GR ENGINEERING SERVICES LIMITED — Interim / Quarterly Report 2018

Feb 25, 2018

GR Engineering Services Limited Half Year Financial Report For the Half Year Ended 31 December 2017

GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

TABLE OF CONTENTS

DIRECTORS’ REPORT	3
AUDITORS’ INDEPENDENCE DECLARATION	6
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME	7
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION	8
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	9
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	10
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	11
DIRECTORS’ DECLARATION	18
INDEPENDENT AUDITOR’S REVIEW REPORT	19

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

DIRECTORS’ REPORT

Your directors present their report on GR Engineering Services Limited (ASX:GNG) (“the consolidated entity”) for the half-year ended 31 December 2017 (HY18).

DIRECTORS

The names of the consolidated entity’s directors in office during the half year and until the date of this report follow. The Directors were in office for this entire period unless otherwise stated.

Geoff Jones (Managing Director) Phillip Lockyer (Non-Executive Chairman) Tony Patrizi (Executive Director) Barry Patterson (Non-Executive Director) Terrence Strapp (Non-Executive Director) Peter Hood (Non-Executive Director)

COMPANY SECRETARY

Giuseppe (Joe) Totaro

PRINCIPAL ACTIVITIES

During the financial period the consolidated entity’s activities have been the provision of process engineering design and construction services to the mining and mineral processing industry and the provision of operations, maintenance and well management services to the oil and gas sector.

REVIEW OF RESULTS AND OPERATIONS

The operating profit after tax of the consolidated entity was $7,502,976 (HY17: $7,896,569). The EBITDA of the consolidated entity was $12,073,388 (HY17: $10,773,636).

Mineral Processing Design & Construction

The half year ended 31 December 2017 (HY18), was a busy period for GR Engineering as construction activity associated with projects awarded late in FY17 escalated. As at the close of HY18, the Company was well advanced on its four major design and construction projects with a total capital value of approximately $223 million. All current projects are progressing on schedule and on budget. In addition to heightened levels of design and construction activity, the Company was engaged on 30 studies (HY17:15) with 17 studies being completed during the half.

In April 2017, GR Engineering entered into a $107 million EPC contract for the design, construction and commissioning of the mineral processing plant for Dacian Gold Limited’s Mt Morgan’s Gold Project, located 25 kilometres south west of Laverton, Western Australia. Ore commissioning of the processing facility is expected to occur during the first quarter of 2018.

In June 2017, the Company entered into a $31.3 million EPC contract with AngloGold Ashanti Australia Limited, to undertake the design and construction of a brownfields upgrade to processing facilities at the Sunrise Dam Gold Mine, located 55 kilometres south of Laverton, Western Australia. This contract involves the design and construction of a new flotation and ultra-fine grind processing facility with associated service upgrades to operate within the existing processing infrastructure. As at 31 December 2017, this project was approximately 75% complete.

In July 2017, GR Engineering entered into a $66.5 million EPC contract with GNT Resources Pty Ltd, a wholly owned subsidiary of Gascoyne Resources Limited. This contract provides for the design and construction of a 2.5 million tonne per annum mineral processing plant and associated infrastructure for the Dalgaranga Gold Project located in the Murchison gold mining region of Western Australia. Commissioning of the processing facility is scheduled for the second quarter of 2018.

As at HY18, work was all but completed on Western Areas Limited’s Cosmic Boy Mill Recovery Enhancement Project. Initial work on this $24 million project commenced in July 2015, with engineering, design and procurement of long lead equipment items, however construction work to the value of approximately $17.5 million was subsequently deferred. These construction works recommenced in May 2017 and practical completion was achieved in January 2018.

On 18 October 2017, GR Engineering announced its appointment by Sheffield Resources Limited (Sheffield) as preferred tenderer for the design and construction of the mineral processing plant for its Thunderbird Mineral Sands Project, located 60 kilometres west of Derby, Western Australia.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

DIRECTORS’ REPORT

In anticipation of entering into an engineering, procurement and construction contract (EPC contract) to undertake the design and construction of the project’s mineral processing facility and associated infrastructure, GR Engineering has entered into an Early Works Agreement with Sheffield.

The Early Works Agreement contemplates a fixed price, lump sum EPC contract with a scope of work comprising the design, construction and commissioning of a wet concentrator plant, concentrate upgrade plant, zircon processing plant, ilmenite processing plant, low temperature roast and associated infrastructure to support the project’s ore processing operations. The project schedule anticipates a delivery term of approximately two years. GR Engineering continues to work with Sheffield as it progresses its development, financing and approval activities.

