Decmil Group Limited
Annual Report 2023

Plain-text annual report

Together, we’re the difference. Together, we’re Decmil. Corporate Directory Directors Bankers Andrew Barclay, Chair National Australia Bank Ltd Rod Heale, Director Peter Thomas, Director David Steele, Non-Executive Director Vin Vassallo, Non-Executive Director Company Secretary Peter Coppini Registered Office 20 Parkland Road, Osborne Park, WA 6017 Telephone: 08 6240 8160 Postal Address PO Box 1233 Osborne Park WA 6916 Australian Business Number 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 Southern Pty Ltd Eastcoast Development Engineering Pty Ltd Homeground Villages Pty Ltd Homeground Gladstone Pty Ltd ATF Homeground Gladstone Unit Trust Decmil Maintenance Pty Ltd Decmil Group Limited Employee Share Plan Trust 35 111 210 390 ASX Code DCG and DCGPA Auditor RSM Australia Partners Level 32, Exchange Tower, 2 The Esplanade, 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 Website: www.computershare. com Decmil Group LimitedWho we are Our Vision We are an Australian-owned provider delivering integrated construction and engineering solutions for multi-disciplinary projects across Australia. Outstanding project management and delivery, regardless of scale and complexity, underpins our approach to everything that we do. To be the market leader in project delivery, achieving sustainable growth through the quality of our people and the strength of our relationships. 1 Annual Report 20232 Decmil Group LimitedContents Overview 4 6 12 16 18 20 22 24 Letter from the Chair Our Business Our Projects Health & Safety Sustainability People & Culture Board of Directors Executive Leadership Team Directors Report 26 Directors’ Report Financial Report 52 Financial Report Warradarge Wind Farm, WA 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 2023. 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’, ‘the Group’, ‘the Company’, ‘the consolidated entity’ 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 2022 to 30 June 2023, 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 is available on our website at www.decmil.com 3 Annual Report 2023Letter from the Chair The strategy for the business going forward is centred around a much more selective approach to tendering new work, with a focus on an appropriate risk allocation to Decmil, higher profit margins than have historically been targeted, and work that is part of Decmil’s core capabilities in its core regions, with financially strong clients. Andrew Barclay Chair 4 Dear Shareholders, As Chair of Decmil Group Limited, and on behalf of my fellow Directors, I am pleased to provide the Decmil Group Annual Report for FY2023. Perseverance, diligence, and resurgence are the three words that best encapsulate the past 12 months for Decmil. Throughout FY2023, Decmil continued to navigate challenging conditions that have been prevalent industry-wide, predominately the escalation costs for materials and energy, and a very tight labour market. In addition, we had the effects of some legacy items lingering over the business. Despite these challenges, Decmil was able to deliver revenue of $489 million and EBITIDA of $9 million, including four straight quarters of positive EBITDA, during FY2023. This compares to revenue of $378 million and an EBITDA loss of $44 million for the prior corresponding period. Our next step will be to translate this positive momentum into sustained profitability. Decmil recorded a net loss after interest and tax of $1.8 million for FY2023, which was a significant improvement on our FY2022 result of a $103 million loss after interest and tax. In tandem with improving our financial performance, we also methodically dealt with key residual legacy issues. During the fiscal year, we formally concluded all disputes relating to the Sunraysia Solar Farm and agreed to a full and final settlement of our dispute with Southern Cross Electrical Engineering regarding works at the Amrun mine project in Queensland. We also swiftly resolved the Munjina dispute in Western Australia, the resolution of which had a net positive impact to our cash position. Overall, we have significantly reduced our reliance on claims compared to the prior year. Following the appointment of CEO Rod Heale at the tail end of FY2022, we took the next step in our Executive Team reinvigoration and bolstered our leadership group across both the west and east coast of Australia in FY2023. Our renewed Executive Team has already delivered significant operational efficiency enhancements across our portfolio of projects and is continuing to target further improvements. Backed by a strengthened operational base, late in FY2023 and post year-end we undertook a well-supported, fully underwritten, $26.3 million capital raise via Redeemable Convertible Preference Shares (RCPS). The innovative nature of the RCPS financial instrument enabled us to raise significant funds, whilst minimising shareholder dilution, to give Decmil the necessary working capital flexibility to advance our strategy. Decmil Group LimitedStrategy Our people Following Rod’s appointment in FY2022 and the subsequent broader Executive Team refresh, our strategy shifted towards a much more selective approach to tendering for new work. I would like to express my appreciation to our employees and contractors for their continued hard work in making our business recovery possible. This is underpinned by an emphasis on a fairer risk allocation to Decmil, higher profit margins than have historically been targeted, and work that is part of Decmil’s core capabilities, in its core regions, with financially strong clients. Over the past year we have established a new high calibre Executive Leadership Team, with two exceptional leaders to manage our East and West Coast operations – Executive General Managers Deon Baddock and Simon Barnes. The strategic focus intensified in FY2023, with the overarching aim of this strategy to deliver profitable revenue growth that will crystalise improved value for shareholders. Outlook Pleasingly, Decmil is growing its orderbook whilst adhering to this highly selective tendering strategy. The order book of contracted and preferred work for Decmil reached $550 million as at 30 June 2023, compared to approximately $335 million by the end of calendar year 2022. Decmil continued to successfully deliver on major projects in the infrastructure market, such as the Albany Ring Road in Western Australia, and the Barwon Heads and Gippsland Line Upgrade (rail) in Victoria. This has positioned the Company well to capture a robust pipeline of work in the sector. The award of early-works contracts with Roy Hill and Covalent Lithium in Western Australia, both of whom are established clients, illustrates our ability to increasingly leverage our proven track record in the resources sector to win ideal-sized contracts that sit within our expertise. Decmil is also refining its presence in the renewable energy sector, focusing on opportunities which have no interconnection risk, particularly Balance of Plant works in the wind farm segment. To this end, in FY2023 we made strong progress on the Ryan Corner wind farm, secured the early works contracts for the Waddi Waddi wind farm, and commenced ECI works on Mount Hopeful Wind Farm and Specimen Hill Wind Farm projects. In addition, earlier this month Symal and Decmil signed an MOU to jointly bid on a variety of wind farm projects in NSW and Queensland. This sets Decmil up very well for the expected activity in wind farm development, with AEMO projecting an additional 30GW of wind farms (~$53bn) being built in the next 10 years. The safety of our people continues to be our priority, with Decmil reporting a strong result for FY23, with a lost time injury frequency rate of zero and a total recordable injury frequency rate of 2.6. As we anticipate that the number of employees will markedly increase over the next few years, our focus now moves towards growing our capability across our business and continuing to implement strategies to attract, develop and retain a highly skilled and experienced workforce. Conclusion There is real optimism ahead for Decmil as the business returns to profitability. We are growing our revenue base, enhancing our underlying earnings, improving our operational capabilities, and we now have a strengthened balance sheet. This places us in good stead to successfully execute our healthy orderbook and capitalise on the buoyant pipeline of work ahead. Finally, I would once again like to sincerely thank you, our shareholders, for your patience and loyalty during the challenging period from which we are emerging. Andrew Barclay Chair 5 Annual Report 2023Our Business. Resources Our contribution to resource projects has helped to build bigger, better cities around the world, house hundreds of employees in remote areas and generate thousands of Australian jobs. 6 Market Opportunity: • • • • Australian exploration expenditure increased by 20% to $5.0 billion in 2021–22. Exploration expenditure in WA rose by 22% in 2021–22 and accounted for 61% of total exploration in 2021–22. The value of projects at the ‘committed’ stage increased over the year to October 2022 from $54bn to $83bn. The majority of committed projects are located in Western Australia, and these projects have an estimated value of $63 billion. Decmil’s Market Positioning: • • • Strong position with 42 years of operation in the resources industry. Extensive knowledge of project requirements in regional and remote mining regions. Track record of successful delivery of Design and Construct projects for major Australian resource clients. • Well established to service the increasing resources project demands in Western Australia. $83b The value of projects at the ‘committed’ stage over the year to October 2022. $63b The estimated value of committed projects located in Western Australia. Decmil Group LimitedCovalent Lithium Kwinana Refinery NPI Buildings, WA Talison MSA Technical Services Building, WA 7 Annual Report 2023Our Business. Renewable Energy Powering our cities and communities is critical, and we’ve helped our clients bring their wind energy projects to life, enabling people to move freely and enjoy the environments around them. 8 Market Opportunity: • • • • • Australia’s major wind resources mean that it is well placed to harness greater wind energy within the electricity industry. 50 GW of wind farm projects announced or committed for Eastern States, with an estimated Civil Balance Of Plant construction estimated at $27bn by 2030. 21 GW of wind farm projects announced or committed for Western Australia, with an estimated Civil Balance Of Plant construction estimated at $8bn by 2030. Australia’s strengthened climate target of 43% of emissions reductions by 2030 and achieve net zero emissions by 2050 provides greater impetus for renewable energy. Australian Government target of 82% renewable electricity by 2030 for Australia’s national mix. • Up to 2027, Australia’s renewable energy capacity is forecast to expand by more than 85%. • Wind remains Australia’s most significant renewable generation contributor overall (when rooftop and utility-scale solar are considered separately), providing 35.6 per cent of all renewable generation and 12.8 per cent of Australia’s total energy generation mix. Decmil’s Market Positioning: • Strong capability to deliver balance of plant works in the renewable energy market. • Delivered the Balance of Plant works for Western Australia’s two largest wind farms; Warradarge Wind Farm and Yandin Wind Farm. • Well established to service the increasing renewable resources project demands in Australia. • Decmil and Symal Joint Venture established to jointly tender for five major wind farm projects in NSW and Queensland. 85% Forecast of Australia’s renewable energy capacity expansion up to 2027. 72 Large-scale projects under construction or financially committed at the end of 2022. Decmil Group LimitedYandin Wind Farm, WA 9 Annual Report 2023Our Business. Infrastructure We’ve constructed some of the most iconic and complex transportation projects across Australia, developing urban and rural infrastructure projects that connect millions of people, freight and products every day. 10 Market Opportunity: • Major public infrastructure projects pipeline is valued at $237bn over the five years from 2021—22 to 2025—26. • Demand for major public infrastructure works has increased by $15bn since 2021, equivalent to 6.7% growth. • • Transport accounts for 63% of this spend. Investment is concentrated in New South Wales, Victoria and Queensland (84% of spend). Decmil’s Market Positioning: • R5 / B4 / F150+ accreditation which allows Decmil to bid on all significant Australian Government road and bridge contracts. • Strong organisational experience on major projects of a similar nature. • Delivery of Australia’s greenest freeway – the award winning Mordialloc Freeway. • New supply chains of recycled materials for infrastructure construction opens opportunities. 6.7% growth with demand for major public infrastructure works increasing by $15bn since 2021. $237b of major public infrastructure projects over the five-year pipeline. Decmil Group LimitedAlbany Ring Road Stage 2, WA Gippsland Line Upgrade Project, VIC Barwon Heads Road Upgrade Project, VIC 11 Annual Report 2023Our Projects. Projects in construction or completed during FY2023 include: Karratha Senior High School WA Government, Department of Finance Perdama Urea Project - Bulk Earthworks Saipem Clough Joint Venture Mesa J HV and LV Facilities Rio Tinto Waddi Wind Farm Early Works Tilt Renewables Mitchell Freeway Principal Shared Path Main Roads Western Australia Florin Parkside Stirling Parkside Port Hedland Community Centre Town of Port Hedland Pundulmurra TAFE WA Government, Department of Finance Christmas Creek Hydrogen Refuelling Station Ancillary Works FMG Munjina Road Over Rail Bridge on Roy Hill Main Roads Western Australia Logistics Road Construction Early Works Covalent Lithium Kwinana Refinery NPI Buildings Albany Ring Road - Stage 2 Covalent Lithium Main Roads Western Australia Talison MSA Technical Building Talison Lithium Renewable Energy Resources Infrastructure 12 Decmil Group LimitedEVA Copper Project - Accommodation Village ECI Harmony Gold Ryan Corner Wind Farm GPG Australia Note: Perdaman Urea Project Bulk Earthworks contract awarded in FY24. Mount Hopeful Wind Farm ECI Neoen Specimen Hill Wind Farm ECI Enel Green Power Bruce Highway Upgrade Gin Gin to Benaraby Department of Transport and Main Roads, Queensland Northern Development Area Camp QGC Shell NDA Charlie Washbay Facility QGC Structures Rehabilitation Project, North & South East Major Road Projects Victoria Snowy District Crossings Department of Environment, Land, Water and Planning Gippsland Line Upgrade Works Rail Projects Victoria Barwon Heads Road Upgrade Major Road Projects Victoria 13 Annual Report 2023Homeground Gladstone. Homeground Gladstone accommodation village maintains a high standard in quality workforce accommodation. Accommodation Village Homeground Gladstone is a 1,392 room, fully serviced accommodation village located 25km southwest of Gladstone, Queensland. It provides accommodation primarily for workforces servicing and constructing industrial facilities and infrastructure in the Gladstone region. Homeground Gladstone is the only accommodation facility in the greater Gladstone area that can accommodate larger workforces and is ideally suited to house workers on large capital projects or major maintenance shutdowns. 1,392 spacious, air-conditioned four star accommodation rooms. 20km from Gladstone, conveniently located near tourism and primary industries. 14 Decmil Group LimitedHomeground Gladstone Gladstone, Queensland 15 Annual Report 2023Health and Safety Our goal is to build a workplace where our people are safe, happy and healthy. Health and Safety ISO 45001:2018 Reaccreditation At Decmil, our unwavering dedication to the well-being of our workforce and partners drives our commitment to safety. Our overarching goal is to cultivate a workplace where our people are safe, happy and healthy. The health, safety and well-being of our employees and valued contractors stand as paramount principles that guide our actions. These values remain steadfast as we continually enhance our safety practices, both on and off the project sites. Safety is ingrained in the fabric of Decmil, shaping the behaviours of every individual involved in our projects. At the heart of our safety ethos is a strong emphasis on safety leadership and culture. We believe that safety is not just a set of protocols, it’s a way of thinking that permeates every level of our business. Our leaders and project teams remain dedicated to fostering a leading safety culture, enabling us to create an environment where every employee cares about their well-being and the well-being of their colleagues. We continue to focus on effectively managing risks across the business, ensuring that together, we can get home safely, every day. We continually evaluate and address potential risks across our operations, uniting our collective efforts to ensure that each day ends as safely as it begins. As we navigate the path forward, we are resolute in our mission to uphold the highest standards of health and safety. Accreditations and Certifications Decmil has implemented a comprehensive Health and Safety Management System that serves as the foundation for our safety practices. Our system is designed to comply with all relevant regulations, standards and industry best practices. We are delighted to share two significant achievements that underscore our dedication to maintaining the highest safety standards within the industry. In FY23 we successfully achieved reaccreditation in ISO 45001:2018. This accomplishment reflects our commitment to upholding occupational health and safety management systems and demonstrates our dedication to assess and mitigate risks and our commitment to continuous improvement. The reaccreditation solidifies our position as a trusted partner for clients, contractors and stakeholders, showcasing our commitment to the highest safety standards. OFSC Accreditation Decmil also successfully maintained its accreditation from the Office of the Federal Safety Commissioner (OFSC) in FY23. This achievement underscores our commitment as a reliable leader in safety practices within the construction industry. Maintaining our OFSC accreditation allows us to continue to tender and deliver Commonwealth-funded projects. As we move forward, we remain steadfast in our pursuit of safety, collaboration, high standards and maintaining our position as a respected industry player. Health and Safety Performance Throughout the preceding year, we have maintained our focus on enhancing our critical risk management initiative, streamlining our management frameworks and optimising the tools employed to effectively record and communicate metrics pertaining to health and safety. We continued to expand the use of our health and safety data platform which has enhanced the proactive capture and subsequent analysis of health and safety data. The platform has also increased efficiency of project teams with mobility solutions removing significant paperwork for project personnel. In FY23, Decmil’s Total Recordable Injury Frequency Rate (TRIFR), Lost Time Injury Frequency Rate (LTIFR) and High Potential Incident Frequency Rate (HPIFR) all improved from the previous reporting period. 