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Annual Report 2020

Plain-text annual report

ANNUAL REPORT For the year ended 31 December draglobal.com 2020 DRA Global Annual Report 2020 / ACN 622581935 CONTENTS Who is DRA Global? ...................... 2 Director’s Report ....................... 58 Services ................................................................. 5 Markets ................................................................. 5 Year at a glance ..................................................... 6 Chairman’s report .................................................. 8 Managing Director and CEO’s report .................. 10 Market trends ............................................... 13 DRA’s operating business ................................... 14 Areas of operation ............................................... 16 Strategy and outlook............................................ 18 Sustainability report ............................................. 20 Leadership .................................. 28 Board of Directors* .............................................. 28 DRA’s Group Executives ..................................... 30 Operational Overview ................. 32 Remuneration Report ................ 70 Financial Statements ................. 84 Consolidated statement of profit or loss .............. 85 Consolidated statement of other comprehensive income ................................................................. 86 Consolidated statement of financial position ....... 87 Consolidated statement of changes in equity ...... 88 Consolidated statement of cash flows ................. 89 Notes to the consolidated financial statements ... 91 Directors’ declaration ......................................... 143 Auditor’s independence declaration .................. 144 Independent auditor’s report to the members of DRA Global Limited ........................................... 145 EMEA region........................................................ 33 APAC/AMER region ............................................ 39 Corporate Directory .................. 151 Financial Overview ...................... 44 Financial Performance......................................... 45 Business and risks............................................... 52 Key risks ....................................................... 55 Please note: All references to $ are in AUD unless otherwise specified DRA Global Annual Report 2020 / ACN 622581935 DRA Global A diversified global engineering, project delivery and operations management group. S E C I V R E S PROJECT DEVELOPMENT PROJECT DELIVERY AND EXECUTION OPERATIONS AND MAINTENANCE Minerals and metals processing OFFICES S T E K R A M Mining Infrastructure Industrial Energy Water DRA Global Annual Report 2020 / ACN 622581935 DRA Global A diversified global engineering, project delivery and operations management group. R E V O sTaFF WORLdWIdE 4500+ R E V O OF EXPERIENCE 3 dECadEs R E V O 7500 PROJECTS, STUDIES & O P E R AT I O N S COMPLETEd sUCCEssFULLY OFFICEs aROUNd THE GLOBE 20 S E U L A V Safety Integrity Excellence Trust Courage E R O PEOPLE C DRA Global Annual Report 2020 / ACN 622581935 WHO IS DRA GLOBAL? / 2 DRA Global Annual Report 2020 / ACN 622581935 // Who is DRA Global / A diversified global engineering, project delivery and operations management group headquartered in Perth, Australia, with an impressive track record spanning more than three decades With a focus on excellence and forward thinking, DRA consistently seeks to develop new, smarter and safer ways of implementation in an ever-changing environment. DRA is forward thinking in its approach to the market, its service offerings to customers, its innovation and its people. The Group is passionate about safety and its goal that everyone returns home safely every day. All practical and reasonable measures are taken to eliminate workplace injuries and health risks. DRA’s Code of Conduct ensures compliance with legal and ethical expectations and strict policies and practices are maintained to reinforce the Group’s commitment to good governance. DRA supports the United Nations Universal Declaration of Human Rights and is committed to protecting the environment. DRA also protects employees and operations in times of natural disaster, major catastrophes, pandemics and unforeseen events. DRA Global Limited (DRA or the Group) is committed to creating tangible value for customers, shareholders and employees through the origination, delivery and optimisation of capital assets around the world. DRA is progressing its vision to be the preferred global mining and minerals technical partner for diversified service offerings. During 2020 DRA achieved the following targets set in 2016 as part of the strategy for the Group: / Develop a truly international business; / Achieve a diverse and balanced spread of revenue from multiple geographical regions. In 2020 DRA generated >65% revenue outside South Africa; / Position DRA as a public company headquartered in Australia; / Generate circa $1 billion in annual revenue; and / Positioned to unlock long-term shareholder value through