In addition, GR Engineering was active on a number of design and project management engagements including the provision of design, procurement support, project controls and supervision for Ok Tedi Mining Limited’s Crusher Replacement Project in Papua New Guinea. Work on this project commenced in September 2017 and the new crusher is due to be commissioned by November 2019.

On 17 August 2017, GR Engineering Services (UK) Limited, a wholly owned subsidiary of GR Engineering, received from Wolf Minerals (UK) Limited (Wolf) a notice of intention to call on a bank guarantee of £7.5 million provided by GR Engineering Services (UK) Limited as performance bonding under the contract for the design and construction of the Hemerdon Tungsten and Tin processing facility in the UK. The Company notes that as at the date of this report, no amounts have been drawn down on the bank guarantee.

As previously noted, the Company was engaged on 30 studies as at 31 December 2017 of which 13 related to gold or gold/copper. Remaining studies were associated with a broad range of commodities including lithium, iron ore, nickel, phosphate, tin and graphite.

Stable commodity prices continue to support capital expenditure on new projects, upgrades and optimisation works. The high level of study activity augurs well for future design and construction opportunities both in Australia and abroad.

Oil and Gas Services

GR Engineering’s oil and gas services business, Upstream Production Solutions (Upstream PS) achieved sustained revenue contributions primarily from the provision of CSG maintenance services in Queensland and operations and maintenance services offshore in the Timor Sea and in the Perth Basin.

In Queensland, Upstream PS’s demonstrated capacity to deliver reliable and cost effective operations and maintenance services through the performance of work packages under existing contracts in the Bowen and Surat Basins.

In Western Australia, Upstream PS continued to undertake operations and maintenance works on a number of oil and gas production assets in the Perth Basin for AWE (Waitsia Field, Xyris and the Dongara Processing facilities).

Offshore, Upstream PS continued to establish its credentials as a provider of operations and maintenance services for production facilities, notably as the registered operator of the Northern Endeavour Floating Production, Storage and Offloading (FPSO) facility in the Timor Sea on behalf of Northern Oil and Gas Australia.

Also in the Timor Sea, work continued under the three year maintenance services contract (awarded in March 2017) with Eni Australia (Eni) for the provision of maintenance services on Eni’s Blacktip gas field production facilities. Upstream PS’s scope of services under this contract includes the administration and execution of maintenance activities, logistics, procurement, engineering and operations support in relation to the unmanned Blacktip well head platform and associated onshore Yelcherr gas plant.

In September 2017 receivers and administrators were appointed to, Empire Oil (WA) Limited (Empire). As a result of this, Upstream PS incurred a bad debt of $417,000 associated with work carried out on the Red Gully oil and gas production asset. Upstream PS has been engaged by Mineral Resources to provide ongoing services at Red Gully.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

DIRECTORS’ REPORT

Safety

In HY18, the group's total reportable injury frequency rate (TRIFR) was 8.34. GR Engineering is seeking to continuously improve its safety outcomes and reaffirms its commitment to a zero harm workplace environment.

Please refer to the consolidated entity’s ASX announcement of 23 February 2018 for a comprehensive summary of the consolidated entity’s recent operational performance.

DIVIDENDS

A fully franked dividend of 6.0 cents per share has been declared for the six months ended 31 December 2017. The ex dividend date for the interim dividend is 13 March 2018, the record date for determining entitlements to the interim dividend is 14 March 2018 and the payment date for the interim dividend is 28 March 2018.

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS

The auditor’s independence declaration to the directors is included on page 6 of the Half Year Financial Report.

EVENTS AFTER THE REPORTING DATE

Eastern Goldfields

GR Engineering notes that it continues to pursue legal action against Eastern Goldfields Ltd (EGS) and others to seek recovery of progress claims in relation to the EPC Contract totalling approximately $9.9 million plus interest plus costs. In a decision of the Supreme Court of Western Australia delivered on 24 January 2018, GR Engineering and EGS were referred to arbitration for the resolution of the disputes between them. A partial stay of GR Engineering’s claims was ordered, with claims remaining on foot in the Supreme Court, including against Investmet Limited whereby GR Engineering claim that Investmet is in default under a deed of partial accord and satisfaction to guarantee EGS’ payment of $5.0 million to GR Engineering.

Signed in accordance with a resolution of directors made pursuant to s.306(3) of the Corporations Act 2001.