2019 2020 2021 2022 2023 TRIFR LTIFR HPIFR 5.3 1.1 9.1 4.3 0.7 7.2 0.9 0.0 5.5 3.6 0.7 4.3 2.6 0.0 2.6 16 Decmil Group LimitedHealth and Wellness In FY23, we proactively prioritised the health and well- being of our dedicated team through various initiatives: • Mental Health Awareness Training: Our commitment was evident as Decmil employees actively participated in Mates in Construction and Lifeline training, equipping them with valuable mental health awareness and support skills. • Step Challenge: Encouraging a healthy lifestyle, our employees enthusiastically joined a step challenge that took them on a virtual global journey, inspiring physical activity and well-being. • Health Promotion: Throughout the year, our commitment to employee health was evident as we shared a diverse range of health initiatives and informative materials, nurturing awareness and empowerment. Future Goals Our journey toward excellence continues, driven by our unwavering dedication to health and safety: • SHIELD Culture Program Refresh: Building on the success of the SHIELD culture program, we are gearing up to refresh it, aiming to reinforce a safety- focused culture where genuine care for each other’s well-being is paramount. • Health and Wellness Initiatives: In the upcoming year, we are dedicated to rolling out new health and wellness initiatives that target both mental and physical well-being, fostering a harmonious balance between a healthy mind and body. • Critical Risk Management: We are focused on a comprehensive review and enhancement of our critical risk management program. Our goal is to ensure that our risk targeting aligns seamlessly with our operations, driving us to challenge ourselves in identifying optimal controls for effective risk management. We look ahead with optimism, confident that these endeavours will further strengthen our commitment to the safety, health and well-being of our valued team. 17 Annual Report 2023Sustainability Our approach to sustainability is to create opportunities that leave a positive legacy for the environment, society and our stakeholders. Strong sustainability performance is at the heart of our ongoing success and reputation. We understand the vital role we play in fostering sustainable growth through best-in-class environmental management, thoughtful design and operations, community investment and the promotion of diversity within our workforce and supply chain. Embarking on a Path to Environmental Responsibility At Decmil, we are taking proactive steps towards responsible environmental practices. As part of our commitment to transparency and sustainable growth, we have initiated the formulation of a comprehensive sustainability strategy, alongside the development of a robust framework for emissions capture and reporting. This undertaking reflects our genuine dedication to accurately assess and mitigate our carbon footprint while aligning our operations with sustainable principles. By addressing our environmental impact earnestly and adopting a holistic approach to sustainability, we are working towards ensuring a positive legacy for future generations. Key Accomplishments • Attaining recertification to ISO 14001, our accredited Environmental Management System stands as a testament to our steadfast commitment to environmental responsibility. • We have strengthened our in-house Environmental and Sustainability capabilities, playing a pivotal role in guiding both corporate and operational outcomes. • • By strengthening awareness of environmental and sustainability initiatives across every discipline, we have amplified awareness and performance levels. Simplified our Environment Management System to ensure alignment with new legislation, improved risk management integration, improved operational efficiency, enhanced market resilience and foster innovation. • Our progress towards a ‘paper-light office’ is well underway, marked by the adoption of electronic document management, collaborative tools and digital technology catering to project-based personnel. Barwon Heads Road Upgrade Project, VIC 18 Decmil Group Limited• Noteworthy achievements in environmental initiatives encompass substantial advancements in carbon reduction, waste management, water recycling and land conservation. Excellence in Environmental Outcomes Structures Rehabilitation Project The Structures Rehabilitation Project exemplifies our dedication to sustainability. Across 9 locations in Melbourne’s North and South Eastern suburbs, our team meticulously planned and collaborated with stakeholders, including community groups, aged care facilities, councils and schools. By encouraging proactive stakeholder communication, we ensured minimal impact on the community. Resource management was skilfully orchestrated, with opportunities for reusing materials on-site and donating them to local residents and businesses. Involvement with local groups such as the Whittlesea Agricultural Society, Cardinia Creek Fishing Clubs and others fostered positive relationships. Achieving a 97.9% Key Performance Score (KPS) target for Sustainability and 100% for KPS for Recycled First, this project earned a coveted “Leading” rating under the Infrastructure Sustainability Council’s (ISC) IS Rating Scheme (version 1.2). Such commitment was rewarded with the “Sustainability Award” in the 2022 Decmil Excellence Award campaign. Barwon Heads Roads Upgrade Project Set to conclude in August 2023, the Barwon Heads Road Upgrade Project underscores our dedication to environmental responsibility, targeting an IS Rating Scheme “Excellent” rating. Inclusivity, social procurement and the use of recycled materials were key project objectives. Navigating complexities near wetlands and protected fauna, we integrated Environmental and Sustainability considerations into design and planning. Approvals were secured through careful consultation with relevant authorities. Albany Ring Road The Albany Ring Road Project is a testament to our commitment to sustainable growth. Through sustainable design and construction, we’ve addressed social, environmental and economic needs. Case studies illuminate our role in minimising land clearing impact, bridging educational gaps, promoting Aboriginal and Torres Strait Islander engagement and fostering community pride. The Albany Ring Road Project exemplifies our dedication to sustainability, echoing our mission to create a positive impact that endures. Aboriginal and Torres Strait Islander Participation and Engagement Decmil is committed to leading the market in project excellence and nurturing robust relationships. Our ongoing progress towards this goal is complemented by a work culture that values inclusion, respect and diversity. In 2020, a significant milestone was achieved with the successful implementation of our first Reflect Reconciliation Action Plan. All outlined objectives in the Plan were accomplished. Building upon this success, we embarked on the next phase of our reconciliation journey in 2022 with the introduction of the Innovate Reconciliation Action Plan. This comprehensive blueprint, endorsed by Reconciliation Australia, will guide our efforts over the next two years. Our Reconciliation Action Plan is founded on four key focus areas, each strategically chosen to realise our reconciliation vision. These four focus areas are creating employment opportunities, increasing cultural competency, expanding supplier diversity and local community engagement. Anchored by the principles of respect, opportunity creation, fostering positive relationships within our sphere of influence and maintaining strong governance, these areas align seamlessly with Decmil’s core values of integrity, solutions, collaboration, sustainability and performance. As we navigate this transformative journey, our commitment to reconciliation remains resolute as we strive to influence positive changes within our industry to enhance future opportunities for Aboriginal and Torres Strait Islander peoples. 19 Annual Report 2023People and Culture For more than forty years Decmil has understood that our people are the key to our success. Our ability to deliver exceptional project management is driven by committed employees who are motivated, understand our vision and believe in Decmil’s purpose and values. Our Cultural Framework Decmil’s values, vision and strategy continue to support our culture. Our beliefs and behaviours are guided by these frameworks which provide a structure to set the operational expectations across our business. • 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’, continues to align our people and is essential for success across Decmil. Our Values At the heart of what we do is our people. We believe that a diverse, inclusive and flexible workforce is the key to successfully delivering projects for our clients and the communities in which we operate. Our core values and guiding principles are the essence of our identity, supporting our vision and shaping our culture. They define why we do what we do and how we do it. Our five core values are key to the successful delivery of our long-term business strategy. Annual Overview Over the past year, Decmil’s focus has been on • Rebuilding a new high calibre executive team led by our Chief Executive Officer, Rod Heale • Retaining and rewarding our highly talented employees whilst we achieve our goal of stabilising the business. Achievements and a Postgraduate Certificate of Management. Deon is a Chartered Professional Engineer, a Member of Engineers Australia and a Graduate of the Australian Institute of Company Directors. Simon Barnes (Executive General Manager – East) joined Decmil in November 2022 and has more than 25 years’ experience in the construction industry across a range of contract models, including Alliance, Design and Construct, and Public Private Partnerships. Most recently, he was Executive Regional Manager – Southern at ACCIONA, where he has worked for 15 years including at its antecedent companies Abigroup and Lend Lease. His extensive expertise ranges from construction delivery and project governance roles, through to regional executive leadership. Simon is a qualified Civil Engineer with a Master of Business Administration and a Graduate of the Australian Institute of Company Directors. • Female workforce reaching a total of 24%. • Updating our paid parental leave scheme to include up to 18 weeks of paid primary carers leave. • • Launching a Graduate Development Program that includes a cohort of six graduates who are participating in the 18 month program. Participating in the “Wellness in Infrastructure Mentoring Program”. The program involves a number of construction companies, and is facilitated by the training organisation Lysander. The aim of the program is to support industry leaders to develop their skills and knowledge as mentors and to share their experience and wisdom with high potential emerging leaders who are in turn, seeking to develop their resilience and influencing skills as mentees. Some of our achievements in the past twelve months include the following: Outlook • The recruitment of two exceptional leaders to manage our East and West coast operations. • Deon Baddock (Executive General Manager – West) joined Decmil in November 2022, and has more than 25 years’ experience in the construction and mining industry across a range of contract models. Prior to joining Decmil, Deon held various operational, executive and governance roles with NRW, Ertech and Main Roads. Deon’s expertise also includes precontracts, commercial, quality and project controls.Deon holds a Bachelor of Engineering (Civil) 20 Our focus will now move towards growing our capability across our business. We anticipate that the number of employees working for Decmil will markedly increase and this is an excellent opportunity to continue to build a diverse and high performance team. We will continue to introduce strategies that attract, develop and retain the highly skilled and experienced workforce required to deliver on our vision. Decmil Group Limited21 Annual Report 2023Board of Directors Andrew Barclay | Chair Andrew was appointed as Chair of Decmil in July 2020. Andrew is a former partner of the Perth office of Mallesons Stephen Jacques (now King & Wood Mallesons) with over 30 years’ experience in major projects, mining, banking and finance and insolvency matters. In private practice Andrew has been involved in significant Western Australian infrastructure and mining projects, and major Western Australian corporate insolvencies. More recently, Andrew has acted as in- house counsel at Fortescue Metals Group and Roy Hill Holdings. Andrew holds a Bachelor of Laws (Hons) and Bachelor of Economics. Barwon Heads Road Upgrade Project, VIC 22 Decmil Group LimitedDecmil’s Board of Directors is a dedicated group of exceptional professionals who drive the overall direction and strategy of the business. Rod Heale – Executive Director Rod was appointed as a Director on 14 August 2023 and CEO on 20 June 2022. Rod brings more than 30 years’ experience in the building, construction and infrastructure industry across Australia. Prior to joining Decmil Rod was Chief Operating Officer for John Holland’s Australia and Asia business. Prior to this, Rod served as a Regional Executive for Thiess, John Holland and CPB Contractors. Rod holds a Bachelor of Engineering (Civil) from Monash University and a Master of Construction Law from The University of Melbourne. Rod is also a Fellow of Engineers Australia, a Fellow of the Australian Institute of Company Directors, and a Registered Builder in Victoria and Western Australia. Peter Thomas | Director Vin Vassallo | Non- Executive Director David Steele | Non- Executive Director Peter Thomas was appointed as a Director in July 2020 and currently holds the position of Chief Financial Officer. He is an experienced executive in the construction and resources industry with a proven track record in delivering large construction projects, and leading commercial, financial and corporate affairs. Peter’s experience in the last decade includes CFO, CEO and Project Director roles with Fortescue Metals Group, Adani and Balla Balla Infrastructure (part of the New Zealand Todd Group). Peter is also Chair of Australian Owned Contractors. Peter holds an MBA from Harvard, Bachelor Of Economics, Bachelor of Science, AIAA and GAICD. Vin was appointed as a Non- Executive Director in June 2021 and held the position of interim Chief Executive Officer during the period April 2022 to June 2022. Vin has over 25 years of experience in the Australian infrastructure sector, including 14 years at Transurban. Vin has previously been Executive Regional Manager for Abigroup Contractors, an Australian infrastructure contractor, and various senior executive roles at Transurban. Vin has recently taken the role of Group Executive – Electricity Transmission at APA Group and is an Executive Director at Olla Advisor. Vin holds a Bachelor of Engineering, specialising in civil engineering. David was appointed as a Non-Executive Director in June 2021. David has over 35 years experience in the resources, energy and infrastructure sectors globally, having been with Worley for 17 years. David has worked in Queensland, WA and overseas. He has served as the Regional Managing Director of Asia and the Middle East, and then as Group Managing Director based in Houston, USA. David holds a Bachelor of Engineering, specialising in electrical engineering. 23 Annual Report 2023Executive Leadership Team Our Executive Leadership Team is focused on innovation, growth and diversification and is made up of a group of talented and driven people who offer an expert wealth of knowledge. 01 04 01 Rod Heale – Chief Executive Officer 02 Peter Thomas – Chief Financial Officer 02 05 03 06 Rod was appointed as a Director on 14 August 2023 and CEO on 20 June 2022. Rod brings more than 30 years’ experience in the building, construction and infrastructure industry across Australia. Prior to joining Decmil Rod was Chief Operating Officer for John Holland’s Australia and Asia business. Prior to this, Rod served as a Regional Executive for Thiess, John Holland and CPB Contractors. Rod holds a Bachelor of Engineering (Civil) from Monash University and a Master of Construction Law from The University of Melbourne. Rod is also a Fellow of Engineers Australia, a Fellow of the Australian Institute of Company Directors, and a Registered Builder in Victoria and Western Australia. Peter Thomas was appointed as a Director in July 2020 and currently holds the position of Chief Financial Officer. He is an experienced executive in the construction and resources industry with a proven track record in delivering large construction projects, and leading commercial, financial and corporate affairs. Peter’s experience in the last decade includes CFO, CEO and Project Director roles with Fortescue Metals Group, Adani and Balla Balla Infrastructure (part of the New Zealand Todd Group). Peter is also Chair of Australian Owned Contractors. Peter holds an MBA from Harvard, Bachelor Of Economics, Bachelor of Science, AIAA and GAICD. 24 Decmil Group Limited03 Deon Baddock – Executive General Manager Western Region Deon joined Decmil in November 2022, and has more than 25 years’ experience in the construction industry across a range of project models. Most recently Deon was Group Manager Risk and Commercial at NRW, where has worked since 2010. At NRW he had both operational and governance roles, which included responsibility for legal and commercial, precontracts, project controls, quality management and including oversight of major projects. Prior to NRW, Deon worked at Main Roads Western Australia (MRWA). Deon is a qualified Civil Engineer and has a Postgraduate Certificate of Management. 04 Simon Barnes – General Manager Eastern Region Simon joined Decmil in November 2022 and has more than 25 years’ experience in the construction industry across a range of contract models, including Alliance, Design and Construct, and Public Private Partnerships. Most recently, he was Executive Regional Manager – Southern at ACCIONA, where he has worked for 15 years including at its antecedent companies Abigroup and Lend Lease. His extensive expertise ranges from construction delivery and project governance roles, through to regional executive leadership. Simon is a qualified Civil Engineer with a Master of Business Administration and holds a GAICD. 05 Rob Currie – Group Manager People & Culture Rob joined Decmil in May 2022 and has 25 years of experience in Human Resources (HR) and Industrial Relations (IR) related roles. He has experience working throughout Australia in the civil construction, building, telecommunications, and mining industries leading both corporate and project HR/IR teams for companies such as Lendlease, Leighton Contractors, Abigroup and Akron Roads. Rob holds a Bachelor of Business and leads and manages Decmil’s People and Culture function. He is responsible for the continued development of Decmil’s organisational culture and staff engagement strategies. 06 Bryn Vaughan - Group HSES Manager Bryn joined Decmil in June 2019 and has extensive experience in HSES management for project and corporate settings across the resources, construction and services industry in Australia and New Zealand. He is experienced in managing and leading HSES teams and has previously managed these functions for various companies including CPB Contractors (previously Leighton Contractors). He has worked across a range of project models including PPP, JV and Alliance projects. Bryn has a Masters Degree in Occupational Health & Safety Management. 25 Annual Report 2023Directors’ Report Albany Ring Road Project, WA 26 Decmil Group Limited Directors’ Report Annual Report 2023 27 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Your directors present their report on the consolidated entity consisting of Decmil Group Limited and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors and Company Secretary The following persons were directors of Decmil Group Limited during the whole of the financial year and up to the date of this report: ▪ Andrew Barclay – Chair ▪ Peter Thomas – Executive Director ▪ David Steele – Non-executive Director ▪ Vin Vassallo – Non-executive Director Rodney Heale was appointed as Executive Director on 14 August 2023 and continues in office at the date of this report. The Company Secretary is Peter Coppini BBus, MBA, GradDipApplCorpGov, LLB, CA, FGIA. Peter Coppini was appointed to the position of company secretary on 31 March 2023. He has more than 12 years of experience as company secretary in both listed and unlisted public companies plus more than 20 years’ experience in the accounting profession. Ian Hobson was company secretary during the financial year up to 31 March 2023. Principal Activities Decmil was established in 1978 and since has grown to provide design, engineering, construction and maintenance engineering construction services to the Infrastructure, Resources, and Renewables sectors across Australia: Infrastructure ▪ Government infrastructure projects including major road and bridge civil engineering projects ▪ Integrated transport solutions such as railway networks and airports. ▪ Construction of schools, medical centres, facilities, airports and accommodation units for government and local councils ▪ Construction of industrial and commercial buildings. Resources ▪ Non-process infrastructure, including industrial buildings, workshop, storage facilities, control rooms, substations, workshops and accommodation facilities ▪ Construction of workforce accommodation and associated facilities ▪ Civil works including site preparation, excavation, bulk earthworks and construction of roads and bridges. Renewables ▪ Feasibility, engineering, project management and construction services for the renewable energy sector Focusing on wind farm civil balance of plant projects Operating and Financial Results Revenue for the financial year ended 30 June 2023 was $489 million compared to $378 million in the prior year. Earnings before interest, tax, depreciation, amortisation and impairments was $9 million compared to a loss of $44 million in the prior year. 28 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 The consolidated entity reported a statutory net loss for the year of $1.8 million (2022: loss of $103 million). Operating cash flow for the financial year ended 30 June 2023 was a net outflow of $23 million compared to a net inflow of $6 million in the prior year. The Company raised $26.3m in equity via a Redeemable Convertible Preferred Share (RCPS) offering in June and July 2023. $20m of this was underwritten prior to 30 June 2023 and the remainder was underwritten and all balances fully received in July 2023. At 30 June 2023 the balance sheet reflected an overall net debt position of $24 million compared to a neutral net debt position in the prior. At 30 June 2023, some $20 million (before fees) of the $26.3 million (before fees) capital raise is recognised in equity. The $6.3m remainder of the $26.3m was underwritten and received after 30 June 2023 and will be recognised in the July 2023 accounts. Net assets were $58.7 million at 30 June 2023 compared to the prior year of $38.3 million. Dividends Paid or Recommended No final dividend for ordinary shares was paid, declared or recommended for payment. A dividend payment of $0.00452459 per RCPS has been determined and recommended for payment at 30 September 2023. This represents a pro rata initial dividend for the 69 days that investors held RCPS. Operational Overview Operations continue to reflect the diversity of the Group, with project activity spanning public sector infrastructure projects across Australia, non-process and worker accommodation facilities for the WA and Queensland resource sectors, general in-situ construction in WA and balance of plant works in renewable energy across multiple states. Revenue from operations has risen from $378 million in FY22 to $489 million in FY23. Key operational highlights for the year ended 30 June 2023 include: Safety ▪ Strong safety performance with zero lost time injuries for the period resulting in a lost time injury frequency rate (LTIFR) of 0.0 and a total recordable injury frequency rate (TRIFR) of 2.6. Infrastructure ▪ No projects were awarded in the period with work commencing on two Early Contractor Involvement contracts and work continuing on major projects awarded in FY22 including: ▪ Contract by Major Road Projects Victoria for the Barwon Heads Road Upgrade Work Package 1 ($50- 100m). ▪ Contract for the design and construction of phase one of the Albany Ring Road for the Western Australian Government and the contract for phase two ($100-250m). ▪ Continued progress on the Gippsland Line Upgrade contract with the VicConnect Alliance, an alliance between Rail Projects Victoria, UGL and Arup (Decmil share $100-250m). ▪ Contract to construct a new Port Hedland Community Centre building complex for the Town of Port Hedland ($0-50m). ▪ Contract to expand and upgrade the Karratha Senior High School ($0-50m). ▪ Contract to construct new training workshops at the Pundulmurra TAFE campus in South Hedland for the WA Department of Finance ($0-50m). ▪ Contract to design and construct the Florin Parkside apartments project for Stirling Capital, located in Perth ($0-50m). ▪ Practical completion achieved for the Peninsular Development Road project at Archer River for the Queensland Department of Transport ($0-50m). 