EXCELSIOR CAPITAL LTD — Annual Report 2013

Aug 21, 2013

CMI Limited

Results For Announcement To The Market For the Financial Year Ended 30 June 2013

Preliminary Final Report of CMI Limited for the Financial Year Ended 30 June 2013

(ABN 98 050 542 553)

This Preliminary Final Report is provided to the Australian Stock Exchange (ASX) under ASX Listing Rule 4.3A.

Current Reporting Period: Financial Year Ended 30 June 2013 Previous Corresponding Period: Financial Year Ended 30 June 2012

1

CMI Limited

Results For Announcement To The Market For the Financial Year Ended 30 June 2013

Revenue and Net Profit/(Loss)

Revenue from continuing operations Down Net profit before tax attributable to members from continuing operations Up Net profit after tax attributable to members from continuing operations Up	Percentage Change % Amount $’000
	3% to 111,755 13% to 13,108 84% to 9,812

Dividends (Distributions)

Final dividend – Ordinary - Payable 4 October 2013 Interim dividend - Ordinary The dividend will be 100% franked. Record date for determining entitlements to the dividend:  Final dividend - Ordinary	Amount per security Franked amount per security
	6¢ 6¢ -¢ -¢ 3 September 2013

Brief Explanation of Revenue, Net Profit/(Loss) and Dividends (Distributions)

The directors of CMI Limited announce today revenue of $111,755 thousand, a decrease of 3% on prior year, and a profit after tax of $9,812 thousand. A summary of all segment results can be found in Note 10 Segment reporting. The Directors have resolved to pay a final dividend to Ordinary shareholders of $0.06 per share.

Net Tangible Assets Per Ordinary Security

Net Tangible Assets Per Ordinary Security
Net tangible assets per ordinary security	2013 2012
	$1.36 $1.06

2

CMI Limited

Consolidated Statement of Comprehensive Income For the Financial Year Ended 30 June 2013

Continuing Operations Revenue Other income Changes in inventories Raw materials expense Sub-contractors expense Employee benefits expense Repairs, maintenance and consumables expense ASX and share register expense Occupancy expense Travel and communication expense Freight and cartage expense Depreciation and amortisation expense Borrowing costs Impairment expense Other expenses from ordinary activities Profit/(Loss) from continuing operations before income tax expense Income tax Profit/(Loss) from continuing operations after income tax expense Profit/(Loss) for the year Other comprehensive income Foreign currency translation Other comprehensive income for the year, net of tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR Profit/(Loss) for the year is attributable to the owners of the parent Total comprehensive income for the year is attributable to the owners of the parent Earnings Per Share from continuing operations: Basic (cents per share) Diluted (cents per share)	Note 2(a) 2 11 7 7	2013 $’000 2012 $’000
		111,755 114,897 206 580 1,795 2,660 (66,799) (66,029) (1,131) (795) (16,805) (13,726) (1,068) (904) (89) (125) (4,194) (4,202) (1,988) (1,924) (3,850) (4,599) (1,691) (1,433) (369) (183) - (9,270) (2,664) (3,376)
		13,108 11,571 (3,296) (6,246)
		9,812 5,325
		9,812 5,325 249 76
		249 76
		10,061 5,401
		9,812 5,325
		10,061 5,401
		29.05 15.78 28.67 15.71

Notes to the financial statements are included on pages 7 to

3

CMI Limited

Consolidated Statement of Financial Position As At 30 June 2013

Current Assets Cash and cash equivalents Trade and other receivables Inventories Current tax assets Total Current Assets Non-Current Assets Property, plant and equipment Other financial assets Goodwill Other intangible assets Deferred tax assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Borrowings Current tax payables Provisions Total Current Liabilities Non-Current Liabilities Borrowings Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated profits / (losses) Total Equity	Note 5 13 12	2013 $’000 2012 $’000
		6,600 5,622 19,536 20,847 29,430 27,635 669 -
		56,235 54,104
		5,351 5,282 - - 6,850 6,850 3,387 2,756 153 543
		15,741 15,431
		71,976 69,535
		13,584 11,363 55 7,664 - 3,609 1,453 1,362
		15,092 23,998
		118 173 128 124
		246 297
		15,338 24,295
		56,638 45,240
		37,680 37,227 7,715 6,832 11,243 1,181
		56,638 45,240

