GR ENGINEERING SERVICES LIMITED — Interim / Quarterly Report 2021

Feb 21, 2021

GR Engineering Services Limited Half Year Financial Report For the Half Year Ended 31 December 2020

GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

TABLE OF CONTENTS

DIRECTORS’ REPORT	3
AUDITOR'S 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	17
INDEPENDENT AUDITOR’S REVIEW REPORT	18

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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) (GR Engineering or consolidated entity) for the half-year ended 31 December 2020 (HY21).

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[1] (Non-Executive Director) Peter Hood (Non-Executive Director) Giuseppe (Joe) Totaro (Non-Executive Director)

1Deceased 9 December 2020

COMPANY SECRETARY

Omesh Motiwalla

PRINCIPAL ACTIVITIES

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

REVIEW OF RESULTS AND OPERATIONS

The operating profit after tax of the consolidated entity was $8,530,749 (HY20 loss after tax: $11,170,948) on revenue of $176,388,713 (HY20: $95,312,855). The EBITDA of the consolidated group was $14,196,136 (HY20 EBITDA loss: $15,353,657).

GR Engineering continued the momentum generated in the second half of FY20 and achieved strong revenue and earnings results for HY21. Revenue increased by 85.0% from HY20 and was due to GR Engineering successfully executing its growing pipeline of projects and as a result of the strong performance by its wholly owned subsidiary, Upstream Production Solutions Pty Ltd (Upstream PS).

Pleasingly, cash generation was excellent and resulted in a high conversion of EBITDA to free cashflows. During the twelve month period from 31 December 2019 to 31 December 2020, cash at bank increased by $32.1 million.

GR Engineering's strong order book into FY22 and anticipated continued strong cash flow generation leaves it well placed to continue to deliver returns to its shareholders.

GR Engineering continues to be proactive in its response to the COVID-19 pandemic and has implemented a range of protective and preventative measures. COVID-19 has had no material impact on the HY21 results.

On an extremely sad note, GR Engineering announced the passing of one of its founding Directors, Barry Patterson, on 9 December 2020. Barry co-founded GR Engineering and was instrumental in establishing the core team of individuals in 1986 that took the business from its roots as JR Engineering Services, a Kalgoorlie based contractor, to the process design and construction group that we are today. Vale Barry Patterson.

Mineral Processing Design and Construction

New and ongoing projects

GR Engineering’s design and construction order book for works being undertaken includes:

• Lake Way Project - $107.9 million EPC and EPCM contracts - GR Engineering has been engaged by Salt Lake Potash Limited to provide services for non-process engineering design and the management of procurement, construction and commissioning of the Lake Way Project processing facility and associated infrastructure. GR Engineering has separately been engaged to undertake the civil, structural, mechanical, electrical and piping construction works for those project areas. Based on Salt Lake Potash Limited's anticipated project timing, the majority of this revenue is likely to be realised in FY21.

• Warrawoona Gold Project - $75.0 million preferred tenderer on EPC contract in relation to the design and construction of the process plant and associated infrastructure for the Warrawoona Gold Project. The project is located in the East Pilbara district of the Pilbara Goldfield in Western Australia, 150km south east of Port Hedland and 25km south east of the town of Marble Bar. Work commenced in late 2020.

• Norseman Gold Project - $57.2 million EPC contract - Letter of Intent with Pantoro Limited for the engineering, procurement and construction of a new processing plant for its 50% owned Norseman Gold Project in Western Australia. GR Engineering has commenced ordering of long lead items and has started engineering works.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

DIRECTORS’ REPORT

• Deflector Flotation Tails Leach Project - $23.0 million EPC contract with Silver Lake (Deflector) Pty Ltd, a wholly owned subsidiary of Silver Lake Resources Limited for upgrade works involving the flotation tailings leach process at the Deflector goldcopper operations. The project is located in the southern Murchison region of Western Australia, 450km north of Perth and 160km east of Geraldton. Work commenced in June 2020 and is expected to complete in the second quarter of calendar year 2021.

