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AUSTIN ENGINEERING LIMITED — Annual Report 2017
Sep 26, 2017
64384_rns_2017-09-26_84a3d324-7d34-48f7-8dfd-a02c0207d183.pdf
Annual Report
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Austin Engineering Ltd Annual Report for the year ended 30 June 2017 ABN 60 078 480 136
Austin Engineering Ltd ABN 60 078 480 136
Annual Report - 30 June 2017
Contents
| Contents | |
|---|---|
| Page | |
| Chairman's review | 3 |
| Chief Executive Officer's report | 4 |
| Operational and financial review | 5 |
| Directors' report | 9 |
| Auditor's independence declaration | 16 |
| Audited remuneration report | 17 |
| Corporate governance statement | 23 |
| Financial statements | 24 |
| Independent auditor's report | 71 |
| Shareholder information | 76 |
| Company information | 77 |
Austin Engineering Ltd Chairman's review 30 June 2017
Market conditions have improved throughout calendar year 2017 with major mining companies increasing their spending on replacement components for their fleets. Global commodity prices have strengthened which has resulted in increased opportunities for the mining services sector.
The Company’s performance improved markedly from the first half of the year to the second half as a result of internal strategies and improved market conditions. Austin’s order book and committed work support a high proportion of the first half of the 2018 financial year expected revenues. Orders received, tenders submitted and enquiry levels remain high.
Financial position
Austin’s financial position has strengthened during the year to enable an increase in working capital of $12.5 million and an increase in net debt of $6.2 million to fund the Group’s growth. Capital management remains a focus for the Company with a refinancing of its Australian debt facilities substantially complete. The Board considered a reduction of debt leverage as the best use of the Company’s capital in the short term, consequently no dividend was declared for the year ended 30 June 2017.
The Board remains committed to delivering value to shareholders and will assess capital management initiatives as the Company’s performance and leverage improves.
Executive management
During this financial year the Company has experienced a restructure of the Board and executive management with a number of senior appointments made throughout the business. With new appointments come fresh ideas and valuable experience that I feel has elevated Austin to a new level of professionalism and leaves the Company well positioned to take advantage of improving market conditions.
New Chief Executive Officer
In October 2016, the Company appointed Peter Forsyth as Chief Executive Officer. Peter has worked in the industry for over 35 years and held senior roles, spanning multiple domestic and international territories, at Caterpillar Inc. and Chesterfield Australia. Peter brings high quality business development and strategic focus to lead the organisation and improve operating performance.
New Chief Financial Officer and Company Secretary
Shortly before the appointment of Peter Forsyth, the Company appointed Christine Hayward as Chief Financial Officer and Company Secretary. Christine has over 20 years’ experience in senior financial and company secretarial roles including public and ASX listed companies. Christine’s appointment provides the Company with an enhanced level of rigour in the finance and governance function.
Governance and the Board
Austin is committed to operating under stringent corporate governance, compliance, safety and risk management protocols. During the 2017 financial year changes were made to the Board together with the recent appointment of Peter Forsyth as Managing Director on 18 August 2017. A number of senior management positions were also created during the year to oversee global risk, safety and human resources functions enhancing the Company’s overarching governance function.
The Company operates in a cyclical market and Austin experienced fiscal pressures in recent years during the mining industry downturn. Strong corporate governance provides the cornerstone of a stable and successful business for the longterm. The Board and executive management continually monitor Company corporate governance practices in line with best practice and the ASX Corporate Governance Principles and Recommendations. The Company’s corporate governance statement is available on Austin’s website, I would encourage our stakeholders to read this report.
Shareholders, financiers and suppliers
As touched upon previously, Austin has faced significant challenges in recent years. Our shareholders, current financiers and suppliers have been instrumental in enabling the Company to maintain its market leading position during this time, I thank them for their continued support. The Board and executive management remain committed to delivering enhanced returns that our shareholders deserve.
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Jim Walker Non-Executive Chairman
Austin Engineering Ltd | Annual Report | Page 3
Austin Engineering Ltd Chief Executive Officer's report 30 June 2017
During my first year at Austin I have encountered a business that has tremendous potential, loyal and committed people, quality products and strong stakeholder relationships. I am excited to be leading this business to effectively harness these internal qualities in an improving external market environment.
We have been highly successful in filling our order book over the past nine to twelve months. This has resulted in a positive performance for the second half of the 2017 financial year and provides the basis of a strong outlook for the first half of the 2018 financial year. Market opportunities continue to improve, including South America where the business units have performed below expectations in recent years.
Financial performance
The Company reported normalised EBITDA of $14.3 million, which was at the higher end of guidance provided in February 2017. The net loss after tax of $27.6 million includes $19.8 million of non-cash impairments of intangible and property assets. The Company’s performance improved markedly in the second half of the financial year and recorded a net profit before tax and impairment charges of $3.8 million for that period.
I am pleased with the improvement in results for the second half of the financial year, and my team and I are focussed on ensuring that the current profitability is sustainable into the future. Specific initiatives to improve Company revenue include an expansion in the global business development function and targeted multilayer customer coverage. Austin continues to review operating costs through its global supply chain procurement initiatives together with engineering and manufacturing efficiency improvements.
Whilst the Group performed reasonably well for the year, certain business units failed to meet expectations. Specific turnaround actions are well progressed in these businesses with an expectation of improved returns in the 2018 financial year.
Engineering focus
Austin’s core competency is our engineering intellectual property and expertise, and the Company has invested in manufacturing efficiencies and attachments that increase productivity and lower operating costs for our clients.
Our wide range of mining products are designed and manufactured to meet individual client specific site conditions and mining equipment. These improved product designs are equally suitable for installation onto new and existing equipment.
These products and services have helped us maintain our position as the market leader in delivering lowest cost per tonne solutions for our clients.
People
Austin’s success comes from its people, whose expertise, experience and relationships are a key differentiator. Austin now employs nearly 2,200 staff, an increase of over 400 people from 30 June 2016.
Our role as employers is to ensure our people have a safe and fulfilling place of work and are provided with opportunities to succeed in achieving both Company and personal goals. Austin recruited various key global positions during the year to facilitate an increased level of governance, safety and risk management through our people engagement and collaboration activities.
Regrettably and despite every effort to ensure our employees are operating in a safe environment, there were two employee fatalities during the period, one due to a road accident and the other related to a lifting process. These incidents were analysed and the lessons used to further improve work processes around commuting and lifting reinforcing our safety standards across the Group.
Strategy and outlook
Austin is well placed to take advantage of improving market conditions in the near term. The Company is the largest independent global supplier of custom truck bodies and buckets, with enhanced product design. Industry conditions are improving, and there are a large number of attachments currently in the field that are due for replacement.
Our strategy over the medium term is to maximise Austin’s core value proposition, namely its engineering intellectual property, quality products and manufacturing expertise, in conjunction with the development of strategic partnerships. This strategy will enable Austin to improve products, increase manufacturing capacity without material levels of capital expenditure required and improved distribution network relationships, resulting in increased total shareholder returns.
Peter Forsyth Chief Executive Officer
Austin Engineering Ltd | Annual Report | Page 4
Austin Engineering Ltd Operational and financial review 30 June 2017
| Consolidated entity | Consolidated entity | ||
|---|---|---|---|
| Change | 2017 | 2016 | |
| % | $000 | $000 | |
| Continuing operations | |||
| Revenue | 24.5 | 234,344 | 188,169 |
| Statutory EBITDA | 62.5 | (7,730) | (20,590) |
| Normalised EBITDA | 100.2 | 14,263 | 7,126 |
| Loss before tax | 33.9 | (25,026) | (37,859) |
| Loss after tax | 8.0 | (27,633) | (30,022) |
| Basic loss per share (cents) | 75.4 | (4.94) | (20.07) |
| Dividend per share | - | - | - |
| Net assets | (18.1) | 112,178 | 137,021 |
OPERATIONAL REVIEW
Australia
Perth operations delivered improved earnings for the financial year as major mining companies in the region commenced a reinvestment phase in replacement components for mining fleets. This operation was particularly successful in increasing sales from engineering advancements, which enabled Austin’s clients to take advantage of material payload increases and unit cost reductions across their fleets.
Operations in Mackay, which consist of Austin Mackay and Aust Bore, continued facing challenging conditions and were impacted by cyclone events during the year. Aust Bore broadened its service offering to include both mining and non-mining clients.
Market conditions in New South Wales coal improved during the year which provided greater opportunities for revenue for Austin’s Hunter Valley operation. High labour costs impacted profitability during the year.
The Australian Site Services business is operating in a highly competitive environment and experienced some margin contraction in the year.
Americas
North American activity levels were subdued for the majority of the year, with improvement in the final quarter. The order book for the 2018 financial year is strong for this region and includes North America’s largest ever order for truck bodies, all for delivery in the first half of the 2018 financial year.
Colombia’s performance improved markedly from recent years with increased revenues generated from higher margin manufactured products. Revenues have historically been predominantly from repair and maintenance contracts.
Whilst the copper market in Chile and Peru has improved in recent months, it was subdued for the majority of the year which impacted on major mining companies spend in this region. Revenues from Austin’s Chilean businesses improved relative to the prior year as a result of increased sales of bodies and buckets into the local market.
Chile’s trading volumes and profitability of the crane business were lower than in recent years. The region’s overall cost base has been reduced and remains under review to improve future profitability and sustainability.
Market conditions in Peru remain challenging with local mining companies focusing on equipment repairs and maintenance as a preference to component replacement.
Asia
The performance of Indonesian operations improved in the second half of the financial year due to higher throughput of work. Utilisation of this facility increased during the course of the financial year as Austin sought to leverage the facility’s highly competitive cost structure and strategic geographical location to secure fabrication work for both Austin products and nonAustin products (including large modular structures and underground mining chutes).
Austin Engineering Ltd | Annual Report | Page 5
Austin Engineering Ltd Operational and financial review 30 June 2017 (continued)
FINANCIAL REVIEW
Performance
Income
The Company reported revenue of $234.3 million which represented a 24.5% increase from the 2016 financial year. Of the total revenue for the year, over 60% was earned in the second half of the financial year.
Revenue from product sales increased by $25.9 million from the 2016 financial year which contributed to improved gross margins. Normalised EBITDA reported was $14.3 million (2016: $7.1 million), an increase of 100.2%.
Austin reported a net loss after tax of $27.6 million (2016: $30.0 million). The results were impacted by impairment charges of $19.8 million (2016: $9.1 million) and restructuring costs of $2.2m (2016: $18.7 million).
Expenditure
Operating expenditure including raw materials and consumables, and employment expenses and other operating expenditure decreased for the year as a proportion of revenue as the Company more effectively recovered its fixed cost base across increased revenue.
Finance costs remained stable at $6.1m for the current year. As a result of refinancing activities undertaken by the Company during the 2016-2017 financial years, a number of non-recurring finance costs have been incurred.
Depreciation and amortisation charges remained stable from the 2016 financial year at $11.2m, these charges are on a straight line basis and as such remain relatively consistent year on year.
Impairment charges of $19.8 million relate predominantly to intangible assets in South America and the Australian Site Services business as a result of their recent performance negatively impacting on their outlook and carrying value. A previous impairment of Indonesia’s property of $2.8 million was reversed as a result of their positive outlook.
Cash flow
Operating cash outflows for the year were $14.8 million mainly resulting from increased working capital requirement to support business growth.
Investing cash inflows for the full-year included $6.8 million capital expenditure offset by net proceeds of $6.0 million from the sale of surplus land in Peru and $3.4 million of proceeds from sale of under-utilised plant and equipment. Financing cash inflows include proceeds from share issues of $8.0 million and net repayments of borrowings of $4.6 million. During the year, Austin recorded an overall net cash outflow of $8.8m.
Position
Net debt
The Company’s balance sheet has strengthened during the 2017 financial year, whilst net debt has increased by $6.2 million to $45.6 million, the Company has improved relationships with suppliers and has stabilised financing arrangements.
Austin’s core Australian debt facility of $20.1 million is due for repayment on 29 July 2018. The Company has secured a credit approved finance package which will improve Austin’s overall debt maturity profile and lower its cost of capital. The facility will be used to repay all Australian facilities.
Working capital
Improved activity levels and revenue growth led to increasing working capital by $12.5 million during the year. Trade receivables increased by $15.9 million to $45.3 million, inventories and work in progress increased by $15.8 million to $31.6 million and trade and other payables increased by $19.2 million to $55.7 million.
Non-current assets
At 30 June 2017, the Company held $135.3 million of non-current assets, a decrease of $32.9 million from 30 June 2016. The majority of this decrease was primarily due to depreciation, amortisation and impairment charges totalling $31 million.
Net assets
Net assets of $112.2 million at 30 June 2017 down by 18.1% from $137.0 million at 30 June 2016. The decrease reflects capital raised during the year, offset by the loss and currency translation differences for the year.
At 30 June 2017 the net tangible asset backing per share of 16.5 cents was down from 19.0 cents as at 30 June 2016 as a result of the decreased net tangible assets and increased number of shares on issue.
Austin Engineering Ltd | Annual Report | Page 6
Austin Engineering Ltd Operational and financial review 30 June 2017 (continued)
STRATEGY
Austin anticipates an increase in opportunities to deliver its products to the market as a result of improved economic factors and market sentiment. In order to best capitalise on these opportunities, the Company has the following key strategic focus areas:
1. Re-orientation of focus to engineering
Austin considers its core competency is engineering intellectual property and expertise. It is the Company’s expertise in the design of custom truck bodies and buckets that positions Austin as the market leader. Historically, Austin has relied upon bricks and mortar, capital intensive workshops to provide its products to clients. This process has been successful for the business to date but has placed a limitation of earnings relative to Group operating capacity of its facilities.
During the 2017 financial year, Austin supplemented its operating capacity beyond its existing facilities by utilising subcontracting arrangements with trusted partners. The Company provides the engineering, quality assurance and control expertise whilst utilising partner facilities that are able to protect Austin’s intellectual property and deliver quality products to our clients.
Austin will continue to manufacture products in our existing facilities while taking advantage of additional capacity through these strategic partnerships to deliver products to new and existing regions. The Company is actively working with global partners to increase global supply and client coverage to better leverage its core competency and provide improved shareholder returns with decreased capital risk.
2. Manufacturing optimisation
Manufacturing capacity is optimised through engineering design and manufacturing methodology improvements. Group engineering teams have successfully reduced the complexity of certain product designs to improve the manufacturing processes and reduce costs. Research and development projects are ongoing and are a key focus for the Company to improve Austin product ranges.
Process improvements involve quality assurance and control throughout the global supply chain, extending from procurement through to after delivery care and performance review. Group manufacturing expertise and best practice operating procedures are shared collaboratively through training and regular manufacturing process reviews. Austin’s manufacturing is subject to continuous improvement in processes, delivering enhanced and consistent quality at reduced costs in a safe manner.
3. Market development
Maintaining active client relationships and a strong tender book is important for the business, converting those tenders to committed orders is critical. Austin has strong relationships with a number of major mining companies and is the preferred supplier of custom bodies and buckets for many large global miners and mining services operators. The Company’s client coverage and alignment program is being developed and implemented to maximise client’s productivity levels at a compelling price.
4. Growth and diversification
Austin’s predominant focus is on the provision of mining products and services to open cut mines. Through Austin’s global engineering team, there exists a number of designs and products for applications that Austin has not historically competed in. As a result, the Company is actively pursuing partnership arrangements with businesses aligned to Austin with compatible core values and in areas where there is minimal current market participation.
5. Fiscal approach
Austin’s financial position has improved over the last two years as it has completed substantial refinancing and recapitalisation activities. Austin has improved fiscal disciplines including Group capital management to best protect the Company’s future to provide sustainable returns to shareholders. This approach includes a strategy to reduce leverage and to return to dividend payments
6. People and culture
Austin understands that our people drive business success. Investment in our people and collaboration across the Group is the key to future success. The Company’s core values framework has been refreshed and a unified global code of conduct and knowledge collaboration platform is in the process of being implemented.
Austin Engineering Ltd | Annual Report | Page 7
Austin Engineering Ltd Operational and financial review 30 June 2017 (continued)
PEOPLE AND SAFETY PERFORMANCE
Austin operates in a number of countries in remote areas and near local communities. The Company takes its social responsibilities seriously and seeks to engage with client companies, local communities and governments to support local communities through the provision of training and employment opportunities.
Austin’s focus on safety has been reinforced during the year under review with a renewed drive to comply and report within the framework of the Austin Global Occupational Health and Safety standard. The Group’s growth has resulted in an increased headcount to meet demand from 1,772 at 30 June 2016 to 2,174 at 30 June 2017, reflecting an increase in man hours of 19%.
The Company improved its safety monitoring and reporting, leading to increased numbers of Lost Time Injuries reported. At year end, Austin’s Lost Time Injury Frequency Rate (LTIFR) was 4.42, up from 2.75 in the 2016 financial year. Due to Austin’s improved safety management, the Total Recordable Injury Frequency Rate (TRIFR) reduced by 4.10 to 17.91 for the 2017 financial year.
RISK MANAGEMENT
Austin operates globally and therefore faces a wide range of risks that may impact operations. A robust Enterprise Risk Management Policy and Standard was originally approved by the Austin Board at the end of 2015, and was reviewed, updated and approved during the 2017 financial year. Management continued its progressive implementation of the Standard during the year, reporting regularly to the Board through the Risk Committee. A Risk Appetite Statement was re-confirmed by the Board for a range of risk categories, and Management is aware of its obligation to identify, evaluate, manage and report risks in accordance with the Enterprise Risk Management Standard.
A program of formal risk management workshops is being undertaken at each of the Austin sites during 2017, with the objective of confirming a comprehensive set of site and Group level Risk Registers to assist with the recording and monitoring of progress in the effective management of key risks across the Company. Management also placed priority on ensuring that adequate risk management training and resources were being incorporated into business plans.
Austin’s business activities are intrinsically linked to the activity levels from global mining operations and the economic and business conditions associated with the related markets. The achievement of targeted financial results for the 2018 financial year is dependent on a continuation of the current improved conditions.
Austin Engineering Ltd | Annual Report | Page 8
Austin Engineering Ltd Directors' report 30 June 2017
The Directors present their report, together with the financial statements, on the Consolidated entity (referred to hereafter as the “Group” or the “Consolidated Entity") consisting of Austin Engineering Ltd (referred to hereafter as the “parent entity” or “the Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2017.
DIRECTORS
The following persons were Directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated:
| Peter Forsyth | (appointed as Managing Director on 18 August 2017 and Chief Executive Officer from 12 October 2016) |
|---|---|
| Jim Walker | (appointed as Non-Executive Director 8 July 2016 and Non-Executive Independent Chairman from 25 |
| November 2016) | |
| Peter Pursey | (former Executive Chairman from 14 February 2016 until 25 November 2016, Independent Non-Executive |
| Director thereafter) | |
| Charlie Sartain | (appointed 1 April 2015) |
| Chris Indermaur | (appointed 8 July 2016) |
| John Nicholls | (retired 8 July 2016) |
| Eugene Fung | (retired 25 November 2016) |
PRINCIPAL ACTIVITIES
The principal activities of the Group during the financial year were the manufacture, repair, overhaul and supply of mining attachment products and other associated products and services for the industrial and resources-related business sectors.