Notes to the financial statements are included on pages 7 to 2223

4

CMI Limited

Consolidated Statement of Changes in Equity For the Year Ended 30 June 2013

At 1 July 2011 Profit/(Loss) for the period Net foreign exchange differences Total comprehensive income for the year Transactions with owners in their capacity as owners Class A share cancellation Class A share balance moved to reserve Equity adjustment on loan repayments At 1 July 2012 Profit/(Loss) for the period Net foreign exchange differences Total comprehensive income for the year Transactions with owners in their capacity as owners Class A share cancellation Exercise of options Exercise of options tax benefit Exercise of options - Cashing out options Exercise of options tax benefit Share-based payments Equity adjustment on loan repayments At 30 June 2013	Issued Capital Reserves Retained Earnings/ Accumulated Losses Total Equity $’000 $’000 $’000 $’000
	70,103 76 (4,144) 66,035
	- - 5,325 5,325 - 76 - 76
	- 76 5,325 5,401 (26,844) - - (26,844) (6,032) 6,032 - - - 648 - 648
	37,227 6,832 1,181 45,240
	- - 9,812 9,812 - 249 - 249
	- 249 9,812 10,061 - (2) - (2) 453 (93) - 360 - 28 - 28 - (279) - (279) 83 - 83 - 772 - 772 - 125 - 125
	37,680 7,715 10,993 56,388

Notes to the financial statements are included on pages 7 to 23

5

CMI Limited

Consolidated Cash Flow Statement For the Financial Year Ended 30 June 2013

Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Interest and other costs of finance paid Income tax paid Net cash provided by/(used in) operating activities Cash Flows From Investing Activities Interest received Payment for property, plant and equipment Proceeds from sale of property, plant and equipment Payment for other intangible assets Net cash provided by/(used in) investing activities Cash Flows From Financing Activities Payment of finance liabilities Proceeds from share loan repayment Proceeds from share issue Proceeds from borrowings Repayment of borrowings Payment for share buyback Net cash provided by/(used in) financing activities Net Increase/(Decrease) In Cash and Cash Equivalents Cash and Cash Equivalents At The Beginning Of The Financial Year Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and Cash Equivalents At The End Of The Financial Year	Note 5(d) 5(a)	2013 $’000 2012 $’000
		128,556 122,377 (110,384) (105,480) (352) (157) (7,082) (7,179)
		10,738 9,561
		59 1,069 (989) (1,258) 6 56 (1,526) (1,140)
		(2,450) (1,273)
		(181) (311) 125 648 360 - - 7,740 (7,500) - (2) (26,844)
		(7,198) (18,767)
		1,090 (10,479) 5,622 16,099 (112) 2
		6,600 5,622

Notes to the financial statements are included on pages 7 to 23

6

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

Note Contents

• 1 Basis of Preparation

• 2 Profit from Continuing Operations

• 3 Subsequent Events

• 4 Commentary

• 5 Notes to the Cash Flow Statement

• 6 Details relating to Dividends (Distributions)

• 7 Earnings Per Share

• 8 Business Combination

• 9 Contingent Liabilities and Contingent Assets

• 10 Operating Segments

• 11 Reconciliation of Income Tax Expense

• 12 Issued Capital

• 13 Other Financial Assets

• 14 Share-based Payment

• 15 Other Significant Information

• 16 Information on Audit or Review

7

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

1. Basis of Preparation

This preliminary final report has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

This condensed financial report has been prepared in order to comply with ASX listing rules.

