MADER GROUP LIMITED — Annual Report 2020

Aug 26, 2020

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Appendix 4E Preliminary final report Period ended on 30 June 2020

Name of entity

Mader Group Limited

ABN or equivalent company reference

51 159 340 397

Reporting Period: Full year ended 30 June 2020 Previous Corresponding Period: Full year ended 30 June 2019

Results for announcement to the market

		Change		30 June 2020	30 June 2019
				$A’000	$A’000
Revenues from ordinary	up	19.6%	to	273,547	228,645
activities
Profit from ordinary activities	up	17.5%	to	17,504	14,900
after tax attributable to the
members of the Mader Group
Adjusted Net Profit for the	up	18.9%	to	18,058	15,189
period attributable to members
of the Mader Group
EBITDA from continuing	up	29.8%	to	33,026	25,452
operations
EBIT from continuing	up	22.2%	to	26,424	21,627
operations
				30 June 2020	30 June 2019
				$/share	$/share
Net tangible asset backing per ordinary security				0.50	0.51

Dividends paid or recommended

An interim dividend of 1.5 cents per Share fully franked paid in 17 March 2020. A final dividend of 1.5 cents per Share fully franked confirmed for payment in 17 September 2020.

Entities over which control has been lost during the period

Not applicable.

Entities over which control has been gained during the period

Not applicable.

- End -

HEAD OFFICE T: (08) 9353 3393 A1/ 2 George Wiencke Dr F: (08) 9353 1966 Perth Airport WA 6105 madergroup.com.au

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MADER GROUP LIMITED ABN: 51 159 340 397 ACN: 159 340 397 ASX: MAD

The financial data in this report is in the process of being audited, pending completion of the Company’s statutory financial report and the issue of the accompanying independent auditor’s report. The audit process has not identified any material adjustments or misstatements that require the financial data included in this preliminary final report to be corrected.

2

Review of Operations

On behalf of the Directors, I am pleased to report the FY2020 financial results for the Mader Group.

Total revenue grew by 19.6% over the corresponding year to $274 million. The Company’s consolidated adjusted net profit after tax (NPAT) improved to $18.0 million, representing a 18.9% increase from $15.2 million in FY2019. The growth in earnings was driven by:

• Increased demand in regions where the Mader already operates (both existing and new customers). Mader believes there remains significant revenue growth potential in all regions in which Mader currently operates;

• Expansion to new addressable markets where usage of heavy mobile equipment is significant;

• Continued scaling of ancillary services to complement the Mader Group’s core service capabilities. Ancillary services achieved year on year revenue growth of 41% in WA; and

• The Group delivered over 2.7 million hours of specialised contract labour, an increase of 0.6 million hours over the prior year (2.1 million hours).

The Group has delivered a strong financial performance with increases in revenue and growth recorded for the financial year ended 30 June 2020 (FY2020).

Earnings

Earnings
Currency: A$ ‘000	FY2020	FY2019	Change
**Profitability: **
Revenue	273,547	228,645	44,901	19.6%
EBITDA	33,026	25,454	7,572	29.8%
EBITDA %	12.1%	11.1%	1.0%
EBIT	26,424	21,628	4,796	22.2%
EBIT %	9.7%	9.5%	0.2%
Net profit after tax	17,504	14,900	2,604	17.5%
Adjusted net profit after tax	18,058	15,189	2,869	18.9%

Adjusted Profitability

Adjusted Profitability
	FY2020	FY2019
Statutorynetprofit after tax	17,504	14,900
Public companycosts1	-	(228)
One-off offer costs2	856	908
Impact of accountingstandard AASB 16	(65)	(267)
Impact of income tax3	(237)	(124)
Adjusted netprofit after tax	18,058	15,189
Adjusted net profit margin	6.6%	6.6%

1. Public company costs include the directors’ estimate of incremental annual costs that the Mader Group will incur as a public listed company:

2. These incremental costs include share registry fees, Executive Director, Non-Executive Director remuneration, Directors’ and Officers’ insurance premiums, additional audit and legal fees, listing fees, investor relations costs as well as annual general meeting and annual report costs;

3. For FY2019, no Public Company costs were incurred. Therefore, as a normalisation adjustment to make FY2019 comparable with FY2020, $0.23 million ($0.16 million tax effected) has been included as an adjustment;

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• For FY2020, the net profit already includes Public Company Costs, therefore no adjustment is required.

• One-off Offer costs incurred by Mader Group of $0.86 million ($0.60 million tax effected).

• Income tax effect -An adjustment has been made to reflect the tax impact of the adjustments based on the Australian statutory corporate tax rate of 30%.

