences until 20 July 2017. He is based in the USA and is paid in US dollars. Relevant portions of Mr Naran’s salary, STI and pension benefits have been converted into Australian dollars above.

• (d) Following a management restructure Bruce McDonald, Andreas Jonsson and Tim Kilmister were promoted to become executive KMP effective 1 April 2017. Messrs McDonald (Canada) and Jonsson (Sweden) are employed outside Australia. Relevant portions of their salaries, STIs and pension benefits have been converted into Australian dollars above.

• (e) Luis Damasceno was appointed on 17 September 2018, replacing Richard Stephens as Chief Financial Officer. He is based in the USA and is paid in US dollars. Relevant portions of Mr Damasceno’s salary, STI and pension benefits have been converted into Australian dollars above.

• (f) David Prince commenced with the Group on 2 October 2017 and ceased employment on 27 December 2018.

• (g) Richard Stephens ceased employment on 30 November 2018.

• (h) Brian Williams ceased employment with the Group on 3 July 2017.

Page 21 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Actual Remuneration — FY2018-19 — audited

Remuneration as determined in accordance with accounting standards:

Short-term	Short-term	Long-term	Postemployment Superannuation & pension benefits $ Termination benefits $	Total remuneration received $
Directors: In AUD Salary $ STI (a) $ Non-monetary benefits(b) $		Value of share- based awards(c) $ D&O insurance premiums $
Executive director:
Raj Naran (d) (apptd MD & CEO 20 Jul 2017)	2019 1,512,327 816,270 14,231 567,040 852 15,190 –			2,925,910
	2018 1,244,632 728,888 8,924 266,136 457 13,862 –			2,262,899
Executives:
Bruce McDonald (e) Andreas Jonsson (e) Tim Kilmister (e) Kristen Walsh Luis Damasceno (f)	2019 624,159 240,068 5,799 271,915 506 – –			1,142,447
	2018 571,210 231,621 5,583 171,026 341 – –			979,781
	2019 477,314 197,764 1,020 120,828 506 917 –			798,349
	2018 414,373 50,372 12,458 72,657 341 11,198 –			561,399
	2019 417,923 164,496 – 140,696 506 25,000 –			748,621
	2018 362,269 140,000 – 78,849 341 26,346 –			607,805
	2019 555,482 14,200 – 181,295 506 23,614 –			775,097
	2018 553,618 116,620 – 126,854 341 21,382 –			818,815
	2019 494,181 128,707 – 39,863 253 592 –			663,596
	2018 – – – – – – –			–
Sub-total: Continuing Executives	2019 4,081,386 1,561,505 21,050 1,321,637 3,129 65,313 –			7,054,020
	2018 3,146,102 1,267,501 26,965 715,522 1,821 72,788 –			5,230,699
Former Executive director:
Greg Kilmister (d) 2019 – – – – – – – 2018 1,314,808 – – 166,044 229 10,096 1,576,451				–
				3,067,628
Former Executives:
David Prince (g) Richard Stephens (h) Brian Williams (i)	2019 358,078 – 17,164 – 422 6,837 8,166			390,667
	2018 186,200 6,778 7,874 – 341 – –			201,193
	2019 528,047 – – 48,095 337 16,667 425,254			1,018,400
	2018 548,248 130,012 – 110,597 341 26,750 –			815,948
	2019 – – – – – – –			–
	2018 347,471 – – 32,000 341 27,435 552,673			959,920
Total: All executives	2019 4,967,511 1,561,505 38,214 1,369,732 3,888 88,817 433,420 8,463,087
	2018 5,542,829 1,404,291 34,839 1,024,163 3,073 137,069 2,129,124 10,275,388
	Table 5.2

• (a) Accrued STI cash component which is paid following the end of the financial year to which it relates.

• (b) Non-monetary benefits include the payment of allowances and provision of motor vehicles.

• (c) Performance rights are granted annually under the LTI Plan to executives – refer financial statements note 8a for details. The fair value of performance rights granted is calculated using Binomial Tree (EPS, EBITDA and ROCE hurdles) and Monte-Carlo Simulation (TSR hurdle) valuation methodologies and allocated to each financial year evenly over the period from grant date to vesting date. Note that the valuation is not reflective of actual remuneration received by the executive. For FY2019 the value of share-based awards also includes an accrual to March 2019 of the estimated value of any deferred compensation earned for STI outperformance – refer section 6 of the Remuneration Report and financial statements note 8a for details.

• (d) Raj Naran was appointed Managing Director and CEO on 20 July 2017 replacing Greg Kilmister who retired on that date. He held the positions of Deputy CEO and Group General Manager Life Sciences until 20 July 2017. He is based in the USA and is paid in US dollars. Relevant portions of Mr Naran’s salary, STI and pension benefits have been converted into Australian dollars above.

Page 22 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Short Term Incentive Plan — audited

• (e) Following a management restructure Bruce McDonald, Andreas Jonsson and Tim Kilmister were promoted to become executive KMP effective 1 April 2017. Messrs McDonald (Canada) and Jonsson (Sweden) are employed outside Australia. Relevant portions of their salaries, STIs and pension benefits have been converted into Australian dollars above.

• (f) Luis Damasceno was appointed on 17 September 2018, replacing Richard Stephens as Chief Financial Officer. He is based in the USA and is paid in US dollars. Relevant portions of Mr Damasceno’s salary, STI and pension benefits have been converted into Australian dollars above.

• (g) David Prince commenced with the Group on 2 October 2017 and ceased employment on 27 December 2018.

• (h) Richard Stephens ceased employment on 30 November 2018.

• (i) Brian Williams ceased employment with the Group on 3 July 2017.

6. SHORT TERM INCENTIVE PLAN — AUDITED

The Board sets the maximum amounts which can be earned as an STI for each executive and also approves the executive KMP STI Plan scorecards annually. KPIs are structured so that they are heavily weighted to financial performance with safety also a mandatory KPI. There is a portion of the total potential payment that is discretionary. Payments to the CEO, at target are set at 60% of his fixed remuneration and payments for other executive KMP, at target, are between 35% and 40% of their fixed remuneration.

STI payments are contingent on the achievement of specified financial and other performance indicators (KPIs) for the financial year, as follows.

Gateway

In order to ensure that Shareholder reward is aligned to the executives’ own reward, the Group overall must have met or exceeded the underlying NPAT achieved the previous FY, before the executive’s own KPIs will yield a payment. Exceptions may be made by the Board where an individual executive has achieved an outstanding financial result.

Financial KPIs

For the executive KMP, the financial hurdles worth 70% of the target quantum are set for the business units that are within the executive’s sphere of control. The financial KPIs including the outperformance KPIs are NPAT/EBIT growth oriented.

Non-Financial KPIs

30% of the potential STI target quantum is dependent on non-financial KPIs including strategic KPIs.

Health, safety, the environment and risk management are a mandatory KPI as in previous years. This KPI, which is set at 10% of the target STI quantum is measured against the Positive Performance Indicator (PPI) Scorecard of health, safety and environmental lead indicators. A minimum score of 90% on the PPI is required to achieve the HSE KPI.

For the executive KMP 10% of the target STI quantum is at the discretion of the CEO. For the CEO 20% of the target STI quantum is at the discretion of the Board and may be used to allocate strategic plan KPI(s) that need to be achieved.

To ensure close management of cash flow and potential bad debts, a debtor-days KPI (set at 10%) was also included for relevant executive KMP.

Unless the Board exercises its discretion under exceptional circumstances, no STI payments are made if the executives’ financial threshold requirement is not met.

Outperformance and Equity Deferral

The STI plan includes a deferred equity component if certain financial “outperformance” stretch targets are achieved and a service condition is met.

Those who attain the “outperformance” financial KPIs will have additional STI payments deferred into Service Rights (rights to ALS shares upon maturity). The period of deferral is two years and the executive must be still employed on 1 April two years hence (2021 in the case of the 2018-19 FY) to receive the shares. Refer financial statements note 8a for further details.

Where the country of assignment has legislation that would prevent allocation of shares, this would be held as deferred cash for the same period.

Executives are able to earn up to 150% of their target STI quantum for outperformance, including the deferred element.

Non-Payment and Clawbacks

Payments are not made to executives found to have misrepresented their financial and nonfinancial KPI results; misrepresentations discovered after an STI payment has been made will require the executive having to return the payment to the Company.

Page 23 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Short Term Incentive Plan — audited

CEO Key Performance Indicator outcomes

The CEO’s ‘gateway’ threshold NPAT target was fully met as was his Target NPAT. The outperformance hurdle was substantially met. An STI payment is due at 83.1% of the total potential (paid in cash and deferred shares).

2018-19 KMP executives’ Key Performance Indicators

STI Plan KPIs and Structure	Applicable to: Outcome for Shareholders	Achievements
Growth and profitability **	70% of STI Payment**	Group Market share growth, improved ROS/EBIT Geochemistry Life Sciences Industrial
		Outperformance level fully achieved
		APAC: Outperformance level substantially achieved EMEA: Outperformance level partially achieved. Americas: Threshold level achieved
		Target level not achieved
HSE **	10% of STI Payment**	Reduces risk, improves safety Better Environmental, Social & Governance rating Protection of the ALS Brand
Strategic Plan Objectives **	10-20% of STI Payment**	Strategic plan objectives included:
	Divest non-Core businesses Enables closer focus on high performing businesses	Achieved
	Establish Operational HQ in USA Closer alignment of operational expertise to growth regions	Achieved
	Roll out enhanced M&A Governance and Structure Ensures greater value derived from current and future acquisitions with better deal metrics	Achieved
	A specific Geochemistry productivity initiative Long term market competitiveness enhanced	Partially achieved
	HR Retention & development plan Retention and development of key talent	Achieved
	A specific technology initiative within Life Sciences Long term market competitiveness enhanced	Partially achieved
	Harmonise Life Sciences LIMS platforms A better experience for our clients	Substantially achieved
	A specific Industrial technology initiative Long term market competitiveness enhanced	Substantially achieved
	Tribology LIMS replacement A better experience for our clients	Partially achieved
Debtor Management **	10% of STI Payment**	Receivables within Company collection parameters Lower debt required, improved cash flow, ROS and EBIT outcomes

Table 6

Page 24 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Short Term Incentive Plan — audited

Executive STI Performance vested / forfeited

Below are details of the outcomes of the STI Plan, for 2018-19 and the previous year, including the value of deferred compensation earned for STI outperformance, awarded to each of the named Executives. Accruals to March 2019 are included in the values of share-based awards in Table 5.2 and the percentages calculated in Table 9 – refer section 6 of the Remuneration Report and financial statements note 8a for details.

		Total cash STI included in remuneration	Total deferred equity STI awarded	Total STI awarded	Total STI awarded	vs fixed remuneration	Total STI awarded	vs max STI opportunity	Total STI forfeited	vs max STI opportunity	Total maximum STI with outperformance	Deferred STI –	Accrual included in share-based awards
		$	$	$		%		%		%	$		$
Executives		(a)	(b)							(c)
	2019	816,270	211,064	1,027,334		66.6		83.1		16.9	1,236,773		70,355
Raj Naran	2018	728,888	–	728,888		57.5		62.7		37.3	1,161,883		–
Bruce	2019	240,068	120,034	360,102		57.2		99.7		0.3	361,186		40,011
McDonald	2018	231,621	116,021	347,642		60.3	100.0			–	347,642		38,674
Andreas	2019	197,764	22,516	220,280		46.0		73.8		26.2	298,437		7,505
Jonsson	2018	50,372	–	50,372		11.5		22.2		77.8	226,901		–
Tim Kilmister	2019	164,496	72,706	237,202		53.6		85.9		14.1	276,000		24,235
	2018	140,000	18,668	158,668		40.8		75.6		24.4	210,000		6,223
Kristen Walsh	2019	14,200	–	14,200		2.5		4.7		95.3	300,000		–
	2018	116,620	–	116,620		20.3		38.9		61.1	300,000		–
Luis	2019	128,707	33,280	161,987		32.7		74.8		25.2	216,436		11,093
Damasceno⁽ᵈ⁾	2018	–	–	–		–		–		–	–		–
Richard	2019	–	–	–		–		–		–	–		–
Stephens⁽ᵈ⁾	2018	130,012	65,006	195,018		33.9		90.0		10.0	216,687		21,669
David Prince	2019	–	–	–		–		–		–	–		–
⁽ᵉ⁾	2018	6,778	–	6,778		3.5		6.7		93.3	101,670		–

Table 7

(a) Amounts included in remuneration for the financial year represent the STI cash components which vested in the financial year based on the achievement of personal goals and satisfaction of specified performance criteria. They do not include the values of any deferred compensation earned for STI outperformance.

(b) STI outperformance announced to be paid in deferred service rights to be granted in FY2020. These values are included in the values of share-based awards in Table 5.2 and the percentages calculated in Table 9 – refer section 6 of the Remuneration Report and financial statements note 8a for details.

(c) The amounts forfeited are due to the performance or service criteria not being met in relation to the financial year.

• (d) Luis Damasceno was appointed on 17 September 2018, replacing Richard Stephens as Chief Financial Officer who ceased employment on 30 November 2018.

(e) David Prince ceased employment on 27 December 2018.

Page 25 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Long Term Incentive Plan — audited

7. LONG TERM INCENTIVE PLAN — AUDITED

Long Term Incentive Plan Hurdles

The structure and substance of hurdles for the 2016, 2017 and 2018 awards are set out on the following pages. The Plans apply Return on Capital Employed (ROCE), Total Shareholder Return (TSR) relative to the ASX100 Index, relative EBITDA margin and underlying earnings per share (EPS) growth hurdles to determine vesting amounts,

The LTI Plan is designed to reward and motivate our senior executives for superior company performance over a three-year performance period.

The principal goals of the LTI Plan are to:

• (a) Focus executives on long term outcomes required by the Board;

• (b) Minimise risk by ensuring performance was measured across multiple factors important to shareholder value, and provide a counter balance for any tendency to focus on short term outcomes;

• (c) Retain key, high performing executives;

• (d) Align executives’ reward with shareholders’ interests by payment in equity;

• (e) Encourage share ownership in ALS; and

• (f) Encourage teamwork through company performance hurdles.

Remuneration under the LTI Plan is in the form of equity-settled performance rights; and in jurisdictions where securities legislation does not permit this, the rights are cash-settled.

The number of performance rights granted to an executive is calculated by dividing the amount of the executive’s LTI maximum potential payment by the volume weighted average price (VWAP) of the Company’s shares over the 10 trading days following the date of announcement of the final full year results for the financial year preceding the period to which the grant of performance rights relates.

Performance Hurdles

Performance hurdles are assessed at the end of the performance period and the performance rights become exercisable, in whole or in part, or lapse from 1 July following the end of the performance period.

Each equity-settled performance right which vests and is exercised converts to an ordinary share in the Company at a nil exercise price; the amount payable per each vested cash-settled performance right is the VWAP of the Company’s shares over the 10 (20 for awards in 2016) trading days following the release of the Company’s full year results for the final year of the performance period.

The LTI plan rules prohibit those who are granted performance rights from entering into arrangements that limit their exposure to share price decreases and the executive must be employed in the Group on the vesting date to be eligible for issue of the shares (equity-settled rights) or receipt of payment (cash-settled rights).

Compound annual underlying EPS growth on a fully diluted basis was chosen because it provides a good indicator of the shareholder value derived from earnings growth and can be directly influenced by management.

Relative TSR provides a good indicator of the value derived from capital growth and distributions to shareholders. The peer group comprises the ASX100 index companies. These companies represent the alternative investment choices for many of our investors.

The relative EBITDA margin hurdle was chosen because it is focused on driving cash earnings and productivity. The EBITDA hurdle measures ALS’ relative EBITDA margin against the EBITDA margins of its key global competitors. It is a measure over which management has direct influence and provides for a fair assessment of performance against our global competitors.

The ROCE hurdle is used as a measure to assess the Company’s success or otherwise in increasing its net worth – i.e. it needs to generate returns in excess of its cost of capital in order to add to its value. In order to provide an incentive for superior performance, the respective ROCE hurdles are set each year at 2% and 7% above the weighted average cost of capital (WACC) as at 31 March with straight line vesting in between the lower and upper hurdles.

The performance hurdles and vesting proportions for the awards granted in 2016, 2017 and 2018 are as follows:

Page 26 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Long Term Incentive Plan — audited

2016 Award Hurdles

Compound annual diluted Underlying EPS growth (April 2016 to March 2019)	Proportion of performance rights that may be exercised if Underlying EPS growth hurdle is met
Less than 5% per annum	0%
Between 5% and 9% per annum	Straight line vesting between 12.5% and 25% of total grant
9% or higher per annum	25% of total grant

Underlying EBITDA margin of ALS relative to Underlying EBITDA margin of comparator peer companies (April 2016 to March 2019)	Proportion of performance rights that may be exercised if Underlying EBITDA hurdle is met
Less than the 50th percentile	0%
50th percentile or higher	25% of total grant
Comparator peer companies: Bureau Veritas (France), Core Laboratories (USA), Eurofins (France), Intertek (UK), SGS (Switzerland), Mistras (USA), Applus (Spain) and Exova (UK).

TSR of ALS relative to TSR of companies in ASX 100 Index over the period April 2016 to March 2019	Proportion of performance rights that b id if TSR
	may e exercse hdl i
	ure s met
Less than the 50th percentile	0%
Between 50th percentile and 75th percentile	Straight line vesting between 12.5% and 25% of total grant
75th percentile or higher	25% of total grant

ROCE Performance (3 year average over the period April 2016 to March 2019)	Proportion of performance rights that may be exercised if ROCE hurdle is met
Below 11.2%	0%
Between 11.2% and 16.2%	Straight line vesting between 0% and 25% of total grant
At or above 16.2%	25% of total grant

* Based on ALS’ March 2016 pre-tax Nominal WACC (midpoint)

2017 Award Hurdles

Compound annual diluted Underlying EPS	Proportion of performance rights that may be exercised if Underlying EPS growth hurdle is met
growth (April 2017 to h
Marc 2020)
Less than 5% per annum	0%
Between 5% and 9% per annum	Straight line vesting between 12.5% and 25% of total grant
9% or higher per annum	25% of total grant

Underlying EBITDA Proportion of margin of ALS relative to performance rights that Underlying EBITDA may be exercised if margin of comparator Underlying EBITDA hurdle peer companies (April is met 2017 to March 2020) Less than the 50th 0% percentile

Underlying EBITDA margin of ALS relative to Underlying EBITDA margin of comparator peer companies (April 2017 to March 2020)	Proportion of performance rights that may be exercised if Underlying EBITDA hurdle is met
Less than the 50th percentile	0%
Between the 50th and 75th percentile	Straight line vesting between 12.5% and 25% of total grant
75th percentile or higher	25% of total grant
Comparator peer companies: Bureau Veritas (France), Core Laboratories (USA), Eurofins (France), Intertek (UK), SGS (Switzerland), Mistras (USA) and Applus (Spain).