29 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 ▪ Practical completion achieved for the Great Eastern Highway Coates Gully projects as part of Main Roads Western Australia Panel Works Program ($0-50m). ▪ Practical completion and commercial settlement achieved for the Roy Hill-Munjina Bridge 5413 road over rail infrastructure project with Main Roads Western Australia ($0-50m). ▪ Practical completion achieved for the contract by Main Roads WA for the construction of the Mitchell Freeway Principal Shared Path from Civic Place to Reid Highway ($0-50m). Resources ▪ Award of the NDA Washbay project for QGC Pty Ltd in Queensland ($0-50m). ▪ Limited notice of award for the Mount Holland Lithium Project in Western Australia for Covalent Lithium Pty Ltd. ▪ Awarded an Early Contractor Involvement contract by Roll Hill Infrastructure to provide Early Design Development Services for its Rolling Stock Maintenance Workshop upgrade. ▪ Awarded an Early Contractor Involvement contract by BHP to provide Early Design Development Services for its Port Haven project. ▪ Completion of the Christmas Creek Hydrogen Refuelling Station for Fortescue Metals Group ($0-50m). ▪ Completion of non-process infrastructure works at the Mesa A and Mesa J iron ore mines in the Pilbara region of Western Australia for Rio Tinto ($50-100m). ▪ Completion of the Talison Lithium project ($0-50m). ▪ Covalent Kwinana NPI works progressing well for Covalent Lithium ($0-50m). Renewables ▪ Work is continuing to progress well at the Ryan Corner Windfarm for GPG ($50-100m). ▪ Decmil has been advised of conditional preferred status as Balance of Plant contractor for the construction of the 108 MW Waddi Wind Farm in Western Australia ($0-50m). Homeground Gladstone ▪ Occupancy levels were modest in FY23 at Homeground Gladstone. Homeground revenue was $9.8m for the year delivering an EBITDA of $1.2m. ▪ Average occupancy for the year was 14%, which included a peak month of 47%. 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 A letter from the Company’s banker, National Australia Bank Limited was received after the balance date of 30 June 2023. In that letter, the bank waived any rights the bank may have had in respect of any potential review events under the facility agreement. If this letter had been received on or prior to 30 June 2023, borrowings of $8.2 million would be classified as a non-current liability (increasing net current assets by $8.2 million). In addition, shortly after the balance date of 30 June 2023, Decmil announced that it had completed its $26.3 million capital raise (before fees), of which was $20 million was underwritten at 30 June 2023 and that $20 million (before fees) was included in the balance sheet at that date. Apart from the matters outlined above, 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. 30 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Likely Developments and Outlook Several of Decmil’s key sectors are experiencing strong market conditions. These sectors and their drivers are summarised below: ▪ Infrastructure: The demand for major public infrastructure works remains strong, having increased by $15 billion since 2021, equivalent to 6.7% growth. The five-year pipeline of major public infrastructure projects is valued at $237 billion, with 63% of this spend accounting for major transport projects. Investment is concentrated in New South Wales, Victoria and Queensland, comprising 84% of this spend. Decmil continues to build its position in infrastructure projects, having been awarded the Albany Ring Road Stage 2 project and entering into an ITC Agreement for Ison Road in Melbourne. ▪ Resources: Australia’s resources and energy major projects pipeline increased over the past year, with further growth of committed projects supporting the investment pipeline. The value of resources projects at the ‘committed’ stage increased over the year to October 2022 from $54bn to $83bn, with $63bn of these in WA. WA also has sizeable reserves of lithium, with strong prices driving investment in large projects. Decmil has now established a presence in the market, having competed one project and continuing to deliver another contract and early works for lithium mining companies. ▪ Renewables: Australia’s strengthened climate target of 43% of emissions reductions by 2030 and achieving net zero emissions by 2050 provides greater impetus for renewable energy. Australia’s renewable energy capacity is forecast to expand by more than 85% up to 2027. Wind remains Australia’s most significant renewable generation contributor overall, providing 35.6 per cent of all renewable generation and 12.8 per cent of Australia’s total energy generation mix. There are currently 50GW of wind farm projects announced or committed in the Eastern States, with an estimated Civil Balance of Plant value estimated at $27bn by 20230. There are 21 GW of wind farm projects announced or committed for Western Australia, with an estimated Civil Balance of Plant value estimated at 8bn by 2030. With an existing presence in the WA market, Decmil has now established a presence in the Eastern States with the delivery of the Ryan Corner Wind Farm project in VIC, and with early works at Mount Hopeful Wind Farm in QLD and feasibility studies at Specimen Hill Wind Farm in QLD. As at 30 June 2023 the Company has approximately $550 million of work in hand extending into FY26. 31 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Material Business Risks The key challenges for the Group going into the 2024 financial year are: ▪ Building and maintaining balance sheet strength ▪ Delivering profitability within the current and future suite of projects ▪ Selecting projects that can deliver acceptable returns for commensurate risk. Material risks that could adversely affect the Group include the following: Effective management of contracts and the risk of dispute: Effective ongoing contract management seeks to ensure, among other things, appropriate project and customer selection and the effective management of customer expectations and contract terms. There is a risk that the Company may fail to manage its existing contracts appropriately and may therefore be subject to disputes with customers regarding the payment of fees and liability for costs and delays. Such disputes can be costly, result in further liability to the Company, absorb significant amounts of management time and damage customer relationships. The Company may also experience payment defaults or delays, whether in conjunction with disputes or otherwise, leading to increased debt levels. External factors that may impede operational activities: The Company's activities are subject to numerous operational risks, many of which are beyond the Company's control. The Company's activities may be curtailed, delayed or cancelled as a result of factors such as adverse weather conditions, mechanical difficulties, shortages or increases in the costs of consumables, spare parts, plant and equipment, external services failure, industrial disputes and action, IT system failures, mechanical failures and compliance with governmental requirements. Industrial and environmental accidents could lead to substantial claims against the Company for injury or loss of life, and damage or destruction to property, as well as regulatory investigations, penalties and the suspension of operations. The occurrence of any one or a combination of these events may have a material adverse effect on the Company's performance and the value of its assets. Safety: In order for the Company to continue working on engineering construction projects, a robust safety methodology needs to be in place. A serious safety incident or fatality may impact the Company's social licence to operate. This can affect the Company by increasing its costs for carrying out work, increasing the time required to complete packages of work and impairing the Company’s ability to win new work. Labour costs and availability: The Company's ability to remain productive and competitive and to affect its planned growth initiatives depends on its ability to attract and retain skilled labour. Tightening of the labour market in key regions due to a shortage of skilled labour, combined with a high industry turnover rate and growing number of competing employers for skilled labour, may inhibit the Company’s ability to hire and retain employees. The Company is exposed to increased labour costs in markets where the demand for labour is strong. A shortage of skilled labour could limit the Company’s ability to grow its business or lead to a decline in productivity and an increase in training costs and adversely affect its safety record. Each of these factors could materially adversely impact its revenue and, if costs increase or productivity declines, its operating margins. Tender processes and new contracts: The Company’s revenue is dependent on winning new contracts with acceptable terms and conditions. The Company operates in competitive markets and it is difficult to predict whether and when the Company will be awarded new contracts due to multiple factors influencing how clients evaluate potential service providers, such as accreditations, maintenance and safety standards, experience, reputation, client relationships and financial strength. Consequently, the Company is subject to the risk of losing new awards to competitors which will adversely impact its business, results of operations and financial condition. The Company's results of operations and cash flows may fluctuate from quarter to quarter depending on the timing and size of new contract awards. The Company is also at risk from materially underestimating the cost of providing services, equipment or plant. 32 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 ▪ Homeground occupancy: 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 lower levels of revenue and profit than historically generated. The Company expects that in the medium-term new opportunities will arise for Homeground Gladstone as energy prices rise and energy companies (gas, hydrogen, renewables) progress investment plans; however, the risk of volatility in the short term remains present. ▪ Environmental regulation: The Company is subject to environmental regulation in accordance with applicable state, territory or federal legislation and statutory requirements for the jurisdictions in which it operates. The Company aims to continually improve its environmental performance. ▪ Inflation: The buoyant economy and demand for construction services and commodities is impacting the price of many construction components including steel, concrete, fuel and other items. While most of the Company’s contracts contain rise and fall clauses, those clauses generally reference publicly available cost indices which may not correspond to the price rises of cost inputs and as such the profitability of individual projects may be impacted. ▪ Accreditations: The Company relies heavily upon various technical and financial accreditations to operate its business. These include safety accreditations, quality assurance standards, building licences, technical accreditations by State Main Roads agencies and various financial accreditations. Many of these accreditations are assessed and monitored by State and Federal government agencies on a regular basis. Any failure to maintain or comply with an accreditation can impact the eligibility of the Company to participate in certain projects and/or sectors and this will have a material effect on the business. ▪ Climate risk: There are a number of climate-related factors that may affect the operations and proposed activities of the Company. The climate change risks particularly attributable to the Company include: I. the emergence of new or expanded regulations associated with the transitioning to a lower-carbon economy and market changes related to climate change mitigation. The Company may be impacted by changes to local or international compliance regulations related to climate change mitigation efforts, or by specific taxation or penalties for carbon emissions or environmental damage. These examples sit amongst an array of possible restraints on industry that may further impact the Company and its profitability. While the Company will endeavour to manage these risks and limit any consequential impacts, there can be no guarantee that the Company will not be impacted by these occurrences. II. climate change may cause certain physical and environmental risks that cannot be predicted by the Company, including events such as increased severity of weather patterns and incidence of extreme weather events and longer-term physical risks such as shifting climate patterns. All these risks associated with climate change may significantly change the industry in which the Company operates. ▪ Economic: General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on the Company’s activities, as well as on its ability to fund those activities. The Company is exposed to the impact of economic cycles and how these cycles increase or decrease future capital expenditure by state and federal governments and by energy and resources companies. These economic cycles are in turn impacted by several factors including: the fiscal conditions of the economy; government policies on capital expenditure; and commodity prices. ▪ Lump sum contracts: A portion of the Company’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. From time-to-time, variations to the planned scope occur or issues arise during the construction phase of a project, not anticipated at the time of bid. This may give rise to claims under the contract with the principal in the ordinary course of business. Where such claims are not resolved in the ordinary course of business, they may enter formal dispute and the outcome upon resolution of these claims may be materially different to the position taken by Company. 33 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 ▪ Market conditions: Share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance. Share market conditions are affected by many factors such as: I. general economic outlook II. introduction of tax reform or other new legislation III. interest rates and inflation rates IV. changes in investor sentiment toward market sectors V. the demand for, and supply of, capital VI. terrorism or other hostilities. The market price of securities can fall as well as rise and may be subject to varied and unpredictable influences on the market for equities in general. Neither the Company nor the Directors warrant the future performance of the Company or any return on an investment in the Company. ▪ Litigation risk: The Company is exposed to possible litigation risks including intellectual property claims, contractual disputes, occupational health and safety claims and employee claims. Further, the Company may be involved in disputes with other parties in the future which may result in litigation. Any such claim or dispute if proven, may impact adversely on the Company’s operations, financial performance, and financial position. ▪ Reliance on key personnel: The Company’s ability to remain productive, profitable, and competitive and to affect its planned growth initiatives, depends on its ability to attract and retain skilled labour. Tightening of the labour market in key regions due to a shortage of skilled labour, combined with a high industry turnover rate and growing number of competing employers for skilled labour, may inhibit the Company’s ability to hire and retain employees. The Company is exposed to increased labour costs in markets where the demand for labour is strong. A shortage of skilled labour could limit the Company’s ability to grow its business or lead to a decline in productivity and an increase in training costs and adversely affect its safety record. Each of these factors could materially adversely impact its revenue and, if costs increase or productivity declines, its operating margins. ▪ Debt facilities: The Company has agreed debt and bonding facilities with both National Australia Bank Limited, Pure Asset Management Pty Ltd, Horley Pty Ltd and its four main surety bond providers. If the Company is unable to repay or refinance its debt facilities upon the expiry of these facilities, the Company may have to seek further equity funding, dispose of its assets, or enter into new debt facilities on less favourable terms and there is no guarantee it will be able to do so. These factors could materially affect the Company’s ability to operate its business and its financial performance. The Company is also subject to various covenants and obligations contained in its debt facilities. In the event that any of these are breached, the Company's lenders may cancel their commitments under the facilities and require all amounts payable to them under or in connection with the facilities to be repaid immediately. If the Company is unable to repay or refinance its debt facilities upon maturity, or in the event of a breach of covenant, the Company may have to seek further equity funding, dispose of its assets, or enter into new debt facilities on less favourable terms and there is no guarantee it will be able to obtain further debt. These factors would materially affect the Company's ability to continue to operate its Environmental Regulation Under section 299(1)(f) of the Corporations Act 2001 (Cth) (‘Corporations Act’), if the Company's operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory, the Company is required to provide details of the entity's performance in terms of compliance with environmental regulations. 34 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 The Company is subject to environmental regulation in accordance with applicable state, territory or federal legislation and statutory requirements for the jurisdictions in which it operates. Based on the assessment of historical data, the Company has assessed it does not meet the thresholds required to provide reports under the NGERs scheme. The assessment of this threshold is updated annually. In the year ended 30 June 2023, the Company conducted 1,549,329 hours worked in which there were no material breaches of environment legislation or approval conditions. Directors’ Meetings During the financial year, 17 directors’ meetings were held. Attendances by each director during the year for Board and committee meetings are shown below. Directors’ Meetings Number of meetings eligible to attend 17 17 17 17 Number attended 16 17 17 16 Andrew Barclay1 David Steele Peter Thomas2 Vin Vassallo Audit & Risk Committee Number of meetings eligible to attend 7 Number attended 7 Remuneration Committee Number of meetings eligible to attend N/a Number attended 4 7 N/a 7 7 7 7 4 4 4 4 4 4 During the financial year, the position of Company Secretary was held by Ian Hobson (1 July 2022 – 31 March 2023) and Peter Coppini (31 March 2023 – 30 June 2023). 