DIVIDENDS
There were no interim and final dividends paid or declared for the financial year ended 30 June 2017.
REVIEW OF OPERATIONS AND RESULTS
The loss for the Group after providing for income tax amounted to $27.633 million (2016: $30.022 million) from continuing operations. The loss for the year was predominantly due to impairment charges of $19.815 million (2016: $9.060 million).
A review of and information about the operations of the group during the financial year and of the results of those operations is contained on pages 5 to 8, which form part of this Directors’ report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the year.
EVENTS AFTER THE REPORTING DATE
Other than those disclosed in note 23, no other matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly affect, the operations of the group, the results of those operations or the state of affairs of the Group or Company subsequent to 30 June 2017.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Likely developments in the operations of the Group in future financial years and the expected results of those operations have been included generally within the financial report and on pages 5 to 8.
ENVIRONMENTAL REGULATION
The Group’s Colombian and Chilean facilities are accredited to ISO 14001 Environmental systems.
The facilities yet to receive ISO 14001 accreditation currently meet all internal group requirements and standards for Environmental management.
Austin Engineering Ltd | Annual Report | Page 9
Austin Engineering Ltd Directors' report 30 June 2017 (continued)
INFORMATION ON DIRECTORS
Jim Walker, Non-Executive Chairman from 25 November 2016 and Non-Executive Director from 8 July 2016
| Experience and | Jim Walker has over 40 years of experience in the resources sector. He is currently non-executive |
|---|---|
| Expertise | Chairman of Macmahon Holdings Limited, Chairman of the WA State Training Board and a Non- |
| Executive Director of Programmed Maintenance Services Group Limited, Seeing Machines and | |
| RACWA Holdings Pty Limited. Jim was formerly Managing Director and Chief Executive Officer of | |
| WesTrac Pty Limited, a Director of Seven Group Holdings Limited and National Hire Group Limited | |
| and was formerly National President of the Australian Institute of Management. Jim is a graduate | |
| member of the Australian Institute of Company Directors (AICD) and Australian Institute of | |
| Management (AIM WA). | |
| Qualifications | GAICD, FAIM |
| Directorships held in | Macmahon Holdings Limited from 22 January 2015, Programmed Maintenance Services Limited |
| other listed entities | from November 2013 and Seeing Machines from May 2014. |
| Former directorships in | None. |
| last 3 years | |
| Special responsibilities | Member of the Audit Committee, Member of the Risk Committee and Member of the Nomination and |
| Remuneration Committee. | |
| Interest in shares and | 80,000 ordinary shares. |
| options |
Peter Forsyth, Managing Director from 18 August 2017, Chief Executive Officer from 12 October 2016
| Experience and | Peter Forsyth has worked as a senior executive with Caterpillar Inc. for 27 years with assignments |
|---|---|
| Expertise | including USA, Singapore, India and Australia. Peter's roles included Mining Manager, District |
| Manager, Off-Highway Truck Product Manager and Major Projects Manager for Caterpillar Australia. | |
| He has successfully managed numerous major mining equipment deals with global mining | |
| companies and mining contractors. Peter was instrumental in the development and execution of | |
| Caterpillar's emerging market strategy for Off-Highway Trucks. Peter holds a Bachelor of Mechanical | |
| and Production Engineering Degree from RMIT University. His most recent role was CEO of | |
| Chesterfield Australia which was the Kobelco and John Deere Dealer in Queensland and New South | |
| Wales. | |
| Qualifications | B. Eng (Bachelor of Mechanical and Production Engineering), RMIT University |
| Directorships held in | None. |
| other listed entities | |
| Former directorships in | None. |
| last 3 years | |
| Special responsibilities | None. |
| Interest in shares and | None. |
| options |
Austin Engineering Ltd | Annual Report | Page 10
Austin Engineering Ltd Directors' report 30 June 2017 (continued)
INFORMATION ON DIRECTORS (continued)
Peter Pursey, AM, Non-Executive Director from 2004 to 27 November 2015, Non-Executive Chairman from 28 November 2015 to 14 February 2016, Executive Chairman from 15 February 2016 to 25 November 2016 and NonExecutive Director from 25 November 2016.
| Experience and | Peter Pursey is an experienced company director of both listed and non-listed public companies. In |
|---|---|
| Expertise | the last decade his commercial interests have included the resources, energy, defence and |
| pharmaceutical industry sectors. He is experienced in executive management, leadership, strategic | |
| planning and capital raising and remains active in those business roles. He is a Member of the | |
| Australian Institute of Company Directors and a Fellow of the Australian College of Defence and | |
| Strategic Studies. | |
| Qualifications | MBA, ACDSS, psc. |
| Honours and Awards | Order of Australia (AM). |
| Directorships held in | None. |
| other listed entities | |
| Former directorships in | None. |
| last 3 years | |
| Special responsibilities | Chair of the Audit Committee and Member of the Nomination and Remuneration Committee. |
| Interest in shares and | 2,225,232 ordinary shares. |
| options |
Chris Indermaur, Non-Executive Director from 8 July 2016
| Experience and | Chris Indermaur has over 30 years of experience in large Australian companies in engineering and |
|---|---|
| Expertise | commercial roles. He is currently the non-executive Chairman of Poseidon Nickel Limited and |
| Medibio Limited and Non-Executive Director of Centrex Metals Limited. Chris was formerly the | |
| Engineering and Contracts Manager for the QNI Nickel Refinery at Yabulu, Company Secretary for | |
| QAL and General Manager for Strategy and Development at Alinta Limited. Chris holds a Bachelor of | |
| Engineering (Mechanical) and a Graduate Diploma of Engineering (Chemical) from the West | |
| Australian Institute of Technology (now Curtin University). Chris also holds a Bachelor of Laws and a | |
| Master of Laws of the Queensland University of Technology and a Graduate Diploma in Legal | |
| Practice from the Australian National University. | |
| Qualifications | B. Eng (Bachelor of Engineering), Graduate Diploma of Engineering (Chemical), B. Law, M. Law, |
| Graduate Diploma in Legal Practice. | |
| Directorships held in | Poseidon Nickel Limited from 2 July 2007, Medibio Limited from 2 April 2015 and Centrix Metals |
| other listed entities | Limited from 1 July 2017. |
| Former directorships in | None. |
| last 3 years | |
| Special responsibilities | Chair of the Nomination and Remuneration Committee, Member of the Audit Committee and Member |
| of the Risk Committee. | |
| Interest in shares and | None. |
| options |
Austin Engineering Ltd | Annual Report | Page 11
Austin Engineering Ltd Directors' report 30 June 2017 (continued)
INFORMATION ON DIRECTORS (continued)
Charlie Sartain, Non-Executive Director from 1 April 2015
| Experience and | Charlie Sartain is a mining engineer with more than 30 years' operational and executive experience |
|---|---|
| Expertise | in the mining industry. In the earlier part of his career Charlie had extensive mining engineering and |
| executive experience across several mining operations of MIM Holdings Limited, culminating in his | |
| appointment to the MIM Holdings Executive Committee as MIM’s most senior executive in Latin | |
| America. After the takeover of MIMH by Xstrata Plc in 2003, he served as CEO of Xstrata's global | |
| copper business for nine years from 2004 until 2013. Xstrata Copper’s businesses included mining | |
| operations and projects spanning eight countries. Since 2013, Charlie has served on a range of | |
| Boards of listed companies and not-for-profit organisations. In addition to his role with Austin, he is | |
| currently a Non-Executive Director of ASX-listed ALS Limited and TSX/NYSE-listed Goldcorp Inc., a | |
| Member of the Senate of the University of Queensland, Chairman of the Advisory Board of the | |
| Sustainable Minerals Institute, and a Board member of the Wesley Medical Research Institute. | |
| Qualifications | B. Eng (Bachelor of Engineering (Hons)(Mining)), University of Melbourne; Fellow, Australasian |
| Institute of Mining and Metallurgy; Fellow, Australian Academy of Technological Sciences and | |
| Engineering. | |
| Directorships held in | ALS Limited from 1 February 2015, Goldcorp Inc. from 1 January 2017. |
| other listed entities | |
| Former directorships in | None. |
| last 3 years | |
| Special responsibilities | Chair of the Risk Committee. |
| Interest in shares and | 3,542,500 ordinary shares. |
| options |
Eugene Fung, Non-Executive Director from 4 May 2004 until retired on 25 November 2016
| Experience and | Eugene Fung is a corporate lawyer and partner of a national law firm. He advises both listed and |
|---|---|
| Expertise | unlisted companies regularly on corporate finance matters, mergers and acquisitions, corporate |
| governance and the ASX listing rules. He is a member of the Australian Institute of Company | |
| Directors and is a Fellow of the Financial Services Institute of Australasia and holds a Graduate | |
| Diploma in Applied Finance from the Securities Institute of Australia (now FinSIA). | |
| Qualifications | B. Com (Bachelor of Commerce), LL.B (Hons) (Bachelor of Laws), Grad Dip (Applied Finance and |
| Investment) | |
| Directorships held in | None. |
| other listed entities | |
| Former directorships in | None. |
| last 3 years | |
| Special responsibilities | Chair of the Nomination and Remuneration Committee and member of the Audit Committee until |
| retired on 25 November 2016. | |
| Interest in shares and | 2,083,241 ordinary shares, at retirement date. |
| options |
Austin Engineering Ltd | Annual Report | Page 12
Austin Engineering Ltd Directors' report 30 June 2017 (continued)
INFORMATION ON DIRECTORS (continued)
John Nicholls, Non-Executive Director since 1 September 2015 until retirement on 8 July 2016
| Experience and | John Nicholls has established manufacturing businesses throughout Asia including those engaged in |
|---|---|
| Expertise | steel fabrication. He has had a long association with the mining industry domestically and |
| internationally as a senior executive and a Director of companies engaged in the sector. Additionally, | |
| he has extensive Public and Private company experience as a Director since 1995 and prior to that | |
| as a Director of subsidiaries/associates of public companies in various jurisdictions. | |
| Qualifications | B. Com (Bachelor of Commerce), MBA |
| Directorships held in | E&A Ltd since 1 September 2015. |
| other listed entities | |
| Former directorships in | None. |
| last 3 years | |
| Special responsibilities | Member of the Risk Committee and member of the Nomination and Remuneration committee until 8 |
| July 2016. | |
| Interest in shares and | 726,000 ordinary shares, at retirement date. |
| options |
INFORMATION ON COMPANY SECRETARIES
Christine Hayward, Chief Financial Officer and Company Secretary since 10 October 2016
Christine Hayward (B.Commerce (Accounting), Graduate Diploma Applied Corporate Governance, FCPA, FGIA and International Chartered Secretary). Christine was appointed as Chief Financial Officer and Company Secretary in October 2016. She is a highly experienced, qualified senior finance and governance executive with over 20 years’ experience in the ASX listed environment, corporate finance, company secretarial and corporate governance. Christine consulted to Austin in a senior capacity from March 2016 to October 2016 supporting financial reporting, commercial initiatives and refinancing activities. Christine has previously held roles as Chief Executive Officer, Chief Financial Officer and Company Secretary in public and ASX listed companies including most recently Titan Energy Services and Rivercity Motorway Group.
Scott Richardson, Company Secretary from 13 January 2014 until resignation on 10 October 2016
Scott Richardson (B.Bus (Accounting), GDBA, FCPA) was Chief Financial Officer and Company Secretary and was a fellow of CPA Australia. Scott has over 20 years experience in various senior finance roles with other large Australian companies including Brambles, Downer EDI, Macarthur Coal and BGW Group.
MEETINGS OF DIRECTORS
The numbers of meetings of the Company's board of Directors and of each board committee held during the year ended 30 June 2017, and the numbers of meetings attended by each Director were:
| Nomination & | Nomination & | |||||||
|---|---|---|---|---|---|---|---|---|
| Board of | Directors | Audit Committee | Remuneration Committee | Risk Committee | ||||
| Eligible to | Eligible to | Eligible to | Eligible to | |||||
| Attend | Attended | Attend | Attended | Attend | Attended | Attend | Attended | |
| Jim Walker | 14 | 14 | 1 | 1 | 3 | 3 | 1 | 1 |
| Peter Pursey | 14 | 14 | 2 | 2 | - | - | - | - |
| Charlie Sartain | 14 | 14 | - | - | - | - | 3 | 3 |
| Chris Indermaur | 14 | 14 | 1 | 1 | - | - | 3 | 3 |
| Peter Forsyth | - | - | - | - | - | - | - | - |
| John Nicholls | 1 | 1 | - | - | - | - | - | - |
| Eugene Fung | 6 | 6 | 1 | 1 | 3 | 3 | - | - |
Austin Engineering Ltd | Annual Report | Page 13
Austin Engineering Ltd Directors' report 30 June 2017 (continued)
AUDITED REMUNERATION REPORT
The audited remuneration report is set out on pages 17 to 22 and forms part of the Directors’ Report.
SHARES UNDER OPTION
Unissued ordinary shares of Austin Engineering Limited under option at the date of this report are as follows:
| Grant date | Expiry date | Exercise price | Number of shares under option |
|---|---|---|---|
| 29 July 2015 | 31 July 2018 | $0.60 | 4,000,000 |
| 29 July 2015 | 31 July 2018 | $1.00 | 6,000,000 |
| 29 July2015 | 31 July2018 | $1.75 | 2,000,000 |
No options were granted to Directors or employees during the year, or after the year end.
SHARES UNDER PERFORMANCE RIGHTS
Unissued ordinary shares of the Company under option at the date of this report are as follows:
| Grant date | Expiry date | Exercise price | Number of shares under right |
|---|---|---|---|
| 21 November 2014 | 21 November 2019 | $0.00 | 316,772 |
| 27 November 2015 | 27 November 2020 | $0.00 | 897,121 |
No performance rights were granted to, or exercised by, Directors or employees during the year, or after the year end.
INSURANCE OF OFFICERS AND INDEMNITIES
(a) Insurance of officers
During the financial year, the Company paid a premium in respect of a contract insuring the Directors and Officers of the Company against a liability incurred as such a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
(b) Indemnity of auditors
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
NON-AUDIT SERVICES
The Directors have considered the position and, in accordance with advice received from the Audit Committee, are satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Services provided related to taxation compliance and advisory services. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in note 28 to the financial statements, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
-
All non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor; and
-
None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
Austin Engineering Ltd | Annual Report | Page 14
Austin Engineering Ltd Directors' report 30 June 2017 (continued)
AUDITOR'S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 16.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of amounts in the Directors' report. Amounts in the Directors' report have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of Directors.
==> picture [121 x 38] intentionally omitted <==
Jim Walker Non-Executive Chairman 27 September 2017 Brisbane
Austin Engineering Ltd | Annual Report | Page 15
Austin Engineering Ltd Auditor's Independence Declaration 30 June 2017
==> picture [78 x 31] intentionally omitted <==
Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au
Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia
DECLARATION OF INDEPENDENCE BY C R JENKINS TO DIRECTORS OF AUSTIN ENGINEERING LTD
As lead auditor of Austin Engineering Ltd for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been:
-
No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
-
No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Austin Engineering Ltd and the entities it controlled during the year.
==> picture [105 x 47] intentionally omitted <==
C R Jenkins Director
BDO Audit Pty Ltd
Brisbane, 27 September 2017
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Austin Engineering Ltd | Annual Report | Page 16
Austin Engineering Ltd Audited remuneration report 30 June 2017
This audited Remuneration Report sets out information about the remuneration of the Group’s key management personnel for the financial year ended 30 June 2017 and forms part of the Directors’ Report for the year ended 30 June 2017. The term ‘key management personnel’ refers to those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Company.
1. EXECUTIVE REMUNERATION
Principles used to determine the nature and amount of remuneration
The objective of the Group’s remuneration policy is to ensure it is competitive and appropriate for the results delivered. The remuneration of senior executives is reviewed annually by the Board through a process that considers the performance of individual business units and the overall performance of the Group. In addition, external analysis and advice is sought by the Board, where considered appropriate, to ensure that the remuneration for senior executives is competitive in the market place. The policy attempts to align executive reward with the achievement of strategic objectives and the creation of value for shareholders. The major features are:
-
Economic profit is a core component;
-
Attract and retain high quality executives;
-
Reward capability and experience;
-
Reflect competitive rewards for contributing to growth in shareholder’s wealth; and
-
Provide recognition for contribution.
Base pay and benefits:
Executive Directors and senior executives are offered a competitive base pay with due regard to current market rates. This base pay is calculated on a total cost basis and may include charges associated with the provision of a motor vehicle, including FBT charges, as well as employer contributions to superannuation funds. The remuneration of Executive Directors is reviewed annually by the Board and the remuneration of senior executives is reviewed annually by the Nomination and Remuneration Committee. There is no guaranteed base pay increases included in any Executive Directors or senior executive contracts.
Short-term performance incentives:
Short-term incentive plan (STI Plan) arrangements in place for senior executives for the year ended 30 June 2017 are set out below:
| Percentage of approved | |||||
|---|---|---|---|---|---|
| budget NPAT | STI | LTI | - | Subject to achieving performance hurdles | |
| Chief Executive Officer | Up to $100,000 combined incentive per annum |
P | P | ||
| Chief Financial Officer and | Up to | Nil | P | P | |
| Company Secretary | $25,000 | ||||
| per annum |
Senior Executive
The Board determined that the Group’s financial performance for the year ended 30 June 2017 was not at an appropriate level to pay incentives to the Chief Executive Officer and Chief Financial Officer and Company Secretary. There were no short-term incentives paid to other senior managers for the year ended 30 June 2017.
Long-term incentives
The current long-term incentive plan (LTI Plan) in place is to be discontinued once existing commitments are concluded. No key management personnel of the Group participate in the current LTI Plan. The Nomination and Remuneration Committee is considering the appropriate performance measure for the Company’s current circumstances prior to establishing a new LTI Plan for senior executives.
The current LTI Plan is delivered through the grant of performance rights to the former Chief Executive Officer and selected senior executives from time to time as part of their total remuneration.
Performance rights
No performance rights were granted to Directors during the current financial year.