• Thunderbox Paste Plant Project - $22.0 million EPC contract with Saracen Mineral Holdings Limited which involves the design, supply, installation and commissioning of a new paste backfill plant at its Thunderbox Operations. Work commenced in June 2020 and is expected to complete in the second quarter of calendar year 2021. GR Engineering was also recently awarded a $12.2 million letter of intent (in addition to the above contract amount) with respect to the Thunderbox Stage 1 Project which will involve an upgrade of the crushing circuit.

• Carosue Dam Operations Plant Expansion Project - $32.6 million EPC contract with Saracen Gold Mines Pty Ltd, a subsidiary of Saracen Minerals Holdings Limited, for the engineering design, procurement and construction of expansion works on the mineral processing plant at the Carosue Dam gold operations, situated approximately 120km north-east of Kalgoorlie in Western Australia. GR Engineering was also awarded a variation under the existing contract to install a paste pump at the Karari Paste Plant to distribute paste to the Whirling Dervish underground mine. This work on the variation is currently ongoing.

• Wiluna Gold Operation - $25.7 million EPC contract with Wiluna Mining Corporation for stage 1 works relating to the concentrator development program for its Wiluna Gold Operations located in Western Australia. GR Engineering commenced work in early December with commissioning scheduled for October 2021.

• Nullagine Mill Refurbishment Project - $8.3 million reimbursable cost contract with Millennium Minerals Ltd, a subsidiary of Novo Resources Corp (Novo) associated with the Nullagine Gold Project, located in the Pilbara region of Western Australia. The scope of works includes the refurbishment and upgrade of the gravity circuit and associated facilities to enable operations to recommence.

• San Dimas Silver Mine Project - US$4.5 million EPCM Services Agreement with First Majestic Silver Corp. to supply engineering, procurement and construction management services to its San Dimas Silver Mine in Durango, Mexico. GR Engineering Services Americas, Inc., supported by its wholly owned subsidiary, Hanlon Engineering & Associates Inc., has been engaged to provide EPCM services and commissioning of a new HIG mill circuit and a new autogenous mill to replace the existing crushing and ball mill circuits. Work commenced in January 2020 and is ongoing.

GR Engineering's pipeline of work opportunities includes:

• Abra Base Metals Project - $74.0 million project award from Galena Mining Limited's subsidiary, Abra Mining Pty Ltd, for the supply of a 1.2 Mtpa lead sulphide flotation plant and ancillary infrastructure for the Abra Base Metals Project located in Western Australia. GR Engineering has commenced early engineering works up to an agreed capped amount.

• Woodlark Gold Project - non-binding letter of intent with Geopacific Resources Limited for the proposed construction of a 2.4 Mtpa gold process plant in Papua New Guinea. The signing of an EPC contract remains subject to GR Engineering being issued with a full notice to proceed. GR Engineering has commenced early works up to an agreed capped amount.

• WA Battery Graphite Manufacturing Facility - on 8 February 2021, EcoGraf announced that it had authorised GR Engineering to undertake early works for the detailed engineering design for the construction of its new 20,000tpa battery graphite facility in Western Australia. GR Engineering is now working with EcoGraf to develop and execute the EPC contract.

• Thunderbird Mineral Sands Project - Sheffield Resources Limited (Sheffield) is progressing an update to its bankable feasibility study update and will aim to finalise the project flowsheet and update capital and operating cost estimates. GR Engineering continue to assist Sheffield with this process. Post completion of the bankable feasibility update, Sheffield will commence project development activities. Importantly, Sheffield's proposed JV partner, Yansteel, received Foreign Investment Review Board approval on 15 December 2020 and a JV agreement with Yansteel was signed on 6 January 2021.

During HY21, GR Engineering successfully achieved practical completion on the Sandy Ridge Waste Storage Project and the Carosue Dam Expansion Project (excluding the ongoing variation work). Subsequent to 31 December 2020, GR Engineering achieved practical completion on the Davyhurst Restart Project.

Studies and Consulting

GR Engineering has been engaged on several engineering and consultancy assignments on a range of domestic and international projects with scopes extending to early engineering studies, process design, procurement support and site supervision services associated with new and existing operations.

During HY21, GR Engineering completed 20 project studies and as at 31 December 2020, GRES was engaged on 24 studies. This level of study activity continues to underpin a solid pipeline of design and construction opportunities into FY21 and beyond.