1 Andrew Barclay is not a committee member of the Remuneration Committee, however attended meetings as a guest. 2 Peter Thomas is not a committee member of the Audit & Risk Committee, however attended meetings as a guest. 35 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Remuneration Report – Audited This Remuneration Report for the year ended 30 June 2023 provides the nature and amount of remuneration for Directors and specified executives of Decmil Group Limited under the requirements of the Corporations Act 2001 (Cth) (‘Corporations Act’) and its delegated legislation. This information has been audited as required by section 308(3C) of the Corporations Act. The Remuneration Report is presented under the sections below. 1. Remuneration governance 1.1. Remuneration committee 1.2. Use of remuneration consultants 2. Executive remuneration approach and structure 2.1. Remuneration philosophy 2.2. Executive remuneration structure 2.3. Remuneration practices 2.4. Link between Company performance and executive remuneration 2.5. Short term incentive plan 2.6. Long term incentive plan 3. Director Options 4. Employment contracts of Directors and senior executives 5. Non-Executive Director fee arrangements 6. Details of remuneration 7. Shareholdings, Option holdings and Performance Right holdings 8. Other transactions with Directors, Key Management Personnel (‘KMP’) and their related parties 9. Annual General Meeting voting This Remuneration Report sets out remuneration information for Decmil’s KMP. The meaning of KMP is defined in AASB 124 Related Party Disclosures and includes 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 KMP during or since the end of the financial year: Role Non-Executive Directors (NEDs) Term Mr Andrew Barclay – Chair of the Board Appointed on 28 July 2020 Mr David Steele Executive Directors Mr Peter Thomas Mr Vin Vassallo Mr Rod Heale Executives (Other KMP) Mr Rod Heale 36 Appointed on 14 June 2021 Appointed as Director on 28 July 2020 Appointed Interim Chief Financial Officer on 7 July 2022 until 20 September 2022 Appointed as CFO on 5 October 2022 Appointed as Director on 14 June 2021 Appointed Interim Chief Executive Officer on 19 April 2022 and resigned as Interim Chief Executive Officer on 20 June 2022 Appointed as Director on 14 August 2023 Appointed as Chief Executive Officer on 20 June 2022 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 1. Remuneration governance 1.1 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. 1.2 Use of remuneration consultants To ensure the Company’s Board and Remuneration Committee is fully informed when making remuneration decisions, external remuneration advice and industry salary survey data is often used. During the financial year, the fixed remuneration of executives was considered by the Company’s Remuneration Committee and the Board. In previous financial years, the Company has engaged remuneration consultants Ernst & Young, AON Hewitt, and Mercer to provide advice on the structure of the long-term incentive plans and provide a comparison of the Company’s plan to market trends. Any guidance provided by the remuneration consultants was not considered a remuneration recommendation in relation to KMP, as defined by s 9B of the Corporations Act. 2. Executive remuneration approach and structure 2.1 Remuneration philosophy The performance of the Company ultimately depends upon the quality of its directors and ELT. 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 remuneration and rewards 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 aims to ensure: ▪ 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 interests of Decmil; and ▪ gender pay equality. 37 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 2.2 Executive remuneration structure The remuneration structure for executive officers, including executive directors, is based on several factors, including experience, qualifications, job level and overall performance of the Company. The service agreements between the Company and specified directors and executives continue and are not expected to change in the immediate future. 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. Remuneration Component Fixed remuneration Vehicle Purpose Link to Performance Comprises base salary, superannuation contributions and other benefits such as motor vehicles and life insurance. 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. Company and individual performance are considered during the annual remuneration review. STI The STI component of the KMP remuneration is a cash bonus. The STI has been designed to support the remuneration philosophy by: ▪ ▪ ▪ rewarding KMP for exceptional business performance (financial and operational) focusing KMP on achieving Key Performance Indicators (KPIs) which contribute to shareholder value providing significant bonus differentials based on performance against KPIs. The STI KPIs include: ▪ ▪ ▪ achievement of EBITDA target as a hurdle for payment of the STI a budgeted target in relation to Group cash flow from operations targets set for safety performance based on Total Recordable Injury Frequency Rates and Lost Time Injury Frequency Rate. 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. Vesting of awards is dependent upon share price targets and continuous employment. 38 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 2.3 Remuneration practices 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 ensures 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, performance 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. Where applicable, executive directors and executives receive a superannuation guarantee contribution required by law, which during the year was 10.5% (subject to the statutory cap), 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 their superannuation. Upon retirement or cessation of employment, specified directors and executives are paid employee entitlements and incentives accrued to the date of their retirement or cessation of employment. All remuneration paid to directors and executives is valued at cost to the Company and expensed. When performance rights and shares are given to directors and executives, they are valued according to the relevant Australian accounting standards. 2.4 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 is a performance based short term incentive scheme associated with key performance indicators. The second is a long-term performance scheme involving the issue of performance rights to executive directors and executives to encourage the alignment of personal and shareholder interests. Additional Information The earnings of the consolidated entity for the five years to 30 June 2023 are summarised below: Revenue EBITDA EBIT (Loss)/profit after income tax 2023 $000 489,167 9,000 3,409 2022 $000 377,597 (43,668) (49,359) 2021 $000 303,722 (2,105) (7,133) 2020 $000 478,607 (86,851) (92,713) (1,844) (103,230) (11,456) (140,424) 2019 $000 663,276 24,100 21,439 14,018 The factors that are considered to affect total shareholder return (TSR) are summarised below: Share price at financial year end ($) Total dividends paid (cents per share) Basic earnings per share (cents per share) 2023 0.14 - 2022 0.10 - 2021 0.46 - (1.185) (67.75) (8.90) 20201 0.06 2.0 (32.99)2 20191 0.91 1.0 6.27 1 Before 10:1 share consolidation on 5 November 2020. 2 Based on continuing operations. 39 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 2.5 Short term incentive plan General Terms of the STI Plan How is it paid? The STI is a cash bonus. How much can executives earn? Executives can earn up to a maximum of 100% of their base salary as an STI incentive. How is performance measured? Through KPI’s set prior to the commencement of each financial year. Measures may include targets for EBITDA, cash position, work won, safety, and health and wellbeing. When is it paid? In September of the financial year after the target year. What happens if an executive leaves or there is a change of control? The payment of any accrued or part STI benefit in these circumstances is at the discretion of the Board. The STI award opportunity is based on a percentage of an employee’s base salary. For the CEO, a maximum award opportunity of 100% 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. 2.6 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 continuing their employment 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. 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)? The CEO and executives can earn up to 100% of total fixed remuneration converted into performance rights at the 20-day VWAP concluding at the close of trading on 30 June. How is performance measured? When is performance measured? Vesting hurdles for performance rights for executives includes net promoter score, continuous service, dividends to shareholders, and share price targets. The achievement of vesting conditions for performance rights are assessed between July and September each year, three years after the financial year of which the grant of the performance rights was made. 40 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 General Terms of the LTI 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. Are executives eligible for dividends? Performance rights do not accrue dividends. 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. Unvested performance rights 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. Performance hurdles Each year the Board reviews and considers the appropriateness of the performance hurdles and, where necessary, adjusts and amends the performance hurdles to reflect market conditions. Below is a summary of the vesting conditions that relate to unvested performance rights as at 30 June 2023. Performance rights to KMP granted 30 June 20201 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. 20% of Performance Rights vest when and if the share price average (based on closing prices) over any consecutive 30 trading days exceeds $0.80 c. 30% of Performance Rights vest when and if the share price average (based on closing prices) over any consecutive 30 trading days exceeds $1.20 d. 30% of Performance Rights vest when and if the share price average (based on closing prices) over any consecutive 30 trading days exceeds $1.60. The above vesting conditions will be assessed three years after the financial year of which the grant of the performance rights was made. 1 From the Performance Rights granted on 30 June 2020, 680,986 performance rights were unvested as at 30 June 2023. 41 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Performance rights to KMP granted 8 December 20221 Class of Performance Rights Number of Performance Rights Class A 1,372,727 Vesting Conditions Expiry Date The Net Promotor Score, including employees, clients, and subcontractors, increasing by 5% from 1 July 2024 to 30 June 2025 provided the 30 June 2025 score is positive. 30 September 2025 Class B 2,745,454 The holder completing three (3) years continuous service to the Company from 1 July of the financial year in which the Performance Rights are granted (‘Effective Date’). 31 July 2025 Class C 4,804,546 Shareholders receiving a dividend at any time during the three (3) financial years from the Effective Date. Class D 2,402,273 The Company achieving a share price average (based on closing prices) of at least $0.25 according to the 20-day volume-weighted average price (‘VWAP’) concluding at the close of trading on 30 June 2024. Five (5) years from date of issue. 31 July 2024 Class E 2,402,273 The Company achieving a share price average (based on closing prices) of at least $0.45 according to the 20-day VWAP concluding at the close of trading on 30 June 2025. 31 July 2025 The above vesting conditions will be assessed three years after the financial year of which the grant of the performance rights was made. All performance rights related to prior year schemes have been forfeited and the details of these schemes have not been included in this report. Performance rights During the year ended 30 June 2023, 13,727,273 performance rights were granted to KMP out of a total of 18,597,539 performance rights granted. During the year ended 30 June 2023, 280,734 performance rights were vested to KMP out of a total of 418,964 vested performance rights. The following rights have been granted to KMP but remain unvested at 30 June 2023: Grant Date Number of Unvested Rights Fair Value of Unvested Rights 8 December 2022 13,727,273 $1,126,446 1 From the Performance Rights granted on 8 December 2022, 13,727,273 KMP performance rights were unvested as at 30 June 2023. 42 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 3. Director options Options issued as part of remuneration for the year ended 30 June 2023 During the year ended 30 June 2023, no options were granted as remuneration to directors (2022: nil). Shares under option granted as remuneration At the date of this report, the unissued ordinary shares of the Company under options granted as remuneration are as follows: Grant Date Expiry Date Exercise Price 12 January 2021 31 October 2024 $0.75 Number of Options Granted 1,800,0001 Fair Value of Options Granted $198,000 Shares issued on the exercise of options granted as remuneration There were no fully paid ordinary shares of the Company issued on the exercise of options during the year ended 30 June 2023 and up to the date of this report. 4. Employment contracts of directors and senior executives The Company has entered into service agreements with key senior executives. The executives detailed in the table below have remuneration reviewed and established annually by the Remuneration Committee and include no contractual termination benefits other than statutory entitlements. Notice periods detailed in the table below apply unless in relation to certain circumstances such as serious misconduct or gross neglect of duty. KMP Notice Period Term Rod Heale 6 months Peter Thomas 30 days Vin Vassallo Nil Alan Ings (resigned 7 July 2022) 3 months Ongoing until terminated Ongoing until terminated Ongoing until terminated Ongoing until terminated Restraint Period 3 months after termination Long Term Incentive Scheme Short Term Incentive Scheme Applies Applies Nil Nil Applies Applies Nil Nil 3 months after termination Applies Applies 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 are ongoing 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. 1 Andrew Barclay granted 900,000 options and Peter Thomas granted 900,000 options. 43 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 5. Non-Executive Director fee arrangements Non-Executive Directors (‘NED') are appointed under appointment letters that deal with, amongst other matters, the following: ▪ terms of appointment and tenure ▪ entitlements ▪ duties and responsibilities ▪ indemnities, insurances, and access. The Board’s policy is to remunerate NEDs at market rates for comparable companies for time, commitment, and responsibilities. The Board approves payments to NEDs and reviews their remuneration annually, based on market practice, duties, and accountabilities. Independent external advice may be used during the review process. The maximum aggregate amount of fees that can be paid to NEDs is subject to approval by shareholders. Fees for NEDs are not linked to the performance of the consolidated entity however aim to align NED interests with shareholder interests. NEDs are encouraged to hold shares in the Company. 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 the NED fee structure inclusive of superannuation for the year ended 30 June 2023: Board fees Chair1 NED Committee fees Committee Chair2 Committee Member Annual Fees ($) 130,000 75,000 8,100 - Maximum aggregate NED fee pool The maximum aggregate amount of directors’ fees that can be paid to NEDs is subject to approval by shareholders and this maximum sum cannot be increased without shareholders’ approval by ordinary resolution at a general meeting. The maximum aggregate amount that may be paid to NEDs is up to $650,000 during any financial year which was approved by the Company’s shareholders on 14 November 2012. 6. Details of remuneration Details of the remuneration of KMP of the consolidated entity are set out in the following tables: NEDs ($) Year Salary and Fees Superannuation STI Paid in Relation to Prior Year Fair Value of Incentive Securities Awarded Other Bonus Total Total Performance Related % Total Fixed Remuneration % Andrew Barclay David Steele Vin Vassallo Total 2023 2022 2023 2022 2023 2022 2023 2022 117,688 12,357 - 118,182 11,818 79,715 68,182 83,100 69,588 280,503 255,952 8,370 6,818 - 20,727 18,636 - - - - - - - - - - - - - - - - - - - - - - - 130,045 130,000 88,085 75,000 83,100 69,588 301,230 274,588 - - - - - - - - 100.0 100.0 100.0 100.0 100.0 100.0 100.0 1 Chair fees are paid to Andrew Barclay. 2 Committee chair fees are paid to David Steele (Remuneration Committee) and Vin Vassallo (Audit & Risk Committee). 44 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Executive Directors ($) Year Salary and Fees Superannuation Peter Thomas1 Vin Vassallo2 Dickie Dique3 Total Other Executives ($) Rod Heale4 Alex Hall5 Alan Ings6 2023 2022 2023 2022 2023 2022 2023 2022 Year 2023 2022 2023 2022 2023 2022 Damian Kelliher7 Total 2023 2022 2023 2022 726,875 348,855 138,744 218,850 - 730,298 865,619 1,298,003 - - - - - 23,568 - 23,568 STI Paid in Relation to Prior Year - - - - - - - - Salary and Fees Superannuation STI Paid in relation to Prior Year 824,708 28,548 - 164,733 21,538 227,308 - 606,263 846,246 1,026,852 25,293 2,997 - 10,329 6,323 15,476 - 23,568 31,616 52,370 - - - - - - - - - - Fair Value of Incentive Securities Awarded 78,555 - - - - - 78,555 - Fair Value of Incentive Securities Awarded 101,169 - - - - - Other Bonus Total Total Performance Related % Total Fixed Remuneration % - - - - - - - - 805,430 348,855 138,744 218,850 - 753,866 944,174 1,321,571 9.8 - - - - - 8.3 - 90.2 100.0 100.0 100.0 - 100.0 91.7 100.0 Other Bonus Total Total Performance Related % Total Fixed Remuneration % - - - - - - 951,170 31,545 - 175,062 27,861 242,784 - - 101,169 - - 30,000 - 30,000 - 659,831 979,031 1,109,222 10.6 - - - - - - 4.5 10.3 4.5 89.4 100.0 - 100.0 100.0 100.0 - 95.5 89.7 95.5 7. 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 shown below. 30 June 2023 Balance 1 July 2022 Received as Part of Remuneration Additions Disposals/ Other Balance 30 June 2023 Directors: Andrew Barclay David Steele Peter Thomas Vin Vassallo KMP: Rod Heale Alan Ings 241,855 125,000 1,300,000 100,000 - - 1,766,855 - - - - - - - - - - - - - - - - - - - - - 241,855 125,000 1,300,000 100,000 - - 1,766,855 1 Peter Thomas was appointed to the board of directors on 28 July 2020 and appointed Chief Financial Officer on 7 July 2022. 2 Vin Vassallo was appointed Chief Executive Officer between 19 April 2022 and 20 June 2022. 3 Dickie Dique resigned from the board of directors on 29 April 2022 and resigned as Chief Executive Officer on 19 April 2022. 4 Rod Heale was appointed as Chief Executive Officer on 20 June 2022. 5 Alex Hall was appointed as Chief Financial Officer between 27 April 2021 and 16 November 2021. 6 Alan Ings was appointed as Chief Financial Officer between 16 November 2021 and 7 July 2022. 7 Damian Kelliher resigned on 24 June 2022. 45 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Option holdings The number of options in the Company held during the financial year by each director and KMP of the consolidated entity, including their personally related parties, is shown below. 30 June 2023 Balance 1 July 2022 Granted as Remuneration Vested During the Period Additions Expired/ Other1 Directors: Andrew Barclay David Steele Peter Thomas KMP: Rod Heale Alan Ings 962,5001 62,5002 1,150,0003 - - 2,175,000 - - - - - - Performance Rights holdings - - - - - - - - - - - - - - - - - - Balance 30 June 2023 962,500 62,500 1,150,000 - - 2,175,000 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 shown below. Balance 1 July 2022 Granted as Remuneration Vested During the Period Expired/ Other Balance 30 June 2023 30 June 2023 Directors: Andrew Barclay David Steele Peter Thomas KMP: Rod Heale Alan Ings - - - - - - - - 6,000,000 7,727,274 - 13,727,274 - - - - - - - - - - - - 8. Other transactions with directors, KMP and their related parties (a) Director Related Transactions4 Consulting fees for Andrew Barclay & Associates, in which Mr Andrew Barclay has a beneficial interest (b) Director Related Balances Amounts owing to Andrew Barclay & Associates, in which Mr Andrew Barclay has a beneficial interest, for consulting fees All transactions were made on normal commercial terms and conditions and at market rates. - - 6,000,000 7,727,274 - 13,727,274 2023 $000 348 59 1 900,000 Remuneration Options granted on 12 January 2021, exercise price $0.75, expiring 31 October 2024; and 62,500 Placement Options granted on 6 September 2021, exercise price $0.48, expiring 6 September 2023. 