EBITDA (of $33.0 million) and EBIT (of $26.4 million) excluding one-off offer costs and the impact of AASB16 grew by 29.8% and 22.2% respectively.

Underlying EBITDA margin of 12.1% reflected strong operational performance together with ongoing investment in our people to further reinforce our platform for sustainable growth.

Cashflow

Cashflow
Currency: A$ ‘000	FY2020	FY2019
Operating cashflow	20,401	9,958

Net operating cashflow of $20.4 million (FY2019: $10.0 million) reflected the strong operational performance. Net capital expenditure of $12.9 million (FY2019: $15.9 million) represented a $3.0 million decrease from the previous financial year and a $3.2 million increase over the IPO Prospectus Forecast ($9.7 million) due to higher than forecast growth in the USA.

Segment Revenue

Currency: A$ ‘000	FY2020	FY2019		Change
Australia	246,908	200,540	46	23.1%
All other	12,813	27,075	(14)	(52.7%)
USA	13,826	1,030	13	1,242.3%
Total revenue	273,547	228,645	45	19.6%

Summary of Operations by Segment

Australia

The Mader Group in Australia provides specialised contract labour for the maintenance of heavy mobile and fixed plant equipment in the resources industry from an in-house pool of skilled employees. The services provided include maintenance labour, field support (site labour with support vehicles and tools), shutdown teams for major overhauls, offsite repairs and maintenance workshop, training of maintenance teams, and a range of complementary ancillary services.

Headquartered in Perth, the Australian Group have regional offices in Kalgoorlie (WA), Mackay (QLD), Hunter Valley (NSW), and opened its newest office in Adelaide (SA) in February 2020. The Mader Group’s Australian operations actively supply specialist contract labour in all states and territories. The Group also has a workshop in Perth which supports offsite repairs. The workshop also houses a component rebuild program and specialised tool hire with products available to customers nationally.

• Revenue for the year was A$246.9m, as compared to A$200.5m in FY2019.

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United States of America

The Mader Group substantially grew its operations in the USA during the financial year, providing specialised contract labour for the maintenance of heavy mobile equipment across five states. Its USA operations continue to scale benefits returning an average quarterly revenue growth of 60%. Supporting several major customers in the resources industry, the USA operations are active in the strong commodity markets primarily copper, gold and zinc. The services provided include maintenance labour, field support (site labour with support vehicles and tools) and shutdown teams for major overhauls.

The USA Group is headquartered in Colorado, and supplied specialist contract labour during the year in, Nevada, Texas, Arizona, Tennessee and Wyoming.

• Revenue for the year was A$13.8m, as compared to A$1.0m in FY2019.

• The USA operations delivered over 73,319 hours of specialised contract labour during the year to 30 June 2020, up from 10,593 hours in its inaugural year of operation which commenced in January 2019.

Other Segments

The Mader Group International (non-USA) provides specialised contract labour for the maintenance of heavy mobile equipment in the resources industry from an in-house pool of skilled employees. The services provided include maintenance labour, field support (site labour with support vehicles and tools), shutdown teams for major overhauls and training of maintenance teams.

During the year, new workscopes were delivered in Chile, the Philippines and Papua New Guinea. Additionally, specialist contract labour was supplied to existing customers in Mongolia, Laos, Mauritania, Senegal, Cote d’Ivoire, Democratic Republic of the Congo and Zambia.

• Revenue for the year was A$12.8m, as compared to A$27.1m in FY2019.

• Mader International withdrew its expatriate workforce from Africa and Asia during the principal impacts of COVID-19, largely re-mobilising them in Australia. The decision was made to protect the health and safety of its workforce. To date, there have been no confirmed cases of COVID-19 among the Mader Group’s employees.

5

Business Outlook for FY2021

Closing the year with a solid balance sheet, the Mader Group is well positioned to continue its growth trajectory. The Company delivers flexible, fit for purpose and cost effective maintenance solutions to its customers and forecasts high demand for its services in the year ahead.

