ANNUAL
REPORT
ABN 35 111 210 390
AUSTRALIAN BUSINESS NUMBER
35 111 210 390
ASX CODE
DCG
REGISTERED ADDRESS
20 Parkland Road
Osborne Park
WA 6017
Tel: +61 8 9368 8877
ANNUAL GENERAL MEETING
Shareholders are advised that the Decmil Group Limited
2017 Annual General Meeting (AGM) will be held on
1st November 2017 at Decmil Head Office 20 Parkland
Road, Osborne Park, Western Australia, commencing at
10.00am (AWST).
www.decmil.com
ABOUT THIS REPORT
This Annual Report is a summary of Decmil Group Limited’s
(ASX: DCG) (“Decmil” or “Company”) operations, activities
and financial position as at 30 June 2017.
Decmil Group Limited (ABN 35 111 210 390) is the parent
Company of the Decmil Group of companies. In this report,
unless otherwise stated, references to ‘Decmil’, ‘DGL’ and
‘the Company’, and ‘we’, ‘us’ and ‘our’ refer to Decmil Group
Limited and its controlled entities.
References in the report to ‘the year’ or ‘the reporting
period’ relate to the financial year, which is 1 July 2016 to
30 June 2017, unless otherwise stated. All dollar figures are
expressed in Australian currency.
In an effort to reduce its impact on the environment, Decmil
will only post printed copies of this Annual Report to those
shareholders who elect to receive one through the share
registry. An electronic copy of this Annual Report will be
available on our website at www.decmil.com
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
Contents
OUR COMPANY
About Us
Our Expertise
Vision and Values
A MESSAGE FROM OUR LEADERS
A Letter from Bill
A Letter from Scott
WHAT MATTERS MOST TO US
People and Culture
Health, Safety & Environment
Decmil in the Community
FINANCIAL REPORT
Directors’ Report
Auditor’s Independence Declaration
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Information for Listed Public Companies
Corporate Directory
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PAGE 1
DECMIL GROUP LIMITED ANNUAL REPORT 2017
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES ABOUT US
Decmil has been a publicly listed company on the Australian Stock Exchange since 2005
(ASX code DCG).
Since our establishment in 1978, Decmil has
remained an Australian owned business that is
focussed on providing full cycle construction and
engineering project delivery. Many things have
changed since our establishment, but the foundations
of our business remain the same. Our vision, “To
be the market leader in project delivery, achieving
sustainable growth through the quality of our
people and the strength of our relationships”
remains relevant and vital to our ongoing success.
We have offices in Perth, Western Australia;
Brisbane, Queensland; Melbourne, Victoria; and
Auckland, New Zealand, supporting our project
delivery teams spread across Australia and New
Zealand. Our offices also support our operations
across South Australia, Northern Territory, New
South Wales, Papua New Guinea and other
neighbouring countries when required.
Our business specialises in design, construction
and engineering, project delivery, accommodation
services and telecommunications.
As respected leaders in complex project delivery,
Decmil offers a diversified range of services to
the infrastructure, renewable energy and natural
resources sectors. For close to 40 years, and often
in remote and challenging locations, we have
collaborated with clients to deliver projects ranging
in capabilities from non-process infrastructure,
fuel, structural mechanical and piping, transport,
accommodation, wind, solar and battery.
Our clients vary from government sectors in
defence, immigration and health to blue chip clients
in the resources, commercial and industrial sectors.
We work closely with our clients to achieve unique,
innovative and cost-effective solutions.
We are committed to outstanding project
management and delivery regardless of the scale or
the intricacy of the work.
PAGE 3
DECMIL GROUP LIMITED ANNUAL REPORT 2017SECTION: OUR COMPANY OUR EXPERTISE
Decmil specialises in a range of design, engineering and construction capabilities which feed
into our three key pillar sectors namely Infrastructure, Renewables and Resources.
INFRASTRUCTURE
Decmil has significant experience in infrastructure
engineering and construction, delivering
multidisciplinary projects in sectors such as
transport, defence & detention and buildings.
We deliver major infrastructure projects across
Australia, New Zealand and Asia Pacific. Our extensive
experience in project delivery has allowed us to foster
relationships with infrastructure asset owners.
Our capabilities include bulk earthworks, road
construction and maintenance, subdivisions,
bridgeworks and environmental remediation
and engineering. Through combining a wide
range of skills with new and unique methods and
technologies we are able to deliver innovative, cost-
effective projects in a timely and safe manner.
Our robust quality management controls and
systems enable us to deliver the high integrity
products required by our clients and their
customers. Our proven record of project delivery
across the infrastructure market reaffirms our
position as a leading contractor in the supply of
high quality complex fabrication, site civil works and
associated construction.
RENEWABLES
Decmil offers a range of feasibility, engineering,
project management and construction services for
the Renewable Energy sector across Australia and
New Zealand.
From scoping studies through to design, approvals,
delivery and operations, Decmil is able to optimise
all stages of the development process to provide our
clients with a cost effective and streamlined delivery
solution. Our established management systems and
best practice project delivery techniques provide
certainty of delivery for our clients.
RESOURCES
From setting new standards in workforce
accommodation, non-process infrastructure,
structural mechanical and piping, construction
management, civil construction such as roads
and bridges, processing units and systems, to
engineering infrastructure for power delivery
management, Decmil has an extensive record of
achievement in the resources industry.
We also specialise in construction and engineering
associated with supporting Coal Seam Gas (CSG)
and Liquified Natural Gas (LNG) Projects. Decmil
works with oil & gas industry clients to construct
wellsites, downstream processing components,
gas compressors and gas plants, non-process
infrastructure such as control rooms, substations
and workshops, and accommodation facilities.
We are innovative in our approach and have the
expertise to create whole-of-project solutions.
Companies choose to work with us as we are holistic
and collaborative and we engineer the best design
and construct solutions for our clients.
Having worked with many of the world’s leading
mining and resource companies on major projects, we
understand the challenges of remote areas, complex
projects and tight budgets, and we work closely with
all stakeholders to achieve the desired outcomes.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES VISION AND VALUES
OUR VISION
To be the market leader in project delivery, achieving sustainable growth through the quality of
our people and the strength of our relationships.
OUR VALUES
INTEGRITY
We are honest in all aspects and
treat people with respect
and dignity.
EXCELLENCE
We strive to deliver results that
stretch our capabilities.
ACCOUNTABILITY
We take responsibility and
accountability for our actions
and hold others to account.
TEAMWORK
We work together and support
each other to achieve our goals.
PAGE 5
DECMIL GROUP LIMITED ANNUAL REPORT 2017SECTION: OUR COMPANY DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES A LETTER FROM BILL
The 2017 financial year represented a year of stabilisation for the Group following the
significant decline in revenue experienced in the 2016 financial year.
Whilst the 2017 financial year will not deliver revenue
growth or on earnings expectations, it has provided
the Group with the opportunity to bed down the
strategies developed over the past few years.
Decmil’s strategy remains based on an overall
ambition to build a diverse and strong construction
and engineering business focussing on three key
sector pillars namely Infrastructure, Resources and
Renewables.
As part of the ongoing development of the business
a number of key opportunities have been originated
that have the potential to underpin growth in
revenue in FY18. Some of these opportunities are
listed below:
▪
▪
▪
▪
Construction commenced on the Group’s first
large scale solar project - the Gullen 10MW
project for Goldwind;
Through Cut & Fill being short-listed to 1 of
3 for the OSARS PPP in Victoria as part of the
Lendlease led consortium in a joint venture for
the project delivery;
Development of opportunities with regards to
brownfield prison expansions, with a modular
approach to construction; and
Execution of an MOU with SolarReserve to
develop a 70MW solar PV project in NSW, likely
to start in 2018.
We see ourselves as part of the communities in
which we operate, and as such we strive to be
a positive, active and contributing participant
in community life. Decmil’s Corporate Social
Responsibility program, Decmil in the Community,
is about giving back, helping people in need and
supporting local communities.
We do this through charity events, corporate
friendships, charity partnerships, volunteering
and donating. Decmil strives to make a broad and
meaningful contribution to the communities in
which we operate through these mechanisms.
In closing, it has been a tough year
but the Board and executive team
believe that the measures we
have taken in the past year have
placed the business in a strong
position for the future. I would
like to take this opportunity on
behalf of the Board to thank
our loyal shareholders for
their ongoing support and
our employees for their
dedication to Decmil.
The transformation that occurred in recent years
has created a more diverse and sustainable national
business.
Bill Healy
CHAIRMAN
The Group enters FY18 with the benefit of having
bedded down the new market entry strategies
executed in recent years (organic and inorganic
strategies), combined with the business re-focussing
on its three key market pillars.
In addition to our business ambitions, Decmil is
also committed to being a good corporate citizen
by taking responsibility for all our social, ethical and
environmental actions.
SECTION: A MESSAGE FROM OUR LEADERS
PAGE 7
DECMIL GROUP LIMITED ANNUAL REPORT 2017 DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES A LETTER FROM SCOTT
Operations in the 2017 financial year reflected the diversification of the Group in recent years,
with project activity spanning a number of sectors.
These include; WA iron ore sustaining capital works,
Queensland coal seam gas upstream maintenance,
Defence enabling infrastructure, road and bridge
projects for State road authorities, renewable energy
and telecommunications. Key highlights include:
▪
▪
▪
Sustaining capital work in the WA iron ore
Sector including a logistics hub for BHP at Port
Hedland, an airstrip and associated facilities at
Cape Preston for Sino Iron and various works
for Samsung C&T at the Roy Hill project. Also
new projects for Fortescue and at Rio Tinto’s
Nammuldi and Silvergrass projects;
Enabling infrastructure works at a number of the
Australian Defence Force bases and facilities;
The Group’s first substantial renewable energy
project, being an engineer, procure and
construct (EPC) contract for a 10MW solar farm
and a two year operation and maintenance
contract near Goulburn in New South Wales;
▪ Ongoing wellhead installation, brownfield
maintenance and miscellaneous works for QGC
in the Queensland coal seam gas sector;
▪ Work in New Zealand for the Ministry of
▪
▪
Education with school projects in Christchurch
and Auckland and securing the first project with
the New Zealand Defence Force at Kauri Point;
A variety of road and bridge projects by Cut &
Fill predominantly for Vic Roads including the
Sand Road Interchange, the Monash Freeway
Bridge Strengthening project and the Sneydes
Road Interchange; and
A contract with NSW Health Infrastructure for
the redevelopment of a regional medical facility
including the diversion of services, demolition
of existing structures and the construction of a
new temporary medical centre.
Decmil has been evolving over the past few years,
however basic principles we continue to follow are:
▪
▪
Preserving our balance sheet strength;
Continuing sustainable diversification;
▪
▪
Sensible investment in people and capability; and
A focus on costs at every level in the business.
Going into FY18 the Group is also seeing an
improvement in market conditions across a number
of its key sectors including:
▪ Natural Resources: Sustaining capital works
▪
▪
and replacement tonnage projects starting to
activate in the WA Iron Ore market;
Infrastructure: Significant opportunity in the
Transport sector in Victoria where the
Group is actively pursuing new
road and bridge projects as
both head contractor and in
joint ventures. Also, significant
opportunity in the Defence
sector, New Zealand and in
new sectors for Decmil such
as Corrections; and
Renewable Energy: Actively
bidding a number of solar
PV projects and wind
projects as a balance of
plant contractor.
I would like to thank the
Board, our employees
and shareholders for the
support afforded to the
business during the past
12 months.
Scott Criddle
MANAGING DIRECTOR &
GROUP CEO
SECTION: A MESSAGE FROM OUR LEADERS
PAGE 9
DECMIL GROUP LIMITED ANNUAL REPORT 2017 DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES PEOPLE & CULTURE
Decmil has a proud history of project delivery since 1978. Many things have changed since then
but the foundations of our business remain the same.
Our vision, ‘To be the market leader in project
delivery, achieving sustainable growth through
the quality of our people and the strength of our
relationships’, will continue to remain relevant and
essential for success across Decmil.
Our values are vital as they are the essence of our
identity, support our vision and shape our culture.
Having a clear and defined set of values help guide
and unify us as one team.
Our values; Integrity, Excellence, Accountability and
Teamwork, are important to us and are embedded
in our organisation. They motivate us, guide us in
our decision making and shape the behaviours we
display to others.
Our hiring philosophy ensures that we attract
the right people who are aligned to our vision of
being the market leader in project delivery. Decmil
focusses on recruiting and retaining qualified
people who reside in the areas which we operate.
We are also driven to hire local and indigenous
employees to ensure that we are supporting the
local communities in which we operate.
ANNUAL OVERVIEW
The last twelve months have been difficult as we
have faced a number of challenges. With having
to review our overhead costs, management
implemented restructuring within the Construction
& Engineering business to ensure we continued to
operate within the difficult economic conditions.
We are employing people across Australia and
New Zealand who represent a diversity of cultures,
backgrounds and skills.
We have been heavily focussed on the integration
and development of all the business to align policies,
processes and procedures across Perth, Melbourne,
Brisbane and Auckland offices.
We have been implementing communication
methods to ensure our people feel part of one
business and recieve regular communication.
As a business with a large proportion of our
workforce involved in contracting, Decmil has to
continually adjust staffing levels in order to meet the
demands of the projects in which we are involved.
As at 30 June 2017 Decmil employed 463 people;
294 salaried employees and 169 wages employees.
To keep our employees engaged and empowered,
we promote professional development through
relationship building between co-workers,
individual development plans, ensuring a safe
work environment and offering competitive
compensation.
Over the coming year, Decmil will continue to focus
on initiatives aimed at recognising and developing
our people to be the best they can be and creating a
united culture within all the businesses.
SECTION: WHAT MATTERS MOST TO US
PAGE 11
DECMIL GROUP LIMITED ANNUAL REPORT 2017 HEALTH, SAFETY AND
ENVIRONMENT
SHIELD
Keeping our people and our projects safe is central to everything we do at Decmil.
Our dedicated safety program, SHIELD, is designed to empower every person in the organisation to ensure
their work practices are focussed on zero harm.
SHIELD drives behaviours, attitudes, decisions and actions within the business to achieve a working
environment that is free from injury or incident.
Decmil’s six elements of SHIELD are:
1. Personal commitment and cultural alignment;
2. Leadership commitment and mentoring;
3. Employee health and welfare;
4. Reward and recognition;
5. Training and development; and
6. Consultation, communication and empowerment.
Since it was implemented seven years ago, the SHIELD program has assisted significantly in reducing Total
Recordable Injury Frequency Rates (TRIFR) across all projects.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES The health and safety of every employee is foremost in everything we do. It is a key focus of
our Group and is underpinned by our values system.
WHS
During the 2017 financial year the Group recorded
similar safety performance to the previous year as
measured by the Total Recordable Injury Frequency
Rate (TRFIR). The TRIFR was 6.27 for this period.
Within the result, an outstanding TRIFR performance
of 1.62 was achieved by the traditional Decmil
business unit.
The Group has achieved third party certification
through DNV.GL of all its registered business units
under a single set of certificates for the latest
standards relating to quality (9001:2015), safety
(18001:2007) and environmental (14001:2015).
Over the next 12 months the Group is focussed on
a range of key initiatives to support the safety and
well-being of our staff.
These include the continued integration and
alignment of all Group businesses under a single,
common HSEQ Management System; continued
automation and enhancement of system processes;
and implementation of specific system and
continued leadership training programs aimed at all
staff and Senior Management of the business.
ENVIRONMENT
Environmental management is a key focus of the
Group with exceptional performance reported for
the 2017 financial year. There were no regulatory
breaches or significant environmental impacts
recorded with the Group’s operations over this
period.
Over the next 12 months the Group is targeting
greenhouse gas emissions (GHG) intensity
reductions as a measure of our full-time equivalent
staff numbers. The Group’s “2nd Nature” program
will incorporate strategies and processes to achieve
this result.
SECTION: WHAT MATTERS MOST TO US
PAGE 13
DECMIL GROUP LIMITED ANNUAL REPORT 2017 DECMIL IN THE
COMMUNITY
Decmil is committed to being a good corporate citizen by taking responsibility for all our
social, ethical and environmental actions.
We see ourselves as part of the communities in
which we operate, and as such we strive to be
a positive, active and contributing participant in
community life.
Decmil’s Corporate Social Responsibility program,
Decmil in the Community, is about giving back,
helping people in need and supporting local
communities. We do this through charity events,
corporate friendships, charity partnerships,
volunteering and donating. Decmil strives to
make a broad and meaningful contribution to the
communities in which we operate through these
mechanisms.
Decmil as an organisation has always been involved
in a range of community activities, supporting
a number of sporting, cultural and educational
organisations. Decmil is proud of the positive
contributions it makes to the communities in which
it operates.
CORPORATE SPONSORSHIPS
STARLIGHT CHILDREN’S FOUNDATION
Decmil has held a national corporate partnership
with Starlight Children’s Foundation since early
2014. Starlight’s mission is to brighten the lives of
seriously ill children and their families.
In 2017 the partnership involved sponsorship of
Starlight Children’s Foundation 5 Chefs Dinners in
Western Australia, Queensland and Victoria. Decmil
has also had the opportunity to donate ‘experiences’
to seriously ill children, provide volunteers for
fundraising events and has been able to offer our
boardroom facilities to assist the Foundation in
conducting their business.
beyondblue
Decmil has a longstanding corporate friendship
with beyondblue. Decmil is proud to promote this
independent, not-for-profit organisation which aims
to increase awareness and understanding of anxiety
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
and depression in Australia and to reduce the
associated social stigma.
As a corporate friend of beyondblue, Decmil actively
fundraises for the organisation. Over the past year
this has included the sale of Entertainment Books
to employees and the proceeds of our annual
Christmas raffle.
STAFF CHARITY EVENTS
At Decmil, we encourage our people to participate
in organised charity events. Over the past year the
Company has been involved in Australia’s Biggest
Morning Tea, Daffodil Day, Pink Ribbon Morning Tea,
World’s Greatest Shave, CEO Sleepout and a national
Christmas collection for the Smith Family.
Decmil also supports staff participation in the HBF
Run for a Reason, the Bridge to Brisbane, the MS
Walk and Fun Run and the Fidelity Life Corporate
Run where employees are able to raise funds for
their own nominated charities whilst getting active
for the cause.
STAFF BASED INITIATIVES
The Decmil in the Community mandate encourages
staff driven charity initiatives that assist worthy
charities and support the communities in which
we operate. Internal assistance with fundraising
and promotion is provided to staff who instigate
initiatives which support Decmil’s charity partners
and our local communities.
Over the past year, Decmil people have undertaken
a range of initiatives such as participation in Shave
for a Cure, Movember, Polished Man, Walking Stars
½ Marathon Night Walk, Bungy Jump for Mental
Health and chocolate sales within the office with
proceeds donated to charity.
KEEPING COMMUNITIES INFORMED
Decmil provides information to the community in
many ways to keep stakeholders informed of its
activities. These include media releases, our annual
report and the Company’s corporate
website www.decmil.com
SECTION: WHAT MATTERS MOST TO US
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 15
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES DIRECTORS’ REPORT
Your directors present their report on the Company and its controlled entities for the financial
year ended 30 June 2017.
The names of directors of the Company at the end of the financial year are:
Bill Healy
Non-Executive Chairman
Scott Criddle
Managing Director and Group Chief Executive Officer
Denis Criddle
Non-Executive Director
Lee Verios
Non-Executive Director
David Saxelby
Non-Executive Director
Directors have been in office since the start of the financial year to the date of this report.
SECTION: FINANCIAL REPORT
PAGE 17
DECMIL GROUP LIMITED ANNUAL REPORT 2017 BOARD OF DIRECTORS
Bill Healy
Non-Executive Chairman
Denis Criddle
Non-Executive Director
Qualifications
▪
▪ Member of the Australian Institute of
Bachelor of Commerce
Company Directors
Experience
Bill Healy was appointed as Non-Executive
Director in April 2009 and appointed as
Non-Executive Chairman in July 2014.
Bill was a director and shareholder in Sealcorp
Holdings from 1985 which then established
and developed the diversified financial services
group.
He was a founding director of ASGARD Capital
Management Ltd, Securitor Financial Group Ltd,
PACT Investment Group Pty Ltd and ASSIRT Pty
Ltd. Sealcorp was acquired by St George Bank in
1997 and Bill remained on the Board until 1999.
He was founding director and Chairman of
BOOM Logistics Ltd and was involved in the
development of the Company’s business model,
early acquisitions and preparation for listing in
2003.
Former Directorships
▪
▪
ASGARD Capital Management Ltd
BOOM Logistics Ltd
Chartered Professional Engineer
Qualifications
▪
▪ Member of Engineers Australia (1989-2012)
▪
Fellow of the Australian Institute of
Company Directors
Experience
Denis was the founder of Decmil Australia, Decmil
Group Limited’s major business division. He was
appointed to the Company’s Board as a
Non-Executive Director in August 2007 and served
as the Non-Executive Chairman from September
2009 to December 2011.
Denis is a civil engineer with more than 30 years’
experience in construction and maintenance
services for the oil and gas and resources sectors
in central Queensland and north-west Western
Australia.
Denis has been involved in rural investments and
local Government and was elected Shire President
of the Roebourne Shire Council during the
development years of oil and gas expansion in the
Karratha region.