2 62,500 Placement Options granted on 6 September 2021, exercise price $0.48, expiring 6 September 2023. 3 900,000 Remuneration Options granted on 12 January 2021, exercise price $0.75, expiring 31 October 2024; and 250,000 Placement Options granted on 6 September 2021, exercise price $0.48, expiring 6 September 2023. 4 Transactions relating to directors’ fees are included in the Directors’ Report details of remuneration. 46 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 9. Annual General Meeting voting Voting and comments made at the Company’s 2022 Annual General Meeting (‘AGM’) held on 10 November 2022: At the 2022 AGM, 92% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2022. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. End of audited Remuneration Report. 47 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Indemnifying Officers or Auditor The Company has indemnified the Directors and Officers 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 and Officers of the Company against a liability to the extent permitted by the Corporations Act. 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. 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 Pty Ltd for non-audit services provided during the year ended 30 June 2023: Taxation compliance services Taxation assistance $ 14,000 11,450 25,450 There were no non-audit services provided by RSM Australia Partners for the year ended 30 June 2023. 48 Decmil Group Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 Cth (‘Corporations Act’) can be found within this financial report. Officers of the Company Who Are Former Partners of RSM Australia Partners There are no officers of the company who are former partners of RSM Australia Partners. Auditor RSM Australia continues in office in accordance with section 327 of the Corporations Act. 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 reported against the ASX Corporate Governance Principles and Recommendations as detailed in Decmil Corporate Governance Statement which can be found at http://www.decmil.com/news-investor/corporate-governance/ This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act. On behalf of the directors Andrew Barclay Chair 23 August 2023 49 Annual Report 2023 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2023 This page has been left blank intentionally 50 Decmil Group Limited RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Decmil Group Limited for the year ended 30 June 2023, 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: 23 August 2023 TUTU PHONG Partner THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation 51 Annual Report 2023 Financial Report Gippsland Line Upgrade Project, VIC 52 Decmil Group Limited Financial Report Annual Report 2023 53 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2023 Note 4 4(a) 5 5, 17, 18 19 6 Revenue Cost of sales Gross profit / (loss) Administration expenses Equity based payments Earnings / (loss) before interest, tax, depreciation, amortisation, and impairments Interest received Borrowing costs Depreciation and amortisation expense Impairment of intangible assets Loss before income tax expense Income tax expense Net loss after tax Other comprehensive income Other comprehensive income Total comprehensive loss for the year Loss for the year attributable to: Owners of Decmil Group Limited Loss for the year Total comprehensive loss for the year, net of tax Earnings per share attributable to the owners of Decmil Group Limited Consolidated Entity 2023 $000 489,167 (452,171) 36,996 (27,139) (857) 9,000 2 (5,255) (5,591) - (1,844) - (1,844) 2022 $000 377,597 (393,358) (15,761) (27,476) (431) (43,668) 17 (5,882) (5,691) (25,482) (80,706) (22,524) (103,230) - (1,844) - (103,230) (1,844) (1,844) (1,844) (103,230) (103,230) (103,230) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 9(b) 9(b) (1.185) (1.185) (67.75) (67.75) The accompanying notes form part of these financial statements. 54 Decmil Group Limited STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2023 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Contract assets Non-current asset held for sale Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment Right-of-use assets Deferred tax assets Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Contract liabilities Borrowings Hire purchase lease liabilities Leasing liabilities Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Trade and other payables Borrowings Hire purchase lease liabilities Leasing liabilities Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Redeemable convertible preference shares Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements. Note 11 12 13 15 16 17 18 24 19 20 14 21 22 22 23 20 21 22 22 23 25 25 Consolidated Entity 2023 $000 3,686 40,838 33,771 56,991 6,374 2022 $000 39,263 37,175 16,258 56,865 5,808 141,660 155,369 8,687 8,441 - 50,000 67,128 208,788 84,403 14,668 8,505 1,108 2,342 3,498 7,975 11,030 - 50,000 69,005 224,374 73,261 41,959 19,454 1,561 2,619 4,986 114,524 143,840 6,908 18,716 1,664 7,875 375 35,538 150,062 58,726 284,273 14,052 3,865 (243,464) 58,726 10,866 17,873 2,919 10,216 319 42,193 186,033 38,341 279,961 - - (241,620) 38,341 55 Annual Report 2023 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023 $000 - - - - - - - - - - - - - - Reserves Accumulated Losses Total $000 (138,390) (103,230) $000 129,097 (103,230) (103,230) (103,230) - - - - 10,558 (642) 431 2,127 (241,620) 38,341 (241,620) (1,844) (1,844) - - - 3,865 - - 3,865 - - - (243,464) 38,341 (1,844) (1,844) 4,667 (369) 14,052 3,865 857 (843) 58,726 Consolidated Entity Balance at 1 July 2021 Net loss for the year Total comprehensive loss for the year Shares issued for the period Transaction costs net of tax benefit Equity based payments Warrants issued for the period Balance at 30 June 2022 Balance at 1 July 2022 Net loss for the year Total comprehensive loss for the year Shares issued for the period Transaction costs net of tax benefit RCPS Capital Raise to be issued Asset Revaluation Equity based payments Movement of warrants Balance at 30 June 2023 Note 30 30d 30 Issued Capital $000 267,487 - - 10,558 (642) 431 2,127 279,961 279,961 - - 4,667 (369) - - 857 (843) 284,273 Redeemable Convertible Preference Shares $000 - - - - - - - - - - - - - 14,052 - - - 14,052 The accompanying notes form part of these financial statements. 56 Decmil Group Limited STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2023 Consolidated Entity CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Finance costs paid Note 4 2023 $000 453,707 (467,377) 2 (9,211) Net cash (used in)/provided by operating activities 29(a) (22,879) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment Non-current asset held for sale additions Proceeds from sale of non-current assets Net cash provided by/(used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Net proceeds/(payments) from capital raise/share issue Net cash (used in)/provided by in financing activities Net (decrease)/increase in cash held Cash at beginning of the financial year Cash at end of the financial year The accompanying notes form part of these financial statements. 17 15 4, 17 21 21 22 11 (546) (126) 2,019 1,347 - (13,749) (4,604) 4,308 (14,045) (35,577) 39,263 3,686 2022 $000 444,038 (432,422) 17 (5,882) 5,751 (870) (210) 220 (860) 21,655 (2,062) (4,565) 9,641 24,669 29,560 9,703 39,263 57 Annual Report 2023NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 The financial statements of Decmil Group Limited (‘the Company’) for the year ended 30 June 2023 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 (Cth). Decmil Group Limited is a company limited by shares registered 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 23 August 2023. NOTE 1: Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of Preparation These general-purpose financial statements have been prepared in accordance with the Corporations Act, Australian Accounting Standards and Interpretations of the AASB, and International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). 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. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 1 (ad). Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 35. 58 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Going concern For the year ended 30 June 2023, the consolidated entity incurred a loss after tax of $1.8 million compared to a loss after tax of $103.2 million in the prior year. The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The ability of the consolidated entity to continue as a going concern is dependent on the directors and management continuing to manage its cash flows in line with its existing cash reserves and banking facilities to successfully execute its contracted projects in hand and win new work to operate within the Company’s cash flow forecast. In addition, the consolidated entity has completed a capital raise as disclosed in note 36 subsequent events. Lastly, the consolidated entity will receive additional cash proceeds from the sale of Homeground. (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. (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. 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 59 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. 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) Contract Assets and Liabilities Contract assets Contract assets are recognised when the consolidated entity has transferred goods or services to the customer but where the consolidated entity is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes. Contract liabilities Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. (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. (e) Operating Segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. (f) Plant and Equipment Each class of plant and equipment is carried at cost on initial recognition, less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. 60 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Depreciation The depreciable amount of all plant and equipment 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 Plant and Equipment Depreciation Rate Owned plant and equipment Leased plant and equipment 5% to 33% 12.5% to 20% 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. After recognition as an asset, an item of property, plant and equipment (such as land, property, buildings, etc.) whose fair value can be measured reliably is carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be measured using fair value at the end of the reporting year and the entire class of property, plant and equipment to which that asset belongs is revalued. When an asset’s carrying amount is increased as a result of a revaluation, the increase is recognised in other comprehensive income and accumulated in equity under revaluation surplus reserve except that the increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. When an asset’s carrying amount is decreased, the decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus reserve in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus. The revaluation surplus included in equity is transferred directly to retained earnings when the asset is derecognised. (g) Non-Current Assets Held for Sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale are presented separately on the face of the statement of financial position, in current assets. (h) Right-of-use Assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease 61 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. (i) Lease Liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. (j) Impairment of Assets Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset's carrying value with a corresponding expense through profit or loss. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in 62 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value- in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. (k) 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. 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. For the purpose of impairment testing and since the acquisition date of the business combination, goodwill is allocated to each cash-generating unit, or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree were assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes and is not larger than a segment. (l) 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. 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. 63 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Equity-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. (m) 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. (n) Trade and Other Payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. (o) 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 3 months or less. 64 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (p) Revenue and Other Income The financial reporting standard on revenue from contracts with customers establishes a five-step model to account for revenue arising from contracts with customers. Revenue is recognised at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. An asset (goods or services) is transferred when or as the customer obtains control of that asset. Revenue from Construction Activities: For long-term service contracts and projects for constructing, manufacturing or developing an asset the customer value is created over time during the contract period and it is accounted for as a single performance obligation or multiple performance obligations that are satisfied over time. This is because the customer simultaneously receives and consumes the benefits of the entity’s performance in processing each transaction as and when each transaction is processed; the performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced; or the performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. The revenue is recognised over time by using the input method. For the input method the revenue is recognised on the basis of the efforts or inputs to the satisfaction of a performance obligation such as resources consumed, labour hours expended and costs incurred, relative to the total expected inputs to the satisfaction of that performance obligation. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Services: Revenue from service orders and term projects is recognised when the entity satisfies the performance obligation at a point in time generally when the significant acts have been completed and when transfer of control occurs or for services that are not significant transactions revenue is recognised as the services are provided. Accommodation: Accommodation revenues are recognised as services are performed, which for the accommodation segment is over the term of the customer’s stay. Interest income: Interest income is recognised using the effective interest method. All revenue is stated net of the amount of goods and services tax (GST). (q) 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. (r) 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 65 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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. (s) 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. (t) 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. (u) 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. (v) Financial Instruments Recognition and derecognition of financial instruments: A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the entity becomes party to the contractual provisions of the instrument. All other financial instruments are recognised and derecognised, as applicable, using trade date accounting or settlement date accounting. A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the entity neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. A financial liability is removed from the statement of financial position when, and only when, it is extinguished, that is, when the obligation specified in the contract is discharged or cancelled or expires. At initial recognition the financial asset or financial liability is measured at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Classification and measurement of financial assets: Financial assets classified as measured at amortised cost: A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value through profit or loss, that is (a) the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Typically trade and other receivables, bank and cash balances are classified in this category. Financial assets that are a debt asset instrument classified as measured at fair value through other comprehensive income: There were no financial assets classified in this category at reporting year end date. 66 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Financial assets that are an equity investment classified as measured at fair value through other comprehensive income: There were no financial assets classified in this category at reporting year end date. Financial assets classified as measured at fair value through profit or loss: There were no financial assets classified in this category at reporting year end date. Classification and measurement of financial liabilities: Financial liabilities are classified as at fair value through profit or loss in either of the following circumstances: the liabilities are managed, evaluated and reported internally on a fair value basis; or the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise. All other financial liabilities are carried at amortised cost using the effective interest method. Reclassification of any financial liability is not permitted. (w) 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. The trade receivables and contract assets are subject to the expected credit loss model under the financial reporting standard on financial instruments. The methodology applied for impairment loss is the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. The expected lifetime losses are recognised from initial recognition of these assets. These assets are grouped based on shared credit risk characteristics and the days past due for measuring the expected credit losses. The allowance matrix is based on its historical observed default rates over a period of 36 months over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date the historical observed default rates are updated and changes in the forward-looking estimates are analysed. (x) 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. A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. (y) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. (z) 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. 67 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. (aa) 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. (ab) 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. (ac) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. 68 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (ad) 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 amount of goodwill is tested annually for impairment. This annual impairment test is based on assumptions that are affected by expected future market or economic conditions. As a result, judgement is required in evaluating the assumptions and methodologies used by management, in particular those relating to the forecasted revenue growth and profit margins. The disclosures about goodwill are included in note 19, which explains that small changes in the key assumptions used could give rise to an impairment of the goodwill balance in the future. Actual outcomes could vary from these estimates. Revenue recognised over time: The entity has revenue where the performance obligation is satisfied over time. Revenue is recognised over time by measuring the progress toward complete satisfaction of that performance obligation. A single method is applied consistently for measuring progress for each performance obligation satisfied over time. Assessing the satisfaction of performance obligations over time requires judgment and the consideration of many criteria that should be met to qualify such as whether the customer presently is obligated to pay for an asset, whether the customer has legal title, whether the entity has transferred physical possession of the asset, whether the customer has assumed the significant risks and rewards of ownership of the asset, and whether the customer has accepted the asset. Events and circumstances frequently do not occur as expected. Even if the events anticipated under the assumptions occur, actual results are still likely to be different from the estimates since other anticipated events frequently do not occur as expected and the variation may be material. The related account balances at the end of the reporting year are disclosed in the notes 4, 13 and 14 on revenues and contract assets and contract liabilities. Contract modifications: A contract with a customer is accounted for as a separate contract if (1) the scope of the contract increases because of the addition of promised goods or services that are distinct and (2) the price of the contract increases by an amount of consideration that reflects the entity's stand-alone selling prices of the additional promised goods or services. In order to faithfully depict the entity's rights and obligations arising from a modified contract, the modifications may be accounted for some prospectively and others on a cumulative catch-up basis. The accounting for the modification depends on whether the additional promised goods or services are distinct. The accounting for contract modification requires judgement. In addition, if the entity has not yet determined the price, management has to estimate the change to the transaction price arising from the contract modification using the variable consideration guidance in the financial reporting standard. Contract modifications may have a significant impact on the entity's ability to record revenue. The related account balances at the end of the reporting year are disclosed in the notes 4 and 13 on revenues and contract assets and liabilities. 