LYCOPODIUM LIMITED — Annual Report 2018

Oct 18, 2018

A N N U A L F I N A N C I A L R E P O R T 2 0 1 8

Contents

		Directors’ Report	1
		Corporate Governance Statement	24
		Financial Report - Consolidated Statement of Proft or Loss and Other Comprehensive Income	31		This fnancial report is the consolidated fnancial report of the group consisting of Lycopodium Limited and its subsidiaries. The fnancial report is presented in
					the Australian currency.
		- Consolidated Balance Sheet	32		Lycopodium Limited is a company
					limited by shares, incorporated and
		- Consolidated Statement of Changes in Equity	33		domiciled in Australia. Its registered ofce and principal place of business
		- Consolidated Statement of Cash Flows	34		is:
					Lycopodium Limited
		- Notes to the Consolidated Financial Statement	35		Level 5, 1 Adelaide Terrace East Perth WA 6004
		Directors’ Declaration	94		A description of the nature of the group’s operations and its principal
					activities is included in the directors’
		Independent Auditor’s Audit Report to the members	95		report on page 1, which is not part of this fnancial report.
					The fnancial report was authorised
		Shareholder Information	99		for issue by the Directors on 20 September 2018. The Directors
		Corporate Directory	101		have the power to amend and reissue the fnancial report.
					Through the use of the internet,
					we have ensured that our corporate
					reporting is timely and complete. All press releases, fnancial reports
					and other information are available
					at our Shareholders’ Centre on our
					website:
					www.lycopodium.com.au

Lycopodium Annual Finanical Report 2018

Directors’ Report

Directors' report

Your Directors present their report on the group consisting of Lycopodium Limited and the entities it controlled at the end of, or during, the year ended 30 June 2018.

Directors

The following persons were Directors of Lycopodium Limited during the whole of the financial year and up to the date of this report:

Michael John Caratti

Peter De Leo Rodney Lloyd Leonard Robert Joseph Osmetti Bruno Ruggiero Peter Anthony Dawson Lawrence William Marshall Steven John Micheil Chadwick

Principal activities

The principal activities of the group during the financial year consisted of engineering consulting in the mining, metallurgical, rail and manufacturing industries. There were no significant changes in the nature of the group's principal activities during the financial year.

Dividends

Dividends paid to members during the financial year were as follows:

Final fully franked dividend for the year ended 30 June 2017 of 9.0 cents (2017: 4.0 cents) per fully paid share paid on 10 October 2017 (2017: 13 October 2016). Interim fully franked dividend for the year ended 30 June 2017 of 12.0 cents (2017: 9.0 cents) per fully paid share paid on 10 April 2018 (2017: 13 April 2017)	2018 $ 2017 $ 3,575,914 1,589,295 4,767,885 3,575,914
	8,343,799 5,165,209

In addition to the above dividends, since the end of the financial year the Directors have recommended the payment of a final fully franked dividend of $7,151,827 (18.0 cents per fully paid share) to be paid on 12 October 2018 out of retained earnings at 30 June 2018 (2017: $3,575,914). This brings the total dividend declared for the year ended 30 June 2018 to 30.0 cents (2017: 18.0 cents).

Review of operations

Lycopodium has had a busy and successful year. Operationally we have delivered five West African gold projects on time, on budget and on specification. Financially we have delivered a good profit result, added to our already strong balance sheet and paid a fully franked dividend of 30 cents per share to shareholders.

Above all else, we have achieved these results while keeping our people safe and healthy.

We continue to be flexible in the form of contract we use to deliver our services. Of the five projects commissioned this financial year, two were delivered under EPC contracts while the remaining three were delivered under EPCM contracts.

EPC

• Mako Project for Toro Gold Ltd (Toro) in Senegal

• Sissingué Project for Perseus Mining Limited (Perseus) in Côte d'Ivoire

EPCM

• Houndé Project for Endeavour Mining Corporation (Endeavour) in Burkina Faso

• Natougou Project for SEMAFO Inc. (SEMAFO) also in Burkina Faso; and

• Fekola Project for B2Gold Corporation (B2Gold) in Mali.

Lycopodium Annual Financial Report 2018 • 1

Directors’ Report (continued)

Review of operations (continued)

Looking forward for the next year we have kicked off two new greenfield gold projects - the Ity Project in Côte d'Ivoire for Perseus and the Waghnion Project for Teranga Gold Corporation in Burkina Faso. We are also completing the Karma Upgrade for Endeavour in Burkina Faso. Subject to market conditions discussed below, our pipeline looks reasonable for 2018/19.

The delivery of major West African gold projects in the past year masks the diversity of our business. As examples of this diversity:

• we have continued to provide EP (Engineering and Procurement) services at the Cobré Panama Project for First Quantum Minerals Ltd (FQM), the largest greenfield copper project in the world.

• we are progressing the Toka Tindung Expansion in North Sulawesi for PT Arci Indonesia.

• we have designed, delivered and are currently commissioning the Final Recovery Plant on the Montepuez Ruby Mine in Mozambique for Gemfields plc.

• we continue to provide a broad range of specialist diamond processing and engineering services to De Beers Group (De Beers) in South Africa, Botswana and Namibia.

• we are jointly preparing the Pre-feasibility Study for the Toliara Minerals Sands Project for Base Minerals Limited in Mozambique.

• we are undertaking studies and delivering projects in battery minerals including graphite, lithium, cobalt and nickel.4

In addition, our infrastructure services continued at a steady rate across the year with a number of material briefs awarded and executed. These included the Stockingbingal to Parkes study package on the Australian Inland Rail Project, study services on the Pipers Flat Coal Unloader for Energy Australia, ongoing professional services as part of the Main Roads of Western Australia Project Management Panel and design services on BHP’s Jimblebar Stretch Assist Project.

In our process industries business we executed the design and construct contract for a Cotton Seed De-linting package in NSW and the EPC work associated with the Mt Piper Air Cannon Project.

This is a broad portfolio of commodities, geographies and sectors within which we operate.

Our staff numbers have reduced modestly over the year reflecting the rise and fall associated with our project delivery activities. It is with great pride that we can report that all our projects and studies are being delivered very well across the business and as always that is a reflection of our great people and teams.

Full Year Results

For the financial year ended 30 June 2018, Lycopodium derived revenues of $194.6 million and a net profit after tax of $18.2 million.

The Directors have resolved to pay a final dividend of 18 cents per share, which is in line with the dividend policy. The total dividend for the year is 30 cents per share fully franked.

2 • Lycopodium Annual Finanical Report 2018

Review of operations (continued) Outlook

General view

The markets within which we operate are in a relatively steady state. We are always adapting to changes in mining legislation, tax structures and security issues in the normal course of our business. Subject to any material impacts associated with trade wars and tariffs on commodities we expect this to continue. In practical terms a steady state translates to a reasonable level of work and opportunity in the market which we expect will translate to reasonable financial returns for the business.

Resources

The gold price this time last year sat at around US$1,310/oz, peaked at over US$1,360/oz and subsequently weakened to US$1,173/oz in mid-August 2018 before rallying to approximately US$1,200/oz in mid-September.

Although this has not had a material effect on our level of activity on gold projects to date, we expect we will see some future delay to near term gold related prospects whilst project owners deal with more arduous routes to project funding.

At time of writing the copper price is also down 10% from this time last year yet the medium to long term outlook for copper sees a production deficit which will exert an upward influence on the price. This has been the general story across many of the commodities with which Lycopodium has historically worked. The result is that whilst there is significant activity in the sector the activity is predominantly in the development phase of the existing project order book. Timeline slippage is being seen in those projects which are at the pre-development and funding phase making predicting project award dates somewhat difficult. Notwithstanding the steady outlook for those more traditional mineral resources we have during the year made significant inroads into the battery metals market having taken on and executed studies and projects in lithium, cobalt, graphite and nickel.

Process Industries

In general we are seeing an increase in engineering services in the chemical processing sector and the water, waste water and waste management sectors, which has offset the decline being experienced in the food and beverage sector and the pharmaceuticals sectors.

Infrastructure

We have seen a steadily improving level of activity within the sectors we service. During the year we have strengthened our position on the east coast of Australia in Rail Infrastructure Management (RIM) services particularly in NSW and have also continued to build our presence in Victoria. We secured a key package on the Inland Rail Project for Australian Rail Track Corporation (ARTC) and a significant multiyear contract with Pacific National Corporation (Pacific National) which should benefit our ability as a business to secure similar future briefs.

Corporate overview

During the course of the year we undertook a thorough strategic planning process involving the full leadership team across our global business. This has culminated in the development of a strategic plan and a series of strategic initiatives to take the business forward.

The outcome of this work can be summarised as:

• Remaining focussed on surety of outcome for our clients, shareholders and staff.

• Enhancing our tradition of innovation in design and innovation in implementation by establishing an innovation centre within the business given the breadth of changes now confronting all of us.

• Pursuing strategies that have the potential to broaden our offering in the market.

All of this delivered from our hubs in Australia, Canada and South Africa supported by our Manila based operation.

Lycopodium Annual Financial Report 2018 • 3

Directors’ Report (continued)

Review of operations (continued)

A key initiative reported last year was the establishment of Mondium Pty Ltd (Mondium). This business is a standalone joint venture company owned by Lycopodium and Monadelphous Ltd, a highly respected engineering and construction company listed on the ASX.

Mondium has been established to service the mineral resources market in Australia and selected other regions by delivering projects on an EPC or Lump Sum Turnkey basis. During the past year Mondium secured a number of EPC briefs and successfully completed its first project at Talison Lithium’s Greenbushes site in Western Australia. This team has continued to build a reputation for delivering quality outcomes and although the number of large EPC opportunities is low we remain highly confident that Mondium will be successful in developing into a significant asset for Lycopodium.

Growing our business, adapting and embracing change, responding to new market conditions - these are challenges to be addressed by Lycopodium’s people. Developing our people so that they, individually, are able to reach their full potential remains at the very core of Lycopodium’s business and culture.

Operational highlights

Resources

We have a world class skill set within our business.

• Gold - we continued building our track record as the preeminent international engineer for gold projects in West Africa

• Copper - we are providing engineering and procurement services on the largest greenfield copper project under construction in the world (Cobre Panama)

• Diamonds - we continue to deliver leading edge diamond process and engineering services to key clients including De Beers.

• Comminution - we provide world-leading comminution circuit modelling, design, commissioning and optimisation services through our wholly owned subsidiary, Orway Mineral Consultants (OMC).

We have worked hard to deliver bespoke solutions for our clients, working with them to resolve problems unique to their own projects and in so doing to increase the probability of project development or alternatively, to de-risk project delivery. The following are a few highlights from the year:

Cobré Panama Project - FQM -Panama

We have been active on this project since 2014. One of the unique features of this project is that FQM has a philosophy of, and a very strong capability in, self-performing and managing project delivery. Holding to these principles for a project of this magnitude (85 Mtpa) is very unusual and a credit to the strength of the FQM organisation. Lycopodium provided the EP component of the process facility and has worked very much hand in glove with FQM throughout the past 4 years. The Cobré Project represents a continuation of a long relationship with FQM that commenced with the KMT Project in 2008 and has now continued across six projects, including Cobré.

Sissingué

In 2015 Lycopodium completed the Feasibility Study, a Mill Option Study and subsequently the Front End Engineering Design (FEED) for the Sissingué Project of Perseus. Lycopodium provided EPC services to deliver the process plant and related project infrastructure. The project involved a standard 1 Mtpa gold plant however was unique in that it was tailored as a fit for purpose design to suit the relatively short term life of mine.

Typical of Lycopodium plants the Sissingué process plant ramped up to nameplate production levels quickly, meeting or exceeding client expectations.

Sissingué is a transformative asset for Perseus, making the company a multi-mine, multi-jurisdiction gold producer. Perseus is now pursuing the development of the larger Yaouré Project in neighbouring Côte d'Ivoire. Lycopodium has been awarded the FEED for this project.

4 • Lycopodium Annual Finanical Report 2018

Review of operations (continued)

Natougou

SEMAFO’s Natougou Project is located 320 km from the capital of Ouagadougou, in the south east of Bukina Faso.

Lycopodium completed a positive Feasibility Study in February 2016 which confirmed the economic viability of an open pit, carbon in pulp project. In May 2016 we were awarded the contracts for the provision of offshore EP (engineering, procurement and project management) services, and onshore CM (field engineering, construction management and commissioning) services for the greenfield process plant and associated facilities.

The process plant concrete works commenced in April 2017, plant construction work was completed in May with the wet commissioning completed in June 2018.

Challenges unique to Natougou included the remoteness of the site being in the far east of Burkina Faso as well as the relative lack of local skilled and semi-skilled labour resources available in support of the construction efforts.

Houndé

In April 2016, Lycopodium was awarded the EPCM contract for the delivery of Endeavour’s 90%-owned Houndé project in Burkina Faso. With an initial capital cost estimated at $328 million, the 3 Mtpa project comprised the delivery of a gold processing plant and associated infrastructure, including a fully integrated owner operated mining fleet.

Having undertaken the detailed feasibility study and participated in project optimisation reviews, we were able to move quickly from study to detailed engineering, with site activities quickly following on.

The project was interesting in that Endeavour self-performed the project infrastructure, while Lycopodium focussed primarily on the processing facility and mine services areas. The project delivery strategy worked well and with the first gold pour occurring in October 2017. Endeavour officially announced to the markets that the mine had been successfully built, ahead of schedule and below budget. Nameplate capacity was achieved within weeks following the introduction of ore into the mill.

Lycopodium’s involvement in the development of this project was a continuation of a successful association with Endeavour across the Nzema Project in Ghana, Agbaou Project in Côte d'Ivoire and Karma Expansion Project in Burkina Faso. This association continues with the current involvement with the Ity Project in Côte d'Ivoire, a project similar in scale to the Houndé Project.

Fekola

This reporting year Lycopodium continued working with B2Gold on the commissioning of the Fekola mine in south western Mali, some 400 km west of the capital Bamako. Overall Lycopodium scope of services included the process design, detailed engineering and design of the new facilities; delivering procurement services for equipment and materials purchases as well as providing a team of engineers who were integrated with B2Gold’s construction and commissioning teams to deliver site technical and scheduling support.

The process plant was originally designed to process nominally 4 Mtpa primary run of mine ore however in 2016 B2Gold announced that, as a result of positive drill results and exploration potential, they had decided to expand throughput at Fekola and proceed with an expansion of the mill. Design factors built into the Optimised Feasibility Study by Lycopodium / B2Gold included 5 Mtpa assumptions for plant design, general infrastructure and tailings dam design and location, thus enabling ore throughput capacity to reach up to 5 Mtpa from the onset of initial production.

Construction of the project started in February 2015 and in November 2017 B2Gold announced that Fekola had achieved commercial production, one month ahead of the revised schedule and four months ahead of the schedule announced in the Optimised Feasibility Study. Production ramp-up to design throughput was achieved on schedule and B2Gold reports that plant operation continues to exceed both throughput and gold recovery nameplate design.

Lycopodium Annual Financial Report 2018 • 5

Directors’ Report (continued)

Review of operations (continued)

Lycopodium’s involvement in the development of this project was a continuation of a successful association with B2Gold following on from previous involvement on their Otjikoto Project in Namibia and Masbate Project in the Philippines. This association continues with the current involvement with the expansion projects / studies for both the Masbate mine and the El Limon mine in Nicaragua.

Mako

In August 2016, we were awarded the EPC contract for the delivery of the Mako Project in eastern Senegal. Mako is the flagship asset of Toro, a private exploration, development and production company focused on West Africa.

The Mako Project is unique in that the deposit comprises a particularly hard and abrasive ore. Following extensive testwork our modelling of the comminution circuit showed that an optimum grind could be achieved on this very hard ore with a single stage SAG mill, an aggressive circuit but one delivering significant capital and operating cost savings to Toro.

Following completion of the pre-feasibility and definitive study phases in 2015 and 2016, Lycopodium successfully delivered the contract scope (treatment plant, mine services area, tailings management facility, river abstraction facility, raw water storage dam, camp and support infrastructure) on an EPC basis. In addition, the project borders a UNESCO listed park so that very high environmental protection standards were implemented in design and construction.

The Mako mine poured its first gold in January 2018, with the project coming in below budget and ahead of schedule. The project has continued to operate at nameplate capacity and design recoveries since commissioning.

XRT Technology Acquisition Project, Venetia Diamond Mines

The Venetia diamond mine, which opened in 1992, is De Beers flagship operation in South Africa. It is the country’s largest diamond producer and yields approximately 40% of South Africa’s annual diamond production.

De Beers is now in the process of developing an underground mining operation at Venetia as it is approaching the depth limit of open-pit operations. The underground mine is expected to commence operation in 2022 and during its lifetime will treat 132 million tonnes of ore containing an estimated 94 million carats. The underground development is expected to extend the life of the mine to 2046.

Lycopodium has been involved in successfully implementing various plant improvement projects at the mine since 2011, specifically in the Reconcentrate Area as well as in the Recovery Plant. We were engaged at the end of 2017 on a cost reimbursable basis to undertake the detail design of an X-Ray Transmission (XRT) facility to be incorporated into the Dense Media Separation concentrate stream, in order to alleviate the bottle-neck that high yielding material creates in the final Recovery Plant. The project is scheduled for completion at the end of 2018.

Aquarium Integrated Sort House, Jwaneng Mine, Botswana

The Jwaneng mine located in Southern Botswana is the richest diamond mine in the world and is owned by Debswana (a partnership between De Beers and the Government of Botswana).

Debswana currently has an old, stand-alone Sorthouse facility located at Jwaneng that is handling concentrate produced from all of the Debswana mines. A decision was made to relocate and integrate this final diamond sorting facility into the existing fully integrated Sorthouse building (located at the mine). The objective of the new Sorthouse facility is to handle up to 50 million carats of diamonds per annum. Debswana engaged Lycopodium, through our local Botswana office, on a cost reimbursable basis to undertake the detailed design of the new Sorthouse. The project is scheduled for completion at the end of 2018.