On behalf of the Directors

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______ Geoff Jones Managing Director Date: 23 February 2018

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

AUDITORS’ INDEPENDENCE DECLARATION

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

Notes Revenue Rendering of services Cost of sales Gross profit Other income 3(a) Finance costs 3(b) Occupancy expenses Administrative expenses Bad debt expense Depreciation and amortisation 3(c) Profit before income tax Income tax expense Net profit for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss : Fair value gain (loss) on available for sale financial assets Exchange differences on translating foreign operations Total other comprehensive income, net of income tax Total comprehensive income for the period Profit attributable to owners of the parent Total comprehensive income attributable to owners of the parent Earnings per Share: Basic (cents per share) Diluted (cents per share)	Half-Year Ended Half-Year Ended 31 December 2017 31 December 2016 $ $ 177,247,075 105,923,381 156,385,299 88,327,135
	20,861,776 17,596,247 499,505 772,595 30,229 28,574 1,295,673 1,193,815 7,333,167 5,876,865 417,445 - 638,246 724,290
	11,646,521 10,545,298 4,143,545 2,648,729
	7,502,976 7,896,569
	75,486 (685,641) 107,295 207,140
	182,781 (478,501)
	7,685,757 7,418,068
	7,502,976 7,896,569
	7,685,757 7,418,068
	Cents per share Cents per share
	4.90 5.17
	4.79 5.12

7

The accompanying notes form part of these Financial Statements

GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

Notes ASSETS Current Assets Cash and cash equivalents 4 Trade and other receivables Inventories Other Current tax asset Total Current Assets Non-Current Assets Deferred tax asset Property, plant and equipment Financial assets 10 Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Borrowings Provisions Unearned revenue 5 Income tax Total Current Liabilities Non-Current Liabilities Borrowings Provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 6 Reserves Retained earnings TOTAL EQUITY	31 December 30 June 2017 2017 $ $ 45,610,697 34,868,758 73,195,881 66,183,661 11,200,451 19,783,118 954,548 497,293 - 2,212,666
	130,961,577 123,545,496
	3,264,075 1,025,438 3,985,551 2,716,545 3,236,959 3,129,121
	10,486,585 6,871,104
	141,448,162 130,416,600
	54,220,185 62,217,046 816,144 458,403 14,872,604 8,834,547 9,150,464 7,135,911 2,413,669 -
	81,473,066 78,645,907
	242,228 226,612 2,774,069 2,681,091
	3,016,297 2,907,703
	84,489,363 81,553,610
	56,958,799 48,862,990
	30,388,000 30,388,000 54,477 (538,355) 26,516,322 19,013,345
	56,958,799 48,862,990

8

The accompanying notes form part of these Financial Statements

GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

Notes Cash flows from operating activities Receipts from customers Payments to suppliers and employees Income tax paid Interest received Net cash flows provided by (used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of assets Payment for acquisition of financial assets Net cash flows used in investing activities Cash flows from financing activities Payment of finance lease liabilities Dividends paid Net cash flows used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effects of exchange rate changes of balances of cash held in foreign currencies Cash and cash equivalents at end of period 4	31 December 31 December 2017 2016 $ $ 196,225,119 83,469,107 (182,038,444) (96,078,651) (1,788,200) (3,236,987) 241,608 524,526
	12,640,083 (15,322,005)
	(1,903,286) (346,168) - 455 - (396,666)
	(1,903,286) (742,379)
	(69,871) (221,264) - (7,643,565)
	(69,871) (7,864,829)
	10,666,926 (23,929,213) 34,868,758 64,923,175 75,013 329,695
	45,610,697 41,323,657

9

The accompanying notes form part of these Financial Statements

GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

Balance as at 30 June 2016 Profit for the period Other Comprehensive income (loss) for the period Total Comprehensive income (loss) for the period Dividends Issue of shares Share based payments Balance as at 31 December 2016 Balance as at 30 June 2017 Profit for the period Other Comprehensive income (loss) for the period Total Comprehensive income (loss) for the period Dividends Issue of shares Share based payments Balance as at 31 December 2017	Issued capital Share Option Reserve Performance Rights Reserve Share Appreciation Rights Reserve Foreign Currency Translation Reserve Investment Revaluation Reserve Retained Earnings Total $ $ $ $ $ $ $ $
	30,225,436 584,497 99,171 53,040 (1,270,503) 866,563 21,435,563 51,993,767
	- - - - - - 7,896,569 7,896,569 - - - - 207,140 (685,641) - (478,501)
	- - - - 207,140 (685,641) 7,896,569 7,418,068
	- - - - - - (7,643,565) (7,643,565) - - - - - - - - - - 41,683 38,932 - - - 80,615
	30,225,436 584,497 140,854 91,972 (1,063,363) 180,922 21,688,567 51,848,885
	30,388,000 584,497 93,345 167,233 (1,095,504) (287,926) 19,013,345 48,862,990
	- - - - - - 7,502,976 7,502,976 - - - - 107,295 75,486 - 182,781
	- - - - 107,295 75,486 7,502,976 7,685,757
	- - - - - - - - - - - - - - - - - - 291,438 118,614 - - - 410,052
	30,388,000 584,497 384,783 285,847 (988,209) (212,440) 26,516,321 56,958,799