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. 69 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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. NOTE 2: New Accounting Standards for Application in Future Periods New, revised or amending Accounting Standards and Interpretations 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 2023. 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. NOTE 3: Segment Reporting The consolidated entity has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The consolidated entity operates as two segments. Construction and Engineering ▪ Decmil Australia Pty Ltd – multi-discipline design, civil engineering and construction services ▪ Decmil Southern Pty Ltd – civil engineering and infrastructure construction services ▪ Decmil Maintenance Pty Ltd – dormant entity formerly known as Decmil Infrastructure Pty Ltd ▪ Eastcoast Development Engineering Pty Ltd – acquired business now integrated into the Decmil Australia Pty Ltd entity ▪ Decmil Engineering Pty Ltd – acquired business now integrated into Decmil Australia Pty Ltd entity ▪ Decmil PNG Limited – dormant construction arm of Decmil located in Papua New Guinea. Accommodation ▪ Homeground Villages Pty Ltd – holder of the units in the Homeground Gladstone Unit Trust ▪ Homeground Gladstone Unit Trust – Homeground Gladstone Accommodation Village located in Gladstone, Queensland. The consolidated entity is domiciled in Australia. 100% of revenue from external customers is generated from Australia. The consolidated entity derives 31%, 23% and 15% (2022: 28%, 25% and 10%) 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. 70 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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. 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/benefit ▪ deferred tax assets and liabilities ▪ current tax liabilities. (a) Segment Performance 2023 External sales Total segment revenue Segment earnings before interest, tax, depreciation and amortisation & impairments Net interest Depreciation & amortisation expense Impairment of intangible assets Segment result Other unallocated expenses Income tax expense Loss for the period Construction & Engineering $000 479,156 Accommodation $000 10,011 479,156 7,772 (5,254) (5,529) - (3,011) 10,011 1,228 1 (62) - 1,167 Total $000 489,167 489,167 9,000 (5,253) (5,591) - (1,844) - - (1,844) 71 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Segment Performance 2022 External sales Construction & Engineering $000 368,317 Accommodation $000 9,280 Total segment revenue Segment earnings before interest, tax, depreciation and amortisation & impairments Net interest Depreciation & amortisation expense Impairment of intangible assets Segment result Other unallocated expenses Income tax expense Loss for the period 368,317 (44,480) (5,865) (5,632) (25,482) (81,459) 9,280 1,310 - (59) - 1,251 (b) Segment Assets 2023 Current assets Non-current assets Other unallocated assets Total segment assets Total assets includes: Construction & Engineering $000 66,254 Accommodation $000 58,402 59,497 192 125,751 58,594 Total $000 377,597 377,597 (43,170) (5,865) (5,691) (25,482) (80,208) (498) (22,524) (103,230) Total $000 124,656 59,689 24,443 208,788 Acquisition of non-current assets 417 255 672 Segment Assets 2022 Current assets Non-current assets Other unallocated assets Total segment assets Total assets includes: Construction & Engineering $000 93,774 Accommodation $000 58,640 59,321 125 153,095 58,765 Total $000 152,414 59,446 12,514 224,374 Acquisition of non-current assets 2,552 286 2,838 72 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (c) Segment Liabilities 2023 Current liabilities Non-current liabilities Other unallocated liabilities Total segment liabilities Segment Liabilities 2022 Current liabilities Non-current liabilities Other unallocated liabilities Total segment liabilities NOTE 4: Revenue Construction and engineering revenue Accommodation revenue Other revenue - grant income - profit/(loss) on sale of non-current assets - rentals Construction & Engineering $000 97,557 Accommodation $000 1,659 90,036 - 187,593 1,659 Construction & Engineering $000 117,984 Accommodation $000 1,481 15,828 - 133,812 1,481 Total $000 99,216 90,036 (39,190) 150,062 Total $000 119,465 15,828 50,740 186,033 Consolidated Entity 2023 $000 477,757 10,011 - 1,045 354 2022 $000 368,107 9,280 - (14) 224 Total revenue from continuing operations 489,167 377,597 (a) Interest revenue Interest revenue from: - other persons Total interest revenue 2 2 17 17 73 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Sectors Infrastructure Resources Renewables Accommodation Other Geographical regions Australia Timing of revenue recognition Services transferred over time Services transferred at a point in time NOTE 5: Expenses Loss before income tax includes the following specific expenses: Defined contribution superannuation expense Finance costs: - plant and equipment leased - buildings leased - software leased - from other parties Total finance costs Depreciation and amortisation of non-current assets: - plant and equipment owned - plant and equipment leased - buildings right-of-use assets - software right-of-use assets Total depreciation 74 Consolidated Entity 2023 $000 342,988 54,635 79,841 10,011 1,692 489,167 2022 $000 274,732 67,253 25,896 9,280 436 377,597 489,167 489,167 377,597 377,597 477,464 11,703 489,167 367,881 9,716 377,597 Consolidated Entity 2023 $000 4,792 132 754 60 4,309 5,255 1,785 1,217 2,005 584 5,591 2022 $000 5,243 176 882 108 4,716 5,882 1,431 1,635 2,041 584 5,691 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 6: Income Tax Expense The components of income tax (expense)/benefit comprise: Current tax Deferred tax Under provision for tax in prior year Consolidated Entity Note 24 24 2023 $000 - - - - 2022 $000 - (22,478) (46) (22,524) The prima facie tax benefit on loss before income tax is reconciled to the income tax (expense)/benefit as follows: Prima facie tax benefit on loss before income tax at 30% (2022: 30%) 553 24,212 Adjusted by the tax effect of: - equity based payments - deductible transaction costs on equity issue - non-deductible items - under provision for tax in prior year - derecognition of deferred tax assets for the year Income tax expense attributable to loss before income tax The applicable weighted average effective tax rates are as follows: (257) 395 (366) - (325) - 0% 129 (386) 184 (46) (46,617) (22,524) 28% NOTE 7: Key Management Personnel Disclosures 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 Andrew Barclay David Steele Peter Thomas Vin Vassallo Key Management Personnel Rod Heale: Chief Executive Officer (appointed 20 June 2022) Vin Vassallo: Interim Chief Executive Officer (until 31 October 2022) Alan Ings: Chief Financial Officer (resigned 7 July 2022) Peter Thomas: Chief Financial Officer (appointed 7 July 2022) 75 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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 2023 $000 2,044 180 2,224 2022 $000 2,705 - 2,705 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. All transactions were made on normal commercial terms and conditions and at market rates. NOTE 8: Auditors’ Remuneration Remuneration of the auditor of the parent entity for: - auditing or reviewing the financial report - taxation compliance services - ATO Combined Assurance Review assistance - taxation assistance Consolidated Entity 2023 $000 319 14 - 11 344 2022 $000 304 22 48 51 425 76 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 9: Earnings Per Share (a) Reconciliation of earnings to profit or loss Loss after income tax Earnings used to calculate basic and dilutive EPS (b) EPS Weighted average number of ordinary shares outstanding during the year used in calculating basic Consolidated Entity 2023 $000 (1,844) (1,844) 2022 $000 (103,230) (103,230) No. No. 155,520,076 152,376,278 Weighted average number of dilutive options outstanding - - Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS 155,520,076 152,376,278 NOTE 10: Dividends Distributions Paid Nil dividends paid Consolidated Entity 2023 $000 - 2022 $000 - Balance of Australian franking account at year end 54,776 54,776 NOTE 11: Cash and Cash Equivalents Cash at bank and in hand Reconciliation of cash 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 Consolidated Entity 2023 $000 3,686 3,686 2022 $000 39,263 39,263 3,686 39,263 Decmil had $2.17 million cash held on trust in project bank accounts, which is not available for use by Decmil in the ordinary course of business. 77 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 12: Trade and Other Receivables CURRENT Trade receivables Less: Allowance for expected credit losses Consolidated Entity 2023 $000 40,838 - 40,838 2022 $000 37,175 - 37,175 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. Within initial trade terms $000 Gross amount $000 40,838 40,838 37,763 37,763 2023 Trade receivables Total 2022 Trade receivables 37,175 36,319 Total 37,175 36,319 Allowance for expected credit loss: Past due but not impaired (days overdue) 31-60 $000 61-90 $000 91-120 $000 >120 $000 Past due and impaired $000 336 336 286 286 847 847 437 437 7 7 8 8 1,885 1,885 125 125 - - There is no allowance for expected credit losses recognised as at 30 June 2023 (2022: Nil). 78 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 13: Contract Assets Contract assets Summarised as follows: Construction contracts in progress Contract costs incurred Recognised profits Progress billings Consolidated Entity Note 2023 $000 33,771 2022 $000 16,258 1,711,455 48,141 1,759,596 (1,740,493) 19,103 33,771 (14,668) 19,103 1,267,433 19,302 1,286,735 (1,312,436) (25,701) 16,258 (41,959) (25,701) Amounts due from customers for contract work Amounts due to customers for contract work Net amount due from / (to) customers for contract work 14 The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting year is shown above. Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Opening balance Additions Transfer to trade receivables Closing balance Consolidated Entity 2023 $000 2022 $000 16,258 31,031 (13,518) 33,771 27,436 7,751 (18,929) 16,258 79 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 14: Contract Liabilities Contract liabilities Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Opening balance Payments received in advance Transfer to revenue Closing balance NOTE 15: Non-Current Asset Held for Sale Balance at beginning of the year Additions Balance at the end of the year Consolidated Entity 2023 $000 14,668 2022 $000 41,959 41,959 9,164 (36,455) 14,668 14,843 31,378 (4,262) 41,959 Consolidated Entity 2023 $000 56,865 126 56,991 2022 $000 56,655 210 56,865 The non-current asset held for sale is a property comprising the Homeground Gladstone Accommodation Village located in Gladstone, Queensland. It is on the market for sale and is expected to be sold within the next twelve months. The property is carried at fair value, with fair value being determined using expressions of interests received from third parties as disclosed in note 33. Charges over the property are detailed in note 29(d). Decmil has assessed that the potential sale is not a discontinued operation as it is not a major line of business. NOTE 16: Other Current Assets Consolidated Entity 2023 $000 2,811 3,563 6,374 2022 $000 2,899 2,909 5,808 Prepayments Others 80 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 17: Plant and Equipment PLANT AND EQUIPMENT Plant and equipment: At cost At valuation Accumulated depreciation Leased plant and equipment (secured) Accumulated depreciation Total plant and equipment Consolidated Entity 2023 $000 2022 $000 30,037 5,209 (29,318) 5,928 5,077 (2,318) 2,759 8,687 40,027 - (36,685) 3,342 7,090 (2,457) 4,633 7,975 Secured items of plant and equipment at a carrying value of $2,759,000 (2022: $4,633,000) are mortgaged or pledged as security for the banking facilities detailed in note 29(d). The basis of the valuation of certain plant and equipment is fair value. These items of plant and equipment were last revalued on 30 June 2023 based on an independent valuer. The directors do not believe that there has been a material movement in fair value since the revaluation date. Valuations are based on current prices for similar assets in the same condition. Movements in Carrying Amounts Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year: Balance at 1 July 2022 Additions Transfer between categories Disposals Revaluation of assets Depreciation expense Balance at 30 June 2023 Balance at 1 July 2021 Additions Transfer between categories Disposals Depreciation expense Balance at 30 June 2022 Note 25 Note Owned Plant and Equipment $000 3,342 Leased Plant and Equipment $000 4,633 546 933 (974) 3,865 (1,784) 5,928 - (657) - - (1,217) 2,759 Owned Plant and Equipment $000 2,889 Leased Plant and Equipment $000 5,757 870 1,247 (233) (1,431) 3,342 1,758 (1,247) - (1,635) 4,633 Total $000 7,975 546 276 (974) 3,865 (3,001) 8,687 Total $000 8,646 2,628 - (233) (3,066) 7,975 81 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 18: Right-of-use Assets LAND AND BUILDINGS Right-of-use Accumulated depreciation SOFTWARE Right-of-use Accumulated depreciation Total right-of-use assets Consolidated Entity 2023 $000 14,912 (7,070) 7,842 3,264 (2,665) 599 8,441 2022 $000 14,912 (5,065) 9,847 3,264 (2,081) 1,183 11,030 The consolidated entity leases land and buildings for its offices under agreements of between five to seven years with options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The consolidated entity also leases software as a service under agreements of between two to five years. The consolidated entity leases plant and equipment under agreements of less than twelve months and office equipment under agreements of three years. These leases are either short-term or low-value, so have been expensed as incurred and not capitalised as right-of-use assets. Movements in Carrying Amounts Movement in the carrying amounts for each class of right-of-use assets between the beginning and the end of the current financial year: Balance at 1 July 2022 Additions Disposals Depreciation expense Balance at 30 June 2023 Balance at 1 July 2021 Additions Disposals Depreciation expense Balance at 30 June 2022 Land and Buildings $000 9,847 - - (2,005) 7,842 Land and Buildings $000 11,888 - - (2,041) 9,847 Software $000 1,183 - - (584) 599 Software $000 1,767 - - (584) 1,183 Total $000 11,030 - - (2,589) 8,441 Total $000 13,655 - - (2,625) 11,030 82 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 19: Intangible Assets Goodwill at cost Total intangible assets Movements in carrying amounts Goodwill Balance at the beginning of the year Impairment charge Balance at the end of the year Allocation of goodwill to CGU’s Construction & engineering Balance at the end of the year Consolidated Entity 2023 $000 50,000 50,000 50,000 - 50,000 50,000 50,000 2022 $000 50,000 50,000 75,482 (25,482) 50,000 50,000 50,000 Goodwill acquired through business combination are allocated to the Construction and Engineering cash- generating unit (CGU). Goodwill is tested for impairment on each reporting period. 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 based on the assumptions below, together with a terminal value. Key assumptions are those to which the recoverable amount of an asset or CGU is most sensitive. The following key assumptions were used in the discounted cash flow model for each CGU: a. 11.0% (2022: 12.9%) pre-tax discount rate b. 7.5% (2022: 2.0%) per annum projected revenue growth rate from FY2024 onwards c. 5.0% (2022: 5.0%) per annum increase in operating costs and overheads from FY2024 onwards The discount rate of 11.0% 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 7.5% revenue growth rate and 5.0% increase in operating costs and overheads is justified based on past experience and current market outlook. At the date of this report there has been no reason to adjust these assumptions. Sensitivity As disclosed above, the directors have made judgements and estimates in respect of impairment testing of goodwill. If the assumptions would change (all changes taken in isolation), by the following rates as below: a. Pre-tax discount rate: there would be a movement of $7,118,000 if the pre-tax discount rate changes by 0.5%. b. Revenue growth rate: there would be a movement of $6,351,000 if the per annum projected revenue growth rate changes by 0.5%. c. Operating costs and overheads: there would be a movement of $4,221,000 if the per annum percentage change in operating costs and overheads changes by 0.5%. 83 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 20: Trade and Other Payables CURRENT Unsecured liabilities Trade payables Sundry payables and accrued expenses Total current trade and other payables NON-CURRENT Sundry payables and accrued expenses Total non-current trade and other payables Total trade and other payables NOTE 21: Borrowings CURRENT Unsecured liabilities Insurance premium funding Bank overdraft Total current borrowings NON-CURRENT Secured liabilities Term loan Total non-current borrowings Total borrowings Consolidated Entity 2023 $000 50,719 33,684 84,403 6,908 6,908 91,311 2022 $000 31,087 42,174 73,261 10,866 10,866 84,127 Consolidated Entity 2023 $000 278 8,227 8,505 18,716 18,716 27,221 2022 $000 202 19,252 19,454 17,873 17,873 37,327 The term loan is a syndicated credit facility provided by Pure Asset Management Pty Ltd and Horley Pty Ltd. Interest is paid quarterly in arrears at the rate of 10.00% per annum (2022: 10.00%) based on the face value. The term loan repayment date is 31 July 2025. Bank Overdraft The bank overdraft is with National Australia Bank Limited. Although the bank overdraft repayment date is 15 July 2025, it has been classified as “current” because the consolidated entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. The lender has not made a demand for accelerated repayment. A letter from the bank was received after the balance date of 30 June 2023. In that letter, the bank waived any rights the bank may have had in respect of any potential review events under the facility agreement. As such the bank overdraft is classified as “current” and the amount so classified is $8,227,000 at the end of the reporting period. The term loan and bank overdraft are secured by first ranking security over the consolidated entity’s property as detailed in note 29(d). As at the date of this report, the Company is in compliance with its obligations under its facilities. 84 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Warrants On 28 July 2021, the Company entered into a financing arrangement with Pure Asset Management Pty Ltd and Horley Pty Ltd. The Company issued 30,769,2311 warrants and 20,000,000 warrants on two separate occasions as part of the loan arrangement. The fair value of the warrants are disclosed in note 30(d). The fair value of the warrants is offset against the carrying amount of the loan. Interest expense equal to the fair value of the warrants is recognised over the life of the loan and amortised to the carrying amount of the loan. No warrants were exercised or expired during the year ended 30 June 2023. Movements in Carrying Amounts Movement in the carrying amounts for each class of borrowings between the beginning and the end of the current financial year: Balance at 1 July 2022 Additions Payments Warrants adjustment Balance at 30 June 2023 Balance at 1 July 2021 Additions Payments Issue of warrants Balance at 30 June 2022 Term Loan $000 17,873 Bank Overdraft $000 19,252 - - 843 18,716 - (11,025) - 8,227 Bank Loan $000 - Bank Overdraft $000 17,597 20,000 - (2,127)2 17,873 1,655 - - 19,252 Insurance Premium Funding $000 202 2,800 (2,724) - 278 Insurance Premium Funding $000 196 2,068 (2,062) - 202 Total $000 37,327 2,800 (13,749) 843 27,221 Total $000 17,793 23,723 (2,062) (2,127) 37,327 1 Number of Warrants shown as converted to ordinary shares upon vesting 2 Fair value of warrants issued to Pure Asset Management Pty Ltd and Horley Pty Ltd. Details of the fair value are disclosed in note 30(d). 