VERIS LIMITED — Interim / Quarterly Report 2016

Feb 14, 2016

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Appendix 4D

OTOC LIMITED FOR THE HALF YEAR ENDED 31 DECEMBER 2015

The current reporting period is the half-year ended 31 December 2015. The prior reporting period is for the half-year ended 31 December 2014.

	RESULTS ANNOUCEMENT TO THE MARKET 31 DECEMBER 2015
	Change from prior period Revenue 91% Expenses 70% Underlying Profit from operating activities Depreciation and Amortisation 13% Restructuring Costs & Acquisition Costs 204% Share-based Payments 99% Net profit from operating activities 366% Net profit from operating activities after tax attributable to members 956% Net profit after tax for the period attributable to members 956%	$000’s 62,486 53,745
		8,741 2,756 (1,082) 289
		6,778 14,313 14,313

Explanation of Results

OTOC has delivered a strong first half to the 2016 financial year. OTOC’s operating revenue for the period ended 31 December 2015 was $62,486,000; up from $32,649,000 in the prior corresponding period.

Including corporate overheads and non-recurring acquisition costs, the Company recorded a net profit after tax of $14,313,000, compared with a loss after tax of $1,672,000 in the prior corresponding period.

The strong results provide validation of the dual approach taken by the Company; establishing a national professional services business with sustainable earnings; and the re-focusing our infrastructure division to mitigate the resources sector downturn.

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Explanation of Results cont.

The Surveying, Town Planning and Urban Design division continues to perform well, benefiting from growth in the property and civil infrastructure sectors on the East Coast of Australia. Our investments in Victoria, New South Wales and Queensland have ensured solid earnings despite soft market conditions in Western Australia.

The Infrastructure division’s disciplined approach to project execution and evaluation, ongoing civil infrastructure work and reduced cost base has resulted in a marked improvement in EBITDA and provides confidence for the remainder of FY 2016.

The OTOC Limited Group is now undoubtedly a national business; providing quality services to clients in all states and territories across Australia and reaching into the Pacific. OTOC has a strong cash balance of $10.2m at 31 December 2015 and is positioned for further and continued growth.

NTA Backing	31 December 2015	31 December 2014
	cents per share	cents per share
Net tangible assets per ordinary share	6.66 cents	5.04 cents

Dividends declared

No dividends were declared or paid during the period by OTOC Limited.

Dividends or distribution reinvestment plan

OTOC Limited does not currently operate a dividend reinvestment plan.

Associates and joint venture entities

Not applicable.

Foreign entities GAAP applied

Not applicable.

Audit report

This report is based on the interim financial report which has been independently reviewed and is not subject to qualifications.

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OTOC Limited 31 December 2015 Interim Financial Report

OTOC Limited Interim Financial Report December 2015

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CONTENTS
	Page
Directors’ report	3
Condensed consolidated interim financial statements	7
Condensed consolidated statement of financial position	7
Condensed consolidated statement of profit or loss and comprehensive income	8
Condensed consolidated statement of changes in equity	9
Condensed consolidated statement of cash flows	10
Basis of Preparation	11
Notes to the condensed consolidated interim financial statements	12
Directors’ declaration	18
Independent auditor’s report on review of condensed consolidated interim financial	19
report
Lead auditor’s independence declaration	21
Corporate information	22

OTOC Limited Interim Financial Report December 2015

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OTOC Limited 31 December 2015 Interim Financial Report

Directors’ report

The directors of OTOC Limited (the “Company” or “OTOC”) present their report together with the consolidated financial statements of the group comprising OTOC Limited and its controlled entities (together referred to as “the Group”), for the six months ended 31 December 2015 and the review report thereon.