Current Directorships
▪
Riverford Holdings Pty Ltd
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES Lee Verios
Non-Executive Director
David Saxelby
Non-Executive Director
Qualifications
▪
Bachelor of Law, University of Western
Australia
Qualifications
▪
Bachelor of Civil Engineering, University of
Sydney
▪ Member of the Australian Institute of
▪ Member of the Australian Institute of
Company Directors
Company Directors
Experience
Lee was appointed as a Non-Executive Director
in April 2010. Lee has more than 40 years’
experience as a commercial and property
lawyer in Western Australia.
Until he retired in July 2012, he was a partner in
the international law firm of Norton Rose where
he headed its Commercial Property division in
Perth.
In addition to his legal background, Lee is an
experienced Company Director, having held
positions in a variety of enterprises in the
public, private and not-for-profit sectors.
Current Directorships
▪
Finbar Group Ltd
▪ Wyllie Group Pty Ltd
▪ Ocean Gardens Inc
Former Directorships
Port Bouvard Ltd
▪
Vmoto Ltd
▪
Experience
David was appointed as a Non-Executive
Director in May 2016. He has held Managing
Director and CEO roles for the past decade,
most recently with Lendlease as CEO of
Construction and Infrastructure Australia.
Prior to Lendlease, David was with the Leighton
Group for 18 years, where he held a number
of senior positions, most recently as Managing
Director of Thiess.
In addition to these roles, David has held a
number of senior positions on Industry Boards
and was listed in the Top 100 Engineers in
Australia.
Current Directorships
▪ Ocius Pty Ltd
▪
▪
▪
▪ Office of Projects (Victoria)
Australian Constructors Association
Bouygues Construction Australia
Australian Rail Track Corporation
SECTION: FINANCIAL REPORT
PAGE 19
DECMIL GROUP LIMITED ANNUAL REPORT 2017 EXECUTIVE MANAGEMENT
Scott Criddle
Managing Director and Group Chief
Executive Officer
Tony Radalj
Chief Operating Officer
Qualifications
▪
Bachelor of Applied Science in Construction
Management and Economics, Curtin
University, Western Australia
Fellow of the Australian Institute of Building
▪
▪ Member of the Australian Institute of
Company Directors
Registered Builder – Western Australia
▪
Experience
Scott was appointed Chief Executive Officer in
July 2009, and Managing Director of Decmil
Group Limited in April 2010 and has been a
Director of the Company since that time.
He was previously the Managing Director of
Decmil Australia Pty Ltd, which was acquired
by Decmil Group Limited in July 2007. In this
role he was responsible for the long-term
growth and strategic direction of the Company,
playing a key role in building relationships with
stakeholders and clients. Scott joined Decmil
Australia in 1993 as a construction labourer to
gain experience and learn about the Company
from the ground up.
He held a variety of roles within Decmil
Australia including Construction Manager,
Estimator, Business Development Manager and
Area Manager.
Qualifications
▪
▪
Bachelor of Engineering – Civil
Diploma in Occupational Health & Safety
Experience
Tony joined Decmil in 2012 and was appointed
Chief Operating Officer for the Decmil Group
in August 2017. During the past 5 years Tony
has held key positions in Decmil such as Civil
Manager and General Manager for Decmil
Australia.
Tony’s career spans across various sectors such
as health, oil and gas, resources, government
infrastructure, building and renewables. Tony
brings extensive technical experience and a
strong focus on strategy for the Group in the
role of COO.
With his flexible management style he
motivates and empowers teams to enable
a strong work ethic and produce rewarding
outcomes. Tony has extensive experience in
relationship style contracting ensuring positive
relationships are sustained with our clients. This
includes utilising contracting models such as
Lump Sum, D&C, Alliance and ECI.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES Craig Amos
Chief Financial Officer
Alison Thompson
Company Secretary
Qualifications
▪
Bachelor of Commerce, Murdoch University,
Western Australia
Fellow of Chartered Accountants Australia
& New Zealand
Graduate Diploma of Applied Corporate
Governance
▪
▪
Experience
Alison has held several senior financial positions
within the Group since August 2007. She is
currently the Group Financial Controller for
Decmil and was appointed Company Secretary
in January 2014.
She has extensive technical experience gained
from 4 years with PricewaterhouseCoopers and
prior to joining Decmil, gained valuable industry
experience at international construction firm
Balfour Beatty based in the United Kingdom.
Qualifications
▪
Bachelor of Commerce (Hons), University of
Cape Town
Graduate Diploma of Advanced Auditing,
University of Cape Town
Graduate Diploma of Applied Finance,
Financial Services Institute of Australasia
Fellow of the Financial Services Institute of
Australasia
▪
▪
▪
▪ Member of Chartered Accountants Australia
& New Zealand
Experience
Craig was appointed Chief Financial Officer in
March 2014, having previously held the position
of Group Manager for Corporate Development
at Decmil Group Limited.
Prior to joining Decmil he held the position of
Executive Director in the Corporate Finance
division of Ernst & Young where he gained
extensive experience leading teams on a range
of strategic corporate transactions.
Craig has over 18 years’ experience in finance,
accounting, corporate transactions and
commercial projects in both corporate and
professional service environments.
SECTION: FINANCIAL REPORT
PAGE 21
DECMIL GROUP LIMITED ANNUAL REPORT 2017 DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Principal Activities
The consolidated entity provides design, engineering and construction work for the natural resources,
Government and infrastructure sectors. The business is focussed on three key sectors:
Infrastructure
Government infrastructure projects including accommodation, immigration facilities, corrections
facilities, office buildings, defence facilities, schools, administration buildings and storage facilities;
Design and construction of fuel infrastructure facilities; and
Road and bridge civil engineering projects.
Resources
Design and construction of permanent and temporary accommodation, including villages, for the
resource sector;
Construction of remote non-process infrastructure, including industrial buildings, processing plants,
workshops and storage facilities;
Coal Seam Gas and LNG wellhead installation with associated pipelines and facilities; and
Civil work on brown and greenfield projects including site preparation, excavation and bulk
earthworks in regional and remote areas.
Renewable Energy
Civil works for remote wind and solar projects including site preparation, foundations and pilings;
Structural and mechanical installations including towers for wind farms and framing systems and PV
modules for solar projects; and
Specialist electrical work for energy storage and distribution.
The consolidated entity also has business units involved in commissioning and maintenance services to
telecommunications network owners, and a remote build, own and operate accommodation village.
Operating Results
The consolidated entity reported a statutory loss after providing for income tax expense of $28,347,000
(2016: loss of $58,236,000).
Dividends Paid or Recommended
No final dividend was paid, declared or recommended for payment.
Review of Operations
The 2017 financial year represented a year of stabilisation for the Group following the significant decline
in revenue experienced in the 2016 financial year ($300m vs $670m in FY15). Whilst the 2017 financial
year will not deliver revenue growth or on earnings expectations, it has provided the Group with the
opportunity to bed down the strategies developed over the past few years.
Accordingly, the business is now focussing on three key sector pillars namely Infrastructure, Resources
and Renewables that will form the base of the business over the next three years. These three pillars of
focus (along with sub-sectors) are summarised in the below table:
Infrastructure
Defence
Resources
Iron Ore
Roads and Bridges
Coal Seam Gas
Renewables
Solar PV
Wind
Health
Corrections
Immigration
Education
LNG
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Notwithstanding the poor earnings performance in FY17, a number of key opportunities have been
originated that have the potential to underpin growth in revenue in FY18.
These opportunities, as well as other Group highlights, are listed below:
Construction commenced on the Group’s first large scale solar project – the Gullen 10MW solar PV
project for Goldwind;
Through Cut & Fill being short-listed to 1 of 3 for the OSARS PPP in Victoria as part of the Lendlease
led consortium and in a joint venture for the project delivery;
Development of opportunities with regards to brownfield prison expansions, with a modular approach
to construction;
Execution of a Memorandum of Understanding with SolarReserve to develop a 70MW solar PV project
in NSW, likely to start in 2018; and
Restructured the traditional Decmil business to be comprised of one national management team.
Financial Performance & Position
Despite an initial expectation of a stronger second half to the FY17 year, delays with construction start
dates on key projects secured in the first half of FY17 year and also delays with the award of new design
and construct tenders bid in the second half of FY17 has resulted in revenue for the FY17 year being
below expectations at approximately $304 million (FY16: $300 million).
Based on the effect of the above, taken together with the project loss on the Hastings contract and
substantial restructuring costs incurred in FY17, the Company reported a broadly break-even FY17
statutory reported EBITDA position.
In line with the requirements of the accounting standards Decmil also completed a comprehensive
assessment of the carrying value of key assets which resulted in:
• A devaluation of the Group’s wholly owned Homeground Gladstone accommodation village due to
continued challenging conditions in the Queensland natural resources sector. Following an
independent valuation, Homeground Gladstone was revalued to $92.4 million as at 30 June 2017;
and
• $10.7 million impairment of goodwill associated with the Group’s telecommunications division.
The Group maintained a net cash position, with cash on hand of $16.9 million at the end of the financial
year.
Whilst the Group has access to substantial senior debt and bonding facilities, it ended the year very lowly
geared. The Board and management considers this fiscal discipline to be appropriate given the challenging
environment in the broader construction and engineering sector.
Operational Highlights
Operations in the 2017 financial year reflect the diversification of the Group in recent years, with project
activity spanning a number of sectors including WA Iron Ore sustaining capital works, Queensland coal
seam gas upstream maintenance, Defence enabling infrastructure, road and bridge projects for State
road authorities, renewable energy and telecommunications.
Key highlights:
Sustaining capital work in the WA Iron Ore Sector including a logistics hub for BHP at Port Hedland,
an airstrip and associated facilities at Cape Preston for Sino Iron and various works for Samsung C&T
at the Roy Hill project. Also new projects for Fortescue and at Rio Tinto’s Nammuldi and Silvergrass
projects;
Commencement of a circa $50 million contract with RTA Weipa Pty Ltd, a wholly owned subsidiary of
Rio Tinto Limited, for the design, construction and commissioning of the mine infrastructure area at
the Amrun project;
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 23
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Enabling infrastructure works at a number of the Australian Defence Force bases and facilities;
The Group’s first substantial renewable energy project, being an engineer, procure and construct
(EPC) contract for a 10MW solar farm and a two year operation and maintenance contract near
Goulburn in New South Wales;
Ongoing wellhead installation, brownfield maintenance and miscellaneous works for QGC in the
Queensland coal seam gas sector;
Work in New Zealand for the Ministry of Education with school projects in Christchurch and Auckland
and securing the first project with the New Zealand Defence Force at Kauri Point;
A variety of road and bridge projects by Cut & Fill predominantly for Vic Roads including the Sand
Road Interchange, the Monash Freeway Bridge Strengthening project and the Sneydes Road
Interchange; and
A contract with NSW Health Infrastructure for the redevelopment of a regional medical facility
including the diversion of services, demolition of existing structures and the construction of a new
temporary medical centre.
Significant Changes in State of Affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial
year.
After Balance Date Events
No matters or circumstances have arisen since the end of the financial year which significantly affected or
may significantly affect the operations of the consolidated entity, the results of those operations, or the
state of affairs of the consolidated entity in future financial years.
Likely Developments and Expected Results of Operations
The transformation that occurred in recent years has created a platform for a more diverse national
business, with sustainable and higher quality of earnings in FY18 and beyond. The Group enters FY18
with the benefit of having bedded down the new market entry strategies executed in recent years
(organic and inorganic strategies), combined with the business re-focussing on its three key market
pillars.
Going into FY18 the Group is also seeing an improvement in market conditions across a number of its key
sectors including:
• Natural Resources: Sustaining capital works and replacement tonnage projects starting to
•
activate in the WA Iron Ore market;
Infrastructure: Significant opportunity in the Transport sector in Victoria where the Group is
actively pursuing new road and bridge projects as both head contractor and in joint ventures.
Also significant opportunity in the Defence sector, New Zealand and in new sectors for Decmil
such as Corrections; and
• Renewable Energy: Actively bidding a number of solar PV and wind projects as a balance of plant
contractor.
Decmil’s strategy remains based on an overall ambition to build a diverse and strong construction and
engineering business capable of competing with Tier 1 contractors in Australia and abroad.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Material Business Risks
The key challenges for the Group going into the 2018 financial year are:
Improve market share with existing clients and sectors;
To recruit quality staff that can sustain projected growth;
Retain robust project controls to ensure project returns are predictable;
To select projects that can deliver acceptable returns; and
Control overheads across the Group.
Material risks that could adversely affect the Group include the following:
Weakness in the broader construction and engineering sector and a reduction in growth capital
expenditure across major new natural resource projects. The Group is responding to this risk with
diversification into new sectors (Government) and an increasing focus on winning work in the
sustaining capital, non-process infrastructure and operating cycles/sustaining capital works of major
resource projects.
In order for the Group to continue working on resource related projects, a robust safety methodology
needs to be in place. A serious safety incident or fatality has the ability to create a substantial risk to
Decmil’s licence to operate. Decmil mitigates this safety risk via its ‘SHIELD’ safety methodology,
ensuring that all employees (including senior management) and sub-contractors are aligned and
engaged with the approach to safety.
A portion of the Group’s contracts are ‘lump sum’ in nature and to the extent costs exceed the
contracted price, there is a risk these amounts may not be recovered. In order to mitigate this risk,
the Group has a sophisticated estimating function that utilises a robust estimating methodology and
project teams monitor costs closely and maintain good working relationships with clients.
From time to time Decmil operates in foreign jurisdictions (such as Papua New Guinea and New
Zealand) and at times face operational and regulatory issues not generally experienced in Australia.
The Group constantly refines its operating and compliance processes to manage these risks.
Any abatement in economic activity in the Gladstone region will result in a short term diminution in
the occupancy levels at the Homeground Village and significantly lower levels of revenue and profit
than historically generated. Management expects that in the medium term new opportunities will
arise for Homeground Gladstone as the LNG sector in Gladstone moves from the construction to
operational and maintenance stages; however the risk of volatility in the short term remains present.
During the 2015 financial year the Company implemented an enterprise risk review process to identify
the most material risks facing the Company enterprise wide, together with an action plan to mitigate the
occurrence or effect of each identified risk (Enterprise Risk Register). Each of the risks on the Enterprise
Risk Register have been allocated to an owner who is responsible for monitoring, reporting and
implementing action plans for each of the risks.
The Enterprise Risk Register brings together the most critical risks (both corporate and operational)
identified by the Group Risk Management System and creates a structured process for regular reporting
to the Board.
The Enterprise Risk Register is reviewed and presented to the Audit and Risk Committee on a quarterly
basis.
Capital Management
Management is continually assessing the optimal capital structure to ensure the Group is working towards
providing shareholders with adequate returns based on assessment of market risks and opportunities.
This includes the management of debt levels, distributions to shareholders and the requirement for
further equity funding.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 25
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Whilst the Group has access to substantial senior debt and bonding facilities, it ended the year with
limited senior debt and low levels of gearing. The Board considers this fiscal discipline to be appropriate
given the environment in the broader construction and engineering sector.
Management also periodically reviews the level of capital invested in the Homeground Gladstone Village
and where appropriate opportunity exists, will consider options to monetise the asset.
Environmental Regulation
The consolidated entity is subject to environmental regulation in accordance with applicable state,
territory or federal legislation and statutory requirements for the jurisdictions in which it operates.
There were no incident events that required reporting to relevant statutory bodies during the financial
year.
The consolidated entity aims to continually improve its environmental performance and has established
carbon emission reduction targets for the next financial year.
Directors’ Meetings
During the financial year, 10 directors’ meetings were held. Attendances by each director during the year
were:
Directors Meetings
Audit & Risk
Remuneration
Number of
meetings
eligible to
attend
Number
attended
Number of
meetings
eligible to
attend
Number
attended
Number of
meetings
eligible to
attend
Number
attended
Denis Criddle
Scott Criddle
Giles Everist
Bill Healy
David Saxelby
Lee Verios
10
10
6
10
10
10
10
10
5
10
10
10
4
-
2
4
-
3
4
-
1
4
-
3
-
-
-
2
2
2
-
-
-
2
2
2
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Remuneration Report - Audited
This Remuneration Report for the year ended 30 June 2017 details the nature and amount of
remuneration for directors and specified executives of Decmil Group Limited in accordance with the
requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been
audited as required by section 308(3C) of the Act.
The Remuneration Report is presented under the following sections:
1. Total realised earnings in FY17
2. Remuneration governance
2.1. Remuneration committee
2.2. Use of remuneration consultants
3. Executive remuneration approach and structure
3.1. Remuneration philosophy
3.2. Executive remuneration structure
3.3. Remuneration practices
3.4. Short term incentive plan
3.5. Long term incentive plan
4. Link between Company performance and executive remuneration
5. Employment contracts of directors and senior executives
6. Non-Executive Director fee arrangements
7. Details of remuneration (statutory disclosures)
This Remuneration Report sets out remuneration information for Decmil’s Key Management Personnel
(KMP) (as defined in AASB 124 Related Party Disclosures) including Non-Executive Directors, Executive
Directors and other senior executives who have authority for planning, directing and controlling the
activities of the Company.
The following persons acted as Directors or Executives during or since the end of the financial year:
Role
Non-Executive Directors (NEDs)
Mr Bill Healy – Chairman of the Board and Remuneration
Committee
Mr Denis Criddle
Appointed to the Board April 2009 and as Chairman
July 2014
Appointed August 2007
Mr Giles Everist
Resigned 7 February 2017
Mr Lee Verios – Chairman of Audit and Risk Committee
Appointed April 2010
Mr David Saxelby
Appointed May 2016
Executive Directors
Mr Scott Criddle – Managing Director and Group CEO
Appointed as CEO in July 2009 and Managing
Director in April 2010
Executives (Other KMP)
Mr Ric Buratto 1 – CEO Construction and Engineering
Appointed July 2015
Mr Craig Amos – Chief Financial Officer
Appointed March 2014
1 Ric Buratto left the Executive Leadership Team during the 2017 financial year
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 27
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
1. Total realised earnings in FY17
The table below sets out the total realised earnings for the executive KMP for FY17 and provides
shareholders with details of the ‘actual’ or ‘take-home’ pay of executives relating to the 2017 financial
year.
These earnings include cash salary, superannuation and bonuses accrued in relation to the current year
and the value of share based incentives that vested during the performance period ended 30 June 2017.
The table does not include the accounting value of share based incentives awarded but not vested. This is
because those share based payments are dependent on the achievement of performance hurdles and
may not be realised. For example, no performance rights were vested during the 2017 financial year and
none have vested since the 2013 financial year.
Details of the remuneration received by the KMP prepared in accordance with statutory requirements and
accounting standards are detailed in note 7.
No STI has been accrued for either the CEO or any other KMP in relation to the 2017 financial year.
Executive Total Realised Earnings in FY17 (non-IFRS)
Name
Mr Scott Criddle4
Managing Director and Group CEO
Mr Craig Amos
Chief Financial Officer
Mr Ric Buratto5
CEO Construction and Engineering
Fixed
Remun-
eration1
$
688,815
407,115
408,462
Total Realised Earnings
1,504,392
2017
STI 2
$
-
-
-
-
Total
Realised
Remun-
eration 2017
$
Total
Realised
Remun-
eration 2016
$
688,815
819,659
407,115
334,183
LTI3
$
-
-
205,000
613,462
673,751
205,000
1,709,392
1,827,593
1 Fixed remuneration includes cash salary, paid leave, superannuation, and non-monetary benefits
2 Represents the value of the STI awarded in relation to the 2017 financial year
3 Represents the value of a sign on award of share based payments that vested during the 2017 financial year
4 As at the date of this report the total fixed remuneration for the Managing Director and Group CEO is $520,049
5 Ric Buratto left the Executive Leadership Team during the 2017 financial year
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
2. Remuneration governance
2.1 Remuneration committee
The Remuneration Committee is responsible for reviewing and recommending to the Board of Directors
compensation arrangements for the directors and Executive Leadership Team (ELT).
The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of
directors and the ELT on a periodic basis. The assessment is made with reference to the Group’s
performance, executive performance and comparable information from industry sectors and other listed
companies in similar industries.
2.2 Use of remuneration consultants
To ensure the Company and Remuneration Committee is fully informed when making remuneration
decisions, it from time to time seeks external remuneration advice and uses industry salary survey data.
During the financial year, the fixed remuneration of executives was benchmarked against peers based on
industry salary surveys sourced from AON Hewitt and Mercer.
In the past, Ernst & Young has also been engaged to provide advice on the structure of the long term
incentive plans and provide a comparison of the Company’s plan to market trends.
For the purposes of the Corporations Amendment (Improving Accountability on Director and Executive
Remuneration) Act 2001 (the Act), any guidance provided by remuneration consultants throughout the
financial year was not considered a remuneration recommendation in relation to KMP as defined by
Division 1 of Part 1.2 of Chapter 1 of the Act.
3. Executive remuneration approach and structure
3.1 Remuneration philosophy
The performance of the Company ultimately depends upon the quality of its directors and ELT. In order to
maintain performance and create shareholder value, the Company must attract, motivate and retain
highly skilled and experienced directors and executives.
Decmil aims to provide competitive at market remuneration and rewards in order to:
attract the right people who are aligned to Decmil’s values and behaviours;
motivate employees so they understand their contribution to Decmil;
recognise employees’ effort and commitment to Decmil; and
retain the highest quality employees within Decmil.