Austin Engineering Ltd | Annual Report | Page 17
Austin Engineering Ltd Audited remuneration report 30 June 2017 (continued)
1. EXECUTIVE REMUNERATION (continued)
Principles used to determine the nature and amount of remuneration (continued)
Long-term incentives (continued)
Performance Indicators
The table below sets out summary information about the Group’s earnings and movements in shareholder wealth since 2013 and forms the background against which short-term incentives and also long-term incentives through the grant of options, over the relevant periods has been considered:
| 30 June | 30 June | 30 June | 30 June | 30 June | 30 June | |
|---|---|---|---|---|---|---|
| Consolidated entity | 2017 | 2016 | 2015 | 2014 | 2013 | |
| $000's | $'000 | $000's | $000's | $000's | ||
| Revenue | 234,344 | 188,169 | 187,239 | 209,870 | 288,838 | |
| Earnings before interest, tax, depreciation and amortisation | ||||||
| (EBITDA) | (7,730) | (20,589) | (34,032) | 15,162 | 51,118 | |
| Normalised EBITDA | 14,263 | 7,126 | 13,766 | 15,162 | 51,118 | |
| Net profit/(loss) after tax – continuing operations | (27,633) | (30,022) | (49,445) | 896 | 28,442 | |
| Net profit/(loss) after tax – discontinued and continuing | ||||||
| operations | (27,633) | (40,455) | (49,332) | 896 | 28,442 | |
| Share price at start of year ($) | 0.08 | 0.48 | 1.61 | 3.15 | 4.30 | |
| Share price at end of year ($) | 0.22 | 0.08 | 0.48 | 1.61 | 3.15 | |
| Interim dividend - fully franked (cents) | - | - | - | 4.50 | 4.50 | |
| Final dividend - fully franked (cents) | - | - | - | - | 10.50 | |
| Basic earnings/(loss) per share (cents) | (4.94) | (20.07) | (58.67) | 1.14 | 39.18 | |
| Diluted earnings/(loss) per share (cents) | (4.94) | (20.07) | (58.67) | 1.14 | 38.61 |
Service agreements
The Company’s senior executives are engaged under executive service agreements that are ongoing and have no fixed end date. However, these contracts may be terminated by notice from either party.
Key details of the executive service agreements of the current Chief Executive Officer and Chief Financial Officer and Company Secretary, and former executive key management personnel, are set out below:
| Company Secretary, | and former executive key management personnel, are set out below: | |
|---|---|---|
| Total Fixed Remuneration - Other remuneration Notice periods to terminate |
Termination At risk |
|
| payments remuneration |
||
| Current executive | ||
| key management | ||
| personnel | ||
| Chief Executive | $500,000 (including superannuation) Short-term incentives as described above. Long- term incentives in accordance with agreed future LTI Plan. 1 months’ notice by either party or payment in lieu, except in certain circumstances such as misconduct where no notice period applies. |
Statutory 16.67 % |
| Officer | entitlements. | |
| Peter Forsyth | ||
| Chief Financial | $425,000 (including superannuation) Short-term incentives as described above. Long- term incentives in accordance with agreed future LTI Plan. 1 months’ notice by either party or payment in lieu, except in certain circumstances such as misconduct where no notice period applies. |
Statutory 5.56% |
| Officer and | entitlements. | |
| Company Secretary | ||
| Christine Hayward | ||
Austin Engineering Ltd | Annual Report | Page 18
Austin Engineering Ltd Audited remuneration report 30 June 2017 (continued)
1. EXECUTIVE REMUNERATION (continued)
Principles used to determine the nature and amount of remuneration (continued)
| Principles used to determine the nature and amount of remuneration (continued) | Principles used to determine the nature and amount of remuneration (continued) |
|---|---|
| Service agreements (continued) | |
| Total Fixed Remuneration - Other remuneration Notice periods to terminate Termination payments At risk remuneration |
|
| Former executive | |
| key management | |
| personnel | |
| Former Executive | $20,000 per month increase in fees whilst engaged as an Executive Director. No short or long term incentives in place for the financial year ended 30 June 2017. 1 months’ notice by either party or payment in lieu, except in certain circumstances such as misconduct where no notice period applies. Statutory entitlements. 0.00% |
| Chairman | |
| Peter Pursey | |
| Former Chief | $821,600 (including superannuation) No short or long term incentives in place for the financial year ended 30 June 2017. 6 months’ notice by either party or payment in lieu, except in certain circumstances such as misconduct where no notice period applies. Statutory entitlements. 0.00% |
| Executive Officer | |
| Michael Buckland | |
| (resigned 15 August | |
| 2016) | |
| Former Chief | $400,000 (including superannuation) No short or long term incentives in place for the financial year ended 30 June 2017. 3 months’ notice by either party or payment in lieu, except in certain circumstances such as misconduct where no notice period applies. Statutory entitlements. 0.00% |
| Financial Officer | |
| and Company | |
| Secretary | |
| Scott Richardson | |
| (resigned 10 | |
| October 2016) |
There were no loans made, guaranteed or secured, directly or indirectly, by Austin Engineering Ltd and any of its subsidiaries to Directors of Austin Engineering Ltd and other key management personnel of the Group, including their close family members and entities related to them.
2. NON-EXECUTIVE DIRECTOR REMUNERATION
The structure of the remuneration provided to Non-Executive Directors is distinct from that applicable to executives. NonExecutive Directors receive only fixed remuneration which is not linked to the financial performance of the Company.
The annual fees paid, inclusive of superannuation, to Non-Executive Directors for the financial year ended 30 June 2017 were set out below:
| were set out below: | |
|---|---|
| 30 June 2017 | |
| $ | |
| Chairman | 115,000 |
| Non-Executive Director | 85,000 |
| AdditionalCommittee Chairman fee | 9,000 |
Non-Executive Directors’ fees and payments are reviewed annually by the Board. Non-Executive Directors’ fees are determined with an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $500,000 and was approved by shareholders at the general meeting on 23 November 2012.
Austin Engineering Ltd | Annual Report | Page 19
Austin Engineering Ltd Audited remuneration report 30 June 2017 (continued)
3. REMUNERATION GOVERNANCE
The Board oversees the remuneration arrangements of the Company. In performing this function the Board is assisted by input and recommendations from the Nomination and Remuneration Committee (“Committee”), external consultants and internal advice as required. The Committee is responsible for the overview, and recommendation to the Board, of remuneration arrangements for Directors and executive managers. The Chief Executive Officer, in consultation with the Board, sets remuneration arrangements for other senior managers. No employee is directly involved in deciding their own remuneration (including the Chief Executive Officer).
Further details of the role and function of the Committee are set out in the Charter for the Nomination and Remuneration Committee on the Company’s website at http://www.austineng.com.au.
The Committee obtains advice and market remuneration data from external remuneration advisors as required. When advice and market remuneration data is obtained, the Committee follows protocols regarding the engagement and use of external remuneration consultants to ensure ongoing compliance with executive remuneration legislation. These protocols ensure that any remuneration recommendation from an external consultant is free from undue influence by any member of the Company’s key management personnel to whom it relates.
The protocols for any external consultant providing remuneration recommendations prohibit them from providing advice or recommendations to employees or Directors before recommendations are given to the Committee. These arrangements were implemented to ensure that any external party will be able to carry out its work, including information capture and formation of its recommendations, free from undue influence by the individuals to whom they relate.
During the year the Committee engaged Egan Associates to provide benchmarking data for the setting of executive remuneration packages for the Chief Executive Officer and Chief Financial Officer and Company Secretary. Egan Associates were engaged by, and reported directly to, the Committee Chair. The fee for these services provided was $3,570.
The report was provided directly to the Committee independently of management. As a consequence, the Board is satisfied that the recommendations were made free from undue influence from any members of key management personnel.
4. VALUE PROVIDED TO KEY MANAGEMENT PERSONNEL
The following tables show details of the remuneration received by Austin Engineering Limited Non-Executive Directors, Executive Directors and other key management personnel of the Group for the current and previous financial year. The names of the Directors of Austin Engineering Ltd and their position are set out on pages 9 to 13 above.
Amounts paid or payable (in round dollars) or otherwise made available to Directors and senior executives as at the date of this report were:
| this report were: | |
|---|---|
| Post- employment Long-term Share based payments-equity |
|
| Short-term benefits benefits benefits settled - |
|
| Cash salary & fees Cash bonus Superannuation Leave Options & rights |
|
| Total | |
| Table 1 $ $ $ $ $ |
$ |
| Non-Executive Directors | |
| Jim Walker1 2017 92,327 - 8,771 - - |
101,098 |
| 2016 - - - - - |
- |
| Charlie Sartain 2017 75,884 - 18,116 - - |
94,000 |
| 2016 75,475 - 17,025 - - |
92,500 |
| Chris Indemaur2 2017 85,069 - 3,617 - - |
88,686 |
| 2016 - - - - - |
- |
| Peter Pursey3 2017 50,870 - 4,833 - - |
55,703 |
| 2016 32,329 - 29,728 - - |
62,057 |
| Eugene Fung4 2017 24,180 - 14,257 - - |
38,437 |
| 2016 62,500 - 30,000 - - |
92,500 |
| John Nicholls5 2017 1,888 - - - - |
1,888 |
| 2016 70,833 - - - - |
70,833 |
| Total compensation for 2017 330,218 - 49,594 - - |
379,812 |
| Non-ExecutiveDirectors 2016 241,137 - 76,753 - - |
317,890 |
Austin Engineering Ltd | Annual Report | Page 20
Austin Engineering Ltd Audited remuneration report 30 June 2017 (continued)
4. VALUE PROVIDED TO KEY MANAGEMENT PERSONNEL (continued)
| Post- employment Long-term Share based payments-equity |
||
|---|---|---|
| Short-term benefits benefits benefits settled |
||
| Cash salary & fees Cash bonus Superannuation Leave Options & rights |
||
| Total | ||
| Table 2 | $ $ $ $ $ |
$ |
| Executive Directors and | ||
| Senior Executives | ||
| Peter Forsyth6 | 2017 334,586 - 25,669 - - |
360,255 |
| 2016 - - - - - |
- | |
| Peter Pursey3 | 2017 142,817 - 4,068 - - |
146,885 |
| 2016 143,760 - - - - |
143,760 | |
| Christine Hayward7 | 2017 295,202 - 14,284 - - |
309,486 |
| 2016 - - - - - |
- | |
| Charles Rottier8 | 2017 251,956 - - - - |
251,956 |
| 2016 154,080 - - - - |
154,080 | |
| Scott Richardson9 | 2017 181,516 - 9,879 - - |
191,395 |
| 2016 372,507 15,000 27,500 5,935 29,281 |
450,223 | |
| Michael Buckland10 | 2017 100,432 - - - - |
100,432 |
| 2016 821,600 - - 3,733 50,767 |
876,100 | |
| Total compensation for | 2017 1,306,509 - 53,900 - - |
1,360,409 |
Executive Directors and |
||
| Senior Executives | 2016 1,491,947 15,000 27,500 9,668 80,048 |
1,624,163 |
| Total key management | 2017 1,636,727 - 103,494 - - |
1,740,221 |
| personnel remuneration | 2016 1,733,084 15,000 104,253 9,668 80,048 |
1,942,053 |
1 Jim Walker was appointed as a Non-Executive Director on 8 July 2016 and Chairman on 25 November 2016.
2 Chris Indermaur was appointed as a Non-Executive Director on 8 July 2016.
3 Peter Pursey was appointed Executive Chairman from 17 February 2016 until 25 November 2016. His Remuneration during the period of his executive role is included in Table 2. Outside of this period, Peter was a Non-Executive Director, his fees earned as a Non-Executive Director are included in Table 1.
4 Eugene Fung retired as Non-Executive Director on 25 November 2016.
5 John Nicholls retired as Non-Executive Director on 8 July 2016.
6 Peter Forsyth commenced as Chief Executive Officer on 12 October 2016 and was appointed Managing Director on 18 August 2017, his remuneration did not change with this appointment.
7 Christine Hayward was appointed as Chief Financial Officer and Company Secretary on 10 October 2016.
8 Charles Rottier was appointed as Chief Strategy Officer on 3 February 2016 and interim Chief Executive Officer from 8 July 2016 to 12 October 2016.
9 Scott Richardson resigned as Chief Financial Officer and Company Secretary on 10 October 2016.
10 Michael Buckland resigned as Chief Executive Officer on 15 August 2016.
No key management personnel appointed during the period received a payment as part of their consideration for agreeing to hold the position.
No bonus payments were made to key management personnel during the 30 June 2017 financial year.
Other transactions with related parties
Eugene Fung, a former Non-Executive Director of the company, is a partner with the law firm Thomson Geer Lawyers. The firm provided legal services to the group on normal commercial terms to the value of $0.196m (2016: $0.842m) during the year to 25 November 2016, when Thomson Geer Lawyers ceased to be a related party. No amounts were outstanding to related parties at 30 June 2017 (2016: $0.141m).
There were no other transactions with related parties during the year to 30 June 2017.
Loans to key management personnel
There were no loans made, guaranteed or secured, directly or indirectly, by Austin Engineering Ltd and any of its subsidiaries to Directors of Austin Engineering Ltd and other key management personnel of the group, including their close family members and entities related to them.
Austin Engineering Ltd | Annual Report | Page 21
Austin Engineering Ltd Audited remuneration report 30 June 2017 (continued)
5. EQUITY INSTRUMENTS
Options held by key management personnel
There were no options held by key management personnel at 30 June 2017 and 30 June 2016.
Performance Rights held by key management personnel
The number of performance rights over ordinary shares in the company held during the financial year by each Director and other members of key management personnel of the Group, including their related parties, is set out below:
| Balance at the | Expired/ | Balance at the | |||
|---|---|---|---|---|---|
| Name | start of the year | Granted | Vested | forfeited/other | end of the year |
| No. | No. | No. | No. | No. | |
| Former Key Management | |||||
| personnel | |||||
| Michael Buckland | 469,108 | - | - | (469,108) | - |
| ScottRichardson | 230,728 | - | - | (230,728) | - |
| Total | 699,836 | - | - | (699,836) | - |
The terms and conditions of each grant of rights over ordinary shares affecting remuneration of the former key management personnel in this financial year or future reporting periods are as follows:
Fair value of rights
| Fair value of rights | |
|---|---|
Total shareholder Earnings per |
|
| Grant date Exercise price return share Performance period Expiry date |
|
| 27 November | |
| 2015 0.00 0.08 0.19 1 July 2015 - 30 June 2018 27 November 2020 |
At 30 June 2017, no current key management personnel held performance rights.
Shares held by key management personnel
The number of performance shares held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below:
| Options | Sold during | ||||||
|---|---|---|---|---|---|---|---|
| Balance at | exercised | Bought | Granted | the year | Balance at | ||
| the start of | during the | during the | during the | and other | the end of | ||
| Name | the year | year | year | year | changes | the year | |
| No. | No. | No. | No. | No. | No. | ||
| Current key management personnel | |||||||
| Peter Pursey | 2,225,232 | - | - | - | - | 2,225,232 | |
| Jim Walker | - | - | 80,000 | - | - | 80,000 | |
| Charlie Sartain | - | - | 5,449,000 | - | (1,906,500) | 3,542,500 | |
| Former key management personnel | |||||||
| Michael Buckland | 4,402,555 | - | - | - | (4,402,555) | - | |
| Scott Richardson | 250,000 | - | - | - | (250,000) | - | |
| John Nicholls | 726,000 | - | - | - | (726,000) | - | |
| EugeneFung | 2,112,024 | - | - | - | (2,112,024) | - | |
| Total | 9,715,811 | - | 5,529,000 | - | (9,397,079) | 5,847,732 |
No other key management personnel held shares at 30 June 2017 and 30 June 2016.
None of the shares above were held nominally by the Directors or any of the other key management personnel.
Austin Engineering Ltd | Annual Report | Page 22
Austin Engineering Ltd Corporate governance statement 30 June 2017
Corporate governance statement
Austin Engineering Ltd is committed to achieving and demonstrating the highest standards of corporate governance. The Board continues to refine and improve the governance framework and practices in place to ensure they meet the interests of shareholders.
The Company complies with the Australian Securities Exchange Corporate Governance Council’s Corporate Governance Principles and Recommendations 3rd Edition (‘the ASX Principles’).
The 2017 Corporate Governance Statement, which is available at www.austineng.com.au, reflects the corporate governance practices in place throughout the 2017 financial year and was approved by the board on 27 September 2017.
Austin Engineering Ltd | Annual Report | Page 23
Austin Engineering Ltd ABN 60 078 480 136
Annual Financial Report - 30 June 2017
| Contents | Page |
|---|---|
| Financial statements | |
| Consolidated statement of profit or loss and other comprehensive income | 25 |
| Consolidated statement of financial position | 26 |
| Consolidated statement of changes in equity | 27 |
| Consolidated statement of cash flows | 28 |
| Notes to the consolidated financial statements | 29 |
| Directors' declaration | 70 |
| Independent auditor's report | 71 |
These financial statements are consolidated financial statements for the Group consisting of Austin Engineering Ltd and its subsidiaries. A list of subsidiaries is included in note 24.
The financial statements are presented in Australian dollars ($).
Austin Engineering Ltd is a listed public company limited by shares, incorporated and domiciled in Australia.
Its registered office and principal place of business is: Austin Engineering Ltd Kings Row 1 Level G 52 McDougall Street Milton QLD 4064
The financial statements were authorised for issue by the Directors on 27 September 2017. The Directors have the power to amend and reissue the financial statements.