• Strong macro trends position Mader for continued growth on a global scale:

• Mader is well placed to deal with the challenges of COVID-19

• Positive outlook for maintenance sector with continued strong demand for services

• Mining provinces globally show increased production and maintenance spend

• High market share in strong commodity markets

• Outlook by region:

• Ongoing growth in USA, QLD and NSW supported by strong recruitment environments

• Steady growth in WA with strong demand expected in WA's Pilbara and Goldfields regions and a dedicated focus to increase the delivery of people to WA’s Midwest Region

• Continued development of ancillary strategy to capitalise on growth potential in mature regions

• Tightening labour market in WA offset by a scalable Trade Upgrade Apprenticeship Program with third intake commencing Q2 FY2021

• Strategy to return limited service to customers in Africa and Asia

• Canadian expansion delayed to assess COVID-19 impacts and capitalise on opportunities with growth potential in USA’s Eastern States

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Patrick Conway Chief Executive Officer Mader Group

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Mader Group Limited (ABN 51 159 340 397) and controlled entities

Results for announcement to the market

Preliminary Final Report for the year ended 30 June 2020

Contents
Consolidated statement of profit or loss and other comprehensive income	8
Consolidated statement of financial position	9
Consolidated statement of changes in equity	10
Consolidated statement of cash flows	11
Notes to the consolidated financial statements	12

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Mader Group Limited

Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2020

	NOTE	2020	2019
		$’000	$’000
Revenue	3	273,547	228,645
Cost of sales		(218,804)	(180,721)
Gross profit		54,743	47,924
Distribution expense		(246)	(104)
Marketing expenses		(813)	(780)
Administration expenses		(27,104)	(24,727)
Other operating expenses		(532)	(825)
Operating profit		26,048	21,488
Finance costs		(1,735)	(1,490)
Other income	3	598	421
Profit before income tax		24,911	20,419
Income tax expense		(7,407)	(5,519)
Profit for the year		17,504	14,900
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Foreign currency translation differences		724	(349)
Total comprehensive income for the year		18,228	14,551
Earnings per share
Basic and diluted earnings per share (cents	6	8.75	8.76
per share)

The accompanying notes form part of these financial statements

8

Mader Group Limited Consolidated statement of financial position As at 30 June 2020

As at 30 June 2020
	NOTE	2020	2019
		$’000	$’000
Current assets
Cash and cash equivalents		6,456	3,049
Trade and other receivables		55,049	54,495
Other assets		1,712	1,403
Current tax assets		122	-
Total current assets		63,339	58,947
Non-current assets
Property, plant and equipment	7	32,542	26,247
Right of use of asset		2,587	-
Other assets		392	417
Deferred tax assets		1,848	1,896
Total non-current assets		37,369	28,560
Total assets		100,708	87,507
Current liabilities
Trade and other payables		18,897	24,809
Lease liabilities		491	-
Provisions		1,905	715
Tax liabilities		3,190	2,611
Borrowings		13,765	14,364
Total current liabilities		38,248	42,500
Non-current liabilities
Lease Liabilities		2,096	-
Provisions		-	425
Deferred tax liabilities		1,097	549
Borrowings		11,150	9,864
Total non-current liabilities		14,343	18,838
Total liabilities		52,591	53,338
Net assets		48,117	34,169
Equity
Issued capital	8	2	2
Reserves		(433)	(1,157)
Retained earnings		48,548	35,324
Total equity		48,117	34,169

The accompanying notes form part of these financial statements

9

Mader Group Limited

Consolidated statement of changes in equity For the year ended 30 June 2020

	Note	Issued		Retained	Reserves	Total
		Capital		Earnings
		$’000		$’000	$’000	$’000
Balance at 1 July 2019			2	35,324	(1,157)	34,169
Comprehensive
income/(loss)
Profit for the year			-	17,504	-	17,504
Other comprehensive			-		724	724
income/(loss) for the year
Total comprehensive			-	17,504	724	18,228
income/(loss)for the year
Transactions with owners,
in their capacity as
owners
Dividends paid or provided	6		-	(4,280)	-	(4,280)
for
Total transactions with				(4,280)		(4,280)
owners
Balance at 30 June 2020			2	48,548	(433)	48,117
	Note	Issued		Retained	Reserves	Total
		Capital		Earnings
		$’000		$’000	$’000	$’000
Balance at 1 July 2018			2	31,586	(808)	30,780
Comprehensive
income/(loss)
Profit for the year			-	14,900	-	14,900
Other comprehensive			-	-	(349)	(349)
income/(loss) for the year
Total comprehensive			-	14,900	(349)	14,551
income/(loss)for the year
Transactions with
owners, in their capacity
as owners
Dividends paid or provided	6		-	(11,162)	-	(11,162)
for
Total transactions with				(11,162)	-	(11,162)
owners
Balance at 30 June 2019			2	35,324	(1,157)	34,169