10

The accompanying notes form part of these Financial Statements

GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

1 CORPORATE INFORMATION

The financial report of GR Engineering Services Limited for the half year ended 31 December 2017 was authorised for issue in accordance with a resolution of the directors on 23 February 2018.

GR Engineering Services Limited is a limited company incorporated and domiciled in Australia. The registered office of GR Engineering Services Limited is located at 179 Great Eastern Highway, Belmont, Western Australia.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The condensed consolidated financial statements have been prepared on the basis of historical cost, except for certain non-current assets and financial instruments that are measured at revalued amounts or fair values. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of computation adoption in the preparation of the half-year financial report are consistent with those adopted and disclosed in the consolidated entity’s annual financial report for the financial year ended 30 June 2017, except for the impact of the Standards and Interpretations described below. The accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

(b) Statement of Compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 ‘Interim Financial Reporting’. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting’. The half-year report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report.

(c) Standards and Interpretations adopted in the current year

The consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to their operations and are effective for the current financial reporting period, being the half year ended 31 December 2017.

The following new and revised Standards and Interpretations which are relevant to the consolidated entity have been adopted in the current financial reporting period :

• AASB 1048 Interpretation of Standards

• AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses

• AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107

• AASB 2017-2 Amendments to Australian Accounting Standards – Further Annual Improvements 2014-2016

The adoption of these Standards and Interpretations does not have any impact on the disclosures or the amounts recognised in the consolidated entity’s condensed consolidated financial statements.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Standards and Interpretations issued but not yet adopted

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the consolidated entity for the half year ending 31 December 2017. Management are in the process of assessing the impact of the adoption of these Standards and Interpretations on the consolidated entity.

(e) Critical accounting judgements, estimates and assumptions

As disclosed in in the most recent annual report, an estimate of doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. The allowance for doubtful debts assessment requires a degree of estimation and judgement. Where the estimation is different to actual results, carrying amounts are adjusted in the next financial period. Management continually evaluates these estimates based on historical experience, ageing of receivables, historical collection rates and specific knowledge of the individual debtor situations. The directors have assessed their aged receivables balances at the reporting date and based on the information available no allowance for doubtful debts has been made.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

3 REVENUES AND EXPENSES

(a) Other income Bank interest received Government rebates and subsidies Profit (loss) on sale of fixed assets Sundry revenue (b) Finance costs Interest charges on finance leases (c) Depreciation and amortisation Depreciation of fixed assets (d) Employee benefits expense Wages and Salaries Workers’ compensation costs Superannuation costs Share based payments 4 Cash at bank and in hand Short term deposits Amortisation of customer contracts CASH AND CASH EQUIVALENTS	31 December 2017 31 December 2016 $ $ 241,608 524,526 39,971 33,750 3,966 2,433 213,960 211,886
	499,505 772,595
	30,229 28,574 638,246 706,908 - 17,382
	638,246 724,290
	42,046,445 39,705,054 377,846 305,619 3,454,154 3,196,073 410,052 80,614
	46,288,497 43,287,360
	31 December 30 June 2017 2017 $ $ 40,610,697 34,868,758 5,000,000 -
	45,610,697 34,868,758

Cash at bank and in hand earns interest at floating rates based on daily bank rates.

Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the consolidated entity, and earn interest at the respective short-term deposit rates.