TSR of ALS relative to TSR of companies in ASX 100 Index over the period April 2017 to March 2020	Proportion of performance rights that may be exercised if TSR hurdle is met
Less than the 50th percentile	0%
Between 50th percentile and 75th percentile	Straight line vesting between 12.5% and 25% of total grant
75th percentile or higher	25% of total grant

ROCE Performance (3 year average over the period April 2017 to March 2020)	Proportion of performance rights that may be exercised if ROCE hurdle is met
Below 12.2%	0%
Between 12.2% and 17.2%	Straight line vesting between 0% and 25% of total grant
At or above 17.2%	25% of total grant

• Based on ALS’ March 2017 pre-tax Nominal WACC (midpoint)

Page 27 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Long Term Incentive Plan — audited

2018 Award Hurdles

Compound annual diluted Underlying EPS growth (April 2018 to March 2021)	Proportion of performance rights that may be exercised if Underlying EPS growth hurdle is met
Less than 6% per annum	0%
Between 6% and 10% per annum	Straight line vesting between 12.5% and 25% of total grant
10% or higher per annum	25% of total grant

Underlying EBITDA margin of ALS relative to Underlying EBITDA margin of comparator peer companies (April 2018 to March 2021)	Proportion of performance rights that may be exercised if Underlying EBITDA hurdle is met
Less than the 50th percentile	0%
Between the 50th and 75th percentile	Straight line vesting between 12.5% and 25% of total grant
75th percentile or higher	25% of total grant
Comparator peer companies: Bureau Veritas (France), Core Laboratories (USA), Eurofins (France), Intertek (UK), SGS (Switzerland), Mistras (USA) and Applus (Spain).

TSR of ALS relative to TSR of companies in ASX 100 Index over the period April 2018 to March 2021	Proportion of performance rights that may be exercised if TSR hurdle is met
Less than the 50th percentile	0%
Between 50th percentile and 75th percentile	Straight line vesting between 12.5% and 25% of total grant
75th percentile or higher	25% of total grant

ROCE Performance (3 year average over the period April 2018 to March 2021)	Proportion of performance rights that may be exercised if ROCE hurdle is met
Below 11.4%	0%
Between 11.4% and 16.4%	Straight line vesting between 0% and 25% of total grant
At or above 16.4%	25% of total grant

* Based on ALS’ March 2018 pre-tax Nominal WACC (midpoint)

Page 28 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Long Term Incentive Plan — audited

Measurement of the LTI Plan Hurdles (2016 – 2019 award)

Underlying Earnings per Share (EPS)

The growth in earnings per share is calculated by comparing the diluted underlying EPS from continuing operations achieved by the Group in the base year (e.g. year to March 2018) with that achieved in the final year of the performance period (e.g. year to March 2021).

Diluted EPS is calculated by dividing the underlying net profit after tax attributable to shareholders of ALS Limited by the weighted average number of ordinary shares on issue for the year being measured (diluted for outstanding equity-settled performance rights).

Following finalisation of ALS’ financial results for FY2018-19 the compound annual growth rate (CAGR) in the Company’s diluted underlying EPS over the three-year period to March 2019 was 19.7% (from 21.7 cents to 37.1 cents) which is above the maximum threshold of a 9% increase. Thus, all the 2016 Award rights subject to the EPS hurdle will vest on 1 July 2019.

Underlying Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)

The EBITDA margin measurement is contingent upon performance of the Company against a group of comparator peer companies that are comprised of our key global competitors. It is calculated on the following basis:

Cumulative Underlying Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) is calculated as a percentage of Revenue over the three-year performance period. This is compared with the cumulative EBITDA margins reported by each of the peer companies for the three financial years ending on or before 31 March of the year of vesting.

Following finalisation of ALS’ financial results for FY2018-19 the underlying EBITDA margin achieved by the Company over the three-year period to March 2019 was 19.61%. As shown below this placed ALS at the 50th percentile when ranked within the group of industry peer companies. Thus, all the rights subject to the EBITDA hurdle (25% of the total number possible) will vest on 1 July 2019.

Company	Currency	Cumulative underlying EBITDA (m)	Cumulative Revenue (m)	EBITDA Margin %	Rank	Percentile
Core Laboratories	USD	394	1,943	20.26%	1	100.0%
SGS	CHF	1,632	8,137	20.06%	2	87.5%
Intertek	GBP	3,752	19,040	19.71%	3	75.0%
Exova	GBP	65	329	19.63%	4	62.5%
ALS	AUD	889	4,533	19.61%	5	50.0%
Bureau Veritas	EUR	2,615	14,034	18.63%	6	37.5%
Eurofins	EUR	1,652	9,289	17.79%	7	25.0%
Applus	EUR	593	4,846	12.24%	8	12.5%
Mistras	USD	242	2,567	9.44%	9	9.5%

Table 8

Total Shareholder Return (TSR)

TSR measures the growth over the performance period in the price of shares plus dividends notionally reinvested in shares.

In order for the TSR Hurdle Rights to vest under the TSR performance hurdle, ALS’ TSR for the Performance Period must be at the 50th percentile or higher against the TSRs of the nominated comparator companies for the same period.

The Company’s performance over the three-year period to March 2019 relative to the ASX100 comparator group was at the 87.9th percentile, therefore all the rights subject to the TSR hurdle (25% of the total number possible) will vest on 1 July 2019.

Page 29 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Company Performance and Link to Shareholder Wealth — audited

Return on Capital Employed (ROCE)

The ROCE hurdle provides a useful measure to assess the Company’s success or otherwise in increasing its net worth – i.e. it needs to generate returns in excess of its cost of capital in order to add to its value. In order to provide an incentive for superior performance, the respective ROCE hurdles were set at 2% and 7% above the previous March weighted average cost of capital (WACC) with straight line vesting in between the lower and upper hurdles.

ROCE is calculated as Underlying Earnings before Interest and Tax (“EBIT”) over the three-year performance period divided by Capital Employed expressed as a percentage. Capital Employed is defined as Total Shareholders’ Equity plus Net Debt and is calculated as the sum of the simple averages of the balances at the beginning and end of each year during the performance period. If material funding transactions (for example, significant additional borrowings, equity issuances or asset impairments) occur such that the simple average for any year during the performance period is not representative of capital actually employed, the average capital employed for the year may be adjusted for the effect of these transactions.

The actual ROCE for the three-year performance period was calculated as 13.3%. This ROCE result was within the hurdle range and caused a partial 10.7% vesting for this hurdle.

Therefore, performance against the EPS, EBITDA, TSR and ROCE hurdles will result in vesting of 85.7% of the total award on 1 July 2019.

8. COMPANY PERFORMANCE AND LINK TO SHAREHOLDER WEALTH — AUDITED

Proportion of performance related and equity-based remuneration

Details of each of the named Executives’ performance related and equity-based remuneration as a proportion of their total remuneration is detailed below.

		Proportion of all at risk remuneration (STI & LTI) as a percentage of total remuneration	Proportion of share-based awards (LTI and deferred STI) as a percentage of total remuneration ⁽ᵃ⁾
		Calculated on remuneration actually received Per accounting standards	Calculated on remuneration actually received Per accounting standards
		(table 5.1) % (table 5.2) %	(table 5.1) % (table 5.2) %
Executives
Raj Naran Bruce McDonald Andreas Jonsson Tim Kilmister Kristen Walsh Luis Damasceno⁽ᶜ⁾	2019	39.9 47.3	8.1 19.4
	2018	38.5 44.0	3.2 11.8
	2019	40.5 44.8	17.9 23.8
	2018	33.9 41.1	7.3 17.5
	2019	37.6 39.9	11.8 15.1
	2018	14.7 21.9	4.9 12.9
	2019	35.8 40.8	12.0 18.8
	2018	30.3 36.0	5.2 13.0
	2019	25.5 25.2	23.6 23.4
	2018	22.3 29.7	6.6 15.5
	2019	20.6 25.4	– 6.0
	2018	– –	– –
Former Executives
David Prince⁽ᵇ⁾ Richard Stephens⁽ᶜ⁾	2019	– –	– –
	2018	3.4 3.4	– –
	2019	11.5 4.7	11.5 4.7
	2018	22.9 29.5	5.4 13.6
			Table 9

(a) Amounts related to deferred compensation earned for STI outperformance are included in the values of share-based awards used to calculate the above percentages – refer section 6 of the Remuneration Report and financial statements note 8a for details.

(b) David Prince ceased employment on 27 December 2018.

• (c) Luis Damasceno was appointed on 17 September 2018, replacing Richard Stephens as Chief Finance Officer who ceased employment on 30 November 2018.

Page 30 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | KMP Equity Instruments and Transactions — audited

Consequences of performance on shareholders’ wealth

The Board considers that the current remuneration strategy results in executive pay that aligns with performance. The financial data in respect of the current and previous four financial years, and its relationship to executive pay, is set out below:

relationship to executive pay, is set out below:
Measure of financial performance Fluctuation in financial performance is reflected in executives' pay via:	2019 2018 2017 2016 2015 $m $m $m $m $m
Underlying profit * attributable to equity holders of the Company STI gateway, STI KPIs and LTI financial measures Profit / (loss) attributable to equity holders of the Company STI gateway, STI KPIs and LTI financial measures Dividends paid or payable LTI TSR measures Share price at balance date LTI TSR measures	181.0 142.2 117.4 108.4 135.4 153.8 51.8 81.6 (240.7) (174.5) 109.3 84.4 68.0 60.8 84.5 $7.59 $7.42 $6.14 $3.99 $4.96

*Underlying profit is a non-IFRS disclosure and is unaudited.

Table 10

9. KMP EQUITY INSTRUMENTS AND TRANSACTIONS — AUDITED

Ordinary shares

The movement during the year in the number of ordinary shares in ALS Limited held directly, indirectly or beneficially by each key management person, including their related parties, is as follows:

	Opening Balance	Purchases ⁽ᵃ⁾	Acquired due to vesting of performance rights	Sales⁽¹⁾	Other	Closing Balance
Directors
Bruce Phillips	60,160	–	–	–	–	60,160
Mel Bridges	57,442	–	–	–	–	57,442
Grant Murdoch	73,071	–	–	–	–	73,071
John Mulcahy	54,027	–	–	–	–	54,027
Charlie Sartain	100,000	20,000	–	(30,000)	–	90,000
Tonianne Dwyer	17,148	–	–	–	–	17,148
Raj Naran	92,543	–	27,801	–	–	120,344
Siddhartha Kadia⁽ᵈ⁾	–	–	–	–	–	–
Executives
Bruce McDonald	11,316	–	25,516	(21,650)	–	15,182
Luis Damasceno⁽ᵇ⁾	–	–	–	–	–	–
Andreas Jonsson	3,335	15,000	12,212	–	–	30,547
Tim Kilmister	7,057	–	11,120	–	–	18,177
Kristen Walsh	10,937	–	24,712	–	–	35,649
Former Executives
Richard Stephens⁽ᵇ⁾	47,823	5,000	16,989	–	(69,812)	–
David Prince⁽ᶜ⁾	–	–	–	–	–	–
						Table 11.1

(a) Includes shares acquired via the dividend reinvestment plan. All purchases and sales complied with the Board’s Securities Trading Policy which permits trading by directors and executives during certain periods in the absence of knowledge of price-sensitive information.

(b) Luis Damasceno was appointed on 17 September 2018, replacing Richard Stephens as Chief Financial Officer who ceased employment on 30 November 2018.

(c) David Prince ceased employment on 27 December 2018.

(d) Siddhartha Kadia was appointed as Non-executive Director effective 15 January 2019.

Page 31 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | KMP Equity Instruments and Transactions — audited

Performance rights over ordinary shares granted as remuneration

The movement during the year in the number of performance rights over ordinary shares in the Company held directly, indirectly or beneficially by each key management person, including their related parties:

	Opening Balance	Granted as compensation	Vested and exercised	Lapsed (a)	Closing Balance
Director
Raj Naran	206,526	103,725	(27,801)	(9,267)	273,183
Executives
Bruce McDonald	112,832	30,816	(25,516)	(8,505)	109,627
Luis Damasceno⁽ᵇ⁾	–	18,152	–	–	18,152
Andreas Jonsson	61,089	20,158	(12,212)	(4,071)	64,964
Tim Kilmister	59,246	18,592	(11,120)	(3,707)	63,011
Kristen Walsh	109,375	26,560	(24,712)	(8,237)	102,986
Former Executives
Richard Stephens⁽ᵇ⁾	75,810	–	(16,989)	(30,418)	28,403
David Prince⁽ᶜ⁾	–	–	–	–	–

Table 11.2

(a) The number of rights lapsed represents those rights which lapsed due to performance hurdles not being met and/or upon cessation of employment.

(b) Luis Damasceno was appointed on 17 September 2018, replacing Richard Stephens, who ceased employment with the Group in November 2018. In accordance with the LTI Plan Rules the rights attaching to some of Richard’s performance rights remain available for vesting on the pre-existing vesting dates subject to the achievement of performance hurdles.

(c) David Prince ceased employment on 27 December 2018.

Service rights over ordinary shares granted as remuneration

The movement during the year in the number of service rights over ordinary shares in the Company held directly, indirectly or beneficially by each key management person, including their related parties:

	Opening Balance	Granted as compensation⁽ᵇ⁾	Vested and exercised	Closing Balance
Executives
Bruce McDonald	–	15,872	–	15,872
Tim Kilmister	–	2,554	–	2,554
Luis Damasceno⁽ᶜ⁾	–	16,174	–	16,174
Former Executive
Richard Stephens⁽ᵃ⁾	–	8,893	(8,893)	–

Table 11.3

(a) Richard Stephens ceased employment with the Group on 30 November 2018 and his service rights vested at that date.

(b) Relate to grants of deferred equity under FY2018 STI plan (issued 1 August 2018 at $7.31 per share).

(c) Relates to award of Service Rights made upon joining the Group, vesting in two tranches on 1 July 2020 and 1 July 2021.

Page 32 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | KMP Equity Instruments and Transactions — audited

Vested and outstanding performance rights

Details of vested and outstanding performance rights over ordinary shares in the Company that were granted as remuneration to each KMP under the LTI Plan are presented in the table below:

Directors / Executives	Grant date	Number of rights granted (a)	Fair value per right at grant date (b)	Issue price used to determine no. of rights granted (b)	Vesting date	Number of rights vested & exercised	Number of rights lapsed	% of rights lapsed
	01-Aug-18	103,725	$6.98	$7.53	01-Jul-21	–	–	–
Raj Naran	20-Jul-17	117,010	$6.21	$6.71	01-Jul-20	–	–	–
(Director)	26-Jul-16	52,448	$4.30	$4.29	01-Jul-19	–	–	–
	30-Jul-15	37,068	$4.04	$6.07	01-Jul-18	27,801	9,267	25%
	01-Aug-18	30,816	$6.98	$7.53	01-Jul-21	–	–	–
Bruce	20-Jul-17	32,046	$6.21	$6.71	01-Jul-20	–	–	–
McDonald	26-Jul-16	46,765	$4.30	$4.29	01-Jul-19	–	–	–
	30-Jul-15	34,021	$4.04	$6.07	01-Jul-18	25,516	8,505	25%
	01-Aug-18	20,158	$6.98	$7.53	01-Jul-21	–	–	–
Andreas	20-Jul-17	20,587	$6.21	$6.71	01-Jul-20	–	–	–
Jonsson	26-Jul-16	24,219	$4.30	$4.29	01-Jul-19	–	–	–
	30-Jul-15	16,283	$4.04	$6.07	01-Jul-18	12,212	4,071	25%
	01-Aug-18	18,592	$6.98	$7.53	01-Jul-21	–	–	–
Tim Kilmister	20-Jul-17	18,778	$6.21	$6.71	01-Jul-20	–	–	–
	26-Jul-16	25,641	$4.30	$4.29	01-Jul-19	–	–	–
	30-Jul-15	14,827	$4.04	$6.07	01-Jul-18	11,120	3,707	25%
	01-Aug-18	26,560	$6.98	$7.53	01-Jul-21	–	–	–
Kristen Walsh	20-Jul-17	29,806	$6.21	$6.71	01-Jul-20	–	–	–
	26-Jul-16	46,620	$4.30	$4.29	01-Jul-19	–	–	–
	30-Jul-15	32,949	$4.04	$6.07	01-Jul-18	24,712	8,237	25%
Luis Damasceno (c)	17-Sep-18	18,152	$6.98	$7.53	01-Jul-21	–	–	–
Former Executives
	20-Jul-17	21,107	$6.21	$6.71	01-Jul-20	–	14,071	67%
Richard Stephens (c)	26-Jul-16	32,051	$4.30	$4.29	01-Jul-19	–	10,684	33%
	30-Jul-15	22,652	$4.04	$6.07	01-Jul-18	16,989	5,663	25%
David Prince (d)	01-Aug-18	9,076	$6.98	$7.53	01-Jul-21	–	9,076	100%
								Table 11.4

(a) All performance rights granted to the executives named above are equity-settled rights.

(b) The number of rights issued to participants in August 2018 was determined using the volume weighted average price of the Company’s shares during the ten trading days following the announcement of the Group’s annual financial results (July 2015: twenty days). The calculation for those rights awarded in July 2016 differed because of the approach received on 1 June 2016 from Advent/Bain to acquire the Company for $5.30 per share. The Board exercised its discretion under the LTI Plan to review the trading period used to determine the number of performance rights to be issued and adopted the 20 trading days VWAP for the period up to and including 31 May 2016 (being the day before trading was halted at $4.05 per share just before the approach was announced to the market).

The grant dates and corresponding fair values per right in the above table have been determined in accordance with Australian Accounting Standards and are dependent on the dates on which individual executives are deemed to have received their offers to participate in the Plan. Fair values have been calculated using Binomial Tree (EPS, EBITDA and ROCE hurdles) and Monte-Carlo Simulation (TSR hurdle) valuation methodologies.

• (c) Luis Damasceno was appointed on 17 September 2018, replacing Richard Stephens as Chief Financial Officer who ceased employment on 30 November 2018.

• (d) David Prince ceased employment on 27 December 2018.

Page 33 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Remuneration report | Outlook for 2019-20 FY Remuneration — unaudited

10. OUTLOOK FOR 2019-20 FY REMUNERATION — UNAUDITED

No changes are proposed to the overall remuneration framework and instruments.

The STI Plan KPIs for FY2020 are as follows:

Financial KPIs – at least 70% of the STI payment will be dependent on the financial performance including, where appropriate, debtor management of the Company or Business Stream results relevant to the executive’s role. As in previous years, executives will be able to earn up to an additional 50% of their STI opportunity for financial outperformance.

In addition to achieving the threshold performance requirement of the Financial KPIs, to attain their full STI payment KMP executives will need to achieve:

• a) A Health Safety & Environmental KPI, worth 10% of the STI payment.

• b) A Business Alignment KPI focused on the “OneALS” and “ALS Experience” initiatives worth 10% of the STI payment.

• c) A Discretionary KPI worth 10% of the STI payment. The purpose of this KPI is to allocate reward against specific strategic initiatives. In the case of the CEO up to 25% of the KPI payment will relate to the achievement of specific strategic KPI’s set by the Board.

The LTI Plan hurdles, comprising EPS growth, Relative TSR, Relative EBITDA and ROCE, will continue for the FY2020 awards.

Korn Ferry were engaged by the Board to conduct job sizing for the KMP roles during the FY2018 reviews following the restructure of the executive team. Following on from this work and cognisant of the increased demand for experienced executives in the TIC industry, the Board has determined to award fixed remuneration increases to certain KMP to recognise the increase in the size and scope of their roles and to align them to market. Total fixed remuneration for Executives will be adjusted on average by 5.9% and for the CEO by 3% with effect from 1 July 2019.