This report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

It is recommended that this report be read in conjunction with the annual report for the year ended 30 June 2012, the interim financial report for the half-year ended 31 December 2012 and considered together with any public announcements made by CMI Limited during the year ended 30 June 2013 in accordance with the continuous disclosure obligations of the ASX listing rules.

The accounting policies and methods of computation are the same as those adopted in the most recent annual financial report.

Prior period comparatives have been adjusted where required to meet current year presentation format.

8

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

013
2013	2012
$’000	$’000

2. Profit From Continuing Operations

Profit from continuing operations before income tax includes the following items of revenue and expense:

(a) Revenue and Other Income – continuing operations Continuing operations Sales of goods Interest – other persons Other Items (b) Profit before income tax – continuing operations Profit before income tax has been arrived at after crediting/(charging) the following gains and losses from continuing operations: Gain/(loss) on disposal of property, plant and equipment Net foreign exchange gains/(losses) Profit before income tax from continuing operations has been arrived at after charging the following expenses: Cost of sales Net bad and doubtful debts Depreciation and amortisation of: Property, plant and equipment Leased assets Brand names Other intangibles Impairment Expense: Loan receivable Interest Receivable	111,696 113,158 59 1,739
	111,755 114,897
	206 580
	206 580
	(220) 1 (53) 72
	(273) 73
	68,778 68,039 268 45 775 700 11 52 - - 905 681
	1,691 1,433
	- 8,500 - 770
	- 9,270

9

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

3. Subsequent Events

There has not been any other matter or circumstance, in the financial statements or notes thereto, that has arisen since the end of the period, that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

4. Commentary

Continuing operations comprise the Electrical Division and TJM Products Division.

The Electrical Division produced a pre-tax profit of $18.5m, a decrease of $3.0m on the 2012 year. Revenue decreased to $70.8m, 4% (or $3.0m) down on prior year.

Revenue from the building and construction product range for the year is higher than the prior year. Revenue from the mining product range decreased on prior year. The decreased sales of higher margin mining products and the increased sales of lower margin building and construction products has resulted in lower overall margin and lower Electrical Division earnings.

Lower coal prices continued and this resulted in further rationalisation of the Coal Mining industry. Continued deferral and cancellation of capital expenditure was more evident in the second half. Mines continued to reduce operational costs, which consequently impacted the Electrical Division revenue from the sale of its products into the underground coal mining sector.

The TJM Products Division produced a pre-tax loss of $2.3m, a decrease of $3.3m on the 2012 year. Revenue (excluding intercompany sales) increased to $40.9m, 4% (or $1.5m) up on last year.

Revenue from the TJM domestic stores network, excluding Original Equipment (OE) domestic sales, is up by 10% on the prior year. Revenue from OE is up by 21%. This is due to an increased demand from the major OE customer and was coupled with a domestic price review.

Export revenues are down by 15%. This is due to a number of export markets being adversely affected by the strong AUD and poor economic factors during this financial year.

Earnings were impacted by one off restructuring costs of $0.7 million related to new market establishment, staff restructuring costs, internet website development and supply chain development and by losses in the USA operation of $0.3 million, an improvement on prior year of 22%.

TJM Products Division has undergone a year of transformation in order to realign itself with its existing customer base and new markets. This period has encompassed a thorough review of resources to meet current and anticipated growth. Initiatives have included further investment in off-shore production facilities to ensure the products offered by TJM are world class.

10

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

2013	2012
$’000	$’000

5. Notes to the Cash Flow Statement

(a) Reconciliation of Cash

For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the statement of financial position as follows:

Cash and cash equivalents Cheque Accounts Term Deposit Bank overdraft	6,600 5,622 - -
	6,600 5,622
	- -
	6,600 5,622

(b) Non-Cash Financing and Investing Activities

During the financial year, the consolidated entity acquired plant and equipment with an aggregate fair value of $nil thousand (2012: $240 thousand) by means of finance leases. These acquisitions are not reflected in the cash flow statement.