Reconciliation of cash

For the purposes of the Statement of Cash Flows, cash and cash equivalents comprise the following at 31 December 2017:

Cash at bank and in hand Short-term deposits	31 December 30 June 2017 2017 $ $ 40,610,697 34,868,758 5,000,000 -
	45,610,697 34,868,758

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

5 UNEARNED REVENUE 6 ISSUED CAPITAL Ordinary Shares Issued and fully paid Issue of ordinary shares At 30 June 2017 At 31 December 2017 7 Finance leases Not longer than 1 year Longer than 5 years Minimum lease payments Less: future finance charges Present value of minimum lease payments Not longer than 1 year Longer than 5 years Total lease payments Bank guarantees Bank guarantees issued Longer than 1 year and not longer than 5 years Unearned revenue on construction contracts Issue of shares from exercise of performance rights Fully paid ordinary shares carry one vote per share and carry a right to dividends. COMMITMENTS AND CONTINGENCIES Longer than 1 year and not longer than 5 years Non-cancellable operating lease commitments	31 December 30 June 2017 2017 $ $ 9,150,464 7,135,911
	9,150,464 7,135,911
	31 December 30 June 2017 2017 No of shares No of shares
	153,253,260 153,253,260
	No of shares $ 153,253,260 30,388,000 - -
	153,253,260 30,388,000
	31 December 30 June 2017 2017 $ $ 843,817 475,573 249,908 231,617 - -
	1,093,725 707,190 (35,354) (22,175)
	1,058,371 685,015
	1,538,317 1,452,354 2,940,786 591,814 - -
	4,479,103 2,044,168
	39,748,084 35,164,531

The consolidated entity's standby multi-option facility has a limit of $70,000,000. The facilities are secured by a fixed and floating charge over all the assets of the consolidated entity.

The consolidated entity provides bank guarantees under this facility to support project performance in favour of certain clients. The amount of these bank guarantees at 31 December 2017 is $38,945,294 (30 June 2017: $34,258,841). The consolidated entity has a bank guarantee facility with National Australia Bank to provide guarantees for the security of rental properties to the value of $802,790 (30 June 2017: $905,690). The amount of bank guarantees issued under this facility at 31 December 2017 is $802,790 (30 June 2017: $905,690).

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

7 COMMITMENTS AND CONTINGENCIES (CONTINUED)

Bond facility

The consolidated entity has a $30 million insurance bond facility with Assetinsure Pty Ltd (30 June 2017: $30,000,000). This facility is utilised to provide retention, maintenance and off site materials bonds in connection with certain projects. The amount of insurance bonds issued under this facility at 31 December 2017 is $6,272,746 (30 June 2017: $6,408,123).

GR Engineering Services Limited, the parent company, has provided guarantees and indemnities in relation to certain contracts entered into by its subsidiaries. Liability under these guarantees and indemnities is limited to the relevant subsidiaries' contracted limits of liability under the contracts.

Certain claims arising out of engineering and construction contracts have been made by or against the consolidated entity in the ordinary course of business, some of which involve litigation. The Directors do not consider the outcome of any of these claims will have a material adverse impact on the financial position of the consolidated entity.

8 DIVIDENDS

During the half year, the consolidated entity made the following dividend payments :

Fully paid ordinary shares Dividend	Cents per share $ Cents per share $ 0.00 - 5.00 7,643,565 31 December 2017 31 December 2016
	0.00 - 5.00 7,643,565

A fully franked dividend of 6.0 cents per share has been declared for the six months ended 31 December 2017. The ex dividend date for the interim dividend is 13 March 2018, the record date for determining entitlements to the interim dividend is 14 March 2018 and the payment date for the interim dividend is 28 March 2018.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

9 SEGMENT INFORMATION

Operating segments have been identified on the basis of internal reports of the consolidated entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. The chief operating decision maker has been identified as the Managing Director. On a regular basis, the board receives financial information on a company basis similar to the financial statements presented in the financial report, to manage and allocate their resources.

The Managing Director has chosen to classify the operations of the consolidated entity by reference to presence in an industry. The segments identified on this basis are "mineral processing" and "oil and gas".

Segment revenues and results

The following table shows the revenue and results of the consolidated entity summarised under these segments.

Segment revenue

Mineral processing Oil and gas Total revenue Segment profit before tax Mineral processing Oil and gas Total profit before tax	31 December 31 December 2017 2016 $ $ 136,136,516 74,298,820 41,110,559 31,624,561
	177,247,075 105,923,381
	31 December 31 December 2017 2016 $ $ 9,885,751 7,155,442 1,760,770 3,389,856
	11,646,521 10,545,298

The above profit for the 6 months to 31 December 2017 for the oil and gas segment includes amortisation expense of $nil (2016: $17,382).

Segment assets

Mineral processing Oil and gas Corporate - securities available for sale Total assets	31 December 30 June 2017 2017 $ $ 110,523,192 96,606,076 27,688,011 30,681,403 3,236,959 3,129,121
	141,448,162 130,416,600

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2017

10 FINANCIAL ASSETS

Available for sale financial assets held at fair value

Shares in listed entities	31 December 30 June 2017 2017 $ $ 3,236,959 3,129,121

Shares held in the listed entities are measured at fair value at the end of the reporting period.