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

DIRECTORS’ REPORT

Oil and Gas Services

GR Engineering’s oil and gas services business, Upstream PS achieved sustained revenue contributions primarily through a combination of operations, maintenance and brownfields projects servicing the coal seam gas services (CSG), liquefied natural gas (LNG), carbon sequestration and onshore and offshore oil and gas sectors throughout Australia.

In Western Australia, Upstream PS remains a leading provider of operations and maintenance services to clients in the Perth Basin, and expanded its presence offshore in the Browse Basin providing operations services to the floating liquefied natural gas sector. In the Northern Territory, Upstream PS continued to provide maintenance services on the Blacktip gas field production facilities (onshore and offshore). Upstream PS' 'Darwin Hub' also continues to operate as a maintenance service and supply base facility servicing tier 1 clients.

During HY20, Upstream PS continued working with the Australian Government to maintain the Northern Endeavour FPSO in a nonproducing state. On 23 December 2020, Upstream PS executed a twelve month contract to 31 December 2021 with the Australian Government to provide operations, maintenance and project services to the Northern Endeavour FPSO and associated infrastructure in preparation for a disconnection and removal of the FPSO. The contract value is approximately $130 million.

In Queensland, Upstream PS managed and executed maintenance and operations support services on over 5,000 CSG wells. In Victoria, Upstream PS continued to deliver services to the carbon sequestration and domestic gas production industries, providing commissioning, operations and maintenance support services and pipeline and surface facility construction.

Safety

The GR Engineering group’s Total Reportable Injury Frequency rate for HY20 was 11.4. Regrettably, one LTI occurred on 19 December 2020. The Company pursues continuous improvement in its commitment to safety, with its primary objective being the achievement of a zero harm workplace environment on all jobs and at all locations.

DIVIDENDS

During the half year period, a final dividend for financial year ended 30 June 2020 was paid. This was an unfranked dividend of 4.0 cents per share, paid on 21 October 2020.

A fully franked dividend of 5.0 cents per share has been declared for the 6 months ended 31 December 2020. The ex-dividend date for the interim dividend is 11 March 2021, the record date for determining entitlements to the interim dividend is 12 March 2021 and the payment date for the interim dividend is 1 April 2021.

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

On 2 February 2021, GR Engineering announced that it had increased its revenue guidance for FY21 to a range of between $340 million to $360 million, with improved EBITDA margins. The previous revenue guidance was in the range of $280 million to $300 million.

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: 22 February 2021

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GR ENGINEERING SERVICES LIMITED HALF-YEAR FINANCIAL REPORT

AUDITOR'S 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 2020

Notes Revenue 3(a) Cost of sales Gross profit Other income 3(b) Finance costs 3(c) Occupancy expenses Administrative expenses Bad and doubtful debt expense Depreciation and amortisation 3(d) Profit (loss) before income tax Income tax expense (credit) Net profit (loss) 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 2020 31 December 2019 $ $ 176,338,713 95,312,855 155,172,693 86,542,032
	21,166,020 8,770,823 2,997,354 1,981,607 169,201 115,626 199,519 205,572 9,976,402 8,404,804 (257,339) 17,400,000 1,448,198 1,322,241
	12,627,393 (16,695,813) 4,096,644 (5,524,865)
	8,530,749 (11,170,948)
	(588,450) 38,802 (136,432) (7,707)
	(724,882) 31,095
	7,805,867 (11,139,853)
	8,530,749 (11,170,948)
	7,805,867 (11,139,853)
	Cents per share Cents per share
	5.54 (7.28)
	5.43 (7.28)