(c) Financing Facilities

An overdraft and bill acceptance/discount facility with the National Australia Bank, reviewed annually, is secured by a fixed and floating charge over the assets and undertaking of the consolidated entity:

consolidated entity:
Amount used	-	7,500
Amount unused	11,000	3,500
	11,000	11,000
(d) Reconciliation of Profit for the Period to Net
Cash Flows From Operating Activities
Profit/(loss) for the period	9,812	5,325
(Gain)/loss on sale of non-current assets	220	-
Depreciation and amortisation of non-current
assets	1,691	1,433
Interest income received and receivable	(59)	(1,739)
Finance lease interest	17	24
Equity settled share-based payment	772	-
Unrealised Foreign Exchange (Gain)/Loss	-	1
Impairment of non-current assets	-	9,270
Increase/(decrease) in current tax liability	(4,047)	(846)
Increase/(decrease) in deferred tax	159	(88)
Changes in net assets and liabilities, net of effects from acquisition of businesses:
(Increase)/decrease in assets:
Current receivables	1,254	(2,856)
Current inventories	(1,519)	(2,541)
Increase/(decrease) in liabilities:
Current payables	2,242	1,467
Current provisions	198	91
Non-current provisions	(2)	20
Net cash from operating activities	10,738	9,561

11

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

6. Details Relating to Dividends (Distributions)

					Amount
					per
					security
			Franked		of
		Amount	Amount		foreign
		per		per	sourced
		security	security		dividend
		¢		¢	¢
Final dividend – Ordinary	2013	6.00		6.00	N/A
Interim dividend–Ordinary	2013	-		-	N/A
Interim dividend – Ordinary	2012	-		-	N/A
Final dividend–Ordinary	2012	-		-	N/A
Total dividend (distribution) per security (interim plus final)
		2013			2012
		¢			¢
Ordinary securities (each class separately)		6.00			-
Interim and final dividend (distribution) on all		securities
		2013			2012
		$’000			$’000
Ordinary securities (each class separately)			2,043		-
Total			2,043		-
Any otherdisclosuresin relationto dividends	(distributions).
The Directors have proposed to pay a final dividend of $0.06 per share in respect					of Ordinary
shares for the year ended 30 June 2013. Dividend is payable on 4 October				2013 to	shareholders
registered on the Record Date of3 September	2013.

12

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

6. Details Relating to Dividends (Distributions) (continued)

Dividend Reinvestment Plans

The dividend or distribution plans shown below are in operation.

Not applicable

The last date(s) for receipt of election notices for the dividend or distribution plans

Not applicable

7. Earnings Per Share – continuing operations

Basic EPS Diluted EPS	2013 ¢ per share 2012 ¢ per share
	29.05 15.78 28.67 15.71

Basic Earnings per Share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

Earnings (a) Weighted average number of ordinary shares	2013 $’000 2012 $’000
	9,812 5,325
	2013 No.‘000 2012 No.’000
	33,774 33,753

(a) Earnings used in the calculation of basic earnings per share reconciles to net profit/(loss) in the statement of comprehensive income as follows:

statement of comprehensive income as follows:
Net profit/(loss) Earnings used in the calculation of basic EPS	2013 $’000 2012 $’000
	9,812 5,325
	9,812 5,325

13

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

7. Earnings Per Share – continuing operations (continued)

Diluted Earnings per Share

The earnings and weighted average number of ordinary and potential ordinary shares used in the calculation of diluted earnings per share are as follows:

calculation of diluted earnings per share are as follows:
Earnings (a) Weighted average number of ordinary shares and potential ordinary shares (b), (c)	2013 $’000 2012 $’000
	9,812 5,325
	2013 No.‘000 2012 No.‘000
	34,220 33,987

• (a) Earnings used in the calculation of diluted earnings per share reconciles to net profit/(loss) in the statement of comprehensive income as follows:

the statement of comprehensive income as follows:
Net profit/(loss) Earnings used in the calculation of diluted EPS	2013 $’000 2012 $’000
	9,812 5,325
	9,812 5,325

• (b) Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows:

Weighted average number of ordinary shares used in the calculation of basic EPS Shares deemed to be issued for no consideration in respect of: Performance rights Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted EPS	2013 No.‘000 2012 No.‘000
	33,774 33,753 446 144
	34,220 33,897

• (c) Performance rights are included on the basis that they are dilutive.