6 • Lycopodium Annual Finanical Report 2018

Review of operations (continued) Process Industries

Lycopodium’s Process Industries group delivers process design, engineering and project delivery services in specialty areas such as chemicals, pharmaceuticals, food and beverage renewables and water / waste water sectors. Several highlights include:

Denso Bitumen Mixing Facility Upgrade

Denso has recently undertaken the relocation of its manufacturing operations to a new purpose built facility in Campbellfield, Victoria. As part of a relocation to the new facility, Denso took the opportunity to upgrade its bitumen storage and manufacturing capability. Lycopodium assisted Denso with the design and construction of the new production facility including the detail design of the product blending tanks, heating, agitation and product transfer systems. The project was delivered on a greenfield site under a lump sum contract. The project was delivered on schedule with no safety or environmental incidents.

Pfizer Aseptic Manufacturing Facility

Pfizer is the second largest pharmaceuticals company on a global basis. Lycopodium has been providing on-going project engineering support to Pfizer at its Perth Aseptic Manufacturing Facility for several years. The facility manufactures plastic vials (Cytosafe®) containing liquid oncology medicines, and plastic ampoules (Sterisafe®) containing sterile solutions.

Altona Salt Reduction Plant

Lycopodium designed and constructed on a D&C basis a new hydrochloric acid (HCl) dosing system for delivery of HCl liquid to reverse osmosis units at the Altona Salt Reduction Plant of Victorian Government’s City West Water. The project was delivered on a brownfield site under a lump sum contract with no interruption or impact to plant operations. We were responsible for the design of the concrete bund area, new pipe bridge, integration of pipe work and tie-in to the existing plant including installing new pipe work to existing tanker unloading area.

EcoMag Magnesium Salt Recovery Project

Lycopodium was recently awarded a detailed feasibility study for EcoMag Limited based on recycling bitterns generated by sea-salt production to extract high purity magnesium compounds.

Infrastructure

Lycopodium’s Infrastructure group provides services across the general infrastructure, transport (road and rail) and asset management sectors with the following highlights:

Jimblebar Mobile Maintenance Facility

BGC Contracting Pty Ltd (BGC) is one of Australia’s largest private mining and construction contractors and provides mining and construction services across the resources, energy and infrastructure sectors. BGC was engaged to undertake the design and construction of new and refurbished Mobile Maintenance facilities at the Jimblebar Mine, one of the BHP Billiton Limited (BHP) iron ore sites in the Pilbara region of Western Australia, some 40 km east of Newman. The Mobile Maintenance facility upgrade will support expansion of the mine’s fleet capacity. Previously, Lycopodium designed the warehouse and workshop at the Sino Iron Project, which was ultimately constructed by BGC. Recognising the quality of design and support provided on that project, BGC invited Lycopodium to tender and subsequently awarded design services for the Jimblebar project.

Pacific National RIM Services

Pacific National Corporation (Pacific National) is Australia’s largest rail provider, hauling coal, steel, automotive, agricultural, minerals and containerised freight to all mainland states and territories in Australia.

Lycopodium was engaged by Pacific National to provide RIM services, on a 3 year plus 1 year agreement to inspect, certify and manage defects at 62 sites Australia wide. Inspections at these sites commenced in April 2018 requiring substantial prior planning and groundwork.

Lycopodium Annual Financial Report 2018 • 7

Directors’ Report (continued)

Review of operations (continued)

RIM services comprise processes and systems to ensure infrastructure is fit-for-purpose, able to support safe and efficient operations. In addition and most importantly, the service ensures risk is managed in accordance with the requirements of rail safety legislation.

Since commencing, Pacific National has expanded our scope to include derailment investigations, special or ad hoc inspections and geotechnical investigations.

HSE and Community

Lycopodium’s primary focus is on the health and safety of its staff and all personnel working on its projects. We continue to set and achieve a high standard of health and safety across all our projects and given the highly international nature of our activities we have worked proactively to ensure the security, safety and wellbeing of our personnel wherever they may be.

In 2017/18 there were 4.14 million manhours worked across the Lycopodium managed projects with a LTIFR of 0.23 against an 11.5 construction industry average.

On the community side, Lycopodium continued to focus on education as a means of strengthening communities and in line with this remained an active sponsor and supporter of the Clontarf Foundation, a charitable not-for-profit organisation in Australia improving the education, discipline, self-esteem, life skills and employment prospects of young Aboriginal men.

Support was also provided around a key annual event for the Murlpirrmarra Connection, a not-for-profit organisation that exists to provide Aboriginal youth in the remote communities of Wiluna, Leonora and surrounding regions in Western Australia, with educational opportunities.

In terms of industry engagement, Lycopodium became a platinum sponsor of the Australian African Mining and Energy Group the peak body representing Australian companies engaged in the development of Africa’s resource industry.

The Company also continued to provide material support to a number of charitable initiatives championed by staff.

Acknowledgement

The Board of Directors recognises that the Company’s ability to continue delivering world class services to our clients and to maintain and enhance the company’s performance and capability is dependent on the continued commitment and support of our personnel. On behalf of my fellow Directors I take this opportunity to sincerely thank all personnel for their highly valued contribution.

We would also like to thank our clients for their continued trust in Lycopodium to deliver services to their projects and studies. We will as always work hard to maintain these valued relationships.

8 • Lycopodium Annual Finanical Report 2018

Review of operations (continued)

A summary of consolidated revenues and results for the year by significant reporting segments is set out below:

Corporate services Minerals - Asia Pacific Minerals - North America Minerals - Africa Project services - Africa Industrial Process Other Intersegment eliminations Goodwill impairment Total Income tax expense Profit for the year Less: Profit attributable to non-controlling interest Profit attributable to owners of Lycopodium Ltd	Segment revenues Segment results 2018 $ 2017 $ 2018 $ 2017 $ 14,216,665 14,854,323 (378,949) 788,088 117,526,791 137,132,984 18,004,649 9,080,813 17,163,303 21,649,588 1,167,134 (746,232) 32,692,363 41,116,856 1,705,232 984,779 22,382,754 16,834,804 4,559,880 2,784,941 9,840,954 4,179,161 (76,389) (199,343) 24,019,294 21,989,969 1,403,966 1,877,816 (43,273,233) (41,141,243) - - - - (1,095,048) (263,242)	Segment revenues Segment results 2018 $ 2017 $ 2018 $ 2017 $ 14,216,665 14,854,323 (378,949) 788,088 117,526,791 137,132,984 18,004,649 9,080,813 17,163,303 21,649,588 1,167,134 (746,232) 32,692,363 41,116,856 1,705,232 984,779 22,382,754 16,834,804 4,559,880 2,784,941 9,840,954 4,179,161 (76,389) (199,343) 24,019,294 21,989,969 1,403,966 1,877,816 (43,273,233) (41,141,243) - - - - (1,095,048) (263,242)
	194,568,891 216,616,442	25,290,475 14,307,620 (6,957,088) (3,934,091)
		18,333,387 10,373,529 (163,201) (81,446)
		18,170,186 10,292,083

Matters subsequent to the end of the financial year

Since year end the directors have recommended the payment of a final dividend on ordinary shares in respect of the 2018 financial year. The total amount of dividend is $7,151,827 which represents a fully franked dividend of 18.0 cents per fully paid ordinary share.

With the exception of the above, no other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect:

• (a) the group's operations in future financial years, or

• (b) the results of those operations in future financial years, or

• (c) the group's state of affairs in future financial years.

Likely developments and expected results of operations

The group will continue to provide engineering consultancy services as detailed above.

Refer to the Review of Operations section within the Directors' Report for information regarding the likely developments and expected results.

Environmental regulation

The group's operations are not subject to significant environmental regulation under a law of the Commonwealth or of a State or Territory in respect of its consulting activities.

Lycopodium Annual Financial Report 2018 • 9

Directors’ Report (continued)

Information on Directors

Michael John Caratti BE (Elec) (Hons). Non-executive Chairman. Age 68.

Experience and expertise

Former Managing Director of Lycopodium Minerals Pty Ltd, Mr Caratti has over 40 years experience in the mineral processing industry and has had a major role in the development of the group's risk management and quality control programmes. Mr Caratti is a Director of Orway Minerals Consultants (WA) Pty Ltd.

Special responsibilities

Chairman of the Board.

Chairman of the Corporate Governance Committee. Chairman of the Remuneration Committee.

Interests in shares and options

9,104,637 ordinary shares of Lycopodium Limited.

Former directorships in the last 3 years None.

Peter De Leo BE (Civ) CPEng FIEAust. Managing Director. Age 52.

Experience and expertise

Mr De Leo has over 29 years experience in the construction and engineering fields. Mr De Leo is the Managing Director of Lycopodium Limited and a Non-executive Director of Mondium Pty Ltd.

Special responsibilities

Member of the Corporate Governance Committee. Member of the Audit Committee.

Interests in shares and options

1,171,711 ordinary shares of Lycopodium Limited.

Former directorships in the last 3 years None.

Rodney Lloyd Leonard BE (Hons), MSc, MAusIMM. Executive Director. Age 57.

Experience and expertise

Mr Leonard has in excess of 30 years experience in the mineral processing industry and is the Managing Director of Lycopodium Minerals Pty Ltd and a Non-executive Director of ADP Holdings (Pty) Limited.

Special responsibilities

Member of the Corporate Governance Committee. Member of the Audit Committee.

Interests in shares and options

2,154,215 ordinary shares of Lycopodium Limited.

Former directorships in the last 3 years None.

10 • Lycopodium Annual Finanical Report 2018

Information on Directors (continued)

Robert Osmetti BE (Civ), MIEAust, CPEng. Executive Director. Age 62.

Experience and expertise

Mr Osmetti has over 38 years experience in the project management and construction of minerals, oil refining and manufacturing projects. Mr Osmetti is a Director of Lycopodium Minerals Canada Limited and Managing Director of Mondium Pty Ltd.

Special responsibilities

Member of the Corporate Governance Committee.

Interests in shares and options

266,148 ordinary shares of Lycopodium Limited.

Former directorships in the last 3 years

None.

Bruno Ruggiero BE (Mech), Grad Dip Min Sc, Grad Cert Eng Tech, MIEAust. Executive Director. Age 54.

Experience and expertise

Mr Ruggiero has over 30 years experience in the minerals industry. He currently serves as the Technical Director for Lycopodium Minerals having overarching responsibility for the Company’s technical knowledge base, capabilities and direction. Mr Ruggerio is a Director of Lycopodium Minerals Pty Ltd and a Non-executive Director of ECG Engineering Pty Ltd and Quantum Graphite Limited.

Special responsibilities

Member of the Corporate Governance Committee.

Interests in shares and options

3,167,332 ordinary shares in Lycopodium Limited.

Former directorships in the last 3 years None.

Peter Anthony Dawson, BSc (Hons). Executive Director. Age 60.

Experience and expertise

Mr Dawson has 30 years experience in the resources sector, initially in operations and subsequently in corporate roles, including as an executive director of listed public companies and as a Partner in the Corporate Finance division of KPMG. Mr Dawson is a Director of Lycopodium Process Industries, Lycopodium Infrastructure Pty Ltd and a Non-executive Director of ADP Holdings (Pty) Limited.

Special responsibilities

Member of the Corporate Governance Committee.

Interests in shares and options

Nil.

Former directorships in the last 3 years

None.

Lycopodium Annual Financial Report 2018 • 11

Directors’ Report (continued)

Information on Directors (continued)

Lawrence William Marshall B.Bus (Acc) CPA. Non-executive Director. Age 65.

Experience and expertise

Mr Marshall in his role as the former Chief Executive Officer of Lycopodium Limited and with over 40 years experience has played a major role in the development of the group's information, accounting and management and risk management systems.

Special responsibilities

Chairman of the Audit Committee.

Member of the Corporate Governance Committee. Member of the Remuneration Commitee.

Interests in shares and options

1,272,332 ordinary shares of Lycopodium Limited.

Former directorships in the last 3 years

None.

Steven Chadwick BASc (Metallurgy). Non-executive Director. Age 64.

Experience and expertise

Mr Chadwick has over 40 years experience in the mining industry, incorporating technical, operating and management roles, as well as a strong metallurgical background. Mr Chadwick is now a metallurgical consultant specialising in project management with a range of local and international clients. He was a founding Director of BC Iron and a former Managing Director of Coventry Resources, PacMin Mining and Northern Gold. Mr Chadwick is a Non-executive Director of Lycopodium Limited and Quantum Graphite Limited.

Special responsibilities

Member of the Corporate Governance Committee. Member of the Remuneration Commitee.

Former directorships in the last 3 years

Coventry Resources.

Company secretary

The company secretary is Keith John Bakker B.Bus (Acc), FCPA. Age 65.

Keith has in excess of 30 years experience in senior finance and company secretarial roles within the airline, human resource consulting and mining services sectors. He is the Chief Financial Officer of Lycopodium Limited.

12 • Lycopodium Annual Finanical Report 2018

Meetings of Directors

The numbers of meetings of the Company's board of Directors and of each board committee held during the year ended 30 June 2018, and the numbers of meetings attended by each Director were:

	Full meetings of directors	Full meetings of directors	Meetings of non-executive directors	Meetings of non-executive directors	Meetings of committees	Meetings of committees	Meetings of committees	Meetings of committees	Meetings of committees	Meetings of committees
					Audit		Nomination		Remuneration
	A	B	A	B	A	B	A	B	A	B
Michael Caratti Peter De Leo Rodney Leonard Robert Osmetti Bruno Ruggerio Peter Dawson Lawrence Marshall Steven Chadwick	11 11 10 10 10 9 9 11	11 11 11 11 11 9 11 11	- * - -	- - - - - - - -	3 1 3 **	- 3 3 - - - 3 -	- - - - - - - -	- - - - - - - -	2 ** 2 2	2 - - - - - 2 2

A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year

• = Not a non-executive Director

** = Not a member of the relevant committee

Lycopodium Annual Financial Report 2018 • 13

Directors’ Report (continued)

Remuneration report - audited

The Directors are pleased to present your Company's 2018 remuneration report which sets out remuneration information for Lycopodium Limited's non-executive Directors, executive Directors and other key management personnel.

Directors and key management personnel disclosed in this report

Name	Position
Michael Caratti	Chairman,Non-executive Director
Peter De Leo	ManagingDirector
RodneyLeonard	Executive Director
Robert Osmetti	Executive Director
Bruno Ruggiero	Executive Director
Peter Dawson	Executive Director
Lawrence Marshall	Non-executive Director
Steven Chadwick	Non-executive Director
Keith Bakker	CompanySecretary,Chief Financial Officer

Role of the remuneration committee

The remuneration committee is primarily responsible for making recommendations on:

• Remuneration levels of executive Directors and other key management personnel

• The over-arching executive remuneration framework and operation of any incentive plan, and

• Key performance indicators and performance hurdles for the executive team.

The objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the company.

Non-executive Director remuneration policy

Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board to ensure that they are appropriate and in-line with the market.

Non-executive Directors are also paid an hourly rate for ad hoc services, as required.

Non-executive Directors do not receive performance-based pay.

Directors' fees

The current base fees were last reviewed with effect from 1 July 2018. The fees are inclusive of committee fees. Details on Directors fees are disclosed under service agreements on page 17.

Executive remuneration policy and framework

In determining executive remuneration, the Board aims to ensure that remuneration practices are:

• Competitive and reasonable, enabling the company to attract and retain key talent

• Aligned to the company’s strategic and business objectives and the creation of shareholder value

• • Transparent, and

• Acceptable to shareholders.

The executive remuneration framework has three components:

• Fixed annual remuneration, including superannuation, and

• Service bonus, and

• Equity.

14 • Lycopodium Annual Finanical Report 2018

Remuneration report - audited (continued)

Executive remuneration policy and framework (continued)

Fixed annual remuneration is structured as a total employment cost package which is delivered as a combination of salary and prescribed non financial benefits partly at the executive’s discretion. Fixed annual remuneration is reviewed at a minimum annually to ensure the executive’s pay is competitive with the market. An executive’s pay is also reviewed on promotion.

A service or senior management bonus may be provided to certain senior salaried employees payable annually, at the discretion of the company.

Voting and comments made at the company's 2017 Annual General Meeting

The remuneration report for the 2017 financial year was unanimously approved by shareholders during the AGM. The company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.

Company performance

The profit after income tax expense and basic earnings per share for the group for the last five years is as follows:

follows:
	2018	2017	2016	2015	2014
Revenue($)	194,568,891	216,616,442	124,460,218	122,811,332	154,765,985
Profit/(Loss)before income tax($)	25,290,475	14,307,620	5,215,629	(1,620,068)	7,682,592
Income tax expense/(benefit) ($)	6,957,088	3,934,091	1,889,219	(604,655)	3,973,206
Profit/(Loss)after income tax($)	18,333,387	10,373,529	3,326,410	(1,015,413)	3,709,386
Basic EPS(cents)	45.7	25.9	8.0	(2.3)	10.0
Basic EPSgrowth, year onyear(%)	76.4%	223.8%	447.8%	(123.0%)	(82.3%)
Fullyfranked dividendsper share(cents)	30.0	18.0	5.5	1.5	6.5
Change in shareprice *($)	1.50	1.05	0.84	(0.84)	(2.17)
Return on equity (%)	24.68%	15.53%	5.22%	(1.61%)	5.61%

*calculated as the difference between the closing share price at the start and end of the respective financial years.

Lycopodium Annual Financial Report 2018 • 15

Directors’ Report (continued)

Remuneration report - audited (continued)

Details of remuneration

The following tables show details of the remuneration received by the Directors and the key management personnel of the group for the current and previous financial year.