All press releases, financial reports and other information are available at our Investor Centre on our website: www.austineng.com.au
Austin Engineering Ltd | Annual Report | Page 24
Austin Engineering Ltd Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2017
| Consolidated entity | Consolidated entity | Consolidated entity | ||
|---|---|---|---|---|
| Notes | 2017 | 2016 | ||
| $'000 | $'000 | |||
| Revenue from continuing operations | 2 | 234,344 | 188,169 | |
| Expenses | ||||
| Raw materials and consumables used | (68,535) | (39,938) | ||
| Changes in inventories and work in progress | 15,803 | (6,973) | ||
| Employment expenses | (102,018) | (87,593) | ||
| Subcontractor expenses | (14,388) | (10,451) | ||
| Occupancy and utility expenses | (6,431) | (13,054) | ||
| Depreciation expense | 14 | (10,311) | (10,277) | |
| Amortisation expense | 15 | (883) | (863) | |
| Production operational expenses | (13,239) | (10,055) | ||
| Other expenses | (33,451) | (31,608) | ||
| Finance costs | (6,102) | (6,156) | ||
| Impairment expense | 3 | (19,815) | (9,060) | |
| Loss before income tax | (25,026) | (37,859) | ||
| Income tax(expense)/benefit | 4 | (2,607) | 7,837 | |
| Loss for the year from continuing operations | (27,633) | (30,022) | ||
| Loss from discontinued operation | - | (10,433) | ||
| Loss for the year | (27,633) | (40,455) | ||
| Other comprehensive income | ||||
| Item that may be reclassified to profit or loss | ||||
| Foreign currency translation differences, net of tax | 18 | (5,135) | (1,991) | |
| Blank | ||||
| Other comprehensive income for the year | (5,135) | (1,991) | ||
| Total comprehensive income for the year | (32,768) | (42,446) | ||
| Loss for the year is attributable to: | ||||
| Owners of Austin Engineering Ltd | (27,633) | (40,455) | ||
| Total comprehensive income for the year is attributable to: | ||||
| Owners of Austin Engineering Ltd | (32,768) | (42,446) | ||
| Cents | Cents | |||
| Earnings per share for profit from continuing operations attributable to the | ||||
| owners of Austin Engineering Ltd: | ||||
| Basic loss per share (cents per share) | 5 | (4.94) | (20.07) | |
| Diluted loss per share (cents per share) | 5 | (4.94) | (20.07) | |
| Earnings per share from continuing and discontinued operations attributable to | ||||
| the owners of Austin Engineering Ltd: | ||||
| Basic loss per share (cents per share) | 5 | (4.94) | (27.04) | |
| Diluted loss per share (cents per share) | 5 | (4.94) | (27.04) |
The above Consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Austin Engineering Ltd | Annual Report | Page 25
Austin Engineering Ltd Consolidated statement of financial position As at 30 June 2017
| Consolidated entity | Consolidated entity | ||
|---|---|---|---|
| Notes | 2017 | 2016 | |
| $'000 | $'000 | ||
| Current assets | |||
| Cash and cash equivalents | 7 | 3,923 | 12,832 |
| Trade and other receivables | 8 | 45,312 | 29,371 |
| Inventories | 9 | 31,617 | 15,814 |
| Current tax assets | 4 | 545 | 1,809 |
| Assets classified as held for sale | 11 | - | 8,740 |
| Other receivables and otherassets | 10 | 14,814 | 11,985 |
| Total current assets | 96,211 | 80,551 | |
| Non-current assets | |||
| Property, plant and equipment | 14 | 105,327 | 113,308 |
| Intangible assets | 15 | 16,768 | 37,268 |
| Deferred taxassets | 4 | 13,242 | 17,632 |
| Total non-current assets | 135,337 | 168,208 | |
| Total assets | 231,548 | 248,759 | |
| Current liabilities | |||
| Trade and other payables | 12 | 55,661 | 36,509 |
| Financial liabilities | 16 | 17,045 | 19,657 |
| Current tax liabilities | 4 | 1,931 | 15 |
| Provisions | 13 | 5,927 | 8,247 |
| Total current liabilities | 80,564 | 64,428 | |
| Non-current liabilities | |||
| Financial liabilities | 16 | 32,446 | 32,593 |
| Deferred tax liabilities | 4 | 5,862 | 10,512 |
| Provisions | 13 | 498 | 4,205 |
| Total non-current liabilities | 38,806 | 47,310 | |
| Total liabilities | 119,370 | 111,738 | |
| Net assets | 112,178 | 137,021 | |
| Equity | |||
| Share capital | 17 | 153,927 | 145,829 |
| Retained earnings | (30,500) | (4,595) | |
| Reserves | 18 | (11,249) | (4,213) |
| Total equity | 112,178 | 137,021 |
The above Consolidated statement of financial position should be read in conjunction with the accompanying notes.
Austin Engineering Ltd | Annual Report | Page 26
Austin Engineering Ltd Consolidated statement of changes in equity For the year ended 30 June 2017
| Foreign | ||||||
|---|---|---|---|---|---|---|
| currency | ||||||
| Consolidated entity | Notes | Contributed equity |
Other reserve |
translation reserve |
Retained earnings |
Total |
| $'000 | $'000 | $'000 | $'000 | $'000 | ||
| Opening balance at 1 July 2015 | 87,344 | 1,842 | (5,623) | 35,860 | 119,423 | |
| Total comprehensive income for the year: | ||||||
| Loss for the year | - | - | - | (40,455) | (40,455) | |
| White text | ||||||
| Other comprehensive income, net of tax: | ||||||
| Currency translation differences | - | - | (1,991) | - | (1,991) | |
| Total comprehensive income for the year | - | - | (1,991) | (40,455) | (42,446) | |
| Transactions with owners in their capacity as | ||||||
| owners: | ||||||
| Issue of share capital | 17 | 61,346 | - | - | - | 61,346 |
| Share issue costs | 17 | (2,861) | - | - | - | (2,861) |
| Share-based payments | - | 1,559 | - | - | 1,559 | |
| 58,485 | 1,559 | - | - | 60,044 | ||
| Balance at 30 June 2016 | 145,829 | 3,401 | (7,614) | (4,595) | 137,021 | |
| Balance at 1 July 2016 | 145,829 | 3,401 | (7,614) | (4,595) | 137,021 | |
| Total comprehensive income for the year: | ||||||
| Loss for the year | - | - | - | (27,633) | (27,633) | |
| White text | ||||||
| Other comprehensive income, net of tax: | ||||||
| Currency translationdifferences | - | - | (5,135) | - | (5,135) | |
| Total comprehensive income for the year | - | - | (5,135) | (27,633) | (32,768) | |
| Transactions with owners in their capacity as | ||||||
| owners: | ||||||
| Issue of share capital | 17 | 8,416 | - | - | - | 8,416 |
| Share issue costs | 17 | (318) | - | - | - | (318) |
| Share-based payments | - | (173) | - | - | (173) | |
| Transfers | - | (1,728) | - | 1,728 | - | |
| 8,098 | (1,901) | - | 1,728 | 7,925 | ||
| Balance at 30 June 2017 | 153,927 | 1,500 | (12,749) | (30,500) | 112,178 |
The above Consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Austin Engineering Ltd | Annual Report | Page 27
Austin Engineering Ltd Consolidated statement of cash flows For the year ended 30 June 2017
| Consolidated entity | Consolidated entity | Consolidated entity | ||
|---|---|---|---|---|
| Notes | 2017 | 2016 | ||
| $'000 | $'000 | |||
| Cash flows from operating activities | ||||
| Receipts from customers | 231,138 | 230,671 | ||
| Payments to suppliers and employees | (241,175) | (227,040) | ||
| Interest received | 88 | 27 | ||
| Finance costs | (6,102) | (5,747) | ||
| Income tax refund | 1,209 | 1,234 | ||
| Income taxpaid | - | (1,095) | ||
| Net cash used in operating activities | (14,842) | (1,950) | ||
| Cash flows from investing activities | ||||
| Payments for property, plant and equipment | 14 | (6,736) | (12,763) | |
| Payments for intangibles | (70) | - | ||
| Proceeds from sale of property, plant and equipment | 3,437 | 914 | ||
| Proceeds from sale of COR Cooling Pty Ltd | - | 13,400 | ||
| Proceedsfromsale ofassetsheldforsale | 5,959 | - | ||
| Net cash provided by investing activities | 2,590 | 1,551 | ||
| Cash flows from financing activities | ||||
| Proceeds from issues of shares and other equity securities | 17 | 7,962 | 57,259 | |
| Proceeds from borrowings | 37,867 | 34,202 | ||
| Repayment ofborrowings | (42,412) | (81,400) | ||
| Net cashprovided by financing activities | 3,417 | 10,061 | ||
| Net (decrease)/increase in cash and cash equivalents | (8,835) | 9,662 | ||
| Cash and cash equivalents at the beginning of the financial year | 12,832 | 3,319 | ||
| Effects ofexchangerate changes oncashand cashequivalents | (74) | (149) | ||
| Cash and cash equivalents at end of theyear | 7 | 3,923 | 12,832 |
The above Consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Austin Engineering Ltd | Annual Report | Page 28
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Contents of the notes to the consolidated financial statements
| Page | ||
|---|---|---|
| Results notes | 30 | |
| 1 | Segment information | 31 |
| 2 | Revenue | 32 |
| 3 | Expenses | 33 |
| 4 | Tax | 33 |
| 5 | Earnings per share | 36 |
| 6 | Dividends | 37 |
| Operating assets and liabilities notes | 38 | |
| 7 | Cash and cash equivalents | 39 |
| 8 | Trade and other receivables | 39 |
| 9 | Inventories | 40 |
| 10 | Other current assets | 40 |
| 11 | Assets held for sale | 41 |
| 12 | Trade and other payables | 41 |
| 13 | Provisions | 41 |
| 14 | Property, plant and equipment | 43 |
| 15 | Intangible assets | 45 |
| Capital and financial risk management notes | 48 | |
| 16 | Financial liabilities | 49 |
| 17 | Equity - issued capital | 50 |
| 18 | Equity - reserves | 51 |
| 19 | Financial risk management | 51 |
| 20 | Fair value measurements | 55 |
| Unrecognised items notes | 56 | |
| 21 | Contingent liabilities | 57 |
| 22 | Capital and leasing commitments | 57 |
| 23 | Events occurring after the reporting period | 57 |
| Group | structure notes | 58 |
| 24 | Interests in other entities | 59 |
| 25 | Deed of cross guarantee | 60 |
| 26 | Parent entity financial information | 60 |
| Other information notes | 61 | |
| 27 | Cash flow information | 62 |
| 28 | Remuneration of auditors | 63 |
| 29 | Related party transactions | 63 |
| 30 | Key management personnel compensation | 64 |
| 31 | Share-based payments | 64 |
| 32 | Critical accounting estimates and judgements | 66 |
| 33 | Summary of significant accounting policies | 67 |
Austin Engineering Ltd | Annual Report | Page 29
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Results notes
| Segment information 31 |
|
|---|---|
| Note 1 | |
| Note 2 | Revenue 32 |
| Note 3 | Expenses 33 |
| Note 4 | Tax 33 |
| Note 5 | Earnings per share 36 |
| Note 6 | Dividends 37 |
Austin Engineering Ltd | Annual Report | Page 30
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 1. Segment information
Management has determined that the strategic operating segments comprise of Australia (for mining equipment, other products and repair and maintenance services), Americas (for mining equipment, other products and repair and maintenance services comprising of North America and South America) and Asia (currently Indonesia for mining equipment and other products). These reporting segments also provide a more balanced view of cross-operational performance across business units, recognising and compensating for inter-regional differences in relation to technical methodologies, production facilities and processes, the cost of key inputs such as labour and steel, the existence of competition and differing customer requirements that may affect product pricing.
Executive management monitors segment performance based on EBITDA. Segment information for the years ended 30 June 2017 and 30 June 2016 is as follows:
| 2017 and 30 June 2016 is as follows: | ||||||||
|---|---|---|---|---|---|---|---|---|
| Australia | Americas | Asia | Total | |||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |
| $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | $'000 | |
| Total segment revenue from continuing | ||||||||
| operations - from external customers | 104,634 | 92,237 | 112,286 | 89,678 | 17,424 | 6,254 | 234,344 | 188,169 |
| EBITDA from continuing operations | 8,068 | (11,252) | 952 | (557) | 3,065 | 279 | 12,085 | (11,530) |
| (112,702) | (80,985) | (113,238) | (89,121) | (20,489) | (6,533) | (246,429) | (176,639) | |
| Other segment information | ||||||||
| Depreciation and amortisation | 2,543 | 2,951 | 7,721 | 7,231 | 930 | 958 | 11,194 | 11,140 |
| Impairment | 12,425 | - | 10,182 | 6,170 | (2,792) | 2,890 | 19,815 | 9,060 |
| Segment assets | 71,759 | 81,735 | 139,023 | 155,664 | 20,766 | 11,360 | 231,548 | 248,759 |
| Total assets includes: | ||||||||
| Additions to non-current assets (other | ||||||||
| than financial assets and deferred tax) | 2,316 | 894 | 4,250 | 11,943 | 170 | 32 | 6,736 | 12,869 |
| Segment Liabilities | 57,922 | 60,000 | 54,398 | 50,016 | 7,050 | 1,722 | 119,370 | 111,738 |
Inter-segment transfers
Segment revenues, expenses and results include transfers between segments. The prices charged on inter-segment transactions are the same as those charged for similar goods to parties outside of the consolidated group at an arm’s length basis. These transfers are eliminated on consolidation.
Segment revenue and non-current assets
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Total revenues from external customers attributed to: | ||
| - Australia | 104,634 | 88,379 |
| - all foreign countries | 129,710 | 99,790 |
| Revenues from external customers attributed to the following individual foreign countries were | ||
| material: | ||
| - Chile | 45,731 | 41,744 |
| - USA | 34,490 | 20,593 |
| Revenues derived from a single external customer were attributable to Australia | 51,096 | 27,299 |
| Non-current assets, excluding financial instruments and deferred tax assets, located: | ||
| - in Australia | 29,262 | 42,095 |
| - in Chile | 56,506 | 78,776 |
| - in foreign countries | 36,327 | 29,705 |
Austin Engineering Ltd | Annual Report | Page 31
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 1. Segment information (continued)
Corporate expenses
Corporate expenses are included in the Australian reporting segment for decision-making purposes as this represents the area within which they are mostly incurred. Asset and liability amounts are measured in the same way that they are measured in the financial statements. Segment assets and liabilities are allocated based on the operations of the segment and the physical location of the assets and liabilities.
The reconciliation of EBITDA to loss before income tax is as follows:
| The reconciliation of EBITDA to loss before income tax is as follows: | ||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $'000 | $'000 | |
| EBITDA used for segment reporting* | 12,085 | (11,530) |
| Impairment expense | (19,815) | (9,060) |
| Reported EBITDA | (7,730) | (20,590) |
| Depreciation expense | (10,311) | (10,277) |
| Amortisation expense | (883) | (863) |
| Interest revenue | 152 | 27 |
| Finance costs | (6,254) | (6,156) |
| Loss before income tax from continuingoperations | (25,026) | (37,859) |
*The 30 June 2017 EBITDA includes restructuring costs totalling $2.178m (2016: $18.656m).
Note 2. Revenue
The Group derives the following types of revenue:
| The Group derives the following types of revenue: | ||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $'000 | $'000 | |
| Sale of goods | 124,169 | 98,285 |
| Services | 109,892 | 88,917 |
| Interest and other income | 283 | 967 |
| Total revenue from continuing operations | 234,344 | 188,169 |
Revenue and other income
Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
-
the group has transferred to the buyer the significant risks and rewards of ownership of the goods;
-
the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
-
the amount of revenue can be measured reliably;
-
it is probable that the economic benefits associated with the transaction will flow to the group; and
-
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at reporting date and where the outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.
Austin Engineering Ltd | Annual Report | Page 32
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 2. Revenue (continued)
Interest income
Interest income is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument.
Note 3. Expenses
(a) Loss for the year from continuing operations includes the following expenses:
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Cost of goods sold | 163,234 | 131,937 |
| Rental expense on operating leases | 2,346 | 9,253 |
| Defined contribution superannuation costs | 3,344 | 3,466 |
| Net foreign currency exchange losses | 557 | 976 |
(b) Impairment charge
Impairment charges of $19.815m (2016: $9.060m) have been allocated against goodwill of $16.045m (2016: $3.519m), to identifiable intangible assets of $3.170m (2016: nil) and to property, plant and equipment $0.600m (2016: $5.541m). Refer to Notes 14 and 15.
Note 4. Tax
(a) Income tax expense/(benefit)
| (a) Income tax expense/(benefit) |
||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $'000 | $'000 | |
| Components of income tax expense/(benefit): | ||
| Current tax - current period | 892 | 676 |
| Over-provision in respect of prior years | 1,458 | (653) |
| Deferred tax - origination and reversal of temporarydifferences | 257 | (7,557) |
| 2,607 | (7,534) | |
| Income tax expense is attributable to: | ||
| Profit/(loss) from continuing operations | 2,607 | (7,837) |
| Profitfromdiscontinued operation | - | 303 |
| 2,607 | (7,534) |
| Numerical reconciliation of income tax expense to prima facie tax payable | |||
|---|---|---|---|
| Consolidated entity | |||
| 2017 | 2016 | ||
| $'000 | $'000 | ||
| Loss from continuing operations before income tax expense | (25,026) | (37,859) | |
| Loss from discontinuing operation before income tax expense | - | (10,130) | |
| (25,026) | (47,989) | ||
Austin Engineering Ltd | Annual Report | Page 33
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 4. Tax (continued)
Numerical reconciliation of income tax expense to prima facie tax payable (continued)
| Numerical reconciliation of income tax expense to prima facie tax payable (continued) | |||
|---|---|---|---|
| Consolidated entity | |||
| 2017 | 2016 | ||
| $'000 | $'000 | ||
| Tax at the Australian tax rate of 30.0% (2016 - 30.0%) | (7,508) | (14,397) | |
| Tax effect of amounts which are not deductible (taxable) | |||
| in calculating taxable income: | |||
| Non-allowable items | 6,222 | 7,231 | |
| Over-provision for tax in prior years | 1,458 | (653) | |
| Share options expensed in the year | (52) | 52 | |
| Differences in overseas tax rates | 855 | 524 | |
| Non-assessable items and other allowances: | |||
| Deferred tax assets not recognised on tax losses | 1,632 | 128 | |
| Other | - | (419) | |
| Income tax expense/(benefit) | 2,607 | (7,534) |
(b) Current tax asset and liability
| Consolidated | entity | entity | |||
|---|---|---|---|---|---|
| 2017 | 2016 | ||||
| $'000 | $'000 | ||||
| Current tax assets | 545 | 1,809 | |||
| Current tax liabilities | (1,931) | (15) | |||
| (1,386) | 1,794 | ||||
(c) Deferred Tax
| Consolidated entity | Consolidated entity |
|---|---|
2017 $'000 2016 $'000 |
|
| Current tax assets 545 1,809 |
|
| Current tax liabilities (1,931) (15) |
|
| (1,386) 1,794 |
|
| (c) Deferred Tax |
|
| Consolidated entity | |
2017 $'000 2016 $'000 |
|
| Deferred tax assets - non-current: | |
| Employee leave entitlements 1,581 1,698 |
|
| Warranty and other provisions 206 1,898 |
|
| Transaction costs on equity issue 967 1,266 |
|
| Tax losses 9,503 7,974 |
|
| Other 985 4,796 |
|
| Total deferred tax assets 13,242 17,632 |
|
| Deferred tax liabilities - non-current: | |
| Intangibles 2,353 2,415 |
|
| Asset financing 756 6,460 |
|
| Other 2,753 1,637 |
|
| Total deferred tax liabilities 5,862 10,512 |
Austin Engineering Ltd | Annual Report | Page 34
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 4. Tax (continued)
(c) Deferred Tax (continued)
| (c) Deferred Tax (continued) |
|||||
|---|---|---|---|---|---|
| Recognised | |||||
| Opening | in profit or | Recognised | Closing | ||
| balance | loss | in equity | balance | ||
| $'000 | $'000 | $'000 | $'000 | ||
| Movements: | |||||
| 2017 | |||||
| Deferred tax assets | |||||
| Employee leave entitlements | 1,698 | (138) | 21 | 1,581 | |
| Warranty and other provisions | 1,898 | (1,697) | 5 | 206 | |
| Transaction costs on equity issue | 1,266 | (299) | - | 967 | |
| Tax losses | 7,974 | 1,500 | 29 | 9,503 | |
| Other | 4,796 | (3,960) | 149 | 985 | |
| Total deferred tax assets | 17,632 | (4,594) | 204 | 13,242 | |
| Deferred tax liabilities | |||||
| Intangibles | 2,415 | (60) | (2) | 2,353 | |
| Asset financing | 6,460 | (5,460) | (244) | 756 | |
| Other | 1,637 | 1,183 | (67) | 2,753 | |
| Total deferred tax liabilities | 10,512 | (4,337) | (313) | 5,862 | |
| Recognised | |||||
| Opening | in profit or | Recognised | Closing | ||
| balance | loss | in equity | Disposals | balance | |
| $'000 | $'000 | $'000 | $'000 | $'000 | |
| Movements: | |||||
| 2016 | |||||
| Deferred tax assets | |||||
| Employee leave entitlements | 1,782 | 168 | 7 | (259) | 1,698 |
| Warranty and other provisions | 233 | 1,681 | 3 | (19) | 1,898 |
| Transaction costs on equity issue | 241 | - | 1,025 | - | 1,266 |
| Tax losses | 3,940 | 4,033 | 1 | - | 7,974 |
| Other | 3,301 | 1,627 | - | (132) | 4,796 |
| Total deferred tax assets | 9,497 | 7,509 | 1,036 | (410) | 17,632 |
| Deferred tax liabilities | |||||
| Revaluation of assets on acquisition | 35 | (35) | - | - | - |
| Intangibles | 3,457 | (1,041) | (1) | - | 2,415 |
| Asset financing | 4,095 | 2,370 | (5) | - | 6,460 |
| Other | 3,001 | (1,342) | (22) | - | 1,637 |
| Total deferred tax liabilities | 10,588 | (48) | (28) | - | 10,512 |
Income tax
The income tax expense or credit for the year is the tax payable on the current year's taxable income, based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting year in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Austin Engineering Ltd | Annual Report | Page 35
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 4. Tax (continued)
Income tax (continued)
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting year and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The Group's Australian subsidiaries, together with the Company, form a tax consolidated group for income tax purposes.