14

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

8. Business Combination

Control gained over entities

Year	Name of entity (or group of entities)	Date control gained	% Acquired
2013	Nil	Nil	Nil
2012	Nil	Nil	Nil

9. Contingent Liabilities and Contingent Assets

Contingent liabilities Guarantees issued to bank in respect of lease of premises and supply contract performance Letters of credit in respect of overseas purchases	2013 $’000 2012 $’000
	1,164 485 753 1,101
	1,917 1,586

Guarantees over CMI Industrial Premises Leases

CMI Limited has provided guarantees in respect of certain land and buildings leased by CMI Industrial Pty Ltd which were granted prior to the sale of the engineering division to CMI Industrial Pty Ltd by CMI Limited. The lessors under those leases may look to CMI for any unpaid amounts due by Industrial under those leases. A payment of $213 thousand was made relating to these guarantees during the 2012 year and resulted in a Deed of Release being finalised for one property leaving one guarantee in place. At this stage, no material net cash outflows by CMI Limited are expected.

Contingent assets

Option to Purchase

The sale of the Engineering business to CMI Industrial Pty Ltd included a vendor loan provided by CMI Limited to CMI Industrial Pty Ltd (refer Note 13) and an option granted to CMI Limited to purchase a portion of the entity that acquired the Engineering business should certain trigger events such as failure to repay the vendor loan, failure to transfer certain leases or failure to settle creditors occur. As noted in Note 13, entities associated with this option have entered liquidation. Exercise of the option by CMI Limited would require the surrender of the vendor loan and approval of the liquidator.

The Directors have assessed the fair value of this option as $nil at 30 June 2012 and 30 June 2013 and do not expect to exercise this option at any point unless circumstances change.

15

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

10. Operating Segments

	CONTINUING OPERATIONS	CONTINUING OPERATIONS	CONTINUING OPERATIONS
BUSINESS	TJM Products – Australia & USA TJM Products – China		TJM Products – Total Electrical Components	Consolidated
	30/06/13 $’000 30/06/12 $’000 30/06/13 $’000	30/06/12 $’000	30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000	30/06/13 $’000 30/06/12 $’000
REVENUE External sales – Domestic 29,959 27,174 - - 29,959 27,174 70,774 73,759 External sales – Export 10,664 11,320 319 997 10,983 12,317 - - Intersegment sales (i) - - 2,777 3,042 - - - - Total Segment Revenue 40,623 38,494 3,096 4,039 40,942 39,491 70,774 73,759 Interest income Total revenue per the statement of comprehensive income RESULT Segment result (2,205) 976 (46) 44 (2,251) 1,020 18,517 21,540 Reconciliation of segment net profit before tax to net profit/(loss) after tax per the statement of comprehensive income Interest income Employee benefits ASX and share register expense Borrowing costs Impairment expense Other expenses from ordinary activities Income tax expense Profit after tax per the statement of comprehensive income	29,959 27,174 - 10,664 11,320 319 - - 2,777	- 997 3,042	29,959 27,174 70,774 73,759 10,983 12,317 - - - - - -	100,733 100,933 10,983 12,317 - -
	40,623 38,494 3,096	4,039	40,942 39,491 70,774 73,759	111,716 113,250
				39 1,647
				111,755 114,897
				16,266 22,560 39 1,647 (1,964) (941) (89) (125) (352) (159) - (9,270) (792) (2,141) (3,296) (6,246)
	(2,205) 976 (46)	44	(2,251) 1,020 18,517 21,540
				9,812 5,325

i) Inter-entity sales are recognised based on an internally set transfer price of goods at cost plus a margin. Sales are between TJM China and Australia/USA and hence eliminate in the consolidated TJM Total.