Directors

The directors of the Company at any time during or since the end of the interim period are:

Name Role	Period of Directorship
Non-executive
Derek La Ferla Non-Executive Chairman	Appointed 28 October 2011
Tom Lawrence Non-Executive Director	Appointed 13 October 2011
Karl Paganin Non-Executive Director	Appointed 19 October 2015
Executive
Adam Lamond Executive Director	Appointed 13 October 2011

Derek La Ferla | Non-Executive Chairman

Mr La Ferla is an experienced corporate lawyer and company director with more than 30 years' experience. He has held senior positions with some of Australia's leading law firms, and is currently a Partner with Western Australian firm, Lavan Legal, in the firm's Corporate Advisory Group (which includes mining and resources). He is also a member of the firm's Advisory Board and previously served on the Norton Rose Australia National Board (while the firm was called Deacons). Mr La Ferla is a director of Goldfields Money Limited. Mr La Ferla also serves as the chairman of Sandfire Resources Limited, Cashmere Iron Limited and Threat Protect Australia Limited and has previously served on a number of corporate, professional and not for profit organisation’s boards, including Katana Capital Limited, Deacons Australia, Edge Employment Solutions and The Western Australia Club. He is a fellow of the Australian Institute of Company Directors (“AICD”) and member of the AICD Western Australian Council.

Special Responsibilities

Mr La Ferla is the Chairman of the Nomination and Remuneration Committee and a member of the Audit and Risk Committee.

Directorships in last 3 years

Sandfire Resources Limited (May 2010 – Current) Threat Protect Australia Limited (September 2015 – Current) Goldfields Money Limited (November 2015 – Current)

Interests in Shares

562,500 fully paid ordinary shares

OTOC Limited Interim Financial Report December 2015

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Directors’ report (continued)

Tom Lawrence | Non-Executive Director

Mr Lawrence is a qualified accountant with a Bachelor of Laws and a Masters Degree in taxation. Mr Lawrence was the principal of Lawrence Business Management for over 15 years, providing tax and management advice to a diverse range of businesses. He now works as a solicitor for Capital Legal, advising clients on a broad range of business related transactions.

Special Responsibilities

Mr Lawrence is the Chairman of the Audit and Risk Committee and a member of the Nomination and Remuneration Committee

Directorships in last 3 years

None

Interests in Shares

3,662,596 fully paid ordinary shares

Karl Paganin | Non-Executive Director

Mr Paganin has over 15 years senior experience in Investment Banking, specialising in transaction structuring, equity capital markets, mergers and acquisitions and strategic management advice to listed companies. Mr Paganin was a Director of Major Projects and Senior Legal Counsel for Heytesbury Pty Ltd (the private trading company of the Holmes à Court Family) which was the proprietor of John Holland Group Pty Ltd. Mr Paganin holds degrees in Law (B.Juris, LLB) and Arts (BA) from the University of Western Australia and is a NonExecutive Director of ASX listed Southern Cross Electrical Engineering Limited and Vice Chairman of the not for profit charity, Autism West Support Inc.

Special Responsibilities

Mr Paganin is a member of the Nomination and Remuneration Committee, Audit and Risk Committee and OHS Committee.

Directorships in last 3 years

Southern Cross Electrical Engineering Ltd (June 2015 – current)

Interests in Shares

4,746,929 fully paid ordinary shares

Adam Lamond | Executive Director

Mr Lamond is a qualified electrician and electrical contractor with over 20 years of experience in the mining industry. Mr Lamond has particular expertise in the electrical trade and camp installations in remote Western Australia.

Mr Lamond began his career in the mining industry in 1995, working for a private electrical contractor and subsequently as a sub-contractor.

He founded his own electrical contracting business in 2003 before merging it with several other private contracting businesses to form Ocean to Outback Contracting Pty Ltd (OTOC), and held the position of Chief Executive Officer. Mr Lamond was Chief Executive Officer of the Company from 13 October 2011 to 31 January 2014.

Directorships in last 3 years

None

Interests in Shares

53,776,815 fully paid ordinary shares

OTOC Limited Interim Financial Report December 2015

5

Directors’ report (continued)

Principal Activities

OTOC Limited (ASX: OTC) offers surveying, planning and infrastructure services throughout Australasia. A leading provider of professional consulting and innovative spatial solutions, OTOC delivers quality service to clients across a range of industry sectors – including land development, infrastructure and engineering surveying, aerial mapping, laser scanning, town planning and urban design in addition to providing infrastructure construction and maintenance services to clients covering government, resources, utilities, remote area and renewable energy.