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 2020

Notes ASSETS Current Assets Cash and cash equivalents 4 Trade and other receivables 5 Inventories Other Current tax asset Total Current Assets Non-Current Assets Deferred tax asset Property, plant and equipment Financial assets 11 Intagible assets Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Borrowings Provisions Contract liabilities 6 Total Current Liabilities Non-Current Liabilities Borrowings Provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 7 Reserves Retained earnings TOTAL EQUITY	31 December 30 June 2020 2020 $ $ 52,791,385 37,528,995 53,250,165 38,844,902 23,800 23,800 3,154,230 1,365,359 41,176 34,604
	109,260,756 77,797,660
	2,322,998 4,157,054 6,328,033 6,369,694 1,375,858 5,262,757 3,860,506 4,401,316
	13,887,395 20,190,821
	123,148,151 97,988,481
	57,737,894 44,622,237 6,674,649 4,986,214 8,870,936 9,407,321 9,433,302 1,102,997
	82,716,781 60,118,769
	2,437,905 2,473,753 1,547,289 712,586
	3,985,194 3,186,339
	86,701,975 63,305,108
	36,446,176 34,683,373
	32,141,677 30,594,847 84,620 2,193,268 4,219,879 1,895,258
	36,446,176 34,683,373

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 2020

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 financial assets Net cash flows provided by investing activities Cash flows from financing activities Payment of lease liabilities Dividends paid Repayment of borrowings 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 2020 2019 $ $ 182,912,343 90,490,736 (163,437,054) (95,567,927) (1,767,803) (2,555,245) 48,655 95,711
	17,756,141 (7,536,725)
	(955,848) (357,936) 5,698,898 1,419,060
	4,743,050 1,061,124
	(612,577) (1,065,908) (6,206,128) (3,072,464) (287,336) -
	(7,106,041) (4,138,372)
	15,393,150 (10,613,973) 37,528,995 31,432,874 (130,760) (79,027)
	52,791,385 20,739,874

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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 2020

Balance as at 30 June 2019 Profit for the period Other Comprehensive income for the period Total Comprehensive income for the period Dividends paid Issue of shares Share based payments Balance as at 31 December 2019 Balance as at 30 June 2020 Profit for the period Other Comprehensive income for the period Total Comprehensive income for the period Dividends paid Issue of shares Share based payments Balance as at 31 December 2020	Issued capital Performance Rights Reserve Share Appreciation Rights Reserve Foreign Currency Translation Reserve Investment Revaluation Reserve Retained Earnings Total $ $ $ $ $ $ $
	30,562,886 1,029,128 210,706 (710,315) 324,325 14,998,805 46,415,535
	- - - - - (11,170,948) (11,170,948) - - - (7,707) 38,802 - 31,095
	- - - (7,707) 38,802 (11,170,948) (11,139,853)
	- - - - - (3,072,464) (3,072,464) - - - - - - - - 240,432 40,511 - - - 280,943
	30,562,886 1,269,560 251,217 (718,022) 363,127 755,393 32,484,161
	30,594,847 1,749,055 - (783,634) 1,227,847 1,895,258 34,683,373
	- - - - - 8,530,749 8,530,749 - - - (136,432) (588,450) - (724,882)
	- - - (136,432) (588,450) 8,530,749 7,805,867
	- - - - - (6,206,128) (6,206,128) 1,546,830 (1,546,830) - - - - - - 133,644 29,420 - - - 163,064
	32,141,677 335,869 29,420 (920,066) 639,397 4,219,879 36,446,176

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 2020

1 CORPORATE INFORMATION

The financial report of GR Engineering Services Limited and its subsidiaries for the half year ended 31 December 2020 was authorised for issue in accordance with a resolution of the directors on 17 February 2021.

GR Engineering Services Limited is a limited company incorporated and domiciled in Australia. The registered office of GR Engineering Services Limited is located at 71 Daly Street, Ascot, 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 2020, 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 half year period

The accounting policies adopted in the preparation of the half-year financial report are consistent with those applied in the preparation of the consolidated entity’s annual financial report for the year ended 30 June 2020, except for new standards, amendments to standards and interpretations which became effective on 1 July 2020 as set out below.

In the current half year, the consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) that are relevant to its operations and effective for an accounting period that begins on or after 1 July 2020, which include:

• AASB 2018-6 Amendments to Australian Accounting Standards - Definition of a Business

• AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material

• AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework

• AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform

• AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia

• AASB 2020-4 Amendments to Australian Accounting Standards – COVID-19 Related Rent Concessions

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.

(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 have not been adopted by the consolidated entity for the reporting period ended 31 December 2020. Management are in the process of assessing the impact of the adoption of these Standards and Interpretations on the consolidated entity.

