DURATEC LIMITED — Interim / Quarterly Report 2021

Feb 24, 2021

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APPENDIX 4D

DURATEC LIMITED

ABN 94 141 614 075

RESULTS FOR ANNOUNCEMENT TO THE MARKET

The current reporting period is the half‐year ended 31 December 2020 and the prior reporting period is the half‐year ended 31 December 2019.

	H1 FY20	H1 FY19	%
	$’000	$’000
Revenue	124,063	128,407	3%
Profit after income tax expense for the
half‐year attributable to members	4,642	6,662	30%

Net tangible assets per share

NTA Backing	31 December 2020	31 December 2019
	cents per share	cents per share
Net tangible asset backing per ordinary share	9.34	11.34*

• A share split occurred on 24 September 2020 and to allow for improved comparability of NTA Backing the 2019 value was calculated using the increased number of shares.

Dividends

The board resolved to pay a pre‐IPO dividend of $0.13 per share (fully franked). The total dividend of $25.2 million was paid in tranches between 29 October and 2 November 2020.

No interim dividend was declared for the half‐year ended 31 December 2020.

Explanation of results

This information is contained in the Half‐Year Results Announcement and Half‐Year Results Presentation.

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Details of associates and joint venture entities

	Reporting entity’s	Reporting entity’s	Contribution to	Contribution to
	percentage holding		profit/(loss)
			(where	material)
Name of associate/ joint venture	Reporting	Previous	Reporting	Previous
	period	period	period	period
	%	%	$’000	$’000
Fortec Australia Pty Ltd	‐*	40	149	207
Duratec Australia – Dundee Rock JV	49	49	60	244
Pty Ltd
Duratec Ertech JV	50	50	982	455

• On 31 August 2020 Duratec disposed of its 40% interest in Fortec Australia Pty Ltd by way of a dividend in‐specie to its shareholders.

Audit report

This report is based on the interim financial report which has been independently reviewed and is not subject to qualifications.

DURATEC LIMITED ABN 94 141 614 075

INTERIM FINANCIAL REPORT 31 DECEMBER 2020

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CORPORATE DIRECTORY

Registered Office

108 Motivation Drive Wangara WA 6065

Principal Place of Business

108 Motivation Drive Wangara WA 6065

+61 (8) 9206 6900 info@duratecaustralia.com.au www.duratecaustralia.com.au

Company Secretary

Dennis Wilkins

Share Registry

Computershare Investor Services Pty Limited Level 11, 172 St George’s Terrace Perth WA 6000

CORPORATE INFORMATION

Duratec Limited is the Group’s holding company that is listed on the ASX under code DUR.

The consolidated financial statements cover Duratec Limited as a consolidated entity consisting of Duratec Limited and the entities it controlled at the end of, or during, the half-year. The financial statements are presented in Australian dollars.

Duratec Limited is a listed public company limited by shares, incorporated and domiciled in Australia.

The nature of the operations and principal activities of the consolidated entity are described in the Directors’ Report.

The financial statements were authorised for issue, in accordance with resolution of Directors, on 24 February 2021.

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TABLE OF CONTENTS DIRECTORS’ REPORT ..................................................................................................................................................... 3 AUDITOR’S INDEPENDENCE DECLARATION .................................................................................................................. 5 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME .................................................................. 6 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................................................... 7 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................................................ 8 CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................................................ 9 NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................... 10 DIRECTORS’ DECLARATION ......................................................................................................................................... 20 INDEPENDENT AUDITOR’S REPORT ............................................................................................................................ 21

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DURATEC LIMITED AND CONTROLLED ENTITIES

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DIRECTORS’ REPORT

The Directors of Duratec Limited present their report together with the consolidated financial statements of Duratec Limited, ABN 94 141 614 075 (“the Company” or “Duratec”) and the entities it controlled (together referred to as “the Group” or the “consolidated entity”) at the end of, or during, the half-year ended 31 December 2020.

Information on Directors

Information on Directors
Name	Period of Directorship
Martin Brydon Non-Executive Chairman	Appointed 1 September 2020
Robert Philip Harcourt ManagingDirector	Appointed 26 August 2010
Christopher John Oates Executive Director – General Manager	Appointed 26 August 2010
Deane Gerald Diprose Executive Director – Operations Manager	Appointed 26 August 2010,Resigned 31 August 2020
Oliver McKeon Executive Director	Appointed 15 October 2019,Resigned 31 August 2020
Gavin Robert Miller Non-Executive Director CompanySecretary	Appointed 14 April 2010 Appointed 14 April 2010,Resigned 31 August 2020
James Patrick Giumelli Non-Executive Director	Appointed 12 November 2014,Resigned 31 August 2020
Michael David Best Non-Executive Director	Appointed 1 October 2018,Resigned 31 August 2020

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DURATEC LIMITED AND CONTROLLED ENTITIES

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Principal activities

The principal activities of the consolidated entity during the period were the provision of assessment, protection, remediation and refurbishment services to a broad range of assets, in particular steel and concrete infrastructure. No significant change in the nature of these activities occurred during the period.