Decmil ensures:
appropriate compensation is given to executives for the services they provide;
attraction and retention of executives with the required skills to effectively manage the operations
and growth of the business;
executives are motivated to perform in the best interest of Decmil; and
gender pay equality.
3.2 Executive remuneration structure
The remuneration structure for executive officers, including executive directors, is based on a number of
factors, including experience, qualifications, job level and overall performance of the Company. The
service agreements between the Company and specified directors and executives are on a continuing
basis which are not expected to change in the immediate future.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 29
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
The following table illustrates the executive remuneration elements, including how each element aligns to
the Company’s remuneration strategy and links remuneration outcomes to performance.
Vehicle
Purpose
Link to performance
Remuneration
component
Fixed
remuneration
STI
Comprises base salary,
superannuation contributions
and other benefits such as
motor vehicles and life
insurance.
Historically, the STI
component of the Chief
Executive Officer’s
remuneration has been paid in
cash. For FY16, FY17 and
FY18 100% of any STI award
earned will be deferred for 12
months and will be satisfied
by the issue of Restricted
Rights instead of a cash
award.
The STI of other executives
are paid in cash.
To provide competitive fixed
remuneration for senior
executives as determined by
the scope of their position
and the knowledge, skill and
experience required to
perform the role.
Rewards executives for
short term achievement of:
▪ financial and operational
key performance
indicators;
▪ progress with the
delivery of the
Company’s business plan
and strategic objectives;
and
▪ specific goals in relation
to the development of
people within the
Company and its profile
within the business
community.
Company and individual
performance are considered
during the annual
remuneration review.
Examples of key performance
indicators include:
▪ Achievement of financial
targets such as Group
revenue and NPAT;
▪ Achievement of target
work in hand levels at 30
June of each year to
ensure the sustainability of
revenue in subsequent
years;
▪ Overhead and cost control
targets;
▪ Targets set in relation to
the achievement of the
Group’s business plan such
as the diversification of the
business and entry into
new markets; and
▪ Targets set for safety
performance based on
Total Recordable Injury
Frequency Rates.
Vesting of awards is
dependent on absolute TSR,
achieving EPS growth targets
and continuous employment.
LTI
Executives are entitled to
participate in the performance
rights scheme approved by
shareholders.
Performance rights do not
attract dividends or voting
rights.
To better align executives to
the interests of shareholders
and provide a reward based
on long term growth in
share price and earnings.
3.3 Remuneration practices – Total Fixed Remuneration
The Company aims to reward executives with a level and mix of remuneration appropriate to their
position, responsibilities and performance within the business and aligned with market practice.
The Company’s policy is to position fixed remuneration around the 50th percentile of salary bands based
on major industry surveys produced by AON Hewitt and Mercer. This aligns with the market median
ensuring Decmil remains competitive with its peers.
The performance of executives is measured against criteria agreed with each executive and is based
predominantly on the Company’s performance and shareholder value. Incentives are linked to
predetermined performance criteria. The Board may, however, exercise its discretion in relation to
approving incentives, bonuses, rights and shares. The policy is designed to attract high calibre executives
and reward them for performance that results in long-term growth in shareholder wealth.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Where applicable, executive directors and executives receive a superannuation guarantee contribution
required by the Government, which during the year was 9.5%, and do not receive any other retirement
benefits. Some individuals, however, have chosen to sacrifice all or part of their remuneration to increase
payments towards superannuation.
Upon retirement, specified directors and executives are paid employee entitlements and incentives
accrued to the date of their retirement.
All remuneration paid to directors and executives is valued at cost to the Company and expensed. Where
performance rights and shares are given to directors and executives, they are valued according to the
accounting standards.
3.4 Short term incentive plan
General Terms of the STI Plan
How is it paid?
Generally in cash. The CEO STI award can be satisfied by the issue of
restricted rights.
How much can executives earn?
Executives can earn up to 50% of their total fixed remuneration as an STI
incentive.
How is performance measured?
Through a balance scorecard of financial, operational and organisation
development KPI’s set prior to the commencement of each financial year.
Financial measures are assessed based on the Group’s audited financial
results.
When is it paid?
In September or October of the financial year after the target year.
What are the deferral terms?
What happens if an executive
leaves or there is a change of
control?
How much STI has been accrued
in relation to the 2017 financial
year?
Historically, the STI component of the Chief Executive Officer’s
remuneration has been paid in cash. It was proposed that for, FY16, FY17
and FY18 100% of any STI award earned will be deferred for 12 months
and will be satisfied by the issue of restricted rights instead of a cash
award.
The payment of any accrued or part STI benefit in these circumstances is at
the discretion of the Board.
No STI has been accrued in relation to the 2017 financial year.
The STI award opportunity is based on a percentage of an individual’s base salary. For the CEO, a
maximum award opportunity of 50% of total fixed remuneration is available. The STI is based on the
previous financial year’s base salary earnings to 30 June before performance based remuneration
reviews.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 31
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
During the financial year ended 30 June 2017 the following key performance indicators were applicable to
the STI opportunity of the CEO:
Key Performance
Indicator
Group Financial Results
Net Profit After Tax
Cash Overhead
Work in Hand
Strategic/Operational Objectives
Organisational Structure
Integration
Financial
People
KPI Weighting
(%)
Measurement
30%
10%
30%
10%
5%
10%
5%
Annual target set by Board measured by audited results
Measured as cash overhead as a percentage of revenue
Level of work in hand in the Group measured at 30 June
Strong leaders appointed to each division capable of
delivering to their business plan
Integrated business units that utilise Group Services
All business units to be operating cash positive for each
quarterly financial review
Succession plan in place for each member of the ELT and
General Managers
OVERALL TOTAL
100%
With the dramatic turnabout in the resources and energy sectors during the 2016 financial year the
Group undertook a number of steps to restructure and reduce the overhead base in its traditional
business units. As part of these efforts, executives of the Group agreed to a 10% reduction in total fixed
remuneration effective February 2016 (with the CEO voluntarily agreeing to a 15% reduction). As market
conditions continued to be subdued throughout FY17, the CEO took a further voluntary reduction of 30%
and the Board took a further 10% reduction in April 2017.
In addition, no STI has been accrued for either the CEO or any other KMP in relation to the 2016 or 2017
financial years.
3.5 Long term incentive plan
The LTI offered to key executives forms a key part of their remuneration and assists to align their
interests with the long term interests of shareholders.
The purpose of the LTI Scheme is to reward key executives for attaining results over a long measurable
period and for staying with the organisation. The LTI Scheme is a share based plan consisting of
performance rights and shares which have pre-determined vesting conditions.
The LTI Scheme is designed to:
create a strong link between the eligible participants’ performance and Decmil’s performance;
assist in retention of employees; and
contribute to eligible participants feeling they own part of Decmil and have an influence in the
direction of Decmil.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
General Terms of the LTI Plan
How is it paid?
The Company uses performance rights and restricted shares in its long term
incentive plan.
How much can be earned (i.e.
maximum opportunity)?
For executives, up to 150% of total fixed remuneration converted into
performance rights at the 60 day VWAP to 30 June.
How is performance measured?
Vesting hurdles for performance rights for executives are based on absolute
TSR (40%), EPS (40%) and continuous employment (20%).
When is performance measured?
The achievement of vesting conditions for performance rights are assessed
between July and September after the target financial year-end.
Measurement periods are from the date of award of the rights to the first
tranche being eligible for vesting.
What happens if an executive
leaves or there is a change of
control?
If an employee resigns, or his or her employment is terminated due to
misconduct or performance related reasons, all performance rights and
restricted shares are immediately forfeited.
If an employee retires or an employee’s employment terminates for
redundancy prior to performance rights or restricted shares vesting, the
Board may use its discretion to vest the performance rights or restricted
shares.
Where a change of control event occurs in respect to the Company, the
Board, in its absolute discretion, may determine the treatment of any
unvested performance rights or restricted shares and the timing of such
treatment.
Only where the Board does not exercise its discretion to determine a
particular treatment, will all unvested performance rights and restricted
shares vest on change of control.
Performance rights do not accrue dividends.
The retention grant of restricted shares to the CEO accrues dividends which
become payable upon vesting.
For a variety of reasons (some market related and some design related)
there has historically been a very low percentage of performance rights
awarded that actually vest e.g. no performance rights have vested since the
2013 financial year despite the fact that in the 2014 and 2015 financial
years the Group performed well financially and grew substantially.
No restricted shares have vested as the time based conditions have not yet
been achieved.
Are executives eligible for
dividends?
Have many shares vested under
the LTI plan?
For executives, performance rights will vest (that is, shares will be issued or become transferable to the
executives upon satisfaction of the performance rights vesting conditions) to the extent that the
applicable performance hurdles set by the Board are satisfied. Subject to achievement of the hurdle, the
performance rights may be converted (on a one-for-one basis) to fully paid ordinary shares in the
Company.
Any performance rights which do not vest at any due vesting date rollover for re-assessment to the next
vesting date. The vesting conditions will be subsequently reassessed in that year and performance rights
may vest as applicable. Unvested performance rights will rollover for the length of the performance
period and will be forfeited at the end of the grant period if not vested. If an executive resigns from his or
her employment, any unvested performance rights will lapse, unless the Board determines otherwise.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 33
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Performance Hurdles
Each year the Board reviews and considers the appropriateness of the performance hurdles and, where
necessary, makes adjustments and amendments to reflect market conditions.
Below is a summary of the performance hurdles that relate to unvested performance rights as at 30 June
2017:
Issued financial year ended 30 June 2013 and prior
Performance rights issued during the financial year ended 30 June 2013 and prior years are eligible for
vesting three, five and seven years after the initial grant date depending upon Total Shareholder Return
(TSR) performance relative to a comparator group identified at the time of grant (S&P/ASX 300 Index).
Performance rights granted during this period remain under these terms and conditions.
The performance rights vest according to the schedule below:
Company TSR Rank in S&P/ASX 300 Index
% of Performance Rights that Vest
Below the 50th Percentile
0%
At or below the 50th Percentile and below the 75th
Percentile
50%, plus 2% for every one Percentile increase above
50th Percentile
At or above the 75th Percentile
100%
Issued financial year ended 30 June 2014
These performance rights vest two, three and four years after the initial grant date and are subject to the
following vesting performance measures:
a) Two thirds of the performance rights are subject to earnings per share compound annual growth
rate (EPS CAGR) performance and;
b) One third of the performance rights are subject to TSR performance relative to the other
companies in the ASX 200.
The performance rights in respect of a financial year will vest in tranches as follows:
Years after the financial year in respect of
which the grant of Performance Rights is made
% of Performance Rights Eligible for Vesting
2
3
4
25%
25%
50%
For performance rights subject to EPS CAGR performance, vesting will occur as follows:
EPS CAGR – Measured from the year in respect
of which grant of Performance Rights is made
% Performance Rights that Vest
<6%
6%
>6% <24%
24% or more
0%
25%
Pro-rata vesting between 25%-100%
100%
For performance rights subject to TSR performance, vesting will occur as follows:
TSR – Measured from the year in respect of
which grant of Performance Rights is made
% Performance Rights that Vest
<50th Percentile
50th Percentile
0%
50%
>50th Percentile <75th Percentile
Pro-rata vesting between 50%-100%
>75th Percentile or more
100%
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Issued financial year ended 30 June 2015 and later
These performance rights are subject to the following vesting conditions:
a) 20% of performance rights are subject to continuous service of employment. This portion will
vest at 100% three years after the financial year of which the grant of the performance rights are
made;
b) 40% of performance rights are subject to EPS CAGR performance; and
c) 40% of performance rights are subject to absolute TSR performance.
In relation to the performance rights subject to the EPS CAGR and TSR, the following vesting tranches
will apply:
Years after the financial year in respect of
which the grant of Performance Rights is made
% of Performance Rights Eligible for Vesting
2
3
4
25%
25%
50%
For performance rights subject to EPS CAGR performance, vesting will occur as follows:
EPS CAGR – Measured from the year in respect
of which grant of Performance Rights is made
% Performance Rights that Vest
< 6%
6%
>6% <8%
>8%
0%
25%
Pro-rata vesting between 25%-100%
100%
For performance rights subject to TSR performance, vesting will occur as follows:
Absolute TSR – Measured from the year in
respect of which grant of Performance Rights is
made
< 7%
7%
>7% <11%
>11%
% Performance Rights that Vest
0%
50%
Pro-rata vesting between 50%-100%
100%
Note, the Company obtained shareholder approval at the 2015 AGM to implement a number of changes
to the hurdles attaching to the performance rights to be issued for FY15, FY16, FY17 and FY18. These
changes included the replacement of the Relative Total Shareholder Return (TSR) performance hurdle
with an Absolute TSR performance hurdle, and adjustment of the Earnings Per Share (EPS) hurdles in line
with current market expectations and inclusion of a performance hurdle relating to continuous
employment with the Group.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 35
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
4. Link between Company performance and executive remuneration
The remuneration policy has been tailored to increase goal congruence between shareholders, directors
and executives. There have been two methods applied in achieving this aim, the first being a
performance based short term incentive based on key performance indicators, and the second being the
issue of performance rights to executive directors and executives to encourage the alignment of personal
and shareholder interests.
5. Employment contracts of directors and senior executives
The Company has entered into a service agreement with Mr Scott Criddle who commenced in the role of
CEO on 1 July 2009.
The key terms of Mr Scott Criddle’s service agreement are:
Notice Period
Term
Three month written notice unless in relation to certain circumstances
such as serious misconduct or gross neglect of duty
Ongoing until terminated
Restraint Period
Three months after termination of employment
Total Fixed Remuneration
Reviewed and established annually by the Remuneration Committee
Long Term Incentive Scheme
The Decmil Group Limited LTI scheme applies
Short Term Incentive Scheme
The Decmil Group Limited STI scheme applies
Termination Benefits
No contractual termination benefits apply
The Company may terminate the contract without cause by providing written notice of the required
termination period or by making payment in lieu of notice based on the individual’s annual salary
component together with a discretionary payment. Termination payments are generally not payable on
resignation or dismissal for serious misconduct. In the instance of serious misconduct the Company can
terminate employment at any time.
Other executives in the Company have similar executive service agreements which include terms and
conditions relating to confidentiality, restraint on employment and intellectual property. The executive
service agreements are typically not fixed term agreements and continue on an ongoing basis until
terminated.
These agreements may be terminated by notice of either party or earlier in the event of certain breaches.
In the event of termination for any reason, the Company will pay accrued and untaken annual leave, and
subject to legislation, any accrued and untaken long service leave owing to the executive. Termination
payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of
serious misconduct the Company can terminate employment at any time.
terms of appointment and tenure;
Non-Executive Directors are appointed under appointment letters that deal with, amongst other matters,
the following:
entitlements;
duties and responsibilities; and
indemnities, insurances and access.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
6. Non-Executive Director fee arrangements
The Board’s policy is to remunerate Non-Executive Directors at market rates for comparable companies
for time, commitment and responsibilities. The Board approves payments to the Non-Executive Directors
and reviews their remuneration annually, based on market practice, duties and accountability.
Independent external advice is sought when required. The maximum aggregate amount of fees that can
be paid to Non-Executive Directors is subject to approval by shareholders during a general meeting. Fees
for Non-Executive Directors are not linked to the performance of the consolidated entity however to align
directors’ interests with shareholder interests, the directors are encouraged to hold shares in the
Company.
Non-Executive Director (NED) fees consist of base fees and committee chair fees. The payment of
committee chair fees recognises the additional time commitment required by NEDs who chair Board
committees. The chair of the Board attends all committee meetings but does not receive any additional
committee fees in addition to base fees.
The table below summaries Board and committee chair fees payable to NEDs at 30 June 2017 (inclusive
of superannuation):
Board fees
Chair
NED
Committee fees
Audit & Risk and Remuneration
Chairs
Member
Maximum aggregate NED fee pool
$000
130
73
$000
8
-
The maximum aggregate amount of fees that can be paid to NEDs is subject to approval by shareholders
during a general meeting. The maximum aggregate amount that may be paid to NEDs for their services is
$650,000 during any financial year, as approved by shareholders at the 2012 AGM. The Board will not
seek an increase to the aggregate NED fee pool limit at the 2017 AGM.
7. Details of remuneration
As part of a restructuring and cost reduction effort by the Company, effective 1 February 2016, the fixed
remuneration of KMP (and directors from 1 May 2016) was reduced by 10% (with the Group CEO
voluntarily agreeing to a 15% reduction).
With market conditions continuing to be subdued throughout FY17, the CEO took a further voluntary
reduction of 30% and the Board took a further 10% reduction on 1 April 2017.
Details of the remuneration of KMP of the consolidated entity are set out in the following tables:
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 37
NEDs ($)
Bill Healy
Denis Criddle
Trevor Davies1
Giles Everist 2
David Saxelby
Lee Verios
Total
Executive
Directors ($)
Scott Criddle 4
Total
Other Executives
($)
Ric Buratto
Craig Amos
Total
Year
Salary and
Fees
Superannuation
STI
Paid in
Relation to
Prior Year
STI Accrued
Current
Year
Fair Value of
Incentive
Securities
Awarded
Other
Total
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
128,219
143,684
72,123
80,822
-
34,247
54,375
98,333
78,975
13,500
80,137
89,802
2017
2016
413,829
460,388
12,181
13,650
6,852
7,678
-
3,253
-
-
-
-
7,613
8,531
26,646
33,112
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
140,400
157,334
78,975
88,500
-
37,500
54,375
98,333
78,975
13,500
87,750
98,333
440,475
493,500
Salary and
Fees
Superannuation
STI
Paid in
Relation to
Prior Year
STI Accrued
Current
Year
Fair Value of
Incentive
Securities
Awarded3
Other
Total
669,200
800,351
669,200
800,351
19,616
19,308
19,616
19,308
-
392,638
-
392,638
-
-
-
-
484,981
1,579,438
- 1,173,797
2,791,735
-
484,981
1,579,438
-
-
1,173,797
2,791,735
41.3
70.6
Salary and
Fees
Superannuation
STI
Paid in
relation to
Prior Year
STI Accrued
Current
Year
Fair Value of
Incentive
Securities
Awarded
Other
Total
393,750
654,443
387,500
314,875
781,250
969,318
14,712
19,308
19,616
19,308
34,328
38,616
-
-
-
146,250
-
146,250
-
-
-
-
-
-
435,534
136,667
127,083
46,879
562,617
183,546
-
-
-
-
843,996
810,418
534,199
527,312
- 1,378,195
1,337,730
-
Total
Performance
Related
%
51.6
16.9
23.8
36.6
40.8
24.7
Year
2017
2016
2017
2016
Year
2017
2016
2017
2016
2017
2016
Total
Performance
Related
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Performance
Related
%
41.3
70.6
Total Fixed
Remuneration
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Total Fixed
Remuneration
%
58.7
29.4
58.7
29.4
Total Fixed
Remuneration
%
48.4
83.1
76.2
63.4
59.2
75.3
1 Trevor Davies resigned from the board of directors 18 November 2015
2 Giles Everist resigned from the board of directors 7 February 2017
3 Includes fair value of one off retention grant of 2,500,000 restricted shares which are subject to the achievement of vesting hurdles
4 As at the date of this report the total fixed remuneration for the Managing Director and Group CEO is $520,049
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Options issued as part of remuneration for the year ended 30 June 2017
There were no options granted to directors or executives as part of their remuneration during the
financial year.
Performance Rights
During the year ended 30 June 2017, the following performance rights were granted.
Grant Date
1 July 2016
Number of Rights Granted
Fair Value of Rights Granted
3,634,749
$1,111,598
During the year ended 30 June 2017, 250,000 performance rights were vested.
During the year ended 30 June 2017, none of the performance rights lapsed due to their vesting criteria
not being met.
The following rights have been granted but remain unvested at 30 June 2017:
Grant Date
Number of Unvested Rights
Fair Value of Unvested Rights
1 July 2010
1 July 2011
1 July 2012
1 July 2013
1 July 2014
1 July 2015
1 July 2016
Total
120,976
235,210
297,665
763,957
754,068
1,612,117
2,006,769
5,790,762
$21,231
$24,932
$30,362
$136,366
$44,867
$56,424
$612,065
$926,247
Additional Information
The earnings of the consolidated entity for the five years to 30 June 2017 are summarised below:
Revenue
EBITDA
EBIT
Profit after income tax
2017
$000
306,015
2016
$000
301,644
2015
$000
666,915
2014
$000
618,401
2013
$000
528,786
(30,912)
(75,926)
62,696
81,117
100,712
(36,539)
(82,902)
55,894
(28,347)
(58,236)
40,280
74,316
52,627
92,580
64,367
The factors that are considered to affect total shareholders return (TSR) are summarised below:
Share price at financial year end ($)
Total dividends paid (cents per share)
0.93
4.0
0.72
10.5
1.16
13.0
1.83
12.5
1.78
11.5
Basic earnings per share (cents per share)
(2.65)1
6.10 1
23.91
29.502
26.942
2017
2016
2015
2014
2013
1 Based on adjusted earnings
2 Excluding business combination gains from both 2013 & 2014 reporting periods
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 39
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Shareholdings, Option Holdings and Performance Rights Holdings
Shareholdings
The number of shares in the Company held during the financial year by each director and KMP of the
consolidated entity, including their personally related parties, is set out below:
30 June 2017
Directors:
Balance
1.07.2016
Received as
Part of
Remuneration
Additions
Disposals/
Other1
Balance
30.06.2017
Denis Criddle
20,989,145
5,709,695
513,332
600,190
-
66,667
1,500
-
Scott Criddle
Giles Everist2
Bill Healy
David Saxelby
Lee Verios
Key management
personnel:
Craig Amos
Ric Buratto3
Total
Option holdings
-
-
-
-
-
-
-
250,000
27,880,529
250,000
-
-
-
-
-
-
-
-
-
-
-
20,989,145
5,709,695
(513,332)
-
-
-
-
-
(250,000)
600,190
-
66,667
1,500
-
(763,332)
27,367,197
There were no options held by directors or KMP at 30 June 2017.