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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 2020

3 REVENUES AND EXPENSES (a) Rendering of services (b) Other income Interest revenue Government rebates and subsidies Profit (loss) on sale of fixed assets Profit on sale of financial assets Net foreign exchange gain/(loss) Sundry revenue (c) Finance costs Interest and leasing charges on leases (d) Depreciation and amortisation Depreciation of fixed assets Depreciation of right of use assets Amortisation of intangible assets (e) Employee benefits expense Wages and salaries Workers’ compensation costs Superannuation costs Share based payments Disaggregation of revenue & time of revenue recognition Rendering of services - mineral processing - over time Rendering of services - oil & gas - at a point in time	31 December 2020 31 December 2019 $ $ 118,262,273 53,886,252 58,076,440 41,426,603
	176,338,713 95,312,855
	48,655 95,711 83,311 53,307 - 24,183 2,901,806 404,060 (182,914) (104,401) 146,496 1,508,747
	2,997,354 1,981,607
	169,201 115,626
	619,365 731,981 739,922 590,260 88,911 -
	1,448,198 1,322,241
	46,039,244 35,022,205 558,080 508,273 3,591,150 2,985,572 163,064 280,943
	50,351,538 38,796,993

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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 2020

4 CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash at bank and in hand Short term deposits	31 December 30 June 2020 2020 $ $ 52,791,385 37,528,995 - -
	52,791,385 37,528,995

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 2020:

Cash at bank and in hand Short-term deposits 5 Trade receivables Less: Loss allowance Other receivables 6 CONTRACT LIABILITIES TRADE AND OTHER RECEIVABLES Contract assets - oil and maintenance contracts Contract assets - mineral processing contracts Contract liabilities - current liabilities	31 December 30 June 2020 2020 $ $ 52,791,385 37,528,995 - -
	52,791,385 37,528,995
	31 December 30 June 2020 2020 $ $ 35,955,777 23,732,802 - (257,339)
	35,955,777 23,475,463
	10,902,786 7,505,584 6,217,301 7,435,308
	17,120,087 14,940,892
	174,301 428,547
	53,250,165 38,844,902
	31 December 30 June 2020 2020 $ $ 9,433,302 1,102,997
	9,433,302 1,102,997

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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 2020

7 ISSUED CAPITAL

Ordinary Shares Issued and fully paid Issue of ordinary shares At 30 June 2020 At 31 December 2020 Bank guarantees Bank guarantees issued Fully paid ordinary shares carry one vote per share and carry a right to dividends. CONTINGENCIES Issue of shares from exercise of performance rights	31 December 30 June 2020 2020 No of shares No of shares
	155,153,189 153,653,189
	No of shares $ 153,653,189 30,594,847 1,500,000 1,546,830
	155,153,189 32,141,677
	31 December 30 June 2020 2020 $ $ 10,796,188 8,985,692

8 CONTINGENCIES

The consolidated entity's standby multi-option bank 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 2020 is $10,364,129 (30 June 2020: $8,553,633). 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 $432,059 (30 June 2020: $432,059). The amount of bank guarantees issued under this facility at 31 December 2020 is $432,059 (30 June 2020: $432,059).

The consolidated entity has a $25 million insurance bond facility with Berkshire Hathaway Specialty Insurance Company and an additional $20 million insurance bond facility with Allianz Australia Insurance Limited. These facilities are utilised to provide retention and off site materials bonds in connection with certain projects. The amount of insurance bonds issued under the Allianz Australia Insurance Limited facility at 31 December 2020 is $2,379,301 (30 June 2020: $2,449,602). No bonds were on issue under the Berkshire Hathaway Specialty Insurance Company facility as at 31 December 2020 (30 June 2020: nil).

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.

9 DIVIDENDS

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

Fully paid ordinary shares Dividend	Cents per share $ Cents per share $ 4.00 6,206,128 2.00 3,072,464 31 December 2020 31 December 2019
	4.00 6,206,128 2.00 3,072,464

A fully franked dividend of 5.0 cents per share has been declared for the six months ended 31 December 2020. The ex dividend date for the interim dividend is 11 March 2021, the record date for determining entitlements to the interim dividend is 12 March 2021 and the payment date for the interim dividend is 1 April 2021.