Review of operations

A review of the operations of the consolidated entity during the period and the results of those operations found that changes in market demand and competition have seen a decrease in sales of 3% to $124,062,926 compared to the previous corresponding period.

corresponding period.
	31 Dec 2020	31 Dec 2019
	$’000	$’000
Revenue from contracts with customers	124,063	128,207
Profit after income tax	4,642	6,662

Significant changes in state of affairs

On 4 November 2020 the official quotation of Duratec Limited’s ordinary fully paid shares commenced on the ASX under code ‘DUR’.

There were no other significant changes in the consolidated entity’s state of affairs during the financial half-year.

Rounding of amounts

The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

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 immediately after this Directors’ report.

This report is made in accordance with a resolution of Directors, pursuant to section 306(3)(a) of the Corporations Act 2001.

On behalf of the Directors,

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Robert Philip Harcourt

Managing Director 24 February 2021

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RSM Australia Partners

Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844

T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111

www.rsm.com.au

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the review of the financial report of Duratec Limited for the half-year ended 31 December 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (ii) any applicable code of professional conduct in relation to the review.

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RSM AUSTRALIA PARTNERS

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Perth, WA Dated: 24 February 2021

J A KOMNINOS Partner

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

DURATEC LIMITED AND CONTROLLED ENTITIES

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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 31 DECEMBER 2020

FOR THE HALF YEAR ENDED 31 DECEMBER 2020
	Consolidated Entity Dec 2020 $’000 Dec 2019 $’000 124,063 128,207 (100,845) (103,231) 23,218 24,976 1,782 403 (11,090) (9,859) (2,435) (3,809) (506) (558) (2,411) (1,743) - (110) 151 - (2,455) (74) (302) (272) 209 451 6,161 9,405 (1,519) (2,743) 4,642 6,662 4,642 6,662 2.27 3.52 2.18 3.52
Note Revenue 3 Contracting cost of sales 4 Other income 3 Employee benefits expense 4 Administration expense Occupancy expense Depreciation and amortisation expense Other expenses Gain on disposal of associate 6 Initial Public Offering expense 4 Finance costs 4 Equity accounted investment results 5 Profit before income tax expense Income tax expense Profit after income tax expense for the half-year Total comprehensive income for the half-year, net of tax Earnings per share Basic earnings cents per share 18 Diluted earnings cents per share 18

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

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DURATEC LIMITED AND CONTROLLED ENTITIES

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

	Consolidated Entity
Note Assets Current assets Cash and cash equivalents 7 Trade and other receivables Contract assets Inventories Other current assets Income tax receivable Total current assets Non-current assets Trade and other receivables Plant and equipment 8 Right-of-use assets 9 Investments accounted for using the equity method Other non-current assets Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings 10 Property lease liabilities 11 Contract liabilities Current tax liability Provisions Total current liabilities Non-current liabilities Borrowings 10 Property lease liabilities 11 Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital 12 Reserves 13 Retained earnings Total equity	Dec 2020 $’000 Jun 2020 $’000 31,045 41,276 18,409 19,597 6,222 6,249 272 273 1,889 966 641 -
	58,478 68,361
	72 36 14,480 10,259 2,689 3,055 1,467 2,749 82 78 2,924 2,142
	21,714 18,319
	80,192 86,680
	29,088 34,932 2,311 1,708 1,136 1,163 11,573 15,681 - 500 4,602 4,934
	48,710 58,918
	6,023 3,867 1,757 2,043 813 432 714 612
	9,307 6,954
	58,017 65,872
	22,175 20,808
	23,704 500 132 (231) (1,661) 20,539
	22,175 20,808

The above statement of financial position should be read in conjunction with the accompanying notes.