Review of operations

OTOC has delivered a strong first half to the 2016 financial year. OTOC’s operating revenue for the period ended 31 December 2015 was $62,486,000; up from $32,649,000 in the prior corresponding period.

Including corporate overheads and non-recurring acquisition costs, the Company recorded a net profit after tax of $14,313,000, compared with a net loss after tax of $1,672,000 in the prior corresponding period.

The Surveying, Town Planning and Urban Design division recorded a 102% increase in operating profit to $4,696,000. This was achieved by an increase in revenue of approximately 57% to $25,476,000, having all acquisitions on board for the full half plus synergies resulting from integration activities.

The strong results provide validation of the dual approach taken by the Company; establishing a national professional services business with sustainable growth; and broadening the focus of OTOC’s infrastructure division to mitigate the resources sector downturn.

The Surveying, Town Planning and Urban Design division continues to perform well, benefiting from growth in the property and civil infrastructure sectors on the East Coast of Australia. OTOC’s investments in Victoria, New South Wales and Queensland have ensured solid earnings growth despite soft market conditions in Western Australia.

In Victoria, through Bosco Jonson, OTOC have enjoyed continued buoyancy in the Melbourne CBD and suburban property development sectors due to a dedicated focus on strategic client relationships and understanding of the needs of the state’s capital.

In Queensland, through THG, OTOC has responded positively to significant economic adjustment and a downturn in business confidence. THG has secured involvement in one of the largest growth areas within South East Queensland through appointment as town planners, surveyors and urban designers on the Undullah project. Through the utilisation of the Groups increasing presence and cross selling of opportunities, THG have also secured a noteworthy contract with BMP Corporation on Night Edge; a 17 storey residential tower in Fortitude Valley.

In New South Wales, the appointment of Geo-Metric as the surveying services partner on the A$2.1b Sydney light rail project is evidence of the Groups involvement in significant infrastructure projects shaping our landscape and is testament to the focus and determination evident across the entire Group.

Western Australia has seen a worsening economic environment as a result of the decline in price of resources. In response, Whelans has strived to become more efficient in core markets, while remaining nimble enough to seek out further market share in locations which present the greatest opportunities. This strategy is demonstrated with the securing of the survey for the 64 Square Kilometre Array east of Geraldton.

OTOC’s Infrastructure division, OTOC Australia, contributed $5,977,000 of underlying profit from operating activities, compared to $80,000 for the same period last year. This improvement can be attributed to OTOC Australia’s disciplined approach to project execution and evaluation, ongoing civil infrastructure work and reduced overheads.

OTOC Limited Interim Financial Report December 2015

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Directors’ report (continued)

OTOC Australia's diversified approach to new business can be seen in projects such as installation of a permanent settlement village, hospital and school at Nauru for Canstruct; procurement services, equipment supply and installation of a 10.6MW solar power system for Juwi Renewable; and installation and commissioning of a fibre optic ring at Perth Airport for Air Services Australia. These projects all contributed to the strong result in the first half of the year.

The OTOC Limited Group is a national business; providing quality services to clients across Australia and reaching into the Pacific. Furthermore OTOC has a strong cash balance of $10.2m at 31 December 2015 and is positioned for further and continued growth.

Lead auditor’s independence declaration

The lead auditor’s independence declaration is set out on page 18 and forms part of the directors’ report for the six months ended 31 December 2015.

Rounding off

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the condensed consolidated interim financial statements and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors:

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Derek La Ferla

Chairman

Dated at Perth this

12 day of February 2016

OTOC Limited Interim Financial Report December 2015

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Condensed consolidated statement of financial position

Note Assets Current assets Cash and cash equivalents Trade and other receivables Work in progress Other current assets Current tax asset Total current assets Non-current assets Plant and equipment Intangible assets Deferred tax asset Total non-current assets Total assets Liabilities Current Liabilities Trade and other payables Deferred vendor payments 2 Loans and borrowings Employee benefits Current tax liabilities Total current liabilities Non-current liabilities Loans and borrowings Deferred vendor payments 2 Employee benefits Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Share based payment reserve 4 Retained earnings Total equity	31 Dec 2015	30 Jun 2015 $000 10,182 15,106 2,839 2,065 -
	$000
	10,158
	20,005
	9,091
	1,051
	162
	40,467	30,192
		7,899 30,358 -
	7,718
	29,090
	5,097
	41,905	38,257
	82,372	68,449
		6,910 5,262 6,125 3,061 1,721
	13,850
	2,702
	9,194
	3,521
	-
	29,267	23,079
		9,915 2,038 408 926
	4,320
	1,700
	400
	-
	6,420	13,287
	35,687	36,366
	46,685	32,083
	22,155	22,155 399 9,529
	688
	23,842
	46,685	32,083