a liquidity event. DRA is committed to delivering operational excellence through all stages of a project life cycle, from concept through delivery, commissioning and ongoing operations and maintenance as well as optimisation and expansion. To date DRA has successfully delivered more than 7,500 projects and studies to customers globally and has worked on some of the largest and most complex projects across the resources sector. The Group is committed to achieving its business goals, as well as achieving or exceeding the goals of its customers and employees. For more than three decades, DRA has created a culture that supports and motivates employees to bring their best to work and to deliver their best for customers. This culture has played a key role in establishing the Group as a partner of first choice across the industry. DRA’s corporate values define this culture and foster an environment of safety, empowerment, innovation and collaboration across markets, sectors and geographies. DRA Global Annual Report 2020 / ACN 622581935 / 3 // Who is DRA Global / Core values PURPOSE DRA Global creates real value by fulfilling the aspirations of our people, customers, shareholders and communities. CORE VALUES SAFETY We care for each other. Safety and well-being is our first consideration. INTEGRITY Do what is right for the right reasons. EXCELLENCE We continuously strive to be better. TRUST We build relationships by delivering on what we promise. COURAGE We have the conviction to step outside our comfort zone and make a difference. PEOPLE The cornerstone of the business / 4 DRA Global Annual Report 2020 / ACN 622581935 // Who is DRA Global / Services Services Markets Originate - Project Development Specialists in engineering and consulting to advance conceptual, pre-feasibility and bankable to successful project implementation. DRA’s experienced consultants act as an extension of the customer team, providing insights, guidance and expertise that has a tangible impact on successful project development. feasibility studies through Deliver - Project Delivery and Execution World-class engineering solutions that add real value through fit-for-purpose engineering solutions, unrivalled expertise, design capabilities and project management skills. Customers recognise the value of DRA’s comprehensive knowledge and broad experience in EPCM, EPC and hybrid project execution solutions. This extensive expertise consistently delivers for our customers. Optimise - Operations and Maintenance Insight, analysis, strategy and advanced technology to reduce operating and maintenance costs while enhancing productivity and yield. Potential areas of improvement exist within any facility – DRA helps customers make the best operational decisions within specific time and capital constraints. Additionally, DRA provides expert outsourced operations and maintenance solutions. CORE VALUES SAFETY We care for each other. Safety and well-being is our first consideration. INTEGRITY Do what is right for the right reasons. EXCELLENCE We continuously strive to be better. TRUST We build relationships by delivering on what we promise. COURAGE We have the conviction to step outside our comfort zone and make a difference. PEOPLE The cornerstone of the business Minerals and Metals Processing Mining Infrastructure Industrial Energy Water DRA Global Annual Report 2020 / ACN 622581935 / 5 // Who is DRA Global / Year at a glance Year at a glance $938M Revenue FY19: $1,033M $188M Gross Profit FY19: $203M $77M Underlying EBITDA1 $44M Underlying NPAT 1 FY19: $91M FY19: $48M 8% Underlying EBITDA margin1 5% Underlying NPAT margin1 FY19: 9% FY19: 5% $204M Cash at Bank FY19: $127M $309M Net Assets FY19: $332M 27.49 cents Basic earning per share 27.39 cents Diluted earning per share FY19: 43.78 cents FY19: 43.78 cents 1. This is a non-IFRS measure. For an explanation of how DRA uses non-IFRS measures, please see page 46. / 6 DRA Global Annual Report 2020 / ACN 622581935 Year at a glance // Who is DRA Global / Year at a glance Operational highlights: 2020 Establish office in Santiago, Chile DRA awarded CHP contract for projects Bravus Mining and Resources in Australia COVID-19 pandemic forces the closure of borders, restricted travel, limited new investment and deferred DRA secured two contracts at Olympic Dam. DRA awarded Kalium Lakes Potash contract in Western Australia Kamoa-Kakula flagship project continues to reach milestones and continued delivery despite COVID-19 Tri-K EPC project in Guinea continue progress despite COVID-19 August 2020, DRA Operations in South Africa back to full operation after COVID-19 shut-down Secured nearly $1 billion of new work in 2020 despite impacts of COVID-19 DRA Global Annual Report 2020 / ACN 622581935 / 7 Chairman’s report Dear Shareholders, The extraordinary events of 2020 are already well documented and, as I write this Report, the COVID-19 pandemic continues to impact us all. It is through the lens of the pandemic that I would like to reflect on the year and report on the incredible progress DRA Global has made over the past 12 months, in spite of the challenges we faced. The pandemic brought