Performance Rights holdings
The number of performance rights in the Company held during the financial year by each director and
KMP of the consolidated entity, including their personally related parties, is set out below:
30 June 2017
Balance
1.07.2016
Granted as
Remuneration
Vested During
the Period
Expired/
Other1
Balance
30.06.2017
Directors:
Scott Criddle
3,088,587
1,590,102
Key management
personnel:
Craig Amos
Ric Buratto3
Total
320,710
500,000
416,667
1,427,980
-
-
-
-
4,678,689
737,377
(250,000)
(1,677,980)
-
3,909,297
3,434,749
(250,000)
(1,677,980)
5,416,066
1 Other includes shares included upon appointment or excluded upon resignation
2 Giles Everist resigned on 7 February 2017
3 Ric Buratto left the Executive Leadership Team during the 2017 financial year
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
Other transactions with directors, KMP and their related parties:
(a) Director Related Transactions
Rent of various properties used by Decmil Australia Pty Ltd paid to Broadway Pty Ltd, an entity in
which Mr Denis Criddle has a beneficial interest
Consulting fees for Saxelby Associates Pty Ltd, an entity in which Mr David Saxelby has a
beneficial interest
(b) Director Related Balances 1
Amounts owing to Saxelby Associates Pty Ltd, an entity in which Mr David Saxelby has a beneficial
interest, for directors’ fees and consulting fees
2017
$000
196
200
23
[End of Remuneration Report]
Shares Under Option
There were no unissued ordinary shares of the Company under option outstanding at the date of this
report.
Shares Issued on the Exercise of Options
There were no ordinary shares of the Company issued on the exercise of options during the year ended
30 June 2017 and up to the date of this report.
Employee Share Program
At the 2014 Annual General Meeting, shareholders approved the adoption by the Company of a broad
based employee share plan and the issue of securities pursuant to that plan. During the financial year,
124,478 shares were issued under this plan as part of the Decmil Employee Share Purchase Plan. Under
this plan, employees who purchased up to $1,000 of shares had those shares matched by the Company.
The matched shares are subject to a trade restriction until the earlier of 3 years or cessation of
employment with the Company.
Indemnifying Officers or Auditor
The Company has indemnified the Directors of the Company for costs incurred, in their capacity as a
director, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the Directors of
the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify
the auditor of the Company or any related entity against a liability incurred by the auditor.
Proceedings on Behalf of Company
During the year ended 30 June 2017 the liquidators for Forge Group Ltd (in liquidation)(receivers and
managers appointed) commenced an action in the Supreme Court of Western Australia against Eastcoast
Development Engineering Pty Ltd (EDE), a subsidiary of the Company, for the repayment of $2.9 million
for what they consider constitute unfair preference payments, insolvent transactions and voidance
transactions. The liquidators have commenced claims against a number of parties which are joined with
EDE in the same action. The claim will be vigorously defended by EDE.
Other than the above, there are currently no material legal proceedings involving the Company or its
subsidiaries.
1 Transactions relating to directors’ fees are included in the Directors’ Report details of remuneration
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 41
DIRECTORS’ REPORT Cont’d
FOR THE YEAR ENDED 30 JUNE 2017
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.
Non-Audit Services
The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision
of non-audit services during the year is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed
below did not compromise the external auditor’s independence for the following reasons:
all non-audit services are reviewed and approved by the audit committee prior to commencement to
ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided does not compromise the general principles relating to auditor
independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the
Accounting Professional and Ethical Standards Board.
The following fees were paid or payable to RSM Australia Partners for non-audit services provided during
the year ended 30 June 2017:
Taxation compliance services
Accounting assistance
Total
$
15,556
9,000
24,556
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 can be found within this financial report.
Rounding of Amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been
rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in
certain cases, the nearest dollar.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the directors
of Decmil Group Limited support and have adhered to the ASX Corporate Governance Principles and
Recommendations as detailed in Decmil Corporate Governance Statement which can be found at
http://www.decmil.com.au/investor-relations/corporate-governance/
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
On behalf of the directors
Bill Healy
Chairman
29 August 2017
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Decmil Group Limited for the year ended 30 June 2017, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 29 August 2017
J A KOMNINOS
Partner
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Revenue from continuing operations
Cost of sales
Gross profit
Administration expenses
Equity based payments
Restructuring costs
Earnings from continuing operations before interest, tax,
depreciation and amortisation & impairments
Note
11
Consolidated Entity
2017
$000
2016
$000
303,870
299,836
(270,334)
(258,949)
33,536
40,887
(31,202)
(31,545)
(1,030)
(1,388)
(84)
(707)
(4,021)
4,614
457
(227)
Interest received
Borrowing costs
11(a)
4
52
(739)
Depreciation and amortisation expense
4, 17, 19
(5,604)
(6,666)
19
33
5
6
9a
9a
9b
9b
9c
9c
(10,687)
(18,763)
(35,825)
8,458
(27,367)
(980)
(28,347)
-
(78,069)
(79,891)
23,806
(56,085)
(2,151)
(58,236)
-
-
(28,347)
(58,236)
(16.57)
(16.57)
(34.50)
(34.50)
(16.00)
(16.00)
(33.23)
(33.23)
(0.57)
(0.57)
(1.27)
(1.27)
Impairment of intangible assets
Investment property fair value adjustment
Profit/(loss) before income tax expense
Income tax (expense)/benefit
Net profit/(loss) from continuing operations
Loss after tax from discontinued operations
Net profit/(loss) for the year
Other comprehensive income
Other comprehensive income
Total comprehensive income for the year
Overall Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinuing Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form part of these financial statements
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Work in progress
Current tax receivable
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Investment property
Property, plant and equipment
Deferred tax assets
Intangible assets
Other assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Current tax payable
Borrowings
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liabilities
Borrowings
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Retained earnings
TOTAL EQUITY
Consolidated Entity
Note
2017
$000
2016
$000
12
13
14
22
20
18
17
24
19
21
22
23
25
24
23
25
26
16,905
34,950
11,914
-
5,716
69,485
92,400
10,425
27,098
75,482
1,595
207,000
276,485
15,077
29,517
15,846
616
7,931
68,987
111,032
37,753
18,834
86,345
-
253,964
322,951
60,158
63,533
49
350
4,017
64,574
316
474
1,125
1,915
66,489
209,996
163,384
46,612
209,996
-
2,161
5,145
70,839
-
7,212
854
8,066
78,905
244,046
162,254
81,792
244,046
The accompanying notes form part of these financial statements
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 45
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
Consolidated Entity
Balance at 1 July 2015
Net loss for the year
Total comprehensive income for the year
Shares issued for the period
Transaction costs net of tax benefit
Equity based payments
Dividends paid
Balance at 30 June 2016
Balance at 1 July 2016
Net loss for the year
Total comprehensive income for the year
Shares issued for the period
Transaction costs net of tax benefit
Equity based payments
Dividends paid
Balance at 30 June 2017
Note
Issued
Capital
$000
Retained
Earnings
$000
Total
$000
161,705
157,646
319,351
-
-
47
(205)
707
-
(58,236)
(58,236)
(58,236)
(58,236)
-
-
-
47
(205)
707
(17,618)
(17,618)
162,254
81,792
244,046
162,254
81,792
244,046
-
-
54
46
1,030
-
(28,347)
(28,347)
(28,347)
(28,347)
-
-
-
54
46
1,030
(6,833)
(6,833)
163,384
46,612
209,996
10
10
The accompanying notes form part of these financial statements
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs paid
Income taxes received
Consolidated Entity
Note
2017
$000
2016
$000
303,708
329,086
(310,774)
(352,739)
53
(739)
800
459
(227)
3,059
Net cash used in operating activities
29(a)
(6,952)
(20,362)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of investments, net of cash acquired
29(b)
Proceeds from sale of non-current assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from/(repayment of) borrowings
Share issue/buy-back transaction costs
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash held
Cash at beginning of the financial year
Cash at end of the financial year
(1,346)
-
26,061
24,715
(9,145)
43
(6,833)
(15,935)
1,828
15,077
16,905
(2,920)
(12,825)
1,158
(14,587)
8,050
46
(17,618)
(9,522)
(44,471)
59,548
15,077
The accompanying notes form part of these financial statements
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 47
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
The financial statements of Decmil Group Limited (‘the Company’) for the year ended 30 June 2017
comprise of the Company and its controlled entities (collectively referred to as ‘the consolidated entity’)
and the consolidated entity’s interests in joint operations. The separate financial statements of the parent
entity, Decmil Group Limited, have not been presented within this financial report as permitted by the
Corporations Act 2001.
Decmil Group Limited is a company limited by shares incorporated in Australia whose shares are publicly
traded on the Australian Securities Exchange.
The financial statements were authorised for issue in accordance with a resolution of the directors dated
29 August 2017.
NOTE 1: Summary of Significant Accounting Policies
Basis of Preparation
These general purpose financial statements have been prepared in accordance with the Corporations Act
2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board,
and International Financial Reporting Standards as issued by the International Accounting Standards
Board. The consolidated entity is a for-profit entity for financial reporting purposes under Australian
Accounting Standards.
Material accounting policies adopted in the preparation of these financial statements are presented below
and have been consistently applied unless otherwise stated.
Except for cash flow information, the financial statements have been prepared on an accruals basis and
are based on historical costs, modified where applicable, by the measurement at fair value of selected
non-current assets, financial assets and financial liabilities.
(a) Principles of Consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities
controlled by Decmil Group Limited at the end of the reporting period. The Company controls an
entity when it 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 over the entity. The assets, liabilities
and results of all controlled entities are fully consolidated into the financial statements of the
consolidated entity from the date on which control is obtained by the consolidated entity. The
consolidation of a controlled entity is discontinued from the date that control ceases.
Intercompany balances and transactions between entities in the consolidated entity are eliminated
on consolidation. Accounting policies of controlled entities have been changed where necessary to
ensure consistency with those adopted by the consolidated entity.
Non-controlling interests in the results and equity of controlled entities are shown separately within
the equity section of the consolidated statement of financial position and statement of profit or loss
and other comprehensive income. The non-controlling interests in the net assets of the controlled
entity comprise their interests at the date of the original business combination and their share of
changes in equity since that date.
Where the consolidated entity loses control over a controlled entity, it derecognises the assets
including goodwill, liabilities and non-controlling interest in the controlled entity together with any
cumulative translation differences recognised in equity. The consolidated entity recognises the fair
value of the consideration received and the fair value of any investment retained together with any
gain or loss in profit or loss.
Business Combinations
The acquisition method of accounting is used to account for business combinations regardless of
whether equity instruments or other assets are acquired.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
The consideration transferred is the sum of the acquisition-date fair values of the assets
transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the
acquiree and the amount of any non-controlling interest in the acquiree. For each business
combination, the non-controlling interest in the acquiree is measured at either fair value or at the
proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as
incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and
liabilities assumed for appropriate classification and designation in accordance with the contractual
terms, economic conditions, the consolidated entity's operating or accounting policies and other
pertinent conditions in existence at the acquisition-date.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair
value. Subsequent changes in the fair value of the contingent consideration classified as an asset
or liability is recognised in profit or loss. Contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and
any non-controlling interest in the acquiree and the fair value of the consideration transferred and
the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the
consideration transferred and the pre-existing fair value is less than the fair value of the
identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is
recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after
a reassessment of the identification and measurement of the net assets acquired, the non-
controlling interest in the acquiree, if any, the consideration transferred and the acquirer's
previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer
retrospectively adjusts the provisional amounts recognised and also recognises additional assets or
liabilities during the measurement period, based on new information obtained about the facts and
circumstances that existed at the acquisition-date. The measurement period ends on either the
earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
The acquisition date fair value of the consideration transferred for a business combination plus the
acquisition date fair value of any previously held equity interest shall form the cost of the
investment in the separate financial statements. Consideration may comprise the sum of the assets
transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree
and the equity interests issued by the acquirer.
(b) Income Tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income
based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred
tax assets and liabilities attributable to temporary differences, unused tax losses and the
adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates
expected to be applied when the assets are recovered or liabilities are settled, based on those tax
rates that are enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an
asset or liability in a transaction that is not a business combination and that, at the time of the
transaction, affects neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with interests in controlled entities, associates
or joint ventures, and the timing of the reversal can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 49
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
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. The carrying amount of recognised and unrecognised deferred tax assets are reviewed
at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer
probable that future taxable profits will be available for the carrying amount to be recovered.
Previously unrecognised deferred tax assets are recognised to the extent that it is probable that
there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset
current tax assets against current tax liabilities and deferred tax assets against deferred tax
liabilities; and they relate to the same taxable authority on either the same taxable entity or
different taxable entities which intend to settle simultaneously.
The consolidated entity recognises the excess of the research and development (R&D) tax offset
over the statutory rate (‘the R&D offset’) being an additional 8.5% (2016: 10%) deduction as a
government grant when there is reasonable assurance it will be received and any attached
conditions will be complied with. As the grant relates to R&D expenditure already incurred it is
recognised in the income statement in the period it became receivable.
Tax consolidation
Decmil Group Limited and its wholly-owned Australian controlled entities have implemented the tax
consolidation legislation. As a consequence, these entities are taxed as a single entity and the
deferred tax assets and liabilities of the entities are set off in the consolidated financial statements.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the tax consolidated group.
The tax funding arrangement ensures that the intercompany charge equals the current tax liability
or benefit of each tax consolidated group member, resulting in neither a contribution by the head
entity to the controlled entities nor a distribution by the controlled entities to the head entity.
(c) Construction Contracts and Work in Progress
Construction work in progress is valued at cost, plus profit recognised to date less any provision for
anticipated future losses. Cost includes both variable and fixed costs relating to specific contracts,
and those costs that are attributable to the contract activity in general and that can be allocated on
a reasonable basis.
Construction profits are recognised on the stage of completion basis and measured using the
proportion of costs incurred to date compared to expected actual costs. Where losses are
anticipated they are provided for in full. Construction revenue has been recognised on the basis of
the terms of the contract adjusted for any variations or claims allowable under the contract.
(d) Interests in Joint Arrangements
Joint arrangements represent the contractual sharing of control between parties in a business
venture where unanimous decisions about relevant activities are required.
Joint venture operations represent arrangements whereby joint operators maintain direct interests
in each asset and exposure to each liability of the arrangement. The consolidated entity’s interests
in the assets, liabilities, revenue and expenses of joint operations are included in the respective line
items of the consolidated financial statements.
Gains and losses resulting from sales to a joint operation are recognised to the extent of the other
parties’ interests. When the consolidated entity makes purchases from a joint operation, it does not
recognise its share of the gains and losses from the joint operations until it resells those
goods/assets to a third party.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
(e) Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any
accumulated depreciation and impairment losses.
The carrying amount of property, plant and equipment is reviewed annually by directors to ensure
it is not in excess of the recoverable amount from these assets. The recoverable amount is
assessed on the basis of the expected net cash flows that will be received from the assets
employment and subsequent disposal. The expected net cash flows have been discounted to their
present values in determining recoverable amounts.
Depreciation
The depreciable amount of all property, plant and equipment but excluding freehold land is
depreciated on a straight-line basis over their useful lives to the consolidated entity commencing
from the time the asset is held ready for use. The depreciation rates used for each class of
depreciable assets are:
Class of Fixed Asset
Depreciation Rate
Building
2.5%
Owned plant and equipment
12.5% to 33%
Leased plant and equipment
12.5%
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.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount.
These gains and losses are included in the statement of profit or loss and other comprehensive
income in the period in which they arise.
(f)
Investment Property
Investment property, comprising investment interests in land and buildings, is held to generate
long-term returns. Investment property is initially measured at cost and subsequently measured
at fair value. Investment property is carried at fair value which is based on discounted cash flow
projections. Investment property is valued at least every 3 years by independent external valuers.
Any resultant changes in fair value are shown separately in the statement of profit or loss and
other comprehensive income as net gains/(losses) from fair value adjustments on investment
property.
(g) Leases
Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of
the asset, but not the legal ownership that are transferred to entities in the consolidated entity
are classified as finance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts
equal to the fair value of the leased property or the present value of the minimum lease
payments, including any guaranteed residual values. Lease payments are allocated between the
reduction of the lease liability and the lease interest expense for the period. Leased assets are
depreciated on a straight-line basis over their estimated useful lives. Lease payments for
operating leases, where substantially all the risks and benefits remain with the lessor, are
recognised as expenses in the periods in which they are incurred.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 51
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
(h) Impairment of Assets
At each reporting date, the consolidated entity reviews the carrying values of its tangible and
intangible assets to determine whether there is any indication that those assets have been
impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the
asset's fair value less costs to sell and value-in-use, is compared to the asset's carrying value.
Any excess of the asset's carrying value over its recoverable amount is expensed immediately to
the statement of profit or loss and other comprehensive income.
Where it is not possible to estimate the recoverable amount of an individual asset, the
consolidated entity estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
(i) Goodwill
Goodwill acquired in a business combination is initially measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree, and the
acquisition date fair value of any previously held equity interest over the acquisition-date fair
value of the identifiable assets acquired and the liabilities assumed.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is not amortised. Goodwill is reviewed for impairment, annually or more frequently if
events or changes in circumstances indicate that the carrying value may be impaired. It is
allocated to the consolidated entity’s cash-generating units or groups of cash-generating units,
representing the lowest level at which goodwill is monitored not being larger than an operating
segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill
related to the entity disposed of.
Impairment losses recognised for goodwill are not subsequently reversed.
(j)
Intangibles other than Goodwill
Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost
model is applied to each class of intangible assets. Where amortisation is charged on assets with
finite lives, this expense is taken to the statement of profit or loss and other comprehensive
income, through the ‘amortisation expenses’ line item.
Intangible assets are tested for impairment where an indicator of impairment exists and in the
case of intangible assets with indefinite useful lives, either individually or at the cash-generating
unit level.
(k) Employee Benefits
Provision is made for the consolidated entity’s obligation for short-term employee benefits. Short-
term employee benefits are benefits that are expected to be settled wholly before 12 months after
the end of the annual reporting period in which the employees render the related service,
including wages, salaries and sick leave. Short-term employee benefits are measured at the
(undiscounted) amounts expected to be paid when the obligation is settled.
The consolidated entity’s obligations for short-term employee benefits such as wages, salaries and
sick leave are recognised as a part of current trade and other payables in the statement of
financial position. The consolidated entity’s obligations for employees’ annual leave and long
service leave entitlements are recognised as provisions in the statement of financial position.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
Other long-term employee benefits
Provision is made for employees’ long service leave and annual leave entitlements not expected to
be settled wholly within 12 months after the end of the annual reporting period in which the
employees render the related service. Other long-term employee benefits are measured at the
present value of the expected future payments to be made to employees. Expected future
payments incorporate anticipated future wage and salary levels, durations of service and
employee departures and are discounted at rates determined by reference to market yields at the
end of the reporting period on government bonds that have maturity dates that approximate the
terms of the obligations. Any remeasurements for changes in assumptions of obligations for other
long-term employee benefits are recognised in statement of profit or loss and other
comprehensive income in the periods in which the changes occur.
The consolidated entity’s obligations for long-term employee benefits are presented as non-
current provisions in its statement of financial position, except where the consolidated entity does
not have an unconditional right to defer settlement for at least 12 months after the end of the
reporting period, in which case the obligations are presented as current provisions.
Equity-based payments
The consolidated entity provides equity-settled equity-based compensation benefits to employees.
The equity-based compensation benefits include the award of shares, and performance rights over
shares, in exchange for the rendering of services. The fair value of the equity to which employees
become entitled is measured at grant date and recognised as an expense over the vesting period,
with a corresponding increase to an equity account. The fair value of shares is measured as the
share price at the date of grant and the fair value of performance rights is ascertained using
various option pricing models which incorporate, where required, market vesting conditions. The
number of shares and performance rights expected to vest is reviewed and adjusted at the end of
each reporting date such that the amount recognised for services received as consideration for the
equity instruments granted shall be based on the number of equity instruments that eventually
vest.
(l) Provisions
Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a
result of past events, for which it is probable that an outflow of economic benefits will result and
that outflow can be reliably measured. Provisions are measured using the best estimate of the
amounts required to settle the obligation at the end of the reporting period, taking into account
the risks and uncertainties surrounding the obligation.
(m) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-
term highly liquid investments with original maturities of 6 months or less.
(n) Revenue and Other Income
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated
entity and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received or receivable.
Revenue from the rendering of a service is recognised upon the delivery of the service to the
customers.