85 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 22: Lease Liabilities CURRENT Hire purchase liability Leasing liabilities Total current lease liabilities NON-CURRENT Hire purchase liability Leasing liabilities Total non-current lease liabilities Total lease liabilities Consolidated Entity 2023 $000 1,108 2,342 3,450 1,664 7,875 9,539 12,989 2022 $000 1,561 2,619 4,180 2,919 10,216 13,135 17,315 See note 18 for details on right-of-use assets. Hire purchase agreements have a typical term of 3 to 5 years. The average interest rate implicit in the hire purchase is 3.51% (2022: 3.60%). The hire purchase liability is secured by a charge over the underlying hire purchase assets. The total value of plant and equipment assets under hire purchase is $5,077,011 (2022: $7,090,000) as detailed in note 17. The following are the amounts recognised in profit or loss: Depreciation expense of right-of-use assets Interest expense on lease liabilities Total amount recognised in profit or loss Movements in Carrying Amounts Consolidated Entity Note 18 2023 $000 2,589 814 3,403 2022 $000 2,625 990 3,615 Movement in the carrying amounts for each class of lease liabilities between the beginning and the end of the current financial year: Balance at 1 July 2022 Additions and lease modifications Payments Balance at 30 June 2023 Balance at 1 July 2021 Additions and lease modifications Payments Balance at 30 June 2022 Hire Purchase Liability $000 4,480 276 (1,984) 2,772 Hire Purchase Liability $000 4,953 1,759 (2,232) 4,480 Leasing Liabilities $000 12,835 - (2,618) 10,217 Leasing Liabilities $000 15,168 - (2,333) 12,835 Total $000 17,315 276 (4,602) 12,989 Total $000 20,121 1,759 (4,565) 17,315 86 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 23: Provisions CURRENT Employee entitlements Total current provisions NON-CURRENT Employee entitlements Total non-current provisions Total provisions Consolidated Entity 2023 $000 3,498 3,498 375 375 3,873 2022 $000 4,986 4,986 319 319 5,305 (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 Amounts used Balance at the end of the year Consolidated Entity 2023 $000 5,305 3,442 (4,875) 3,872 2022 $000 5,060 5,711 (5,466) 5,305 87 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 24: Other Deferred Tax Consolidated Entity 2023 Deferred tax assets on: Transaction costs on equity issue Provisions – employee benefits Investment due diligence costs Other provisions and accruals Tax losses and carry forward tax credits Property, plant and equipment Research and development tax offset (non-refundable) Total deferred tax assets Deferred tax liabilities on: Prepayments Accrued income Total deferred tax liabilities Net deferred tax asset Consolidated Entity 2022 Deferred tax assets on: Transaction costs on equity issue Provisions – employee benefits Investment due diligence costs Other provisions and accruals Tax losses and carry forward tax credits Property, plant and equipment Research and development tax offset (non-refundable) Total deferred tax assets Deferred tax liabilities on: Prepayments Accrued income Total deferred tax liabilities 1 July 2022 Opening Balance $000 Under- provision in Prior Year $000 Charged to Income $000 Charged Directly to Equity $000 De- recognised (charged to Income) $000 30 June 2023 Closing Balance $000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 July 2021 Opening Balance $000 Under- provision in Prior Year $000 Charged to Income $000 Charged Directly to Equity $000 De- recognised (charged to Income) $000 30 June 2022 Closing Balance $000 862 1,629 27 1,116 14,275 3,337 1,017 22,263 14 - 14 - - - 9 (33) (22) - (46) - - - - - - - - - - - - - - - 275 - - - - - - (1,137) (1,629) (27) (1,125) (14,242) (3,315) (1,017) 275 (22,492) - - - (14) - (14) 275 (22,478) - - - - - - - - - - - - - Net deferred tax asset 22,249 (46) Unused tax losses of which no deferred tax asset has been recognised amount to $204 million (2022: $187 million). 88 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 25: Share Capital and Reserves Consolidated Entity 155,552,216 (2022: 155,133,252) fully paid ordinary shares 22,808,656 (2022: -) redeemable convertible preference shares Total (a) Ordinary Shares 2023 $000 279,973 4,300 284,273 At the beginning of reporting period Performance rights converted to shares Issue of shares from capital raising Share consolidation 10:1 Equity based payments Transaction costs of issue Issue of warrants for term loan Movement in warrants (Note 21) No. 155,133,252 418,964 - - - - - - At the end of the reporting date 155,552,216 2023 2022 $000 279,961 No. 128,737,597 105 - - 857 (3) - (947) 279,973 - 26,395,655 10,558 - - - - - - 431 (642) 2,127 - 155,133,252 279,961 2022 $000 279,961 - 279,961 $000 267,487 - 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. Shares allocated to employees stay in the trust and vest to employees after two years of continuous employment from the date of grant. There was no allocation made to employees during the year ended 30 June 2023. During the year ended 30 June 2023, 418,964 shares were issued to former executives upon vesting of performance rights who are no longer KMP. On 5 November 2020 a share consolidation took place, reducing every 10 securities on issue to 1 security, applying to shares, performance rights and options on issue at that date. (b) Redeemable Convertible Preference Shares At the beginning of reporting period Issue of redeemable convertible preference shares Transaction costs of issue 2023 No. - 22,808,656 - At the end of the reporting date 22,808,656 $000 - 4,562 (262) 4,300 2022 No. $000 - - - - - - - - During the year ended 30 June 2023, 22,808,656 redeemable convertible preference shares were issued to Institutions. Key terms of the redeemable convertible preference shares are contained within an ASX announcement dated 22 June 2023 and summarised below: 89 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Security Cumulative, fully paid, redeemable convertible preference shares (RCPS) Issuer Decmil Group Limited (Decmil) “Initial Term” 3 years Dividend Rate Preferential dividends accrue and are, at the election of Decmil, payable semi- annually (Dividend Payment Date) at 12.00% pa during the Initial Term. The dividend rate will increase by 1.00% pa each year after the Initial Term unless the RCPS is converted or redeemed on the terms set out below. Any dividends not paid accumulate until the RCPS is converted or redeemed. Preferential dividends will be 100% franked in the Initial Term and are expected to carry franking credits beyond the initial term. Decmil intends to hold the amount of cash equal to each years’ dividend amount in advance to ensure that each of the dividend payments for that year are paid in cash rather than cumulating. It is intended that whenever a dividend is paid in cash, the relevant bank account will be immediately replenished with an equivalent amount to ensure that, at all times there is at least the next 12 months’ worth of dividend payments on deposit in advance. In addition, the bank account will have an attaching irrevocable directive that the funds deposited can only be disbursed for the purpose of paying the RCPS semi-annual dividend payments. Conversion Dates – Holder’s election RCPS Holders may elect to convert all or some of their RCPS (including accrued but unpaid dividends) into fully paid ordinary shares (Shares) (Conversion): on the last Business Day of every month within 30 months of (a) the issue date; or (b) schemes, delisting, insolvency etc), on the occurrence of a trigger event (e.g. takeover bids, by giving a conversion notice to Decmil not less than 10 Business Days (or in the case of a trigger event, 5 Business Days) prior to the relevant conversion date (provided that if the RCPS Holder holds less than 20,000 RCPS, this election must be for all of their RCPS). Decmil must, as soon as reasonably possible, announce the occurrence of any trigger event, or any other event or circumstance has occurred which would, with the expiry of a grace period, the giving of notice or any combination of the foregoing, be a trigger event, has occurred. Conversion formula The number of Shares issued on Conversion is: (a) (b) 1 per RCPS; and 1 per each $0.20 of unpaid dividends, Ordinary shares Issued upon Conversion subject to adjustment for any share splits, bonus issues, rights issues, or other capital reconstructions or certain other dilutionary events. Each new Share issued on Conversion will rank in all respects equally with the then existing Shares. The issue of Shares issued on Conversion following the Call Date (as that term is defined below) (including those Shares issued on conversion of any unpaid dividends as contemplated below) shall be issued to the Holder of the RCPS on the relevant Conversion date. If the issue of Shares upon Conversion of any RCPS would result in any Holder being in contravention of section 606(1) of the Corporations Act (General Prohibition), then the Conversion shall be deferred until such later time or times that the issue would not result in a contravention of the General Prohibition. Decmil Conversion / Redemption election On the date that the Initial Term concludes (Call Date) and on each subsequent Dividend Payment Date, Decmil will have the right to convert the RCPS into Shares or redeem the RCPS for cash at Face Value (plus any unpaid dividends). 90 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 The Conversion of any unpaid dividends accrued following the Call Date into Shares shall be subject to the prior approval of Decmil’s Shareholders. If the RCPS are not redeemed or converted on the Call Date or any subsequent Dividend Payment Date, the Directors will ensure that they are satisfied on a reasonable basis that Decmil will have sufficient cash reserves to meet the dividend payments for the next year of the term of the RCPS. Ranking On a winding up of Decmil, RCPS will rank for a return of capital, behind all creditors of Decmil but ahead of ordinary shareholders. Rights Prior to the Call Date, RCPS holders are only entitled to vote on certain limited matters as required under the ASX Listing Rules and Decmil’s Constitution such as a proposal that affects the rights attaching to RCPS or for the disposal of the whole of the property, business and undertaking of Decmil. However, this restriction on voting does not apply when a dividend is not paid in full on the RCPS or during a winding up of Decmil. RCPS Holders are entitled to receive all reports, notices of meeting and other documents sent to Shareholders and to attend general meetings. Quotation The RCPS are intended to be listed on ASX. (c) Reserves At the beginning of reporting period Additions Disposals At the end of the reporting date 2023 2022 $000 $000 - 3,865 - 3,865 - - - - During the year ended 30 June 2023, $3.9 million in assets were revaluated based on an independent valuation report. (d) 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. 91 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 26: Controlled Entities Controlled Entities Country of Incorporation Percentage Owned (%) 2023 2022 Parent Entity: Decmil Group Limited Controlled entities of Decmil Group Limited: Decmil Australia Pty Ltd Eastcoast Development Engineering Pty Ltd Homeground Villages Pty Ltd Decmil Maintenance 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 Australia Australia Australia Australia Australia Australia Australia Australia Controlled entities of Decmil Australia Pty Ltd: Decmil PNG Limited Decmil Engineering Pty Ltd Decmil Southern Pty Ltd Papua New Guinea Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (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 and Homeground Villages 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 Loss after income tax (ii) Accumulated losses: 2023 $000 2022 $000 (14,828) - (14,828) (73,724) (22,524) (96,248) Accumulated losses at the beginning of the year Loss after income tax Accumulated losses at the end of the year (259,159) (14,828) (273,987) (162,911) (96,248) (259,159) 92 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (iii) Statement of Financial Position: CURRENT ASSETS Cash and cash equivalents Trade and other receivables Contract assets Non-current asset held for sale Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment Right-of-use assets Deferred tax assets Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Contract liabilities Borrowings Lease liabilities Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Trade and other payables Borrowings Lease liabilities Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Redemmable convertible preference shares Reserves Accumulated losses TOTAL EQUITY 2023 $000 1,316 34,318 14,253 56,991 5,126 2022 $000 27,645 12,190 11,651 56,865 3,613 112,004 111,964 4,497 7,499 - 50,000 61,996 174,000 93,966 7,045 8,505 2,688 1,975 5,339 9,310 - 50,000 64,649 176,613 71,017 19,232 19,454 2,791 3,137 114,179 115,631 6,908 18,716 8,407 285 34,316 148,495 25,505 284,273 14,052 1,167 (273,987) 25,505 10,866 17,873 11,242 199 40,180 155,811 20,802 279,961 - - (259,159) 20,802 93 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 27: Joint Arrangements Interest in Joint Operations VicConnect Alliance Mordialloc JV Country of Incorporation Australia Australia 2023 40% 40% 2022 40% 40% The following material Joint Operations are disclosed as follows: VicConnect Alliance In March 2021, Rail Projects Victoria, a Victorian state government department, awarded the VicConnect Alliance a $300 million contract for the Gippsland Line Upgrade project, part of the Victorian Government’s Regional Rail Revival Program. Decmil Southern Pty Ltd has a 40% participation interest as a non-owner participant in the VicConnect Alliance along with UGL Engineering Pty Limited, Arup Australia Projects Pty Ltd, the rail operator V/Line Corporation and the owner/client, Rail Projects Victoria. Under the alliance agreement Decmil Southern Pty Ltd has a 40% participation interest in all the assets used, revenues generated and the expenses incurred by the joint arrangement. Decmil Southern Pty Ltd is also liable for 40% of any liabilities incurred by the joint arrangement. In addition, Decmil Southern 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). VicConnect Alliance is an unincorporated entity and is classified as a joint operation. Accordingly, Decmil Southern 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 VicConnect Alliance that are included in the consolidated financial statements are as follows: 2023 $000 - - 83,025 (78,753) 4,272 2022 $000 - - 38,765 (36,399) 2,366 TOTAL ASSETS TOTAL LIABILITES Revenue Expenses Profit for the year 94 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 Mordialloc JV In March 2019, Major Roads Projects Victoria, a Victorian state government department, awarded Decmil Southern Pty Ltd, in joint venture with McConnell Dowell Constructors (Aust) Pty Ltd (Mordialloc JV), a $25m contract for an early works package for the Mordialloc Freeway project and in October 2019 a main works contract valued at $417 million. The project will link the Mornington Peninsular Freeway to the Dingley Bypass and create one continuous freeway from Frankston to Clayton. Under the joint venture agreement Decmil Southern Pty Ltd has a 40% participation interest in all the assets used, revenues generated and the expenses incurred by the joint arrangement. Decmil Southern Pty Ltd is also liable for 40% of any liabilities incurred by the joint arrangement. In addition, Decmil Southern 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). Mordialloc JV is an unincorporated entity and is classified as a joint operation. Accordingly, Decmil Southern 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. 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 2023 $000 4,179 2022 $000 9,339 95 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 28: Commitments Consolidated Entity (a) Hire Purchase Commitments1 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) Leasing Liabilities Payable Non-cancellable leasing liabilities contracted for but not recognised as liabilities Payable – minimum lease payments Not later than 1 year Between 1 and 5 years (d) Operating Leases Receivable Future minimum rentals receivable for operating leases at the end of the reporting period but not recognised as assets Receivable – minimum lease receipts Not later than 1 year Between 1 and 5 years 2023 $000 - - - - - - - - - 453 1 454 170 - 170 2022 $000 1,691 3,069 4,760 (280) 4,480 206 206 (4) 202 451 128 579 199 170 369 1 Hire purchase commitments include contracted amounts for various plant and equipment with a written down value of $2,759,000 (2022: $4,633,000) 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. 96 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 29: Cash Flow Information (a) Reconciliation of Cash Flow from Operations with Loss after Income Tax Loss after income tax Adjustments for: Depreciation and amortisation Equity based payments Loss/(profit) on sale of non-current assets Cash provided by / (used in) operations before working capital changes Changes in assets and liabilities Trade and other receivables Other assets Contract assets Intangible assets Trade and other payables Contract liabilities Deferred tax assets Provisions Change in working capital balances Net cash (used in)/provided by operating activities (b) Non-cash Financing and Investing Activities Finance leases to acquire plant and equipment Share based payments (c) Changes in Liabilities Arising from Financing Activities Consolidated Entity Borrowings Lease liabilities Consolidated Entity Borrowings Lease liabilities 1 July 2022 Opening Balance $000 37,327 17,315 Cash Flows $000 (13,749) (4,604) 1 July 2021 Opening Balance $000 17,793 20,121 Cash Flows $000 19,593 (4,565) Consolidated Entity 2023 $000 (1,844) 5,591 857 (1,046) 3,558 10,379 2,236 (17,513) - 7,184 (27,291) - (1,432) (26,437) (22,879) 2022 $000 (103,230) 5,691 431 14 (97,094) (12,235) (400) 11,178 25,482 29,210 27,116 22,249 245 102,845 5,751 Consolidated Entity 2023 $000 - 857 Non-Cash Changes $000 3,643 277 Non-Cash Changes $000 (59) 1,759 2021 $000 1,803 431 30 June 2023 Closing Balance $000 27,221 12,988 30 June 2022 Closing Balance $000 37,327 17,315 97 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (d) Credit Standby Facilities with Financial Institutions Credit facilities Amount utilised Bank overdraft Limited recourse receivables funding Bank guarantee facility Term loan facility Equipment finance Surety bond facilities Credit facilities available The credit facilities are summarised as follows: Bank overdraft and/or limited recourse receivables funding facility and/or bank guarantee facility Term loan facility Equipment finance Surety bond facilities Total credit facilities Consolidated Entity 2023 $000 84,045 (8,227) - (24,145) (20,000) (2,742) (11,387) 17,544 40,000 20,000 5,045 19,000 84,045 2022 $000 75,000 (19,252) - (20,540) (20,000) (4,480) - 10,728 40,000 20,000 15,000 - 75,000 The majority of credit facilities are provided by National Australia Bank Limited and comprise a $40 million multi-option facility and a $0.5 million corporate credit card facility. The $40 million multi-option facility encompasses a bank guarantee facility, letter of credit facility, overdraft facility and a limited recourse receivables funding facility. Security for the National Australia Bank facilities comprises the following: ▪ First Ranking General Security Deeds granted by Decmil Group Limited and its controlled entities (other than Decmil PNG Ltd) ▪ First Ranking registered real property mortgage over property situated at 101 Calliope River Road, West Stowe, Queensland (Homeground). A syndicated credit facility provided by Pure Asset Management Pty Ltd and Horley Pty Ltd comprising a $20 million term loan facility. Security for the syndicated facility comprises the following: ▪ Second Ranking General Security Deeds granted by Decmil Group Limited and its controlled entities (other than Decmil PNG Ltd) ▪ Second Ranking registered real property mortgage over property situated at 101 Calliope River Road, West Stowe, Queensland (Homeground). In addition to the National Australia Bank facilities, the consolidated entity also has the following facilities: ▪ Equipment finance of $3.0 million with Toyota Finance. ▪ Equipment finance of $2.05 million with Caterpillar Finance. ▪ Surety bond facility of $19.0m with AssetInsure. 98 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 30: Equity Based Payments Expenses arising from equity based payment transactions recognised during the year were as follows: Performance rights Incentive shares Related party options Warrants (a) Performance Rights Plan Consolidated Entity 2023 $000 355 - 50 452 857 2022 $000 (53) 43 50 391 431 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 2021 Granted Forfeited Vested Lapsed Performance rights outstanding as at 30 June 2022 Granted Forfeited Vested Lapsed Performance rights outstanding as at 30 June 2023 Number 4,746,499 - (392,651) - - 4,353,848 18,597,539 (3,253,898) (418,964) - 19,278,525 The fair value of the performance rights granted during the financial year ended 30 June 2023 was $1,526,095. Performance rights are valued using various valuation methodologies, including Binomial and Barrier option pricing models. 