11 FINANCIAL INSTRUMENTS

Fair value of financial instruments

The fair values of financial assets and liabilities, together with their carrying amounts in the statement of financial position for the consolidated entity are as follows :

Assets Cash at bank Cash on deposit Trade receivables Available for sale securities Liabilities Trade payables Lease liability	Carrying amount Fair value Carrying amount Fair value $ $ $ $ 40,610,697 40,610,697 34,868,758 34,868,758 5,000,000 5,000,000 - - 73,195,881 73,195,881 66,183,661 66,183,661 3,236,959 3,236,959 3,129,121 3,129,121 31 December 2017 30 June 2017
	122,043,537 122,043,537 104,181,540 104,181,540
	54,220,185 54,220,185 62,217,046 62,217,046 1,058,371 1,058,371 685,015 685,015
	55,278,556 55,278,556 62,902,061 62,902,061

The group holds available for sale equity securities of $3,236,959 (30 June 2017: $3,129,121) which are classified as fair value hierarchy level 1, in which fair values are based on quoted prices in active markets. There have been no transfers of fair value hierarchy levels during the period.

During the period, net gains of $107,837 (31 December 2016: net loss of $685,641) have been included in other comprehensive income and are reported in the investment revaluation reserve.

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KEY MANAGEMENT PERSONNEL

Remuneration arrangements of key management personnel are disclosed in the annual financial report dated 30 June 2017.

13 EVENTS AFTER THE REPORTING DATE

A fully franked dividend of 6.0 cents per share has been declared for the six months ended 31 December 2017. The ex dividend date for the interim dividend is 13 March 2018, the record date for determining entitlements to the interim dividend is 14 March 2018 and the payment date for the interim dividend is 28 March 2018.

Eastern Goldfields

GR Engineering notes that it continues to pursue legal action against Eastern Goldfields Ltd (EGS) and others to seek recovery of progress claims in relation to the EPC Contract totalling approximately $9.9 million plus interest plus costs. In a decision of the Supreme Court of Western Australia delivered on 24 January 2018, GR Engineering and EGS were referred to arbitration for the resolution of the disputes between them. A partial stay of GR Engineering’s claims was ordered, with claims remaining on foot in the Supreme Court, including against Investmet Limited whereby GR Engineering claim that Investmet is in default under a deed of partial accord and satisfaction to guarantee EGS’ payment of $5.0 million to GR Engineering.

There has been no other matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen since the end of the financial 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.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

DIRECTORS’ DECLARATION

The directors declare that:

(a) In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

(b) In the directors’ opinion, the attached financial statements and notes thereto are in compliance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.

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

On behalf of the Directors

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Name: Geoff Jones Managing Director Date: 23 February 2018

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Deloitte Touche Tohmatsu ABN 74 490 121 060

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Tower 2 Brookfield Place 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

Independent Auditor’s Review Report to the Members of GR Engineering Services Limited

Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au

We have reviewed the accompanying half-year financial report of GR Engineering Services Limited, which comprises the condensed consolidated statement of financial position as at 31 December 2017, the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in equity 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 end of the half-year 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 gives a true and fair view and 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 2015 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 GR Engineering Services 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.

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

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Auditor’s Independence Declaration

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 GR Engineering Services Limited, would be in the same terms if given to the directors as at the time of this auditor’s review report.

Basis for Qualified Conclusion

The consolidated entity has trade and other receivables of $73,195,881 as at 31 December 2017. Included in this amount are long outstanding trade receivables totalling $16,794,418 in respect of which we have been unable to obtain sufficient appropriate evidence to determine whether these balances will be recoverable. Accordingly, we have been unable to determine whether the recoverable amount of these trade receivables is at least equal to their carrying value. In the event that the carrying value of these trade receivables exceeds their recoverable amounts, it would be necessary for the carrying value to be written down to their recoverable amounts.

Qualified Conclusion

Based on our review, which is not an audit, except for the possible effects of the matter described in the Basis for Qualified Conclusion paragraph, we have not become aware of any matter that makes us believe that the half-year financial report of GR Engineering Services 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 2017 and of its performance for the half-year ended on that date; and

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

DELOITTE TOUCHE TOHMATSU

Nicole Menezes Partner Chartered Accountants Perth, 23 February 2018

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