The condensed notes on pages 12 to 17 are an integral part of these condensed consolidated interim financial statements.

OTOC Limited Interim Financial Report December 2015

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Condensed consolidated statement of profit or loss and comprehensive income

For the six months ended 31 December 2015

Note Continuing operations Revenue Expenses Depreciation Amortisation Acquisition related cost/income Restructuring costs Share-based payment Results from operating activities Financial income Finance costs Net finance costs Profit (loss) before income tax Income tax benefit (expense) 5 Profit (loss) from continuing operations Profit (loss) for the period Total comprehensive income (loss) for the period Earnings per share Basic earnings (loss) cents per share Diluted earnings (loss) cents per share	2015	2015
	$000	$000 32,649 (31,570)
	62,486
	(53,745)
	8,741	1,079 (1,849) (589) (813) (232) (145)
	(1,256)
	(1,500)
	1,082
	-
	(289)
		(2,549) 63 (424)
	6,778
	38
	(420)
		(361)
	(382)
		(2,910)
	6,396
		1,238
	7,917
		(1,672)
	14,313
		(1,672)
	14,313
		(1,672)
	14,313
	5.42	(0.77)
	5.42	(0.77)

The condensed notes on pages 12 to 17 are an integral part of these condensed consolidated interim financial statements.

OTOC Limited Interim Financial Report December 2015

Condensed consolidated statement of changes in equity

For the six months ended 31 December 2015

Note Balance at 1 July 2015 Total comprehensive income for the period Income for the period Total comprehensive loss for the period Transactions with owners of the Company, recognised directly in equity Issue of ordinary shares Share-based payment transactions 4 Total transactions with owners of the Company Balance at 31 December 2015 For the six months ended 31 December 2014 Balance at 1 July 2014 Total comprehensive loss for the period Loss for the period Total comprehensive loss for the period Transactions with owners of the Company, recognised directly in equity Issue of ordinary shares Share-based payment transactions Total transactions with owners of the Company Balance at 31 December 2014		Share Capital Share Based Payment Reserve Retained Earnings Total Equity $000 $000 $000 $000 22,155 399 9,529 32,083 - - 14,313 14,313 - - 14,313 46,396 - - - - - 289 - 289 - 289 - 289 22,155 688 23,842 46,685 Share Capital Share Based Payment Reserve Retained Earnings Total Equity $000 $000 $000 $000 9,188 - 18,315 27,503
		- - (1,672) (1,672)
		- - (1,672) 25,831
		12,675 - 12,675 143 - 143
		12,675 143 - 12,818
		21,863 143 16,643 38,649

The condensed notes on pages 12 to 17 are an integral part of these condensed consolidated interim financial statements.

OTOC Limited Interim Financial Report December 2015

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Condensed consolidated statement of cash flows

For the six months ended 31 December 2015

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Cash generated from operations Interest paid Interest received Net cash from operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Deferred vendor payment Acquisition of subsidiaries net of cash acquired Net cash (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings and lease liabilities Proceeds from share issues (net of costs) Net cash (used in) from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 31 December	2015	2014 $000 48,092 (37,971)
	$000
	57,583
	(51,584)
	5,999	10,121 (424) 63
	(420)
	38
	5,617	9,760
		243 (1,460) - (19,592)
	284
	(1,174)
	(1,648)
	-
	(2,538)	(20,809)
		9,060 (1,622) 9,868
	-
	(3,103)
	-
	(3,103)	17,306
		6,257 6,803
	(24)
	10,182
	10,158	13,060

The condensed notes on pages 12 to 17 are an integral part of these consolidated interim financial statements.