During FY2020, the Board will commission a review of STI and LTI Plans to ensure that they are aligned to market

Total fees for Directors will remain unchanged for FY2020 following the review of fees and the overall fee pool that was conducted during 2018.

The Directors believe that these adjustments will continue to deliver a fair outcome for executives with a strong link to shareholder value and sustainable growth. Consultation with shareholder advisory groups and use of external specialist consultants will continue to be a feature of our remuneration strategy and process into the future.

End of remuneration report

Page 34 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Environmental regulation

Environmental regulation

The Group is committed to complying with environmental legislation, standards, and codes of practice relevant to the particular business in the areas in which it operates. A number of hub laboratories are regulated under State and local government legislation predominately for their hazardous waste generation and disposal. Each hub laboratory holds a current licence and or consent from the relevant environment protection authority or local council where required.

Environmental management

As part of the Group’s compliance program, environmental matters are reported on monthly by all divisional managers. In addition, internal signoffs are completed by all managers on a yearly basis, reporting on performance against relevant environmental legislation and key environmental risks in their area of operations. Apart from complying with local legal requirements each site location across the world operates under the corporate health safety and environment foundation standard which sets out 17 key standards including identification and management of key environmental risks, emergency planning, reporting environmental incidents, and conducting regular audits.

Initiatives

There were a number of environmental initiatives implemented during the year across the Group. These are explained in detail in our Sustainability Report for 2019, a copy of which can be found on our website.

Performance against environmental compliance requirements

There were no material breaches of environmental statutory requirements during the reporting period. One prosecution was recorded against ALS Malaysia when the company breached an HSE regulation that required an air velocity test to be conducted on a fume capture hood that was situated inside the laboratory. The air testing had been conducted internally according to the required frequency however the regulation required an external accredited company to perform the testing. ALS appeared in court in November 2018, entered a guilty plea and was fined AUD$1,800.

Events subsequent to reporting date

Since the interval between the end of the financial year and the date of this report there have been the following Subsequent Events.

On 17 April 2019, the Group announced that it had successfully placed new long term USPP senior notes totalling $252 million equivalent. The new USPP issuance is comprised of three tranches each of 15 years tenor, denominated AUD$125 million, EUR €40 million and STG £35 million. The weighted average cost of funds in relation to the new 15-year fixed rate USPP notes is 3.3%. The mix of currencies sought via the new issuance allows the Group’s global cashflows and operating asset mix to be appropriately balanced by funding in similarly denominated currencies. The extended debt maturity profile complements the Group’s long-term capital management strategy and supports planned capital investment.

On 29 April 2019, the Group announced the completion of the sale of its environmental and analytical testing business in China for USD$57.3 million and adjusted net cash to SUEZ. The Group’s net assets which relate to this strategic divestment are appropriately classified within Assets and Liabilities Held for Sale in the Group’s Balance Sheet as at 31 March 2019. As at Balance Date the financial gain relating to this transaction has not been recognised in the Group’s Profit and Loss Statement.

Other than those events separately described above, there have been no other Subsequent Events requiring separate disclosure in the interval between the end of the financial year and the date of this report.

Likely developments

The Group’s objective during the next financial year will be to maximise earnings and investment returns across all the business units in its diversified portfolio. For comments on divisional outlooks refer to the review of results and operations in this report.

Internal and external audits and internal reporting and monitoring have indicated a high level of compliance with site licence conditions, relevant legislation and corporate minimum standards.

Page 35 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Directors’ interests

Directors’ interests

The relevant interest of each director in the share capital of the Company as notified by the directors to the Australian Securities Exchange in accordance with section 205G(1) of the Corporations Act 2001 as at the date of this report is:

:
Bruce Phillips Raj Naran Mel Bridges Grant Murdoch John Mulcahy Charlie Sartain Tonianne Dwyer Siddhartha Kadia	No. of Ordinary shares
	60,160 120,344 57,442 73,071 54,027 90,000 17,148 -

Refer to the Remuneration Report above for details of performance rights held by Mr Naran.

Directors’ meetings

The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are:

	Board Meetings	Board Meetings	Audit and Risk Committee Meetings⁽¹⁾	Audit and Risk Committee Meetings⁽¹⁾	People Committee Meetings⁽¹⁾	People Committee Meetings⁽¹⁾	Sustainability Committee Meetings⁽¹⁾	Sustainability Committee Meetings⁽¹⁾
	A	B	A	B	A	B	A	B
Bruce Phillips	9	9	-	-	4	4	-	-
Raj Naran	9	9	-	-	-	-	-	-
Mel Bridges	9	8	4	2	-	-	2	2
Grant Murdoch	9	9	4	4	-	-	-	-
John Mulcahy	9	9	-	-	4	4	-	-
Charlie Sartain	9	9	4	4	-	-	2	2
Tonianne Dwyer	9	9	-	-	4	4	2	2
Siddhartha Kadia⁽²⁾	3	3	-	-	-	-	1	1

• A – Number of meetings held during the time the director held office during the year

• B – Number of meetings attended

• (1) – All non-member directors are permitted by the Committee Charters to attend meetings on a standing invitation basis.

Indemnification and insurance of directors and officers

Indemnification

Under its Constitution, and by resolution of the Board, the Company has agreed to indemnify to the extent permitted by law and the Corporations Act 2001:

• every person and employee who is or has been an officer of the Company or of a Group entity where requested to do so, including a director or secretary, against any liability (other than for legal costs) incurred by that person or employee as an officer of the Company or of a Group entity (including liabilities incurred by that person or employee as an officer of the Company or of a Group entity where the Company requested that person or employee to accept that appointment).

• every person and employee who is or has been an officer of the Company or of a Group entity where requested to do so, including a director or secretary, against reasonable legal costs incurred in defending an action for a liability incurred by that person or employee as an officer of the Company or of a Group entity (including such legal costs incurred by that person or employee as an officer of the Company or of a Group entity where the Company requested that person or employee to accept that appointment).

Insurance premiums

During the financial year, the Company paid insurance premiums in respect of directors’ and officers’ liability and personal accident insurance contracts, for current and former directors and senior executives, including senior executives of its controlled entities. The current directors are listed elsewhere in this report. The insurance relates to:

• costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and

• other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage.

It is a condition of the policies that premiums paid and terms and conditions of the policies are not to be disclosed.

• (2) – appointed 15 January 2019.

Page 36 of 86

2019 | Annual report

DIRECTORS’ REPORT | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Non-audit services

Non-audit services

During the year KPMG, the Company’s auditor, has performed certain other services in addition to statutory duties.

The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and

• the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and non-audit services provided during the year are set out in note 7d.

Lead auditor’s independence declaration

The Lead auditor’s independence declaration is set out on page 86 and forms part of the directors’ report for the financial year ended 31 March 2019.

Rounding off

The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016 and in accordance with that Instrument, amounts in the financial report and directors’ report have been rounded off to the nearest one hundred thousand dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors:

==> picture [76 x 42] intentionally omitted <==

==> picture [130 x 33] intentionally omitted <==

Bruce Phillips Raj Naran Chairman Managing Director Brisbane Brisbane 21 May 2019 21 May 2019

ear are set out in note 7d.
In thousands of AUD Services other than audit and review of financial statements: Other assurance and investigation services Taxation services	2019
	467.3
	887.6
	1,354.9

Page 37 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Contents

Financial statements

For the year ended 31 March 2019

Contents

Consolidated statement of Profit
and Loss and Other
Comprehensive Income	39
Consolidated Balance sheet	40
Consolidated Statement of
Changes in Equity	41
Consolidated Cash Flow Statement	42
Notes to the Financial Statements	43
1 Financial overview	43-48

1a. Operating segments

1b. Earnings per share

• 1c. Revenue

• 1d. Expenses (Continuing operations)

• 1e. Discontinued operations and assets held for sale

2 Capital employed: Working Capital & other instruments 49-55

2a. Trade and other receivables

2b. Related party transactions

2c. Inventories

• 2d. Trade and other payables

• 2e. Property, plant & equipment

• 2f. Investment property

• 2g. Intangible assets

3 Net debt 55-56

3a. Cash and cash equivalents

• 3b. Reconciliation of operating profit to net cash

• 3c. Reconciliation of liabilities arising from financing activities

• 3d. Loans and borrowings

4 Risk & Capital Management 56-62

4a. Financial & capital risk management 4b. Capital & reserves

4c. Financial Instruments

4d. Contingencies

4e. Capital commitments 4f. Operating leases 5 Group structure 62-66 5a. Acquisition of subsidiaries 5b. Consolidated entities 5c. Deed of cross guarantee 5d. Parent entity disclosures 6 Taxation 67-69 6a. Income taxes 6b. Deferred tax assets and liabilities 7 Other information 69-75

7a. Basis of preparation

7b. Significant accounting policies

7c. Determination of fair value

7d. Auditors’ remuneration

7e. Events subsequent to balance date

8 Employment matters 76-79

8a. Share-based payments

8b. Key management personnel disclosures

Signed reports
Directors’ declaration	80
Independent auditor’s report	81
Lead auditor’s independence
declaration	86

Page 38 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 | Consolidated statement of Profit and Loss and Other Comprehensive Income

ALS LIMITED AND ITS SUBSIDIARIES

Consolidated statement of Profit and Loss and Other Comprehensive Income

For the year ended 31 March 2019

In millions of AUD	Note	2019	2018
Continuing operations
Revenue	1c	1,664.8	1,446.9
Expenses	1d	(1,329.9)	(1,236.8)
Share of profit of equity-accounted investees, net of tax	0	2.2	1.6
Profit before financing costs, depreciation and amortisation (EBITDA)	0	337.1	211.7
Amortisation and depreciation	0	(74.8)	(70.6)
Profit before net financing costs (EBIT)	0	262.3	141.1
Finance income	0	1.8	3.9
Finance cost	0	(33.8)	(29.7)
Net financing costs	0	(32.0)	(25.8)
Profit before tax	0	230.3	115.3
Income tax expense	6a	(62.4)	(48.0)
Profit from continuing operations	0	167.9	67.3
Discontinued operations	0	0.0	0.0
Loss of discontinued operations, net of tax	1e	(13.1)	(14.0)
Profit for the year	0	154.8	53.3
Profit attributable to:		0.0	0.0
Equity holders of the company		153.8	51.8
Non-controlling interest		1.0	1.6
Profit for theyear	3b	154.8	53.4
Other comprehensive income
Items that are or may be reclassified subsequently to the profit and loss (net of tax)
Foreign exchange translation		(28.2)	70.3
Gain/(Loss) on hedge of net investments in foreign subsidiaries, net of tax		1.6	(1.1)
Gain on cash flow hedges taken to equity, net of tax		1.0	(0.3)
Other comprehensive income for theyear, net of tax		(25.6)	68.9
Total comprehensive income for the year		129.2	122.3
Total comprehensive income attributable to:
Equity holders of the company		128.2	120.6
Non-controlling interest		1.0	1.6
Total comprehensive income for the year		129.2	122.2
Earnings per share
Basic earnings per share attributable to equity holders	1b	31.57c	10.34c
Diluted earnings per share attributable to equity holders	1b	31.46c	10.30c
Basic earnings per share attributable to equity holders from continuing operations	1b	34.26c	13.13c
Diluted earnings per share attributable to equity holders from continuing operations	1b	34.14c	13.09c

The notes on pages 43 to 79 are an integral part of these consolidated financial statements.

Page 39 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Consolidated balance sheet

Consolidated balance sheet

As at 31 March 2019

In millions of AUD Note	2019 2018
Current assets Cash and cash equivalents 3a Trade and other receivables 2a Inventories 2c Other assets Assets held for sale 1e	148.3 187.6 314.1 278.3 71.8 75.8 43.1 35.2 34.6 25.3
Total current assets	611.9 602.2
Non-current assets Investment property 2f Deferred tax assets 6b Property, plant and equipment 2e Intangible assets 2g Other assets	10.1 10.2 21.7 22.0 438.4 400.0 1,046.0 980.6 50.6 43.3
Total non-current assets	1,566.8 1,456.1
Total assets	2,178.7 2,058.3
Current liabilities Bank overdraft 3a Trade and other payables 2d Loans and borrowings 3d Employee benefits Other liabilities Liabilities held for sale 1e	0.1 0.4 200.4 169.8 266.6 – 51.3 44.7 8.7 0.6 14.3 0.7
Total current liabilities	541.4 216.2
Non-current liabilities Loans and borrowings 3d Deferred tax liabilities 6b Employee benefits Other	513.5 697.1 6.1 9.5 8.4 8.6 6.1 4.9
Total non-current liabilities	534.1 720.1
Total liabilities	1,075.5 936.3
Net assets	1,103.2 1,122.0
Equity Share capital 4b Reserves Retained earnings	1,325.9 1,348.1 (32.7) (8.9) (199.8) (229.1)
Total equity attributable to equity holders of the company Non-controlling interest	1,093.4 1,110.1 9.8 11.9
Total equity	1,103.2 1,122.0

The notes on pages 43 to 79 are an integral part of these consolidated financial statements.

Page 40 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Consolidated statement of changes in equity

Consolidated statement of changes in equity

For the year ended 31 March 2019

In millions of AUD	Share Capital Note	Share Capital Note	Foreign	Currency	Translation	Other	reserves	Employee	share-based	awards	Retained earnings	Total	Non-	controlling Interest	Total Equity
Balance at 1 April 2017		1,453.4	(85.4)			3.7				4.1	(200.2)	1,175.6		9.6	1,185.2
Profit for the year		–			–		–			–	51.8	51.8		1.6	53.4
Other comprehensive income		–		69.1		(0.3)				–	–	68.8		–	68.8
Total comprehensive income for the period		–		69.1		(0.3)				–	51.8	120.6		1.6	122.2
Transactions with owners in their capacity as owners:
Dividends provided for or paid	4b	–			–		–			–	(80.8)	(80.8)		–	(80.8)
Share buyback	4b	(106.8)			–		–			–	–	(106.8)		–	(106.8)
Equity-settled performance rights awarded and vested	4b	1.5			–		–		(0.1)		0.1	1.5		–	1.5
Total contributions and distributions to owners		(105.3)			–		–		(0.1)		(80.7)	(186.1)		–	(186.1)
Changes in ownership interests
Acquisition of non-controlling
interest without change in control		–			–		–			–	–	–		–	–
Non-controlling interest ownership of subsidiary acquired		–			–		–			–	–	–		0.7	0.7
Total changes in ownership interests		–			–		–			–	–	–		0.7	0.7
Total transactions with owners		(105.3)			–		–		(0.1)		(80.7)	(186.1)		0.7	(185.4)
Balance at 31 March 2018		1,348.1	(16.3)			3.4				4.0	(229.1)	1,110.1	11.9		1,122.0
Adjustment on initial application of AASB 15 (net of tax)	7b	–			–		–			–	(21.3)	(21.3)		–	(21.3)
Adjustment of initial application of AASB 9(net of tax)	7b	–			–		–			–	(3.4)	(3.4)		–	(3.4)
Adjusted balance 1 April 2018*		1,348.1	(16.3)			3.4				4.0	(253.8)	1,085.4	11.9		1,097.3
Profit for the year		–			–		–			–	153.8	153.8		1.0	154.8
Other comprehensive income		–	(26.6)			1.0				–	–	(25.6)		–	(25.6)
Total comprehensive income for the period		–	(26.6)			1.0				–	153.8	128.2		1.0	129.2
Transactions with owners in their capacity as owners:
Dividends to equity holders	4b	–			–		–			–	(97.5)	(97.5)	(0.5)		(98.0)
Share buyback		(24.6)			–		–			–	–	(24.6)		–	(24.6)
Equity-settled performance rights awarded and vested	4b	2.4			–		–			1.8	(2.2)	1.9		–	1.9
Total contributions and distributions to owners		(22.2)			–		–			1.8	(99.8)	(120.2)	(0.5)		(120.7)
Changes in ownership interests
Acquisition of non-controlling
interest without change in control		–			–		–			–	–	–		–	–
Non-controlling interest ownershipof subsidiarysold		–			–		–			–	–	–	(2.6)		(2.6)
Total changes in ownership interests		–			–		–			–	–	–	(2.6)		(2.6)
Total transactions with owners		(22.2)			–		–			1.8	(99.8)	(120.2)	(3.1)		(123.3)
Balance at 31 March 2019		1,325.9	(42.9)			4.4				5.8	(199.8)	1,093.4		9.8	1,103.2

* The Group has initially applied AASB 9 and AASB 15 at 1 April 2018. Under the transition methods chosen, comparative information is not restated. See note 7b.

The notes on pages 43 to 79 are an integral part of these consolidated financial statements.

Page 41 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Consolidated statement of cash flows

Consolidated statement of cash flows

For the year ended 31 March 2019

In millions of AUD	Note	2019	2018
Cash flows from operating activities
Cash receipts from customers		1,856.6	1,652.0
Cash paid to suppliers and employees		(1,555.5)	(1,392.7)
Cash generated from operations		301.1	259.3
Interest paid		(33.8)	(29.7)
Interest received		1.8	3.5
Income taxes paid		(50.3)	(47.3)
Net cash from operating activities	3b	218.8	185.8
Cash flows from investing activities
Payments for property, plant and equipment		(108.9)	(73.4)
Loans to associate entities		(1.4)	(0.1)
Payments for net assets on acquisition of businesses and subsidiaries (net of cash acquired)		(62.8)	(31.8)
Acquisition of minority interest equity		(3.0)	–
Net proceeds from sale of operations		5.7	79.5
Dividend from associate		2.2	2.6
Proceeds from sale of other non-current assets		2.1	6.1
Net cash (used in) investing activities		(166.1)	(17.1)
Cash flows from financing activities
Proceeds from borrowings		60.0	–
Repayment of borrowings		(30.4)	(38.4)
Issued capital bought back on-market		(24.6)	(106.8)
Lease payments		–	(1.0)
Dividends paid		(98.0)	(80.8)
Net cash (used in)/from financing activities		(93.0)	(227.0)
Net movement in cash and cash equivalents		(40.3)	(58.3)
Cash and cash equivalents at 1 April		187.2	248.9
Effect of exchange rate fluctuations on cash held		1.3	(3.4)
Cash and cash equivalents at 31 March	3a	148.2	187.2

The notes on pages 43 to 79 are an integral part of these consolidated financial statements.

Page 42 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

FINANCIAL OVERVIEW | 1a. Operating segments

Notes to the financial statements

About this report

ALS Limited (the “Company”) is a for-profit company domiciled in Australia. The consolidated financial report of the Company for the year ended 31 March 2019 comprises the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities.

Throughout this document, non-International Financial Reporting Standards (non-IFRS) financial indicators are included to assist with understanding the Group’s performance. The primary non-IFRS information is Underlying earnings before income tax, depreciation and amortisation (EBITDA), Underlying earnings before interest and tax (EBIT) and Underlying net profit after tax (NPAT).

Management believes Underlying EBITDA, Underlying EBIT and Underlying NPAT are appropriate indicators of the ongoing operational earnings of the business and its segments because these measures do not include significant one-off items (both positive and negative) that relate to disposed or discontinued operations, preacquisition legal settlement costs and cost incurred to restructure the business in the current period.

1. FINANCIAL OVERVIEW

This section provides information that is most relevant to explaining the group’s performance during the year, and where relevant includes the accounting policies that have been applied and significant estimates and judgements made.