2018 Name Non-executive Directors Michael Caratti Lawrence Marshall Steven Chadwick Sub-total non-executive directors Executive Directors Peter De Leo Rodney Leonard Robert Osmetti Bruno Ruggiero Peter Dawson Other key management personnel Keith Bakker Total key management personnel compensation (group)	Short-term employee benefits Post-em ployment benefits Cash salary and fees Cash bonus Non- monetary benefits Other Super- annuation Total Perfor- mance related $ $ $ $ $ $ % 54,794 - 11,764 - 5,206 71,764 - 94,416 - 11,764 - 25,000 131,180 - 79,200 - - - - 79,200 -
	228,410 - 23,528 - 30,206 282,144 - 500,000 38,750 11,764 - 25,000 575,514 - 425,000 32,500 11,764 - 25,000 494,264 - 305,000 32,500 11,764 - 25,000 374,264 - 381,641 - 11,764 - 25,000 418,405 - 332,410 - 9,235 - 16,657 358,302 - 336,088 - - - 25,000 361,088 -
	2,508,549 103,750 79,819 - 171,863 2,863,981 -

No element of the above remuneration is conditional upon meeting key performance indicators.

2017	Short-term employee	Short-term employee	benefits		Post-em ployment
					benefits
	Cash		Non-				Perfor-
	salary and	Cash	monetary		Super-		mance
Name	fees	bonus*	benefits	Other	annuation	Total	related
	$	$	$	$	$	$	%
Non-executive Directors
Michael Caratti	54,794	-	11,378	-	5,206	71,378	-
Lawrence Marshall	94,470	-	11,378	-	35,000	140,848	-
Steven Chadwick	108,180	-	-	-	-	108,180	-
Sub-total non-executive directors	257,444	-	22,756	-	40,206	320,406	-
Executive Directors
Peter De Leo	493,450	-	11,378	-	35,000	539,828	-
Rodney Leonard	427,700	-	11,378	-	34,000	473,078	-
Robert Osmetti	475,785	-	9,155	5,100	35,000	525,040	-
Bruno Ruggiero	384,278	-	11,378	-	35,000	430,656	-
Other key management personnel
Keith Bakker	317,175	15,000	-	-	35,000	367,175	-
Total key management personnel
compensation (group)	2,355,832	15,000	66,045	5,100	214,206	2,656,183	-
No element of the above remuneration is conditional upon meeting key performance				indicators.

16 • Lycopodium Annual Finanical Report 2018

Remuneration report - audited (continued) Service agreements

Remuneration and other terms of employment for the Directors and key management personnel are formalised in employment contracts. Each contract deals with fixed annual remuneration. Other major provisions of the agreements relating to remuneration are set out below.

All employment contracts with Directors and executives may be terminated by either party with one month’s notice. None of the directors or executives are provided with termination benefits.

Name	Term of agreement	Fixed Remuneration including superannuation*
Michael Caratti, Chairman and Non-executive Director	No fixed term	Directors fee of$75,000p.a.
Peter De Leo, Managing Director	No fixed term	$590,000p.a.
Rodney Leonard, Executive Director	No fixed term	$540,000p.a.
Robert Osmetti, Executive Director	No fixed term	$415,000 p.a. Directors fee of$75,000p.a.
Bruno Ruggiero, Executive Director	No fixed term	$415,000 p.a. Directors fee of$75,000p.a.
Peter Dawson, Executive Director	No fixed term	$415,000 p.a. Directors fee of$75,000p.a.
Lawrence Marshall, Non-executive Director	No fixed term	Fixed hourly rate of $216.15 Directors fee of$75,000p.a.
Steven Chadwick, Non-executive Director	No fixed term	Directors fee of$75,000p.a.
Keith Bakker, Company Secretary and Chief Financial Officer	No fixed term	$370,000p.a.

• Fixed remuneration payable from 1 July 2018 and reviewed annually by the Remuneration Committee.

Lycopodium Annual Financial Report 2018 • 17

Directors’ Report (continued)

Remuneration report - audited (continued) Service agreements (continued)

Equity instrument disclosures relating to key management personnel

The table below shows the number of:

( i ) Shares in the company

that were held during the financial year by key management personnel of the group, including their close family members and entities related to them.

There were no shares granted during the reporting period as compensation.

(i) Share holdings

The numbers of shares in the Company held during the financial year by each Director of Lycopodium Limited and other key management personnel of the group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

			Other
2018	Balance at	Received during	changes	Balance at
	the start of	the year on the	during the	end of the
Name	the year	exercise of options	year	year
Directors of Lycopodium Limited
Ordinary shares
Michael Caratti	9,104,367	-	-	9,104,367
Peter De Leo	1,171,711	-	-	1,171,711
Rodney Leonard	2,354,215	-	(200,000)	2,154,215
Robert Osmetti	1,808,148	-	(1,542,000)	266,148
Bruno Ruggiero	3,167,332	-	-	3,167,332
Peter Dawson	-	-	-	-
Lawrence Marshall	1,942,332	-	(670,000)	1,272,332
Steven Chadwick	-	-	-	-
Other key management personnel of the group
Ordinary shares
Keith Bakker	46,874	-	(6,000)	40,874

18 • Lycopodium Annual Finanical Report 2018

Remuneration report - audited (continued)

Loans to key management personnel

Details of loans made to Directors of Lycopodium Limited and other key management personnel of the group, including their personally related parties, are set out below.

(i) Aggregates for key management personnel

	Balance at	Interest paid		Balance at	Number in
	the start of	and payable	Interest not	end of the	group at the
	the year	for the year	charged	year	end of the
	$	$	$	$	year
2018	40,607	-	-	35,357		1
2017	49,134	-	-	40,607		1

Loans outstanding at the end of the current and prior year include a loan to a key management personnel under the senior manager share acquisition plan.

All other loans to key management personnel are short-term advances in nature and are insignificant.

No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to key management personnel.

End of remuneration report.

Lycopodium Annual Financial Report 2018 • 19

Directors’ Report (continued)

Shares under option

There were no unissued ordinary shares of Lycopodium Limited under option at the date of this report.

Insurance of officers

During the financial year, Lycopodium Limited took out insurance cover for the Directors, secretaries and senior officers of the company and its controlled entities.

The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company.

The directors have not included specific details of the premium paid as such disclosure is prohibited under the terms of the contract.

Indemnity of auditors

Lycopodium Limited has agreed to indemnify their auditors, Grant Thornton Audit Pty Ltd, to the extent permitted by law, against any claim by a third party arising from Lycopodium Limited's breach of their agreement. The indemnity stipulates that Lycopodium Limited will meet the full amount of any such liabilities including a reasonable amount of legal costs.

Proceedings on behalf of the company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001.

20 • Lycopodium Annual Finanical Report 2018

Non-audit services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the group are important.

Details of the amounts paid or payable to the auditor (Grant Thornton Australia Ltd) for audit and non-audit services provided during the year are set out below.

The board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms:

Taxation services Firm related to Grant Thornton Australia Ltd: Tax compliance services (including income tax returns) Network firm of Grant Thornton Australia Ltd: Tax compliance services (including income tax returns) Non-Grant Thornton Australia Ltd audit firms: Tax compliance services (including income tax returns) Total remuneration for taxation services Other services Firm related to Grant Thornton Australia Ltd: Other services Non-Grant Thornton Australia Ltd audit firms: Other services Total remuneration for other services Total remuneration for non-audit services	Consolidated 2018 $ 2017 $ 63,440 32,300 40,529 56,926 15,275 33,951
	119,244 123,177
	39,870 15,183 57,168 24,536
	97,038 39,719
	216,282 162,896

Lycopodium Annual Financial Report 2018 • 21

Directors’ Report (continued)

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 23.

This report is made in accordance with a resolution of Directors.

==> picture [60 x 62] intentionally omitted <==

Peter Anthony Dawson Director

Perth 20 September 2018

22 • Lycopodium Annual Finanical Report 2018

==> picture [489 x 531] intentionally omitted <==

Lycopodium Annual Financial Report 2018 • 23

Corporate Governance Statement

Corporate governance statement

The Board of Directors of Lycopodium Limited is responsible for the overall corporate governance of the company. The Board has implemented the Recommendations of the ASX Corporate Governance Council to the extent considered appropriate for the size and nature of the Company’s current operations.

Lycopodium Limited’s practices are consistent with the ASX Corporate Governance Council’s Principles and Recommendations (3rd Edition) (‘Principles’) with any exceptions noted.

1.0 COUNCIL PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

1.1 Council Recommendation 1.1:

A listed entity should:

• (a) disclose the respective roles and responsibilities of the Board and Management

• (b) disclose those matters expressly reserved to the Board and those delegated to Management.

The Company complies with this recommendation.

1.2 Council Recommendation 1.2:

A listed entity should:

• (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election as a Director

• (b) provide security holders with all material information in its possession relevant to a decision whether or not to elect or re-elect a Director.

The Company complies with this recommendation.

1.3 Council Recommendation 1.3:

A listed entity should have a written agreement with each Director and senior executive setting out the terms of their appointment.

The Company complies with this recommendation.

1.4 Council Recommendation 1.4:

The Company Secretary of a listed entity should be accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board.

The Company complies with this recommendation.

1.5 Council Recommendation 1.5:

A listed entity should:

• (a) have a diversity policy which includes requirements for the Board or a relevant committee of the Board to set measurable objectives for achieving gender diversity and to access annually both the objectives and the entity's progress in achieving them;

• (b) disclose that policy or a summary of it; and

• (c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the Board or a relevant committee of the Board in accordance with the entity's diversity policy and its progress towards achieving them, and either:

• (i) the respective proportions of men and women on the Board, in senior executive positions and across the whole organisation (including how the entity has defined 'senior executive' for these purposes); or

24 • Lycopodium Annual Finanical Report 2018

1.0 COUNCIL PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

(continued)

1.5 Council Recommendation 1.5: (continued)

• (ii) if the entity is a 'relevant employer' under the Workplace Gender Equality Act, the entity's most recent published 'Gender Equality Indicators', as defined in under the Act.

The Company does not comply with recommendation 1.5(a) or 1.5(c)(i). As a global participant, the Company recruits staff from every continent and has an established policy of equal opportunity employment.

1.6 Council Recommendation 1.6:

A listed entity should:

• (a) have and disclose a process for periodically evaluating the performance of the Board, its committees and individual Directors; and

• (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

The Company complies with this recommendation.

1.7 Council Recommendation 1.7:

A listed entity should:

• (a) have and disclose a process for periodically evaluating the performance of its senior executives; and

• (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.

The Company complies with this recommendation.

2.0 COUNCIL PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE

2.1 Council Recommendation 2.1:

The Board of a listed entity should:

• (a) have a nomination committee which:

• (i) has at least 3 members, a majority of which are independent directors; and

• (ii) is chaired by an independent director; and disclose

• (iii) the charter of the committee;

• (iv) the members of the committee; and

• (v) as at the end of each reporting period, the number of times the committee meet throughout the period and the individual attendances of the members at these meetings; or

• (b) if it does not have a nomination committee, disclose the fact and the process it employs to address Board succession issues and to ensure that the Board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.

The Company does not comply with this recommendation. The role of the nomination committee is carried out by the full Board. The Board intends to reconsider the formation of a separate Nomination Committee as the Company's operations evolve.

Lycopodium Annual Financial Report 2018 • 25

Corporate Governance Statement (continued)

2.0 COUNCIL PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE (continued) 2.2 Council Recommendation 2.2:

A listed entity should have and disclose a Board skills matrix setting out the mix of skills and diversity that the Board currently has or is looking to achieve in its membership.

The Company does not comply with this recommendation. The Board considers that each of its current directors possess skills and experience appropriate to managing and developing the Company. Any additional information or specific advice can be more appropriately and economically obtained by engaging independent external expert consultants.

2.3 Council Recommendation 2.3:

A listed entity should disclose:

• (a) the names of directors considered by the Board to be independent directors;

• (b) if a director has an interest, position, association or relationship that might cause doubt about the independence of the director but the Board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the Board is of that opinion; and

(c) the length of service of each director.

The Company complies with this recommendation.

2.4 Council Recommendation 2.4:

A majority of the Board of a listed entity should be independent.

The Company does not comply with this recommendation as only one director is independent. The Board considers that at this time the shareholders are better served by directors who have a vested interest in the Company.

2.5 Council Recommendation 2.5:

The Chair of the Board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.

The Company does not fully comply with this recommendation as the Chairperson is not an independent director. The Board considers that at this stage in the development of the Company, an independent Chairperson would not add sufficient expertise to the Board to justify the associated cost and any additional information or specific advice required can be more appropriately and economically obtained from independent external expert consultants.

2.6 Council Recommendation 2.6:

A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform the role as directors effectively.

The Company complies with this recommendation.

26 • Lycopodium Annual Finanical Report 2018

3.0 COUNCIL PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY

3.1 Council Recommendation 3.1:

A listed entity should:

• (a) have a code of conduct for its directors, senior executives and employees; and

• (b) disclose that code or a summary of it.

The Company complies with this recommendation.

4.0 COUNCIL PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE REPORTING

4.1 Council Recommendation 4.1:

The board of a listed entity should:

• (a) have an audit committee which:

• (i) has at least three members, of all whom are non-executive directors and a majority are independent directors; and

• (ii) is chaired by an independent director, who is not the chair of the Board, and disclose;

• (iii) the charter of the committee;

• (iv) the relevant qualifications and experience of the members of the committee; and

• (v) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at these meetings; or

• (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner.

The Company does not fully comply with this recommendation in that the Audit Committee consists of three directors only one of which is a non-executive and none are independent.

4.2 Council Recommendation 4.2:

The Board of a listed entity should, before it approves the entity's financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

The Company complies with this recommendation.

4.3 Council Recommendation 4.3:

A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.

The Company complies with this recommendation.

Lycopodium Annual Financial Report 2018 • 27

Corporate Governance Statement (continued)

5.0 COUNCIL PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE

5.1 Council Recommendation 5.1:

A listed entity should:

• (a) have a written policy for complying with its continuous disclosure obligations under the listing Rules; and

• (b) disclose that policy or a summary of it.

The Company complies with this recommendation.

6.0 COUNCIL PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS

6.1 Council Recommendation 6.1:

A listed entity should provide information about itself and its governance to investors via its website.

The Company complies with this recommendation.

6.2 Council Recommendation 6.2:

A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors.

The Company complies with this recommendation.

6.3 Council Recommendation 6.3:

A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.

The Company does not currently comply with this recommendation, although the matter will be assessed in the light of what emerges in the market and will be responded to as appropriate.

6.4 Council Recommendation 6.4:

A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically.

The Company complies with this recommendation.

7.0 COUNCIL PRINCIPLE 7: RECOGNISE AND MANAGE RISK

7.1 Council Recommendation 7.1:

The Board of a listed entity should:

• (a) have a committee or committees to oversee risk, each of which:

• (i) has at least 3 members, a majority of whom are independent directors; and

• (ii) is chaired by an independent director, and disclose;

• (iii) the charter of the committee;

• (iv) the members of the committee; and

• (v) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

• (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity's risk management framework.

The Company complies with (b) of this recommendation.

28 • Lycopodium Annual Finanical Report 2018

7.0 COUNCIL PRINCIPLE 7: RECOGNISE AND MANAGE RISK (continued) 7.1 Council Recommendation 7.1: (continued)

The Board considers risk management as one of its primary responsibilities. The Board has adopted a Risk Management Policy, which provides that:

• All members of the Board are responsible for risk management and oversight of internal controls. The day to day responsibilities for risk management and internal controls rest with the Managing Director.

• The Managing Director reports on risk management and internal controls, using an exception reporting basis, to the full Board as part of a monthly written report to directors.

The Company has an internal control framework covering all areas of identified risk within the Company’s operations and has documented these policies in order to centralise the controls and intends that the Risk Management Policy will be enhanced as its operations evolve. The areas of risk covered by the internal control framework are tenders / proposals, client contract negotiation and management, financial control and reporting, commercial / corporate control and reporting, operational control and reporting, personnel management, procurement and purchasing and supplier contract negotiation and management.

7.2 Council Recommendation 7.2:

The Board or a committee of the Board should:

• (a) Review the entity's risk management framework at least annually to satisfy itself that it continues to be sound; and

• (b) Disclose, in relation to each reporting, whether such a review has taken place.

The Company complies with this recommendation.

7.3 Council Recommendation 7.3:

A listed entity should disclose:

• (a) if it has an internal audit function, how the function is structured and what role it performs; or

• (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes.

The Company complies with (b) of this recommendation.

7.4 Council Recommendation 7.4:

A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages or intends to manage these risks.

The Company is of the view that it is not materially exposed to the risks outlined in this recommendation.

8.0 COUNCIL PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY

8.1 Council Recommendation 8.1:

The Board of a listed entity should:

• (a) have a remuneration committee which:

• (i) has at least three members, a majority of whom are independent directors; and

• (ii) is chaired by an independent director, and disclose;

• (iii) the charter of the committee;

• (iv) the members of the committee; and

• (v) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or

Lycopodium Annual Financial Report 2018 • 29

Corporate Governance Statement (continued)

8.0 COUNCIL PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY (continued)

8.1 Council Recommendation 8.1: (continued)

(b) if it does not have a remuneration committee, disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.

The Company does not fully comply with this recommendation as the Remuneration Committee does not have a majority of independent directors nor is it chaired by an independent director. The role of the Remuneration Committee is carried out by the full Board.

The Company has a remuneration committee charter which is published on its website. Statistics regarding participation at remuneration committee meetings are published in each Annual Report.

8.2 Council Recommendation 8.2:

A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives.

The Company complies with this recommendation.