ii) Corporate charges and income tax expense are not allocated to each business segment

16

CMI LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (CONTINUED)

10. Operating Segments (continued)

BUSINESS	TJM Products – Australia & USA TJM Products – China TJM Products – Total Electrical Components	Consolidated
	30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000	30/06/13 $’000 30/06/12 $’000
SEGMENT ASSETS Segment assets 26,131 26,948 2,789 1,349 28,920 28,297 38,141 37,823 Reconciliation of segment assets to the statement of financial position Cash and cash equivalents Future income tax benefits Property, plant & equipment Other assets Current tax assets Total assets from continuing operations per the statement of financial position	26,131 26,948 2,789 1,349 28,920 28,297 38,141 37,823	67,061 66,120 3,903 2,881 535 418 6 7 33 109 438 -
		71,976 69,535

17

CMI LIMITED NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (CONTINUED)

10. Operating Segments (continued)

10. Operating Segments (continued)	10. Operating Segments (continued)	10. Operating Segments (continued)	10. Operating Segments (continued)
BUSINESS	TJM Products – Australia & USA TJM Products – China	TJM Products – Total Electrical Components	Consolidated
	30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000	30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000	30/06/13 $’000 30/06/12 $’000
SEGMENT LIABILITIES Segment liabilities	5,626 6,416 1,265 446	6,641 6,862 7,720 6,026	14,611 12,888
Reconciliation of segment assets to the statement of financial position Tax Payables Borrowings Other Liabilities Total liabilities from continuing operations per the statement of financial position			- 3,507 - 7,500 977 400
			15,588 24,295

BUSINESS	TJM Products – Australia & USA TJM Products – China	TJM Products – Total Electrical Components Reconciliation to statement of cashflows Consolidated	TJM Products – Total Electrical Components Reconciliation to statement of cashflows Consolidated
	30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000	30/06/13 $’000	30/06/12 $’000 30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000 30/06/13 $’000 30/06/12 $’000
CASHFLOW INFORMATION Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities
	(552) (2,343) 212 (46)	(340)	(2,389) 20,082 22,092 (9,004) (10,142) 10,738 9,561
	(1,521) (1,843) (608) (59)	(2,129)	(1,902) (358) (341) 37 970 (2,450) (1,273)
	(835) 82 675 -	(160)	82 (21) (100) (7,017) (18,749) (7,198) (18,767)

18

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

10. Operating Segments (continued)

Products and Services within each Business Segment

For management purposes, the consolidated entity is organised into three major operating divisions – electrical components, 4WD components Australia & USA and 4WD components China. These divisions are the basis on which the consolidated entity reports its primary segment information. The above business segments derive revenue from the following products and services:

Continuing operations:

• TJM – the design, distribution and marketing of components and parts for 4WD, light commercial and heavy transport vehicles.

• Electrical Components – the manufacture of specialist cabling and electrical products for a range of industry sectors.

11. Reconciliation of Income Tax Expense

	Consolidated 2013	Consolidated 2012
	$’000	$’000
Profit/(Loss) Before Tax	13,108 11,571 3,932 3,471 (383) (220) (4) 1 (859) (717) - 2,550 610 1,161
At 30%
Prior year under/overs
Foreign exchange adjustment
Research & Development Incentive
Impairment
Other
Tax Expense/(Benefit)	3,296 6,246

19

CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

12. Issued Capital

Class A Share Cancellation

On 12 June 2012, the share capital of the Company was reduced by the cancellation of all 28,005,311 Class A Shares on issue in consideration for the payment of $0.95 for each Class A Share cancelled.

Ordinary Share Issue

The Issued Capital of CMI Limited is 34,052,634 Fully Paid Ordinary Shares at 30 June 2013 (2012: 33,752,634).