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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 2020

10 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

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Mineral processing Oil and gas Total revenue Segment profit before tax Mineral processing Oil and gas Total profit (loss) before tax Segment assets Mineral processing Oil and gas Corporate - financial assets Total assets FINANCIAL ASSETS Shares and options in listed entities Financial assets held at fair value through other comprehensive income	31 December 31 December 2020 2019 $ $ 118,262,273 53,886,252 58,076,440 41,426,603
	176,338,713 95,312,855
	31 December 31 December 2020 2019 $ $ 7,085,124 (2,227,806) 5,542,269 (14,468,007)
	12,627,393 (16,695,813)
	31 December 30 June 2020 2020 $ $ 91,631,901 63,841,306 30,140,392 28,884,418 1,375,858 5,262,757
	123,148,151 97,988,481
	31 December 30 June 2020 2020 $ $ 1,375,858 5,262,757

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

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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 2020

12 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 Trade receivables Equity instruments Liabilities Trade payables Bank loan	Carrying amount Fair value Carrying amount Fair value $ $ $ $ 52,791,385 52,791,385 37,528,995 37,528,995 53,250,165 53,250,165 38,844,902 38,844,902 1,375,858 1,375,858 5,262,757 5,262,757 31 December 2020 30 June 2020
	107,417,408 107,417,408 81,636,654 81,636,654
	57,737,894 57,737,894 44,622,237 44,622,237 2,826,483 2,826,483 3,403,713 3,403,713
	60,564,377 60,564,377 48,025,950 48,025,950

The consolidated entity holds equity securities of $1,375,858 (30 June 2020: $5,262,757) 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.

Equity securities are measured at fair value at the end of the reporting period, resulting in gross unrealised gains of $422,071 (31 December 2019: gain of $488,638) included in other comprehensive income and reported in the investment revaluation reserve.

During the period, equity securities were disposed of, resulting in a gain on sale of $2,901,806 recorded in other income.

13 KEY MANAGEMENT PERSONNEL

Remuneration arrangements of key management personnel are disclosed in the annual financial report dated 30 June 2020.

Share appreciation rights

As at 31 December 2020, the consolidated entity had issued a total of 1,474,447 performance rights to Geoff Jones, Managing Director, as part of the consolidated entity's equity incentive plan (as at 30 June 2020: nil).

The share appreciation rights will be subject to vesting conditions, namely the participant being employed by the consolidated entity as Managing Director and the share price being equal to or greater than the exercise price at the vesting date.

				Performance
				condition share
Number of share appreciation rights	Grant date	Vesting date	Exercise price	price targets
610,000	25/11/2020	1/07/2021	$0.75	$1.25
478,432	25/11/2020	1/07/2022	$0.75	$1.39
386,015	25/11/2020	1/07/2023	$0.75	$1.54

14 EVENTS AFTER THE REPORTING DATE

A fully franked dividend of 5.0 cents per share has been declared for the six months ended 31 December 2020. The ex dividend date for the interim dividend is 11 March 2021, the record date for determining entitlements to the interim dividend is 12 March 2021 and the payment date for the interim dividend is 1 April 2021.

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: 22 February 2021

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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

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

GR Engineering Services Limited

Conclusion

We have reviewed the half-year financial report of GR Engineering Services Limited (the “Company”) and its subsidiaries (the “Group”), which comprises the condensed consolidated statement of financial position as at 31 December 2020, and 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 as set out on pages 7 to 17.

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 the Group is not in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the Group’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 the Corporations Regulations 2001 .

Basis for Conclusion

We conducted our review in accordance with ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity . Our responsibilities are further described in the Auditor’s Responsibilities for the Review of the Half-year Financial Report section of our report. We are independent of the Group in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the annual financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s review report.

Directors’ Responsibilities 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 Responsibilities for the Review of the Half-year Financial Report

Our responsibility is to express a conclusion on the half-year financial report based on our review. ASRE 2410 requires us to conclude whether 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 Group’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 .

Liability limited by a scheme approved under Professional Standards Legislation.

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Member of Deloitte Asia Pacific Limited and the Deloitte organisation.

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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.

DELOITTE TOUCHE TOHMATSU

Nicole Menezes Partner Chartered Accountants Perth, 22 February 2021

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