into sharp focus the importance and high priority for the health, safety and wellbeing of our people, who are at the core of everything we do. I congratulate the Executive Team for a job well done during 2020 in managing the continuity of our business and appreciate their ongoing efforts in remaining vigilant as we continue to grapple with the effects of COVID-19. With a global workforce of more than 4,500, across 20 locations, it is not surprising that the pandemic has had a direct and very real impact on our people and their families, and on behalf of the Board I send our thoughts and support to all of those affected. A positive outcome of the pandemic has been the ability to test the resilience of our business and while we have come though this challenge well, we will continue to make a concerted effort to improve the operational safety performance of DRA. You will be aware that in 2015-2016 we undertook a strategic process to develop a five-year plan for the Group. This plan set out a number of commitments, including to become a $1 billion revenue company, growing our non-South African revenues and taking the necessary steps to redomicile DRA from South Africa in order to create a platform for further international growth, including being listed on the ASX and JSE. While these commitments were made prior to my time, I am delighted to report that the Board and Executive Team have met these commitments to shareholders and, all going well, we expect DRA to become publicly listed in 2021. A key supporter of developing and delivering that five-year plan has been Leon Uys, DRA’s former CEO and a long-term servant of the Group at an Executive level, as well as serving as a Non-executive Director since 2013. It is therefore somewhat appropriate that, having seen the culmination of his plan, Leon has chosen to call time on his career with DRA and resigned in early May. I know I am joined by the extended DRA family in thanking Leon for his enduring service and wishing he and his family every future success. // Who is DRA Global / Chairman’s report Peter Mansell While the pandemic stymied our ability to run a typical in person strategic planning process, this is a Board and Executive priority for 2021. An IPO is multi-faceted, with the alignment of all existing shareholders being a fundamental component. Back in 2016, Stockdale Street’s investment in DRA was ‘fit for purpose’, providing a partial exit for former employee shareholders and the support for DRA Global’s growth strategy. However, with its primary investment focus being on private opportunities, the run-up to DRA’s public listing was a natural exit point for Stockdale and in January 2021, a process to buy-back Stockdale’s shares commenced. Throughout my tenure as Chairman, the Board has been unwavering in tackling issues head on and smoothing the path ahead in the interests of all shareholders. With change on the horizon and following Stockdale’s exit, we have refreshed the Board, including the resignation of Ken Thomas and Stockdale’s representatives stepping down, paving the way for further independent directors to join the Board. To this end, we recently welcomed Paul Lombard to the Board as an independent Non-executive Director. Paul will make a valuable contribution to the Board with his significant experience working throughout EMEA, and as a South African based Director. Looking ahead, I am extremely optimistic about the opportunities for DRA, our people and our customers. / 8 DRA Global Annual Report 2020 / ACN 622581935 Chairman’s report // Who is DRA Global / Chairman’s report While we are sure to encounter more unexpected challenges in the coming 12 months, we can all draw from the experiences of 2020 and the knowledge that DRA has the resilience and the Team to prosper. Finally, I would like to acknowledge and thank Andrew Naude, his Executive Team and the hard-working people of DRA for their focus on customer delivery through difficult circumstances. The Board salutes you and, when circumstances permit, looks forward to thanking you in person. Thank you again. Stay safe and well. Sincerely, Peter Mansell Chairman Peter Mansell DRA Global Annual Report 2020 / ACN 622581935 / 9 // Who is DRA Global / Managing Director and CEO’s report Managing Director and CEO’s report Dear Shareholders, It is with great pleasure that I provide this Managing Director’s Report for DRA for the 2020 year, one for which I am extremely proud of our team and its performance. DRA is generally known as “…a diversified global engineering, project delivery and operations management group…”, but fundamentally we are a people business that delivers innovative, timely and fit-for-purpose solutions to our valued customers. Most importantly, DRA remained steadfast on its safety focus. Working towards Zero Harm is a job that is never complete – there will always be room for improvement, and we remain committed to the goal of becoming a 0.0 LTIFR business. DRA employs over 4,500 staff across the globe and their safety is a core focus for the management team. I would like to acknowledge the hard work of our people across the Group for their commitment