• 1a. Operating segments

• 1b. Earnings per share

• 1c. Revenue

• 1d. Expenses (Continuing operations)

• 1e. Discontinued operations and assets held for sale

1a. Operating segments

The Group has three reportable segments, as described below, representing three distinct strategic business units each of which is managed separately and offers different products and services. For each of the strategic business units, the CEO reviews internal management reports on at least a monthly basis. Following a decision by Directors in March 2018 to exit the Group’s Oil & Gas Laboratory business, a fourth segment – Oil & Gas Laboratories – was re-classified as “discontinued operations”. The following summary describes the operations in each of the Group’s reportable segments:

• Commodities – provides assaying and analytical testing services and metallurgical services for mining and mineral exploration companies and provides specialist services to the coal industry such as coal sampling, analysis and certification, formation evaluation services, and related analytical testing.

• Life Sciences – provides analytical testing data to assist consulting and engineering firms, industry, and governments around the world in making informed decisions about environmental, food and pharmaceutical, electronics, and animal health testing matters.

• Industrial – provides the energy, resources and infrastructure sectors with asset care and tribology testing services.

Page 43 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

FINANCIAL OVERVIEW | 1a. Operating segments

2019 In millions of AUD	Commodities	Life Sciences	Industrial	Other (1)	Total Continuing Operations	Discon- tinued operations	Conso- lidated
Revenue	620.3	831.4	213.1	–	1,664.8	7.7	1,672.5
Africa	54.3	–	–	–	54.3	–	54.3
Asia/Pacific	220.9	248.0	152.9	–	621.8	–	621.8
EMENA	109.3	284.9	0.8	–	395.0	3.0	398.0
Americas	235.8	298.5	59.4	–	593.7	4.7	598.4
Underlying EBITDA (2)	189.6	166.8	27.7	(31.2)	352.9	(4.1)	348.8
Depreciation and amortisation	(21.9)	(42.4)	(6.3)	(1.2)	(71.8)	(1.5)	(73.3)
Underlying EBIT (2)	167.7	124.4	21.4	(32.4)	281.1	(5.6)	275.5
Restructuring & other one- off items	(9.1)	(3.5)	1.0	(4.2)	(15.8)	(11.7)	(27.5)
Amortisation of intangibles	–	–	–	(3.0)	(3.0)	–	(3.0)
Net financing costs	–	–	–	(32.0)	(32.0)	–	(32.0)
Statutory profit before income tax	158.6	120.9	22.4	(71.6)	230.3	(17.3)	213.0
Underlying EBIT margin (2)	27.0%	15.0%	10.0%	–	16.9%	-72.7%	16.5%
Underlying EBITDA margin (2)	30.6%	20.1%	13.0%	–	21.2%	-53.2%	20.9%
Segment assets	754.6	939.3	246.0	46.7	1,986.6	21.5	2,008.1
Cash and cash equivalents	–	–	–	–	–	–	148.3
Tax Assets	–	–	–	–	–	–	22.3
Total assets per the balance sheet	754.6	939.3	246.0	46.7	1,986.6	21.5	2,178.7
Segment liabilities	(87.9)	(114.0)	(50.5)	(15.5)	(267.9)	(12.6)	(280.5)
Loans and borrowings	–	–	–	–	–	–	(780.2)
Tax liabilities	–	–	–	–	–	–	(14.8)
Total liabilities per the balance sheet	(87.9)	(114.0)	(50.5)	(15.5)	(267.9)	(12.6)	(1,075.5)

1 Represents unallocated corporate costs. Net expenses of $32.4 million in 2019 comprise net foreign exchange gains of $4.6 million and other corporate costs of $37.0 million.

2 Underlying EBITDA = Underlying EBIT plus depreciation and amortisation. Underlying EBIT = Underlying Earnings before interest and tax. The terms EBITDA and EBIT are non-IFRS disclosures.

Page 44 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

FINANCIAL OVERVIEW | 1a. Operating segments

2018	Commodities	Life Sciences	Industrial	Other (1)	Total Continuing Operations	Discon- tinued opera- tions	Conso- lidated
In millions of AUD
Revenue	518.9	734.1	193.9	–	1,446.9	48.2	1,495.1
Africa	46.6	–	–	–	46.6	–	46.6
Asia/Pacific	187.6	221.1	143.0	–	551.7	6.2	557.9
EMENA	90.5	258.0	–	–	348.5	14.7	363.2
Americas	194.2	255.0	50.9	–	500.1	27.3	527.4
Underlying EBITDA (2)	146.3	140.7	32.1	(29.8)	289.3	0.3	289.6
Depreciation and amortisation	(22.8)	(38.6)	(5.9)	(0.7)	(68.0)	(4.9)	(72.9)
Underlying EBIT (2)	123.5	102.1	26.2	(30.5)	221.3	(4.6)	216.7
Restructuring & other one-off Items	(4.1)	(6.6)	(1.0)	(2.9)	(14.6)	(10.7)	(25.3)
Impairment	(40.0)	–	(23.0)	–	(63.0)	–	(63.0)
Amortisation of intangibles	–	–	–	(2.6)	(2.6)	–	(2.6)
Net financing costs	–	–	–	(25.8)	(25.8)	–	(25.8)
Statutory profit before income tax	79.4	95.5	2.2	(61.8)	115.3	(15.3)	100.0
Underlying EBIT margin (2)	23.8%	13.9%	13.5%	–	15.3%	-9.5%	14.5%
Underlying EBITDA margin (2)	28.2%	19.2%	16.6%	–	20.0%	0.7%	19.4%
Segment assets	717.4	841.4	222.4	43.5	1,824.7	22.1	1,846.8
Cash and cash equivalents	–	–	–	–	–	–	187.6
Tax Assets	–	–	–	–	–	–	23.9
Total assets per the balance sheet	717.4	841.4	222.4	43.5	1,824.7	22.1	2,058.3
Segment liabilities	(74.8)	(101.6)	(33.6)	(19.6)	(229.6)	(0.6)	(230.2)
Loans and borrowings	–	–	–	–	–	–	(696.0)
Tax liabilities	–	–	–	–	–	–	(10.1)
Total liabilities per the balance sheet	(74.8)	(101.6)	(33.6)	(19.6)	(229.6)	(0.6)	(936.3)

1 Represents unallocated corporate costs. Net expenses of $30.5 million in 2018 comprise net foreign exchange losses of $4.0 million and other corporate costs of $26.5 million.

2 Underlying EBITDA = Underlying EBIT plus depreciation and amortisation. Underlying EBIT = Underlying Earnings before interest and tax. The terms EBITDA and EBIT are non-IFRS disclosures.

Page 45 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

FINANCIAL OVERVIEW | 1b. Earnings per share

Geographical segments

In presenting information on a geographical basis segment revenue from external customers is by geographical location of customers. Segment assets are attributed based on geographic location of the business unit. Geographical locations are aligned to those reported internally to the Chief Executive Officer (CEO), who is the Group’s chief operating decision maker.

In millions of AUD	In millions of AUD	Consolidated	Consolidated
	2019		2018
	Reve- nues	Non- current assets	Reve- nues	Non- current assets
Africa	54.3	25.5	46.6	27.5
Asia/Pacific	621.9	592.9	557.9	578.0
EMENA	398.0	374.7	363.1	368.5
Americas	598.3	593.2	527.5	502.1
Total	1,672.5	1,586.3	1,495.1	1,476.1

Accounting policy – Operating segments

The Group determines and presents operating segments based on information that is reported internally to the Chief Executive Officer (CEO), who is the Group’s chief operating decision maker.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment results that are reported to the CEO include items directly attributed to the segment as well as those that can be allocated on a reasonable basis. Underlying EBIT is calculated as earnings before interest, foreign currency gains and losses, and income tax.

Items not allocated to segments comprise corporate costs, foreign currency gains or losses, amortisation of intangibles and net financing costs before income tax. Inter-segment pricing is determined on an arm’s length basis.

1b. Earnings per share

Cents per share	Consolidated	Consolidated
	2019	2018
Basic earnings per share	31.57c	10.34c
Diluted earnings per share	31.46c	10.30c

Basic earnings per share from continuing operations	34.26c	13.13c
Diluted earnings per share from continuing operations	34.14c	13.09c
Basic earnings per share from discontinued operations	(2.69)c	(2.79)c
Diluted earnings per share from discontinued operations	(2.68)c	(2.79)c

Basic and diluted earnings per share

The calculations of both basic and diluted earnings per share were based on the profit/(loss) attributable to equity holders of the Company of $153.8m profit (2018: $51.8m profit).

Basic and diluted earnings per share from continuing operations

The calculations of both basic and diluted earnings per share from continuing operations were based on the profit/(loss) attributable to equity holders of the Company from continuing operations of $166.9m profit (2018: $65.8m profit).

Basic and diluted earnings per share from discontinued operations

The calculations of both basic and diluted earnings per share from discontinued operations were based on the loss attributable to equity holders of the Company from discontinued operations of $13.1m (2018: $14.0m loss).

Weighted average number of ordinary shares (Basic and diluted)

In millions of shares Note Issued ordinary shares at 1 April 4b Effect of shares bought back on- market Weighted average number of ordinary shares at 31 March (Basic) Effect of potential shares relating to performance rights granted to employees as compensation, but not yet vested Weighted average number of ordinary shares at 31 March (Diluted)	Consolidated 2019 2018 488.8 504.2 (1.6) (3.1)
	487.2 501.1 1.6 1.6
	488.8 502.7

Accounting policy – Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise performance rights granted to employees.

Page 46 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

FINANCIAL OVERVIEW | 1d. Expenses (Continuing operations)

1c. Revenue

Revenue represents the fair value of the consideration received or receivable for services rendered, excluding sales related taxes and intragroup transactions.

AASB 15 Revenue from contracts with customers came into effect on 1 April 2018 and replaced AASB 118 Revenue, AASB 111 Construction Contracts and related interpretations. Whilst AASB 118 is based on deliverables and the transfer of risk and rewards, AASB 15 identifies performance obligations. Performance obligations vary across business lines and regions, and on a contract-bycontract basis.

Under AASB 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring services to a customer.

The Group has adopted AASB 15 from 1 April 2018 and the effect of initially applying this standard is mainly attributed to the following:

• Non-project related works in progress is no longer recognised as revenue;

• Deferral in the recognition of revenues attaching to the Group’s Tribology operations (Industrial Division).

The nature and effect of initially applying AASB 15 on the Group’s financial statements are disclosed in note 7b.

Disaggregation of revenue from continuing operations

Revenue is disaggregated by geographical locations of external customers.

In millions of AUD	Consolidated	Consolidated
Africa	2019 54.3	2018 46.6
Asia/Pacific	621.8	551.6
EMENA	395.0	348.5
Americas	593.7	500.2
Total revenue	1,664.8	1,446.9

Accounting policy – Revenue

Services rendered

The Group recognise revenue when the amount of revenue can be readily measured, and it is probable that future economic benefits will flow to the Group. AASB 15 establishes a five-step model to account for revenue arising from contracts with customers and requires judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contract with customers.

The Group recognises revenue based on two models: services transferred at a point in time and

services transferred over time. The majority of the Group’s customer contracts give rise to short-term projects where revenue is recognised at a point in time. Revenue from these projects are recognised in the profit and loss statement upon completion of the performance obligations, usually when the report of findings or test/inspection certificate is issued. Revenue from these projects is measured according to the transaction price agreed in the contract. Once services are rendered, the customer is invoiced, and payment is due as per the terms of the agreement, typically between 30 – 90 days.

For long-term projects, the Group recognise revenue in the profit and loss statement over time. Revenue from these projects is recognised based on the measure of progress. When the Group has a right to consideration from a customer at the amount corresponding directly to the customer’s value of the performance completed to date, revenue is recognised in the amount to which the Group has a right to invoice. Long-term contract invoices are issued per contractually agreed instalments and prices, with payment due typically between 30 – 90 days from invoicing.

Dividend Income

Dividend income is recognised in profit and loss on the date that the Group’s right to receive payment is established.

1d. Expenses (Continuing operations)

Profit before income tax include the following specific expenses:

In millions of AUD Note Employee expenses Raw materials and consumables Occupancy costs External service costs Equity-settled share-based payment transactions 8a Contributions to defined contribution post- employment plans – included in employee expenses above Impairment charges Loss/(gain) on sale of property plant and equipment Net (gain) on foreign exchange	Consolidated 2019 2018 785.9 685.9 184.1 161.2 118.6 109.5 45.6 39.2 3.6 2.2 33.0 28.4 – 63.0 1.9 0.6 (4.6) 4.0

Accounting policy – Expenses Finance lease payments

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so

Page 47 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

FINANCIAL OVERVIEW | 1e. Discontinued operations and assets held for sale

as to produce a constant periodic rate of interest on the remaining balance of the liability.

Finance income and finance expense

Finance income comprises interest income on funds invested and is recognised in the profit and loss statement as it accrues, using the effective interest method.

Finance expense comprises interest expense on borrowings calculated using the effective interest method and gains and losses on hedging instruments that are recognised in the profit and loss statement (see note 4a). The interest expense component of finance lease payments is recognised in the profit and loss statement using the effective interest method.

Foreign currency gains and losses

Foreign currency gains and losses are reported on a net basis

no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of cash-settled share-based awards is recognised as an expense, with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is re-measured to fair value at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as employee expenses in profit or loss.

1e. Discontinued operations and assets held for sale

In March 2018, a decision was made to divest the laboratory services component (Labs) of the Oil & Gas sector. In July 2017, the Group divested the majority of its assets in the Oil & Gas technical services sector (Non-Labs).

Defined contribution superannuation funds

Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the profit and loss statement as incurred.

Short-term service benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Long-term service benefits

The Group’s net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in the profit or loss in the period in which they arise.

Share-based payment transactions

The grant-date fair value of equity-settled sharebased payment arrangements granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and nonmarket performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is

Information attributable to discontinued operations is as follows:

In millions of AUD Discontinued operations Oil & Gas Labs	Consolidated 2019 2018
Revenue Amortisation and depreciation Other Expenses	7.7 8.4
	(1.5) (1.4)
	(23.5) (12.4)
Results from operating activities Income tax benefit	(17.3) (5.4)
	4.2 1.4
Loss of discontinued operations net of tax	(13.1) (4.0)
Diluted earnings per share from discontinued operations Oil & Gas Non-Labs	(2.69)c (0.79)c
Revenue Amortisation and depreciation Other Expenses	– 39.8
	– (3.5)
	– (36.0)
Results from operating activities Income tax benefit	– 0.3
	– (0.1)
Results from operating activities, net of income tax	– 0.2
Gain on sale of discontinued operations	– 0.9
Foreign exchange losses on inter-company balances, transferred from the foreign currency translation reserve on divestment of Oil & Gas Non-Labs subsidiaries	– (11.1)
Loss of discontinued operations	– (10.0)
Diluted earnings per share from discontinued operations	– (2.00)c
Cash flows from discontinued operations

Page 48 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Notes to the financial statements

CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS | 2a. Trade and other receivables

Net cash from operating activities	(2.8)	(2.9)
Net cash from investing activities	(1.9)	(5.5)
Net cash from financing activities	–	–
Net cash from discontinued operations	(4.7)	(8.4)
Assets held for sale
Trade and other receivables	7.7	3.0
Inventories	0.4	0.7
Property, plant and equipment	19.8	16.0
Intangible assets	2.3	2.0
Deferred tax assets	0.6	1.9
Other assets	3.8	1.7
	34.6	25.3
Liabilities held for sale	–	–
Trade and other liabilities	14.0	0.4
Loans and borrowings	–	–
Employee benefits	0.3	0.3
	14.3	0.7

The assets and liabilities disclosed as held for sale as at balance date consist of those used in the Oil & Gas Labs and the China environmental testing businesses.

Accounting policy – Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has ceased or been disposed of or is held for sale. When an operation is classified as a discontinued operation, the comparative profit and loss and other comprehensive income statement is restated as if the operation had been discontinued from the start of the comparative period.

Accounting policy – Held for Sale

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use.

Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets or investment property, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held for sale and subsequent gains and losses on remeasurement are recognised in profit or loss.

2. CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS

This section provides information about the working capital of the Group and key balance sheet items. Where relevant the accounting policies that have been applied and significant estimates and judgements made is included with each note.

2a. Trade and other receivables

2b. Related party transactions

2c. Inventories

2d. Trade and other payables

2e. Property, plant & equipment

2f. Investment property

• 2g. Intangible assets

2a. Trade and other receivables

In millions of AUD Current Trade receivables Other receivables Aging of trade receivables In millions of AUD Current 30 days 60 days 90 days and over Total Allowance for impairment of Opening balance AASB 9 adjustment Write off Movement in provision Closing balance	Consolidated 2019 2018 274.0 251.4 40.1 26.9
	314.1 278.3
	171.0 159.7 63.2 57.9 24.2 18.7 22.1 19.6
	280.5 255.9
	trade receivables 4.5 6.2 3.4 – (2.8) (6.4) 1.4 4.7
	6.5 4.5

Trade receivables are shown net of allowance for impairment losses of $6.5m (2018: $4.5m) and are all expected to be recovered within 12 months. Impairment on trade receivables charged as part of operating costs was $2.8m (2018: $6.4m). Other receivables includes derivative assets of $8.4m.

AASB 9 Financial Instruments came into effect on 1 April 2018 and changes the classification and measurement of financial instruments. The standard replaces AASB 139 Financial

Instruments: Recognition and Measurement. AASB 9 requires impairments to be based on a forward-

Page 49 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Notes to the financial statements

CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS | 2c. Inventories

looking model. This new model is an expected credit loss model that results in the earlier recognition of credit losses than the incurred loss impairment model under AASB 139.

The Group has initially adopted AASB 9 on 1 April 2018. The effect of initially applying this standard results in the increase in impairment losses recognised on trade receivables (refer note 7b).

There is no concentration of credit risk with respect to trade receivables. There is no single customer making up a material percentage of the Group’s revenue (refer note 4a).

Exposures to currency risks related to trade and other receivables are disclosed in note 4c.

Accounting policy – Trade and other receivables

Trade receivables are recognised at the value of the original invoice amount to customers less any impairment losses (amortised cost). Estimates are used in determining the level of receivable that will not be collected. An impairment allowance is made for trade receivable balances in compliance with the simplified approach permitted by AASB 9, by using a provision matrix. The matrix was developed to reflect historic default rates, by region, with higher default rates applied to older balances. The approach is followed for all receivables unless there are specific circumstances, such as significant financial difficulties of the customer or bankruptcy of a customer, which would render the receivable irrecoverable and therefore require a specific provision. A provision is made against trade receivables until such time as the Group believes the amount to be irrecoverable, after which the trade receivable balance is written off.

2b. Related party transactions

The related party transactions disclosed are transactions with related parties at the time they were considered related parties of the Group. The ultimate parent of the Group is ALS Limited.

All receivables and payables to and from related parties, except for related party borrowings are made on terms equivalent to those that prevail in arm’s length transactions. There have been no guarantees provided to any related party. For the period ended 31 March 2019, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2018: nil).