OTOC Limited Interim Financial Report December 2015

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BASIS OF PREPARATION

Reporting entity

OTOC Limited (the “Company” or “OTOC”) is a for-profit company domiciled in Australia. The condensed consolidated interim financial statements of the Company as at and for the six months ended 31 December 2015 comprises the Company and its subsidiaries (together referred to as the “Group”). The Group is a diversified infrastructure and survey solutions company.

The consolidated annual financial statements of the Group as at and for the year ended 30 June 2015 are available upon request from the Company’s registered office at Level 12, 3 Hasler Road Osborne Park WA 6017 or at www.otoc.com.au

Statement of Compliance

The condensed consolidated interim financial statements are general purpose financial statements prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001, and with IAS 34 Interim Financial Reporting .

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 30 June 2015. The consolidated interim financial statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated annual financial statements of the Group as at and for the year ended 30 June 2015.

These condensed consolidated interim financial statements were approved by the Board of Directors on 12 February 2016.

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with the Class Order, amounts in the consolidated interim financial statements have been rounded off to the nearest thousand dollars, unless otherwise stated.

Judgements and estimates

Preparing interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 June 2015.

Significant accounting policies

The accounting policies applied by the Group in the condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 30 June 2015.

OTOC Limited Interim Financial Report December 2015

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NOTES

1. Operating segments

The Group has two reportable segments that are being managed separately by the service provided as described below:

• Surveying – provides surveying, mapping and town planning services.

• Infrastructure – provides construction and installation services.

Information regarding the results of each reporting segment is detailed below for the six months ended 31 December.

Information about reportable segments

Revenues Inter-segment revenues External revenues Costs Inter-segment costs External costs Underlying profit from operations1 Depreciation Segment profit (loss) before amortisation, acquisition, restructuring, finance costs and income taxes Amortisation Segment profit (loss) before acquisition, restructuring, finance costs and income taxes Segment assets Segment liabilities	Surveying Infrastructure Total
	2015 2014 2015 2014 2015 2014 $000 $000 $000 $000 $000 $000 25,476 16,255 37,876 17,075 63,352 33,330 (827) (332) (39) (349) (866) (681)
	24,649 15,923 37,837 16,726 62,486 32,649 (20,072) (13,932) (32,607) (16,987) (52,679) (30,919) 119 339 747 342 866 681
	(19,953) (13,593) (31,860) (16,645) (51,813) (30,238) 4,696 2,330 5,977 80 10,673 2,410 (970) (769) (282) (1,060) (1,252) (1,829)
	3,726 1,561 5,695 (980) 9,421 581 (1,500) (589) - - (1,500) (589)
	2,226 972 5,695 (980) 7,921 (8) Dec 2015 June 2015 Dec 2015 June 2015 Dec 2015 June 2015 $000 $000 $000 $000 $000 $000 47,872 50,767 27,618 11,941 75,490 62,708
	9,563 12,753 16,886 10,081 26,449 22,834

Revenue from two major customers of the Group (Juwi Renewable Energy Pty Ltd and Canstruct Pty Ltd), individually representing more than 10% of total Group revenue, represented approximately $31.6 million during the six months ended 31 December 2015. (2014: two major customers of more than 10% representing approximately $15.3 million).

1 Underlying profit from operations is defined as underlying profit before depreciation, amortisation, acquisition related costs/income, restructuring costs, finance costs and income taxes.

OTOC Limited Interim Financial Report December 2015

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1. Operating segments (continued)

Reconciliations of reportable segment revenues, profit or loss, assets and liabilities