Note 5. Earnings per share
| Consolidated entity | Consolidated entity | Consolidated entity | |
|---|---|---|---|
| Basic earnings per share | 2017 | 2016 | |
| Cents | Cents | ||
| From continuing operations | (4.94) | (20.07) | |
| Fromdiscontinued operations | - | (6.97) | |
| Total basic earnings per share | (4.94) | (27.04) | |
| Diluted earnings per share | |||
| From continuing operations | (4.94) | (20.07) | |
| Fromdiscontinued operations | - | (6.97) | |
| Total diluted earnings per share | (4.94) | (27.04) | |
| Consolidated entity | |||
| Reconciliation of earnings to loss | 2017 | 2016 | |
| $'000 | $'000 | ||
| Loss after tax: | |||
| From continuing operations | (27,633) | (30,022) | |
| Fromdiscontinued operation | - | (10,433) | |
| Loss attributable to the ordinary equity holders of the Company used in calculating | |||
| diluted earnings per share | (27,633) | (40,455) |
Austin Engineering Ltd | Annual Report | Page 36
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 5. Earnings per share (continued)
| Note 5. Earnings per share (continued) |
||
|---|---|---|
| Consolidated entity | ||
| Weighted average number of shares used as the denominator | 2017 | 2016 |
| Number | Number | |
| Weighted average number of shares | 558,946,633 | 149,613,457 |
| Effect ofdilutive securities-share options | - | - |
| Used to calculate diluted earnings per share | 558,946,633 | 149,613,457 |
Performance rights granted to employees under the performance rights plan, rights granted to senior executives under the performance rights plan and options issued as part consideration for the subordinated loan are considered to be potential ordinary shares. Whilst that is the case, because of the net loss after tax, these have not been included in the determination of diluted earnings per share as they are considered to be anti-dilutive.
Note 6. Dividends
Recognised amounts
There were no interim or final dividends paid during the year ended 30 June 2017 and 30 June 2016.
Dividends not recognised at the end of the reporting period
Since the end of financial year the Directors have not declared a final dividend for the financial year ended 30 June 2017 (2016: Nil cents per share).
Franking credits
| Franking credits | ||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $'000 | $'000 | |
| Franking credits available for subsequent reporting periods based on a tax rate of 30.0% | ||
| (2016 - 30.0%) | 26,627 | 26,627 |
The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for:
==> picture [43 x 42] intentionally omitted <==
(a) franking credits that will arise from the payment of the amount of the provision for income tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
There has been no reduction in the franking account since the end of the reporting period, as there was no final dividend declared at year end.
Austin Engineering Ltd | Annual Report | Page 37
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Operating assets and liabilities notes
| Cash and cash equivalents 39 |
|
|---|---|
| Note 7 | |
| Note 8 | Trade and other receivables 39 |
| Note 9 | Inventories 40 |
| Note 10 | Other current assets 40 |
| Note 11 | Assets held for sale 41 |
| Note 12 | Trade and other payables 41 |
| Note 13 | Provisions 41 |
| Note 14 | Property, plant and equipment 43 |
| Note 15 | Intangible assets 45 |
Austin Engineering Ltd | Annual Report | Page 38
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 7. Cash and cash equivalents
| Note 7. Cash and cash equivalents |
||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $'000 | $'000 | |
| Cash and cash equivalents | 3,923 | 12,832 |
| 3,923 | 12,832 |
Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position.
Restricted cash
At 30 June 2017, there were no restricted cash balances (2016: $8.622m of the cash balance was held in a restricted account on escrow with our former banking syndicate as security for financial liabilities due to the syndicate).
Note 8. Trade and other receivables
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Trade receivables | 45,545 | 29,537 |
| Provision for impairment | (233) | (166) |
| 45,312 | 29,371 |
The carrying amounts of the consolidated entity’s trade receivables are denominated in the following currencies:
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Australian dollars | 22,051 | 13,249 |
| Chilean pesos (Australian dollar equivalent) | 7,189 | 5,714 |
| US dollars (Australian dollar equivalent) | 11,275 | 5,280 |
| Indonesian rupiah (Australian dollar equivalent) | 2,309 | 59 |
| Colombian pesos (Australian dollar equivalent) | 2,488 | 1,614 |
| Peruvian nuevo soles (Australiandollarequivalent) | - | 3,455 |
| 45,312 | 29,371 |
The age of trade receivables that were past due but not impaired was as follows:
| The age of trade receivables that were past due but not impaired was as follows: | ||
|---|---|---|
| Consolidated | entity | |
| 2017 | 2016 | |
| $'000 | $'000 | |
| 30 days | 4,089 | 4,107 |
| 31-60 days | 1,554 | 1,823 |
| 61-90 days | 543 | 726 |
| 6,186 | 6,656 |
The trade receivables that were past due but not impaired relate to a number of customers for whom there is no recent history of default or other indicators of impairment.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
Austin Engineering Ltd | Annual Report | Page 39
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 8. Trade and other receivables (continued)
Impairment loss on receivables
Receivables are determined to be uncollectible only when there is no expectation of recovering any additional cash. This may occur when there is a final distribution from administrators or liquidators or where unsuccessful attempts have been made to recover the debt through legal actions or debt collection agencies and the prospect of recovering any additional cash is remote. For these receivables the estimated impairment losses are recognised in a separate provision for impairment.
Receivables for which an impairment provision was recognised are written off against the provision when there is no expectation of recovering additional cash. Impairment losses are recognised in profit and loss within other expenses. Subsequent recoveries of amounts previously written off are credited against other expenses.
Refer to note 19 for more information on the consolidated entity’s risk management policy, the credit quality and risk of trade receivables.
Note 9. Inventories
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| At cost: | ||
| Raw materials and consumables | 13,154 | 9,246 |
| Work in progress | 17,699 | 6,212 |
| Finished goods | 764 | 356 |
| 31,617 | 15,814 |
Raw materials, consumables and work in progress
Inventories consist of raw materials, consumables and work in progress and are valued at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
Note 10. Other current assets
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Current | ||
| Prepayments | 3,216 | 2,199 |
| Accrued income | 7,715 | 6,205 |
| Other receivables | 3,883 | 3,581 |
| 14,814 | 11,985 |
Austin Engineering Ltd | Annual Report | Page 40
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 11. Assets held for sale
Assets are classified as held for sale when its carrying value will be recovered principally through a sale transaction rather than through continuing use. Assets held for sale are measured at the lower of the carrying amount and fair value less costs to sell.
There were no assets classified as held for sale as at 30 June 2017 (at 30 June 2016: $8.740m), those classified as assets held for sale at 30 June 2016 related to property assets held by the group in Peru and Colombia which were either sold or reclassified to property, plant and equipment during the year ended 30 June 2017.
Note 12. Trade and other payables
| Note 12. Trade and other payables |
||
|---|---|---|
| Consolidated entity | ||
| Current unsecured liabilities: | 2017 | 2016 |
| $'000 | $'000 | |
| Trade payables | 35,852 | 22,860 |
| Accrued and other payables | 12,751 | 10,632 |
| Progress paymentsinadvance | 7,058 | 3,017 |
| 55,661 | 36,509 |
The carrying amounts of the consolidated entity’s trade and other payables are denominated in the following currencies:
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Australian dollars | 23,390 | 15,635 |
| US dollars (Australian dollar equivalent) | 13,007 | 6,056 |
| Chilean pesos (Australian dollar equivalent) | 9,061 | 6,385 |
| Indonesian rupiah (Australian dollar equivalent) | 3,468 | 1,000 |
| Colombian pesos (Australian dollar equivalent) | 4,118 | 1,000 |
| Peruvian nuevo soles (Australian dollar equivalent) | 1,987 | 6,433 |
| Singaporeandollars (Australiandollarequivalent) | 630 | - |
| 55,661 | 36,509 |
For information about the consolidated entity’s exposure to foreign exchange risk refer to note 19.
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at the fair value and subsequently measured at amortised cost using the effective interest method.
Invoicing in advance of revenue recognition is treated as progress payments in advance and presented as liabilities until revenue recognition criteria is met. All current trade and other payables are measured at face value.
Note 13. Provisions
| Note 13. Provisions |
|||
|---|---|---|---|
| Consolidated entity | |||
| 2017 | 2016 | ||
| $'000 | $'000 | ||
| Current | |||
| Employee leave entitlements | 4,559 | 5,488 | |
| Warranty provisions | 782 | 542 | |
| Onerous operating leases | - | 1,382 | |
| Other | 586 | 835 | |
| 5,927 | 8,247 | ||
| Non-current | |||
| Employee leave entitlements | 498 | - | |
| Onerous operatingleases | - | 4,205 | |
| 498 | 4,205 |
Austin Engineering Ltd | Annual Report | Page 41
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 13. Provisions (continued)
Movements in each class of provision during the financial year, other than employee leave entitlements and other provisions, are set out below:
| are set out below: | ||
|---|---|---|
| Onerous | ||
| operating | ||
| Warranty | leases | |
| 2017 | $'000 | $'000 |
| Carrying amount at start of year | 542 | 5,587 |
| Amounts utilised during the year | (272) | (4,238) |
| Charged/(credited) to profit or loss | 512 | (1,349) |
| Carrying amount at end ofyear | 782 | - |
| Onerous | ||
| operating | ||
| Warranty | leases | |
| 2016 | $'000 | $'000 |
| Carrying amount at start of year | 503 | - |
| Charged/(credited) to profit or loss | 218 | 6,292 |
| Amounts utilised duringtheyear | (179) | (705) |
| Carrying amount at end of year | 542 | 5,587 |
A provision is recognised in the consolidated statement of financial position when there is a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amounts has been reliably estimated. Provisions are not recognised for future operating losses.
Employee benefits - short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefit obligations
Liabilities for long service leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recorded as non-current. They are therefore recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of Australian Corporate Bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the statement of financial position if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Warranties
Provision is made for potential warranty claims at the reporting date and is based on management assessments of the likelihood of claims arising from products delivered during the year as well as historical costs incurred on meeting warranty claims in prior years.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the consolidated group from a contract are lower than the unavoidable cost meeting its obligations under the contract. Expected future payments are discounted using market yields at the end of the reporting period of Australian Corporate Bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.
There is no onerous operating lease provision at 30 June 2017 (2016: the onerous operating lease related to the closure of Brisbane workshop site).
Austin Engineering Ltd | Annual Report | Page 42
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 14. Property, plant and equipment
| Consolidated entity | Consolidated entity | Consolidated entity | ||||
|---|---|---|---|---|---|---|
| 2017 | 2016 | |||||
| $'000 | $'000 | |||||
| Freehold land | ||||||
| Cost | 22,748 | 20,154 | ||||
| 22,748 | 20,154 | |||||
| Freehold buildings | ||||||
| Cost | 43,486 | 42,134 | ||||
| Accumulated depreciation | (13,239) | (5,606) | ||||
| 30,247 | 36,528 | |||||
| Plant and equipment | ||||||
| Cost | 102,947 | 102,386 | ||||
| Accumulated depreciation | (51,124) | (46,082) | ||||
| 51,823 | 56,304 | |||||
| Assets under construction | ||||||
| Cost | 509 | 322 | ||||
| 509 | 322 | |||||
| 105,327 | 113,308 | |||||
| Capital work | Plant and | |||||
| Freehold land | Buildings | in progress | equipment | Total | ||
| Consolidated entity | $'000 | $'000 | $'000 | $'000 | $'000 | |
| Year ended 30 June 2017 | ||||||
| Opening net book amount | 20,154 | 36,528 | 322 | 56,304 | 113,308 | |
| Additions | - | 910 | 438 | 5,388 | 6,736 | |
| Reallocation of capital work in progress | (200) | 75 | - | 125 | - | |
| Disposals | (845) | - | (35) | (1,517) | (2,397) | |
| Transfers* | 4,892 | (2,458) | - | 1,756 | 4,190 | |
| Foreign currency exchange movements | (1,253) | (2,851) | (216) | (1,279) | (5,599) | |
| Impairment** | - | (600) | - | - | (600) | |
| Depreciation expense | - | (1,357) | - | (8,954) | (10,311) | |
| Closing net book amount | 22,748 | 30,247 | 509 | 51,823 | 105,327 |
- Transfer from assets held for sale, see note 11 and reclassification of assets category land in Colombia.
** The Company undertook market valuations of its Australian property portfolio during the financial year. The recoverable amount of properties at the Austin Mackay, Austin Hunter Valley and Aust Bore businesses was below the carrying value. Consequently an impairment charge of $3.393m was expensed in the year. The recoverable amount of the PT Austin Engineering Indonesia CGU increased such that an impairment recorded on property, plant and equipment in the year ended 30 June 2016 of $2.793m was reversed at 30 June 2017. Valuation for property, plant and equipment were performed using the direct comparison method.
| Capital work | Plant and | |||||
|---|---|---|---|---|---|---|
| Freehold land | Buildings | in progress | equipment | Total | ||
| Consolidated entity | $'000 | $'000 | $'000 | $'000 | $'000 | |
| Year ended 30 June 2016 | ||||||
| Opening net book amount | 20,557 | 44,140 | 251 | 60,285 | 125,233 | |
| Additions | - | 571 | 169 | 12,023 | 12,763 | |
| Reallocation of capital work in progress | - | - | (73) | 73 | - | |
| Disposals | - | (511) | (30) | (834) | (1,375) | |
| Disposal of subsidiary | - | (392) | - | (2,599) | (2,991) | |
| Transfers* | (730) | (3,198) | - | (355) | (4,283) | |
| Foreign currency exchange movements | 327 | 197 | 5 | (190) | 339 | |
| Impairment | - | (2,887) | - | (2,654) | (5,541) | |
| Depreciationexpense | - | (1,392) | - | (9,445) | (10,837) | |
| Closing net book amount | 20,154 | 36,528 | 322 | 56,304 | 113,308 |
- Transfer to assets held for sale, see note 11.
Austin Engineering Ltd | Annual Report | Page 43
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 14. Property, plant and equipment (continued)
(i) Non-current assets pledged as security
Refer to note 16 for information on non-current assets pledged as security by the Group.
(ii) Leased assets
| (ii) Leased assets |
|||
|---|---|---|---|
| Plant and equipment | 2017 | 2016 | |
| $'000 | $'000 | ||
| Assets under finance lease arrangements included in the totals noted above are as follows: | |||
| Opening balance | 15,058 | 14,837 | |
| Additions | 2,403 | 6,989 | |
| Assets no longer under finance lease arrangements | (3,502) | (4,799) | |
| Disposals | - | (655) | |
| Foreign currency exchange movements | (26) | 36 | |
| Depreciationexpense | (1,212) | (1,350) | |
| Net book amount | 12,721 | 15,058 |
Cost
Property, plant and equipment are measured on the cost basis. The cost of fixed assets constructed includes the cost of materials, direct labour and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable asset are:
| Class of fixed asset | Depreciation rate |
|---|---|
| Buildings | 2%-3% |
| Plant and equipment | 5%-40% |
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in profit or loss.
Impairment
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Assets that have suffered an impairment are reviewed for possible reversal of impairment at the end of each reporting period.
Austin Engineering Ltd | Annual Report | Page 44
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 15. Intangible assets
| Customer | Other | |||||
|---|---|---|---|---|---|---|
| Goodwill | Brands | relationships | intangibles | Total | ||
| $'000 | $'000 | $'000 | $'000 | $'000 | ||
| Year ended 30 June 2016 | ||||||
| Opening net book amount | 45,216 | 2,749 | 10,693 | 630 | 59,288 | |
| Additions | - | - | - | 106 | 106 | |
| Disposal of subsidiary | (14,423) | (2,699) | (731) | (104) | (17,957) | |
| Release of deferred taxes | (108) | - | - | - | (108) | |
| Exchange differences | 330 | - | 94 | 4 | 428 | |
| Amortisation charge | - | - | (932) | (38) | (970) | |
| Impairment charge | (3,519) | - | - | - | (3,519) | |
| Closing net book amount | 27,496 | 50 | 9,124 | 598 | 37,268 | |
| At 30 June 2016 | ||||||
| Cost | 64,250 | 50 | 14,688 | 675 | 79,663 | |
| Accumulated amortisationandimpairment | (36,754) | - | (5,564) | (77) | (42,395) | |
| Net book amount | 27,496 | 50 | 9,124 | 598 | 37,268 | |
| Year ended 30 June 2017 | ||||||
| Opening net book amount | 27,496 | 50 | 9,124 | 598 | 37,268 | |
| Additions | - | - | - | 70 | 70 | |
| Exchange differences | (346) | - | (205) | 79 | (472) | |
| Amortisation charge | - | - | (700) | (183) | (883) | |
| Impairment charge | (16,045) | (50) | (3,120) | - | (19,215) | |
| Closing net book amount | 11,105 | - | 5,099 | 564 | 16,768 | |
| At 30 June 2017 | ||||||
| Cost | 63,749 | 50 | 14,938 | 824 | 79,561 | |
| Accumulated amortisationandimpairment | (52,644) | (50) | (9,839) | (260) | (62,793) | |
| Net book amount | 11,105 | - | 5,099 | 564 | 16,768 |
Goodwill
Goodwill is initially recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to the cash generating units ("CGU") as follows:
| Goodwill is allocated to the cash generating units ("CGU") as follows: | ||
|---|---|---|
| Consolidated entity | ||
| Cash generating unit | 2017 | 2016 |
| $'000 | $'000 | |
| Aust Bore Pty Ltd | 6,310 | 8,310 |
| Pilbara Hire Group Pty Ltd | - | 6,982 |
| Austin Engineering USA Inc. | 3,606 | 3,706 |
| Austin Mackay | 1,189 | 1,189 |
| Austin Ingenieros Chile Ltda | - | 2,487 |
| Austin ArrendaminentosLtda | - | 4,822 |
| Net carrying value | 11,105 | 27,496 |
Austin Engineering Ltd | Annual Report | Page 45
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 15. Intangible assets (continued)
Customer relationships
Customer relationships acquired as part of a business combination are recognised separately from goodwill. The customer relationships are carried at their fair value at the date of acquisition less accumulated amortisation. Amortisation is calculated on the straight line basis and utilises an estimated useful life of the customer relationships, which is estimated to be 13 years.