In thousands AUD % Ownership	Sales to related parties*	Amounts owed by related parties 2019 2018
ALS Arabian Company Ltd 42% ALS Technichem Malaysia 40% PT. ALS Indonesia 20%	2,309.9 186.7 32.8	1,603.5 297.0 261.2 203.1 78.6 69.5
	2,529.3	1,943.3 569.7

* Period ended 31 March 2019

2c. Inventories

In millions of AUD Raw materials and consumables Work in progress Finished goods	Consolidated 2019 2018 49.9 41.6 21.5 34.2 0.4 –
	71.8 75.8

In 2018 inventory work in progress included costs for sample testing in the analytical laboratories that commenced but was not yet completed. On adoption of AASB 15, revenue and the associated costs for these tests are recognised on completion of the test (refer to note 7B). Work in progress recognised by the Group relates to contractual arrangements (refer note 1c). No information is provided about remaining performance obligations that have an original expected duration of 1 year or less.

Accounting policy

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost of inventories is based on the weighted average method and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

Cost for incomplete field services works are recognised as work in progress and measured at the lower of cost to date and net realisable value.

Page 50 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS | 2e. Property, plant & equipment

2d. Trade and other payables

In millions of AUD Trade payables Deferred revenue Other payables and accrued expenses	Consolidated 2019 2018 57.2 52.7 18.6 – 124.6 117.1
	200.4 169.8

The effect on trade and other payables of initially applying AASB 15 is described in note 7b.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits that can be estimated reliably will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Accounting policy Trade and other payables

Trade and other payables are stated at their amortised cost. Trade payables are non-interest bearing and are normally settled on 60-day terms.

2e. Property, plant & equipment

In millions of AUD	Freehold land and buildings	Plant and equipment	Leasehold improve- ments	Leased plant and equipment	Capital works in progress	Total
Opening balance at 1 April 2017
At cost	202.8	692.3	130.6	5.9	14.4	1,046.0
Accumulated depreciation	(43.6)	(524.6)	(78.6)	(3.7)	–	(650.5)
Net book amount at 1 April 2017	159.2	167.7	52.0	2.2	14.4	395.5
Additions	11.2	59.4	8.4	–	1.4	80.4
Disposals	(3.2)	–	(0.1)	(0.3)	(0.3)	(3.9)
Transfers	1.3	(0.5)	(0.2)	0.3	(0.5)	0.4
Depreciation expense	(6.7)	(55.2)	(9.7)	(0.3)	–	(71.9)
Impairment	(4.0)	(4.5)	(7.3)	–	(0.1)	(15.9)
Exchange differences	6.8	6.6	1.9	–	0.1	15.4
Net book amount at 31 March 2018	164.6	173.5	45.0	1.9	15.0	400.0
Opening balance at 1 April 2018
At cost	214.2	732.4	132.7	5.9	15.0	1,100.2
Accumulated depreciation	(49.6)	(558.9)	(87.7)	(4.0)	–	(700.2)
Net book amount at 1 April 2018	164.6	173.5	45.0	1.9	15.0	400.0
Additions	4.6	82.5	15.7	0.3	10.2	113.3
Disposals	(0.6)	(2.7)	(0.2)	–	(0.2)	(3.7)
Transfers	–	0.6	1.7	(1.8)	(2.0)	(1.5)
Depreciation expense	(6.8)	(53.6)	(10.0)	(0.1)	–	(70.5)
Assets held for sale	(0.2)	(2.6)	(1.1)	–	0.1	(3.8)
Exchange differences	2.0	1.5	1.6	–	(0.5)	4.6
Net book amount at 31 March 2019	163.6	199.2	52.7	0.3	22.6	438.4
At 31 March 2019
At cost	219.7	778.1	154.3	0.6	22.6	1,175.3
Accumulated depreciation	(56.1)	(578.9)	(101.6)	(0.3)	–	(736.9)
Net book amount at 31 March 2019	163.6	199.2	52.7	0.3	22.6	438.4

Page 51 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS | 2f. Investment property

Accounting policy – Property, plant & equipment Owned assets

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “Other expenses” in the profit and loss statement. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

Borrowing costs

The Group capitalises borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. All other borrowing costs are recognised in the profit and loss using the effective interest method.

Reclassification to investment property

When the use of a property changes from owneroccupied to investment property, the property is held at cost and reclassified as investment property.

Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.

Subsequent costs

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the profit and loss statement as an expense as incurred.

Depreciation

Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is charged to the profit and loss statement on a straight-line or diminishing value basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives in the current and comparative periods are as follows:

• Buildings	20-40 Years
• Plant and equipment	3-10 Years
• Leasehold improvements	3-20 Years
• Leased plant and equipment	4-5 Years

The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually and adjusted if appropriate.

2f. Investment property

In millions of AUD Carrying amount at the beginning of the year Depreciation Carrying amount at end of year	Consolidated 2019 2018 10.2 10.4 (0.1) (0.2)
	10.1 10.2

Investment property comprises a commercial property leased to a third party. The current lease expires in September 2022. See note 4f (Operating leases) for further information.

Fair value of the property is estimated to be $19.0m (2018: $19.0m) based on a capitalisation rate of 8.75%.

Accounting policy – Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both. Investment property is measured at cost and is depreciated on a straight-line basis over the estimated useful life.

Page 52 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS | 2g. Intangible assets

2g. Intangible assets

In millions of AUD	Consolidated
	Goodwill Purchased trademarks and brandnames Customer Relation- ships Techno- logy Software Total
Balance at 1 April 2017 Additions through business combinations Impairment(1) Additions Transfer Disposal Held for sale Amortisation Effect of movements in foreign exchange	969.0 – 5.1 – 7.7 981.8 27.2 – – – – 27.2 (63.0) – – – – (63.0) – 0.5 5.4 0.1 5.0 11.0 – – – – (0.4) (0.4) – – – – (0.1) (0.1) – – – – (2.0) (2.0) – – (2.6) – (2.3) (4.9) 30.7 – 0.2 – 0.1 31.0
Balance at 31 March 2018 Additions through business combinations Additions Held for sale Transfer Disposal Amortisation Effect of movements in foreign exchange	963.9 0.5 8.1 0.1 8.0 980.6
	52.8 – – – – 52.8
	– – 3.3 – 3.9 7.2
	– – – – (0.3) (0.3)
	– – – – 1.5 1.5
	– – – – (0.3) (0.3)
	– – (2.4) – (2.6) (5.0)
	9.8 – (0.3) – – 9.5
Balance at 31 March 2019	1,026.5 0.5 8.7 0.1 10.2 1,046.0

(1) During the year ended 31 March 2018, In recognition of uncertain market conditions being experienced in the sectors serviced by the Coal and Industrial businesses, goodwill impairment charges amounting to $63 million were recognised in respect of these cash generating units: Coal – $40 million and Industrial – $23 million.

Impairment tests for cash generating units containing goodwill

Calculation of recoverable amounts

The recoverable amount of assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

The following cash generating units have significant carrying amounts of goodwill:

In millions of AUD ALS Minerals ALS Life Sciences – Australia ALS Life Sciences – North America ALS Life Sciences – South America ALS Life Sciences – Europe ALS Food Pharma – Europe ALS Life Sciences – Asia ALS Coal ALS Industrial Other cash generating units	Consolidated 2019 2018
	368.2 359.6 48.4 48.5 160.8 111.1 56.1 50.8 100.6 101.9 85.1 86.5 20.3 20.1 37.6 38.0 148.9 146.9 0.5 0.5
	1,026.5 963.9

Page 53 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

CAPITAL EMPLOYED: WORKING CAPITAL AND OTHER INSTRUMENTS | 2g. Intangible assets

The value in use calculations performed for all cash generating units use cash flow projections based on actual operating results, the Board approved budget for FY2019, and forecasts drawn from FY2020 through to FY2024 which are based on management’s estimates of underlying economic conditions, past financial results, and other factors anticipated to impact the cash generating units’ performance. A discounted terminal cash flow value is calculated post FY2024 using a nominal growth rate of 2.75%. Terminal growth rates are consistent with the prior year. Directors believe these terminal growth rates are an appropriate estimate of the long-term average growth rates achievable in the industries in which the Group participates.

The following nominal pre-tax discount rates have been used in discounting the projected cash flows.

In millions of AUD ALS Minerals ALS Life Sciences – Australia ALS Life Sciences – North America ALS Life Sciences – South America ALS Life Sciences – Europe ALS Food Pharma – Europe ALS Life Sciences – Asia ALS Coal ALS Industrial	Pre-tax (nominal) discount rate 2019 2018
	12.4% 12.5% 12.0% 11.8% 10.1% 10.4% 16.3% 16.5% 9.2% 8.4% 9.8% 10.4% 11.9% 13.2% 11.0% 13.0% 13.1% 13.1%

The determination of the recoverable amounts of the Group’s cash generating units involves significant estimates and judgements and the results are subject to the risk of adverse and sustained changes in the key markets and/or geographies in which the Group operates. With the exception of the ALS Industrial and ALS Life Sciences South America CGU’s, sensitivity analyses performed indicate a reasonably possible change in any of the key assumptions for the Group’s CGU’s would not result in impairment.

ALS Industrial CGU

The estimated recoverable amount of the ALS Industrial CGU exceeded its carrying value by approximately $37.7 million. The Goup has identified that a reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount of the CGU. For the estimated recoverable amount to be equal to the carrying amount, the following assumptions would need to change by the amount specified (whilst holding all other assumptions constant):

• (a) the pre-tax discount rate would need to increase by 1.7 per cent to 14.8 per cent; or

• (b) the compound average growth rate across the forecast period would need to decrease by 0.3 percentage points to 3.2 per cent.

ALS Life Sciences – South America CGU

The estimated recoverable amount of the ALS Life Sciences – South America CGU exceeded its carrying value by approximately $26.1 million. The Group has identified that a reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount of the CGU. For the estimated recoverable amount to be equal to the carrying amount, the following assumptions would need to change by the amount specified (whilst holding all other assumptions constant):

• (a) the pre-tax discount rate would need to increase by 4.5 per cent to 20.8 per cent; or

• (b) the compound average growth rate across the forecast period would need to decrease by 0.7 percentage points to 4.6 per cent.

Accounting policy – Intangible assets Goodwill

Goodwill arising on the acquisition of a subsidiary or business is included in intangible assets.

Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment.

Other intangible assets

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.

Expenditure on internally generated goodwill and brands is recognised in the profit and loss statement as an expense as incurred.

Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Amortisation

Amortisation is calculated on the cost of an asset less its residual value. Amortisation is charged to the profit and loss statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use.

Page 54 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

NET DEBT | 3c. Reconciliation of liabilities arising from financing activities

The estimated useful lives in the current and comparative periods are as follows:

• Capitalised computer software 3-10 Years • Trademarks and Brand-named 3-5 Years • Customer Relationships 5-6 Years • Technology 4 Years

The residual value, the useful life and the amortisation method applied to an asset are reassessed at least annually and adjusted if appropriate.

3. NET DEBT

This section provides information about the overall debt of the company. Where relevant the accounting policies that have been applied and significant estimates and judgements made is included with each note.

• 3a. Cash and cash equivalents

• 3b. Reconciliation of operating profit to net cash

• 3c. Reconciliation of liabilities arising from financing activities

• 3d. Loans and borrowings

3a. Cash and cash equivalents

In millions of AUD Bank balances Bank fixed rate deposits Cash and cash equivalents in the balance sheet Bank overdrafts repayable on demand Cash and cash equivalents in the statement of cash flows	Consolidated 2019 2018
	148.3 187.6 – -
	148.3 187.6 (0.1) (0.4)
	148.2 187.2

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 4.

Accounting policy – Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

3b. Reconciliation of operating profit to net cash

In millions of AUD Profit/(loss) for the period Adjustments for: Amortisation and depreciation (Profit)/loss on sale of property plant and equipment Share-settled performance rights amounts recognised during the year Share of associates and joint venture net profit Gain on sale of discontinued operations FX retranslation loss transferred from foreign currency translation reserve for Oil & Gas Non Labs subsidiaries Impairment charges Net non-cash expenses Operating cashflow before changes in working capital and provisions (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories (Decrease)/increase in trade and other payables (Decrease)/increase in taxation provisions Net cash from operating activities	Consolidated 2019 2018
	154.8 53.4 – – 76.3 75.5 1.8 (0.3) (1.5) 0.5 (2.2) (1.6) – (0.9) – 11.1 – 63.0 (7.1) 4.5
	222.1 205.2 (48.4) (27.2) (20.0) (2.3) 57.2 10.7 7.9 (0.6)
	218.8 185.8

3c. Reconciliation of liabilities arising from financing activities

01 April 2018 Net Cashflows $ $	Non-cash changes 31 March 2019 Acquisition Foreign exchange movements
	$ $ $
Long-term notes 695.6 – Bank loans 1.5 29.6 Lease liabilities – –	– 53.2 748.8
	– (0.1) 31.0
	0.3 – 0.3
Total 697.1 29.6	0.3 53.1 780.1

Page 55 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

RISK & CAPITAL MANAGEMENT | 3d. Loans and borrowings

01 April 2017 Net Cashflows $ $	Non-cash changes 31 March 2018 Acquisition Foreign exchange movements
	$ $ $
Long-term notes 740.6 (38.4) Bank loans 1.5 – Lease liabilities 0.5 (1.0)	– (6.6) 695.6
	– – 1.5
	– 0.5 –
Total 742.6 (39.4)	– (6.1) 697.1

3d. Loans and borrowings

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 4a.

In millions of AUD Current Liabilities Long term notes Bank loans Finance lease liabilities Non-current liabilities Bank loans Long term notes	Consolidated 2019 2018
	266.3 – – – 0.3 –
	266.6 –
	– – 31.0 1.5 482.5 695.6
	513.5 697.1

Bank loans

In October 2018 the Group renegotiated its bank facilities, entering into new revolving multicurrency facilities with a group of five banks totalling USD$300m. These new bank facilities will mature in October 2021. Funding available to the Group from undrawn facilities at 31 March 2019 amounted to $392.7m (2018: $52.1m).

The weighted average interest rate (incorporating the effect of interest rate contracts) for all bank loans at balance date is 3.0% (2018: n/a).

The Company and six of its subsidiaries, namely Australian Laboratory Services Pty Ltd, ALS Canada Limited, ALS Group General Partnership, ALS Group USA Corp, ALS Inspection UK Ltd, and Stewart Holdings Management Ltd are parties to multi-currency term loan facility agreements as borrowers with a number of banks.

Under the terms of the agreements, the Company and a number of its wholly-owned subsidiaries jointly and severally guarantee and indemnify the banks in relation to each borrower’s obligations.

Long term notes

The Company’s controlled entities ALS Group General Partnership, ALS Testing Services Group Inc. and ALS Canada Ltd have issued long term, fixed rate notes to investors in the US Private Placement market. The original issuances occurred in December 2010, July 2011, and again in September 2013. The notes are denominated in US dollars and Canadian dollars and mature as follows – due July 2019: $266.3m; due December 2020: $212.4m; and due July 2022: $267.8m.

Certain of the long term notes are designated as part of a fair value hedge in relation to the interest rate risk (refer note 4c), their carrying value includes a fair value adjustment uplift of $2.3m (2018: $2.6m) being the revaluation of the debt for the risk being hedged. This fair value loss in the carrying value of the notes is offset by gains on interest rate swap instruments which are designated as an effective fair value hedge and recognised as a fair value derivative receivable (refer note 4c).

Interest is payable semi-annually to noteholders. The weighted average interest rate (incorporating the effect of interest rate contracts) for all long term notes at balance date is 4.1% (2018: 4.0%).

Under the terms of the note agreements, the Company and a number of its wholly-owned subsidiaries jointly and severally guarantee and indemnify the noteholders in relation to the issuer’s obligations.

Accounting policy – Loans and borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interestbearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the profit and loss statement over the period of the borrowings on an effective interest basis.

4. RISK & CAPITAL MANAGEMENT

This section provides information about the Group’s risk and capital management. Where relevant the accounting policies that have been applied and significant estimates and judgements made is included with each note.

• 4a. Financial & capital risk management

• 4b. Capital & reserves

• 4c. Financial Instruments

• 4d. Contingencies

• 4e. Capital commitments

• 4f. Operating leases

Page 56 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

RISK & CAPITAL MANAGEMENT | 4a. Financial & capital risk management

4a. Financial & capital risk management

Risk management framework

Identification, measurement and management of risk is a strategic priority for the Group. The provision of goods and services carries a number of diverse risks which may have a material impact on the Group’s financial position and performance. Consequently, the Board has established a comprehensive framework covering accountability, oversight, measurement and reporting to maintain high standards of risk management throughout the Group.

The Group allocates specific roles in the management of risk to executives and senior managers and to the Board. This is undertaken within an overall framework and strategy established by the Board.

The Audit and Risk Committee obtains assurance about the internal control and risk management environment through regular reports from the Risk and Compliance team.

The Group has exposure to the following risks from their use of financial instruments:

• Credit risk

• Liquidity risk

• Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

Credit risk

The Group has an established credit policy and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets. There is no single customer making up a material percentage of the Group’s revenue. Geographic concentrations of trade receivables are – Australia 30.7% (2018: 29.7%), Canada 8.1% (2018: 9.0%), USA 15.3% (2018: 14.3%), UK 11.4% (2018: 12.7%), and other countries 34.5% (2018: 34.3%). The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

Counterparties to transactions involving derivative financial instruments are large Australian and international banks with whom the Group has a signed netting agreement. Management does not expect any counterparty to fail to meet its obligations.

Group policy is to provide financial guarantees only to wholly-owned subsidiaries. Details of the Deed of Cross Guarantee are provided in note 5c.

Liquidity risk

The liquidity position of the Group is continuously managed using cash flow forecasts to ensure sufficient liquid funds are available to meet its financial commitments in a timely and costeffective manner. The Group is party to a number of bilateral debt facility and long term note agreements which provide funding for acquisitions and working capital (refer note 3c).

Note 4c details the repayment obligations in respect of the amount of the facilities and derivatives utilised.

Market risk

Interest rate risk

Interest rate risk is the risk that the Group’s financial position and performance will be adversely affected by movements in interest rates. Interest rate risk on cash and short term deposits is not considered to be a material risk due to the short term nature of these financial instruments.

The Group’s interest rate risk arises from longterm debt. Floating rate debt exposes the Group to cash flow interest rate risk and fixed rate debt exposes the Group to fair value interest rate risk. Interest rate risk is managed by maintaining an appropriate mix of fixed and floating rate debt. The Group enters into interest rate swaps to manage the ratio of fixed rate debt to floating rate debt. Hedging is undertaken against specific rate exposures only, as disclosed in note 4c.

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures.

Foreign exchange risk arises from future purchase and sales commitments and assets and liabilities that are denominated in a currency that is not the functional currency of the respective Group entities. Measuring the exposure to foreign exchange risk is achieved by regularly monitoring and performing sensitivity analysis on the Group’s financial position.

The Group may enter into forward foreign exchange contracts (FECs) to hedge certain forecast purchase commitments denominated in foreign currencies (principally US dollars). The terms of these commitments are generally less than three months. The amount of forecast purchases is estimated based on current conditions in foreign markets, customer orders, commitments to suppliers and experience.

The Group borrows funds in foreign currencies to hedge its net investments in foreign operations. The Group’s Canadian dollar denominated

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2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

RISK & CAPITAL MANAGEMENT | 4b. Capital & reserves

borrowings are designated as hedges of the Group’s net investments in subsidiaries with this functional currency.