The accompanying notes form part of these financial statements

10

Mader Group Limited

Consolidated statement of cash flows For the year ended 30 June 2020

Mader Group Limited Consolidated statement of cash flows For the year ended 30 June 2020
	NOTE	2020	2019
		$’000	$’000
Cash flows from operating activities
Receipts from customers		272,994	213,518
Payments to suppliers and employees		(244,510)	(199,285)
Interest received		(1,513)	15
Finance costs		(216)	(1,490)
Income tax paid		(6,354)	(2,800)
Net cash provided by operating activities		20,401	9,958
Cash flows from investing activities
Proceeds from sale of plant and equipment		1,108	749
Payments for plant and equipment		(13,969)	(16,660)
Payments for purchase of shares in unlisted		-	(416)
companies
Proceeds from sale of shares in unlisted		-	900
companies
Net cash (used in) investing activities		(12,861)	(15,427)
Cash flows from financing activities
Dividends paid		(4,280)	(9,161)
Payment of lease liabilities		(540)	-
Proceeds from promissory note		846	-
Proceeds from (repayment of) finance		(1,531)	1,262
mortgage borrowings (net)1
Proceeds from chattel mortgage borrowings		12,003	-
Repayment of chattel mortgage borrowings		(10,631)	8,173
Net cash provided by/(used in) financing		(4,133)	274
activities
Net increase/(decrease) in cash held		3,407	(5,195)
Net foreign exchange difference		-	(2)
Cash at the beginning of the financial year		3,049	8,246
Cash at the end of the financial year		6,456	3,049

1. Debtors finance has been reclassified as finance mortgage borrowings.

The accompanying notes form part of these financial statements

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1. Basis of Preparation

The financial report is a general purpose report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. The financial statements and notes also comply with International Financial Reporting Standards.

The financial report has been prepared on a historical cost basis unless otherwise stated in the notes. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand ($000), except when otherwise indicated under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191.

2. Going concern

The Directors have prepared the preliminary final report on a going concern basis, which contemplates the continuity of normal business activities and the realisation of assets and the settlements of liabilities in the ordinary course of business. The Directors believe that at the date of releasing the preliminary final report, there are reasonable and supportable grounds to believe the consolidated entity has sufficient funds to meet its obligations as and when they fall due and are of the opinion that the use of the going concern basis remains appropriate.

3. Revenue

		2020	2019
		$’000	$’000
Operating Revenue
-	Maintenance services	260,434	214,688
-	Hire recoveries	1,793	2,119
-	Direct expense recoveries	11,320	11,838
Total operating revenue		273,547	228,645
Other income
-	Interest income	6	15
-	Other income	592	406
Total other income		598	421

4. Expenses

	2020	2019
	$’000	$’000
Expenses
Depreciation	6,602	3,826
Employee benefits expense	168,602	149,568
Rental expense of operating leases	963	1,153
One-off offer costs	856	908
Finance costs
Interest on debts and borrowings	472	537
Finance charges payable under finance leases	1,047	687
and hire purchase contracts
Total interest expense	1,519	1,224
Other finance costs	216	266

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Total finance costs

1,735

1,490

5. Earnings per share (EPS)

5. Earnings per share (EPS)
	2020	2019
	$‘000	$‘000
Basic and diluted earnings per share (cents)	8.75	8.76
Earnings used in the calculation of basic and diluted	17,504	14,900
earnings per share ($,000)
Weighted average number of ordinary shares
Weighted average number of ordinary shares for the	200,000,000	170,000,001
purpose of basic and diluted earnings per share

Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these financial statements.

6. Dividends

6. Dividends
	2020	2019
	$’000	$’000
Cash dividends on ordinary shares declared and
paid:
Dividends declared and paid during the year	4,280	11,162
Total dividends	4,280	11,162

7. Property Plant and Equipment

	Buildings	Office	Plant	Low value	Total
	and property	furniture and	equipment	pool
		equipment	and motor
	$’000		vehicles		$’000
		$’000	$’000	$’000
2020
Cost	631	1,307	48,111	236	50,286
Accumulated
depreciation	(148)	(543)	(16,873)	(179)	(17,744)
Carrying value as
at 30 June 2020	483	764	31,238	57	32,542
2019
Cost	600	1,179	36,231	209	38,219
Accumulated
depreciation	(70)	(426)	(11,318)	(158)	(11,972)
Carrying value as
at 30 June 2019	530	753	24,913	51	26,247

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8. Issued Capital

				2020		2019
				$’000		$’000
Fully paid ordinary shares	200,000,000	(2019:	200,000,000)		2		2

9. Contingent liabilities

There are no contingent liabilities other than bank guarantees that are issued to third parties arising out of dealings in the normal course of business.

10. Events after the end of the period

Subsequent to 30 June 2020, the Directors declared a final dividend of 0.015 cents per share.

The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it had affected the international operations for the consolidated entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintain social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.

There have been no other matters or circumstances that have arisen after the balance sheet date that have significantly affected, or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods.

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