8.3 Council Recommendation 8.3:

A listed entity which has an equity based remuneration scheme should:

(a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and

(b) disclose that policy or a summary of it.

This recommendation does not apply as the Company has not entered into any scheme which enables participants to hedge or otherwise limit the economic risk of participation without prior disclosure and the approval of security holders at a general meeting.

30 • Lycopodium Annual Finanical Report 2018

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2018

		Consolidated	Consolidated
		2018	2017
	Notes	$	$
Revenue from operations	5	194,568,891	216,616,442
Employee benefits expense		(67,562,580)	(61,898,213)
Depreciation and amortisation expense	6	(1,228,479)	(1,171,764)
Project expenses		(17,418,251)	(9,843,966)
Equipment and materials		(23,838,936)	(74,207,912)
Contractors		(41,753,703)	(38,255,322)
Occupancy expense		(8,577,494)	(8,052,368)
Impairment of goodwill	16	(1,095,048)	(263,242)
Other expenses		(8,793,785)	(9,540,001)
Loss on disposal of asset		(2,080)	(1,634)
Finance costs	6	(120,741)	(93,651)
Share of net profit of associates and joint ventures accounted for using
the equity method		1,112,681	1,019,251
Profit before income tax		25,290,475	14,307,620
Income tax expense	7	(6,957,088)	(3,934,091)
Profit for the year		18,333,387	10,373,529
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets	22(a)	325,511	7
Exchange gains/(losses) on translation of foreign operations	22(a)	(26,508)	111,932
Other comprehensive income for the year, net of tax		299,003	111,939
Total comprehensive income for the year		18,632,390	10,485,468
Profit for the year is attributable to:
Owners of Lycopodium Limited		18,170,186	10,292,083
Non-controlling interests		163,201	81,446
		18,333,387	10,373,529
Total comprehensive income for the year is attributable to:
Owners of Lycopodium Limited		18,469,189	10,404,022
Non-controlling interests		163,201	81,446
		18,632,390	10,485,468
		Cents	Cents
Earnings per share for profit attributable to the ordinary equity
holders of the Company:
Basic earnings per share	32(a)	45.7	25.9
Diluted earnings per share	32(b)	45.7	25.9

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

Lycopodium Annual Financial Report 2018 • 31

Consolidated Balance Sheet

As at 30 June 2018

Notes ASSETS Current assets Cash and cash equivalents 8 Trade and other receivables 9 Inventories Current tax receivables Other current assets 10 Derivative financial assets 11(c) Total current assets Non-current assets Investments accounted for using the equity method 13 Available-for-sale financial assets 11(b) Property, plant and equipment 14 Intangible assets 16 Other receivables 12 Deferred tax assets 15 Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables 17 Borrowings 11(d) Derivative financial liabilities 11(c) Current tax liabilities Provisions 18 Total current liabilities Non-current liabilities Borrowings 11(d) Provisions 20 Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity 21 Reserves 22(a) Retained earnings 22(b) Parent entity interest Non-controlling interests 23 Total equity	Consolidated 2018 $ 2017 $ 74,287,788 85,334,768 37,616,637 36,919,288 819,844 327,430 1,334,151 1,344,040 1,740,851 2,149,687 - 164,994
	115,799,271 126,240,207
	2,767,690 2,227,735 1,256,106 102,963 3,434,487 3,174,174 6,792,017 7,421,173 332,356 442,616 8,350,798 3,797,930
	22,933,454 17,166,591
	138,732,725 143,406,798
	31,749,229 64,080,966 696,905 509,731 27,694 - 9,568,881 3,978,266 16,361,009 4,280,795
	58,403,718 72,849,758
	562,066 832,912 416,531 500,796
	978,597 1,333,708
	59,382,315 74,183,466
	79,350,410 69,223,332
	20,823,772 20,823,772 (689,039) (988,042) 56,238,757 46,412,369
	76,373,490 66,248,099 2,976,920 2,975,233
	79,350,410 69,223,332

The above consolidated balance sheet should be read in conjunction with the accompanying notes.

32 • Lycopodium Annual Finanical Report 2018

Consolidated Statement of Changes in Equity For the year ended 30 June 2018

Attributable to members of Lycopodium Limited

					Available
				Foreign	for sale
				currency	investment	Performance	Non-
		Contributed	Retained	translation	revaluation	rights	controlling	Total
		equity	earnings	reserve	reserve	reserve	interests	equity
Consolidated	Notes	$	$	$	$	$	$	$
Balance at 1 July 2016		20,823,772	41,285,494	(1,016,051)	(83,930)	259,037	3,062,695	64,331,017
Proft for the year		-	10,292,083	-	-	-	81,446	10,373,529
Other comprehensive income / (expense)		-	-	111,932	7	-	-	111,939
Total comprehensive income for the year		-	10,292,083	111,932	7	-	81,446	10,485,468
Transactions with owners in
their capacity as owners:
Foreign currency translation with non-controlling interest	23	-	-	111,932	7	-	(168,908)	(168,908)
Dividends provided for or paid	24	-	(5,165,208)	-	-	-	-	(5,165,208)
Performance rights - expired	22	-	-	-	-	(259,037)	-	(259,037)
		-	(5,165,208)	-	-	(259,037)	(168,908)	(5,593,153)
Balance at 30 June 2017		20,823,772	46,412,369	(904,119)	(83,923)	-	2,975,233	69,223,332
Balance at 1 July 2017		20,823,772	46,412,369	(904,119)	(83,923)	-	2,975,233	69,223,332
Proft for the year		-	18,170,186	-	-	-	163,201	18,333,387
Other comprehensive income / (expense)		-	-	(26,508)	325,511	-	-	299,003
Total comprehensive income for the year		-	18,170,186	(26,508)	325,511	-	163,201	18,632,390
Transactions with owners in
their capacity as owners:
Foreign currency translation with non-controlling interest	23	-	-	-	-	-	(161,514)	(161,514)
Dividends provided for or paid	24	-	(8,343,798)	-	-	-	-	(8,343,798)
		-	(8,343,798)	-	-	-	(161,514)	(8,505,312)
Balance at 30 June 2018		20,823,772	56,238,757	(930,627)	241,588	-	2,976,920	79,350,410

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

Lycopodium Annual Financial Report 2018 • 33

Consolidated Statement of Cash Flows

For the year ended 30 June 2018

Notes Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Income taxes paid Net cash (outflow)/inflow from operating activities 31 Cash flows from investing activities Dividends received from joint ventures and associate Payments for property, plant and equipment 14 Proceeds from sale of property, plant and equipment Payments for intangible assets 16 Proceeds from sale of available-for-sale financial assets Payment for available-for-sale financial assets 11(b) Net cash (outflow)/ from investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Repayments of hire purchase and lease liabilities Loans advanced to joint venture Repayment of loans from associate Dividends paid to company's shareholders Proceeds from repayment of loans under the senior manager share acquisition plan Net cash outflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of financial year 8	Consolidated 2018 $ 2017 $ 170,346,647 237,498,193 (168,124,948) (187,908,401)
	2,221,699 49,589,792 1,847,145 1,557,922 (5,909,452) (1,814,985)
	(1,840,608) 49,332,729
	572,726 560,267 (1,053,110) (335,812) 20,240 6,311 (631,529) (50,116) 1,187,036 - (75,000) -
	20,363 180,650
	1,274,258 1,231,311 (1,203,222) (1,229,832) (504,329) (227,765) (884,000) (336,000) 387,500 - (8,343,798) (5,165,208) 110,261 79,282
	(9,163,330) (5,648,212)
	(10,983,575) 43,865,167 85,334,768 41,547,756 (63,405) (78,155)
	74,287,788 85,334,768

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

34 • Lycopodium Annual Finanical Report 2018

Notes to the Consolidated Financial Statements

30 June 2018

Contents of the notes to the consolidated financial statements

		Page
1	Summary of significant accounting policies	36
2	Financial risk management	51
3	Critical accounting estimates and judgements	55
4	Segment information	56
5	Revenue	60
6	Expenses	61
7	Income tax expense	62
8	Current assets - Cash and cash equivalents	64
9	Current assets - Trade and other receivables	64
10	Current assets - Other current assets	66
11	Financial assets and liabilities	66
12	Non-current assets - Other receivables	69
13	Non-current assets - Investments accounted for using the equity method	70
14	Non-current assets - Property, plant and equipment	73
15	Non-current assets - Deferred tax assets	74
16	Non-current assets - Intangible assets	75
17	Current liabilities - Trade and other payables	78
18	Current liabilities - Provisions	79
19	Non-current liabilities - Deferred tax liabilities	80
20	Non-current liabilities - Provisions	80
21	Contributed equity	81
22	Reserves and retained earnings	82
23	Non-controlling interests	83
24	Dividends	84
25	Remuneration of auditors	85
26	Contingencies	86
27	Commitments	86
28	Related party transactions	88
29	Subsidiaries	90
30	Events occurring after the reporting period	90
31	Reconciliation of profit after income tax to net cash inflow from operating activities	91
32	Earnings per share	91
33	Share-based payments	92
34	Parent entity financial information	93

Lycopodium Annual Financial Report 2018 • 35

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of this consolidated financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report comprises the financial statements for the group consisting of Lycopodium Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 . Lycopodium Limited is a for-profit entity for the purpose of preparing the financial report.

(i) Compliance with IFRS

The consolidated financial report of the Lycopodium Limited group complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

(ii) New and amended standards adopted by the group

There were no new or amended standards issued by the Australian Accounting Standards Board that were material to the Group and need be disclosed in this financial report. All standards applicable for the period were therefore adopted with no material impact on the Group.

(iii) Early adoption of standards

The group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2017.

(iv) Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and financial assets at fair value through profit and loss.

(v) Critical accounting estimates

The preparation of financial report requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial report, are disclosed in note 3.

36 • Lycopodium Annual Finanical Report 2018

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation

(i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the group (refer to note 1(h)).

Intercompany transactions, balances and unrealised gains on transactions between companies in the group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated balance sheet, respectively.

(ii) Employee Share Trust

The group has formed a trust to administer the group's employee share scheme. This trust is consolidated, as the substance of the relationship is that the trust is controlled by the group.

(iii) Joint arrangements

Under AASB 11 Joint Arrangement investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than legal structure of the joint arrangement. Lycopodium Limited has a joint venture arrangement.

Joint ventures

Interest in joint ventures are accounted for using the equity method (see (v) below), after initially being recognised at cost in the consolidated balance sheet.

(iv) Associates

Associates are all entities over which the group has significant influence but not control or joint control. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see (v) below), after initially being recognised at cost.

(v) Equity method

Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group's share of the post-acquisition profits or losses of the investee in profit or loss, and the group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

When the group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.

Lycopodium Annual Financial Report 2018 • 37

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

1 Summary of significant accounting policies (continued)

(b) Principles of consolidation (continued)

(v) Equity method (continued)

Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group's interest in these entities. Unrealised losses are also eliminated unless the transactions provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group.

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributed to owners of Lycopodium Limited.

(vi) Changes in ownership interests

When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

(c) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial report of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial report are presented in Australian dollars, which is Lycopodium Limited's functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss.

Translation differences on financial assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other comprehensive income.

(iii) Consolidated entities

The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

38 • Lycopodium Annual Finanical Report 2018

1 Summary of significant accounting policies (continued)

(d) Foreign currency translation (continued)

(iii) Consolidated entities (continued)

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet

• income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and

• all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign operations, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, associated exchange differences are recognised in the profit and loss, as part of the gain or loss on sale where applicable.

(e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group's activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

(i) Rendering of services

Revenue from consulting services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised under the percentage of completion method, based on the actual service provided as a proportion of the total services to be provided.

If circumstances arise that may change the original estimates of revenues, costs or extent of progress toward completion, estimates are revised. These revisions may result in increases or decreases in estimated revenues or costs and are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

(ii) Rental revenue

Rental revenue is accounted for on a straight-line basis over the lease term as this matches the profile of the manner in which rental is earned. Contingent rental income is recognised as income in the periods in which it is earned.

(iii) Interest income

Interest income is recognised using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

(iv) Dividends

Dividends are recognised as revenue when the right to receive payment is established.

Lycopodium Annual Financial Report 2018 • 39

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

1 Summary of significant accounting policies (continued)

(f) Income tax

The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial report. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Lycopodium Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation effective 1 July 2013. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial report.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(g) Leases

Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases (note 27). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

40 • Lycopodium Annual Finanical Report 2018

1 Summary of significant accounting policies (continued)

(h) Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition-date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.

The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

(i) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

(j) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

(k) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.

Lycopodium Annual Financial Report 2018 • 41

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

1 Summary of significant accounting policies (continued)

(k) Trade receivables (continued)

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the profit and loss within ‘administration and management costs’. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against 'administration and management costs' in the profit and loss.

(l) Inventories

Contract work in progress

Contract work in progress is stated at the aggregate of contract costs incurred to date plus recognised profits less recognised losses and progress billings. If there are contracts where progress billings exceed the aggregate costs incurred plus profits less losses, the net amount is presented under other liabilities.

Contract costs include all costs directly related to specific contracts, costs that are specifically chargeable to the customer under the terms of the contract and an allocation of overhead expenses incurred in connection with the group's contract activities in general.

(m) Investments and other financial assets

Classification

The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit and loss are financial assets held-for-trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held-for-trading unless they are designated as hedges. Assets in this category are classified as current assets.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.

(iii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long-term.

42 • Lycopodium Annual Finanical Report 2018

1 Summary of significant accounting policies (continued)

(m) Investments and other financial assets (continued)

Financial assets - reclassification

The group may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if the group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.

Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively.

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date - the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains and losses from investment securities.

Measurement

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in profit or loss within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss as part of revenue from continuing operations when the group's right to receive payments is established. Interest income from these financial assets is included in the net gains/(losses).

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income.

Details on how the fair value of financial instruments is determined are disclosed in note 2.

Lycopodium Annual Financial Report 2018 • 43

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

1 Summary of significant accounting policies (continued)

(m) Investments and other financial assets (continued)

Impairment

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

(i) Assets carried at amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument's fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

Impairment testing of trade receivables is described in note 1(k).

(ii) Assets classified as available-for-sale

If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss.

Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.

If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.

(n) Derivatives financial instruments

The Group enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risk. Further details of derivative financial instruments are disclosed in Note 11(c).

Derivatives are initially recognised at fair value at the date of the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which even the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

(o) Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

44 • Lycopodium Annual Finanical Report 2018

1 Summary of significant accounting policies (continued)

(o) Property, plant and equipment (continued)

Depreciation on plant and equipment is calculated using the straight line or diminishing value method to allocate their cost, net of their residual values, over their estimated useful lives, as follows:

-	Plant and equipment	3 - 10 years
-	Vehicles	5 - 7 years
-	Furniture, fittings and equipment	3 - 8 years
-	Leasehold improvements	3 - 6 years
-	Leased plant and equipment	3 - 5 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(i)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit and loss.

(p) Intangible assets

(i) Goodwill

Goodwill is measured as described in note 1(h). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4).

(ii) Customer contracts

Customer contracts acquired as part of a business combination are recognised separately from goodwill. The customer contracts are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated based on the timing of projected cash flows of the contracts over their estimated useful lives, which currently vary from 1 to 5 years.

(iii) Software

Intangible assets also comprise capitalised computer software. Computer software has a finite useful life and is carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of the computer software over their estimated useful lives, being 3 years.

(q) Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

(r) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

Lycopodium Annual Financial Report 2018 • 45

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

1 Summary of significant accounting policies (continued)

(r) Borrowings (continued)

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(s) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(t) Provisions

Provisions for legal claims, service warranties and make good obligations are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.

(u) Employee benefits

(i) Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits expected to be settled wholly within 12 months after the end of the period in which the employees render the related services are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. All other short-term employee benefit obligations are presented as payables.

(ii) Other long-term employee benefits obligations

The liability for long service leave and annual leave which is not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service is therefore recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high quality corporate bonds with terms and currency that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.

The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur.

46 • Lycopodium Annual Finanical Report 2018

1 Summary of significant accounting policies (continued)

(u) Employee benefits (continued)

(iii) Retirement benefit obligations

Contributions to defined contribution funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iv) Share-based payments

Share-based compensation benefits are provided to certain executive directors and other designated employees via the Performance Rights Plans. Information relating to this scheme is set out in note 33.

The fair value of rights granted under the Performance Rights Plans are recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Binomial Tree option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

(v) Senior manager share acquisition plan

The senior manager share acquisition plan was approved at the company's Annual General Meeting on 24 November 2009. The aim of the plan was to allow the Board to assist managers, who in the Board's opinion have demonstrated the qualities and dedication to become the next generation of senior managers, to take up a significant shareholding so as to ensure their commitment and the future of the company.

Eligible Senior Managers include both full-time senior managers and executive directors of the group or such other persons as the Board determines.

A broad outline of the plan is summarised below:

• The company will loan funds to participating Senior Managers to purchase Lycopodium Limited shares via the Lycopodium Share Plan Trust.

• The loan will be a limited recourse loan provided the Senior Manager stays with the group for greater than 3 years.

• The loan will be interest free if the Senior Manager remains employed by the group for greater than 3 years.

• In the event that the Senior Manager leaves within 3 years, interest will be charged equal to the market rate of interest that would have accrued on the loan from the date of advance of the funds to the repayment date.

• During the term of the loan, dividends will be offset against the outstanding loan balance.

• The shares are allocated to the Senior Managers at a 1 cent discount to the volume weighted average of the prices at which the shares of Lycopodium Limited were traded on the ASX during the one week period up to and including the date of allocation.

The group has the following as the result of this transaction:

Share based payment

The difference between the value of the shares purchased and the value of the shares allocated to the senior managers represents the cost to the company for providing the loan to the employees. This amount is expensed in the profit and loss.