The Group has also entered into cross currency interest rate swaps which have been designated as hedges of net investments in foreign operations whose functional currencies are Canadian dollars, Czech koruna, and Euros.

Capital management

Capital comprises equity attributable to equity holders, loans and borrowings and cash and cash equivalents.

Capital management involves the use of corporate forecasting models which facilitates analysis of the Group’s financial position including cash flow forecasts to determine the future capital management requirements. Capital management is undertaken to ensure a secure, cost-effective and flexible supply of funds is available to meet the Group’s operating and capital expenditure requirements. The Group monitors gearing and treasury policy breaches and exceptions. The gearing ratio (net debt to net debt plus equity) as at balance date is 36.3% (2018: 31.1%).

The Group maintains a stable capital base from which it can pursue its growth aspirations, whilst maintaining a flexible capital structure that allows access to a range of debt and equity markets to both draw upon and repay capital.

4b. Capital & reserves

Reconciliation of movement in capital

4b. Capital & reserves Reconciliation of movement in capital	4b. Capital & reserves Reconciliation of movement in capital
In millions of AUD Consolidated 2019 2018 Issued and paid up share capital
485,514,376 ordinary shares fully paid (2018: 488,764,376) 1,325.9 1,348.1 Movements in ordinary share capital
Balance at beginning of year 3,250,000 shares buyback (2018: 15,456,767) 279,610 Net Treasury shares vested and issued to employees (2018: 183,384) Balance at end of year	1,348.1 1,453.4 (24.6) (106.8)
	2.4 1.5
	1,325.9 1,348.1

As at the end of year, the total number of treasury shares held by the ALS Limited LTI Plan Trust was 32,815 (2018: 312,425). These treasury shares are held by the Trust to meet the Company’s future anticipated equity-settled performance rights obligations in respect of the LTI Plan.

Terms and Conditions

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after creditors and are entitled to the net proceeds of liquidation.

Reserves

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity, as well as from the translation of liabilities or changes in fair value of derivatives that hedge the Company’s net investment in a foreign subsidiary.

The employee share-based awards reserve comprises the cumulative amount, recognised as an employee expense to date, of the fair value at grant date of share-based, share-settled awards granted to employees. Refer to notes 1d and 8a.

Other reserves comprise the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. In the prior year, it also included amounts arising from the accounting for a put and call option arrangement entered with a non-controlling interest of a controlled entity.

Dividends

Dividends recognised in the current year by the Company are:

Company are:
In millions of AUD	Cents per share	Franked amount (cents)	Total amount	Date of payment
2019
Interim 2019 ordinary 11.0 2.2			53.5 18 Dec 18
Final 2018 ordinary 9.0 3.6			44.0 02 Jul 18
			97.5
2018 Interim 2018 ordinary 8.0 3.2 Final 2017 ordinary 8.0 3.2			40.4 18 Dec 17 40.4 03 Jul 17 80.8

Dividend declared after the end of the financial year: Final 2019 11.5 4.0 55.8 01 Jul 19 ordinary

The financial effect of this dividend has not been brought to account in the financial statements for the year ended 31 March 2019 and will be recognised in subsequent financial reports.

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2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

RISK & CAPITAL MANAGEMENT | 4c. Financial Instruments

The franked components of all dividends paid or declared since the end of the previous financial year were franked based on a tax rate of 30%.

In millions of AUD Dividend franking account 30% franking credits available to shareholders of ALS Limited for subsequent financial years	Consolidated 2019 2018
	1.9 3.1

The above available amounts are based on the balance of the dividend franking account at yearend adjusted for:

• franking credits/debits that will arise from the payment/receipt of current tax liabilities/assets;

• franking debits that will arise from the payment of dividends recognised as a liability at the year-end;

• franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated group at the year-end; and

• franking credits that the entity may be prevented from distributing in subsequent years.

The final FY19 dividend declared after balance date will be franked to 35% using franking credits in existence at balance date and arising from the Company’s tax instalments to be paid during the year ending 31 March 2019.

Accounting policy

Transaction costs

Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.

Dividends

Dividends are recognised as a liability in the period in which they are declared.

4c. Financial Instruments

Liquidity risk

Contractual maturities for financial liabilities on a gross cash flow basis are analysed below:

CONSOLIDATED

As at 31 March 2019 In millions of AUD Bank overdraft Trade and other payables Finance lease liabilities Long term notes Bank loans Derivative financial instruments Total CONSOLIDATED As at 31 March 2018 In millions of AUD Bank overdraft Trade and other payables Finance lease liabilities Long term notes Bank loans Derivative financial instruments Total	6 months or less 6 to 12 months 1 to 2 years 2 to 5 years Over 5 years Total
	0.1 – – – – 0.1
	200.4 – – – – 200.4
	0.1 0.2 – – – 0.3
	280.3 10.9 231.2 283.9 – 806.3
	1.2 1.2 2.4 31.4 – 36.2
	(0.4) (0.5) (1.3) - – (2.2)
	481.7 11.8 232.3 315.3 – 1,041.1
	6 months or less 6 to 12 months 1 to 2 years 2 to 5 years Over 5 years Total 0.4 – – – – 0.4 169.8 – – – – 169.8 – – – – – – 14.9 14.8 269.2 479.4 – 778.3 0.1 – – – – 0.1 (1.0) (0.6) (0.7) (0.5) – (2.8)
	184.2 14.2 268.5 478.9 – 945.8

The gross outflows/(inflows) disclosed in the tables above for derivative financial liabilities represent the contractual undiscounted cash flows of derivative financial instruments held for risk management purposes and which are usually not closed out prior to contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash settled.

Page 59 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

RISK & CAPITAL MANAGEMENT | 4c. Financial Instruments

Currency risk

The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:

CONSOLIDATED In millions of AUD Trade and other receivables Cash at bank Bank loan Long term notes Trade and other payables Net balance sheet exposure CONSOLIDATED In millions of AUD Trade and other receivables Cash at bank Bank loan Long term notes Trade and other payables Net balance sheet exposure

2019 USD CAD NOK EUR PLN GBP 12.7 – – 2.7 0.2 1.0 32.8 – – 4.4 – 0.4 – – – – – – The following exchange rates against the Australian dollar applied at 31 March: – (68.6) – – – – (2.2) – – (0.4) – (0.1) 43.3 (68.6) – 6.7 0.2 1.3 31 March spot rate 2018 2019 2018 USD CAD NOK EUR PLN GBP USD 0.7096 0.7682 14.1 – – 2.7 0.2 – CAD 0.9473 0.9912 48.4 – 0.7 3.6 0.1 0.6 NOK 6.1225 6.0278 – – – – – – EUR 0.6326 0.6235 – (65.6) – – – – PLN 2.7228 2.6244 (3.1) – – (0.3) – – GBP 0.5445 0.5482 59.4 (65.6) 0.7 6.0 0.3 0.6

Sensitivity analysis

A 10 percent strengthening of the Australian dollar against the above balances at 31 March would have increased (decreased) profit before income tax and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2018.

In millions of AUD As at 31 March 2019 USD CAD EUR GBP	Consolidated In millions of AUD Profit Equity As at 31 March 2018 (4.0) - USD - 6.2 CAD (0.6) - EUR (0.1) - GBP (4.7) 6.2	Consolidated Profit Equity (5.4) - - 6.0 (0.5) - (0.1) -
		(6.0) 6.0

A 10 percent weakening of the Australian dollar against the above balances at 31 March would have increased (decreased) profit before income tax and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2018.

In millions of AUD As at 31 March 2019 USD CAD EUR GBP	Consolidated In millions of AUD Profit Equity As at 31 March 2018 4.8 - USD - (7.6) CAD 0.8 - EUR 0.1 - GBP 5.7 (7.6)	Consolidated Profit Equity 6.6 - - (7.3) 0.7 - 0.1 -
		7.4 (7.3)

Page 60 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

RISK & CAPITAL MANAGEMENT | 4c. Financial Instruments

Interest rate risk

At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

Consolidated In millions of AUD Financial assets Financial liabilities Effect of interest rate contracts*	2019 2018 2019 2018 Fixed rate instruments Variable rate instruments – – 148.3 187.6 (748.8) (695.6) (31.4) (0.4) 146.1 137.2 (146.1) (137.2)
	(602.7) (558.4) 29.2 50.0

* Represents the net notional amount of interest rate swaps used for hedging.

Sensitivity analysis

Fair value sensitivity analysis for fixed rate instruments

The Group has designated interest rate contracts as hedging instruments under a fair value hedge accounting model in relation to its fixed rate long term notes. The interest rate contracts swap the fixed interest payable on a portion of the loan notes to variable interest rates for the term of the debt. In accordance with the Group’s accounting policy (refer note 3c) changes in fair value of the interest rate contracts together with the change in fair value of the debt arising from changes in interest rates are recognised in the profit and loss (to the extent the fair value hedge is effective). In 2019, the change in fair value of interest rate contracts was ($0.4) million (2018: ($5.1) million) and was offset in the Group’s profit and loss statement by an equal amount relating to the change in fair value of the hedged risk. A change of 50 basis points in interest rates at the reporting date would not materially impact the Group’s profit and loss before income tax or equity (2018: Nil).

Cash flow sensitivity analysis for variable rate instruments

A change of 50 basis points in interest rates at the reporting date would have increased (decreased) profit before income tax and equity by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2018.

Consolidated In millions of AUD Variable rate instruments Interest rate contracts Cash flow sensitivity (net)	As at 31 March 2019	As at 31 March 2019	As at 31 March 2019	As at 31 March 2019	As at 31 March 2018	As at 31 March 2018	As at 31 March 2018	As at 31 March 2018
	Profit		Equity		Profit		Equity
	50 bp increase	50 bp decrease	50 bp increase	50 bp decrease 50 bp increase		50 bp decrease	50 bp increase	50 bp decrease
	0.6 (0.6) – – 0.9 (0.9) – – (0.7) 0.7 – – (0.7) 0.7 – –
	(0.1) 0.1 – – 0.2 (0.2) – –

Fair values of financial instruments

The Group’s financial assets and liabilities are included in the balance sheet at amounts that approximate fair values with the exception of fixed rate debt which has a fair value of $764.8m (2018: $706.3m). The basis for determining fair values is disclosed in note 7c. The fair value at 31 March 2019 of derivative assets (2018: asset) held for risk management, which are the Group’s only financial instruments carried at fair value, was a net gain of $1.2m (2018: $5.6m loss) measured using Level 2 valuation techniques as defined in the fair value hierarchy shown in note 7c. The Group does not have any financial instruments that are categorised as Level 1 or Level 3 in the fair value hierarchy.

Page 61 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Notes to the financial statements

GROUP STRUCTURE | 5a. Acquisition of subsidiaries

Leases as lessor

4d. Contingencies

The directors are of the opinion that there are no material contingent liabilities at 31 March 2019.

4e. Capital commitments

In millions of AUD	Consolidated	Consolidated
	2019	2018
Capital expenditure commitments
Plant and equipment contracted
but not provided for and payable	27.6	24.8
within one year

4f. Operating leases

Leases as lessee

In millions of AUD Less than one year Between one and five years More than five years	Consolidated 2019 2018 42.5 35.4 88.4 64.8 51.5 37.9
	182.4 138.1

The Group leases property, plant and equipment under operating leases expiring over terms of up to six years. Leases generally provide the Group with a right of renewal at which time all terms are renegotiated. Some leases provide for additional rent payments that are based on a local price index.

During the year ended 31 March 2019 $54.7m was recognised as an expense in the profit and loss statement in respect of operating leases (2018: $49.9m).

Accounting policy

Operating lease payments

Payments made under operating leases are recognised in the profit and loss statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the profit and loss statement as an integral part of the total lease expenses and spread over the lease term.

The Group leases out its investment property held under operating lease (see note 2f). The future minimum lease payments receivable under noncancellable leases are as follows:

In millions of AUD Less than one year Between one and five years	Consolidated 2019 2018 2.1 2.1 5.6 7.8
	7.7 9.9

During the year ended 31 March 2019 $2.1m was recognised as rental income in the profit and loss statement (2018: $1.9m).

5. GROUP STRUCTURE

This section provides information about the Group’s structure. Where relevant the accounting policies that have been applied and significant estimates and judgements made is included with each note.

5a. Acquisition of subsidiaries

5b. Consolidated entities

5c. Deed of cross guarantee

5d. Parent entity disclosures

5a. Acquisition of subsidiaries

Business Combinations

In millions of AUD

2019 Interest Acquired Date acquired	Conside- ration
Bioscreen Testing Services Inc 100% Feb-19	43.9
Other acquisitions during the year	22.4
	66.3

If the acquisitions had occurred on 1 April 2018, management estimates that Group revenue from continuing operations would have been $1,688.5m and net profit after tax from

continuing operations would have been $169.0m.

In millions of AUD Interest Acquired Date acquired 2018 ALS Marshfield LLC 100% Jun-17 Mikrolab Group 100% Oct-17 Other acquisitions during the year	Conside- ration 12.6 14.2 6.1
	32.9

If the acquisitions had occurred on 1 April 2017, management estimates that Group revenue would have been $1,454.4m and net profit after tax would have been $56.2m.

Page 62 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

GROUP STRUCTURE | 5a. Acquisition of subsidiaries

Bioscreen Testing Services Inc.

Bioscreen Testing Services Inc.
In millions of AUD	Fair Value**
	2019
Property, plant and equipment	4.1
Trade and other receivables	1.6
Cash and cash equivalents	–
Trade and other payables	(1.8)
Net identifiable assets and liabilities	3.9
Goodwill on acquisition	40.0
Consideration paid, satisfied in cash	43.9
Cash (acquired)	–
Net cash outflow	43.9

** These acquisitions have been recognised on a provisional basis.

Directly attributable transaction costs of $350,000 relating to these acquisitions were included in administration and other expenses in the profit and loss statement. In the period to 31 March 2019 Bioscreen Testing Services Inc contributed revenue of $3.3m and a net profit after tax of $0.4m to the consolidated net profit after tax for the year.

The goodwill recognised on acquisition is attributable mainly to skills and technical talent of the acquired business’s workforce and the synergies expected to be achieved from integrating the company into the Group’s existing business. The goodwill is not expected to be deductible for income tax purposes.

Other acquirees’ net assets at acquisition dates

In millions of AUD Property, plant and equipment Inventories Identifiable intangible assets Trade and other receivables Other current assets Cash and cash equivalents Interest-bearing loans and borrowings Employee benefits Trade and other payables Current tax liabilities Net identifiable assets and liabilities Goodwill on acquisition Consideration paid Deferred consideration Paid in cash Cash (acquired) Net cash outflow	Fair Value ** Fair Value *2019 2018 4.3 7.0 – 0.7 0.1 0.9 3.6 7.6 – 0.3 0.3 1.1 (1.0) (2.6) (0.4) (0.5) (1.7) (1.8) (0.2) –
	5.0 12.7 17.4 20.2
	22.4 32.9 (3.2) –
	19.2 32.9 (0.3) (1.1)
	18.9 31.8

• The comparatives disclose all 2018 acquisitions.

** These acquisitions have been recognised on a provisional basis.

Directly attributable transaction costs of $485,500 (2018: Nil) relating to these acquisitions were included in administration and other expenses in the profit and loss statement. In the period to 31 March 2019 the other acquirees contributed revenue of $9.7m and a net profit after tax of $0.3m to the consolidated net profit after tax for the year.

The goodwill recognised on acquisition is attributable mainly to skills and technical talent of the acquired business’s workforce and the synergies expected to be achieved from integrating the company into the Group’s existing business. The goodwill is not expected to be deductible for income tax purposes.

Accounting policy – Business Combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less

• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit and loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Transaction costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit and loss. When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination.

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2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

GROUP STRUCTURE | 5c. Deed of cross guarantee

This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

In determining the fair value of identifiable net assets acquired, the Group considers the existence of identifiable intangible assets such as brand-named, trademarks, customer contracts and relationships and in process research and development intangible assets. Where material, these items are recognised separately from goodwill.

5b. Consolidated entities

The Group’s significant controlled entities are listed below:

Parent entity Country of	Incorporation
ALS Limited	Australia
Subsidiaries
Australian Laboratory Services Pty Ltd	Australia
ACIRL Proprietary Ltd	Australia
ACIRL Quality Testing Services Pty Ltd	Australia
Ecowise Australia Pty Ltd	Australia
ALS Industrial Pty Ltd	Australia
ALS Metallurgy Pty Ltd	Australia
ALS South American Holdings Pty Ltd ALS Canada Ltd	Australia Canada
ALS Testing Services Group, Inc	USA
ALS Group General Partnership	USA
ALS Group USA, Corp ALS USA, Inc ALS Services USA, Corp ALS Technichem (Singapore) Pte Ltd ALS Chemex South Africa (Proprietary) Ltd ALS Burkina SARL	USA USA USA Singapore South Africa Burkina Faso
Group de Laboratoire ALS MALI SARL	Mali
ALS Scandinavia AB	Sweden
ALS Inspection UK Limited United Kingdom ALS Chemex de Mexico S.A. de C.V. Mexico
ALS Patagonia S.A. ALS Peru S.A.	Chile Peru

The above entities were wholly owned at the end of the current year and the comparative year.

Accounting policy – Consolidated entities Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are

included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

Associates and joint ventures

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Joint ventures are those entities over whose activities the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in associates and joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity accounted investees, until the date on which significant influence or joint control ceases.

Non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to noncontrolling interest are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss.

Transactions eliminated on consolidation

Intra-group balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with associates and joint ventures are eliminated to the extent of the Group’s interest in the entity with adjustments made to the “Investments accounted for using the equity method” and “Share of net profit of associates and joint ventures accounted for using the equity method” accounts.

5c. Deed of cross guarantee

Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 28 September 2016 (replacing ASIC Class order 98/1418 dated 13 August 1998), the whollyowned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for

Page 64 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

GROUP STRUCTURE | 5c. Deed of cross guarantee

preparation, audit and lodgement of financial reports, and directors’ reports.

It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up.

The subsidiaries subject to the Deed are:

• ACIRL Proprietary Limited

• ACIRL Quality Testing Services Pty Ltd

• ALS Metallurgy Holdings Pty Ltd

• ALS Metallurgy Pty Ltd

• ALS Metallurgy Pty Ltd atf Ammtec Unit Trust

• ALS Industrial Holdings Pty Ltd

• ALS Industrial Pty Ltd

• Australian Laboratory Services Pty Ltd

• Ecowise Australia Pty Ltd

• ALS South American Holdings Pty Ltd

A consolidated profit and loss statement, consolidated statement of comprehensive income and consolidated balance sheet, comprising the Company and subsidiaries which are a party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 31 March 2019 is set out below.