Revenue recognition relating to the provision of services, namely construction activities, is
determined with reference to the stage of completion of the transaction at the end of the
reporting period, where outcome of the contract can be estimated reliably. Stage of completion is
determined with reference to the services performed to date as a percentage of total anticipated
services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised
only to the extent that related expenditure is recoverable.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 53
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
Interest revenue is recognised as interest accrues using the effective interest rate method.
All revenue is stated net of the amount of goods and services tax (GST).
(o) Financing Costs
Borrowing costs directly attributable to the acquisition, construction or production of assets that
necessarily take a substantial period of time to prepare for their intended use or sale, are added
to the cost of those assets, until such time as the assets are substantially ready for their intended
use or sale.
All other borrowing costs are recognised in the statement of profit or loss and other
comprehensive income in the period in which they are incurred.
(p) Earnings Per Share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Decmil
Group Limited, 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 financial year.
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 shares
assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(q) Issued Capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
(r) 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.
(s) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the
amount of GST incurred is not recoverable from the relevant revenue authority. In these
circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an
item of the expense. Receivables and payables in the statement of financial position are shown
inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST
component of investing and financing activities, which are disclosed as operating cash flows.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
(t) Financial Instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the consolidated entity becomes a
party to the contractual provisions to the instrument. For financial assets, this is equivalent to the
date that the consolidated entity commits itself to either the purchase or sale of the asset (i.e.
trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the
instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are
expensed to the statement of profit or loss and other comprehensive income immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at either of fair value, amortised cost using the
effective interest rate method, or cost. Fair value represents the amount for which an asset could
be exchanged or a liability settled, between knowledgeable, willing parties. Where available,
quoted prices in an active market are used to determine fair value. In other circumstances,
valuation techniques are adopted, including recent arm’s length transactions, reference to similar
instruments and option pricing models.
Amortised cost is the amount at which the financial asset or liability is measured at initial
recognition less principal repayments and any reduction for impairment, and adjusted for any
cumulative amortisation of the difference between that initial amount and the maturity amount
calculated using the effective interest rate method.
The effective interest rate method is used to allocate interest income or interest expense over the
relevant period and is equivalent to the rate that exactly discounts estimated future cash
payments or receipts (including fees, transaction costs and other premiums or discounts) over the
expected life (or when this cannot be reliably predicted, the contractual term) of the financial
instrument to the net carrying amount of the financial asset or financial liability. Revisions to
expected future net cash flows will necessitate an adjustment to the carrying value with a
consequential recognition of an income or expense in the statement of profit or loss or other
comprehensive income.
The consolidated entity does not designate any interests in subsidiaries, associates or joint
venture entities as being subject to the requirements of Accounting Standards specifically
applicable to financial instruments.
i. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market and are subsequently measured at amortised cost. Gains
or losses are recognised in the statement of profit or loss and other comprehensive income
through the amortisation process and when the financial asset is derecognised.
ii. Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at
amortised cost.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 55
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
iii. Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either not suitable
to be classified into other categories of financial assets due to their nature, or they are
designated as such by management. They comprise investments in the equity of other entities
where there is neither a fixed maturity nor fixed or determinable payments.
Available-for-sale financial assets are included in non-current assets, except for those which are
expected to mature within 12 months after the end of the reporting period. All other financial
assets are classified as current assets.
Impairment
At the end of each reporting period, the consolidated entity assesses whether there is objective
evidence that a financial asset has been impaired. In the case of available-for-sale financial
instruments, a prolonged decline in the value of the instrument is considered to determine
whether an impairment has arisen. Impairment losses are recognised in the statement of profit
or loss and other comprehensive income.
(u)
Trade and Other Receivables
Trade and other receivables include amounts due from customers for goods sold and services
performed in the ordinary course of business. Receivables expected to be collected within 12
months of the end of the reporting period are classified as current assets. All other receivables
are classified as non-current assets. Trade and other receivables are initially recognised at fair
value and subsequently measured at amortised cost using the effective interest rate method,
less any provision for impairment.
Trade and other receivables include amounts due from customers for goods sold and services
performed in the ordinary course of business. Receivables expected to be collected within 12
months of the end of the reporting period are classified as current assets. All other receivables
are classified as non-current assets. Trade and other receivables are initially recognised at fair
value and subsequently measured at amortised cost using the effective interest rate method,
less any provision for impairment.
(v)
Current and Non-current Classification
Assets and liabilities are presented in the statement of financial position based on current and
non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold
or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is
expected to be realised within 12 months after the reporting period; or the asset is cash or cash
equivalent unless restricted from being exchanged or used to settle a liability for at least 12
months after the reporting period. All other assets are classified as non-current.
(w)
Foreign Currency Transactions and Balances
Foreign currency translation
The financial statements are presented in Australian dollars, which is the Company’s functional
and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars 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 financial year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
(x)
Fair Value of Assets and Liabilities
The consolidated entity measures some of its assets and liabilities at fair value on either a
recurring or non-recurring basis, depending on the requirements of the applicable Accounting
Standard.
Fair value is the price the consolidated entity would receive to sell an asset or would have to pay
to transfer a liability in an orderly (i.e. unforced) transaction between independent,
knowledgeable and willing market participants at the measurement date.
As fair value is a market-based measure, the closest equivalent observable market pricing
information is used to determine fair value. Adjustments to market values may be made having
regard to the characteristics of the specific asset or liability. The fair values of assets and
liabilities that are not traded in an active market are determined using one or more valuation
techniques. These valuation techniques maximise, to the extent possible, the use of observable
market data.
To the extent possible, market information is extracted from either the principal market for the
asset or liability (i.e. the market with the greatest volume and level of activity for the asset or
liability) or, in the absence of such a market, the most advantageous market available to the
consolidated entity at the end of the reporting period (i.e. the market that maximises the
receipts from the sale of the asset or minimises the payments made to transfer the liability,
after taking into account transaction costs and transport costs).
The fair value of liabilities and the consolidated entity’s own equity instruments (excluding those
related to equity-based payment arrangements) may be valued, where there is no observable
market price in relation to the transfer of such financial instrument, by reference to observable
market information where such instruments are held as assets. Where this information is not
available, other valuation techniques are adopted and, where significant, are detailed in the
respective note to the financial statements.
(y)
Rounding of Amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the
Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this
report have been rounded off in accordance with that Corporations Instrument to the nearest
thousand dollars, or in certain cases, the nearest dollar.
(z)
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to
changes in presentation for the current financial year.
(aa) Critical Accounting Estimates and Judgements
The directors evaluate estimates and judgements incorporated into the financial statements
based on historical knowledge and best available current information. Estimates assume a
reasonable expectation of future events and are based on current trends and economic data,
obtained both externally and within the consolidated entity.
Impairment of goodwill and intangibles
The consolidated entity determines whether goodwill and intangible assets are impaired at least
on an annual basis. This requires an estimation of the recoverable amount of the cash-
generating units to which the goodwill and intangibles with indefinite useful lives are allocated.
The assumptions used in this estimation of recoverable amount and the carrying amount of
goodwill and intangibles are discussed in note 19.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 57
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
Equity-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instrument at the date at which they are granted.
The fair value of performance rights are determined using various option pricing models. The
accounting estimates and assumptions relating to equity-settled equity-based payments would
have no impact on the carrying amount of assets and liabilities within the next annual reporting
period but may impact expenses and equity.
Construction contracts
When accounting for construction contracts, the contracts are either combined or segmented if
this is deemed necessary to reflect the substance of the agreement. Revenue arising from fixed
price contracts is recognised in accordance with the percentage of completion method. Stage of
completion is agreed with the customer on a work certified to date basis, as a percentage of the
overall contract. Revenue from cost plus contracts is recognised by reference to the recoverable
costs incurred plus a percentage of fees earned during the financial year. The percentage of fees
earned during the financial year is based on the stage of completion of the contract.
Where a loss is expected to occur from a construction contract, the excess of the total expected
contract costs over expected contract revenue is recognised as an expense immediately.
Provision for maintenance
In determining the level of provision required for maintenance, the consolidated entity has made
judgements in respect of the expected outcome of construction contracts and the costs of fulfilling
the maintenance obligations. The provision is based on estimates made from historical data
associated with past construction contracts.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value,
using a three level hierarchy, based on the lowest level of input that is significant to the entire fair
value measurement, being: level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities that the consolidated entity can access at the measurement date; level 2:
Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly or indirectly; and level 3: Unobservable inputs for the asset or liability.
Considerable judgement is required to determine what is significant to fair value and therefore
which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation
models. These include discounted cash flow analysis or the use of observable inputs that require
significant adjustments based on unobservable inputs.
Provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and
judgement. The level of provision is assessed by taking into account the recent sales experience,
the ageing of receivables, historical collection rates and specific knowledge of the individual
debtors’ financial position.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: Summary of Significant Accounting Policies (Cont’d)
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates.
Significant judgement is required in determining the provision for income tax. There are many
transactions and calculations undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. The consolidated entity recognises liabilities for
anticipated tax audit issues based on the consolidated entity's current understanding of the tax
law. Where the final tax outcome of these matters is different from the carrying amounts, such
differences will impact the current and deferred tax provisions in the period in which such
determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and losses only if the
consolidated entity considers it is probable that future taxable amounts will be available to utilise
those temporary differences and losses.
Employee benefits provision
The liability for employee benefits expected to be settled more than 12 months from the reporting
date are recognised and measured at the present value of the estimated future cash flows to be
made in respect of all employees at the reporting date. In determining the present value of the
liability, estimates of attrition rates and pay increases through promotion and inflation have been
taken into account.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and
amortisation charges for its property, plant and equipment and finite life intangible assets. The
useful lives could change significantly as a result of technical innovations or some other event.
The depreciation and amortisation charge will increase where the useful lives are less than
previously estimated lives, or technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
NOTE 2: New Accounting Standards for Application in Future Periods
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current
reporting period. The adoption of these Accounting Standards and Interpretations did not have any
significant impact on the financial performance or position of the consolidated entity.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have
not been early adopted.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are
not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting
period ended 30 June 2017. The consolidated entity's assessment of the impact of these new or amended
Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The
standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial
Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement
models for financial assets.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 59
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 2: New Accounting Standards for Application in Future Periods (Cont’d)
A financial asset shall be measured at amortised cost, if it is held within a business model whose
objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and
solely principal and interest. All other financial instrument assets are to be classified and measured at fair
value through profit or loss unless the entity makes an irrevocable election on initial recognition to
present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive
income (OCI). For financial liabilities, the standard requires the portion of the change in fair value that
relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting
mismatch). New simpler hedge accounting requirements are intended to more closely align the
accounting treatment with the risk management activities of the entity. New impairment requirements
will use an 'expected credit loss' (ECL) model to recognise an allowance. Impairment will be measured
under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly
since initial recognition in which case the lifetime ECL method is adopted. The standard introduces
additional new disclosures. The consolidated entity will adopt this standard from 1 July 2018 but the
impact of its adoption is yet to be assessed by the consolidated entity.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The
standard provides a single standard for revenue recognition. The core principle of the standard is that an
entity will recognise revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. The standard will require: contracts (either written, verbal or implied) to be identified,
together with the separate performance obligations within the contract; determine the transaction price,
adjusted for the time value of money excluding credit risk; allocation of the transaction price to the
separate performance obligations on a basis of relative stand-alone selling price of each distinct good or
service, or estimation approach if no distinct observable prices exist; and recognition of revenue when
each performance obligation is satisfied. Credit risk will be presented separately as an expense rather
than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer
obtains control of the goods. For services, the performance obligation is satisfied when the service has
been provided, typically for promises to transfer services to customers. For performance obligations
satisfied over time, an entity would select an appropriate measure of progress to determine how much
revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be
presented in an entity's statement of financial position as a contract liability, a contract asset, or a
receivable, depending on the relationship between the entity's performance and the customer's payment.
Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts
with customers; the significant judgements made in applying the guidance to those contracts; and any
assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will
adopt this standard from 1 July 2018 but the impact of its adoption is yet to be assessed by the
consolidated entity.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The
standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases
and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of
financial position, measured as the present value of the unavoidable future lease payments to be made
over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-
value assets (such as personal computers and small office furniture) where an accounting policy choice
exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss
as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future
restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be
replaced with a depreciation charge for the leased asset (included in operating costs) and an interest
expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease,
the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses
under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results
will be improved as the operating expense is replaced by interest expense and depreciation in profit or
loss under AASB 16. For classification within the statement of cash flows, the lease payments will be
separated into both a principal (financing activities) and interest (either operating or financing activities)
component. For lessor accounting, the standard does not substantially change how a lessor accounts for
leases. The consolidated entity will adopt this standard from 1 July 2019. The adoption of this standard
has been assessed by the consolidated entity and will impact its assets, liabilities and expenses but the
extent of which has not yet been assessed by the consolidated entity.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 3: Parent Entity Information
Statement of profit or loss and other comprehensive income
Profit/(loss) for the year
Total comprehensive income for the year
Statement of financial position
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
EQUITY
Issued capital
Retained earnings
TOTAL EQUITY
a) Guarantees
Parent Entity
2017
$000
(4,069)
(4,069)
2016
$000
556
556
83,664
90,987
99,188
80,406
174,651
179,594
140,145
137,062
822
444
140,967
137,506
164,751
162,254
(131,067)
(120,166)
33,684
42,088
Cross guarantees have been provided by Decmil Group Limited and its controlled entities as listed in
note 15(b).
b) Other Commitments and Contingencies
Decmil Group Limited has no commitments to acquire property, plant and equipment, and has no
contingent liabilities apart from that disclosed in note 34.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 61
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 4: Expenses
From continuing operations
(Loss)/profit before income tax includes the following specific
expenses:
Employee benefits costs
Finance costs
Depreciation and amortisation of non-current assets:
- plant and equipment owned
- plant and equipment leased
- building
- amortisation of intangible assets
Total depreciation
Rental expense on operating leases
Net foreign exchange loss/(gain)
Consolidated Entity
2017
$000
2016
$000
84,070
739
92,477
227
4,831
5,985
80
517
176
5,604
2,025
(198)
81
526
74
6,666
1,207
410
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 5: Income Tax Expense
Income tax (expense)/benefit is attributable to:
Loss from continuing operations
Loss from discontinued operations
The components of income tax (expense)/benefit comprise:
Current tax
Deferred tax
Over/(under) provision for tax in prior year
The prima facie tax expense on loss before income tax is
reconciled to the income tax (expense)/benefit as follows:
Prima facie tax (expense)/benefit on loss before income tax at
30% (2016: 30%)
Adjusted by the tax effect of:
- equity based payments
- deductible capital raising costs
- non-deductible items
- research and development tax offset (non-refundable)
- over/(under) provision for tax in prior year
Income tax (expense)/benefit attributable to loss before
income tax
Consolidated Entity
Note
6
24
2017
$000
8,458
420
8,878
662
7,824
392
8,878
2016
$000
23,806
628
24,434
(1,000)
25,454
(20)
24,434
11,168
24,801
(230)
54
(212)
193
(2,763)
(2,162)
257
392
1,834
(20)
8,878
24,434
The applicable weighted average effective tax rates are as follows:
24%
30%
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 63
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 6: Discontinued Operations
Due to unfavourable market conditions, the SAS Telecom business was discontinued during the 2016
financial year.
(a) Financial performance information
Consolidated Entity
Other services revenue
Interest received
Total revenue
Cost of sales
Administration expenses
Depreciation and amortisation expense
Impairment of intangible assets
Restructuring costs
Total expenses
Profit/(loss) before income tax expense
Note
2017
$000
2,145
-
2,145
(3,370)
(151)
(24)
-
-
(3,545)
(1,400)
Income tax (expense)/benefit
5
420
2016
$000
2,241
2
2,243
(2,685)
(1,574)
(310)
(433)
(20)
(5,022)
(2,779)
628
Profit/(loss) after income tax expense from discontinued
operations
(980)
(2,151)
(b) Financial position information
Consolidated Entity
Note
2017
$000
6
42
-
-
-
48
215
54
269
317
5,989
-
5,989
5,989
2016
$000
150
505
692
587
13
1,947
41
255
296
2,243
6,851
84
6,935
6,935
(5,672)
(4,692)
Current Assets
Cash and cash equivalents
Trade and other receivables
Work in progress
Current tax receivable
Other current assets
Total Current Assets
Non-current Assets
Deferred tax assets
Property, plant and equipment
Total Non-current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Total Current Liabilities
Total Liabilities
Net Assets/(Liabilities)
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 6: Discontinued Operations (Cont’d)
(c) Cash flow information
Consolidated Entity
Net cash used in operating activities
Net cash used in investing activities
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents from
discontinued operations
NOTE 7: Key Management Personnel Disclosures
Note
2017
$000
(175)
31
-
(144)
2016
$000
(5)
(68)
-
(73)
A. Names and positions held of directors and other members of Key Management Personnel in
office at any time during the financial year are:
Parent Entity Directors
Denis Criddle
Scott Criddle
Giles Everist (resigned 7 February 2017)
Bill Healy
David Saxelby
Lee Verios
Key Management Personnel
Ric Buratto: CEO Construction and Engineering1
Craig Amos: Chief Financial Officer
B. Compensation for Key Management Personnel
The totals of remuneration paid to directors and KMP of the Company and the consolidated entity during
the year are as follows:
Short-term employee benefits
Equity-based payments
2017
$000
1,945
1,047
2,992
2016
$000
2,860
1,763
4,623
C. Loans to Key Management Personnel
No directors or KMP had any loans during the reporting period.
D. Other transactions and balances with Key Management Personnel
There were no other transactions and balances with KMP other than that disclosed in note 31.
1 Ric Buratto left the Executive Leadership Team during the 2017 financial year
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 65
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 8: Auditors’ Remuneration
Remuneration of the auditor of the parent entity for:
-
-
-
-
auditing or reviewing the financial report
taxation services
accounting assistance
corporate finance services
NOTE 9: Earnings Per Share
(a) Reconciliation of earnings to profit or loss from overall
operations
Loss after income tax
Earnings used to calculate basic and dilutive EPS
(b) Reconciliation of earnings to profit or loss from
continuing operations
Loss after income tax
Earnings used to calculate basic and dilutive EPS
(c) Reconciliation of earnings to profit or loss from
discontinuing operations
Loss after income tax
Earnings used to calculate basic and dilutive EPS
(d) Weighted average number of ordinary shares
outstanding during the year used in calculating
basic EPS
Consolidated Entity
2017
$000
266
16
9
-
291
2016
$000
287
12
-
7
306
Consolidated Entity
2017
$000
2016
$000
(28,347)
(28,347)
(58,236)
(58,236)
(27,367)
(27,367)
(56,085)
(56,085)
(980)
(980)
(2,151)
(2,151)
No.
No.
171,036,636
168,800,836
Weighted average number of dilutive options outstanding
-
-
Weighted average number of ordinary shares outstanding
during the year used in calculating dilutive EPS
171,036,636
168,800,836
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 10: Dividends
Distributions Paid
Final dividend for the year ended 30 June 2016 of 2.0 cents (2015:
8.5 cents) per share fully franked at the tax rate of 30% (2015:
30%)
Interim dividend for the year ended 30 June 2017 of 2.0 cents
(2016: 2.0 cents) per share fully franked at the tax rate of 30%
(2016: 30%)
Balance of franking account at year end
NOTE 11: Revenue
From continuing operations
Construction and engineering revenue
Accommodation revenue
Other revenue
- government grant
- rentals
- profit on sale of property
- other services revenue
Total revenue from continuing operations
(a) Interest revenue
Interest revenue from:
- other persons
Total interest revenue
Consolidated Entity
2017
$000
2016
$000
3,398
14,220
3,435
3,398
6,833
54,244
17,618
59,886
Consolidated Entity
Note
2017
$000
263,584
14,486
891
351
2,213
22,345
303,870
2016
$000
271,638
8,964
6,112
492
-
12,630
299,836
52
52
457
457
On 23 June 2017, the commercial office located at 20 Parkland Road, Osborne Park, Western Australia
was sold for $27.5 million. The written down value at the date of sale was $23.189 million. The profit
recognised on sale was $2.213 million net of selling costs.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 67
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 12: Cash and Cash Equivalents
Cash at bank and in hand
Reconciliation of cash
Consolidated Entity
2017
$000
16,905
16,905
2016
$000
15,077
15,077
Cash at the end of the financial year as shown in the statement of
cash flows is reconciled to items in the statement of financial
position as follows:
Cash and cash equivalents
16,905
15,077
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 13: Trade and Other Receivables
CURRENT
Trade receivables
Less: Provision for impairment of receivables
Movement in the provision for impairment of receivables are as
follows:
Opening balance
Additional provisions recognised
Written off during the year as uncollectable
Closing balance
Consolidated Entity
2017
$000
2016
$000
34,950
29,517
-
-
34,950
29,517
-
31
(31)
-
-
47
(47)
-
The following table details the consolidated entity’s trade receivables exposed to credit risk with ageing
analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has
not been settled, with the terms and conditions agreed between the consolidated entity and the customer
or counterparty to the transaction. Receivables that are past due are assessed for impairment by
ascertaining solvency of the debtors and are provided for where there are specific circumstances
indicating that the debt may not be fully repaid to the consolidated entity.
The balances of receivables that remain within initial trade terms (as detailed in the table) are considered
to be of high credit quality.