Lycopodium Annual Financial Report 2018 • 47

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

1 Summary of significant accounting policies (continued)

(u) Employee benefits (continued)

(v) Senior manager share acquisition plan (continued)

Embedded derivative

The senior manager loan receivable is a loan with an embedded derivative with the senior manager having an option to put back the share to the group in full settlement of the loan after the 3 year period. As the embedded derivative is closely related to the senior manager loan, the financial instrument is measured at fair value through profit or loss.

(v) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(w) Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

(x) Earnings per share

(i) Basic earnings per share Basic earnings per share is calculated by dividing:

• the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares

• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:

• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(y) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

48 • Lycopodium Annual Finanical Report 2018

1 Summary of significant accounting policies (continued)

(z) New accounting standards not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods. The group's assessment of the impact of these new standards and interpretations is set out below.

(i) AASB 9 Financial Instruments

AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139.

The effective date is for annual reporting periods beginning on or after 1 January 2018.

The company has performed its detailed assessment. When this standard is first adopted for the year ending 30 June 2019, there will be no material impact on the transactions and balances recognised in the financial statements.

(ii) AASB 15 Revenue from Contracts with Customers

AASB 15 replaces AASB 118: Revenue, AASB 111 Construction Contracts and some revenue-related Interpretations. In summary, AASB 15:

• establishes a new revenue recognition model;

• changes the basis for deciding whether revenue is to be recognised over time at a point in time;

• provides a new and more detailed guidance on specific topics (eg multiple element arrangements, variable pricing, rights of return and warranties); and

• expands and improves disclosures about revenue.

The company has performed its detailed assessment. When this standard is first adopted for the year ending 30 June 2019, there will be no material impact on the transactions and balances recognised in the financial statements.

(iii) AASB 16 Leases

AASB 16 replaces AASB 117 Leases and some lease-related Interpretations. In summary, AASB 16:

• requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset leases;

• provides new guidance on the application of the definition of lease and on sale and lease back accounting;

• largely retains the existing lessor accounting requirements in AASB 117; and

• requires new and different disclosures about leases.

Based on the entity’s preliminary assessment, the likely impact on the first time adoption of the Standard for the year ending 30 June 2020 includes:

• a significant increase in lease assets and financial liabilities recognised on the balance sheet;

• the reported equity will reduce as the carrying amount of lease assets will reduce more quickly than the carrying amount of lease liabilities;

• EBIT in the statement of profit or loss and other comprehensive income will be higher as the implicit interest in lease payments for former off balance sheet leases will be presented as part of finance costs rather than being included in operating expenses;

Lycopodium Annual Financial Report 2018 • 49

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

1 Summary of significant accounting policies (continued)

(z) New accounting standards not yet effective (continued)

(iii) (continued)

• operating cash outflows will be lower and financing cash flows will be higher in the statement of cash flows as principal repayments on all lease liabilities will now be included in financing activities rather than operating activities. Interest can also be included within financing activities.

(aa)Parent entity financial information

The financial information for the parent entity, Lycopodium Limited, disclosed in note 34 has been prepared on the same basis as the consolidated financial report, except as set out below.

(i) Investments in subsidiaries, associates and joint venture entities

Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial report of Lycopodium Limited. Dividends received from associates are recognised in the parent entity's profit or loss, rather than being deducted from the carrying amount of these investments.

(ii) Share based payments

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

50 • Lycopodium Annual Finanical Report 2018

2 Financial risk management

The group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the group's financial risk management policy. The objective of the policy is to support the delivery of the group's financial targets whilst protecting future financial security.

The main risks arising from the group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rates and foreign exchange. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk, and liquidity risk is monitored through the development of future rolling cash flow forecasts.

The primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified above.

(a) Market risk

(i) Foreign exchange risk

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar (USD) and Philippine Peso (PHP). Exchange rate exposures are managed with approved policy parameters utilising forward exchange contracts.

Foreign exchange risk arises when future commercial transactions and recognised financial assets and financial liabilities are denominated in a currency that is not the entity’s functional currency.

The group's exposure to foreign currency risk at the reporting period, expressed in Australian dollar, was as follows:

Cash and cash equivalents Trade and other receivables Other current assets Trade and other payables Net exposure	30 June 2018 30 June 2017 USD $ PHP $ USD $ PHP $ 4,340,880 197,520 26,491,471 203,126 - 35,411 - 32,356 - 623,895 - 184,017 (2,660,357) (207,859) (10,621,049) (161,669)
	1,680,523 648,967 15,870,422 257,830

Group sensitivity

Based on the financial instruments held at 30 June 2018, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, the group's post-tax profit and equity for the year would have been $168,052 higher/$168,052 lower (2017: $1,587,042 higher/$1,587,042 lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table. Profit is less sensitive to movements in the Australian dollar/US dollar exchange rates in 2018 than 2017 because of the lower amount of US dollar denominated cash and cash equivalents.

Based on the financial instruments held at 30 June 2018, had the Australian dollar weakened/strengthened by 10% against the Philippine Peso with all other variables held constant, the group's post-tax profit and equity for the year would have been $64,897 higher/$64,897 lower (2017: $25,783 higher/$25,783 lower), mainly as a result of foreign exchange gains/losses on translation of Philippine Peso denominated financial instruments as detailed in the above table. Profit is more sensitive to movements in the Australian dollar/Philippine Peso exchange rates in 2018 than 2017 mainly because of the higher amount of Philippine Peso denominated cash and cash equivalents.

Lycopodium Annual Financial Report 2018 • 51

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

2 Financial risk management (continued)

(a) Market risk (continued)

(i) Foreign exchange risk (continued)

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk.

(ii) Price risk The group is exposed to equity securities price risk with the exposure, however, being minimal. Equity securities price risk arises from investments in equity securities. The equity investments are publicly traded on the Australian Securities Exchange ("ASX"). The price risk for the listed securities is immaterial in terms of a possible impact on profit and loss or total equity and as such a sensitivity analysis has not been completed. The group does not have a risk management policy surrounding price risk in place as the Board considers the risk minimal.

(iii) Interest rate risk

The group is exposed to interest rate risk arising mainly from borrowings and cash balances held. The risk is considered minimal as the group's borrowings are minimal. The group does not enter into any specific swaps or hedges to cover any interest rate volatility and does not have a risk management policy surrounding cash flow and interest rate risk as the Board considers these risks to be minimal.

Group sensitivity

At 30 June 2018, if interest rates had changed by -/+50 basis points from the year end rates with all other variables held constant, post-tax profit and equity for the year would have been $259,482 lower/higher (2017: -/+50 basis points: $298,419 lower/higher), as a result of lower/higher interest income from cash and cash equivalents.

(b) Credit risk

Credit risk arises from the financial assets of the group, which comprise cash and cash equivalents, trade and other receivables and other current assets. The group's exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Other receivables comprises of the loan under the senior management share acquisition plan. The group is not exposed to credit risk as the loan is secured under the terms of the loan (note 1(u)).

52 • Lycopodium Annual Finanical Report 2018

2 Financial risk management (continued)

(b) Credit risk (continued)

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

credit risk at the reporting date was:
Cash and cash equivalents Trade and other receivables Deposits held with banks (note 10)	Consolidated 2018 $ 2017 $ 74,287,788 85,334,768 37,616,637 36,919,288 778,401 569,742
	112,682,826 122,823,798

Cash and cash equivalents

The credit risk on cash and cash equivalents is limited because the group's primary bank is rated AA- by an international credit-rating agency.

Trade and other receivables

The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the group's policy to securitise its trade and other receivables. All receivables at balance date that are neither past due nor impaired comply with the group's policy on credit quality.

It is the group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation.

In addition, receivable balances are monitored on an ongoing basis with the result that the group's exposure to bad debts is minimised.

There are no significant concentrations of credit risk within the group. The group minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a number of customers that operate predominantly in the mining and extractive industry sector including the major players in the industry and the junior/emerging players. There are multiple contracts with our significant customers, across a number of their subsidiaries, divisions within those subsidiaries and locations.

Deposits held with banks

The credit risk on deposits held with banks are limited as they comprise deposits held with banks with high credit ratings assigned by international credit-rating agencies.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. The group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Lycopodium Annual Financial Report 2018 • 53

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

2 Financial risk management (continued)

(c) Liquidity risk (continued)

Financing arrangements

The group had access to the following undrawn borrowing facilities at the reporting date:

Leasing facility Standby credit facility Insurance bonds	Consolidated 2018 $ 2017 $ 1,523,000 1,850,000 10,784,328 11,658 14,119,239 3,238,479
	26,426,567 5,100,137

Maturities of financial liabilities

The following tables detail the group's remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group can be required to pay. The table includes both interest and principal cash flows.

Consolidated - At 30 June 2018 Non-derivatives Trade payables Insurance premium funding Finance lease liabilities Total Consolidated - At 30 June 2017 Non-derivatives Trade payables Insurance premium funding Finance lease liabilities Total	1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Total contrac- tual cash flows Carrying amount liabilities $ $ $ $ $ $ - - - - - 12,980,390 218,689 - - - 218,689 218,689 526,584 516,251 69,693 - 1,112,528 1,040,282
	745,273 516,251 69,693 - 1,331,217 14,239,361
	1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Total contrac- tual cash flows $ Carrying amount liabilities $ 23,401,728 - - - 23,401,728 23,401,728 121,247 - - - 121,247 121,247 450,053 450,053 439,719 - 1,339,825 1,221,396
	23,973,028 450,053 439,719 - 24,862,800 24,744,371

54 • Lycopodium Annual Finanical Report 2018

2 Financial risk management (continued)

(c) Liquidity risk (continued)

In assessing and managing liquidity risks of its derivative financial instruments the Group considers both contractual inflows and outflows. The contractual cash flows of the Group’s derivative financial assets and liabilities are all current (within 12 months).

Derivative financial instruments reflect forward exchange contracts (see Note 11(c)) that will be settled on a gross basis.

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Impairment testing of goodwill

The group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(i). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions. Refer to note 16 for details of these assumptions and the potential impact of changes to the assumptions.

(ii) Service and equipment warranties

In accordance with the accounting policy stated in note 1(t), the group has recognised warranty provisions at the end of the financial year in respect of potential claims for rectification work on some of its EPC contracts. Refer to note 18 in relation to the service warranty provisions provided at period end. The amounts provided takes into account the percentage completion of the project, forecast to complete costs plus any close-out obligations and potential contractual liabilities during the warranty period.

(iii) Fixed-price contracts

The group uses the percentage of completion method in accounting for its revenue from fixed-sum contracts. The stage of completion is measured by reference to the contract costs incurred to date compared to the estimated total costs for the contract.

Significant assumptions are required to estimate the total contract costs and the recoverable variations work that will affect the stage of completion and the contract revenue respectively. In making these estimates, the group has relied on past experience and best available information.

Lycopodium Annual Financial Report 2018 • 55

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

4 Segment information

(a) Description of segments

Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.

The Board considers the business from both a product and geographic perspective and has identified nine operating segments of which four (2017: four) are reportable in accordance with the requirements of AASB 8.

The Corporate Services segment consists of managerial and legal services provided to the group in addition to strategic investment holdings.

The Minerals segment consists of engineering and related services provided to the extractive mining industry. The clients, including junior exploration companies and major multinational producers, are developing projects for a wide range of commodities. These projects range in scope from large greenfield projects involving process plant and equipment, civil, building works, control systems, services and infrastructure to small skid-mounted pilot plants.

The Process Industries segment consists of engineering and related services provided to the manufacturing and renewable energy facilities throughout Australia and South East Asia.

The Project Services - Africa segment consists of project management. construction management and commissioning services provided to the extractive mining industry in Africa.

All other operating segments are not reportable operating segments, as they fall under the quantitative thresholds of AASB 8. The results of these operations are included in the 'Other' column.

The remaining operating segments that are not reportable consists of:

Infrastructure: asset management, engineering, architectural and project delivery services to a wide range of private and public clients across Australia. Metallurgical: metallurgical consulting providing a range of services to the mineral processing community, primarily in the field of comminution, hydrometallurgy and mineralprocessing design. Project Services Asia: provision of drafting services to offshore Lycopodium entities.

(b) Segment information provided to the Board of Directors

The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2018 and 30 June 2017 are as follows:

56 • Lycopodium Annual Finanical Report 2018

4 Segment information (continued)

(b) Segment information provided to the Board of Directors (continued)

2018										Project
	~~Corporat~~ Services	~~e~~		M		inerals					~~Services -~~ Africa	~~Ind~~ Pro	~~strial~~ cess		Other		Total
				Asia Pacifc		North America		Africa
Total segment revenue Inter-segment revenue Revenue from external customers Proft / (Loss) before tax Interest in the proft of equity accounted joint ventures Depreciation and amortisation Income tax beneft / (expense) Total segment assets Total assets includes: Investment in joint	$ 14,216,66 (13,580,95	5 1) 4 9) 7 3 8 3 1		$ ~~117526791~~	1 (	$ 7,~~163,303~~ 6,777,315) 0,385,988 1,167,134 - 70,962 (302,819) 9,446,818 -	$ ~~163303~~	$ ~~32,692,3~~6 32,692,36	3 -		$ ~~22382754~~	~~9,~~84 (33	$ 0,~~954~~ 4,146) 6,808 6,389) - 9,249 2,701) 8,600 -	~~954~~	$ ~~24,019,29~~4 (9,255,700	) )	$ ~~237,842,124~~ (43,273,233)
				~~,,~~			~~,~~				~~,,~~
				(4,659,510)							(8,665,611)
	635,71			112,867,281 18,004,649 416,194	1				3		13,717,143	9,50			14,763,594		194,568,891
	(378,94							1,705,23	2		4,559,880	(7			1,403,966		26,385,523
	696,48 15 443,25 22,478,19							219,81 (776,59 17,106,36	- 8 8) 3		-	5 (5 5,11			- 160,166 (172,728 11,782,914		1,112,681 1,228,479 (6,957,088) 138,697,608
				716,478 (4,916,146) 65,123,623 1,274,049							1,653 (1,179,354) 7,641,097 -
	1,493,64	1							-						-		2,767,690
ventures Additions to non-current assets (other than fnancial assets and deferred tax) Total segment liabilities	- 1,502,239			864,816 39,225,091	129,863 5,982,709			256,563 5,876,314			- 5,772,947	142,493 2,753,378			543,909 4,308,836		1,937,644 65,421,514

Lycopodium Annual Financial Report 2018 • 57

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

4 Segment information (continued)

(b) Segment information provided to the Board of Directors (continued)

2017	Corporate Services	Minerals	Minerals	Minerals		Project Services - Africa	Industrial Process	Other	Total
		Asia Pacifc	North America	Africa
Total segment revenue Inter-segment revenue Revenue from external customers Proft / (Loss) before tax Interest in the proft of equity accounted joint ventures Depreciation and amortisation Income tax beneft / (expense) Total segment assets Total assets includes: Investment in joint ventures Additions to non-current assets (other than fnancial assets and deferred tax) Total segment liabilities	$ 14,854,323 (14,741,676) 112,647 788,088 927,295 153 711,881 22,748,913 1,369,880 - 3,749,923	$ 137,132,984 (3,427,752)	$ 21,649,588 (7,614,681) 14,034,907	$ 41,116,856 (114,273)		$ 16,834,804 (5,316,980)	$ 4,179,161 (353,497) 3,825,664 (199,343) - 31,048 59,258 4,082,881 - 1,398 1,588,570	$ 21,989,969 (9,572,384)	$ 257,757,685 (41,141,243)
		133,705,232 9,080,813 91,956 593,629 (2,910,830) 66,636,322 857,855 1,482,555 49,142,644		41,002,583 984,779 - 309,152 (650,065) 17,556,315 - 58,764 6,374,583		11,517,824 2,784,941 - 3,831 (402,807) 14,545,417 - - 11,501,412		12,417,585 1,877,816 - 157,876 (822,144) 10,070,508 - 205,939 3,386,944	216,616,442
			(746,232)						14,570,862
			- 76,075 80,616 4,725,219 - 16,935 2,461,174						1,019,251 1,171,764 (3,934,091) 140,365,575
									2,227,735 1,765,591 78,205,250

58 • Lycopodium Annual Finanical Report 2018

4 Segment information (continued)

(c) Other segment information

(i) Segment revenue

Sales between segments are carried out at arm's length and are eliminated on consolidation. The revenue from external parties reported to the board of Directors is measured in a manner consistent with that in the consolidated statement of profit or loss and other comprehensive income.

The entity is domiciled in Australia. The result of its revenue from external customers in Australia is $59,271,697 (2017: $24,016,675), and the total of revenue from external customers from other countries is $135,297,193 (2017: $192,599,767). Segment revenues are allocated based on the country in which the customer is located.

Revenues of approximately $70,186,213 (2017: $91,090,536) are derived from the top 3 customers. These revenues are attributable to the Minerals segment.

(ii) Segment profit before tax

The board of Directors assesses the performance of the operating segments based on a measure of adjusted profit before tax.

A reconciliation of segment profit before tax to the profit before tax in the consolidated statement of profit or loss and other comprehensive income is provided as follows:

Segment profit before tax Goodwill impairment Profit before income tax as per statement of comprehensive income	Consolidated 2018 $ 2017 $ 26,385,523 14,570,862 (1,095,048) (263,242)
	25,290,475 14,307,620

(iii) Segment assets

The amounts provided to the board of Directors with respect to total assets are measured in a manner consistent with that of the financial report. These assets are allocated based on the operations of the segment and the physical location of the asset.