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DURATEC LIMITED AND CONTROLLED ENTITIES

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 DECEMBER 2020

Consolidated Entity	Issued Capital Retained Earnings Reserves Non-Controlling Interest Total Equity
Note Balance at 30 June 2019 Adoption AASB 16 Balance at 1 July 2019 Comprehensive income Profit for the half-year Total comprehensive income for the half-year Transactions with owners Dividends paid 14 Acquisition of non-controlling interest Balance at 31 December 2019 Balance at 1 July 2020 Comprehensive income Profit for the half-year Total comprehensive income for the half-year Transactions with owners Share-based payments Issue of ordinary shares (net of costs) Dividends paid 14 Balance at 31 December 2020	$’000 $’000 $’000 $’000 $’000 500 17,871 (507) 184 18,048 - (23) - - (23)
	500 17,848 (507) 184 18,025 - 6,662 - - 6,662
	- 6,662 - - 6,662 - (3,200) - - (3,200) - (92) 276 (184) -
	500 21,218 (231) - 21,487
	500 20,539 (231) - 20,808
	- 4,642 - - 4,642
	- 4,642 - - 4,642
	- - 363 - 363
	23,204 - - 23,204
	- (26,842) - - (26,842)
	23,704 (1,661) 132 - 22,175

The above statement of changes in equity should be read in conjunction with the accompanying notes.

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DURATEC LIMITED AND CONTROLLED ENTITIES

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CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 31 DECEMBER 2020

	Consolidated Entity
Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Income tax paid Interest and finance costs paid Interest received Net cashflows (used in)/ from operating activities 17 Cash flow from investing activities Proceeds from sale of plant and equipment Purchase of plant and equipment Dividends received Net cashflows used in investing activities Cash flow from financing activities Dividend paid Proceeds from share issue Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Repayment received from related party Net cashflows from/ (used in) financing activities Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at the end of the financial half-year 7	Dec 2020 $’000 Dec 2019 $’000 134,011 144,773 (137,872) (134,729) (2,721) (2,569) (235) (265) 86 142
	(6,731) 7,352
	191 55 (5,930) (2,093) 1,407 170
	(4,332) (1,868)
	(25,200) (3,200) 24,000 - 4,099 1,464 (1,341) (1,032) (731) (477) 5 -
	832 (3,245)
	(10,231) 2,239 41,276 35,736
	31,045 37,975

The above statement of cash flows should be read in conjunction with the accompanying notes.

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Notes to the financial statements 31 December 2020

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NOTES TO THE FINANCIAL STATEMENTS

Note 1. Significant Accounting Policies

Basis of preparation

Duratec Limited is a for-profit company limited by shares, incorporated and domiciled in Australia. The Company’s registered address is 108 Motivation Drive, Wangara, WA 6065. The consolidated financial statements of the Company as at and for the financial half-year ended 31 December 2020 comprises the Company and its subsidiaries (together referred to as the “Group” or the “consolidated entity”). The Group provides assessment, protection, remediation and refurbishment services to a broad range of assets, in particular steel and concrete infrastructure.

The consolidated financial report is presented in Australian dollars, which is Duratec Limited's functional and presentation currency. All values are rounded to the nearest thousand, except when otherwise indicated, under the option available to the Company under ASIC Corporations (Rounding in Financial/Director’s Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies.

These general-purpose financial statements for the interim half-year reporting period ended 31 December 2020 have been prepared in accordance with Australian Accounting Standard AASB 134 ‘Interim Financial Reporting’ and the Corporations Act 2001, as appropriate for for-profit entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting’.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the consolidated financial report for the year ended 30 June 2020 and any public announcements made by the Company during the interim reporting period in accordance with continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

New or amended Accounting Standards and interpretations adopted by the Group

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

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Notes to the financial statements 31 December 2020

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Note 2. Segment reporting

The Group is organised into three operating segments based on difference in services provided; Defence, Mining & Industrial and Buildings & Facades. Other segments relate to Energy, Ports, Transport and Water. These operating segments are based on the internal reports that are reviewed and used by the Managing Director (who is identified as the Chief Operating Decision Maker, ‘CODM’) in assessing performance and in determining the allocation of resources.