Summary profit and loss statement and retained profits

etained profits
In millions of AUD Profit before tax Income tax expense Profit after tax Retained profits at beginning of year Retained earnings adjustment* Dividends recognised during the year Retained profits at end of year	Consolidated 2019 2018 159.1 20.3 (17.2) (17.3)
	141.9 3.0 (72.6) 4.5 (1.8) 0.7 (99.8) (80.8)
	(32.3) (72.6)

Statement of comprehensive income

In millions of AUD Profit for the period Total comprehensive income for the period	Consolidated 2019 2018 141.9 3.0
	141.9 3.0

Balance Sheet

Balance Sheet
In millions of AUD Assets	Consolidated 2019 2018
Cash and cash equivalents Trade and other receivables Inventories Other Total current assets Receivables Investments accounted for using the equity method Investment property Deferred tax assets Property, plant and equipment Intangible assets Other investments Total non-current assets Total assets Liabilities	14.3 41.5 97.1 84.3 22.0 16.8 3.8 3.3
	137.2 145.9
	155.7 150.9 16.1 14.8 10.1 10.2 23.5 20.9 141.5 139.0 333.1 332.7 741.8 725.9
	1,421.81,394.4
	1,559.01,540.3
Trade and other payables Income tax payable Employee benefits Total current liabilities Loans and borrowings Employee benefits Other Total non-current liabilities Total liabilities Net assets Equity	58.6 54.4 1.6 3.1 33.8 30.1
	94.0 87.6
	151.5 161.9 6.7 7.3 10.0 7.6
	168.2 176.8
	262.2 264.4
	1,296.8 1,275.9
Share capital Reserves Retained earnings Total equity	1,325.9 1,348.1 3.2 0.4 (32.3) (72.6)
	1,296.8 1,275.9

• Represents applicable amounts taken directly to retained earnings.

Page 65 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

GROUP STRUCTURE | 5d. Parent entity disclosures

5d. Parent entity disclosures

In millions of AUD 2019	2018
Profit / (loss) for the period (19.3)	40.5
Total comprehensive income /
(loss) for the period (19.3)	40.5
Financial position of parent entity at	year end
In millions of AUD 2019	2018
Current assets 17.2	44.8
Total assets 1,628.9	1,756.5
Current liabilities 9.9	12.5
Total liabilities 457.0	446.1
Net assets 1,171.9	1,310.4
Share capital 1,325.9	1,348.1
Reserves 4.2	4.6
Retained earnings (158.2)	(42.3)
Total equity 1,171.9	1,310.4
Parent entity capital commitments
In millions of AUD 2019	2018
Plant and equipment contracted
but not provided for and
payable within one year –	0.7
–	0.7

Parent entity guarantees in respect of the debts of its subsidiaries

The Company is party to a number of financing facilities and a Deed of Cross Guarantee under which it guarantees the debts of a number of its subsidiaries. Refer to notes 3d and 5c for details.

Page 66 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Notes to the financial statements

TAXATION | 6a. Income taxes

6. TAXATION

This section provides information about the Group’s income tax expense (including a reconciliation of income tax expense to accounting profit), deferred tax balances and income tax recognised directly in equity. Where relevant the accounting policies that have been applied and significant estimates and judgements made is included with each note.

6a. Income taxes

• 6b. Deferred tax assets and liabilities

6a. Income taxes

In millions of AUD Recognised in the profit and loss statement Current tax expense from continuing operations	Consolidated 2019 2018
Current year Adjustments for prior years Deferred tax expense	67.1 44.7 (0.3) 1.9
	66.8 46.6
Origination and reversal of temporary differences Total income tax expense in profit and loss statement Reconciliation between tax expense and pre-tax net profit/(loss)	(4.4) 1.4
	62.4 48.0
Profit/(loss) before tax from continuing operations Income tax using the domestic corporation tax rate of 30% (2018: 30%) Difference resulting from different tax rates in overseas countries Increase in income tax expense due to:	230.3 115.4 69.1 34.6
	(7.1) (4.0)
Non-deductible expenses Non-deductible new market expansion and acquisition related costs Tax losses of subsidiaries not recognised Non-resident withholding tax paid upon receipt of distributions from foreign related parties Non-deductible goodwill impairment losses Non-deductible amortisation of intangibles Decrease in income tax expense due to:	4.8 0.8 0.1 0.1 1.8 0.6 2.3 1.4 – 18.9 0.9 0.8
	9.9 22.6
Previously unrecognised tax losses utilised during the year Share of associate entities net profit Foreign statutory tax exemptions granted Tax exempt revenues Deductible financing costs Other deductible items Under / (over) provided in prior years Income tax expense on pre-tax net profit/(loss) from continuing operations Deferred tax recognised directly in equity	– (0.6) (0.7) (0.5) (1.3) (1.4) (0.8) (1.2) (4.5) (1.9) (1.9) (1.5) (0.3) 1.9
	62.4 48.0
Relating to hedging reserve	(0.4) 0.1
	(0.4) 0.1

Page 67 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

TAXATION | 6b. Deferred tax assets and liabilities

6b. Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Consolidated In millions of AUD	Assets Liabilities Net 2019 2018 2019 2018 2019 2018
Property, plant and equipment Unrealised FX losses/(gains) Provisions and other payables Undeducted equity raising costs Unearned Revenue Fair value derivatives Inventories Other items Tax value of loss carry-forwards recognised Tax assets / liabilities Set off of tax Net tax assets / liabilities	6.6 5.8 6.4 7.0 0.2 (1.2) 3.1 8.6 4.7 6.0 (1.6) 2.6 17.5 16.8 – – 17.5 16.8 0.6 0.9 – – 0.6 0.9 3.1 – – – 3.1 – – – 1.8 1.4 (1.8) (1.4) 0.1 – 6.3 4.8 (6.2) (4.8) 5.9 1.7 2.1 2.1 3.8 (0.4) – – – – – –
	36.9 33.8 21.3 21.3 15.6 12.5 (15.2) (11.8) (15.2) (11.8) – –
	21.7 22.0 6.1 9.5 15.6 12.5

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

In millions of AUD Tax losses	Consolidated Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits. 2019 2018 34.8 34.8

Accounting policy

Income taxes

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the profit and loss statement except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised in equity or other comprehensive income, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

Tax consolidation

The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 April 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is ALS Limited.

Page 68 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

OTHER INFORMATION | 7a. Basis of preparation

Nature of tax funding arrangements

The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity payable (receivable) equal in amount to the tax liability (asset) assumed. The inter-entity payables (receivables) are at call.

Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.

Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as a current asset or liability in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

7. OTHER INFORMATION

This section provides information on items that are not considered to be significant in understanding the financial performance and position of the Group but must be disclosed to comply with the Accounting Standards, the Corporation Act 2001 or the Corporations Regulations.

7a. Basis of preparation

7b. Significant accounting policies

7c. Determination of fair value

7d. Auditors’ remuneration

7e. Events subsequent to balance date

7a. Basis of preparation

Statement of compliance

The financial report is a general-purpose financial report which has been prepared in accordance with Australian Accounting Standards (“AASBs”) adopted by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001. The consolidated financial report of the Group also complies with the International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board.

This is the first of the Group’s annual financial reports in which AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments have been applied. Changes to significant accounting policies are described in note 7b.

The financial report was authorised for issue by the directors on 21 May 2019.

Basis of measurement

The financial report is prepared on the historical cost basis except that derivative financial instruments and liabilities for cash-settled share-based payments are measured at fair value.

Functional and presentation currency

The financial report is presented in Australian dollars which is the Company’s functional currency. The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016 and in accordance with that Instrument, amounts in the financial report have been rounded off to the nearest hundred thousand dollars, unless otherwise stated.

Use of estimates and judgements

The preparation of a financial report requires judgements, estimates and assumptions to be made, affecting the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Page 69 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

OTHER INFORMATION | 7b. Significant accounting policies

In particular, the most significant uses of estimates and judgements are described in notes 2a. Trade and other receivables, 2g. Intangible assets, 5a. Acquisition of subsidiaries, 6a. Income taxes and 6b. Deferred tax assets and liabilities.

7b. Significant accounting policies

Except as described below, the accounting policies applied by the Group in this financial report are the same as those applied by the Group in its consolidated financial report as at and for the year ended 31 March 2019.

Significant new accounting policies

The Group has initially adopted AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments from 1 April 2018.

AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced AASB 118 Revenue, AASB 111 Construction Contracts and related interpretations. Under AASB 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control – at a point in time or over time – requires judgement.

The Group has adopted AASB 15 using the cumulative effect method (without practical expedients), with the effect of initially applying this standard recognised at the date of initial application, 1 April 2018. Accordingly, the information presented for FY18 has not been restated and is presented, as previously reported, under AASB 118, AASB 111 and related interpretations.

The effect of initially applying AASB 15 is mainly attributed to the following:

• Non-project related works in progress no longer recognised as revenue . Under AASB 118 revenue for non-project related work was recognised for performance obligations started but not yet completed at the end of the period. Under AASB 15, revenue is recognised only to the extent that the performance obligation is fully complete, usually when the report of findings or test/inspection certificate is issued to the customer. Revenue is now recognised later than under AASB 18. The effect of implementing AASB15 is a decrease of Inventories Work in Progress of $12.3m with an adjustment of equal value made to opening retained earnings. If AASB 118 would have been applied this year, revenue would have been higher with $8.8m.

• to the customer. Each sample bottle sold to a customer essentially has attached to it a promise by ALS to analyse the lubricant sample returned to the laboratory. In many instances, the return of the customers samples for analysis by ALS could take place weeks or months after the customer has already been invoiced and revenue recognised. When assessing the discharge of performance obligation criterion for revenue recognition applicable under AASB 15, revenue should not be booked until the customer is in receipt of the analytical test report in respect of each returned sample bottle. Under AASB15, the average revenue cycle for each jurisdiction is estimated and applied to the amounts of prebilled revenues. This method tracks the average lead time between sample dispatch and sample analysis. Revenue is now recognised later than under AASB118. The effect of implementing AASB15 is an increase in deferred revenue, reported under Trade and other payables on the balance sheet, of $12.2m. The after-tax effect on opening retained earnings is $9.1m. If AASB 118 would have been applied this financial year, revenue would have been higher with $1.2m.

AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces AASB 139 Financial Instruments: Recognition and Measurement . The Group has taken an exemption not to restate comparative information for prior periods with respect to classification and measurement (including impairment) requirements. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of AASB 9 are recognised in retained earnings and reserves as at 1 April 2018. Accordingly, the information presented for FY18 does not generally reflect the requirements of AASB 9 but rather those of AASB 139.

The effect of initially applying AASB 9 is mainly attributed to the following:

• Increase in impairment losses recognised on financial assets.

The adoption of AASB 9 did not impact on the classification of financial assets or liabilities.

The following table summarises the impact, net of tax, of transition to AASB 15 and AASB 9 on retained earnings and Non-Controlling Interest at 1 April 2018.

Estimated impact of adoption of AASB 9 and AASB 15

• Deferral in recognition of revenues attaching to the Company’s Tribology operations . Under AASB 118 customers were invoiced and revenue recognised at the time when the customer submits a purchase order for Tribology kits and these were dispatched

Page 70 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

OTHER INFORMATION | 7b. Significant accounting policies

In millions of AUD Trade and other receivables	As reported at 31 March 2018 278.3	Adjustments due to adoptions of AASB 15 –	Adjustments due to adoption of AASB 9 (3.4)	Adjusted opening balances at 1 April 2018 274.9
Inventories Assets held for sale	75.8 25.3	(11.8) (0.5)	– –	64.0 24.8
Deferred Tax Assets	22.0	3.1	–	25.1
Trade and other payables Retained earnings	(169.8) 229.1	(12.2) 21.3	– 3.4	(182.0) 253.8

The total adjustment (net of tax) to the opening balance of the Group’s equity at 1 April 2018 is $24.7 million. The principal components of the adjustment are as follows.

A decrease of $12.3million in retained earnings (net of tax) due to changes in recognition of accrued revenues for non-project related works in progress, reducing inventories by $11.8million and Assets held for sale by $0.5million respectively.

A decrease of $9.1million in retained earnings (net of tax) due to a deferral in recognition of revenues attaching to the Company’s Tribology operations (Industrial segment) increasing Trade and other payables as unearned revenues by $9.1million.

A decrease of $3.4million in retained earnings (net of tax) due to impairment losses on financial assets, including additional loss allowances in respect of trade receivables. Trade and other receivables (net) decreased by $3.4million due to increased provisions recognised on the initial application of AASB 9.

There was no material impact on the Balance sheet and Profit & Loss for the period ended 31 March 2019 as a result of the implementation of the new standards.

Accounting policies that apply to specific content in the financial statements have been included within the relevant notes.

Accounting policies that apply across a number of contents in the financial statements are listed below.

Impairment

Financial assets

The Group’s primary type of financial assets subject to AASB 9’s new expected credit loss model is trade receivables. The Group has applied the simplified approach permitted in AASB 9,

which requires the use of the lifetime expected loss provision for all receivables, whereas AASB 139 operated under an incurred loss model and would only recognise impairments when there was objective evidence.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-forsale financial asset is calculated by reference to its fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in the profit and loss statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the profit and loss statement.

Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories (see note 2b) and deferred tax assets (see note 6b), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit and loss statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the profit and loss statement.

Impairment losses recognised in respect of cashgenerating units are allocated first to reduce the carrying amount of any goodwill allocated to cashgenerating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Goodwill that forms part of the carrying amount of an investment in equity accounted investees is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment is tested for impairment as a single asset when there is objective evidence that the investment may be impaired.

Page 71 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

OTHER INFORMATION | 7b. Significant accounting policies

Hedging

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective portion of any gain or loss on the derivative financial instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or the forecast transaction for a nonfinancial asset or non-financial liability, the associated cumulative gain or loss is transferred from other comprehensive income and included in the initial cost or other carrying amount of the nonfinancial asset or liability. In other cases the amount recognised in other comprehensive income is transferred to the profit and loss statement in the same period that the hedged item affects profit or loss.

The ineffective portion of any change in fair value is recognised immediately in the profit and loss statement.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship, but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in other comprehensive income is recognised immediately in the profit and loss statement.

Fair value hedges

Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognised in the profit or loss. The hedged item also is stated at fair value in respect of the risk being hedged; the gain or loss attributable to the hedged risk is recognised in profit or loss with an adjustment to the carrying amount of the hedged item.

Economic hedges

Where a derivative financial instrument is not designated in a qualifying hedge relationship, all changes in fair value are recognised in the profit and loss statement

Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate

ruling at that date. Foreign exchange differences arising on translation are recognised in the profit and loss statement, except for differences arising on the translation of a financial liability designated as a hedge of the net investment in a foreign operation or qualifying cash flow hedges, which are recognised in other comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in other comprehensive income and presented in the foreign currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss as part of the profit or loss on disposal. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and are presented within equity in the FCTR.

Hedge of net investment in foreign operations

The Group applies hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and the parent entity’s functional currency regardless of whether the net investments are held directly or through an intermediate parent. Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in other comprehensive income, in the foreign currency translation reserve, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognised in the profit and loss statement. When the hedged part of a net investment is disposed of, the associated cumulative amount in equity is transferred to the profit and loss statement as an adjustment to the gain or loss on disposal.

Page 72 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

OTHER INFORMATION | 7b. Significant accounting policies

Derivative financial instruments

The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported net income.

Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value and changes therein are recognised immediately in the profit and loss statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

New standards and interpretations not yet adopted AASB 16 Leases

AASB 16 Leases became effective for annual periods beginning after 1 April 2019. This standard has not been applied in preparing these consolidated financial statements.

AASB 16 replaces existing leases guidance, including IAS 17 Leases , IFRIC 4 Determining whether an Arrangement contains a Lease , SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease .

This standard will become effective for the Group for annual periods beginning on or after 1 April 2019 (Group’s 2020 consolidated financial statements).

AASB 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease

liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases.

The Group has assessed the estimated impact that initial application of AASB 16 will have on its consolidated financial statements, as described below. The actual impacts of adopting the standard on 1 April 2019 may change because:

• the Group has not finalised the testing and assessment of controls over its new IT systems; and

• the new accounting policies are subject to change until the Group presents its first financial statements that include the date of initial application.

i. Leases in which the Group is a lessee

The Group will recognise new right-of-use assets and lease liabilities for its operating leases of premises, vehicles and equipment. The nature of expenses related to those leases will now change because the Group will recognise an amortisation charge for right-of-use assets and interest expense on lease liabilities.

Previously, the Group recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised. The impact on the Group’s profit and loss statement will not be material.

In addition, the Group will no longer recognise provisions for operating leases that it assesses to be onerous. Instead, the Group will include the payments due under the lease in its lease liability.

The Group will apply the modified retrospective approach and will record any impact of first-time application of the standard in retained earnings at 1 April 2019, with no restatement of comparatives. On transition, the majority of leases will be recognised using the modified retrospective B option, whereby the right-of-use assets relating to property, equipment and vehicles will be measured at the same amount as the liability at 1 April 2019, being the present value of the remaining future minimum lease payments at the date of initial application, adjusted for lease payments made in advance or due.

The Group has applied the practical expedient whereby AASB 16 has been applied to contracts that were previously identified as leases when applying AASB 17 and IFRIC4.

The Group acquired software to track and report its lease contracts in accordance with the new standard. Based on the information currently

Page 73 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

OTHER INFORMATION | 7c. Determination of fair value

available, the Group estimates that it will recognise additional assets and lease liabilities in the range of $200m to $250m as at 1 April 2019. Future lease payments are discounted using incremental borrowing rates calculated using all-in interest rate yield curve data for corporate entities with a similar credit profile to the Group, noting different rates for the five major currencies (AUD, USD, GBP, CAD, EUR), over various lease terms. The Group makes no distinction between the various classes of assets (property, equipment and vehicles) as its access to capital funding is not dependant on the category of leased asset being financed.

The Group does not expect the adoption of AASB 16 to impact its ability to comply with the revised maximum leverage threshold loan covenants.

No significant impact is expected for the Group’s finance leases.

• ii. Leases in which the Group is a lessor

No significant impact is expected for leases in which the Group is a lessor.

7c. Determination of fair value

The following summarises the major methods and assumptions used in estimating the fair values for measurement and disclosure purposes:

Fair value hierarchy

In determining fair value measurement for disclosure purposes, the Group uses the following fair value measurement hierarchy that reflects the significance of the inputs used in making the measurements:

• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

• Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation.

Derivatives

Forward exchange contracts are marked to market using publicly available forward rates. Interest rate contracts are marked to market using discounted estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate for a similar instrument at the balance sheet date. Where other pricing models are used, inputs are based on market related data at the balance sheet date.

Loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows, discounted at the market rate of interest at the measurement date.

Trade and other receivables / payables

For receivables / payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables / payables are discounted to determine the fair value.

Finance leases

The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogenous lease agreements. The estimated fair value reflects changes in interest rates.

Share-based payment transactions

The fair value of share-based awards to employees is measured using Binomial Tree (Earnings per Share and EBITDA hurdles and service condition) and Monte-Carlo Simulation (Total Shareholder Return hurdle) valuation methodologies. Measurement inputs include the Company’s share price on measurement date, expected volatility thereof, expected life of the awards, the Company’s expected dividend yield and the riskfree interest rate. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. Refer note 8a for details.

Contingent consideration

The fair value of contingent consideration is calculated using the income approach based on the expected payment amounts and their associated probabilities. When appropriate, it is discounted to present value.

Page 74 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Notes to the financial statements

OTHER INFORMATION | 7e. Events subsequent to balance date

7d. Auditors’ remuneration

In thousands of AUD Audit services	Consolidated 2019 2018
Auditors of the Company KPMG Australia: Audit and review of consolidated and company financial reports Other regulatory services Other KPMG member firms: Audit and review of financial reports Other auditors Audit and review of financial reports Other services	627.8 615.9 10.5 73.0 1,263.9 1,073.3 – –
	1,902.2 1,762.2
Auditors of the Company KPMG Australia Other assurance and investigation services Taxation services Other KPMG member firms: Other assurance and investigation services Taxation services	22.5 263.3 242.1 53.3 444.8 131.6 645.5 495.0
	1,354.9 943.2

7e. Events subsequent to balance date

Since the interval between the end of the financial year and the date of this report there have been the following Subsequent Events.