to creating a safe workplace and ensuring everybody is part of the DRA safety program. Navigating COVID-19 Amid the emergence of the COVID-19 pandemic in 2020, which disrupted global markets and has shaped a “new normal” for business, DRA continued to perform well. In 2020 DRA delivered another healthy profit and ended the year in a strong cash position, which demonstrates the robustness of the Group. As the pandemic continues to disrupt activities across many regions, the mining and resources industry has shown resilience, and DRA’s people have and are continuing to demonstrate lateral thinking, adaptability and a “can do” attitude to get the job done, in spite of the uncertainty. Clearly, the impact of the pandemic will continue well into 2021 and beyond, so we will remain focused on maintaining the health, safety and wellbeing of our people and their families, our customers and our business partners. DRA’s people-first culture At DRA we are committed to building an entrepreneurial culture, providing our people with the autonomy and a sense of ownership. To achieve this, we are creating a company with bench-strength of leadership at all levels, and an operating model that facilitates empowerment, autonomy and effective delivery. In 2020 we successfully increased collaboration and integration in our Europe, Middle East and Africa (EMEA) region through the sharing of resources, expertise, talent and ideas-generation, across the DRA Projects, SENET and Minopex capabilities. Andrew Naude In 2021 we plan to extend this to our growth region of Asia- Pacific (APAC) and the Americas (AMER). Over the 12 months to 31 December 2020, we also invested significantly in resourcing key corporate functions and believe these investments will support our long-term strategic growth journey, including strengthened governance, business continuity and resilience across all our operations. To create a thriving, future-fit organisation, and to pivot our employees to the new world of work, we have rapidly shifted our workforce to remote and flexible working arrangements, whilst also investing in technology and practices to support this. We also initiated a comprehensive employee wellness program during the year, to support our teams, work, financial, physical and mental health. Building long-term customer engagement DRA’s commitment to being a leader amongst industry peers, through an unwavering customer focus, came to the forefront in 2020 against a challenging and unpredictable macroenvironment. This was evidenced by winning repeat work from our loyal customer base, including some multi-year contracts . DRA works across the full spectrum of customer needs in the resources sector, offering a true end-to-end service. We embarked on a Group-wide initiative during the year to bolster engagement with our customer-base, yielding great results for both them and DRA. While the future always has elements of uncertainty, what is clear to DRA is that demand for skills and expertise will increase, customers will continue to seek out new and more efficient technologies, and further innovations and safety performance will be paramount. Helping drive a sustainable, low-carbon economy while giving back to the communities in which DRA operates, is increasingly becoming a must, rather than a choice. It’s our view that / 10 DRA Global Annual Report 2020 / ACN 622581935 // Who is DRA Global / Managing Director and CEO’s report customers will come back again and again, to an engineering, project delivery and operations management company that is forward-thinking. For DRA this means creating an atmosphere that is conducive to creativity, growth and shared success. Over the past year DRA has continued to grow its orderbook. The longer-term forward opportunity pipeline has also increased, with qualified opportunities of around $8 billion, across projects, operations, maintenance and shut-down services, which is a record for DRA. Operational excellence In 2020, DRA also embarked on an ambitious operational excellence program across the group. The program focused on creating synergies between the various functional groups and operating businesses. Through our investment in the operational excellence program, we have been able to generate savings through efficiencies, as well as better integration of systems and processes. The program has also been instrumental in enabling DRA to be IPO ready in 2021. Delivering shareholder value Over the past year and amidst very challenging conditions across the world DRA continued to deliver on, and was involved in, some iconic projects. I would like to acknowledge the hard work of our teams on their dedication and diligence in delivering these projects. DRA’s involvement in the Kamoa-Kakula project, which upon completion will be one of the largest copper mines in the world, was a particular highlight. DRA continues to provide services across the underground mine development, process plant and associated infrastructure. DRA’s man-hours across the project are in excess of five million and with zero LTI’s which is a remarkable accomplishment. Another significant project in execution for