The principal services of each of the operating segments are as follows:

• Defence – dedicated to the delivery of capital facilities, infrastructure and estate works program projects

• Mining & Industrial – provision of tailored preventative maintenance programmes

• Buildings & Facades – completion of façade condition assessments and façade restorations

Consolidated – Dec 2020 Sales to external customers Total revenue Gross profit for reportable segments Unallocated amounts (including corporate overheads) EBITDA Depreciation and amortisation Finance costs Profit before income tax expense Income tax expense Profit after income tax expense	Defence Mining & Industrial Buildings & Facades Other Segments	Total
	$’000 $’000 $’000 $’000	$’000
	54,106 27,588 15,301 27,068	124,063
	54,106 27,588 15,301 27,068	124,063
	8,905 4,563 4,190 5,560	23,218
		(14,335)
		8,883
		(2,420)
		(302)
		6,161
		(1,519)
		4,642

Consolidated – Dec 2019 Sales to external customers Total revenue Gross profit for reportable segments Unallocated amounts (including corporate overheads) EBITDA Depreciation and amortisation Finance costs Profit before income tax expense Income tax expense Profit after income tax expense	Defence Mining & Industrial Buildings & Facades Other Segments $’000 $’000 $’000 $’000 71,904 22,242 11,259 22,802	Total $’000 128,207
	71,904 22,242 11,259 22,802 13,846 5,453 2,059 3,618	128,207 24,976 (13,556) 11,420 (1,743) (272)
		9,405 (2,743)
		6,662

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Notes to the financial statements

31 December 2020

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Note 3. Revenue

Revenues from contracts with customers Disaggregation of revenue from contracts with customers by location Western Australia New South Wales Victoria Northern Territory South Australia Queensland Tasmania Australian Capital Territory Other Income Interest received Sundry income Rental income Sale of scrap metal Dividends received Gain on disposal of plant and equipment	Dec 2020 $’000 Dec 2019 $’000 124,063 128,207 53,774 66,063 25,859 32,690 10,688 12,902 7,082 3,493 8,780 4,071 9,463 6,596 775 1,950 7,642 442
	124,063 128,207
	Dec 2020 $’000 Dec 2019 $’000 86 143 - 54 154 36 27 - 1,407 170 108 -
	1,782 403

Note 4. Expenses

Profit before income tax from continuing operations includes the following specific expenses:

Expenses Cost of sales Interest expense for financial liabilities not at fair value through profit or loss External – Interest on loans and borrowings – Interest on lease liabilities Total finance costs	Dec 2020 $’000 Dec 2019 $’000 100,845 103,231
	204 189 98 83
	302 272

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Notes to the financial statements

31 December 2020

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Note 4. Expenses (continued)

Initial Public Offering costs Expensed In equity: Before tax Tax effect Recognised in equity (net of tax) Total IPO costs for the period Employee expenses Share based payments Other	Dec 2020 $’000 Dec 2019 $’000 2,455 74 1,138 - (342) -
	796 -
	3,251 74
	Dec 2020 $’000 Dec 2019 $’000 363 - 10,727 9,859
	11,090 9,859

Note 5. Equity accounted investment results

Equity accounted investment results – associate – Duratec Australia - Dundee Rock JV Equity accounted investment results – associate – Fortec Australia Pty Ltd	Dec 2020 $’000 Dec 2019 $’000 60 244 149 207
	209 451

Note 6. Disposal of associate

On 31 August 2020 Duratec disposed of its 40% interest in Fortec Australia Pty Ltd by way of a dividend in specie to the Company’s shareholders.

1 July 2020 – Investment in Fortec Australia Pty Ltd Share or profits for the period 31 Aug 2020 – Investment in Fortec Australia Pty Ltd In specie dividend distribution Gain on disposal of associate	Dec 2020 $’000
	1,342
	149
	1,491
	1,642
	151

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Notes to the financial statements 31 December 2020

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Note 7. Cash and cash equivalents

Cash at bank and on hand Short-term deposits Total cash and cash equivalents	Dec 2020 $’000 Jun 2020 $’000 27,045 18,276 4,000 23,000
	31,045 41,276

Note 8. Plant and equipment

Plant and machinery At cost Accumulated depreciation Motor vehicles At cost Accumulated depreciation Office furniture, fixtures, fittings At cost Accumulated depreciation Information technology At cost Accumulated depreciation Leasehold improvements At cost Accumulated depreciation Capital work in progress At cost Total plant and equipment	Dec 2020 $’000 Jun 2020 $’000 11,858 8,836 (5,082) (4,480)
	6,776 4,356
	7,891 6,807 (3,648) (3,127)
	4,243 3,680
	312 299 (200) (172)
	112 122
	2,482 1,550 (717) (457)
	1,765 1,093
	1,141 1,070 (630) (523)
	511 547
	1,073 461
	14,480 10,259

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Notes to the financial statements

31 December 2020

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Note 8. Plant and equipment (continued)

Reconciliation of written down values at the beginning and end of the current financial half-year are set out below:

Consolidated Balance at 1 July 2020 Additions Disposals Depreciation expense Balance at 31 Dec 2020	Plant and Machinery Motor Vehicles Office Furniture Information Technology Leasehold Improvement Capital WIP Total $’000 $’000 $’000 $’000 $’000 $’000 $’000
	4,356 3,680 122 1,093 547 461 10,259
	3,092 1,206 13 936 71 612 5,930
	(34) (47) - (1) - - (82)
	(638) (596) (23) (263) (107) - (1,627)
	6,776 4,243 112 1,765 511 1,073 14,480

Note 9. Right of use assets

ote 9. Right of use assets
Land and buildings Right-of-use Accumulated depreciation	Dec 2020 $’000 Jun 2020 $’000 4,431 4,161 (1,742) (1,106)
	2,689 3,055

Reconciliation of written down values at the beginning and end of the current financial half-year are set out below:

Balance at 1 July 2020 Additions during the half-year Leases expired during the half-year Depreciation expense Balance at 31 Dec 2020	Cost Accumulated Depreciation Carrying value 4,161 (1,106) 3,055 418 - 418 (148) 148 - - (784) (784)
	4,431 (1,742) 2,689

Note 10. Borrowings

ote 10. Borrowings
Current Equipment finance Total current borrowings Non-current Equipment finance Total non-current borrowings	Dec 2020 $’000 Jun 2020 $’000 2,311 1,708
	2,311 1,708
	6,023 3,867
	6,023 3,867

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Notes to the financial statements

31 December 2020

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Note 11. Property lease liabilities

Current Lease liabilities – Property (AASB 16) Total current property lease liabilities Non-current Lease liabilities – Property (AASB 16) Total non-current property lease liabilities	Dec 2020 $’000 Jun 2020 $’000 1,136 1,163
	1,136 1,163
	1,757 2,043
	1,757 2,043

Note 12. Issued capital

Note 12. Issued capital
Ordinary shares – fully paid Movement in ordinary share capital: Details Balance Share split Issue of shares – IPO Share issue costs (net of tax) - IPO Balance	Dec 2020 Shares Jun 2020 Shares Dec 2020 $’000 Jun 2020 $’000 237,444,800 4,000 23,704 500 Date Shares Cumulative Shares Issue price ($) $’000 1 July 2020 4,000 4,000 - 500 1 July 2020 189,440,801 189,444,801 - - 4 Nov 2020 48,000,000 237,444,801 0.50 24,000 4 Nov 2020 - - - (796)
	31 Dec 2020 237,444,801 23,704

Note 13. Reserves

Acquisition Reserve Balance at the beginning of the financial period Acquisition of non-controlling interest Balance at end of the financial period Share Based Payment Reserve Balance at the beginning of the financial period Share based payment transactions Balance at end of the financial period Total Reserves	Dec 2020 $’000 Jun 2020 $’000 (231) (507) - 276
	(231) (231)
	- - 363 -
	363 -
	132 (231)

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Notes to the financial statements

31 December 2020

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Note 14. Dividends

Dividends paid during the financial half-year were as follows:

ote 14. Dividends ividends paid during the financial half-year were as follows:
Disposal of Fortec Australia Pty Ltd by way of a dividend in specie to the Company’s shareholders Other dividends (paid cash) Declared fully franked ordinary dividends franked at 30% (2019: 30%)	Dec 2020 $’000 Dec 2019 $’000 1,642 - 25,200 3,200
	26,842 3,200

Note 15. Contingent liabilities

The Company uses both Bank Guarantee and Insurance Bond facilities to guarantee contract completion obligations and maintain period liabilities in respect of contracts undertaken. These guarantees and insurance bonds can be activated only in the event of a failure by the Company to meet its obligations under the contract.

Bonds & Guarantees in issue at end of financial half-year	Dec 2020 $’000 Dec 2019 $’000 26,390 26,951

Note 16. Events after the reporting period

The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not materially negatively impacted the consolidated entity up to 31 December 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

No matter or circumstance has arisen since 31 December 2020 that has significantly affected, or may significantly affect the Group’s operations, the result of those operations, or the Group’s state of affairs in future financial years.