Brands
Brands that are acquired by the group and that have indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Other intangibles
Other intangible assets that are acquired by the group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of these assets over their estimated useful lives, which vary from 2 to 20 years.
Impairment of assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to profit or loss.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount of the cash generating units (“CGU”) is based on value in-use calculations. These calculations use cash flow projections covering a five year period that are based on financial forecasts of how the business is expected to operate based on current performance consistent with previous experience and external data, excluding any benefit expected to arise from future restructuring or from improved asset performance. Cash flows beyond the five-year period are extrapolated using perpetual growth rates.
Impairment charge
The impairment was the result of the Company reassessing the recoverable values of its CGUs in light of the anticipated risks and opportunities that exist in each CGU.
During the year, a net impairment charge of $19.215m (2016: $3.519m) have been allocated to the following intangible assets and CGUs:
| assets and CGUs: | |||||
|---|---|---|---|---|---|
| Other | |||||
| intangible | |||||
| Goodwill | assets | 2017 | 2016 | ||
| Consolidated entity | $000’s | $000’s | $000’s | $000’s | |
| Pilbara Hire Group Pty Ltd | 6,982 | 50 | 7,032 | - | |
| Austin Arrendamientos Ltda | 2,206 | 1,333 | 3,539 | - | |
| Austin Ingenieros Chile Ltda | 4,857 | 1,787 | 6,644 | - | |
| Aust Bore Pty Ltd | 2,000 | - | 2,000 | - | |
| Austin EngineeringUSA Inc. | - | - | - | 3,519 | |
| Total impairment | 16,045 | 3,170 | 19,215 | 3,519 |
Austin Engineering Ltd | Annual Report | Page 46
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 15. Intangible assets (continued)
Key assumptions used for value in use calculations
The recoverable amount of the cash generating units is based on value-in-use calculations. These calculations use cash flow projections covering a five year period that are based on financial forecasts of how the business is expected to operate based on current performance consistent with previous experience and external data, excluding any benefit expected to arise from future restructuring or from improved asset performance. Cash flows beyond the five-year period are extrapolated using perpetual growth rates.
The calculation of value-in-use for the CGUs is most sensitive to the following assumptions:
==> picture [43 x 42] intentionally omitted <==
-
(a) Growth rates used within the forecast period;
-
(b) Discount rates; and
-
(c) Growth rates used to extrapolate cash flows beyond the forecast period.
In performing value-in-use calculations, the Company has applied a pre-tax discount rate to discount the forecast future cash flows. Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the group and its operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the group’s investors. The cost of debt is based on the interest bearing borrowings the group is obliged to service. A risk premium is included in each CGU’s discount rate, reflecting the level of forecasting, size, country and financing risks for that CGU. The pre-tax WACC's are shown below:
Pre-tax WACC
| Pre-tax WACC | |
|---|---|
| 2017 2016 |
|
| Region | % % |
| Australia | 15.44 15.71 |
| USA | 15.40 16.67 |
| Chile | 15.73 16.45 |
| Colombia | 20.24 20.13 |
| Peru | 17.18 18.75 |
| Indonesia | 16.18 19.81 |
Perpetual growth rates are applied based on the CGU’s location. The average perpetual growth rates used for the CGUare 3% (2016: 3%) based on the long-term growth rates experienced in the group’s end-markets and external forecasts.
Impact of reasonably possible changes in key assumptions
The impairments recorded during the year were based on management determination on the CGU's recoverable amount, after taking into consideration of any possible change in key assumptions of value-in-use calculation of the CGU's. At 30 June 2017, after the impairment charges, and applying reasonable sensitivity analysis, the recoverable amount of each CGU exceeds its carrying value.
Austin Engineering Ltd | Annual Report | Page 47
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Capital and financial risk management notes
| Financial liabilities 49 |
|
|---|---|
| Note 16 | |
| Note 17 | Equity - issued capital 50 |
| Note 18 | Equity - reserves 51 |
| Note 19 | Financial risk management 51 |
| Note 20 | Fair value measurements 55 |
Austin Engineering Ltd | Annual Report | Page 48
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 16. Financial liabilities
| 2017 | 2017 | 2016 | 2016 | |
|---|---|---|---|---|
| Current Non-current |
Current | Non-current | ||
| $'000 | $'000 | $'000 | $'000 | |
| Secured liabilities | ||||
| Bank facilities | 8,621 | 11,462 | 9,695 | 4,928 |
| Non-bank core debt | - | 20,080 | 6,602 | 19,752 |
| Other | 8,424 | 904 | 3,360 | 7,913 |
| 17,045 | 32,446 | 19,657 | 32,593 | |
| Assets pledged as security - fixed/floating charge | ||||
| Consolidated entity | ||||
| Notes | 2017 | 2016 | ||
| $'000 | $'000 | |||
| Current | ||||
| Floating charge | ||||
| Cash and cash equivalents | 7 | 2,268 | 12,832 | |
| Receivables | 8 | 25,795 | 29,371 | |
| Inventories | 14,352 | 15,814 | ||
| Total current assets pledged as security | 42,415 | 58,017 | ||
| Non-current | ||||
| Finance lease | ||||
| Property, plant and equipment | 14 | 12,721 | 15,058 | |
| blank | ||||
| Floating charge | ||||
| Property, plant and equipment | 55,890 | 98,250 | ||
| Total non-current assetspledged as security | 68,611 | 113,308 | ||
| Total assets pledged as security | 111,026 | 171,325 |
Financing facilities
The group had access to the following financing facilities at the reporting date:
| The group had access to the following financing facilities at the reporting date: | ||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $'000 | $'000 | |
| Total facilities | ||
| Bank facilities | 25,902 | 21,548 |
| Non-bank core debt | 20,080 | 26,354 |
| Other | 10,327 | 11,273 |
| 56,309 | 59,175 | |
| Utilised facilities | ||
| Bank facilities | 20,083 | 14,623 |
| Non-bank core debt | 20,080 | 26,354 |
| Other | 9,328 | 11,273 |
| 49,491 | 52,250 | |
| Unused | ||
| Bank facilities | 5,819 | 6,925 |
| Non-bank core debt | - | - |
| Other | 999 | - |
| 6,818 | 6,925 |
Austin Engineering Ltd | Annual Report | Page 49
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 16. Financial liabilities (continued)
Banking facilities
The banking facilities relate to bank guarantees, leases and bank loans in various jurisdictions within the group totalling $25.902m (2016: $21.548m). Of these facilities, $5.629m relates to a property mortgage in Chile which bears interest of 9.36% per annum, expiring 2 December 2024.
At 31 December 2016, a subsidiary of the Company did not meet its Debt : EBITDA covenant of a bank facility. The lender agreed to waive this non-compliance in February 2017. There are no reportable facility covenants that the subsidiaries have to meet as at 30 June 2017.
Non-bank core debt
The group entered into a loan agreement with LIM Asia Special Situations Master Fund Limited (LIM) for $20.000m, which was fully drawn down on 29 July 2015. The loan bears interest at 9% per annum, is secured by general security over the assets of Austin Engineering Ltd and is repayable on 29 July 2018. Further to this, LIM was issued 12 million share options on 29 July 2015, expiring on 31 July 2018 at various exercise prices as part consideration for the loan. The group must maintain financial covenants relating to earnings compared to the group debt drawn.
Other
The Company has a working capital financing facility drawn in July 2016. The facility does not have any financial covenants.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.
Note 17. Equity - issued capital
| Note 17. Equity - issued capital |
|||||
|---|---|---|---|---|---|
| 2017 | 2016 | ||||
| No. | $'000 | No. | $'000 | ||
| Ordinary shares | |||||
| Opening balance | 526,233,756 | 145,829 | 84,274,004 | 87,344 | |
| Non-renounceable entitlement offer | 52,600,000 | 8,416 | 70,228,337 | 31,603 | |
| Share placement | - | - | 20,908,911 | 1,673 | |
| Renounceable entitlement offer | - | - | 350,822,504 | 28,070 | |
| Cost of share issues | - | (318) | - | (2,861) | |
| Balance at end ofyear | 578,833,756 | 153,927 | 526,233,756 | 145,829 |
Ordinary shares entitle the holder to participate in dividends and the proceeds of winding up of the Company in proportion to the number of and amounts paid on the shares held. Every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote per share. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
On 15 November 2016, the Company issued 52,600,000 ordinary shares at an issue price of $0.16 per share to institutional and sophisticated investors in terms of a share placement.
On 30 June 2016 the company issued 350,822,504 ordinary shares pursuant to a renounceable entitlement offer. The shares were issued at $0.08 per share.
On 1 June 2016 the company issued 20,908,911 fully paid ordinary shares at an issue price of $0.08 per share to institutional and sophisticated investors in terms of a share placement.
On 29 July 2015 and 14 August 2015 the company issued 42,396,059 and 27,832,278 ordinary shares respectively, pursuant to the institutional and retail components of an accelerated non-renounceable entitlement offer. The shares were issued at $0.45 per share.
All shares issued in the year to 30 June 2017 ranked equally with all existing fully paid ordinary shares from the date of issue of the respective shares and the proceeds were used to support group working capital.
Options and Performance Rights Plan
For information relating to Austin Engineering Limited’s employee option plan and performance rights plan, including details of options and rights issued, exercised and lapsed during the financial year and the options and rights outstanding at the year-end, refer to note 31.
Austin Engineering Ltd | Annual Report | Page 50
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 17. Equity - issued capital (continued)
Capital management
Management controls the capital of the group in order to maintain optimal debt to equity and leverage ratios, provide the shareholders with adequate returns and ensure that the group can fund its operations and continue as a going concern.
The Group’s total capital is defined as the shareholders’ net equity plus net debt and amounted to $157.746m at 30 June 2017 (30 June 2016: $176.439m). The objective when managing the Group’s capital is to safeguard the business as a going concern, to maximise returns to shareholders and to maintain an optimal capital structure in order to reduce the cost of capital.
The gearing ratios for the years ended 30 June 2017 and 30 June 2016 are as follows:
| The gearing ratios for the years ended 30 June 2017 and 30 June 2016 are as follows: | ||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $'000 | $'000 | |
| Total borrowings | 49,491 | 52,250 |
| Less cash and cash equivalents | (3,923) | (12,832) |
| Net debt | 45,568 | 39,418 |
| Totalequity | 112,178 | 137,021 |
| Total capital | 157,746 | 176,439 |
| Net gearing ratio | 29% | 22% |
Note 18. Equity - reserves
Share-based payments
The option/performance rights reserve records items recognised as expenses on the valuation of Director and employee share options, performance shares and performance rights.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income and accumulate in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
Note 19. Financial risk management
The group’s activities expose it to a variety of financial risks including market risk, credit risk and liquidity risks. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the business. The Group uses, when necessary, derivative financial instruments such as foreign exchange contracts to hedge certain market risk exposures. The Group had no derivatives at the end of the financial year. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk. The Group’s policy is to centralise debt and surplus cash balances and also to match the assets and liabilities currency exposure whenever possible.
Risk management is carried out by the finance function under principles and parameters approved by the Board of Directors. The finance function identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units.
Austin Engineering Ltd | Annual Report | Page 51
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 19. Financial risk management (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings in financial instruments.
The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising returns.
(i) Foreign exchange risk
The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Chilean peso, Colombian peso, Peruvian nuevo soles and Indonesian rupiah as a result of its operations in the Americas and Indonesia.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the Group’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Australian dollar is the functional currency for a large part of the Group’s entities and business activities.
Management has put in place a policy requiring business units and group entities to manage their foreign exchange risk against their functional currency. The group companies are required to bring significant foreign currency transactions to the attention of the central finance function for evaluation as to the use of hedging using forward foreign currency contracts.
Sensitivity
A sensitivity analysis was performed at 30 June 2017, to determine how the measurement of financial instruments denominated in a foreign currency would be affected if the Australian dollar weakened or strengthened by 10%. The analysis was performed on the same basis as 2016, as indicated below:
| Consolidated | entity | ||||
|---|---|---|---|---|---|
| Strengthening by 10% | Weakening by 10% | ||||
| Equity | Profit or loss | Equity | Profit or loss | ||
| $'000 | $'000 | $'000 | $'000 | ||
| 30 June 2017 | |||||
| US dollar | 305 | (230) | (305) | 230 | |
| Chilean peso | 2,884 | 1,843 | (2,884) | (1,843) | |
| Indonesian rupiah | (898) | (129) | 898 | 129 | |
| Colombian peso | (775) | (212) | 775 | 212 | |
| Peruvian nuevo soles | (479) | 307 | 479 | (307) | |
| Total | 1,037 | 1,579 | (1,037) | (1,579) | |
| 30 June 2016 | |||||
| US dollar | (1,748) | 259 | 1,748 | (259) | |
| Chilean peso | (5,997) | 1,080 | 5,997 | (1,080) | |
| Indonesian rupiah | (1,144) | 42 | 1,144 | (42) | |
| Colombian peso | (934) | 92 | 934 | (92) | |
| Peruvian nuevo soles | (657) | 8 | 657 | (8) | |
| Total | (10,480) | 1,481 | 10,480 | (1,481) |
(ii) Price risk
The group is not exposed to material price risk relating to equity securities and it has therefore not been included in the sensitivity analysis.
(iii) Cash flow and fair value interest rate risk
The group’s interest rate risk predominantly arises from long-term borrowings. Borrowings at variable rates expose the group to cash flow interest rate risk and fixed interest rates expose the group to fair value interest rate risk. The group analyses its interest rate exposure on an ongoing basis. Various interest rate shifts are simulated taking into account refinancing, renewal of existing positions and facilities, alternative financing and hedging. Based on these interest rate shifts, the group calculates the impact on profit and loss. The interest rate shift scenario is run only for assets and liabilities that represent the major interest-bearing positions.
Austin Engineering Ltd | Annual Report | Page 52
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 19. Financial risk management (continued)
Market risk (continued)
(iii) Cash flow and fair value interest rate risk (continued)
The following table analyses the group’s financial assets and liabilities that are subject to interest rate risk.
| Consolidated | entity | |||||
|---|---|---|---|---|---|---|
| Weighted | Weighted | |||||
| Average | Average | |||||
| Interest Rate | 2017 | Interest | Rate | 2016 | ||
| % | $'000 | % | $'000 | |||
| Cash | 0.3 | 3,923 | 0.3 | 12,832 | ||
| Financial liabilities | 8.9 | (49,491) | 7.2 | (52,250) | ||
| Net exposure to cash flow interest rate risk | - | (45,568) | - | (39,418) |
The Group’s fixed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to interest rate risk as defined in AASB 7.
Sensitivity
Based on the simulations performed, the annual impact on profit and loss of a one per cent shift in interest rates, with all other variables held constant, is estimated to be a maximum increase or decrease of $0.456m (2016: $0.394m). The simulation is performed on a bi-annual basis to estimate the maximum loss potential.
Credit risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or contract, leading to a financial loss. Credit risk arises principally from cash deposits and receivables. Credit risk is co-operatively managed by the finance function and the operating units for customers, including outstanding receivables and committed transactions and at a group level for credit risk arising from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions. Only reputable banks and financial institutions are dealt with.
Trade and other receivables:
The group’s exposure to credit risk for trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk. The group enters into transactions with a number of high quality customers within the resources industry sector thereby minimising concentration of credit risk for trade and other receivables. The group has multiple contracts with its significant customers, across a number of their subsidiaries, divisions within those subsidiaries and locations. The group’s activities are largely focused on the mining and mining services industry sectors and as a result its credit risk for trade and other receivables is concentrated in this sector.
Individual risk exposures are set for customers in accordance with specified limits established by management based on independent credit reports, financial information, credit references and the group’s credit and trading history with the customer. Outstanding customer receivables are regularly monitored and any credit concerns highlighted to senior management. High risk projects or shipments for customers are generally covered by letters of credit or other forms of guarantee.
At 30 June 2017, included in trade receivables is one significant customer accounting for approximately 25% (2016: 26%) of the total trade receivables. Details of trade and other receivables past due but not impaired are provided in note 8.
The maximum exposure to credit risk, without taking into account the value of any collateral or other security, in the event that other parties fail to perform their obligations under financial instruments for each class of reporting recognised financial asset at the reporting date is the carrying amount of those assets as indicated in the statement of financial position.
Refer note 8 for a summary of the group’s exposure to credit risk relating to receivables at the end of the financial year.
Cash and cash equivalents:
The credit risk on cash and cash equivalents is limited because the counterparties are banks and financial institutions with high credit-ratings assigned by international credit-rating agencies.
Austin Engineering Ltd | Annual Report | Page 53
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 19. Financial risk management (continued)
Liquidity risk
Liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due.
The objective of managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions. The group has established a number of policies and processes for managing liquidity risk. These include:
-
Continuously monitoring cash flows on a daily basis as well as forecasting cash flows on a medium and long-term basis;
-
Monitoring the maturity profiles of financial assets and liabilities in order to match inflows and outflows;
-
Maintaining adequate reserves and support facilities;
-
Monitoring liquidity ratios and all constituent elements of working capital; and
-
Maintaining adequate borrowing and finance facilities.
The group maintains backup liquidity for its operations and currently maturing debts through a combination of bank overdrafts, bank guarantees and general finance facilities, of which $6.818m were undrawn at 30 June 2017 (2016: $6.925m). The principal terms of repayment are detailed in note 16.