Reportable segments' assets are reconciled to total assets as follows:

physical location of the asset. Reportable segments' assets are reconciled to total assets as follows:
Segment assets Intersegment eliminations Intangibles arising on consolidation Total assets as per the consolidated balance sheet	Consolidated 2018 $ 2017 $ 138,697,608 140,365,575 (6,091,111) (4,180,052) 6,126,228 7,221,276
	138,732,725 143,406,799

The total of non-current assets other than financial instruments and deferred tax assets in Australia is $13,303,765 (2017: $9,968,180), and other countries is $1,278,891 (2017: $3,400,482).

Lycopodium Annual Financial Report 2018 • 59

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

4 Segment information (continued)

(c) Other segment information (continued)

(iv) Segment liabilities

The amounts provided to the board of Directors with respect to total liabilities are measured in a manner consistent with that of the financial report. These liabilities are allocated based on the operations of the segment.

Reportable segments' liabilities are reconciled to total liabilities as follows:

Segment liabilities Intersegment eliminations Total liabilities as per the consolidated balance sheet 5 Revenue From operations Sales revenue Contract revenue Other revenue Rents and sub-lease rentals Bank interest Other revenue Total revenue from operations	Consolidated 2018 $ 2017 $ 65,421,514 78,205,250 (6,039,199) (4,021,783)
	59,382,315 74,183,467
	Consolidated 2018 $ 2017 $ 192,016,864 214,817,550 68,888 59,803 1,883,705 1,639,559 599,434 99,530
	2,552,027 1,798,892
	194,568,891 216,616,442

5 Revenue

Total revenue from operations

60 • Lycopodium Annual Finanical Report 2018

6 Expenses

Profit before income tax includes the following specific expenses: Depreciation Fixtures and fittings Leasehold improvements Leased plant and equipment Motor vehicles Total depreciation Amortisation Computer software Total depreciation and amortisation Finance costs Interest and finance charges paid/payable Net foreign exchange (gains)/losses Net loss on disposal of property, plant and equipment Rental expense relating to operating leases Minimum lease payments Defined contribution superannuation expense	Consolidated 2018 $ 2017 $ 528,652 649,407 52,830 60,331 454,110 160,172 9,956 18,826
	1,045,548 888,736
	182,931 283,028
	1,228,479 1,171,764
	120,741 93,651 (543,812) 433,067 2,080 1,634 8,577,494 8,052,368 2,791,804 2,604,288

Lycopodium Annual Financial Report 2018 • 61

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

7 Income tax expense

(a) Income tax expense

(a) Income tax expense
	Consolidated
	2018	2017
	$	$
Current tax	11,841,388	4,879,361
Deferred tax	(4,533,986)	(1,184,980)
Adjustments for current tax of prior periods	(350,314)	239,710
	6,957,088	3,934,091
Deferred income tax expense/(benefit) included in income tax expense
comprises:
Increase in deferred tax assets (note 15)	(4,345,535)	(1,464,815)
(Decrease)/increase in deferred tax liabilities (note 19)	(188,451)	279,835
	(4,533,986)	(1,184,980)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
	Consolidated
	2018	2017
	$	$
Profit before income tax expense	25,290,475	14,307,620
Tax at the Australian tax rate of 30% (2017: 30%)	7,587,143	4,292,286
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Goodwill impairment	328,514	78,973
Sundry items	191,858	278,688
	8,107,515	4,649,947
Adjustments for current tax of prior periods - under/(over) provision of prior year
income tax	(350,314)	239,710
Difference in overseas tax rates	(567,357)	(267,374)
Previously unrecognised tax losses now recouped to reduce current tax expense	-	(466,812)
Deferred taxes not recognised	101,048	84,395
Share of net profit of joint ventures accounted for using the equity method	(333,804)	(305,775)
Total income tax expense/(benefit)	6,957,088	3,934,091

(b) Numerical reconciliation of income tax expense to prima facie tax payable

62 • Lycopodium Annual Finanical Report 2018

7 Income tax expense (continued)

(c) Amounts recognised directly in equity

Consolidated 2018 2017 $ $ Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity: Current tax - debited directly to equity 139,505 3

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity:

(d) Tax consolidation

The company and its 100% owned Australian entities formed a tax consolidated group on 1 July 2013. Members of the consolidated group have entered into a tax sharing agreement in order to allocate income tax expense to the wholly owned Australian entities on a pro-rata basis. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At balance date, the possibility of default is remote. The head entity of the tax consolidated group is Lycopodium Limited.

Tax effect accounting by members of the tax consolidated group

Members of the tax consolidated group have entered into a tax funding agreement effective from 1 July 2013. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group. Deferred taxes are allocated to members of the tax consolidated group in accordance with the group allocation approach, which is consistent with the principles of AASB 112 Income Taxes.

The allocation of taxes under the tax funding agreement is recognised as an increase/(decrease) in the member entities’ intercompany accounts with the tax consolidated group head company, Lycopodium Limited. In this regard, the company has assumed the benefit of tax losses from the member entities as of the balance date. The nature of the tax funding agreement is such that no tax consolidated contributions by or distributions to participant's equity are required.

Lycopodium Annual Financial Report 2018 • 63

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

8 Current assets - Cash and cash equivalents

Cash at bank and in hand

Consolidated	Consolidated
2018	2017
$	$
74,287,788	85,334,768

(a) Risk exposure

The group's exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.

9 Current assets - Trade and other receivables

Trade receivables Allowance for impairment of receivables (a) GST and other receivables Cash advanced to employees Loan to associates	Consolidated 2018 $ 2017 $ 32,933,663 36,833,250 (877,744) (2,342,738)
	32,055,919 34,490,512
	4,305,390 1,593,490 35,328 62,420 1,220,000 772,866
	5,560,718 2,428,776
	37,616,637 36,919,288

(a) Impaired trade receivables

As at 30 June 2018, current trade receivables of the group with the value of $877,743 (2017: $2,342,738) were impaired, with the amounts being fully provided for.

The ageing of these receivables are as follows:

61 to 90 days 91 to 120 days 121 to 210 days 211 days or over	Consolidated 2018 $ 2017 $ - 43,475 - 207,520 - 381,674 877,743 1,710,069
	877,743 2,342,738

64 • Lycopodium Annual Finanical Report 2018

9 Current assets - Trade and other receivables (continued)

(a) Impaired trade receivables (continued)

Movements in the provision for impairment of receivables are as follows:

At 1 July Provision for impairment recognised during the year Receivables written off during the year as uncollectable Unused amounts reversed Exchange difference At 30 June	Consolidated 2018 $ 2017 $ 2,342,737 859,424 65,567 1,527,262 (546,798) (288,079) (988,877) 244,625 5,114 (495)
	877,743 2,342,737

The other classes within trade and other receivables do not contain impaired assets.

(b) Past due but not impaired

As of 30 June 2018, trade receivables of $9,118,811 (2017: $6,634,696) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

31 to 60 days 61 to 90 days 91 to 120 days 121 to 210 days 211 days and over	Consolidated 2018 $ 2017 $ 3,109,089 4,236,362 4,325,781 503,733 540,835 1,183,188 671,938 330,939 471,168 380,474
	9,118,811 6,634,696

(c) Risk exposure

Information about the group's exposure to foreign exchange risk and interest rate risk is provided in note 2.

(d) Fair value and credit risk

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. The group does not hold any collateral as security. Refer to note 2 for more information on the risk management policy of the group.

Lycopodium Annual Financial Report 2018 • 65

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

10 Current assets - Other current assets

10 Current assets - Other current assets
Other current assets (a) Prepayments	Consolidated 2018 $ 2017 $ 778,401 569,742 962,450 1,579,945
	1,740,851 2,149,687

(a) Other current assets

Other current assets consist of deposits held with licensed banks as security/bond on the various properties leased by the group.

11 Financial assets and liabilities

(a) Categories of financial assets and liabilities

Note 1(m) provides a description of each category of financial assets and liabilities and the related accounting policies. The carrying amounts of financial assets and liabilities in each category are as follows:

Financial assets Consolidated - At 30 June 2018 Note Cash and cash equivalents 8 Trade and other receivables 9 Deposits held with banks 10 Available-for-sale financial assets 11(b) Other Receivables 12 Consolidated - At 30 June 2017 Cash and cash equivalents 8 Trade and other receivables 9 Deposits held with banks 10 Derivative financial assets Available-for-sale financial assets 11(b) Other Receivables 12	Available for sale $ Derivatives used for hedging $ Loans and receivables at amortised cost $ Total $ - - 74,287,788 74,287,788 - - 37,616,637 37,616,637 - - 778,401 778,401 1,256,106 - - 1,256,106 - - 332,356 332,356
	1,256,106 - 113,015,182 114,271,288
	- - 85,334,769 85,334,769 - - 36,919,288 36,919,288 - - 569,742 569,742 - 164,994 - 164,994 102,963 - - 102,963 - - 442,616 442,616
	102,963 164,994 123,266,415 123,534,372

66 • Lycopodium Annual Finanical Report 2018

11 Financial assets and liabilities (continued)

(a) Categories of financial assets and liabilities (continued)

Financial liabilities Consolidated - At 30 June 2018 Note Trade and other payables Borrowings 11(d) Derivative financial liabilities Consolidated - At 30 June 2017 Trade and other payables Borrowings 11(d)	Liabilities at fair value through profit or loss $ Derivatives used for hedging $ Liabilities at amortised cost $ Total $ - - 12,980,393 12,980,393 - - 1,258,971 1,258,971 - 27,694 - 27,694
	- 27,694 14,239,364 14,267,058
	- - 23,401,725 23,401,725 - - 1,342,643 1,342,643
	- - 24,744,368 24,744,368

A description of the Group’s financial instrument risks, including risk management objectives and policies is given in Note 2.

The methods used to measure financial assets and liabilities reported at fair value are described in Note 2.

(b) Available for sale financial assets

The details and carrying amounts of AFS financial assets are as follows:

Balance at the beginning of the year Revaluation gain transferred to equity Sale of available-for-sale financial assets Shares received in lieu of payment of services Purchases of available-for-sale financial assets Balance at end of year	Consolidated 2018 $ 2017 $ 102,963 102,953 465,015 10 (265,747) - 878,875 - 75,000 -
	1,256,106 102,963

Lycopodium Annual Financial Report 2018 • 67

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

11 Financial assets and liabilities (continued)

(c) Derivative financial instruments

The Group’s derivative financial instruments are measured at fair value and are summarised below:

Current assets Other hedging instruments Total current derivative financial instrument assets Current liabilities Other hedging instruments Total current derivative financial instrument liabilities	Consolidated 2018 $ 2017 $ - 164,994
	- 164,994
	27,694 -
	27,694 -
	(27,694) 164,994

The Group uses forward foreign exchange contracts to mitigate exchange rate exposure arising predominantly from forecast sales in US dollars. All forward exchange contracts are considered by management to be part of economic hedge arrangements but have not been formally designated. The Group’s US-dollar forward contracts relate to cash flows that have been forecasted for July 2018 to December 2018. All forecast transactions are expected to occur.

During 2018 a loss of $483,288 (2017: loss of $257,091) was recognised in profit and loss as a result of fair-valuing the derivative instrument at year end.

(d) Borrowings

Borrowings include the following financial liabilities:

Carrying amount at amortised costs: Secured Lease liabilities Total secured borrowings Unsecured Other loans Total unsecured borrowings Total borrowings	Consolidated 2018 2017 Current $ Non- current $ Total $ Current $ Non- current $ Total $ 478,216 562,066 1,040,282 388,484 832,912 1,221,396
	478,216 562,066 1,040,282 388,484 832,912 1,221,396
	218,689 - 218,689 121,247 - 121,247
	218,689 - 218,689 121,247 - 121,247
	696,905 562,066 1,258,971 509,731 832,912 1,342,643

All borrowings are denominated in AUD.

Bank borrowings are secured by plant and equipment owned by the Group. Current interest rates are variable and average 5.57% (2017: 7.22%). The carrying amount of bank borrowings is considered to be a reasonable approximation of fair value.

68 • Lycopodium Annual Finanical Report 2018

11 Financial assets and liabilities (continued)

(e) Fair value measurement

Financial assets and liabilities measured at fair value in the Balance Sheet are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

• Level 3: unobservable inputs for the asset or liability.

The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 30 June 2018 and 30 June 2017.

Consolidated - At 30 June 2018 Financial assets / (liabilities) Listed Securities Foreign currency forward contracts Net fair value Consolidated - At 30 June 2017 Financial assets / (liabilities) Listed Securities Foreign currency forward contracts Net fair value	Level 1 Level 2 Level 3 Total $ $ $ $ 1,256,106 - - 1,256,106 - (27,694) - (27,694)
	1,256,106 (27,694) - 1,228,412
	Level 1 Level 2 Level 3 Total $ $ $ $ 102,963 - - 102,963 - 164,994 - 164,994
	102,963 164,994 - 267,957

There were no transfers between Level 1 and Level 2 in 2018 and 2017.

Measurement of fair value of financial instruments

The Group’s finance team performs valuations of financial items for financial reporting purposes, in consultation with third party valuation specialists for complex valuations, where required. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The financial team reports directly to the Chief Financial Officer and to the audit committee.

The valuation techniques used for instruments categorised in Level 2 are described below:

Foreign currency forward contracts (Level 2)

The Group’s foreign currency forward contracts are not traded in active markets. These have been fair valued using observable forward exchange rates and interest rates corresponding to the maturity of the contract. The effects of non-observable inputs are not significant for foreign currency forward contracts.

12 Non-current assets - Other receivables

		Consolidated	Consolidated
		2018	2017
	Notes	$	$
Loans under senior management share acquisition plan	33(a)	332,356	442,616
(a) Impaired receivables and receivables past due
None of the non-current receivables are impaired or past due but not impaired.

Lycopodium Annual Financial Report 2018 • 69

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

13 Non-current assets - Investments accounted for using the equity method

Investment in joint ventures Investment in associates	Consolidated 2018 $ 2017 $ 1,274,049 857,856 1,493,641 1,369,879
	2,767,690 2,227,735

(a) Investment in joint ventures

The group has one material joint venture, Pilbara EPCM Pty Ltd ("PEPL").

Name of Joint Venture Country of Incorporation & Principal Place of Business Principal Activities	Proportion of Ownership Interest Held by the Group	Proportion of Ownership Interest Held by the Group
	2018	2017
Pilbara EPCM Pty Ltd Australia Engineering, procurement, construction management services	50%	50%

The investment in PEPL is accounted for using the equity method in accordance with AASB 128.

Summarised financial information for PEPL is set out below:

Current assets (a) Non-current assets Total assets Current liabilities (b) Non-current liabilities (c) Total liabilities a. Includes cash and cash equivalents b. Includes current financial liabilities (excluding trade and other payables and provisions) c. Includes non-current financial liabilities (excluding trade and other payables and provisions)	2018 2017 $ $ 2,636,218 2,661,470 - -
	2,636,218 2,661,470
	65,125 333,855 - 611,908
	65,125 945,763
	2,636,218 2,653,672 - - - -

70 • Lycopodium Annual Finanical Report 2018

13 Non-current assets - Investments accounted for using the equity method (continued)

(continued)
Revenue Profit for the year Depreciation and amortisation Interest income Interest expense Tax expense	2018 2017 $ $ 37,428 1,605,130
	23,001 183,912
	- - 37,428 30,973 - - - 66,784

A reconciliation of the above summarised financial information to the carrying amount of the investment in PEPL is set out below:

	2018	2017
	$	$
Total net assets of PEPL	2,548,098	1,715,707
Proportion of ownership interest held by the Group	50%	50%
Carrying amount of the investment in PEPL	1,274,049	857,856

No dividends were received during the year from PEPL (2017: $250,000).

PEPL is a Private Company; therefore no quoted market prices are available for its shares. The investment is currently in the process of being wound-up.

In 2017, Lycopodium (40%) and Monadelphous Group Ltd (60%) formed an incorporated joint venture, Mondium Pty Ltd ("Mondium").

Mondium's purpose is to target and deliver engineering, procurement and construction (EPC) projects in the minerals processing sector, domestically and within selected international markets.

Mondium is a private company, with no quoted market prices available for its shares. The investment is currently carried at a nil value (2017: Nil).

Lycopodium Annual Financial Report 2018 • 71

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

13 Non-current assets - Investments accounted for using the equity method (continued)

(b) Investment in associates

The Group has one material investment in associate, ECG Engineering Pty Ltd, an electrical engineering consultancy based in Perth, Australia.