Revenues Total revenue for reportable segments Elimination of inter-segment revenue Consolidated revenue Expenses Total expenses for reportable segments Elimination of inter-segment costs Unallocated amounts - other corporate expenses Consolidated expenses Profit (loss) Total profit (loss) for reportable segments before amortisation, restructuring, finance costs and taxes Unallocated amounts - other corporate expenses Amortisation Acquisition related cost/income Restructuring costs Net finance expense Consolidated profit (loss) before income taxes Assets Total assets for reportable segments Other unallocated amounts Consolidated total assets Liabilities Total liabilities for reportable segments Other unallocated amounts Consolidated total liabilities	2015 2014 $000 $000 63,352 33,330 (866) (681)
	62,486 32,649 52,679 30,919 (866) (681) 1,932 1,332
	53,745 31,570 9,421 581 (2,225) (1,496) (1,500) (589) 1,082 (813) - (232) (382) (361)
	6,396 (2,910)
	Dec 2015 June 2015 75,490 62,708 6,882 5,741
	82,372 68,449
	26,449 22,834 9,238 13,532
	35,687 36,366

2. Acquisitions

During the prior period, the Company made three acquisitions as part of its national surveying and strategic plan as detailed below:

Acquisition of business – Bosco Jonson Pty Ltd

On 30 September 2014, the Group acquired the assets of Bosco Jonson Pty Ltd, a leading Victorian surveying, town planning and urban design business. The acquisition was made via a wholly owned subsidiary, Victoria Survey Pty Ltd. Following completion of the acquisition Victoria Survey Pty Ltd changed its name to Bosco Jonson. Consideration paid was $12.67 million cash, issue of $1.0 million ordinary shares and potential future performance consideration of up to $3.0 million, subject to the achievement of financial hurdles.

As part of the purchase price the Company has agreed to pay the vendors of Bosco Jonson an earn-out of $3.0 million in two tranches. Tranche 1 allows for $1.5 million to be paid in Period 1 from 1 October 2014 to 30 September 2015 if the EBITDA of the business during Period 1 is $3.5 million. Tranche 2 allows for $1.5 million to be paid in Period 2 from 1 October 2015 to 30 September 2016 if the EBITDA of the business during Period 2 is $3.5 million. A full provision of $3.0 million has been recognised as deferred consideration at acquisition on the basis that management forecasts targets will be reached. If the targets are not reached, the fair value amount of the deferred consideration will be reduced in accordance with the asset sale agreement. Tranche 1 of $1.5 million has been paid. The Group incurred acquisition related costs of $0.45 million relating to external legal fees, due diligence and travel costs. These amounts have been included in acquisition costs in the prior period

OTOC Limited Interim Financial Report December 2015

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2. Acquisitions (continued)

Acquisition of subsidiary – Geo-metric Surveying Pty Ltd

On 5 December 2014, the Group acquired 100% of the issued shares of Geo-metric Surveying Pty Ltd, a specialist provider of surveying solutions for civil infrastructure (railways, tunnels, bridges and roads) and resources projects. Consideration paid was $7.0 million cash and $2.283 million in new fully paid ordinary shares in OTOC.

As part of the purchase price the Company has agreed to pay Geo-metric a milestone payment of $2.5 million in two payments. Milestone Payment 1 allows for $1.25 million to be paid (50% cash, 50% shares) in Period 1 from February 2015 to January 2016 if EBIT of the business is $3.0 million in Period 1. Milestone Payment 2 allows for $1.25 million to be paid (50% cash, 50% shares) in Period 2 from February 2016 to January 2017 if EBIT of the business is $3.0 million in Period 2. A full provision of $2.5 million was recognised as deferred consideration at acquisition on the basis that management forecasts targets will be reached. If the targets are not reached, the fair value amount of the deferred consideration will be reduced in accordance with the share purchase agreement. During the 6 months to December 2015, acquisition costs include the reversal of a deferred vendor payment of $1.25 million.

Acquisition of subsidiary – THG WSG PTY LTD

On 14 May 2015, the Group acquired the assets and business of THG WSG Pty Ltd (trading as ‘THG Resource Strategists’, ‘Whitsunday Surveys’ and ‘Charles O’Neill Surveyors and Planners’) (‘THG’). THG is a leading Queensland surveying and planning consultancy business. The acquisition was made via a wholly owned subsidiary, Queensland Surveying Pty Ltd. Consideration paid was $2.1 million cash, issue of $0.3 million ordinary shares and potential future performance consideration of up to $1.8 million, subject to the achievement of financial hurdles.