Past due but not impaired (days overdue)
Within
initial
trade
terms
$000
Gross
amount
$000
31-60
$000
61-90
$000
91-120
$000
>120
$000
Past due
and
impaired
$000
2017
Trade receivables
34,950
29,912
4,010
Total
2016
34,950
29,912
4,010
Trade receivables
29,517
23,625
4,152
Total
29,517
23,625
4,152
326
326
604
604
170
170
532
532
225
225
911
911
-
-
-
-
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 69
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 14: Work in Progress
Consolidated Entity
Note
2017
$000
2016
$000
CURRENT
Construction and engineering contracts
Cost incurred to date plus profit recognised
730,763
843,853
Consideration received and receivables as progress billings
(730,362)
(850,107)
Advanced billings to customers
Unbilled amounts due from customers
401
21
(11,513)
11,914
401
(6,254)
(22,100)
15,846
(6,254)
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 15: Controlled Entities
(a) Controlled Entities
Country of
Incorporation
Percentage Owned (%)
2017
2016
Parent Entity:
Decmil Group Limited
Controlled entities of Decmil Group Limited:
Decmil Australia Pty Ltd
Decmil Properties Pty Ltd
Eastcoast Development Engineering Pty Ltd
Homeground Villages Pty Ltd
Decmil Infrastructure Pty Ltd
Decmil Services Pty Ltd
Scope Australia Pty Ltd
Decmil Group Limited Employee Share Plan Trust
Controlled entities of Homeground Villages Pty Ltd:
Homeground Gladstone Pty Ltd ATF Homeground
Gladstone Unit Trust
Homeground Gladstone Unit Trust
Homeground Karratha Pty Ltd
Controlled entities of Decmil Australia Pty Ltd:
Decmil PNG Limited
Decmil Construction NZ Limited
Decmil Engineering Pty Ltd
Cut and Fill Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Papua New
Guinea
New Zealand
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
Controlled entities of Decmil Infrastructure Pty Ltd:
Cornelisse Shoal Pty Ltd
Australia
100%
100%
Controlled entities of Decmil Services Pty Ltd:
Decmil Telecom Pty Ltd
SC Holdings Pty Ltd
SC Services Pty Ltd
SC Equipment Holdings Pty Ltd
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 71
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 15: Controlled Entities (Cont’d)
(b) A deed of cross guarantee between Decmil Group Limited and the following wholly-owned controlled
entities existed during the financial year and relief was obtained from preparing a financial report for
Decmil Group Limited’s wholly-owned controlled entities under ASIC Class Order 98/1418: Decmil
Australia Pty Ltd, Eastcoast Development Engineering Pty Ltd, Homeground Villages Pty Ltd and Decmil
Properties Pty Ltd.
Under the deed, Decmil Group Limited and the above named wholly-owned controlled entities guarantee
to support each other’s liabilities and obligations. Decmil Group Limited and its above named wholly-
owned controlled entities are the only parties to the deed of cross guarantee and are members of the
Closed Group.
The following are the aggregate totals, for each category, relieved under the deed.
Financial information in relation to:
(i) Statement of profit or loss and other comprehensive
income:
Loss before income tax
Income tax (expense)/benefit
Loss after income tax
(ii) Retained Earnings:
Retained earnings at the beginning of the year
Loss after income tax
Dividends recognised for the period
Retained earnings at the end of the year
2017
$000
2016
$000
(22,420)
(78,549)
7,268
22,555
(15,152)
(55,994)
38,970
(15,152)
(6,833)
16,985
112,582
(55,994)
(17,618)
38,970
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 15: Controlled Entities (Cont’d)
(iii) Statement of Financial Position:
2017
$000
2016
$000
Current Assets
Cash and cash equivalents
Trade and other receivables
Work in progress
Current tax receivable
Other assets
Total Current Assets
Non-current Assets
Investment property
Property, plant and equipment
Deferred tax assets
Intangible assets
Other financial assets
Other assets
Total Non-current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Provisions
Total Current Liabilities
Non-current Liabilities
Deferred tax liabilities
Provisions
Total Non-current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Retained earnings
Net Equity
9,773
25,602
6,165
271
2,808
44,619
92,400
5,469
25,690
69,343
9,560
1,595
204,057
248,676
64,429
243
2,194
66,866
316
1,125
1,441
68,307
180,369
163,384
16,985
180,369
10,520
19,524
11,093
1,455
1,813
44,405
111,032
32,567
18,006
69,343
9,560
-
240,508
284,913
80,139
45
2,770
82,954
-
735
735
83,689
201,224
162,254
38,970
201,224
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 73
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: Joint Arrangements
Interest in Joint Operations
In June 2017, Pilbara Marine Pty Ltd, a wholly owned subsidiary of Fortescue Metals Group, awarded
Decmil Australia Pty Ltd, in joint venture with BESIX Australia Pty Ltd (Decmil BESIX JV), a ~$21.0m
contract for the provision of tug infrastructure and service facilities including fuel, lighting, electrical and
water services at Anderson Point, Port Hedland in Western Australia. The principal place of business of
the joint operation is Australia.
Under the joint venture agreement Decmil Australia Pty Ltd has a 50% participation interest in all the
assets used, revenues generated and the expenses incurred by the joint arrangement. Decmil Australia
Pty Ltd is also liable for 50% of any liabilities incurred by the joint arrangement. In addition, Decmil
Australia Pty Ltd has voting rights in the joint arrangement, which generally require unanimity on most
decisions save for certain urgent matters which may initially be determined by the Project Manager (and
can be subsequently disputed by either party).
Decmil BESIX JV is an unincorporated entity and is classified as a joint operation. Accordingly, Decmil
Australia Pty Ltd’s interests in the assets, liabilities, revenues and expenses attributable to the joint
arrangement have been included in the appropriate line items in the consolidated financial statements.
The consolidated entity’s share of assets employed, liabilities owing and net results of the Decmil BESIX
JV that are included in the consolidated financial statements are as follows:
CURRENT ASSETS
Cash and cash equivalents
Other assets
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITES
Revenue
Expenses
Profit for the year
2017
$000
2016
$000
100
673
773
773
728
728
728
592
(529)
63
-
-
-
-
-
-
-
-
-
-
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: Joint Arrangements (Cont’d)
In August 2016, Decmil Construction NZ Limited, a controlled entity of Decmil Group Limited entered into
a 50% participation interest in the Stanley Decmil Joint Venture with joint venture partner Stanley
Construction Limited to construct the Thames Indoor Sports Facility for the Thames Coromandel District
Council located in Thames, New Zealand valued at NZD$3.4m. The principal place of business of the joint
operation is New Zealand.
Under the joint venture agreement Decmil Construction NZ Limited has a 50% participation in all the
assets used, the revenues generated and the expenses incurred by the joint arrangement. Decmil
Construction NZ Limited is also liable for 50% of any liabilities incurred by the joint arrangement. In
addition, pursuant to the joint venture agreement, Decmil Construction NZ Limited has 50% of the voting
rights in relation to the Stanley Decmil Joint Venture.
Stanley Decmil Joint Venture is an unincorporated entity and is classified as a joint operation.
Accordingly, Decmil Construction NZ Limited’s interests in the assets, liabilities, revenues and expenses
attributable to the joint arrangement have been included in the appropriate line items in the consolidated
financial statements.
The consolidated entity’s share of assets employed, liabilities owing and net results of the Stanley Decmil
Joint Venture that are included in the consolidated financial statements are as follows:
CURRENT ASSETS
Cash and cash equivalents
Other assets
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITES
Revenue
Expenses
Profit for the year
2017
$000
2016
$000
58
92
150
150
114
114
114
1,556
(1,506)
50
-
-
-
-
-
-
-
-
-
-
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 75
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: Joint Arrangements (Cont’d)
Decmil Australia Pty Ltd, a controlled entity of Decmil Group Limited, is a participant in two
unincorporated joint ventures with Balance Utility Solutions Pty Ltd. The first is a 50% participation
interest in the delivery of a battery energy storage system for Western Power in Perenjori, Western
Australia valued at $1.6m. The second is a 67% participation interest in the construction of a 10MW solar
farm in Goulburn, New South Wales and a two year operation and maintenance contract for Gullen Solar
Pty Ltd valued at $19.2m.
Under the joint venture agreements entered into in 2016, Decmil Australia Pty Ltd has the respective
participation interests stated above, which reflects its percentage share of assets, distribution of funds
and percentage liability for costs and expenses incurred by the joint arrangement (whether by way of
return of capital or distribution of surplus funds). Those participation interests are supported by cross
indemnities from Decmil and its joint venture partner. Decmil Australia Pty Ltd has voting rights in each
joint arrangement, which generally require unanimity on most decisions save for certain urgent matters
that only require a majority.
Each of the arrangements described above are unincorporated entities and are classified as joint
operations. Accordingly, Decmil Australia Pty Ltd’s interests in the assets, liabilities, revenues and
expenses attributable to the joint arrangement have been included in the appropriate line items in the
consolidated financial statements.
The consolidated entity’s share of assets employed, liabilities owing and net results of Decmil Balance JV
that are included in the consolidated financial statements are as follows:
CURRENT ASSETS
Cash and cash equivalents
Other assets
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITES
Revenue
Expenses
Profit for the year
2017
$000
499
1,955
2,454
2,454
1,898
1,898
1,898
12,957
(12,162)
795
2016
$000
-
-
-
-
-
-
-
-
-
-
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: Joint Arrangements (Cont’d)
In September 2014, Leighton Contractors Pty Ltd awarded Decmil Australia Pty Ltd, in a joint venture
with Structural Systems and Hawkins Civil (DASSH JV), a $19.9m contract for the construction of the
Elizabeth Quay Pedestrian Bridge in Perth, Western Australia. The works are part of the Elizabeth Quay
Inlet and Public Space Development for the West Australian State Government. The principal place of
business of the joint operation is Australia.
Under the joint venture agreement entered into in 2014, Decmil Australia Pty Ltd has a 45% interest in
all the assets used, the revenues generated and the expenses incurred by the joint arrangement. Decmil
Australia Pty Ltd is also liable for 45% of any liabilities incurred by the joint arrangement. In addition,
pursuant to the joint venture agreement, Decmil Australia Pty Ltd has 45% of the voting rights in relation
to the DASSH JV.
DASSH JV is an unincorporated entity and is classified as a joint operation. Accordingly, Decmil Australia
Pty Ltd’s interests in the assets, liabilities, revenues and expenses attributable to the joint arrangement
have been included in the appropriate line items in the consolidated financial statements.
The consolidated entity’s share of assets employed, liabilities owing and net results of DASSH JV that are
included in the consolidated financial statements are as follows:
CURRENT ASSETS
Cash and cash equivalents
Other assets
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITES
Revenue
Expenses
Profit/(loss) for the year
2017
$000
2016
$000
-
-
-
-
-
-
-
-
-
-
41
3
44
44
82
82
82
1,125
(1,437)
(312)
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 77
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: Joint Arrangements (Cont’d)
Main Roads Western Australia awarded Decmil Australia Pty Ltd, in a joint venture with Obrascon Huarte
Lain S.A. (Decmil OHL JV), a $7.6m contract for the demolition and replacement of an existing bridge in
Maylands, Western Australia. The principal place of business of the joint operation is Australia.
Under the joint venture agreement entered into in 2014, Decmil Australia Pty Ltd has a 50% interest in
all the assets used, the revenues generated and the expenses incurred by the joint arrangement. Decmil
Australia Pty Ltd is also liable for 50% of any liabilities incurred by the joint arrangement. In addition,
pursuant to the joint venture agreement, Decmil Australia Pty Ltd has 50% of the voting rights in relation
to the Decmil OHL JV.
Decmil OHL JV is an unincorporated entity and is classified as a joint operation. Accordingly, Decmil
Australia Pty Ltd’s interests in the assets, liabilities, revenues and expenses attributable to the joint
arrangement have been included in the appropriate line items in the consolidated financial statements.
The consolidated entity’s share of assets employed, liabilities owing and net results of Decmil OHL JV that
are included in the consolidated financial statements are as follows:
CURRENT ASSETS
Cash and cash equivalents
Other assets
TOTAL CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
TOTAL LIABILITES
Revenue
Expenses
Profit/(loss) for the year
2017
$000
2016
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24
1
25
Contingent Liabilities in Respect of Joint Arrangements
The consolidated entity is liable for the following contingent liabilities owing from its participation
interests in the joint arrangements if and when they arise:
Guarantees given for satisfactory contract performance
2017
$000
18,757
2016
$000
248
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 17: Property, Plant and Equipment
LAND AND BUILDING (Secured)
Freehold land, at cost
Building:
At cost
Accumulated depreciation
PLANT AND EQUIPMENT
Plant and Equipment:
At cost
Accumulated depreciation
Leased Plant and Equipment (Secured)
Accumulated depreciation
Consolidated Entity
2017
$000
2016
$000
554
5,002
216
(22)
748
21,536
(2,306)
24,232
42,145
43,959
(32,973)
(30,779)
9,172
1,221
(716)
505
13,180
1,268
(927)
341
Total Property, Plant and Equipment
10,425
37,753
Movements in Carrying Amounts
Movement in the carrying amounts for each class of property, plant and equipment between the
beginning and the end of the current financial year:
Balance at 1 July 2016
Additions
Transfer between leased and owned
Disposals
Depreciation expense
Balance at 30 June 2017
Land and
Building
$000
24,232
222
-
(23,189)
(517)
748
Owned Plant
and
Equipment
$000
Leased Plant
and
Equipment
$000
13,180
994
109
(257)
(4,854)
9,172
341
353
(109)
-
(80)
505
Total
$000
37,753
1,569
-
(23,446)
(5,451)
10,425
On 23 June 2017, the commercial office located at 20 Parkland Road, Osborne Park, Western Australia
was sold for $27.5 million. The written down value at the date of sale was $23.189 million. The profit
recognised on sale was $2.213 million net of selling costs.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 79
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 17: Property, Plant and Equipment (Cont’d)
Balance at 1 July 2015
Additions
Transfer between leased and owned
Disposals
Additions through acquisition of
controlled entity
Depreciation expense
Balance at 30 June 2016
NOTE 18: Investment Property
Balance at beginning of year
Additions
Fair value adjustment
Balance at end of year
Land and
Building
$000
24,758
-
-
-
-
(526)
24,232
Owned Plant
and
Equipment
$000
Leased Plant
and
Equipment
$000
13,367
2,193
758
(940)
3,846
(6,044)
13,180
915
-
(758)
-
265
(81)
341
Total
$000
39,040
2,193
-
(940)
4,111
(6,651)
37,753
Consolidated Entity
2017
$000
2016
$000
111,032
188,374
131
(18,763)
92,400
727
(78,069)
111,032
The investment property comprises the Homeground Gladstone Accommodation Village located in
Gladstone, Queensland. The investment property is carried at fair value, with fair value being determined
using a discounted cash flow valuation model based on assumptions made by the consolidated entity as
detailed in note 33.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 19: Intangible Assets
Goodwill at cost
Additions
Goodwill written off
Customer contracts, at cost
Additions
Accumulated amortisation
Consolidated Entity
2017
$000
86,169
-
(10,687)
75,482
176
-
(176)
-
2016
$000
69,343
16,826
-
86,169
-
250
(74)
176
Total intangible assets
75,482
86,345
Movements in Carrying Amounts
Goodwill
Balance at the beginning of the year
Additions
Goodwill written off
Balance at the end of the year
Customer Contracts
Balance at the beginning of the year
Additions
Amortisation
Customer contracts written off
Balance at the end of the year
Allocation of goodwill to CGU’s
Decmil Australia Pty Ltd
SC Services Pty Ltd
Cut and Fill Pty Ltd
Scope Australia Pty Ltd
Balance at the end of the year
86,169
-
(10,687)
75,482
176
-
(176)
-
-
69,343
-
4,422
1,717
75,482
69,343
16,826
86,169
684
250
(325)
(433)
176
69,343
10,687
4,422
1,717
86,169
The recoverable amount of the consolidated entity's goodwill has been determined by value-in-use
calculations using discounted cash flow models, based on a 1 year budget approved by the Board and
extrapolated for a further 4 years using a steady rate, together with a terminal value.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most
sensitive.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 81
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 19: Intangible Assets (Cont’d)
The following key assumptions were used in the discounted cash flow model for each cash-generating
unit:
(a) 12.9% (2016: 12.9%) pre-tax discount rate;
(b) 5% (2016: 5%-10%) per annum projected revenue growth rate;
(c) 2.5% (2016: 2.5%) per annum increase in operating costs and overheads; and
(d) 2.5% (2016: 2.5%) per annum increase in terminal value.
The discount rate of 12.9% pre-tax reflects management’s estimate of the time value of money and the
consolidated entity’s weighted average cost of capital, the risk free rate and the volatility of the share
price relative to market movements.
Management believes the projected 5% revenue growth rate and 2.5% increase in operating costs and
overheads is justified based on past experience and current market outlook. Management also believes
that a 2.5% increase in the terminal value of each cash-generating unit is prudent and appropriate based
on current market conditions.
At the date of this report there has been no reason to adjust these assumptions.
Based on the above, an impairment charge of $10,687,000 has been applied as the carrying amount of
goodwill exceeded its recoverable amount for the SC Services Pty Ltd cash-generating unit.
Sensitivity
As disclosed above, the directors have made judgements and estimates in respect of impairment testing
of goodwill. Should these judgements and estimates not occur the resulting goodwill carrying amount
may decrease. The sensitivities are as follows:
(a) Revenue for Cut and Fill Pty Ltd would need to increase by less than 1.2% before goodwill would
need to be impaired, with all other assumptions remaining constant.
(b) Overheads for Cut and Fill Pty Ltd would need to increase by more than 6.3% before goodwill
would need to be impaired, with all other assumptions remaining constant.
(c) Revenue for Scope Australia Pty Ltd would need to decrease by more than 2.8% before goodwill
would need to be impaired, with all other assumptions remaining constant.
(d) Overheads for Scope Australia Pty Ltd would need to increase by more than 11.6% before
goodwill would need to be impaired, with all other assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the recoverable
amount of each cash-generating unit’s goodwill is based would not cause the carrying amount to exceed
its recoverable amount.
In addition to goodwill, intangible assets in the form of customer contracts valued at $250,000 were
recognised on the acquisition of Cut and Fill Pty Ltd for construction contracts in progress at the time of
acquisition. These were fully amortised as at 30 June 2017.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 20: Other Current Assets
CURRENT
Prepayments
Others
NOTE 21: Trade and Other Payables
Note
Consolidated Entity
2017
$000
1,258
4,458
5,716
2016
$000
1,067
6,864
7,931
Consolidated Entity
Note
2017
$000
2016
$000
CURRENT
Unsecured Liabilities
Trade payables
Advance billings to customers
14
Sundry payables and accrued expenses
NOTE 22: Current Income Tax
24,817
11,513
23,828
60,158
21,619
22,100
19,814
63,533
Consolidated Entity
Current tax receivable
- income tax refundable
Current tax payable
- provision for income tax
Note
2017
$000
-
49
49
2016
$000
(616)
-
(616)
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 83
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 23: Borrowings
CURRENT
Secured liabilities
Bank loan
Hire purchase liability
Insurance premium funding
Software subscription funding
Total current borrowings
NON-CURRENT
Secured liabilities
Bank loan
Hire purchase liability
Insurance premium funding
Software subscription funding
Total non-current borrowings
Total Borrowings
Consolidated Entity
2017
$000
2016
$000
-
107
186
57
350
-
474
-
-
474
824
2,000
161
-
-
2,161
7,000
212
-
-
7,212
9,373
Hire purchase agreements have an average term of 4 years. The average interest rate implicit in the hire
purchase is 4.54% (2016: 5.09%). The hire purchase liability is secured by a charge over the underlying
hire purchase assets.
The bank loan was repaid during the year ended 30 June 2017.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
30 June
2017
Closing
Balance
$000
7
1,578
-
12
843
12,630
12,028
27,098
(17)
333
316
30 June
2016
Closing
Balance
$000
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 24: Other Deferred Tax
1 July
2016
Opening
Balance
$000
Under-
provision
in Prior
Year
$000
Acquired
on Acquis-
ition
$000
Charged
to
Income
$000
Charged
Directly
to Equity
$000
Consolidated Entity
2017
Deferred tax assets on:
Transaction costs on equity
issue
Provisions – employee benefits
Restructuring costs
Investment due diligence costs
Other provisions and accruals
Tax losses and carry forward
tax credits
6
1,949
4
34
430
-
-
-
-
332
9,130
(276)
Property, plant and equipment
7,281
Total deferred tax assets
18,834
113
169
Deferred tax liabilities on:
Prepayments
Equity based payments
Total deferred tax liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(371)
(4)
(22)
81
3,776
4,634
8,094
(17)
287
270
1
-
-
-
-
-
-
1
-
46
46
1 July
2015
Opening
Balance
$000
Under-
provision
in Prior
Year
$000
Acquired
on Acquis-
ition
$000
Charged
to
Income
$000
Charged
Directly
to Equity
$000
Consolidated Entity
2016
Deferred tax assets on:
Transaction costs on equity
issue
199
Provisions – employee benefits
2,796
Restructuring costs
Investment due diligence costs
9
60
Other provisions and accruals
1,171
Tax losses and carry forward
tax credits
Property, plant and equipment
-
-
-
-
-
9
8
-
-
-
348
-
-
7
972
-
-
(193)
6
(1,195)
(5)
(35)
(756)
8,158
7,281
-
-
-
-
-
-
1,949
4
34
430
9,130
7,281
Total deferred tax assets
4,235
17
1,327
13,448
(193)
18,834
Deferred tax liabilities on:
Property, plant and equipment:
Tax allowance
Fair value gain
Prepayments
2,770
9,131
69
Total deferred tax liabilities
11,970
9
-
-
9
-
-
27
27
(2,779)
(9,131)
(96)
(12,006)
-
-
-
-
-
-
-
-
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 85
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 25: Provisions
CURRENT
Employee entitlements
Onerous lease
Total current provisions
NON CURRENT
Employee entitlements
Onerous lease
Total non-current provisions
Total Provisions
Consolidated Entity
Note
2017
$000
25a
3,931
86
4,017
25a
1,125
-
1,125
5,142
2016
$000
4,868
277
5,145
854
-
854
5,999
(a) Provision for Employee Entitlements
Provision for employee benefits represents amounts accrued for annual leave and long service leave.