DRA is the Tri-K gold project. Here again, the team worked throughout the COVID-19 pandemic with zero LTI’s and is on track to achieve first gold in 2021. From operating and maintaining the highest diamond mine in the world in Lesotho, to providing owners support to new customers in Peru and Russia and from performing shut- down services in the Australian outback to delivering world-class projects across the African continent, the entire DRA team can be proud of their achievements. Health, safety and wellbeing Over the year, DRA employees and contractors delivered more than 12.3 million man hours across customer projects, and over 7.7 million additional man hours across operations, maintenance and shut-downs, achieving LTIFR of 0.24 per 200,000 man hours and TRIFR 0.72 per 200,000 man-hours. Our Projects business achieved a LTIFR of under 0.1 in 2020, a fantastic achievement which reflects our unwavering focus on safety. Zero Harm remains at the forefront of all DRA operations and our focus on safety is unwavering, transcending our diverse workforce across various demographics and geographies. Our safety culture is centred around six key pillars, being: / Leadership / Environment / Employee engagement / Behaviour / People / Systems We will continue to adopt a progressive mindset in our approach to safety and work closely with our customers and our industry to eliminate safety incidents from the workplace. Looking ahead The next 12 months are pivotal for DRA and I am excited about what lies ahead. We remain on track to deliver against our goals culminating, we hope, in DRA being recognised as a leading global engineering, project delivery and operations management service provider to the mining, minerals and metals market. From a corporate point of view, 2021 will bring a heightened profile and new demands from our stakeholders. Preparing to list is a major step for the Group and will provide the necessary platform to support DRA’s longer-term strategic aspirations. Having worked through the challenges of 2020 successfully and with a strong pipeline of work in front of us, the outlook for our operational performance is also healthy. To conclude, I would like to acknowledge and thank our Chairman, Peter Mansell, and the Board as well as my Executive Team for their commitment and support over the past 12 months. Learning from and being part of such an inspirational team is humbling and I am grateful for the guidance and backing I receive from my colleagues. Stay safe and best wishes for 2021. Sincerely, Andrew Naude Managing Director and CEO DRA Global Annual Report 2020 / ACN 622581935 / 11 // Who is DRA Global / How DRA creates value How DRA creates value Corporate social responsibility A key component of any company of integrity, is an investment in its licence to operate or, more typically articulated, its Corporate Social Responsibility (CSR). As part of this, DRA works with its customers and suppliers to deliver sustainable economic, social and environmental outcomes at every opportunity. In the broader context of CSR, DRA’s strategic pillars are centred around: / Empowering talent both now and in the future, through setting people up for success and excellence through the provision of a safe, healthy and inclusive working environment, that promotes diversity and wellbeing. / / Inspiring people with their career development, encouraging ownership and innovation and investing in the future of engineering to attract the best talent to serve DRA’s customers. Investing in communities and supply chains in which DRA operates. DRA will continue to develop this by creating a positive and enduring impact on the local communities where we do business through strategic partnerships and meaningful engagement. / Focusing on building a resource efficient, low carbon future, by helping customers succeed decarbonisation commitments through the delivery of innovative, resource efficient and climate resilient engineering solutions and capital assets. in their / Supporting production of the minerals and metals necessary in a low carbon future and acting responsibly to minimise our impacts on the environment. In every operating jurisdiction, DRA is committed to constantly deliver excellent service in the most efficient way possible, for the shared benefit of customers, shareholders, employees, stakeholders and communities in which we are operating. DRA designs and delivers complex engineering solutions for customers who value certainty and long-term value creation through efficient design. This approach allows DRA to build long-term partnerships, from the very earliest engagement, with customers and strategic partners who value and share DRA’s commitment to forward-thinking and intelligent engineering, delivered smartly. DRA’s approach to the origination, delivery and optimisation of capital projects is trusted by customers. / Originate: Customers rely on DRA’s extensive knowledge in engineering consulting to advance their conceptual, pre-feasibility and bankable feasibility studies through to successful project implementation. / Deliver: Comprehensive knowledge and broad experience in