As part of the purchase price the Company has agreed to pay the vendors of THG performance payments of up to $1.8 million cash in two tranches payable over 2 years subject to meeting certain EBIT hurdles of at least $0.8 million in a performance period. A full provision of $1.8 million has been recognised as deferred consideration at acquisition on the basis that management forecasts targets will be reached. If the targets are not reached, the fair value amount of the deferred consideration will be reduced in accordance with the asset sale agreement.

The Group incurred acquisition related costs of $0.27 million relating to external legal fees, due diligence and travel costs. These amounts have been included in acquisition costs in the prior period.

3. Financial instruments

The Group’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 30 June 2015. For further information on deferred vendor payments refer to Note 2.

OTOC Limited Interim Financial Report December 2015

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4. Share-based payments

As at 31 December 2015, the Group had the following share-based payment arrangements.

On 3 November 2014 shareholders approved the Group’s Long Term Incentive Plan established to motivate, retain and reward executives. On 12 November 2014, the Group granted Performance Rights to eligible employees under the Plan. On 17 November 2015, shareholders approved a further grant to key executives and on the 8 December 2015 the Board approved a further grant to executives on similar terms. Subject to continued employment and achievement of financial performance hurdles (relative total shareholder return and compounded earnings per share growth), the Performance Rights approved to be granted during the 6 months ended 31 December 2015 will vest as follows:

	Number of Performance Rights approved to be granted during HY2016
Grant Date(A)		Vesting Date(B)
			Vesting Hurdles(C)
			50% rTSR		50%	EPS CAGR
17 Nov 2015	2,239,414	30 Jun 2017	<50thpercentile	Nil	<5%	Nil
17 Nov 2015	11,502,559	30 Jun 2018	>50th percentile, <75th percentile	50%, plus 2% for every one percentile increase above 50thpercentile	>5%- <20%	pro rata vesting between 25%- 100%
8 Dec 2015	5,902,975	30 Jun 2018	75thpercentile or more	100%	20%>	100%
	19,644,948

(A) The Grant of 13,741,973 Performance Rights was approved by Shareholders on 17 November 2015 and the Grant of 5,902,975 Performance Rights was approved by the Board on 8 December 2015. The issue of the Performance Rights took place subsequent to the period end on 20 January 2016.

(B) Subject to the achievement of the performance hurdles, on vesting, Performance Rights will automatically convert to ordinary shares on a one for one basis. Performance Rights that do not vest will lapse.

(C) The board believes the relative Total Shareholder Return (rTSR) performance hurdle alongside the use of Compounded Earnings per Share Growth (EPSCAGR) provides the appropriate balance between relative and absolute company performance. These performance measures are mutually exclusive, meaning, that if one measure is not met, there is still the ability to earn an LTI under the other measure. rTSR is measured against the total shareholder return relative to the ASX All Ordinaries Index.

As the Company had been lacking a long term incentive plan until the introduction of the Plan in 2014, the Board has adopted a transitional vesting approach for the grant of rights to long standing Executives as follows: - 25% (Tranche 1) will vest in 2 years (based on performance from 1 July 2015 to 30 June 2017); and - 75% (Tranche 2) will vest in 3 years (based on performance from 1 July 2015 to 30 June 2018).

The vesting for the grant of rights to Executives appointed during FY 2015 is as follows:

• 100% (Tranche 3) will vest in 3 years (based on performance from 1 July 2015 to 30 June 2018).

OTOC Limited Interim Financial Report December 2015

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4. Share-based payments (continued)

(a) Measurement of Fair Values of Share-Based Payments

The fair value of the Performance Rights issued under the Group’s Long Term Incentives Plan during the six months to 31 December 2015 has been measured using the Monte Carlo simulation model incorporating the probability of the relative TSR vesting condition being met. The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payments plans were as follows:

			Tranche 2	Tranche 2
	Tranche 1				Tranche 3
Performance Measure
	rTSR	EPSCAGR	rTSR	EPSCAGR	rTSR	EPSCAGR
Share price at grant date	$0.175	$0.175	$0.175	$0.175	$0.175	$0.175
Exercise price	N/A	N/A	N/A	N/A	N/A	N/A
Volatility	85%	85%	85%	85%	85%	85%
PerformancePeriod	1Jul 2015	–30 Jun 2017	1Jul 2015–	30 Jun 2018	1Jul 2015–	30 Jun 2018
Risk Free Rate	2.06%	2.06%	2.13%	2.13%	2.13%	2.13%
Remaining Life	1.62 years	1.62 years	2.62 years	2.62 years	2.56 years	2.56 years
Fair value at grant date	$0.173	$0.175	$0.169	$0.175	$0.170	$0.175

The measure of expected volatility used is the annualised standard deviation of the historical TSR for OTOC and each constituent of the ASX All Ords for the length of time equal to the corresponding vesting period prior to the grant date.