On 17 April 2019, the Group announced that it had successfully placed new long term USPP senior notes totalling $252 million equivalent. The new USPP issuance is comprised of three tranches each of 15 years tenor, denominated AUD$125 million, EUR €40 million and STG £35 million. The weighted average cost of funds in relation to the new 15-year fixed rate USPP notes is 3.3%. The mix of currencies sought via the new issuance allows the Group’s global cashflows and operating asset mix to be appropriately balanced by funding in similarly denominated currencies. The extended debt maturity profile complements the Group’s long-term capital management strategy and supports planned capital investment.

On 29 April 2019, the Group announced the completion of the sale of its environmental and analytical testing business in China for USD$57.3 million and adjusted net cash to SUEZ. The Group’s net assets which relate to this strategic divestment are appropriately classified within Assets and Liabilities Held for Sale in the Group’s Balance Sheet as at 31 March 2019. As at Balance Date the financial gain relating to this transaction has not been recognised in the Group’s Profit and Loss Statement.

Other than those events separately described above, there have been no other Subsequent Events requiring separate disclosure in the interval between the end of the financial year and the date of this report.

Page 75 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

EMPLOYMENT MATTERS | 8a. Share-based payments

8. EMPLOYMENT MATTERS

This section provides information on items relating to share based payments and key management personnel .

8a. Share-based payments

• 8b. Key management personnel disclosures

8a. Share-based payments

The Group operates a Long-Term Incentive Plan (LTIP) designed as a retention and reward tool for high performing personnel. Under the Plan key employees may be granted conditional rights to receive ordinary shares in the Company at no cost to the employees (or in limited cases to receive cash-settled awards). These conditional rights have performance hurdles which are assessed at the end of the performance period.

Service based rights were also issued during FY2019 to some key management personnel (KMP) to retain and reward, as well as under the Short-Term Incentive Plan in respect of deferred compensation earned for STI outperformance during FY2018. A further tranche of new Service based rights in relation in respect of deferred compensation earned for STI outperformance during FY2019 will be granted to certain KMP during FY2020. An estimated accrual for the fair value of services received in return for these new deferred STI service rights (yet to be granted) has been made at 31 March 2019 and included in the value of share-based awards for KMP shown in Table 5.2 of the Remuneration Report.

All of the rights carry an exercise price of nil. The terms and conditions of rights in existence during the year are set out below together with details of rights vested, lapsed and forfeited:

Equity-settled performance and service rights

All equity-settled rights refer to rights over ordinary shares in the Company and entitle an executive to ordinary shares on the vesting date subject to the achievement of performance hurdles and or a service condition. The rights expire on termination of an executive’s employment prior to the vesting date and or upon the failure of achievement of performance hurdles.

Performance-hurdle rights granted year ended 31 March: Date of grant Testing date for performance hurdles Vesting date and testing date for service condition Number of rights:	2019 2018 2017 2016 01-Aug-18 20-Jul-17 26-Jul-16 30-Jul-15 31-Mar-21 31-Mar-20 31-Mar-19 31-Mar-18 01-Jul-21 01-Jul-20 01-Jul-19 01-Jul-18
Opening balance 1 April Granted Vested & exercised Lapsed (a) Closing balance 31 March	– 556,944 720,925 457,075 583,432 – – – – (3,250) (24,558) (390,634) (28,260) (30,795) (30,138) (66,441)
	555,172 522,899 666,229 –

(a) Performance-hurdle rights lapsed due to hurdles not being met or on cessation of employment.

Service-based rights granted year ended 31 March: Date of grant Vesting date and testing date for service condition Number of rights:	2019 2019 2019 2016 01-Aug-18 17-Sep-18 17-Sep-18 01-Nov-15 01-Apr-20 01-Jul-21 01-Jul-20 01-Nov-18
Opening balance 1 April Granted Vested & exercised Lapsed (a) Closing balance 31 March	– – – 67,757 132,491 8,087 8,087 – (8,893) – – (67,757) – – – –
	123,598 8,087 8,087 –

(a) Service-based rights lapsed due to cessation of employment.

Page 76 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

EMPLOYMENT MATTERS | 8a. Share-based payments

Cash-settled performance rights

All cash-settled performance rights expire on termination of an executive’s employment prior to the vesting date and or upon the failure of achievement of performance hurdles. The amount of cash payment is determined based on the volume weighted average price of the Company’s shares over the 20 trading days following the release of the Group’s full year results for the final year of each performance period.

Performance-hurdle rights granted year ended 31 March: Date of grant Testing date for performance hurdles Vesting date and testing date for service condition Number of rights:	2019 2018 2017 2016 01-Aug-18 20-Jul-17 27-Jul-16 30-Jul-15 31-Mar-21 31-Mar-20 31-Mar-19 31-Mar-18 01-Jul-21 01-Jul-20 01-Jul-19 01-Jul-18
Opening balance 1 April Granted Vested & exercised Lapsed (a) Closing balance 31 March	– 40,974 29,196 72,540 32,742 – – – – – – (17,429) – (5,961) (1,166) (55,111)
	32,742 35,013 28,030 –

(a) Performance-hurdle rights lapsed due to hurdles not being met or on cessation of employment.

Vesting conditions – performance hurdle rights

Vesting conditions in relation to the performancehurdle rights granted in August 2018 are set out below:

Employees must be employed by the Group on the vesting date (1 July 2021). The rights vest only if Earnings Per Share (“EPS”), relative Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”), relative Total Shareholder Return (“TSR”) or Return on Capital Employed (“ROCE”) hurdles are achieved by the Company over the specified performance period. 25 percent of employees’ rights are subject to each of these hurdles. The performance hurdles and vesting proportions for each measure are as follows:

Compound annual diluted Underlying EPS growth (April 2018 to March 2021)	Proportion of performance rights that may be exercised if Underlying EPS growth hurdle is met
Less than 6% per annum	0%
Between 6% and 10% per annum	Straight line vesting between 12.5% and 25% of total grant
10% or higher per annum	25% of total grant

Underlying EBITDA Proportion of margin of ALS relative performance rights to Underlying EBITDA that may be exercised margin of comparator if Underlying EBITDA peer companies (April hurdle is met 2018 to March 2021) Less than the 50th 0% percentile Straight line vesting Between the 50th and between 12.5% and 25% 75th percentile of total grant 75th percentile or 25% of total grant higher Comparator peer companies: Bureau Veritas (France), Core Laboratories (USA), Eurofins (France), Intertek (UK), SGS (Switzerland), Mistras (USA) and Applus (Spain).

The Underlying EBITDA margin measurement is contingent upon performance of the Company against a group of comparator peer companies, which include:

Bureau Veritas (France), Core Laboratories (USA), Eurofins (France), Intertek (UK), SGS (Switzerland), Mistras (USA) and Applus (Spain).

Page 77 of 86

2019 | Annual report

ALS LIMITED AND ITS SUBSIDIARIES Notes to the financial statements

EMPLOYMENT MATTERS | 8a. Share-based payments

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

TSR of ALS relative to TSR of companies in ASX 100 Index over the period April 2018 to March 2021	Proportion of performance rights that may be exercised if TSR hurdle is met
Less than the 50th percentile	0%
Between 50th percentile and 75th percentile	Straight line vesting between 12.5% and 25% of total grant
75th percentile or higher	25% of total grant

The TSR measurement is contingent upon performance of the Company against companies comprising the ASX 100 Index at the start of the performance period.

ROCE Performance (3 year average over the period April 2018 to March 2021)	Proportion of
	performance rights
	that may be exercised if ROCE hurdle is met
Below 11.4%	0%
Between 11.4% and 16.4%	Straight line vesting between 0% and 25% of total grant
At or above 16.4%	25% of total grant

ROCE is calculated as Underlying Earnings before Interest and Tax ( EBIT ) over the three (3) year performance period divided by Capital Employed expressed as a percentage.

Capital Employed = Total Shareholders’ Equity + Net Debt (the sum of the simple averages of the balances at the beginning and end of each year during the performance period.

The cumulative performance hurdles are assessed at the testing date and the “at risk” LTI component becomes exercisable or is forfeited by the executive at this time. New offers of participation are ratified by the Board after recommendation by the People Committee.

Expenses recognised as employee costs in relation to share-based payments

The fair value of services received in return for LTIP rights granted during the year ended 31 March 2019 is based on the fair value of the rights granted measured using Binomial Tree (EPS, EBITDA and ROCE hurdles and service condition) and Monte-Carlo Simulation (TSR hurdle) valuation methodologies with the following inputs:

Equity-settled	Granted	Granted	Granted
rights	2019	2018	2017
Date of grant	1 August 2018	20 July 2017	26 July 2016
Weighted average
fair value at date of
grant of	$6.98	$6.21	$4.30
performance-hurdle
rights
Share price at date of grant	$8.30	$7.18	$5.09
Expected volatility	37%	40%	45%
Expected life	2.9 years	3.0 years	2.9 years
Risk-free interest rate	2.12%	2.01%	1.49%
Dividend yield	2.70%	2.40%	3.00%

		Granted	Granted	Granted
	Cash-settled rights	2019	2018	2017
	Date of grant	1 August 2018	20 July 2017	26 July 2016
	Weighted average
	fair value at date of
	grant of	$6.98	$6.21	$4.30
	performance-hurdle
	rights
	Share price at date of grant	$8.30	$7.18	$5.09
	Expected volatility	37%	40%	45%
	Expected life	2.9 years	3.0 years	2.9 years
	Risk-free interest rate	2.12%	2.01%	1.49%
	Dividend yield	2.70%	2.40%	3.00%

The fair value of the liability for cash-settled rights, for which performance hurdle testing dates remain in the future, is remeasured at each reporting date.

Service based rights have been issued during FY2019 to some key management personnel (KMP) under the Short-Term Incentive Plan in respect of deferred compensation earned for STI outperformance during FY2018. These Service Rights have had their value estimated using the volume weighted average price (VWAP) of ALS shares over the five trading days which followed 31 March 2018 ($7.31). As at 31 March 2019 there were 139,772 services rights on issue.

Service based rights will be issued during FY2020 to some key management personnel (KMP) under the Short-Term Incentive Plan in respect of deferred compensation earned for STI outperformance during FY2019. An estimated accrual for the fair value of services received in return for these deferred STI service rights has been made at 31 March 2019 and included in the value of share-based awards for KMP shown in Table 5.2 of the Remuneration Report. As these service rights are yet to be issued, their value has been estimated using the volume weighted average price (VWAP) of ALS shares over the five

Page 78 of 86

2019 | Annual report

FINANCIAL STATEMENTS | FOR THE YEAR ENDED 31 MARCH 2019 |

ALS LIMITED AND ITS SUBSIDIARIES

Notes to the financial statements

EMPLOYMENT MATTERS | 8b. Key management personnel disclosures

trading days which followed 31 March 2019 ($7.92).

Expenses recognised in relation to share-based payments during the year were:

In thousands of AUD Note Equity-settled rights 1d Cash-settled rights Total expenses recognised as employee costs Carrying amount of liabilities for cash- settled rights	Consolidated 2019 2018 3,602 2,220 229 537
	3,831 2,757
	349 217

8b. Key management personnel disclosures

The key management personnel compensation included in employee expenses are as follows:

In AUD Short term employee benefits Post-employment benefits Value of share-based awards Termination benefits Other long-term benefits	Consolidated 2019 2018 7,772,348 8,101,594 195,430 243,433 1,369,732 1,024,163 433,420 2,129,124 9,213 7,189
	9,780,143 11,505,503

Related party transaction

There are no other related party transactions with Key Management Personnel during the period.

The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period:

Non-executive directors

Bruce Phillips (Chairman)

Mel Bridges Grant Murdoch John Mulcahy Charlie Sartain Tonianne Dwyer Siddhartha Kadia

Executive Directors

Raj Naran

Executives

Bruce McDonald (GM Geochemistry) Andreas Jonsson (GM Life Sciences, EMEA) Tim Kilmister (GM Life Sciences, APAC) Kristen Walsh (GM Industrial) Luis Damesceno (Chief Financial Officer appointed 17 September)

Former Executives

David Prince (GM Life Sciences, Americas until 27 December 2018) Richard Stephens (Chief Financial Officer until 30 November 2018)

Greg Kilmister (Managing Director and Chief Executive Officer (CEO) Retired 20 July 2017)

Brian Williams (Group General Manager Commodities until 3 July 2017)

Page 79 of 86

2019 | Annual report

DIRECTORS’ DECLARATION FOR THE YEAR ENDED 31 MARCH 2019

ALS LIMITED AND ITS SUBSIDIARIES

Directors’ declaration

In the opinion of the directors of ALS Limited (“the Company”):

1. The consolidated financial statements and notes numbered 1a to 8b, and the remuneration report contained in the Directors’ report, are in accordance with the Corporations Act 2001 including:

2. a) giving a true and fair view of the Group’s financial position as at 31 March 2019 and of its performance for the year ended on that date: and

3. b) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

4. the financial report also complies with the International Financial Reporting Standards as disclosed in note 7a;

5. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

There are reasonable grounds to believe that the Company and the subsidiaries identified in note 5c will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee between the Company and those entities, pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 28 September 2016 (replacing ASIC Class Order 98/1418 dated 13 August 1998).

The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 31 March 2019.

Signed in accordance with a resolution of the directors:

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Bruce Phillips Chairman Brisbane 21 May 2019

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Raj Naran Managing Director Brisbane 21 May 2019

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2019 | Annual report

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Independent Auditor’s Report

To the shareholders of ALS Limited

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of ALS Limited (the Company).

In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001 , including:

• giving a true and fair view of the Group’s financial position as at 31 March 2019 and of its financial performance for the year ended on that date; and

• complying with Australian Accounting Standards and the Corporations Regulations 2001 .

The Financial Report comprises:

• Consolidated balance sheet as at 31 March 2019

• Consolidated statement of profit and loss and other comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash flows for the year then ended

• Notes including a summary of significant accounting policies

• Directors’ Declaration.

The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report.

We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

Key Audit Matters

The Key Audit Matters we identified are:

• Valuation of goodwill

• Decentralised operations

• Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period.

These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

81

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

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Valuation of goodwill

Valuation of goodwill	Valuation of goodwill
Refer to Note 2g. to the Financial Report
The Key audit matter	How the matter was addressed in our audit
The assessment of impairment of the Group’s goodwill is a key audit matter due to the significance of the amount to the Group’s balance sheet (47% of total assets) and the judgement applied by us when evaluating the forward-looking assumptions in the Group’s value in use models. We focused on the following assumptions: • Forecast operating cash flows and growth rates – the Group operates in competitive markets which can put pressure on growth and margins. This increases the possibility of goodwill being impaired, which is a focus for us. • Forecast growth rates – in addition to the uncertainty described above, the ALS Life Sciences South America and ALS Industrial Cash Generating Units (CGUs) models are sensitive to small changes in growth assumptions. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy. • Discount rate - these are complicated in nature and vary according to the conditions and environment the specific CGU is subject to from time to time. The Group’s models used to calculate value in use are largely manually developed, use adjusted historical performance, and a range of internal and external sources as inputs to the assumptions. Modelling using forward-looking assumptions tends to be prone to greater risk for potential bias and error. These conditions necessitate additional scrutiny by us. We involved senior audit team members including valuation specialists to challenge the Group’s assumptions.	Our procedures included: • We considered the appropriateness of the value in use method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards; • We assessed the historical accuracy of forecasting of the Group by comparing actual past performance against previous forecasts and assumptions to inform our evaluation of forecasts incorporated in the models; • Working with our valuation specialists, we challenged the Group’s forecast operating cash flows and growth rates in light of the margin pressure from the competitive environment the Group operates within. We compared base year cash flows to Board approved plans and strategy, our understanding of the current business and operations as obtained from our audit testing for consistency of relationships. We compared forecast growth rates to publicly available market data for comparable entities, and considered differences for the Group’s operations. We used our knowledge of the Group, their past performance, business and customers, and our industry experience; • Working with our valuation specialists we analysed the Group’s discount rates against publicly available market data for comparable entities; • We considered the sensitivity of the value in use models by varying key assumptions, including the discount rate and growth rate, within a reasonably possible range. We did this to identify those CGUs at higher risk of impairment and to focus our further procedures; • We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards.

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Decentralised operations
The Key audit matter	How the matter was addressed in our audit
The Group comprises more than 150 subsidiaries and associates (components) whose operations extend across the world. The Group’s business is analytical testing and the individual components are wide ranging in size, customer base and type of service provided. The decentralised and varied nature of these operations require significant oversight by the Group to monitor the activities, review component financial reporting and undertake the Group consolidation. This is an extensive process due to the high number of accounting systems used in the Group. This was a key audit matter for us given the large number of subsidiaries and associates, and the high number of accounting systems, which resulted in significant audit effort by us. We focused on: • Understanding the components and identifying the significant risks of material misstatement within them; • The scoping of relevant procedures consistent with the risk identified; • The assessment of the components’ compliance with Group accounting policies; • The assessment of the results of procedures performed by component audit teams; and • The consolidation and reporting process.	Our procedures included: • We instructed selected component audit teams to perform procedures on the financial information prepared for consolidation purposes. The selected components were those of most significance to the audit of the Group, either by individual size or by risk to the Group, plus a sample, on a rotational basis, of the remaining components not meeting the size and risk criteria. The objective of this approach was to gather evidence on significant balances that consolidate to form the Group’s financial reporting; • The component audit teams performed procedures on the financial information prepared for consolidation purposes. We worked with the component audit teams to understand the components, identify risks significant to the audit of the Group and plan relevant procedures; • We evaluated the work performed by the component audit teams for our purposes. We did this by working with component audit teams to identify and address matters as they arose during the audit. We also assessed component audit teams reporting to us on the component’s results and compliance with the Group’s accounting policies; • We discussed the observations and findings from the component auditors’ procedures and inspected selected component auditors work papers; • We tested the financial data used in the consolidation process for consistency with the financial data audited by component audit teams. We also assessed the consolidation process for compliance with accounting standards; • For the other components not within the above scope, we performed analytical procedures to deepen our understanding of these components, corroborate our scoping decisions, and analyse financial information. In our analytical procedures we compared actual financial performance to the prior year results, we enquired of Group and component management and considered these results against our expectations.

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Other information

Other Information is financial and non-financial information in ALS Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

• implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error

• assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

• to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and

• to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report.

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Report on the Remuneration Report

Opinion

In our opinion, the Remuneration Report of ALS Limited for the year ended 31 March 2019 complies with Section 300A of the Corporations Act 2001 .

Directors’ responsibilities

The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001 .

Our responsibilities

We have audited Sections 2 to 9 of the Remuneration Report which is included in the Directors’ report for the year ended 31 March 2019.

Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards .

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KPMG

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Scott Guse Partner

Brisbane 21 May 2019

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of ALS Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of ALS Limited for the financial year ended 31 March 2019 there have been:

• i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

• ii. no contraventions of any applicable code of professional conduct in relation to the audit

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KPMG

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Scott Guse Partner

Brisbane 21 May 2019

86

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.