During the year, the issued share capital was increased by $453,000 by the issue of 300,000 ordinary shares of $1.51 each. This issue related to the exercise of options by Director Danny Herceg at $1.20 and the shares were issued at market value via the Employee Share Trust.

13. Other Financial Assets

Other Financial Assets
Other Receivables Loan receivable Provision for Impairment	2013 $’000 2012 $’000 17,000 17,000 (17,000) (17,000)
	- -

Associated with the sale of the engineering business was a loan provided by CMI Limited to the purchaser to purchase the business with a $17 million face value. The loan bears interest on normal terms. The loan is secured by a second ranking fixed and floating charge over CMI Industrial Pty Ltd behind the National Australia Bank and a personal guarantee from M.J. Hofmeister of $2.5 million. On 26 February 2013, a bankruptcy trustee was appointed in relation to M. J. Hofmeister.

The loan was due to be repaid on 16 April 2011. Following an approach by CMI Industrial Pty Ltd it was agreed to extend the repayment date by 6 months. The loan was extended on the same terms and conditions.

The loan was not repaid on 16 October 2011. Interest had been paid on the loan in accordance with the security documents up until 16 October 2011 but interest payments due since have not been received.

On a regular basis the Board of CMI has assessed the recoverable value of the loan by assessing if there is any objective evidence of impairment as a result of one or more events that have occurred. On 24 June 2010 the Board determined that objective evidence of impairment in the loan balance existed (based on information provided by the borrower and other external sources) and again re-assessed the estimated future cash flows from this asset. As a result of this, the loan’s carrying value exceeded its recoverable value by $8 million and an impairment expense and provision for this amount was recorded.

The final discount repayment period expired on 15 April 2011. The carrying value increased to $17 million and the provision for impairment increased by $0.5 million.

On 28 February 2012 the Board determined that objective evidence of impairment in the loan balance existed (based on information provided by the borrower and other external sources) and again re-assessed the estimated future cash flows from this asset. As a result of this, the loan’s carrying value exceeded its recoverable value by $8.5 million and an impairment expense and provision for this amount was recorded at 31 December 2011. A further impairment of $0.8m had been recognised relating to the interest arrears and earlier adjustments due under the original sale agreements. No tax benefit was recorded on the principal (capital) impairment of $8.5 million as sufficient forecasted capital profits are not envisaged to utilise these losses.

Administrators and Receivers were appointed to CMI Industrial Pty Ltd on 26 April 2012. An amount of $186 thousand was received during the year from the administrator. This amount is a provisional payment only and

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CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

subject to variation. As a result of this, the amount has not yet been recognised as income. The amount is recorded as a current liability at 30 June 2013.

At 30 June 2013, principal and interest arrears, including default interest and charges, and earlier adjustments due under the original sale agreements total $21.4 million.

In forming the accounts at 30 June 2013, and subsequent to this date, the Board’s assessment of the loan’s recoverable value has not changed with respect to this loan. The loan is carried at a nil value and classified as a non-current asset as the Board does not expect the loan to be repaid in the following 12 month period.

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CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

14. Share-based Payment

Issued During the Period

In December 2012, 500,000 performance share rights were granted to the Executive Chairman and Managing Director under the Company’s Performance Rights Plan (PRP). The exercise price of the rights is nil.

The rights parcels A (150,000 rights) and B (350,000 rights) vest if the Total Shareholder Return (TSR), based on the Group’s 60-day volume weighted average price share price, increases by 15% within 12 months and 25% within 24 months, respectively, from the date of grant. If the 15% increase required for Parcel A is not met within 12 months, these shares form part of Parcel B, with the opportunity for them to vest if the share price increases by 25%. If this increase is not met within 24 months, both Parcel A and B rights lapse. The 500,000 performance share rights issued to the Executive Chairman vested in February 2013 and became exercisable.