Name of Joint Venture Country of Incorporation & Principal Place of Business Principal Activities	Proportion of Ownership Interest Held by the Group	Proportion of Ownership Interest Held by the Group
	2018	2017
ECG Engineering Pty Ltd Australia Electrical engineering	31%	31%

Summarised financial information of the Group's share in the associates:

Profit from continuing operations Other comprehensive income Total comprehensive income Carrying amount of the Group's interest in associates	2018 2017 $ $ 696,487 927,295 - -
	696,487 927,295
	. 1,493,641 1,369,879

72 • Lycopodium Annual Finanical Report 2018

14 Non-current assets - Property, plant and equipment

At 1 July 2016 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2017 Opening net book amount Additions Disposal Depreciation charge Transfers to intangible assets Exchange differences Closing net book amount At 30 June 2017 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2018 Opening net book amount Additions Disposal Depreciation charge Exchange differences Closing net book amount At 30 June 2018 Cost Accumulated depreciation Net book amount	Fixtures and fittings $ Motor vehicles $ Leasehold improvements $ Leased plant and equipment $ Total $ 6,798,763 212,142 783,485 - 7,794,390 (5,035,009) (143,096) (272,489) - (5,450,594)
	1,763,754 69,046 510,996 - 2,343,796
	1,763,754 69,046 510,996 - 2,343,796 297,450 - 38,362 1,379,663 1,715,475 (4,180) (4,904) - - (9,084) (649,407) (18,826) (60,331) (160,172) (888,736) (9,650) - - - (9,650) 29,477 1,800 (8,904) - 22,373
	1,427,444 47,116 480,123 1,219,491 3,174,174
	6,935,104 186,962 798,331 1,379,663 9,300,060 (5,507,660) (139,846) (318,208) (160,172) (6,125,886)
	1,427,444 47,116 480,123 1,219,491 3,174,174
	1,427,444 47,116 480,123 1,219,491 3,174,174 981,618 - 71,490 253,006 1,306,114 (2,482) - - - (2,482) (528,652) (9,956) (52,830) (454,110) (1,045,548) (2,674) (141) 5,044 - 2,229
	1,875,254 37,019 503,827 1,018,387 3,434,487
	7,480,514 179,528 862,332 1,632,668 10,155,042 (5,605,260) (142,509) (358,505) (614,281) (6,720,555)
	1,875,254 37,019 503,827 1,018,387 3,434,487

Lycopodium Annual Financial Report 2018 • 73

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

15 Non-current assets - Deferred tax assets

						Consolidated	Consolidated
						2018	2017
						$	$
The balance comprises temporary differences attributable to:
Unused tax losses						138,371	37,422
Employee benefits						2,513,522	2,177,976
Doubtful debts						24,688	408,877
Accrued expenses						107,421	110,965
Deferred revenue						649,359	209,886
Other provisions						5,446,746	1,516,230
Finance leases						312,084	366,419
						9,192,191	4,827,775
Set-off of deferred tax liabilities pursuant to set-off provisions (note					19)	(841,393)	(1,029,845)
Net deferred tax assets						8,350,798	3,797,930
Deferred tax assets expected to be recovered			within 12	months		8,385,756	4,108,718
Deferred tax assets expected to be recovered			after more than 12 months			806,435	719,057
						9,192,191	4,827,775
	Doubtful	Employee	Deferred	Accrued	Other	Finance Unused
	debts	Benefits	revenue	expenses	provisions	Leases tax losses	Total
Movements	$	$	$	$	$	$ $	$
At 1 July 2016	142,442	2,089,752	160,935	174,696	(4,299)	- 969,025	3,532,551
Credited/(charged)
- to profit or loss	266,435	88,224	48,951	(63,731)1,520,532		366,419 (762,016)	1,464,814
- directly to equity	-	-	-	-	(3)	- -	(3)
Utilisation of
recognised losses	-	-	-	-	-	- (161,657)	(161,657)
Exchange rate
differences	-	-	-	-	-	- (7,930)	(7,930)
At 30 June 2017	408,877	2,177,976	209,886	110,965	1,516,230	366,419 37,422	4,827,775
At 1 July 2017	408,877	2,177,976	209,886	110,965	1,516,230	366,419 37,422	4,827,775
(Charged)/credited
- to profit or loss	(384,189)	335,546	439,473	(3,544)4,070,021		(54,335) (57,437)	4,345,535
- directly to equity	-	-	-	-	(139,505)	- -	(139,505)
Reversal of recognised
losses	-	-	-	-	-	- 158,386	158,386
At 30 June 2018	24,688	2,513,522	649,359	107,421	5,446,746	312,084 138,371	9,192,191

74 • Lycopodium Annual Finanical Report 2018

16 Non-current assets - Intangible assets

At 1 July 2016 Cost Accumulated amortisation and impairment Net book amount Year ended 30 June 2017 Opening net book amount Additions Amortisation charge Impairment loss recognised Transfers from property, plant and equipment Exchange differences Closing net book amount Cost Accumulated amortisation and impairment Net book amount Year ended 30 June 2018 Opening net book amount Additions Amortisation charge Impairment loss recognised Disposal Exchange differences Closing net book amount At 30 June 2018 Cost Accumulated amortisation Net book amount	Goodwill $ Software $ Customer contracts $ Total $ 8,885,406 1,934,790 315,000 11,135,196 (1,319,822) (1,592,621) (315,000) (3,227,443)
	7,565,584 342,169 - 7,907,753
	7,565,564 342,169 - 7,907,733 - 50,116 - 50,116 - (283,028) - (283,028) (263,242) - - (263,242) - 9,650 - 9,650 - (56) - (56)
	7,302,322 118,851 - 7,421,173
	8,885,406 1,878,728 315,000 11,079,134 (1,583,084) (1,759,877) (315,000) (3,657,961)
	7,302,322 118,851 - 7,421,173
	Goodwill $ Software $ Customer contracts $ Total $ 7,302,322 118,851 - 7,421,173 - 631,529 - 631,529 - (182,931) - (182,931) (1,095,048) - - (1,095,048) - 17,895 - 17,895 - (601) - (601)
	6,207,274 584,743 - 6,792,017
	8,885,406 2,478,811 315,000 11,679,217 (2,678,132) (1,894,068) (315,000) (4,887,200)
	6,207,274 584,743 - 6,792,017

• Group amortisation of $182,931 (2017: $283,028) is included in depreciation and amortisation expense in the statement of comprehensive income.

Lycopodium Annual Financial Report 2018 • 75

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

16 Non-current assets - Intangible assets (continued)

(a) Impairment tests for goodwill

Goodwill is allocated to the group cash-generating units (CGUs) identified according to business segment and country of operation.

A segment-level summary of the goodwill allocation is presented below.

2018 Minerals Metallurgical 2017 Minerals Infrastructure (previously Maintenance) Metallurgical	Australia $ Other countries $ Total $ 3,622,991 2,465,026 6,088,017 119,257 - 119,257
	3,742,248 2,465,026 6,207,274
	Australia $ Other countries $ Total $ 3,622,991 2,465,026 6,088,017 1,095,048 - 1,095,048 119,257 - 119,257
	4,837,296 2,465,026 7,302,322

(b) Key assumptions used for value-in-use calculations

The recoverable amount of each CGU within the business segment is determined on the basis of value-in-use ('VIU'). The following describes the assumptions on which management has based its cash flow projections when determining value in use:

	Growth	rates	Discount	rates
	2018	2017	2018	2017
	%	%	%	%
Minerals	2.5	2.5	3.2	4.0
Process Industries	-	-	-	4.0
Infrastructure	1.0	2.5	3.2	4.0
Metallurgical	2.5	2.5	3.2	4.0
Growth rate

The growth rate represents a steady indexation rate which does not exceed management's expectations of the long term average growth rate for the business in which each CGU operates.

Discount rate

For the Australian CGUs, the pre-tax discount rate applied to cash flow projections is 3.2% (2017: 4.0%) and for the Minerals CGUs in other countries, the pre-tax discount rate is 9.2% (2017: 9.0%).

Cash flows

VIU calculations use cash flow projections from approved budgets based on past performance and its expectations for the future covering a three year period.

76 • Lycopodium Annual Finanical Report 2018

16 Non-current assets - Intangible assets (continued)

(b) Key assumptions used for value-in-use calculations (continued)

Revenue

Value-in-use model is based on budget approved by the Board. The forecast budget process was developed based on revenue expectations for the year built around existing customer contracts along with the potential to develop new markets and sustain growth.

Sensitivities

The Board has performed sensitivities around all key assumptions disclosed above. There are no fluctuations to any of the assumptions that could reasonably occur that would cause the recoverable amount of the CGU to be equivalent to that of the carrying amount of the CGUs assets.

(c) Cash flow assumptions

Minerals, Infrastructure and Metallurgical

The forecast was adjusted in 2018 for the decline in asset management services in the Infrastructure segment due to increased competition in the sector. As a result, the Board expects lower growth and declining profit margins for this segment.

Impairment testing, taking into account these latest developments, resulted in a reduction in goodwill in 2018 of $1,095,048. The related goodwill impairment loss of $1,095,048 was included within impairment of non-financial assets.

Apart from the consideration described in determining the value-in-use of the cash-generating units described above, the Board is not currently aware of any other probable changes that would necessitate changes in its key estimates.

Lycopodium Annual Financial Report 2018 • 77

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

17 Current liabilities - Trade and other payables

17 Current liabilities - Trade and other payables
Trade payables Revenue received in advance Goods and services tax (GST) payable Sundry creditors and accrued expenses Employee benefit obligations (a)	Consolidated 2018 $ 2017 $ 6,198,804 10,225,530 8,602,053 32,659,785 2,330,610 708,415 6,781,586 13,176,194 7,836,176 7,311,042
	31,749,229 64,080,966

Included in the above are financial liabilities of $12,980,390 (2017: $23,401,725).

(a) Amounts not expected to be settled within the next 12 months

Employee benefit obligations include accruals for annual leave and unconditional entitlements of long service leave. The entire obligation is presented as current, since the group does not have an unconditional right to defer settlement. However, based on past experience, the group does not expect all employees to take the full amount of accrued leave within the next 12 months.

The following amounts reflect leave that is not expected to be taken within the next 12 months:

Annual leave obligation expected to be settled after 12 months Long service leave obligation expected to be settled after 12 months	Consolidated 2018 $ 2017 $ 1,142,739 922,499 1,118,000 973,563
	2,260,739 1,896,062

(b) Risk exposures

Details of the group's exposure to foreign exchange risk is provided in note 2.

78 • Lycopodium Annual Finanical Report 2018

18 Current liabilities - Provisions

18 Current liabilities - Provisions
Service and equipment warranties (a) Movements in provisions 2018 Carrying amount at beginning of year Provisions recognised Carrying amount at end of year	Consolidated 2018 $ 2017 $ 16,361,009 4,280,795
	Service and equipment warranties $ Total $ 4,280,795 4,280,795 12,080,214 12,080,214
	16,361,009 16,361,009

The group recognises service and equipment warranty provisions in accordance with its current policy. The amount provided takes into account the percentage completion of the project, forecast to complete costs plus any close-out obligations and potential contractual liabilities during the warranty period. The increase in the balance for the financial year ended 30 June 2018 reflects multiple major projects nearing completion or having been completed.

Lycopodium Annual Financial Report 2018 • 79

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

19 Non-current liabilities - Deferred tax liabilities

19 Non-current liabilities - Deferred tax liabilities	19 Non-current liabilities - Deferred tax liabilities
The balance comprises temporary differences attributable to: Accrued income Other provisions Depreciation & Amortisation Prepaid expenses Set-off of deferred tax liabilities pursuant to set-off provisions (note 15) Net deferred tax liabilities Deferred tax liabilities expected to be settled within 12 months Deferred tax liabilities expected to be settled after more than 12 months Movements Depreciation & amortisation $ Accrued income $ Other provisions $ At 1 July 2016 235,475 321,126 169,388 Charged/(credited) - profit or loss 290,407 (2,851) (24,339) At 30 June 2017 525,882 318,275 145,049 At 1 July 2017 525,882 318,275 145,049 Charged/(credited) - profit or loss (40,401) (18,713) (129,076) At 30 June 2018 485,481 299,562 15,973		Consolidated 2018 $ 2017 $ 299,562 318,275 15,973 145,049 485,481 525,882 40,377 40,639
		841,393 1,029,845 (841,393) (1,029,845)
		- -
		355,912 503,963 485,481 525,882
		841,393 1,029,845
		Prepaid expenses $ Total $ 24,021 750,010 16,618 279,835
	525,882 318,275 145,049	40,639 1,029,845
	525,882 318,275 145,049 (40,401) (18,713) (129,076)	40,639 1,029,845 (262) (188,452)
	485,481 299,562 15,973	40,377 841,393

20 Non-current liabilities - Provisions

Employee benefits - long service leave	Consolidated 2018 $ 2017 $ 416,531 500,796

80 • Lycopodium Annual Finanical Report 2018

21 Contributed equity

(a) Share capital

2018 Shares Ordinary shares Fully paid 39,732,373 (b) Movements in ordinary share capital Date Details 1 July 2016 Opening balance No movements during the period 30 June 2017 Closing balance 1 July 2017 Opening balance No movements during the period 30 June 2018 Closing balance	2018 Shares 39,732,373	2017 Shares 2018 $ 2017 $ 39,732,373 20,823,772 20,823,772	2017 Shares 2018 $ 2017 $ 39,732,373 20,823,772 20,823,772
		Number of shares Issue price $ 39,732,373 20,823,772 - - 39,732,373 20,823,772 39,732,373 20,823,772 - - 39,732,373 20,823,772
			20,823,772
			20,823,772 -
			20,823,772

(b) Movements in ordinary share capital

(c) Ordinary shares

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(d) Capital risk management

The group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'borrowings' and 'trade and other payables' as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the consolidated balance sheet (including non-controlling interests) plus net debt.

Lycopodium Annual Financial Report 2018 • 81

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

21 Contributed equity (continued)

(d) Capital risk management (continued)

During 2018, the group's strategy was to maintain a gearing less than 40%. The gearing ratios at 30 June 2018 and 30 June 2017 were as follows:

Total borrowings (including payables) Less: cash and cash equivalents Net debt Total equity Total capital Gearing ratio	Consolidated 2018 $ 2017 $ 33,008,203 65,423,613 (74,287,788) (85,334,768)
	(41,279,585) (19,911,155) 76,373,486 66,248,097
	35,093,901 46,336,942
	(54)% (30)%

22 Reserves and retained earnings

(a) Other reserves

Available-for-sale investment revaluation reserve Foreign currency translation reserve Movements: Available-for-sale investment revaluation reserve Balance 1 July Revaluation - gross Deferred tax Balance 30 June Performance rights reserve Balance 1 July Expiry of performance rights Balance 30 June Foreign currency translation reserve Balance 1 July Currency translation differences arising during the year Balance 30 June	Consolidated 2018 $ 2017 $ 241,588 (83,923) (930,627) (904,119)
	(689,039) (988,042)
	Consolidated 2018 $ 2017 $ (83,923) (83,930) 465,015 10 (139,504) (3)
	241,588 (83,923)
	- 259,037 - (259,037)
	- -
	(904,119) (1,016,051) (26,508) 111,932
	(930,627) (904,119)

82 • Lycopodium Annual Finanical Report 2018

22 Reserves and retained earnings (continued)

(b) Retained earnings

(b) Retained earnings
Balance 1 July Profit for the year Dividends paid or payable Balance 30 June	Consolidated 2018 $ 2017 $ 46,412,369 41,285,494 18,170,186 10,292,083 (8,343,798) (5,165,208)
	56,238,757 46,412,369

(c) Nature and purpose of other reserves

(i) Available-for-sale investments revaluation reserve

Changes in the fair value and exchange differences arising on translation of investments, such as equities, classified as available-for-sale financial assets, are recognised in other comprehensive income as described in note 1(m) and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired.

(ii) Performance rights reserve

The performance rights reserve is used to recognised the fair value of rights issued to certain Directors or employees during the year.

(iii) Foreign currency translation reserve

Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income as described in note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

23 Non-controlling interests

Share capital Reserves Non-controlling interest on acquisition Retained earnings	Consolidated 2018 $ 2017 $ 14,937 14,937 (1,986) 4,230 2,833,808 2,833,808 130,161 122,258
	2,976,920 2,975,233

Lycopodium Annual Financial Report 2018 • 83

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

24 Dividends

24 Dividends
(a) Ordinary shares
	Parent entity
	2018	2017
	$	$
Final dividends for year ended 30 June 2017 of 9.0 cents (2017: 4.0 cents)
per fully paid share paid on 10 October 2017 (2017: 13 October 2016)
Fully franked based on tax paid @ 30% (2017: 30%)	3,575,914	1,589,295
Interim dividend for the year ended 30 June 2018 of 12.0 cents (2017: 9.0 cents)
per fully paid share paid on 10 April 2018 (2017: 13 April 2017)
Fully franked based on tax paid @ 30% (2017: 30%)	4,767,885	3,575,914
Total dividends provided for or paid	8,343,799	5,165,209
(b) Dividends not recognised at the end of the reporting period
	Parent entity
	2018	2017
	$	$
In addition to the above dividends, since year end the Directors have
recommended the payment of a final dividend of 18.0 cents per fully paid
ordinary share (2017: 9.0 cents), fully franked based on tax paid at 30%. The
aggregate amount of the proposed dividend expected to be paid on 12 October
2018 out of retained earnings at 30 June 2018, but not recognised as a liability at
year end, is	7,151,827	3,575,914
(c) Franked dividends
	Consolidated
	2018	2017
	$	$
Franking credits available for subsequent reporting periods based on a tax rate of
30% (2017: 30%)	19,842,221	10,713,752
The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted
for:
(a) franking credits that will arise from the payment of the amount of the provision for income tax
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date,
and

• (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends.

The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $3,065,069 (2017: $1,532,534).

84 • Lycopodium Annual Finanical Report 2018

25 Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms:

(a) Grant Thornton Australia Ltd

Consolidated

Audit and other assurance services Audit and review of financial reports Taxation services Tax compliance services (including income tax returns) Total remuneration for taxation services Other services Other services Total remuneration	2018 $ 2017 $ 190,000 190,000 63,440 32,300
	63,440 32,300
	39,870 15,183
	293,310 237,483

(b) Network firms of Grant Thornton Australia Ltd

Audit and other assurance services Audit and review of financial statements Taxation services Tax compliance services (including income tax returns) Total remuneration of network firms of Grant Thornton Australia Ltd	Consolidated 2018 $ 2017 $ 110,072 106,687 40,529 56,926
	150,601 163,613

Lycopodium Annual Financial Report 2018 • 85

Notes to the Consolidated Financial Statements 30 June 2018 (continued)

25 Remuneration of auditors (continued)

(c) Non-Grant Thornton Australia Ltd

Audit and other assurance services Audit and review of financial statements Taxation services Tax compliance services (including income tax returns) Total remuneration for taxation services Other services Other services Total remuneration of non-Grant Thornton Australia Ltd audit firms Total auditors' remuneration	Consolidated 2018 $ 2017 $ 49,087 48,804 15,275 33,951
	15,275 33,951 57,168 24,536
	121,530 107,291
	565,441 508,387

It is the group's policy to employ Grant Thornton Australia Ltd on assignments additional to their statutory audit duties where Grant Thornton Australia Ltd expertise and experience with the group are important. These assignments are principally tax advice and due diligence reporting on acquisitions, or where Grant Thornton Australia Ltd is awarded assignments on a competitive basis. It is the group's policy to seek competitive tenders for all major consulting projects.