The current portion for this provision includes the total amount accrued for annual leave entitlements and
the amounts accrued for long service leave entitlements that have vested due to employees having
completed the required period of service. Based on past experience, the consolidated entity does not
expect the full amount of annual leave or long service leave balances classified as current liabilities to be
settled within the next 12 months. However, these amounts must be classified as current liabilities since
the consolidated entity does not have an unconditional right to defer the settlement of these amounts in
the event employees wish to use their leave entitlement.
The non-current portion for this provision includes amounts accrued for long service leave entitlements
that have not yet vested in relation to those employees who have not yet completed the required period
of service.
Movement in provision
Balance at beginning of year
Additional provision
Additions through acquisition of controlled entity
Amounts used
Balance at end of year
Note
Consolidated Entity
2017
$000
5,722
6,162
-
(6,828)
5,056
2016
$000
6,458
6,788
1,471
(8,995)
5,722
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 26: Issued Capital
Consolidated Entity
2017
$000
2016
$000
171,736,697 (2016: 169,892,219) fully paid ordinary shares
163,384
162,254
(a) Ordinary Shares
2017
2016
No.
$000
No.
$000
At the beginning of reporting period
169,892,219
162,254
167,294,299
161,705
Shares issued during the year
124,478
Options exercised during the year
-
Issue of retention shares
Performance rights converted to
shares
Equity based payments
Transaction costs of issue/buy-back
1,470,000
250,000
-
-
54
-
-
-
1,030
46
2,597,920
-
-
-
-
-
47
-
-
-
707
(205)
At the end of the reporting date
171,736,697
163,384
169,892,219
162,254
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion
to the number of shares held. At the shareholders meetings each ordinary share is entitled to one vote
when a poll is called, otherwise each shareholder has one vote on a show of hands.
During the year ended 30 June 2017, the Decmil Group Limited Employee Share Plan Trust was
established. In November 2016, 1,470,000 ordinary shares were issued into the trust on an allocated
basis for 58 employees. These ordinary shares will vest to employees after two years of continuous
employment from the date of grant.
Also, during the year ended 30 June 2017, 124,478 shares were issued under the Decmil Employee Share
Purchase Plan. Under this plan, employees who purchased up to $1,000 of shares had those shares
matched by the Company. The matched shares are subject to a trade restriction until the earlier of three
years or cessation of employment with the Company.
In addition to the above share issues, 250,000 shares were issued to executives upon vesting of
performance rights during the year ended 30 June 2017.
During the year ended 30 June 2016 shareholders approved a one off retention grant of 2,500,000
restricted shares to the Group CEO, which will vest in equal proportions two and four years from grant
date subject to the achievement of certain hurdles outlined in the Remuneration Report. In addition,
97,920 shares were issued under the Decmil Employee Share Purchase Plan.
(b) Capital Management
Management controls the capital of the consolidated entity in order to maintain an optimal debt to equity
ratio, provide shareholders with adequate returns and ensure that the consolidated entity can fund its
operations and continue as a going concern. The consolidated entity’s debt and capital includes ordinary
share capital and financial liabilities (including bank guarantee and surety bonding facilities), supported
by financial assets.
Management manages the consolidated entity’s capital by assessing the consolidated entity’s financial
risks and adjusting its capital structure in response to changes in these risks and in the market. This
includes the management of debt levels, distributions to shareholders and the requirement for further
equity funding in the consolidated entity. The deployment of capital to the consolidated entity’s assets
and business units is also reviewed regularly and managed to ensure rates of return continue to be at an
acceptable level. Where necessary, management may consider redeploying capital within the
consolidated entity or alternatively returning capital to shareholders.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 87
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 27: Commitments
Consolidated Entity
Note
2017
$000
2016
$000
(a) Hire Purchase Commitments 1
Payable – minimum HP payments
- Not later than 1 year
- Between 1 and 5 years
Minimum HP payments
Less future finance charges
Present value of minimum HP payments
(b) Insurance Premium Funding Commitments
Payable – minimum payments
- Not later than 1 year
Minimum payments
Less future finance charges
Present value of minimum payments
(c) Software Subscription Funding Commitments
Payable – minimum payments
- Not later than 1 year
Minimum payments
Less future finance charges
Present value of minimum payments
(d) Operating Leases Payable
Non-cancellable operating leases contracted for but not recognised
as liabilities
Payable – minimum lease payments
- Not later than 1 year
- Between 1 and 5 years
- More than 5 years
(e) Operating Leases Receivable
Future minimum rentals receivable for operating leases at the end
of the reporting period but not recognised as assets
Payable – minimum lease payments
- Not later than 1 year
- Between 1 and 5 years
131
515
646
(65)
581
188
188
(2)
186
61
61
(4)
57
3,380
8,393
1,176
12,949
167
642
809
175
228
403
(30)
373
-
-
-
-
-
-
-
-
1,164
585
-
1,749
712
711
1,423
1 Hire purchase commitments include contracted amounts for various plant and equipment with a written down value of $505,770
(2016: $341,014) secured under hire purchase contracts expiring within one to five years. Under the terms of the hire purchase
contracts, the consolidated entity has the option to acquire the assets under finance for predetermined residual values on the expiry of
the contracts.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 28: Segment Reporting
The consolidated entity has identified its operating segments based on the internal reports that are
reviewed and used by the chief operating decision makers (being the Chief Executive Officer and the
Chief Financial Officer) in assessing performance and determining the allocation of resources. The
consolidated entity operates as three segments.
1. Construction and Engineering
Decmil Australia Pty Ltd – multi-discipline design, civil engineering and construction services;
Eastcoast Development Engineering Pty Ltd – fabrication and installation of high pressure pipes,
vessels and tanks;
Decmil PNG Limited – construction arm of Decmil located in Papua New Guinea;
Decmil Engineering Pty Ltd – civil construction including roads and bridges primarily for the
Government sector;
Decmil Construction NZ Limited – construction arm of Decmil located in New Zealand;
Cut and Fill Pty Ltd – civil engineering company focussed on civil infrastructure works across the
South Eastern seaboard of Australia; and
Scope Australia Pty Ltd – specialising in the delivery of study, project management, engineering and
design consultancy services to the mining, resources, government and construction sectors.
2. Accommodation
Homeground Villages Pty Ltd – build-own-operation of the Homeground Gladstone Accommodation
Village located in Gladstone, Queensland.
3. Other
Decmil Properties Pty Ltd – former owner and manager of a commercial office building located at 20
Parkland Road, Osborne Park, Western Australia which derived internal and external revenue;
SC Services Pty Ltd – design, installation, commissioning and maintenance services to
telecommunications network owners, manufacturers and NBN service providers; and
Decmil Telecom Pty Ltd trading as SAS Telecom – the discontinued telecommunications and managed
services business.
The consolidated entity is domiciled in Australia. 95% of revenue from external customers is generated
from Australia.
The consolidated entity derives 14%, 10% and 10% (2016: 24%, 19% and 16%) of its revenues from
the top three external customers. All of the consolidated entity’s assets are located in Australia.
Basis of accounting for purposes of reporting by operating segments
A. Accounting policies adopted
Unless stated otherwise, all amounts reported to the chief operating decision makers with
respect to operating segments, are determined in accordance with accounting policies that are
consistent with those adopted in the annual financial statements of the consolidated entity
B. Intersegment transactions
Corporate charges are allocated to reporting segments based on the segments’ overall
proportion of revenue generation within the consolidated entity. Management believes this is
representative of likely consumption of head office expenditure that should be used in assessing
segment performance and cost recoveries.
C. Segment assets
Where an asset is used across multiple segments, the asset is allocated to the segment that
receives the majority of the economic value from the asset. In most instances, segment assets
are clearly identifiable on the basis of their nature and physical location.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 89
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 28: Segment Reporting (Cont’d)
D. Segment liabilities
Liabilities are allocated to segments where there is a direct nexus between the incurrence of the
liability and the operations of the segment. Tax liabilities are generally considered to relate to
the consolidated entity as a whole and are not allocated. Segment liabilities include trade and
other payables and certain direct borrowings.
E. Unallocated items
The following items of revenue, expenses, assets and liabilities are not allocated to operating
segments as they are not considered part of the core operations of any segment:
income tax expense;
deferred tax assets and liabilities; and
current tax liabilities.
(a) Segment Performance
2017
External sales
Total segment revenue
Segment earnings before interest,
tax, depreciation and amortisation &
impairments
Construction &
Engineering
$000
264,354
264,354
Accommodation
$000
14,529
14,529
Other
$000
27,133
Total
$000
306,016
27,133
306,016
(2,500)
3,315
(1,534)
(719)
Net interest
(352)
Depreciation & amortisation expense
(3,738)
Impairment of intangible assets
Investment property fair value
adjustment
-
-
(19)
(1,024)
-
(316)
(866)
(687)
(5,628)
(10,687)
(10,687)
(18,763)
-
(18,763)
Segment result
(6,590)
(16,491)
(13,403)
(36,484)
Other unallocated expenses
Income tax (expense)/benefit
Loss for the period
Segment Performance
2016
External sales
Total segment revenue
Segment earnings before interest,
tax, depreciation, amortisation &
impairments
(741)
8,878
(28,347)
Construction &
Engineering
$000
277,256
277,256
Accommodation
$000
9,149
9,149
Other
$000
15,239
Total
$000
301,644
15,239
301,644
6,721
(761)
(3,129)
2,831
Net interest
388
6
(161)
233
Depreciation & amortisation expense
(4,621)
(1,316)
(1,039)
(6,976)
Impairment of intangible assets
Investment property fair value
adjustment
-
-
-
(78,069)
-
-
-
(78,069)
Segment result
2,488
(80,140)
(4,329)
(81,981)
Other unallocated expenses
Income tax (expense)/benefit
Loss for the period
(688)
24,433
(58,236)
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 28: Segment Reporting (Cont’d)
(b) Segment Assets
2017
Current assets
Non-current assets
Other unallocated assets
Construction &
Engineering
$000
Accommodation
$000
57,515
82,497
1,732
93,240
Other
$000
9,612
1,698
Total
$000
68,859
177,435
30,191
Total segment assets
140,012
94,972
11,310
276,485
Total assets includes:
Acquisition of non-current assets
849
314
537
1,700
Segment Assets
2016
Current assets
Non-current assets
Other unallocated assets
Construction &
Engineering
$000
Accommodation
$000
54,836
84,993
2,678
112,679
Other
$000
9,706
36,023
Total
$000
67,220
233,695
22,036
Total segment assets
139,829
115,357
45,729
322,951
Total assets includes:
Acquisition of non-current assets
4,534
807
1,691
7,032
(c) Segment Liabilities
2017
Current liabilities
Non-current liabilities
Other unallocated liabilities
Construction &
Engineering
$000
Accommodation
$000
56,734
1,093
1,200
-
Other
$000
5,017
-
Total
$000
62,951
1,093
2,445
Total segment liabilities
57,827
1,200
5,017
66,489
Segment Liabilities
2016
Current liabilities
Non-current liabilities
Other unallocated liabilities
Construction &
Engineering
$000
Accommodation
$000
61,397
623
1,720
-
Other
$000
6,346
7,000
Total
$000
69,463
7,623
1,819
Total segment liabilities
62,020
1,720
13,346
78,905
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 91
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 29: Cash Flow Information
(a) Reconciliation of Cash Flow from Operations with (Loss)/Profit after Income Tax
Loss after income tax
Adjustments for:
Depreciation and amortisation
Equity based payments
Impairment of investment property
Impairment of intangible assets
Profit on sale of non-current assets
Fixed assets write off
Cash generated from operations before working capital changes
Changes in assets and liabilities
Trade receivables
Other assets
Work in progress
Consolidated Entity
2017
$000
2016
$000
(28,347)
(58,236)
5,627
1,030
18,763
10,687
(2,615)
-
5,145
(5,433)
620
3,932
6,976
707
78,069
433
(381)
-
27,568
23,410
6,938
(2,560)
Trade payables and accruals
(3,133)
(51,906)
Current tax liabilities
Deferred tax assets
Deferred tax liabilities
Provisions
Change in working capital balances
Net cash used in operating activities
722
(8,264)
316
(857)
(12,097)
(6,952)
3,912
(13,278)
(11,997)
(2,449)
(47,930)
(20,362)
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 29: Cash Flow Information (Cont’d)
(b) Acquisition of Entities
(i) On 1 December 2015, the Group acquired 100% of the issued capital of SC Holdings Pty Ltd, SC
Services Pty Ltd and SC Equipment Holdings Pty Ltd for an upfront purchase consideration of
$14,000,000. The SC entities’ activities include design, installation, commissioning and maintenance
services to telecommunications network owners, manufacturers and NBN service providers. The
acquisition is part of the Group’s strategy to diversify into the telecommunications service sector.
Details of the transaction were:
Purchase consideration
Less: escrow adjustments
Less: cash acquired
Cash outflow on acquisition
Assets and liabilities held at acquisition date
Receivables
Work in progress
Other assets
Plant and equipment
Payables
Accruals
Provisions
Identifiable assets acquired and liabilities assumed
Goodwill on consolidation
Purchase consideration
Consolidated Entity
2017
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2016
$000
14,000
(154)
-
13,846
3,069
2,651
524
947
(2,090)
(1,277)
(511)
3,313
10,687
14,000
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 93
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 29: Cash Flow Information (Cont’d)
(b) Acquisition of Entities (Cont’d)
(ii) On 1 February 2016, the Group acquired 100% of the issued capital of Cut and Fill Pty Ltd for
$9,560,000. Cut & Fill is a Melbourne based civil engineering company focussed on civil
infrastructure works across the South Eastern seaboard of Australia.
Details of the transaction were:
Consolidated Entity
Purchase consideration
Less: cash acquired
Cash outflow/(inflow) on acquisition
Assets and liabilities held at acquisition date
Cash
Receivables
Work in progress
Deferred tax assets
Other assets
Plant and equipment
Payables
Accruals
Provisions
Other liabilities
Identifiable assets acquired and liabilities assumed
Goodwill on consolidation
Intangible assets on consolidation
Purchase consideration
2017
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2016
$000
9,560
(12,261)
(2,701)
12,261
2,031
(5,147)
1,248
171
2,967
(6,292)
(906)
(901)
(544)
4,888
4,422
250
9,560
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 29: Cash Flow Information (Cont’d)
(b) Acquisition of Entities (Cont’d)
(iii) On 1 March 2016, the Group acquired the business assets of Scope Australia Pty Ltd for $1,680,000
on a cash free and debt free basis. Scope Australia specialises in the delivery of study, project
management, engineering and design consultancy services to a range of industry sectors including
mining, resources, government and construction.
Details of the transaction were:
Purchase consideration
Less: cash acquired
Cash outflow on acquisition
Assets and liabilities held at acquisition date
Deferred tax assets
Plant and equipment
Provisions
Identifiable assets acquired and liabilities assumed
Goodwill on consolidation
Purchase consideration
Consolidated Entity
2017
$000
-
-
-
-
-
-
-
-
-
2016
$000
1,680
-
1,680
73
134
(244)
(37)
1,717
1,680
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 95
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 29: Cash Flow Information (Cont’d)
(c) Non-cash Financing and Investing Activities
Finance leases to acquire plant and equipment
(d) Credit Standby Facilities with Banks
Credit facilities
Amount utilised
Bank overdraft
Receivables funding
Loan facility
Equipment finance
Bank guarantees and surety bond facilities
The credit facilities are summaries as follows:
Bank overdraft and/or receivables funding facility
Loan facility
Equipment finance
Bank guarantees and surety bond facilities
Consolidated Entity
2017
$000
382
2016
$000
-
Consolidated Entity
2017
$000
2016
$000
187,000
234,900
(233)
(3,059)
-
(581)
(63,516)
119,611
20,000
25,000
2,000
140,000
187,000
-
-
(9,000)
(373)
(45,207)
180,320
15,000
35,000
13,200
171,700
234,900
The majority of credit facilities are provided by National Australia Bank Limited and comprise a $40
million multi-option facility, $25 million market loan facility and a $0.4 million corporate credit card
facility. The $40 million multi-option facility encompasses a bank guarantee facility, letter of credit
facility, overdraft and/or limited recourse receivables funding facility capped at $20 million.
The bank market loan facility expires in July 2020. The interest charged is calculated at Bank Bill Rate
plus a margin of 1.45% (2016: 1.40%) which equates to 3.30% as at 30 June 2017 (2016: 3.54%).
Security for the National Australia Bank facilities comprises the following:
General Security granted by Decmil Group Limited and its controlled entities (other than Decmil PNG
Ltd and Homeground Karratha Pty Ltd);
Negative pledge in relation to Homeground Gladstone Pty Ltd; and
First registered mortgage over property situated at 101 Calliope River Road, Calliope, Queensland.
In addition to the National Australia Bank facilities, the consolidated entity also has the following
facilities:
Equipment finance of $2 million with Toyota Finance; and
Surety bond facilities of $50 million with Asset Insure, $35 million with Vero and $35 million with
Insurance Australia Limited.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 30: Equity-Based Payments
Performance Rights Plan
The Board believes that the long term incentive offered to key executives forms a key part of their
remuneration and assists to align their interests with the long term interests of Shareholders. For details
of the Long Term Incentive Plan, refer to the Directors’ Report.
A summary of the movements of all performance rights issued is as follows:
Performance rights outstanding as at 30 June 2015
Granted
Forfeited
Vested
Lapsed
Performance rights outstanding as at 30 June 2016
Granted
Forfeited
Vested
Lapsed
Performance rights outstanding as at 30 June 2017
Number
3,100,783
3,365,996
-
-
-
6,466,779
3,634,749
(4,060,766)
(250,000)
-
5,790,762
The fair value of the performance rights granted during the financial year was $1,111,598. Performance
rights are valued using various valuation methodologies, including Black-Scholes option pricing models
and Monte Carlo simulations where performance rights have market based vesting conditions. Expected
life is based on management’s best estimate at the time of valuation of vesting criteria being achieved.
The fair value has been discounted to reflect the probability of not meeting the vesting conditions. The
discount factors were determined through an analysis of relative share price to the date of grant,
dividends paid and likelihood of rights being forfeited prior to vesting.
The weighted average fair value of performance rights granted during the year was $0.305 (2016:
$0.169). These values were calculated using a Black-Scholes option pricing model applying the following
inputs:
Expected vesting period for the performance rights to vest:
2, 3 and 4 years
Expected share price volatility:
Risk-free interest rate:
Dividend yield
30%
2.02%
4.5%
Historical volatility has been the basis for determining expected share price volatility as it is assumed that
this is indicative of future movements. Expenses arising from equity-based payment transactions
recognised during the year were as follows:
Performance Rights
Expenses
Written back due to forfeiting
Written back on reassessment of probabilities
Consolidated Entity
2017
$000
1,442
(381)
(397)
664
2016
$000
792
-
(85)
707
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 97
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 30: Equity-Based Payments (Cont’d)
Incentive Shares Plan
During the year the Board approved an Incentive Shares Plan whereby ordinary shares are issued into
the Decmil Group Limited Employee Share Plan Trust on an allocated basis for employees. These ordinary
shares will vest to employees after two years of continuous employment from the date of grant. In the
event an employee resigns or Decmil terminates their employment due to misconduct or performance
related reasons prior to vesting, the shares are forfeited.
A summary of the movements of all incentive shares issued is as follows:
Unvested incentive shares as at 30 June 2016
Granted
Forfeited
Unvested incentive shares as at 30 June 2017
Number
-
1,475,000
(105,000)
1,370,000
The fair value of the incentive shares granted during the financial year was $1,223,775. Incentive shares
are valued using the share price at the date of grant. The fair value has been discounted by 25% to
reflect the probability of not meeting the continuous employment vesting condition.
Expenses arising from the incentive shares plan transactions recognised during the year were as follows:
Incentive Shares
Expenses
Written back due to forfeiting
Consolidated Entity
2017
$000
387
(21)
366
2016
$000
-
-
-
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 31: Related Party Transactions and Balances
Parent entity
Decmil Group Limited is the parent entity.
Controlled entities
Interests in controlled entities are set out in note 15.
Key management personnel
Disclosures relating to KMP are set out in note 7 and the Remuneration Report in the Directors' Report.