The fair value of the rights granted is estimated at the grant date, 14 December 2012, using a Monte Carlo simulation pricing model, taking into account the terms and conditions upon which the rights were granted. The contractual life of each right granted is five years. There is no cash settlement of the rights.

The fair value of rights granted during the six months ended 31 December 2012 was estimated on the date of shareholder approval using the following assumptions:

Volatility of share price (%) 50.0% Risk-free interest rate (%) 2.61% Dividend yield (%) 0.0% 60 day volume weighted average share price ($) $1.92

On the basis of the assessment for the 12 months ended 30 June 2013, the fair value per right is $1.36 for Parcel A and $1.29 for Parcel B. The Group has recognised $655,500 of share-based payment transactions expense in the statement of comprehensive income (2012: $nil).

Since 31 December 2012, 450,000 performance rights were granted to executives and are detailed below. The rights vest if the performance hurdles are met at 30 June 2016 and the senior executive is still employed on such date. Performance hurdles include, depending on position, increase in total shareholder return, revenue increases, profit maintenance and continuing employment conditions. If the performance hurdles are not met at 30 June 2016, the rights lapse.

In January 2013, 200,000 performance share rights were granted to the Chief Financial Officer (CFO)/Company secretary under the Company’s Performance Rights Plan (PRP). The exercise price of the rights is nil. The fair value of the rights granted is estimated at the grant date, 23 January 2013, using a Monte Carlo simulation pricing model, taking into account the terms and conditions upon which the rights were granted. The contractual life of each right granted is five years.

There is no cash settlement of the rights. On the basis of the assessment for the 12 months ended 30 June 2013, the fair value per right is $1.44 and the Group has recognised $35,122 of share-based payment transactions expense in the statement of comprehensive income (2012: $nil).

In February 2013, 250,000 performance share rights were granted to the General Manager – TJM Products under the Company’s Performance Rights Plan (PRP). The exercise price of the rights is nil. The fair value of the rights granted is estimated at the grant date, 25 February 2013, using a BlackScholes option pricing model, taking into account the terms and conditions upon which the rights were granted. The contractual life of each right granted is five years. There is no cash settlement of the rights. On the basis of the assessment for the 12 months ended 30 June 2013, the fair value per right is $2.68 and the Group has recognised $81,707 of share-based payment transactions expense in the statement of comprehensive income (2012: $nil).

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CMI Limited

Notes to the Financial Statements For the Financial Year Ended 30 June 2013

At 22 August 2013, an invitation for 350,000 performance share rights remains extended to the General Manager – Electrical under the Company’s Performance Rights Plan (PRP). The exercise price of the rights is nil.

On the basis of the assessments for the 12 months ended 30 June 2013, the Group has recognised a total share-based payment transactions expense of $772,329 in the statement of comprehensive income (2012: $nil).

Existing at Beginning of Period

At 30 June 2012, 600,000 options, exercisable at $1.20 per option, were outstanding. These options were exercised in April 2013. As a result, 300,000 ordinary shares were issued to Danny Herceg and $279,000 was paid to Colin Ryan to cash-out 300,000 options. This payment was not paid prior to 30 June 2013 and was based on a 5-day VWAP of $2.13 less the exercise price of $1.20. The tax-effected amount of $195,300 has been recognised in the Employee Equity-settled Benefits Reserve in the Statement of Changes in equity.

Total Options and Performance Share Rights

At 30 June 2013, 950,000 performance share rights over ordinary shares were outstanding, excluding those offered to the General Manager – Electrical.

15. Other Significant Information

Not Applicable

16. Information on Audit or Review

This preliminary final report is based on accounts to which one of the following applies.

 The accounts have been audited.  The accounts have been subject to review.

 The accounts are in the process of being  The accounts have not yet been audited or subject to review. audited or reviewed.

Description of likely dispute or qualification if the accounts have not yet been audited or subject to review or are in the process of being audited or subjected to review.

Not Applicable

Description of dispute or qualification if the accounts have been audited or subjected to review.

Not Applicable

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