The table below analyses the group’s financial liabilities into maturity groupings based on the remaining period from the reporting date to the contractual maturity date. As amounts disclosed in the table are the contractual undiscounted cash flows including future interest payments, these balances will not necessarily agree with the amounts disclosed on the statement of financial position.
| 1 Year | 1 to 5 Years | Total | Total | |
|---|---|---|---|---|
| At 30 June 2017 | $'000 | $'000 | $'000 | |
| Bank facilities | 9,405 | 13,341 | 22,746 | |
| Non-core debt | 1,849 | 20,688 | 22,537 | |
| Other | 9,520 | - | 9,520 | |
| 20,774 | 34,029 | 54,803 | ||
| At 30 June 2016 | ||||
| Bank facilities | 9,695 | 4,928 | 14,623 | |
| Non-core debt | - | 20,607 | 20,607 | |
| Other | 10,354 | 8,453 | 18,807 | |
| Total | 20,049 | 33,988 | 54,037 |
The group’s activities expose it to a variety of financial risks including market risk, credit risk and liquidity risks. The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the business. The group uses, when necessary, derivative financial instruments such as foreign exchange contracts to hedge certain market risk exposures. The group has no derivatives at the end of the financial year. The group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk. The group’s policy is to centralise debt and surplus cash balances and also to match the assets and liabilities currency exposure whenever possible.
Austin Engineering Ltd | Annual Report | Page 54
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 20. Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. Fair values are categorised into different levels in a fair value hierarchy based on inputs used in the valuation techniques as follows:
==> picture [43 x 50] intentionally omitted <==
-
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
-
(b) directly (as prices) or indirectly(derived from prices) (level 2); and
-
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
At 30 June 2017 the Group did not have any financial instruments that were measured and recorded at fair value. The following methods and assumptions are used to determine the fair values of financial assets and financial liabilities.
Cash and cash equivalents and other receivables
The carrying values approximate their fair value as they are short term in nature or are receivable on demand.
Receivables and other assets
The carrying value approximates their fair value as they are short term in nature.
Short-term borrowings and other payables
The carrying value approximates their fair value as they are short term in nature.
Long-term borrowings
The fair value of variable rate borrowings, and fixed rate borrowings repriced within twelve months, approximates the carrying value. Discounted cash flow model was used to calculate the fair value of other fixed term long-term borrowings. The Australian CGU discount rate as disclosed in note 15 was applied.
The carrying value of fixed rate borrowings not repriced within twelve months is $20.080m (2016: $19.752m). This borrowing has a fair value of: $20.262m (2016: $19.715m).
Austin Engineering Ltd | Annual Report | Page 55
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Unrecognised items notes
| Note 21 | Contingent liabilities 57 |
| Note 22 | Capital and leasing commitments 57 |
| Note 23 | Events occurring after the reporting period 57 |
Austin Engineering Ltd | Annual Report | Page 56
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 21. Contingent liabilities
There are no contingent liabilities other than bank guarantees that are issued to third parties arising out of dealings in the normal course of business.
Note 22. Capital and leasing commitments
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Finance and hire purchase lease commitments: | ||
| Not later than one year | 3,489 | 3,752 |
| Betweenone yearandfive years | 7,224 | 8,453 |
| 10,713 | 12,205 | |
| Minimum lease payments | ||
| Less: future finance charges | (763) | (932) |
| 9,950 | 11,273 |
Plant and equipment is leased from finance providers for periods lasting between one and five years. Lease payments are for fixed amounts over the term of the leases. Lease liabilities are secured by a charge over the leased assets.
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $'000 | $'000 | |
| Operating leases commitments: | ||
| Not later than one year | 2,584 | 3,434 |
| Between one year and five years | 4,442 | 9,182 |
| Greater than fiveyears | - | 741 |
| 7,026 | 13,357 |
The group has various property leases under non-cancellable arrangements expiring between 1 and 10 years with rent payable monthly in advance. Contingent rental provisions within the lease agreements require that the minimum payments be increased by CPI or current market rental at various review periods. Options exist to renew the leases at the end of their term for additional periods and conditions. The leases allow for subletting of the lease areas.
Capital commitments:
Significant capital expenditure contracted for at the end of the reporting year but not recognised as liabilities was $0.381m (2016: $0.342m). The capital commitments are payable within twelve months. No capital commitments are payable after twelve months.
Note 23. Events occurring after the reporting period
After the reporting date, the Company secured credit approved letters of offer for combined senior and working capital facilities that will be utilised to refinance the LIM Asia Special Solutions Master Fund Limited (LIM) debt of $20.080m and other non-bank loans in Australia. All elements of the finance package are fully credit approved subject to the agreement of legal documents and satisfaction of draw down conditions.
No other matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly affect, the operations of the group, the results of those operations or the state of affairs of the group or economic entity in subsequent financial years.
Austin Engineering Ltd | Annual Report | Page 57
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Group structure notes
| Note 24 | Interests in other entities 59 |
| Note 25 | Deed of cross guarantee 60 |
| Note 26 | Parent entity financial information 60 |
Austin Engineering Ltd | Annual Report | Page 58
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 24. Interests in other entities
| Place of | Percentage | Percentage | |
|---|---|---|---|
| business/ | Owned | ||
| country of | |||
| incorporation | 2017 | 2016 | |
| Parent entity | |||
| Austin Engineering Limited | Australia | ||
| Subsidiaries of Austin Engineering Limited | |||
| Aust Bore Pty Ltd | Australia | 100% | 100% |
| Austin Engineering USA Inc. | USA | 100% | 100% |
| Austin Engineering South America (No.1) Pty Ltd | Australia | 100% | 100% |
| Austin Engineering South America (No.2) Pty Ltd | Australia | 100% | 100% |
| Austin Engineering Singapore Pte Ltd | Singapore | 100% | 100% |
| PHG Services Pty Ltd | Australia | 100% | 100% |
| Pilbara Hire Group Pty Ltd | Australia | 100% | 100% |
| Subsidiaries of Austin Engineering USA Inc. | |||
| Western Technology Services International Inc. | USA | 100% | 100% |
| Subsidiaries of Austin Engineering South America (No.1) Pty Ltd | |||
| Austin Inversiones Chile Ltda | Chile | 99% | 99% |
| Austin Ingenieros Chile Ltda | Chile | 1% | 1% |
| Austin Engineering Peru S.A.C | Peru | 99% | 99% |
| Austin Arrendamientos Chile Ltda | Chile | 0.01% | 0.01% |
| Subsidiaries of Austin Engineering South America (No.2) Pty Ltd | |||
| Austin Inversiones Chile Ltda | Chile | 1% | 1% |
| Subsidiaries of Austin Engineering Singapore Pte Ltd | |||
| Austin Engineering Offshore Pte Ltd | Singapore | 100% | 100% |
| Austin Engineering Batam Pte Ltd | Singapore | 100% | 100% |
| Subsidiaries of Western Technology Services International Inc. | |||
| WOTCO Inc. | USA | 100% | 100% |
| Subsidiaries of Austin Inversiones Chile Ltda | |||
| Austin Ingenieros Chile Ltda | Chile | 99% | 99% |
| Austin Arrendamientos Chile Ltda | Chile | 99.99% | 99.99% |
| Subsidiaries of Austin Ingenieros Chile Ltda | |||
| Austin Ingenieros Colombia S.A.S | Colombia | 100% | 100% |
| Austin Engineering Peru S.A.C | Peru | 1% | 1% |
| Subsidiaries of Austin Engineering Offshore Pte Ltd | |||
| PT Austin Engineering Indonesia | Indonesia | 1% | 1% |
| Subsidiaries of Austin Engineering Batam Pte Ltd | |||
| PT Austin Engineering Indonesia | Indonesia | 99% | 99% |
Cash and short-term deposits held in Asian countries (including Indonesia) are subject to local exchange control regulations. These regulations provide for restrictions on exporting capital from those countries, other than through normal dividends. The carrying amount of the assets included within the consolidated financial statements to which these restrictions apply is $0.534m (2016: $0.229m). There are no other restrictions on exporting capital from any of the other foreign entities within the group.
Austin Engineering Ltd | Annual Report | Page 59
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 25. Deed of cross guarantee
Guarantees in relation to the debts of subsidiaries
Austin Engineering Ltd and its former wholly-owned subsidiary COR Cooling Pty Ltd were parties to a deed of cross guarantee under which each Company guarantees the debts of the others. By entering into the deed, the wholly-owned entities were relieved from the requirement to prepare a financial report and Directors' report under ASIC Corporations (wholly-owned companies) instrument 2016/785.
Following the sale of COR Cooling Pty Ltd in May 2016, the deed was terminated.
Note 26. Parent entity financial information
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
| 2017 | 2016 | 2016 | |
|---|---|---|---|
| $'000 | $'000 | ||
| Balance sheet | |||
| Current assets | 115,610 | 153,807 | |
| Non-current assets | 57,125 | 57,484 | |
| Total assets | 172,735 | 211,291 | |
| Current liabilities | 35,268 | 31,431 | |
| Non-current liabilities | 20,984 | 23,966 | |
| Total liabilities | 56,252 | 55,397 | |
| Net assets | 116,483 | 155,894 | |
| - | - | ||
| Equity | |||
| Contributed equity | 153,927 | 145,829 | |
| Options reserve | 1,500 | 3,401 | |
| Retained earnings | (38,944) | 6,664 | |
| 116,483 | 155,894 | ||
| (Loss)/profit for the year | (45,608) | 4,335 | |
| Totalcomprehensiveincome | - | - | |
| Total comprehensive income | (45,608) | 4,335 | |
| Contractual commitments for the acquisition of property, plant or equipment |
At 30 June 2017 and 30 June 2016 there were no contractual commitments entered into in respect of capital expenditure projects.
Contingent liabilities
The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016. For information about guarantees given by the parent entity, please see note 25 above.
Austin Engineering Ltd | Annual Report | Page 60
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Other information notes
| Cash flow information 62 |
|
|---|---|
| Note 27 | |
| Note 28 | Remuneration of auditors 63 |
| Note 29 | Related party transactions 63 |
| Note 30 | Key management personnel compensation 64 |
| Note 31 | Share-based payments 64 |
| Note 32 | Critical accounting estimates and judgements 66 |
| Note 33 | Summary of significant accounting policies 67 |
Austin Engineering Ltd | Annual Report | Page 61
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 27. Cash flow information
(a) Reconciliation of profit after income tax to net cash inflow from operating activities
| (a) Reconciliation of profit after income tax to net cash inflow from operating activities |
|||
|---|---|---|---|
| Consolidated entity | |||
| 2017 | 2016 | ||
| $'000 | $'000 | ||
| Loss for the year | (27,633) | (40,455) | |
| Adjustment for | |||
| Depreciation and amortisation | 11,194 | 11,807 | |
| Impairment expense | 19,815 | 9,060 | |
| Loss on disposal of property, plant and equipment | (41) | 268 | |
| Loss on disposal of subsidiary | - | 11,389 | |
| Fair value reduction of assets classified as held for sale | - | 2,169 | |
| Share options expense | (173) | 400 | |
| Interest capitalised | 473 | - | |
| Change in operating assets and liabilities | |||
| (Increase)/decrease in receivables | (16,949) | 2,356 | |
| (Increase)/decrease in inventories | (16,662) | 4,382 | |
| (Increase)/decrease in other assets | (3,371) | (4,510) | |
| Increase/(decrease) in payables | 19,258 | 3,962 | |
| Increase/(decrease) in income taxes payable and deferred | 3,021 | (9,306) | |
| Increase/(decrease)inotherprovisions | (3,774) | 6,528 | |
| Net cash inflow(outflow) from operating activities | (14,842) | (1,950) |
(b) Non-cash investing and financing activities
| (b) Non-cash investing and financing activities |
||
|---|---|---|
| Consolidated | entity | |
| 2017 | 2016 | |
| $'000 | $'000 | |
| Acquisition of plant and equipment by means of finance leases | 2,403 | 6,989 |
(c) Net debt reconciliation
| (c) Net debt reconciliation |
||
|---|---|---|
| Consolidated entity | ||
| Net debt | 2017 | 2016 |
| $'000 | $'000 | |
| Cash and cash equivalents | 3,923 | 12,832 |
| Financial liabilities – repayable within one year | (17,045) | (19,657) |
| Financial liabilities– repayable afterone year | (32,446) | (32,593) |
| Net debt | (45,568) | (39,418) |
Austin Engineering Ltd | Annual Report | Page 62
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 28. Remuneration of auditors
| Note 28. Remuneration of auditors |
||
|---|---|---|
| Consolidated | entity | |
| 2017 | 2016 | |
| $ | $ | |
| Auditor of the parent entity (BDO Audit Pty Ltd) for: | ||
| Auditing or reviewing thefinancial reports ofany entityinthe group | 274,362 | 275,555 |
| Entities related to BDO Audit Pty Ltd: | ||
| Taxation services | 119,476 | 224,948 |
| Corporate advisory services | 20,425 | 41,800 |
| 139,901 | 266,748 | |
| Network firms of BDO Audit Pty Ltd: | ||
| Auditing or reviewing the financial reports | 164,965 | 143,991 |
| Taxationservices | 17,787 | 31,929 |
| 182,752 | 175,920 | |
| Remuneration of other auditors (non BDO Audit Pty Ltd or related Network firms): | ||
| Auditing or reviewing the financial reports | 103,895 | 105,124 |
| Taxation services | 54,330 | 105,401 |
| Otherservices | 253 | 24,410 |
| 158,478 | 234,935 | |
| Total auditors’ remuneration | 755,493 | 953,158 |
Note 29. Related party transactions
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties.
Ultimate parent company
Austin Engineering Limited is the ultimate parent company.
Controlled entities
Interests in subsidiaries are set out in note 24.
Transactions with other related parties
The following transactions occurred with related parties:
| The following transactions occurred with related parties: | ||
|---|---|---|
| Consolidated entity | ||
| 2017 | 2016 | |
| $ | $ | |
| Sales and purchases of goods and services | ||
| Purchase of legal services from other related parties* | 196,392 | 841,890 |
| Outstanding balances arising from sales/purchases of goods and services | ||
| Current payables (purchases of services) | ||
| Other related parties* | - | 140,908 |
- Eugene Fung, a former non-executive of the company (retired on 25 November 2016), is a partner with Thomson Geer Lawyers. The firm provided legal services to the company on normal commercial terms. Thomson Geer lawyers ceased to be a related party subsequent to Eugene's retirement as a Non-Executive Director of the company.
Austin Engineering Ltd | Annual Report | Page 63
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 30. Key management personnel compensation
| Consolidated entity | Consolidated entity | |
|---|---|---|
| 2017 | 2016 | |
| $ | $ | |
| Short-term employee benefits | 1,636,727 | 1,761,000 |
| Post-employment benefits | 103,494 | 139,253 |
| Long-term benefits | - | 9,668 |
| Share-based payments | - | 80,048 |
| 1,740,221 | 1,989,969 |
Detailed remuneration disclosures are provided in the remuneration report on pages 17 to 22.
Note 31. Share-based payments
Equity settled share based payments form part of the remuneration of employees (including executives) of the consolidated entity. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options and performance rights with the relative TSR performance measure is calculated at the grant date using the Monte-Carlo simulation model, taking into account, amongst other things, the impact of the TSR condition and that right holders are not entitled to dividends during the vesting period.
The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.
The group has the following share-based payment arrangements:
-
Performance rights
-
Options
The total reversal of expense arising from share-based payment transactions recognised during the period as part of employee benefits expense was $0.173m (2016: $0.400m).
Performance rights
On 30 September 2014, the Company announced that it would be proceeding with the Austin Engineering Limited (Austin) Performance Rights Plan. The Performance Rights Plan is a long term incentive aimed at creating a stronger link between employee performance and reward and increasing shareholder value by enabling senior executives to have greater involvement with, and share in the future growth and profitability of the Company.
The performance rights are exercisable into one ordinary share in Austin and have a nil exercise price. The performance rights will vest if the Performance and Exercise Conditions are achieved. The Performance Conditions consist of meeting a Total Shareholder Return (TSR) target and earnings per share (EPS) growth target relative to a selected group of peers.
On 21 November 2014 and 25 September 2014 the former Chief Executive Officer and to Executives were granted 164,672 and 985,627 performance rights respectively. The issue of 164,672 performance rights to the former Chief Executive Officer was approved at the 2014 Annual General Meeting. The issue of performance rights to Executives did not require shareholder approval. The performance rights were issued in two tranches. The first tranche of 281,773 performance rights is for the performance period 1 July 2013 to 30 June 2016 and the second tranche of 868,526 performance rights is for the performance period 1 July 2014 to 30 June 2017. The performance rights expire on 25 September 2019.
Austin Engineering Ltd | Annual Report | Page 64
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 31. Share-based payments (continued)
Performance rights (continued)
On 27 November 2015 the Company issued 2,132,933 performance rights to the former Chief Executive Officer and to Executives. The issue of 304,436 performance rights to the former Chief Executive Officer was approved at the Annual General Meeting held on 27 November 2015. The issue of performance rights to Executives did not require shareholder approval. The performance rights are for the period 1 July 2015 to 30 June 2018 and expire on 27 November 2020.
| 2017 | 2017 | 2016 | 2016 | ||
|---|---|---|---|---|---|
| Weighted | Weighted | ||||
| Performance rights outstanding and exercisable at the | Average | Average | |||
| reporting date are as follows | Number | Exercise Price | Number | Exercise Price | |
| ($) | ($) | ||||
| Outstanding at beginning of year | 3,283,232 | - | 1,150,299 | - | |
| Granted | - | - | 2,132,933 | - | |
| Expired | - | - | - | - | |
| Exercised | - | - | - | - | |
| Forfeited/lapsed | (2,069,339) | - | - | - | |
| Outstanding at end ofyear | 1,213,893 | - | 3,283,232 | - | |
| Totalexercisable at end ofyear | - | - | 281,773 | - |
The valuation model inputs used to determine the fair value at the grant date are as follows:
| Weighted | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Price of | average | |||||||||
| shares | Risk free | fair value | ||||||||
| Grant | Expiry | Exercise | on grant | Estimated | interest | Dividend | rights | Fair | value of | |
| date | date | price | date | volatility | rate | yield | granted | rights | ||
| TSR | EPS | |||||||||
| 27/11/15 | Former Chief | 27/11/20 | - | $0.25 | 57.46% | 2.09% | 8.67% | $0.25 | $0.08 | $0.19 |
| Executive Officer | ||||||||||
| 27/11/15 | Other executives | 27/11/20 | - | $0.25 | 57.46% | 2.09% | 8.67% | $0.25 | $0.08 | $0.19 |
The expected price volatility is based on the historic volatility (based on the remaining life of the rights), adjusted for any expected changes to future volatility due to publicly available information.