(b) Unvested Unlisted Performance Rights

Of the 10,517,963 Performance Rights issued on 12 November 2014, 1,920,000 lapsed during FY2015 due to termination of employment and 2,149,490 lapsed during the period due to not meeting the financial hurdles. 6,448,473 of these remain unvested at 31 December 2015. All of the 19,644,948 additional Performance Rights approved to be issued during the 6 months to 31 December 2015 remain unvested at 31 December 2015. No Performance Rights will vest until the Board notifies the employee and provides a vesting notification advising them that the Performance Rights have vested.

5. Tax benefit (expense)

Tax expense is recognised based on Management’s best estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period.

Reconciliation of effective tax rate:

Profit (loss) before income tax Income tax at 30% (2014: 30%) Add (less) tax effect of: Other non-allowable /assessable items Adjustments for prior periods	2015 2014 $000 $000 6,396 (2,910) 1,919 (873) (2,127) 314 (7,709) (679)
	(7,917) (1,238)

OTOC Limited Interim Financial Report December 2015

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5. Tax benefit (expense) (continued)

The Company has provided construction and installation services external to Australia through a permanent establishment in another country. The earnings from this permanent establishment are subject to the taxation regime within that country and are considered exempt from Australian income tax. This income has been previously included in the Company’s assessable income for Australian Taxation. The Company has lodged amended income tax returns for the relevant years, which has resulted in an income tax credit of $7.0 million being recognised in the statement of comprehensive income and a deferred tax asset of $7.0 million being reflected in the balance sheet as at 31 December 2015. Whilst these amended returns remain subject to normal Australian Taxation compliance, the Directors are satisfied with this position based on specialist advice.

The Research and Development claim for the financial year 2015 of $0.5 million is booked as part of the adjustment for prior periods.

6. Subsequent event

No significant subsequent events occurred since the end of the period.

OTOC Limited Interim Financial Report December 2015

18

OTOC Limited

Directors’ Declaration

In the opinion of the directors of OTOC Limited (“the Company”):

1. the condensed consolidated financial statements and notes set out on pages 7 to 17, are in accordance with the Corporations Act 2001 including:

2. (a) giving a true and fair view of the Group’s financial position as at 31 December 2015 and of its performance for the six month period ended on that date; and

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

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

Signed in accordance with a resolution of the directors:

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Derek La Ferla

Chairman

Dated at Perth this 12 day of February 2016

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Independent auditor’s review report to the members of OTOC Limited

Report on the financial report

We have reviewed the accompanying interim financial report of OTOC Limited, which comprises the condensed consolidated statement of financial position as at 31 December 2015, condensed consolidated statement of profit or loss and comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the half-year ended on that date, notes 1 to 6 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the half-year’s end or from time to time during the half-year period.

Directors’ responsibility for the interim financial report

The directors of the company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the interim financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 31 December 2015 and its performance for the interim period ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of OTOC Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of OTOC Limited is not in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the Group’s financial position as at 31 December 2015 and of its performance for the half-year ended on that date; and

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

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KPMG

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R Gambitta Partner

Perth

12 February 2016

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of OTOC Limited

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2015 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the review.

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KPMG

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R Gambitta Partner

Perth

12 February 2016

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

OTOC Limited Interim Financial Report December 2015

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Corporate Information

The registered office of the company is:

OTOC Limited Level 12, 3 Hasler Road Osborne Park WA 6017

The principal place of business is:

OTOC Limited Level 12, 3 Hasler Road Osborne Park WA 6017 Telephone: (08) 9317 0600