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 and the likelihood of rights being forfeited prior to vesting. 99 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 The weighted average fair value of performance rights granted during the year ended 30 June 2023 was $0.082. These values were calculated using a Binomial and Barrier option pricing model applying the following inputs: Assumptions Class A, B, C Class D Class E Expected vesting period for the performance rights to vest: 3 years 2 years 3 years Market price of shares at date of grant: Expected share price volatility: Risk-free interest rate: Dividend yield: $0.17 $0.17 $0.17 70% 70% 70% 3.06% 3.08% 3.06% 0% 0% 0% 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 performance rights transactions recognised during the year were as follows: Performance Rights Expenses Written back due to forfeiting Written back due to lapsing Written back on reassessment of probabilities (b) Incentive Shares Plan Consolidated Entity 2023 $000 413 (58) - - 355 2022 $000 133 (19) - (167) (53) During the year ended 30 June 2020, 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 20211 Granted1 Vested1 Forfeited1 Unvested incentive shares as at 30 June 2022 Granted Vested Forfeited Unvested incentive shares as at 30 June 2023 1 Balances adjusted for 10:1 share consolidation which took place on 5 November 2020 100 Number 30,000 - (30,000) - - - - - - Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 No incentive shares were granted during the financial year. Expenses arising from the incentive shares plan transactions recognised during the year were as follows: Incentive Shares Expenses Written back due to forfeiting (c) Options Consolidated Entity 2023 $000 - - - 2022 $000 43 - 43 During the year ended 30 June 2022 the Company granted 13,179,834 Placement Options. The Placement Options were granted on 6 September 2021 as part of a Placement conducted by Decmil which was announced by the Company on 26 July 2021 and approved by Shareholders on 30 August 2021. The Placement Options have an expiry date of 6 September 2023 and an exercise price of $0.48. A total of 937,500 Placement Options were granted to Directors of the Company because the Directors participated in the Placement. A summary of the movements of all options granted is below. Unvested options as at 30 June 2021 Granted Vested Forfeited Unvested options as at 30 June 2022 Granted Vested Forfeited Unvested options as at 30 June 2023 No options were granted during the financial year. Number 1,800,000 13,179,834 - - 14,997,834 - - - 14,997,834 Expenses arising from the options transactions recognised during the year were as follows: Options Expenses Consolidated Entity 2023 $000 50 2022 $000 50 101 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (d) Warrants A summary of the movements of all warrants is as follows: Unvested warrants as at 30 June 2021 Granted Vested Forfeited Unvested warrants as at 30 June 2022 Granted1 Vested1 Forfeited1 Unvested warrants as at 30 June 20231 Number - 50,769,231 - - 50,769,231 - - - 50,769,231 Expenses arising from the warrant transactions recognised during the year were as follows: Warrants Consolidated Entity 2023 $000 843 2022 $000 - 1 Number of Warrants shown as converted to ordinary shares upon vesting 102 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 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 26. 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: Consolidated Entity (a) Director Related Transactions1 Consulting fees for Andrew Barclay & Associates, in which Mr Andrew Barclay has a beneficial interest Consulting fees for C1 Energy Pty Ltd, an entity in which Mr Peter Thomas has a beneficial interest (2023 is captured in the remuneration report) Interim CEO fees for Olla Advisory Pty Ltd as trustee for the Olla Advisory Trust, an entity in which Mr Vin Vassallo has a beneficial interest (2023 is captured in the remuneration report) (b) Director Related Balances Amounts owing to Andrew Barclay & Associates, in which Mr Andrew Barclay has a beneficial interest Amounts owing to C1 Energy Pty Ltd, an entity in which Mr Peter Thomas has a beneficial interest Amounts owing to Olla Advisory Pty Ltd as trustee for the Olla Advisory Trust, an entity in which Mr Vin Vassallo has a beneficial interest 2023 $000 348 - - 59 - - 2022 $000 274 286 205 43 63 80 All transactions were made on normal commercial terms and conditions and at market rates. NOTE 32: Financial Instruments The consolidated entity’s financial instruments consist mainly of deposits with banks, accounts receivable and payable and borrowings. The consolidated entity does not use derivatives nor speculates 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. 1 Transactions relating to directors’ fees are included in the Directors’ Report details of remuneration 103 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (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 and price 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. Unused facilities are disclosed in note 29(d). Credit risk Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner are subject to credit risk. These arise principally from cash balances with banks, cash equivalents, receivables and other financial assets. The maximum exposure to credit risk is the total of the fair value of the financial assets at the end of the reporting year. Credit risk on cash balances with banks and any other financial instruments is limited because the counter-parties are entities with acceptable credit ratings. For expected credit losses (ECL) on financial assets, a simplified approach is permitted by the financial reporting standards on financial instruments for financial assets that do not have a significant financing component, such as trade receivables. On initial recognition, a day-1 loss is recorded equal to the 12 month ECL (or lifetime ECL for trade receivables), unless the assets are considered credit impaired. For credit risk on trade receivables an ongoing credit evaluation is performed on the financial condition of the debtors and an impairment loss is recognised in profit or loss. Reviews and assessments of credit exposures in excess of designated limits are made. Renewals and reviews of credits limits are subject to the same review process. Note 11 discloses the maturity of the cash and cash equivalents balances. Cash and cash equivalents are also subject to the impairment requirements of the standard on financial instruments. There are no material amounts of collateral held as security at 30 June 2023. 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. 104 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (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. Weighted Average Effective Interest Rate % Non-Interest Bearing $000 Within 1 year $000 1 to 5 Years $000 > 5 Years $000 Carrying Amount $000 2023 Financial Assets Cash and cash equivalents Receivables Contract assets Financial Liabilities Payables Contract liabilities Borrowings Lease liabilities 2022 Financial Assets Cash and cash equivalents Receivables Contract assets Financial Liabilities Payables Contract liabilities Borrowings Lease liabilities - - - - - 10.5 6.4 - 3,686 40,838 33,771 74,609 (91,311) (14,668) - - - - 3,686 - - (8,505) (4,166) - - - - - - (18,716) (11,270) (105,979) (12,671) (29,986) 0.9 - 39,263 - - - - 10.1 6.3 37,175 16,258 53,433 (84,127) (41,959) - - - - 39,263 - - (19,458) (5,123) (23,384) (13,948) (126,086) (24,581) (37,332) - - - - - - 3,686 40,838 33,771 78,295 (91,311) (14,668) (27,221) (15,436) (148,636) 39,263 37,175 16,258 92,696 (84,127) (41,959) (42,842) (20,709) (189,637) - - (1,638) (1,638) 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. 105 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 (v) Sensitivity Analysis Interest Rate Risk and Price Risk The consolidated entity has performed sensitivity analysis relating to its exposure to interest rate risk and price 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 2023, 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 The consolidated entity is not exposed to any significant price risk. 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 2023 Assets Non-current asset held for sale Total assets Consolidated 2022 Assets Non-current asset held for sale Total assets Level 1 $000 Level 2 $000 Level 3 $000 Total $000 - - - - 56,991 56,991 56,865 56,865 - - - - 56,991 56,991 56,865 56,865 The non-current asset held for sale has been valued by using expressions of interests received from third parties. 106 Decmil Group Limited NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 34: Contingent Liabilities Guarantees given to external parties for satisfactory contract performance for the consolidated entity NOTE 35: 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 Accumulated losses TOTAL EQUITY a) Guarantees Consolidated Entity 2023 $000 57,196 2022 $000 77,630 Parent Entity 2023 $000 56,638 56,638 16,991 150,139 167,130 79,542 33,730 113,272 2022 $000 (46,790) (46,790) 18,587 72,259 90,846 85,624 26,366 111,990 298,337 (244,479) 53,858 279,973 (301,117) (21,144) Cross guarantees have been provided by Decmil Group Limited and its controlled entities as listed in note 26. 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. c) Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the following: - Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. 107 Annual Report 2023 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2023 NOTE 36: Subsequent Events A letter from the Company’s banker, National Australia Bank Limited was received after the balance date of 30 June 2023. In that letter, the bank waived any rights the bank may have had in respect of any potential review events under the facility agreement. If this letter had been received on or prior to 30 June 2023, borrowings of $8.2 million would be classified as a non-current liability (increasing net current assets by $8.2 million). In addition, shortly after the balance date of 30 June 2023, Decmil announced that it had completed its $26.3 million capital raise (before fees), of which was $20 million was underwritten at 30 June 2023 and that $20 million (before fees) was included in the balance sheet at that date. Apart from the matters outlined above, 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. 108 Decmil Group Limited DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2023 In the directors' opinion: ▪ ▪ ▪ ▪ the attached financial statements and notes comply with the Corporations Act 2001 (Cth) (‘Corporations Act’), 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 2023 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 26(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. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act. On behalf of the directors Andrew Barclay Chair 23 August 2023 109 Annual Report 2023 RSM Australia Partners Level 32, Exchange Tower 2 The Esplanade Perth WA 6000 GPO Box R1253 Perth WA 6844 T +61 (0) 8 9261 9100 F +61 (0) 8 9261 9111 www.rsm.com.au 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 2023, the consolidated statement of profit or loss and other 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 2023 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. THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 110 Liability limited by a scheme approved under Professional Standards Legislation Decmil Group Limited 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 Revenue Refer to Note 4 in the financial statements The Group’s largest source of revenue is from construction and engineering. Construction and engineering revenue is recognised by management after assessing all factors relevant to each contract, including specifically assessing the following as applicable: • Determination of the stage of completion and measurement of progress towards performance obligations; • 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; and • Estimation of project completion date. This area is a key audit matter due to the number and type of estimation events over the course of the contract life, the unique nature of individual contract conditions, leading to complex and judgmental revenue recognition from contracts. Our audit procedures included: • Assessing contractual terms with customers and substantiating project revenues and costs incurred against underlying supporting documents; • Assessing management’s in determining the stage of completion, total contract revenue and total estimated costs; assumptions • Checking the mathematical accuracy of revenue recognised during the year based on the stage of completion; • Reading and customers subcontractor correspondence and discussing the progress of projects with project managers for any potential disputes, variation order claims, known technical issues or significant events that could impact the estimated contract costs; • Discussing the rationale for revisions made to estimated costs with project personnel and management and checking explanations to supporting documentation; • Challenging management’s assessment and testing the reasonableness of the provision for foreseeable losses; and • Challenging the judgements made by management in estimating the expected credit loss relating to contract assets. 111 Annual Report 2023 Our audit procedures included: • • • provided documentation Evaluating by management to conclude whether the property met the criteria to be classified as an asset held-for-sale; Assessing management’s determination of whether there are any impairment indicators; and Evaluating the adequacy of the disclosures to the financial statements. Our audit procedures included: • • Assessing management’s determination that the goodwill should be allocated to one CGU; Assessing the valuation methodology used to determine the recoverable amount of goodwill and the CGU’s property plant and equipment and right of use assets; • Challenging the reasonableness key assumptions, including the cash flow projections, expected revenue growth rates, the discount rates and sensitivities used; Evaluating management’s sensitivity analysis over the key assumptions used in the model; of • reconciling • Checking the mathematical accuracy of the value- to in-use model and supporting evidence, such as approved budgets and considering the reasonableness of these budgets; and Evaluating the adequacy of the disclosures to the financial statements. input data • Non-Current Asset Held-for-sale Refer to Note 15 in the financial statements The Group owns a property in the Homeground Accommodation Village in Gladstone, Queensland. We determined this area to be a key audit matter due to the material balance to the Group's financial position, in particular, the net current asset balance. The factors and complexity of the accounting requires significant audit effort and involvement of senior audit team members in assessing this key audit matter. Impairment of Intangible Assets Refer to Note 19 in the financial statements The carrying amount of goodwill is $50,000,000. Management performs an annual impairment test on the recoverability of the goodwill as required by Australian Accounting Standards. We determined this area to be a key audit matter due to the size of the goodwill balance and because the directors’ assessment of the value-in-use of the cash generating unit (CGU) involves significant management judgement about the identification of CGU, the future underlying cash flows of the business and the discount rate applied. 112 Decmil Group Limited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 2023 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: https://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. 113 Annual Report 2023 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 2023. In our opinion, the Remuneration Report of Decmil Group Limited, for the year ended 30 June 2023, 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: 23 August 2023 TUTU PHONG Partner 114 Decmil Group Limited INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2023 115 Annual Report 2023 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES FOR THE YEAR ENDED 30 JUNE 2023 Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. Fully Paid Ordinary Shares Substantial shareholders of fully paid ordinary shares As at 24 July 2023 the following organisations have disclosed a substantial holding notice to the Australian Securities Exchange: Thorney International Pty Ltd1 Franco Family Holdings2 Shares 31,010,771 11,953,300 % 19.99 7.68 Distribution of shareholdings of fully paid ordinary shares The following information is current at 24 July 2023: 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total No. of shareholders 2,801 No. of ordinary shares 754,067 1,135 440 884 197 5,457 2,873,338 3,368,116 29,189,587 119,367,108 155,552,216 % 0.48 1.85 2.17 18.77 76.74 100.00 There are 2,942 shareholders with an unmarketable parcel totalling 2,095,433 shares. Securities Exchange Listing The fully paid ordinary shares of Decmil Group Limited are listed on the Australian Securities Exchange under the symbol of DCG. Voting rights of fully paid ordinary shares All fully paid ordinary shares issued by Decmil Group Limited carry one vote per share without restriction. 1 Substantial holding as at 5 November 2021, as per notice lodged on 5 November 2021. 2 Substantial holding as at 26 June 2020, as per notice lodged on 26 June 2020 (adjusted). 116 Decmil Group Limited ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES FOR THE YEAR ENDED 30 JUNE 2023 Twenty largest shareholders of fully paid ordinary shares The names of the twenty largest registered shareholders of fully paid ordinary shares in the Company as at 24 July 2023 are: UBS Nominees Pty Ltd BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd BNP Paribas Nominees Pty Ltd Mrs Jenny Mary Baguley + Mr John Richard Baguley Healey Nominees Pty Ltd Block Capital Group Limited Mr Simon Hannes + Mrs Mignon Catherine Booth Mr Thomas Matthew McLean Billy Lids Pty Ltd Spinite Pty Ltd BNP Paribas Nominees Pty Ltd Barclays Mr Peter James Thomas Berkopy Holdings Pty Ltd Est Dr Olga Assef Brindle Holdings Pty Ltd Mr Sugandi Marjuki + Mrs Wai Shan Pang Citicorp Nominees Pty Limited Mr Barnaby Colman Caddick Dr Salvador Gala Neweconomy Com AU Nominees Pty Limited <900 Account> No. of Ordinary Fully Paid Shares Held 31,301,306 11,953,300 8,697,206 2,699,949 2,100,000 2,000,000 1,620,000 1,575,619 1,570,000 1,413,021 1,322,913 1,300,000 1,250,000 1,075,198 1,067,377 1,000,000 925,067 907,000 905,306 841,029 % 20.12 7.68 5.59 1.74 1.35 1.29 1.04 1.01 1.01 0.91 0.85 0.84 0.80 0.69 0.69 0.64 0.59 0.58 0.58 0.54 Total 75,524,291 48.55 Redeemable Convertible Preference Shares (‘RCPS') Distribution of holdings of Redeemable Convertible Preference Shares The following information is current at 24 July 2023: 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total There are no unmarketable parcels of RCPS. Securities Exchange Listing No. of holders No. of RCPS 174 127 69 205 98 673 59,748 357,671 543,980 8,179,550 122,235,680 131,376,629 % 0.05 0.27 0.41 6.23 93.04 100.00 The RCPS of Decmil Group Limited are listed on the Australian Securities Exchange under the symbol of DCGPA. 117 Annual Report 2023 ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES FOR THE YEAR ENDED 30 JUNE 2023 Voting rights of Redeemable Convertible Preference Shares1 Prior to the Call Date, RCPS Holders are only entitled to vote on certain limited matters as required under the ASX Listing Rules and Decmil’s Constitution such as a proposal that affects the rights attaching to RCPS or for the disposal of the whole of the property, business and undertaking of Decmil. If RCPS Holders are entitled to vote, each Holder is entitled to one vote per RCPS held. However, this restriction on voting does not apply when a dividend is not paid in full on the RCPS or during a winding up of Decmil. At such times, and always after the Call Date, RCPS shall vote on an as if converted based. Twenty largest shareholders of Redeemable Convertible Preference Shares The names of the twenty largest registered holders of RCPS in the Company as at 24 July 2023 are: UBS Nominees Pty Ltd BNP Paribas Nominees Pty Ltd Klip Pty Ltd Timster Pty Limited Beirne Trading Pty Ltd Mr Ronald Alfred Brierley Eyeon Investments Pty Ltd J S Millner Holdings Pty Limited Rahn Investments Pty Limited Waradale Pty Ltd Gailforce Marketing & PR Pty Limited Boatlife Holdings Pty Ltd Sotam Pty Ltd Mr Peter James Thomas Finclear Nominees Pty Ltd Onmell Pty Ltd Dinwoodie Investments Pty Ltd Lollywatch Pty Ltd Mrs Jenny Mary Baguley + Mr John Richard Baguley CKDJ Nominees Pty Ltd Total No. of Ordinary Fully Paid Shares Held 50,102,095 6,597,793 5,250,000 5,000,000 3,000,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,117,648 2,000,000 2,000,000 1,704,411 1,500,000 1,354,902 1,205,000 1,000,982 1,000,000 % 38.14 5.02 4.00 3.81 2.28 1.90 1.90 1.90 1.90 1.90 1.61 1.52 1.52 1.30 1.14 1.03 0.92 0.76 0.76 1,000,000 97,332,831 0.76 74.09 1 For further information, please refer to note 25 (b). 118 Decmil Group Limited 

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