Options
The Company granted 12 million options on 29 July 2015 to LIM Asia Special Situations Master Fund Limited (LIM) as part consideration for a subordinated loan from LIM. The fair value of the options shares granted to LIM was calculated using the Binomial simulation model. The options expire on 31 July 2018 at various exercise prices (4 million options exercisable at $0.60; 6 million options exercisable at $1.00; 2 million options exercisable at $1.75).
| Share options outstanding and exercisable at the reporting | |||||
|---|---|---|---|---|---|
| date are as follows: | 2017 | 2016 | |||
| Weighted | Weighted | ||||
| Average | Average | ||||
| Exercise Price | Exercise Price | ||||
| Number | ($) | Number | ($) | ||
| As at 1 July | 12,000,000 | 0.99 | - | - | |
| Granted | - | - | 12,000,000 | 0.99 | |
| Exercised | - | - | - | - | |
| Forfeited/lapsed | - | - | - | - | |
| 12,000,000 | 0.99 | 12,000,000 | 0.99 |
The options outstanding at 30 June 2017 had a weighted average remaining contractual life of 1.08 years.
Austin Engineering Ltd | Annual Report | Page 65
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 31. Share-based payments (continued)
Options (continued)
The valuation model inputs used to determine the fair value, based on the Binomial simulation model, at the grant date are as follows:
| follows: | |||||||
|---|---|---|---|---|---|---|---|
| Exercise | Price of shares at | Estimated | Risk free | Dividend | Fair value at | ||
| Grant date | Expiry date | price | grant date | volatility | interestrate | yield | grant date |
| 29/07/15 | 31/07/18 | $0.60 | $0.46 | 64.82% | 2.139% | 4.5% | $0.14 |
| 29/07/15 | 31/07/18 | $1.00 | $0.46 | 64.82% | 2.139% | 4.5% | $0.08 |
| 29/07/15 | 31/07/18 | $1.75 | $0.46 | 64.82% | 2.139% | 4.5% | $0.04 |
Note 32. Critical accounting estimates and judgements
Key estimates
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of intangibles
The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates and require the group to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate present value. For information relating to these calculations refer to note 15.
Contractual customer relationships
The useful life of contractual customer relationships of 10 to 20 years is based on management’s expectation of future attrition rates based on historical rates. An increase in attrition rates may lead to a reduction in the estimated useful life and an increase in the amortisation charge. The actual attrition rates for the 2017 and 2016 financial years did not differ materially from the expected attrition rates. The carrying value of contractual customer relationships is disclosed in note 15.
Taxation - Carried forward tax losses
The group has tax losses mainly in Australian, North American and Colombian taxable entities that have the potential to reduce tax payments in future years. Deferred tax assets have been recognised to the extent that their recovery is probable, having regard to the projected future taxable income of these taxable entities and after taking account of specific risk factors that affect the recovery of these assets.
Key judgements
Other than those already referred to, the key judgements are:
Contractual customer relationships
Judgement is exercised by management in identifying those acquired relationships with customers that meet the definition of separately identifiable intangibles that have a finite life.
Going concern
The financial report has been prepared on a going concern basis, which contemplates the continuity of business activities and the realisation of assets and settlement of liabilities in the ordinary normal course of business.
Although the Company has incurred a net loss of $27.633m, the earnings before tax, interest, depreciation, amortisation and impairment charge was positive at $12.085m (2016: negative $11.530m). At reporting date, the excess of current assets over current liabilities was $15.647m (2016: $16.123m). The Director’s expectations of returning to profitability and continued compliance with current and proposed financing covenants is based on approved budgets and forecasts. These forecasts are necessarily based on best estimate assumptions that may or may not occur as expected and are subject to influences and events outside the control of the group. The forecasts take into account reasonably possible changes in trading performance.
After the reporting date, the Company secured credit approved letters of offer for combined senior and working capital facilities that will be utilised to refinance the LIM Asia Special Solutions Master Fund Limited (LIM) debt of $20.080m and other non-bank loans in Australia. All elements of the finance package are fully credit approved subject to the agreement of legal documents and satisfaction of draw down conditions. The Directors are of the opinion that the use of the going concern basis of accounting is appropriate as they are satisfied that the group will return to profitability and the cash flows will improve due to the improved outlook.
Austin Engineering Ltd | Annual Report | Page 66
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 33. Summary of significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to the extent they have not already been disclosed in the other notes above. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of Austin Engineering Ltd and its subsidiaries.
(a) New accounting standards and interpretations issued but not yet effective
New accounting standards and interpretations have been published that are not compulsory for the 30 June 2017 reporting period. The consolidated entity’s assessment of the impact of the new standards and interpretations that may affect the financial report are set out below.
AASB 9 Financial Instruments
AASB 9 Financial instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting. In December 2014, the AASB made further changes to the classification and measurement rules and also introduced a new impairment model. These latest amendments now complete the new financial instruments standard. The standard is not applicable until 1 January 2018 but is available for early adoption.
When adopted, the standard will affect the group’s accounting for available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. The group does not currently have any available-for-sale financial assets that would be impacted by this standard. Additionally there will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities.
The new rules for hedge accounting should make it easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation.
The new impairment model is an expected credit loss (ECL) model which may result in the earlier recognition of credit losses.
The group has not yet assessed how its own hedging arrangements and impairment provisions would be affected by the new rules, and it has not yet decided whether to adopt AASB 9 early. In order to apply the new hedging rules, the group would have to adopt AASB 9 and the consequential amendments to AASB 7 and AASB 139 in their entirety.
AASB 15 Revenue from contracts with customers
AASB 15 introduces a five step process for revenue recognition with the core principle of the new standard being for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the entity expects to be entitled in exchange for those goods or services.
AASB 15 will also result in enhanced disclosure about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multipleelement arrangements. This standard is not applicable until reporting periods beginning on or after 1 January 2018.
The changes in revenue recognition requirements in AASB 15 may cause changes to the timing and amount of revenue recorded in the financial statements as well as additional disclosures. The impact of AASB 15 has not yet been quantified.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligations to make lease payments. A lessee measures right-of-use assets similarly to other nonfinancial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows applying AASB 107 Statement of Cash Flows. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. AASB 16 contains disclosure requirements for lessees.
The group will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the group.
Austin Engineering Ltd | Annual Report | Page 67
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 33. Summary of significant accounting policies (continued)
(a) New accounting standards and interpretations issued but not yet effective (continued)
Other standards and interpretations
There are no other standards and interpretations that are not yet effective and that are expected to have a material impact on the consolidated entity in the current or future reporting periods and on foreseeable future transactions.
(b) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 . Austin Engineering Ltd is a for-profit entity for the purpose of preparing the financial statements.
(c) Principles of consolidation and equity accounting
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Australian dollar ($), which is Austin Engineering Ltd's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss and other comprehensive income on a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
-
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
-
• income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and
-
all resulting exchange differences are recognised in other comprehensive income.
Austin Engineering Ltd | Annual Report | Page 68
Austin Engineering Ltd Notes to the consolidated financial statements for the year ended 30 June 2017
Note 33. Summary of significant accounting policies (continued)
(d) Foreign currency translation (continued)
(iii) Group companies (continued)
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
(e) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease year so as to produce a constant periodic rate of interest on the remaining balance of the liability for each year. The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases (note 22). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the year of the lease.
Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term. The respective leased assets are included in the statement of financial position based on their nature.
(f) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(g) Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
(h) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.
Austin Engineering Ltd | Annual Report | Page 69
Austin Engineering Ltd Directors' declaration 30 June 2017
In the Directors' opinion:
-
(a) the financial statements and notes set out on pages 24 to 69 are in accordance with the Corporations Act 2001 , including:
-
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and
-
(ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of its performance for the financial year ended on that date, and
-
(b) the remuneration disclosures contained in the Remuneration Report in the Directors’ Report comply with section 300A of the Corporations Act 2001.
-
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Note 33 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors.
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Jim Walker Non-Executive Chairman 27 September 2017 Brisbane
Austin Engineering Ltd | Annual Report | Page 70
Tel: +61 7 3237 5999 Level 10, 12 Creek St Fax: +61 7 3221 9227 Brisbane QLD 4000 www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia
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INDEPENDENT AUDITOR'S REPORT
To the members of Austin Engineering Ltd
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Austin Engineering Ltd (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001 , including:
-
(i) Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and
-
(ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001 .
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. 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 also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
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.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Austin Engineering Ltd | Annual Report | Page 71
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Revenue Recognition
Key audit matter
How the matter was addressed in our audit
Refer to Note 2 of the financial report.
Revenue is a key driver to the Group. Revenue is generated from multiple streams including the sale of goods as well as the rendering of various services to the mining industry.
The Group's management focuses on revenue as a key driver by which the performance of the Group is measured.
This area is a key audit matter due to revenue being the most significant item in the financial statements and the volume of transactions included in revenue.
Our audit procedures included:
-
Assessing the Group’s revenue recognition policy’s for compliance with Australian Accounting Standards
-
Selecting a sample of services rendered, and sale of goods recognised as revenue in the general ledger and agreeing to supporting invoices, signed customer contracts and proof of delivery where applicable
-
Obtaining and evaluating credit notes issued post year end and performing cut-off testing to ensure revenue transactions around year end have been recorded in the correct reporting period
-
Checking, for a sample of deferred revenue amounts, whether the amount recognised in the current period was consistent with services supplied per the terms of the customer agreement
-
Analytical review procedures on all significant revenue streams on a disaggregated basis and against expected trends and the prior year
-
Assessing the adequacy of the Group's disclosures within the financial statements.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Austin Engineering Ltd | Annual Report | Page 72
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Impairment Assessment of Non-Financial Assets
Key audit matter
How the matter was addressed in our audit
The Group’s disclosures about impairment are included in Notes 3, 14 and 15, which details the impairment expense recognised on Property, Plant & Equipment and Intangible Assets. Note 15 also discloses the allocation of goodwill to the various Cash Generating Units (CGU’s), sets out the key assumptions for valuein-use calculations and the impact of possible changes in these assumptions.
This impairment assessment was significant to our audit because the total impairment expense recognised of $19,815,000 for the year ended 30 June 2017, the value of Property, Plant & Equipment of $105,327,000 and Intangible Assets of $16,768,000 (post impairment) are material to the financial statements.
The carrying values of CGU’s is supported by either a value-in-use calculation or fair value less costs to sell assessment. Management’s value in use impairment assessment is complex, highly judgmental and is based on assumptions such as margins, growth rates, and discount rates that are affected by expected future market or economic conditions.
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For assets supported by a value in use calculation, our audit procedures included, but were not limited to the following:
-
Obtaining an understanding of the 'Value in Use' model and evaluating management's methodologies and their key assumptions
-
Assessing management’s allocation of goodwill and assets and liabilities, including corporate assets to CGU's
-
Evaluating the inputs used in the value in use calculation including the growth rates, discount rates and the underlying cash flows by comparing them to historical results, current contracts, economic and industry forecasts
-
Involving our internal specialists to assess the discount rates and terminal value growth rates against comparable market information.
For assets supported by valuations at fair value less costs to sell our procedures included, but were not limited to the following:
-
Agreeing the fair value less costs of disposal of particular items of Property, Plant & Equipment to a valuation obtained by the Group from valuation experts and assessing the extent to which we could use the work of the valuation experts by considering their competence and objectivity.
-
Assessing the independent valuations assumptions and judgements used to determine they were reasonable.
We reviewed the adequacy of the disclosures related to the goodwill and the impairment assessment by comparing these disclosures to our understanding of the matter and the applicable accounting standards.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Austin Engineering Ltd | Annual Report | Page 73
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Recognition of Deferred Tax Assets
-
Key audit matter How the matter was addressed in our audit Refer to Note 4 of the financial report. Our audit procedures included: The Group recognised deferred tax assets of Evaluating management’s forecast of future $13,242,000 as at 30 June 2017 which includes taxable profits and assessing whether it is temporary differences and carried forward tax losses. probable that there will be sufficient future profits to utilise the deferred tax assets
-
Australian Accounting Standards require deferred tax recognised
-
assets to be recognised only to the extent that it is probable that sufficient future taxable profits will be Assessing the key assumptions used in the generated in order for the benefits of the deferred tax forecast period including revenue, assets to be realised. These benefits are realised by expenditure and growth rates applied against reducing tax payable in future taxable profits. actual results achieved This was a key audit matter as the assessment of the Comparing the taxable income generated for future taxable profits involves judgement by the year ended 30 June 2017 with the management. forecast taxable income provided during the 30 June 2016 audit
-
Assessing the disclosures related to the recognition of the deferred tax assets and unrecognised deferred tax assets.
Other information
The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, 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.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Austin Engineering Ltd | Annual Report | Page 74
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In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are 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 the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and 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 this 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 (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 17 to 22 of the directors’ report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of Austin Engineering Ltd, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001 .
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 responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
BDO Audit Pty Ltd
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C R Jenkins Director
Brisbane, 27 September 2017
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Austin Engineering Ltd | Annual Report | Page 75
Austin Engineering Ltd Additional information for public listed companies
The shareholder information set out below was applicable as at 22 September 2017
A. Substantial holders at 22 September 2017
| A. Substantial holders at 22 September 2017 |
|||
|---|---|---|---|
| Number | |||
| held | Percentage | ||
| Thorney Investments | 122,530,685 | 21.17% | |
| LIM Advisors | 55,139,062 | 9.53% | |
| Discovery Assets Management Pty Ltd | 38,820,183 | 6.71% | |
| IOOF Holdings | 40,174,995 | 6.94% | |
| UniSuper Limited | 29,130,220 | 5.03% |
B. Distribution of equity securities
| B. Distribution of equity securities |
|||
|---|---|---|---|
| Range of Holding | Number of | ||
| Shareholders | No of Shares | ||
| 1 - 1000 | 820 | 272,235 | |
| 1,001 - 5,000 | 791 | 2,253,174 | |
| 5,001 - 10,000 | 446 | 3,476,738 | |
| 10,001 - 100,000 | 1,162 | 46,246,175 | |
| 100,001 and over | 378 | 526,585,434 | |
| 3,597 | 578,833,756 |
C. Voting rights
All ordinary shares issued by the company carry one vote per share without restriction.
D. Twenty largest shareholder at 22 September 2017
| D. Twenty largest shareholder at 22 September 2017 |
D. Twenty largest shareholder at 22 September 2017 |
|---|---|
| Name Ordinary shares |
|
Number held Percentage of issued shares |
|
| HSBC Custody Nominees (Australia) Limited 165,146,926 28.07 |
|
| UBS Nominees Pty Ltd 55,074,904 8.98 |
|
| BNP Paribas Nominees Pty Ltd 40,699,204 6.86 |
|
| Transfield Finance Pty Ltd 22,222,222 4.48 |
|
| Merrill Lynch (Australia) Nominees Pty Ltd 18,565,509 3.84 |
|
| SJ Quinlivan Pty Ltd 17,982,453 3.21 |
|
| JP Morgan Nominees Australia Limited 17,072,046 3.11 |
|
| National Nominees Limited 14,612,328 2.34 |
|
| RBC Investor Services Australia Nominees Pty Ltd (BK A/C) 11,863,916 2.05 |
|
| RBC Investor Services Australia Nominees Pty Ltd (VFA A/C) 10,029,937 1.73 |
|
| Citicorp Nominees Pty Ltd 9,186,087 1.59 |
|
| Citicorp Nominees Pty Ltd (Colonial First State Investment A/C) 5,453,220 0.94 |
|
| Mr Peter Howells 5,431,197 0.85 |
|
| BNP Paribas Noms Pty Ltd 3,818,522 0.61 |
|
| Sartain Enterprises Pty Ltd 3,400,000 0.59 |
|
| Mr Sanjay Sharma & Dr Seema Sharma 2,340,000 0.40 |
|
| Mr Peter Louis Pursey & Mrs Helen Elizabeth Pursey 2,075,232 0.36 |
|
| Depofo Pty Ltd 2,003,942 0.35 |
|
| Mr David Zalmon Baffsky 2,000,000 0.35 |
|
| Cannow PtyLtd 2,000,000 0.35 |
|
| 410,977,645 71.06 |
|
| E. Additional information |
E. Additional information
There is no on-market buy-back currently in effect.
Austin Engineering Ltd | Annual Report | Page 76
Principal Place of Business and
Brisbane Operation: Kings Row 1, Level G 52 McDougall Street Milton, QLD 4064 P: +61 7 3723 8600 F: +61 7 3271 3689
Principal Australian Operations Queensland
Mackay Austin Mackay 56 Len Shield Street Paget, QLD 4740 P: +61 7 4952 4533 F: +61 7 4952 4687
Aust Bore Pty Ltd 12-16 Progress Drive Paget, QLD 4740 P: +61 7 4952 6222 F: +61 7 4952 6223
Western Australia
Perth Austin WA 100 Chisholm Crescent Kewdale, WA 6105 P: +61 8 9334 0666 F: +61 8 9359 2390
International Operations: USA
Western Technology Services Inc. 415 First Street Mills, Wyoming, 82644 P: +1 307 235 6475 F: +1 307 235 3306
Chile
Austin Ingenieros Chile Ltda Camino a la Minera No.254 La Negra, Antofagasta, Chile P: +56 55 2 657400
Austin Ingenieros Chile Ltda Camino a Chiu-Chiu No 121, Manzana 3 Calama, Chile P: +56 55 2 417870
Austin Arrendamientos Ltda 21 de Mayo No. 730 3 Sitio 9 La Negra, Antofagasta, Chile P: +56 55 2893946
Peru
Austin Engineering Peru S.A.C Calle Los Tulipanes No. 147 Edificio Blu Building, Oficina 901, Piso 9 Santiago de Surco, Lima, Peru P: + 51 1 6344400
Share Registry:
Computershare Investor Services 117 Victoria Street West End, QLD 4101 P: +61 3 9415 4000 P: 1300 850 505 (within Australia) F: +61 3 9473 2555 F: 1800 783 447 (within Australia)
Lawyers:
Thomson Geer Lawyers Level 16 Waterfront Place 1 Eagle Street Brisbane, QLD 4000
Auditors:
BDO Audit Pty Ltd Level 10, 12 Creek Street Brisbane, QLD 4000
Principal Bankers: Commonwealth Bank of Australia Commonwealth Bank Building 240 Queen St, Brisbane, QLD 4000
Secretary: Christine Hayward
Stock Exchange:
Pilbara Hire Group Pty Ltd 2 Draper Place Kewdale, WA 6105 P: +61 8 9359 1800 F: +61 8 9359 1655
New South Wales
Hunter Valley Austin Hunter Valley 34 Carramere Road Muswellbrook, NSW 2333 P: +61 2 6541 0111 F: +61 2 6541 0222
Colombia
Austin Ingenieros Colombia S.A.S Calle 4, No. 11 Sur-85 Municipio de Malambo Depto. Atlantico, Colombia P: +57 5 3819333
Indonesia
PT Austin Engineering Indonesia Jl. Mas Surya Negara Kav.B2 Kawasan Industrial Terpadu Kab Batu Besar Nongsa, Batam, 29467 P: +62 778 711 999
Australian Securities Exchange
ASX Code: ANG
Website: www.austineng.com.au
ABN: 60 078 480 136
Austin Engineering Ltd | Annual Report | Page 77