26 Contingencies

The group had contingent liabilities at 30 June 2018 and 30 June 2017 in respect of:

(a) Contingent liabilities

(i) Guarantees

Guarantees are given in respect of rental bonds for $1,830,584 (2017: $1,910,888).

These guarantees may give rise to liabilities in the event that the group defaults on its obligations under the terms of the lease agreement for its premises at 1 Adelaide Terrace, East Perth, 60 Leichhardt Street, Spring Hill, 253-269 Wellington Road, Mulgrave, 138-140 Beaumont Street, Hamilton, Centennial Place, Century Boulevard, Century City, Cape Town, South Africa and Golf Park, Cape Town, South Africa.

No material losses are anticipated in respect of any of the above contingent liabilities (2017: Nil).

27 Commitments

(a) Capital commitments

There were no capital expenditures contracted for at the reporting date which have not been recognised as liabilities (2017: Nil).

86 • Lycopodium Annual Finanical Report 2018

27 Commitments (continued)

(b) Lease commitments: group as lessee

(i) Non-cancellable operating leases

The Perth property under operating lease by Lycopodium Minerals Pty Ltd is a non cancellable lease with a 120 month term ending 31 January 2021. Minimum lease payments are contingent upon both 4% fixed annual increases and market-based reviews during the term of the lease. The lease allows for sub letting of all lease areas, subject to the consent of the landlord.

The Melbourne property under operating lease by Lycopodium Process Industries Pty Ltd is a non cancellable lease with a 36 month term ending 25 September 2018, with an option to renew the lease at the end of the term for a further 36 months. The agreement provides for an annual increase in the rental payments of 3.5% over the previous year's rental.

The Manila property under operating lease by Lycopodium (Philippines) Pty Ltd is a non cancellable lease with a 60 month term ending 20 August 2023. The agreement provides for an increase in the rental payments of 5% per annum.

The Brisbane property under operating lease by Lycopodium Minerals Pty Ltd is a non-cancellable lease with a 36 month term ending 28 February 21, with an option to renew for 36 months. The lease agreement provides for annual increase in the rental payments of 3.25% over the previous year's rental. The lease allows for sub-letting of all lease areas subject to prior consent of the landlord.

The Perth property under operating lease by Lycopodium Infrastructure Pty Ltd is a non cancellable lease with a 96 month term ending 31 January 2021, with an option to renew a further 60 month term. Minimum lease payments are contingent upon a 4.5% fixed annual increase. The lease allows for sub letting of all lease areas, subject to the consent of the landlord.

The Toronto property under lease by Lycopodium Minerals Canada Ltd is a non-cancellable lease with a 63 month term ending 31 October 2022. No provision for increase in base rental.

The Newcastle property under operating lease by Lycopodium Infrastructure Pty Ltd is a non-cancellable lease with a 36 month term ending 1 November 2020, with an option to renew the lease at the end of its term for a further 72 months. Minimum lease payments are contingent upon annual CPI movements during the terms of its lease.

The Century City property under lease by ADP Holdings (Pty) Limited is a non-cancellable lease with a 37 month term ending 31 May 2021. The agreement provides for an annual increase in the rental payments of 8% over the previous year's rental. The lease allows for sub-letting of all lease areas subject to prior consent of the landlord.

The Golf Park property under lease by ADP Holdings (Pty) Limited is a non-cancellable lease with a 36 month term ending 31 May 2021.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years	Consolidated 2018 $ 2017 $ 7,554,801 7,807,360 14,822,359 17,492,391
	22,377,160 25,299,751

Lycopodium Annual Financial Report 2018 • 87

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

27 Commitments (continued)

(b) Lease commitments: group as lessee (continued)

(ii) Finance leases and hire purchase commitments

The group has finance leases and hire purchase contracts for various items of plant and equipment with a carrying amount of $1,018,386 (2017: $1,219,491). These lease contracts expire within 1 to 5 years. Under the terms of the leases, the group has the option to acquire the leased assets.

Commitments in relation to finance leases are payable as follows: Within one year Later than one year but not later than five years Minimum lease payments Future finance charges Total lease liabilities Representing lease liabilities: Current (note 11(d)) Non-current (note 11(d))	Consolidated 2018 $ 2017 $ 526,584 450,053 585,944 889,772
	1,112,528 1,339,825 (72,246) (118,429)
	1,040,282 1,221,396
	478,216 388,484 562,066 832,912
	1,040,282 1,221,396

The weighted average interest rate implicit in the leases and hire purchases is 5.57% (2017: 7.22%).

28 Related party transactions

(a) Parent entities

The parent entity within the group is Lycopodium Limited, which is incorporated in Australia.

(b) Subsidiaries

Interests in subsidiaries are set out in note 29.

(c) Key management personnel

Short-term employee benefits Post-employment benefits	Consolidated 2018 $ 2017 $ 2,692,118 2,441,977 171,863 214,206
	2,863,981 2,656,183

Detailed remuneration disclosures are provided in the remuneration report on pages 14 to 19.

88 • Lycopodium Annual Finanical Report 2018

28 Related party transactions (continued)

(d) Transactions with other related parties

The following transactions occurred with related parties:

	Consolidated	Consolidated
	2018	2017
	$	$
Purchases of goods and services
Purchases from associates	8,188,821	4,927,903
Sale of goods and services
Sales to associates and joint ventures	-	337,291

(e) Outstanding balances arising from sales/purchases of goods and services

The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:

Current payables Associates (f) Loans to/from related parties Loans to associates Beginning of the year Loans advanced Repayments made End of year	Consolidated 2018 $ 2017 $ 18,007 278,393 Consolidated 2018 $ 2017 $ 723,500 387,500 884,000 336,000 (387,500) -
	1,220,000 723,500

(f) Loans to/from related parties

There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has been recognised in respect of impaired receivables due from related parties.

(g) Terms and conditions

Purchases and sales of goods and services with statutory joint ventures are made at cost.

Purchases and sales of goods and services with the associate are made at arms-length.

Loans advanced to the joint venture and associate are interest-free and repayable within 12 months.

Outstanding balances are unsecured and are repayable in cash.

Lycopodium Annual Financial Report 2018 • 89

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

29 Subsidiaries

(a) Significant investments in subsidiaries

The consolidated financial report incorporate the assets, liabilities and results of the following principal subsidiaries in accordance with the accounting policy described in note 1(b):

	Country of
	incorporation /
	Principal
Name of entity	activity	Class of shares	Equity holding
			2018 2017
			% %
Lycopodium Minerals Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Process Industries Pty Ltd	Australia (1)	Ordinary	100	100
Orway Mineral Consultants (WA) Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Ghana Ltd	Ghana (2)	Ordinary	100	100
Lycopodium Asset Management Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Burkina Faso SARL	Burkina Faso (2)	Ordinary	100	100
Lycopodium Infrastructure Pty Ltd	Australia (1)	Ordinary	100	100
Lycopodium Minerals Canada Ltd	Canada (1)	Ordinary	100	100
Lycopodium Mauritius	Mauritius (2)	Ordinary	100	100
Lycopodium Philippines Pty Ltd	Australia (1)	Ordinary	100	100
Metco Global Limited	Angola (2)	Ordinary	74	74
Orway Mineral Consultants (Canada) Ltd	Canada (1)	Ordinary	100	100
Lycopodium Rail Pty Ltd	Australia (1)	Ordinary	100	100
ADP Holdings (Pty) Limited	South Africa (1)	Ordinary	74	74

(1) Engineering, procurement, construction management services

(2) Offshore project support services

30 Events occurring after the reporting period

Since year end the directors have recommended the payment of a final dividend on ordinary shares in respect of the 2018 financial year. The total amount of the dividend is $7,151,827 (2017: $3,575,914), which represents a fully franked dividend of 18.0 (2017: 9.0) cents per fully paid ordinary share.

With the exception of the above, no other matter or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect:

• (a) the group's operations in future financial years, or

• (b) the results of those operations in future financial years, or

• (c) the group's state of affairs in future financial years.

90 • Lycopodium Annual Finanical Report 2018

31 Reconciliation of profit after income tax to net cash inflow from operating activities

Profit for the year Depreciation and amortisation Impairment of goodwill Loans advanced to joint venture (incl at cash flows from financing activities) Repayment of loans from associate (incl at cash flow from financing activities) Proceeds from available-for-sale financial assets (incl at cash flow from investing activites) Non-cash employee benefits expense - share-based payments Non-cash shares received in lieu of payment for services Net (gain)/loss on sale of non-current assets Share of net profit of associate and joint venture accounted for using the equity method Interest relating to financing activities Finance lease expense Change in operating assets and liabilities: Increase in trade debtors and other receivables (Increase)/decrease in inventories Increase in deferred tax assets Decrease/(increase) in other operating assets (Decrease)/increase in trade creditors Increase in provision for income taxes payable Increase in other provisions Decrease/(increase) in derivative financial assets Net cash inflow from operating activities

Consolidated 2018 $ 2017 $ 18,333,387 10,373,528 1,228,479 1,171,764 1,095,048 263,242 884,000 336,000 (387,500) - (1,187,036) - - (259,037) (878,875) - (35,653) 1,634 (1,112,681) (1,019,251) 96,617 56,377 - 43,011 (697,349) (10,393,981) (492,414) 376,256 (4,552,868) (866,965) 408,836 (356,658) (32,331,738) 42,644,013 5,600,504 2,986,072 11,995,947 4,141,718 192,688 (164,994)

(1,840,608) 49,332,729

32 Earnings per share

(a) Basic earnings per share

(a) Basic earnings per share
Basic earnings per share attributable to the ordinary equity holders of the company (b) Diluted earnings per share Diluted earnings per share attributable to the ordinary equity holders of the company	Consolidated 2018 Cents 2017 Cents 45.7 25.9
	Consolidated 2018 Cents 2017 Cents 45.7 25.9

Lycopodium Annual Financial Report 2018 • 91

Notes to the Consolidated Financial Statements

30 June 2018 (continued)

32 Earnings per share (continued)

(c) Reconciliation of earnings used in calculating earnings per share

Basic earnings per share Profit attributable to the ordinary equity holders of the company used in calculating basic earnings per share Diluted earnings per share Used in calculating diluted earnings per share (d) Weighted average number of shares used as denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share	Consolidated 2018 $ 2017 $ 18,170,186 10,292,083
	18,170,186 10,292,083
	Consolidated 2018 Number 2017 Number 39,732,373 39,732,373

(d) Weighted average number of shares used as denominator

33 Share-based payments

(a) Senior manager share acquisition plan

The senior manager share acquisition plan was introduced in November 2009. Under the plan eligible senior managers are provided with an interest free limited recourse loan for a period of 3 years to acquire shares in Lycopodium Limited. The purchase of the shares will be done via the employee share trust. The loan will be interest free if the participating senior manager stays with the group for more than 3 years. In the event the participating senior manager leaves within 3 years, interest will be charged equal to market rate of interest that would have accrued on the loan from the date of advance of the funds to the repayment date. Eligibility will be decided by the board of Directors.

The value of the loan to each participating senior manager is based on the value of the shares allocated to the respective senior manager. The shares are allocated at a 1 cent discount to the volume weighted average of the prices at which the shares were traded on the ASX during the one week period up to and including the date of allocation. During the financial year ended 30 June 2010, 607,500 shares were acquired on and off market.

The difference between the price of the shares acquired and the value of shares allocated to the participating senior managers was expensed in the financial year ended 30 June 2010. This amounted to $125,855.

(b) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were nil.

92 • Lycopodium Annual Finanical Report 2018

34 Parent entity financial information

(a) Summary financial information

The individual financial report for the parent entity show the following aggregate amounts:

Balance sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Shareholders' equity Contributed equity Retained earnings Profit for the year Total comprehensive income	2018 $ 2017 $ 20,254,065 20,757,301 30,065,700 29,956,945
	50,319,765 50,714,246
	1,484,003 3,705,820 18,236 44,102
	1,502,239 3,749,922
	48,817,526 46,964,324
	(146,452,578) (140,892,972) 20,823,772 20,823,772 27,993,754 26,140,552
	48,817,526 46,964,324
	10,197,001 11,916,083
	10,197,001 11,916,083

(b) Guarantees entered into by the parent entity

In 2016, the parent entity entered into an arrangement with a insurer for a standby insurance bonding facility of $15.0m. In return, the parent entity and Lycopodium Minerals Pty Ltd jointly executed a cross guarantee and indemnity as security for the facility. This facility was increased to $20.0m during the year ended 30 June 2018.

(c) Contingent liabilities of the parent entity

The parent entity did not have any contingent liabilities as at 30 June 2018 or 30 June 2017.

(d) Contractual commitments for the acquisition of property, plant or equipment

The parent entity did not have any contractual commitments for the acquisition of property, plant and equipment as at 30 June 2018 or 30 June 2017.

Lycopodium Annual Financial Report 2018 • 93

Directors’ Declaration

In the Directors' opinion:

• (a) the financial report and notes set out on pages 31 to 93 are in accordance with the Corporations Act 2001 , including:

• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• (ii) giving a true and fair view of the group's financial position as at 30 June 2018 and of its performance for the year ended on that date, and

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

Note 1(a) confirms that the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001 .

This report is made in accordance with a resolution of Directors.

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Peter Anthony Dawson Director

Perth 20 September 2018

94 • Lycopodium Annual Finanical Report 2018

Audit Report

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Lycopodium Annual Financial Report 2018 • 95

Audit Report (continued)

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96 • Lycopodium Annual Finanical Report 2018

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Lycopodium Annual Financial Report 2018 • 97

Audit Report (continued)

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98 • Lycopodium Annual Finanical Report 2018

Shareholder Information

The shareholder information set out below was applicable as at 31 August 2018.

A. Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

Holding 1 - 1000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over	Total Holders 338 464 135 163 28
	1,128

There were 76 holders of less than a marketable parcel of ordinary shares.

B. Equity security holders

The names of the twenty largest holders of quoted equity securities are listed below:

Ordinary shares

Name 1 Reesh Pty 2 HSBC Custody Nominees (Australia) Limited 3 BNP Paribas Nominees Pty Limited 4 Luala Pty Ltd 5 JP Morgan Nominees Australia Limited 6 Caddy Fox Pty Ltd 7 Accede Pty Ltd 8 Citicorp Nominees Pty Ltd 9 Monadelphous Group Limited 10 Mr David James Taylor 11 De Leo Nominees Pty Ltd (The De Leo Investment A/C) 12 Mr Peter De Leo & Mrs Tiana De Leo 13 De Leo Nominees Pty Ltd (The De Leo Family A/C) 14 Selso Pty Ltd 15 Citicorp Nominees Pty Ltd (Colonial First State Inv A/C) 16 RBC Investor Services Australia Nominees Pty Ltd 17 Lycopodium Share Plan Pty Ltd 18 Fifty Second Celebration Pty Ltd 19 Botech Pty Ltd 20 Nancris Pty Ltd

Number held Percentage of Units 9,104,367 22.91 4,981,300 12.54 3,235,157 8.14 3,167,332 7.97 3,067,569 7.72 2,154,215 5.42 1,272,332 3.20 821,000 2.07 603,511 1.52 447,635 1.13 407,900 1.03 407,071 1.02 348,800 0.88 266,148 0.67 265,475 0.67 252,484 0.63 235,000 0.59 202,947 0.51 188,959 0.48 175,000 0.44

31,604,202 79.54

Lycopodium Annual Financial Report 2018 • 99

Shareholder Information (continued)

C. Substantial holders

Substantial holders in the company are set out below:

C. Substantial holders Substantial holders in the company are set out below:
	Number	Percentage of
Name	held	Units
1 Reesh Pty Ltd	9,104,367	22.91
2 HSBC Custody Nominees (Australia) Limited	4,981,300	12.54
3 BNP Parabis Nominees Pty Ltd	3,235,157	8.14
4 Luala Pty Ltd	3,167,332	7.97
5 JP Morgan Nomineed Australia Limited	3,067,569	7.72

D. Voting rights

The voting rights attaching to each class of equity securities are set out below:

• (a) Ordinary shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

100 • Lycopodium Annual Finanical Report 2018

Corporate Directory

Directors	Michael John Caratti
	Peter De Leo
	Rodney Lloyd Leonard
	Robert Joseph Osmetti
	Bruno Ruggiero
	Peter Anthony Dawson
	Lawrence William Marshall
	Steven John Micheil Chadwick
Company Secretary	Keith John Bakker
Registered and Principal Office	Level 5, 1 Adelaide Terrace
	East Perth WA 6004
	Australia
	T: +61 (0)8 6210 5222
	www.lycopodium.com.au
Share Registry	Computershare Investor Services Pty Limited
	Level 11, 172 St Georges Terrace
	Perth WA 6000
	T: +61 (0)8 9323 2000
	www.computershare.com.au
Lawyers to the Company	Clyde & Co.
	Level 28, 197 St Georges Terrace
	Perth WA 6000
	T: +61 (0)8 6145 1700
	www.clydeco.com
Auditor	Grant Thornton Audit Pty Ltd
	Level 43, 152 - 158 St Georges Terrace
	Perth WA 6000
	T: +61 (0)8 9480 2000
	www.grantthornton.com.au

Lycopodium Annual Financial Report 2018 • 101

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Lycopodium Annual Financial Report 2018
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Level 5, 1 Adelaide Terrace East Perth Western Australia 6004 T: + 61 (0)8 6210 5222 www.lycopodium.com.au