Transactions with related parties
The following transactions occurred with related parties:
(a) Director Related Transactions
Rent of various properties used by Decmil Australia Pty Ltd paid to
Broadway Pty Ltd, an entity in which Mr Denis Criddle has a
beneficial interest
Consulting fees for Saxelby Associates Pty Ltd, an entity in which
Mr David Saxelby has a beneficial interest
(b) Director Related Balances 1
Amounts owing to The Nevern Group Pty Ltd, an entity in which Mr
Giles Everist has a beneficial interest, for directors’ fees
Amounts owing to Saxelby Associates Pty Ltd, an entity in which
Mr David Saxelby has a beneficial interest, for directors’ fees and
consulting fees
Consolidated Entity
2017
$000
2016
$000
196
200
-
23
202
33
8
26
1 Transactions relating to directors’ fees are included in the Directors’ Report details of remuneration
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 99
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 32: Financial Instruments
The consolidated entity’s financial instruments consist mainly of deposits with banks, accounts receivable
and payable and borrowings.
No derivatives are used by the consolidated entity and the consolidated entity does not speculate in the
trading of derivative instruments.
(i) Financial Risk Management Policies
The Chief Financial Officer and other senior finance executives regularly analyse financial risk exposure
and evaluate treasury management strategies in the context of the most recent economic conditions and
forecasts.
The overall risk management strategy seeks to assist the consolidated entity in meeting its financial
targets, whilst minimising potential adverse effects on financial performance.
Treasury functions are performed in accordance with policies approved by the Board of Directors. Risk
management policies are approved and reviewed by the Board on a regular basis.
(ii) Specific Financial Risk Exposures and Management
The main risks the consolidated entity is exposed to through its financial instruments are interest rate
risk, liquidity risk, credit risk, price risk and foreign exchange risk.
Interest rate risk
Exposure to interest rate risk arises on financial assets and liabilities recognised at the end of the
reporting period whereby a future change in interest rates will affect future cash flows.
Liquidity risk
The consolidated entity manages liquidity risk by monitoring forecast cash flows and ensuring that
adequate unutilised borrowing facilities are maintained.
Credit risk
The maximum exposure to credit risk, at balance date to recognise financial assets, is the carrying
amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial
position and notes to the financial statements.
There are no material amounts of collateral held as security at 30 June 2017.
In respect of the parent entity, credit risk also incorporates the exposure of Decmil Group Limited to the
liabilities of all the parties to the deed of cross guarantee. Credit risk is managed on a consolidated basis
and reviewed regularly by finance executives and the Board. It arises from exposures to customers as
well as through deposits with financial institutions. The consolidated entity does not have any material
credit risk exposure to any single receivable or group of receivables under financial instruments entered
into by the consolidated entity.
Price risk
The consolidated entity is exposed to price risks associated with labour costs and to a lesser extent, fuel
and steel prices. Wherever possible, the consolidated entity contracts out such exposures or allows for
the rise and fall for changes in prices or provides sufficient contingencies to cover for such price risks.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 32: Financial Instruments (Cont’d)
Foreign exchange risk
Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial
instrument fluctuating due to movement in foreign exchange rates of currencies in which the consolidated
entity holds financial instruments which are other than the Australian Dollar (AUD) functional currency of
the consolidated entity.
(iii) Financial instrument composition and maturity analysis:
The tables below reflect the undiscounted contractual settlement terms for financial instruments of a
fixed period of maturity, as well as management’s expectations of the settlement period for all other
financial instruments. As such, the amounts may not reconcile to the statement of financial position.
2017
Financial Assets
Cash and cash equivalents
Receivables
Financial Liabilities
Payables
Borrowings
2016
Financial Assets
Cash and cash equivalents
Receivables
Financial Liabilities
Payables
Borrowings
Weighted
Average
Effective
Interest
Rate
%
Non-
Interest
Bearing
$000
Within
1 year
$000
1 to 5
Years
$000
Carrying
Amount
$000
1.5
-
-
3.6
2.0
-
-
3.6
-
16,905
34,950
34,950
-
16,905
(60,158)
-
(60,158)
-
(350)
(350)
-
15,077
29,517
29,517
-
15,077
(63,533)
-
-
-
-
-
(474)
(474)
-
-
-
-
16,905
34,950
51,855
(60,158)
(824)
(60,982)
15,077
29,517
44,594
(63,533)
-
(63,533)
(2,161)
(2,161)
(7,212)
(9,373)
(7,212)
(72,906)
The cash flows in the maturity analysis above are not expected to occur significantly earlier than
contractually disclosed above.
(iv) Net Fair Values of financial instruments
Unless otherwise stated, the carrying amount of financial instruments reflect their fair value.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 101
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 32: Financial Instruments (Cont’d)
(v) Sensitivity Analysis
Interest Rate Risk and Price Risk
The consolidated entity has performed sensitivity analysis relating to its exposure to interest rate risk,
price risk and foreign exchange risk at balance date. This sensitivity analysis demonstrates the effect on
the current year results and equity which could result from a change in these risks.
Interest Rate Sensitivity Analysis
The consolidated entity’s cash and cash equivalents and borrowings are subject to interest rate
sensitivities. At 30 June 2017, the effect on profit and equity as a result of changes in the interest rate,
with all other variables remaining constant is immaterial.
Price Risk Sensitivity Analysis
At 30 June 2017, the effect on profit and equity as a result of changes in the price risk, with all other
variables remaining constant would be as follows:
Consolidated Entity
2017
$000
2016
$000
Change in profit
Increase in labour costs by 5% (CPI assumption)
(4,204)
(4,763)
Change in equity
Increase in labour costs by 5% (CPI assumption)
(4,204)
(4,763)
In the opinion of the consolidated entity’s management, the majority of the above increase in labour cost,
had it been incurred, would have been negated by an increase in the price of services offered by the
consolidated entity.
The above sensitivity analysis has been performed on the assumption that all other variables remain
unchanged.
Foreign Exchange Sensitivity Analysis
The effect on profit and equity as a result of changes in foreign exchange rates, with all other variables
remaining constant, is immaterial.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 33: Fair Value Measurement
Fair value hierarchy
The following tables detail the consolidated entity's assets measured or disclosed at fair value, using a
three level hierarchy, based on the lowest level of input that is significant to the entire fair value
measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets that the consolidated entity can
access at the measurement date
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset, either
directly or indirectly
Level 3: Unobservable inputs for the asset
Consolidated 2017
Assets
Investment property
Total assets
Consolidated 2016
Assets
Investment property
Total assets
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
-
-
-
-
-
-
-
-
92,400
92,400
92,400
92,400
111,032
111,032
111,032
111,032
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to
approximate their fair values due to their short-term nature.
Investment property has been valued using a discounted cash flow model.
Movements in level 3 assets during the current and previous financial year are set out below:
Consolidated
Balance at 30 June 2015
Additions
Revaluation
Balance at 30 June 2016
Additions
Revaluation
Balance at 30 June 2017
Investment Properties
$000
188,374
727
(78,069)
111,032
131
(18,763)
92,400
Total
$000
188,374
727
(78,069)
111,032
131
(18,763)
92,400
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 103
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 33: Fair Value Measurement (Cont’d)
During the reporting period the Group’s investment property, being the Homeground Gladstone
Accommodation Village located near Gladstone, Queensland, was revalued by an independent valuer
(Ernst & Young). The primary valuation method utilised by the valuer was a discounted cash flow model.
Key assumptions utilised by the valuer in the preparation of its valuation included:
Useful life of the asset in the range of 20 to 30 years with no terminal value;
Various occupancy assumptions over the estimated useful life (low of 15% to high of 98%);
Room rate growth in the range of 0% to 2.0%; and
A nominal post-tax discount rate range of 11.0% to 12.0%.
As a result of the independent valuation, the Homeground Gladstone investment property was revalued
to $92,400,000.
The fair value is sensitive to changes within the range of key assumptions disclosed above. Any material
change within the range for any individual assumption or any combination of assumptions will likely have
a material impact on the fair value as follows:
Assumption
Useful life
Occupancy
Room rate growth
Discount rate
NOTE 34: Contingent Liabilities
Guarantees given to external parties for satisfactory contract
performance for the consolidated entity
Increase in
Assumption
Decrease in
Assumption
Positive impact
Negative impact
Positive impact
Negative impact
Positive impact
Negative impact
Negative impact
Positive impact
Consolidated Entity
2017
$000
2016
$000
63,614
45,207
During the year ended 30 June 2017 the liquidators for Forge Group Ltd (in liquidation)(receivers and
managers appointed) commenced an action in the Supreme Court of Western Australia against Eastcoast
Development Engineering Pty Ltd (“EDE”), a subsidiary of the Company, for the repayment of $2.9
million for what they consider constitute unfair preference payments, insolvent transactions and voidance
transactions. The liquidators have commenced claims against a number of parties which are joined with
EDE in the same action. The claim will be vigorously defended by EDE.
On 1 May 2017 the Company received an advice from AusIndustry, the agency that oversees technical
elements of the Australian Tax Office’s Research and Development Inventive Scheme (“R&D Scheme”),
disputing the eligibility of certain engineering activities submitted by the Company in relation to the 2014
financial year for the R&D Scheme. R&D Scheme benefits received by the Company in relation to the
2014 financial year for the disputed engineering activities amounts to approximately $3.4 million.
The Company does not agree with the advice received from AusIndustry and under the relevant
legislation has requested an independent review of the matter. As at the date of this report, the
independent review had not been completed. The Company is also considering further review options
available to it, including submission to the Australian Administrative Tribunal.
Apart from the above there are no further contingent liabilities relating to the consolidated entity.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
NOTES TO THE FINANCIAL STATEMENTS (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
NOTE 35: Subsequent Events
No matters or circumstances have arisen since the end of the financial year which significantly affected or
may significantly affect the operations of the consolidated entity, the results of those operations, or the
state of affairs of the consolidated entity in future financial years.
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 105
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2017
In the directors' opinion:
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
the attached financial statements and notes comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in note 1 to the financial
statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's
financial position as at 30 June 2017 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the
Extended Closed Group identified in note 15(b) will be able to meet any obligations or liabilities to
which they are, or may become, subject by virtue of the deed of cross guarantee described.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the directors
Bill Healy
Chairman
29 August 2017
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT
To the Members of Decmil Group Limited
Opinion
We have audited the financial report of Decmil Group Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement
of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
cash flows for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies, and the directors' declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group's financial position as at 30 June 2017 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How our audit addressed this matter
Recognition of Deferred Tax Assets
Refer to Note 24 in the financial statements
The Group has net deferred tax assets of $27.098
million relating mainly to tax losses and temporary
differences.
For the year ended 30 June 2017, management
has performed an assessment on
the
recoverability of the net deferred tax assets by
using the Group’s forecast for 2018 and beyond to
satisfy the probability criteria that future taxable
profits will be available against which the balance
can be utilised.
Our audit procedures in relation to management’s
recognition of deferred tax assets included:
Reviewing of the Group’s forecast for 5 years
from 2018 and assessing management’s
assumptions and inputs for reasonableness;
and
Assessing the recoverability of deferred tax
assets, and the manner in which timing
differences would be reversed and losses
utilised. This was based on the same
intangible asset
forecasts used
valuation model (refer below) and were
therefore assessed in conjunction with our
audit procedures over intangible assets.
the
in
Impairment of Intangible Assets
Refer to Note 19 in the financial statements
The Group has goodwill of $75.482 million relating
three cash generating units (“CGU”) as
to
disclosed in note 19. We focused on this area due
to the size of the goodwill balance, and because
the directors’ assessment of the ‘value in use’ of
involves
the cash generating unit
judgements about the future underlying cash
flows of the business and the discount rates
applied to them.
(“CGU”)
For the year ended 30 June 2017, management
has performed an impairment assessment over
the goodwill balance by:
identifying three CGUs which has been
based on the smallest identifiable group of
assets that generate cash inflows that are
largely independent of the cash inflows
from other assets or groups of assets;
calculating the value in use for three CGUs
using a discounted cash flow model. These
(revenues,
models used cash
expenses and capital expenditure) for each
CGU for 5 years, with a terminal growth
rate applied to the 5th year. These cash
flows
Our audit procedures in relation to management’s
impairment assessment included:
Assessing management’s determination
that the goodwill should be allocated to
three CGUs based on the nature of the
Group’s business and the manner in which
results are monitored and reported;
Assessing the valuation methodology used
and reconciling input data to supporting
evidence, such as approved forecasts,
then reviewing these forecasts against
actual current and previous performance;
Challenging the reasonableness of key
assumptions used in the valuation model,
including
forecast and
the cash
discount rates used;
flow
Reviewing management’s
sensitivity
analysis on revenue growth rates and
overheads used in the valuation model to
determine the extent of headroom for the
CGUs; and
Reviewing the adequacy of disclosures
against the requirements of AASB 136.
flows were then discounted to net present
value using the Group’s weighted average
cost of capital (WACC); and
comparing the resulting value in use of the
three CGUs
their respective book
values.
to
Recognition of Revenue and Profits on Long Term Contracts
Refer to Note 14 in the financial statements
The Group’s largest source of revenue is from
construction and engineering.
Our audit procedures in relation to recognition of
revenue and profits on long term contracts included:
from contracts where
revenues are
Construction and engineering
derived
is
revenue
recognised based on the stage of completion.
This is measured as the percentage of work
performed up to the reporting date with respect to
the
to be
performed. Construction and engineering revenue
is recognised by management after assessing all
factors relevant
including
specifically assessing the following as applicable:
total anticipated contract work
to each contract,
Determination of stage of completion
Estimation of total contract revenue and
costs including the estimation of cost
contingencies
Determination of contractual entitlement
and assessment of the probability of
customer approval of variations and
acceptance of claims
Estimation of project completion date
Provision for loss making contracts
We focused on this area as a key audit matter due
to the number and type of estimation events over
the course of the contract life, the unique nature
of
to
complex and judgmental revenue recognition from
contracts.
individual contract conditions,
leading
Evaluating and assessing
the operating
effectiveness of internal controls over the
accuracy and timing of revenue recognised in
the financial report, including:
- Transactional controls in the revenue and
billing cycles
- Transactional controls in the underlying
contract related cost balances in the
purchase and payroll cycles
For material contracts with a delivery
schedule of greater than 12 months, we
performed the following procedures:
- Understanding
the performance and
status of the contracts through enquiries
of personnel with
for
contract management.
responsibility
- Assessing the Group’s ability to deliver
contracts within budgeted margins by
analysing
the historical accuracy of
forecasting margins.
- Assessing the provisions for loss making
these
the expected
contracts
appropriately
contractual provisions.
reflected
whether
and
- Evaluating contract performance in the
period since year end to audit opinion
date to assess the need for any further
provisions for losses.
Fair Valuation of Investment Property
Refer to Note 18 in the financial statements
The Group has an investment property fair valued
at $92.4 million as at 30 June 2017.
For the year ended 30 June 2017, a valuation was
undertaken by an external valuer using the
discounted cash flow method, with assumptions
made in respect of financial forecast inputs
including occupancy rates, growth rates and
discount rates.
Our audit procedures in relation to fair valuation of
investment property included:
Assessing the valuation methodology used;
and
Reviewing the independent valuation and
assessing the assumptions and inputs for
reasonableness.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2017, but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the 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 financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf.
This description forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included within the directors' report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of Decmil Group Limited, for the year ended 30 June 2017, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 29 August 2017
J A KOMNINOS
Partner
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
FOR THE YEAR ENDED 30 JUNE 2017
Additional information required by the Australian Securities Exchange and not shown elsewhere in this
report is as follows.
1. Substantial shareholders
The names of substantial beneficial shareholders listed on the Company’s register as at 30 June 2017
are:
%
12.22
11.21
7.96
7.59
7.26
%
0.53
4.92
4.45
13.76
76.34
Denis Criddle
Commonwealth Bank Group
Paradice Investment Management Pty Ltd
Thorney Investments Group
Franco Family Holdings (Retail Group)
The following information is made up as at 31 July 2017:
2. Distribution of shareholdings
Shares
20,989,145
19,257,910
13,677,756
13,041,141
12,475,000
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
No. of
shareholders
1,676
No. of ordinary
shares
916,595
2,831
1,005
941
75
8,450,712
7,643,176
23,634,270
131,091,944
6,528
171,736,697
100.00
There are 956 shareholders with an unmarketable parcel totalling 269,458 shares.
3. Voting rights
All ordinary shares issued by Decmil Group Limited carry one vote per share without restriction.
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES (Cont’d)
FOR THE YEAR ENDED 30 JUNE 2017
4. Twenty largest shareholders
The names of the twenty largest registered shareholders of fully paid ordinary shares in the Company as
at 31 July 2017 are:
Citicorp Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
National Nominees Ltd
Broadway Pty Ltd – The Decmil Australia Fund A/C
Broadway Pty Ltd – The Decmil Australia A/C
L, M & R Franco – LMR Franco Unit Trust A/C
J P Morgan Nominees Australia Ltd
National Exchange Pty Ltd
SJ & AC Criddle Holdings Pty Ltd – SJ & AC Criddle Family A/C
Delauney Pty Ltd – Franco Family A/C
Farview Pty Ltd – Ernesto Franco Family A/C
Zero Nominees Pty Ltd
Mrs Nola Isabel Criddle – Criddle Investment Fund A/C
CPU Share Plans Pty Ltd
SJ & AC Criddle Holdings Pty Ltd – SJ & AC Criddle Family A/C
Mr Mario Franco + Mrs Immacolata Franco – The Mario Franco S/F
BNP Paribas Nominees Pty Ltd
Prudential Nominees Pty Ltd
BNP Paribas Noms (NZ) Ltd
Criddle Holdings Pty Ltd – SJ Criddle Family A/C
No. of Ordinary
Fully Paid
Shares Held
27,099,610
23,830,032
16,312,354
10,475,000
7,824,666
5,000,000
4,210,346
2,500,000
2,500,000
2,300,000
2,300,000
2,077,837
1,947,827
1,370,000
1,257,195
1,100,000
1,074,447
1,000,000
878,303
857,195
%
15.78
13.88
9.50
6.10
4.56
2.91
2.45
1.46
1.46
1.34
1.34
1.21
1.13
0.80
0.73
0.64
0.63
0.58
0.51
0.50
Total
115,914,812
67.51
SECTION: FINANCIAL REPORT
DECMIL GROUP LIMITED ANNUAL REPORT 2017
PAGE 113
Auditor
RSM Australia Partners
8 St Georges Terrace
Perth WA 6000
Telephone: 08 9261 9100
Share Registry
Computershare Investor Services Pty Ltd
Level 11, 172 St Georges Terrace
Perth WA 6000
Telephone: 08 9323 2000
Email: www-
au.computershare.com/Investor/Contact
Website: www.computershare.com
Bankers
National Australia Bank Ltd
100 St Georges Terrace
Perth WA 6000
Telephone: 13 10 12
Controlled Entities
Decmil Australia Pty Ltd
Decmil Engineering Pty Ltd
Decmil PNG Limited
Decmil Construction NZ Limited
Cut and Fill Pty Ltd
Eastcoast Development Engineering Pty Ltd
Scope Australia Pty Ltd
Homeground Villages Pty Ltd
Homeground Gladstone Pty Ltd ATF
Homeground Gladstone Unit Trust
Homeground Karratha Pty Ltd
Decmil Properties Pty Ltd
Decmil Infrastructure Pty Ltd
Cornelisse Shoal Pty Ltd
Decmil Services Pty Ltd
Decmil Telecom Pty Ltd
SC Holdings Pty Ltd
SC Services Pty Ltd
SC Equipment Holdings Pty Ltd
Decmil Group Limited Employee Share Plan
Trust
ASX Code
DCG
CORPORATE DIRECTORY
FOR THE YEAR ENDED 30 JUNE 2017
Directors
Bill Healy, Non-Executive Chairman
Scott Criddle, Managing Director
Denis Criddle, Non-Executive Director
David Saxelby, Non-Executive Director
Lee Verios, Non-Executive Director
Executive Team
Scott Criddle, Chief Executive Officer
Tony Radalj, Chief Operating Officer
Craig Amos, Chief Financial Officer
Company Secretary
Alison Thompson
Australian Business Number
35 111 210 390
Principal Registered Address
20 Parkland Road
Osborne Park WA 6017
Telephone: 08 9368 8877
Facsimile: 08 9368 8878
Postal Address
PO Box 1233
Osborne Park WA 6916
Operational Offices
Decmil Australia Pty Ltd
20 Parkland Road
Osborne Park WA 6017
Telephone: 08 9368 8877
Decmil Australia Pty Ltd &
Homeground Villages Pty Ltd
Level 5, 60 Edward Street
Brisbane QLD 4000
Telephone: 07 3640 4600
Decmil Construction NZ Limited
Level 6, 16 Kingston Street
Auckland 1010
Telephone: +64 9 443 4443
SC Services Pty Ltd
133 Pilbara Street
Welshpool WA 6106
Telephone: 08 9208 5999
Cut and Fill Pty Ltd
86 Denmark Street
Kew VIC 3101
Telephone: 03 8417 7800
Scope Australia Pty Ltd
1025 Wellington Street
West Perth WA 6005
Telephone: 08 9216 7400
DECMIL GROUP LIMITED ABN 35 111 210 390 AND CONTROLLED ENTITIES
decmil.com