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Notes to the financial statements

31 December 2020

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Note 17. Reconciliation of profit after income tax to net cash from operating activities

Profit after income tax expense for the half-year Adjustments for: Depreciation Share of profits of associates and joint ventures Dividends received Gain on sale of fixed assets Gain on disposal of investment Share based payment expense IPO costs reallocated to equity (before tax) Change in operating assets and liabilities: Decrease in trade and other receivables Decrease in contract assets Decrease/ (increase) in inventories Increase in other assets Decrease in trade and other payables Decrease in contract liabilities Decrease in provisions Decrease in tax balances Net cash (used in)/ from operating activities

Dec 2020 $’000 Dec 2019 $’000 4,642 6,662 2,420 1,743 (209) (451) (1,407) (170) (117) - (151) - 363 - (1,138) - 1,147 2,976 27 760 1 (36) (926) (630) (5,843) (1,229) (4,108) (1,107) (231) (105) (1,201) (1,061)

(6,731) 7,352

Note 18. Earnings per share

Earnings used to calculate basic EPS ($’000) Weighted average number of ordinary shares outstanding during the period used in calculating basic EPS (number of shares) Basic earnings per share (cents per share) Earnings used to calculate diluted EPS ($’000) Weighted average number of ordinary shares outstanding during the period used in calculating diluted EPS (number of shares) Diluted earnings per share (cents per share)		Dec 2020 Dec 2019 4,642 6,662 204,395,620 189,444,801*
		2.27 3.52
		4,642 6,662 213,270,620 189,444,801*
		2.18 3.52

*A share split occurred on 24 September 2020 and to allow for improved comparability of Earnings per share the December 2019 EPS was calculated using the increased number of shares.

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Notes to the financial statements 31 December 2020

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Note 19. Share-based payments

As at 31 December 2020, the Company had the following share-based payment arrangements:

a) IPO Rights Offer

On 4 November 2020, as part of the Company’s IPO, an offer of 4,815,000 Rights was made to certain employees. Each Right is a right to receive one share subject to continued employment vesting conditions. On vesting, Rights will automatically convert to ordinary shares on a one for one basis. Rights that do not vest will lapse. Shares allocated to employees following vesting and automatic exercise of those Rights are subject to a Disposal Restriction which lifts on the 36-month anniversary of the Grant Date.

Number of Rights granted	Vesting Date	Lapsed	Vested during the period		Vesting Hurdles	Vesting Hurdles
					50%	50%
2,407,500	4 Nov 2021	-	-		Continued employment for 12 months to 4 Nov 2021	Continued employment for 24 months to 4 Nov 2022
2,407,500	4 Nov 2022	-	-
4,815,000		-	-

b) Hurdled Performance Rights

On 24 November 2020, an offer of 3,710,000 Rights was made to senior executives and key managers, as determined by the Board of Directors

Number of Rights granted	Vesting Date	Lapsed	Vested during the period		Vesting Hurdles	Vesting Hurdles
					Continued employment until 31 August 2023
					50%	50%
1,855,000	30 June 2023	-	-		Meeting an earnings per share (EPS) target	Meeting a total shareholder return (TSR) target
1,855,000	30 June 2023	-	-
3,710,000		-	-

c) Non-Hurdled Performance Rights

On 24 November 2020, an offer of 450,000 Rights was made to certain employees deemed to have key roles as determined by the Board of Directors

Number of Rights granted	Vesting Date	Lapsed	Vested during the period		Vesting Hurdles
450,000	31 August 2023	-	-		Continued employment until 31 August 2023
450,000		-	-

The cost of equity-settled transactions is measured at fair value on their respective grant dates. Where market vesting conditions apply, fair value has been determined using a Monte Carlo simulation model. The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to the profit or loss is calculated based on the grant date fair value, the best estimate of the number of awards that are likely to vest and any expired portion of the vesting period. The amount recognised in the profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

19

DIRECTORS’ DECLARATION

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DIRECTORS’ DECLARATION

FOR THE HALF YEAR ENDED 31 DECEMBER 2020

In the Directors’ opinion:

• a. the attached financial statements and notes comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 ‘Interim Financial Reporting’, the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• b. the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 31 December 2020 and of its performance for the financial half-year ended on that date; and

• c. there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors made pursuant to Section 303(5)(a) of the Corporations Act 2001.

On behalf of the Directors

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Robert Philip Harcourt

Director Perth

24 February 2021

20

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RSM Australia Partners

Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844

T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111

www.rsm.com.au

INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF DURATEC LIMITED

We have reviewed the accompanying half-year financial report of Duratec Limited which comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year 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 half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2020 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Duratec Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Duratec Limited, would be in the same terms if given to the directors as at the time of this auditor’s review report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Duratec Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2020 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

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RSM AUSTRALIA PARTNERS

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Perth, WA Dated: 24 February 2021

J A KOMNINOS Partner