EPCM, EPC, construct-only and hybrid solutions deliver world-class, fit-for-purpose engineering solutions that add real value. DRA’s design capabilities and strong project management skills ensure the successful implementation of projects across multiple geographies and sectors, often under challenging conditions. / Optimise: Insight, analysis, strategy and advanced technology are employed to reduce operating and maintenance costs while enhancing productivity. Potential areas of improvement exist within any facility; DRA’s operations and maintenance business provides insight, analysis, strategy and advanced technology to help customers make the best operational decisions to achieve the right outcomes within specific time and capital constraints. / 12 DRA Global Annual Report 2020 / ACN 622581935 Market trends Regional The COVID-19 pandemic delivered challenges but also opportunities to commodity markets across APAC, target business regions. The outlook remains uncertain and depends on the duration and AMER, and EMEA, DRA’s severity of the pandemic. On a positive note, the global level of mining activity has picked up significantly from March 2020. The number of projects reporting drill results increased 32% from December 2020 to January 2021, demonstrating the uptick in exploration budgets in the second half of 2020. Exploration activity appears to be gathering momentum, alongside commodity prices, which is positive for DRA’s business and key regions. Platinum Over recent years, platinum – widely used as an auto catalyst for chemical reactions – has benefited from a slower than expected uptake of electric vehicles (EVs) globally. EV battery unit prices remain too high to entice customers to swap from cheaper, conventionally powered vehicles. Nevertheless, given palladium’s higher price (preferred in petrol engines), it is expected that petrol vehicle manufacturers will substitute platinum for palladium in their catalytic converters in the future. We expect DRA’s strong reputation in platinum will continue to provide a platform to build a full value chain offering, including project delivery and ongoing operations and maintenance. Gold The trend in gold remains driven by uncertainty and fear of the economic future. With the weaker global economic outlook today, uncertainty continues to build and is increasing gold prices and demand. In response to the COVID-19-related economic downturn, global governments and central banks increased fiscal and monetary spending. This has directly benefited the gold sector with growing demand, rising prices, and increasing capital investment from miners looking to take advantage of higher gold prices. DRA elevated the gold sector to one of its strategic focus areas and we expect it to remain a key area of investment in the coming years. Copper Global macro trends such as an increasing global population, the clean energy movement and economic growth in underdeveloped (i.e. African countries) and developing nations (i.e. China), continue to drive copper demand. Copper has widespread applications across the economy, including in construction, infrastructure, electronics and power generation. This demand is reflected in the copper price, which has been in an uptrend and reached an eight-year high in 2020. DRA has a well-established global business, servicing the front- end and delivery phases of copper projects around the globe. From a regional perspective, DRA remain focused on the regions where it sees the most projected growth and are pursuing the significant copper needs of these projects. Metallurgical Coal Historically, metallurgical coal has been an essential product in the steel-making process. The trend is unlikely to change over the medium term. Despite the research into finding a substitute product it could be years before an economically viable replacement heat source is developed. China’s growing steel industry is facing rising costs which is a promising positive indicator for metallurgical coal prices and demand in the future. DRA remains environmentally metallurgical coal projects. focused on delivering sustainable and friendly practices across our customers’ Iron Ore Global megatrends such as urbanisation, population growth and infrastructure continue to drive long-term demand in the iron ore market. While the overall trend is positive, a constant balancing equation between feedstock and market dynamics continues, with nations having differing iron ore appetites. For this reason, China, Africa, and North America appear to be the leading hotspots for iron ore demand and capital expenditure in the coming years. DRA’s focus is being driven by our iron ore customers in Australia. Given DRA’s reputation across the iron ore sector, servicing the world’s largest iron ore miners, the focus will remain on expanding extensive delivery capabilities to meet customer demands. DRA’s operating business DRA is committed to providing engineering excellence through all stages of the project life cycle, from concept through delivery, commissioning, operations and rehabilitation. // Who is DRA Global / DRA’s operating business Over the past three decades DRA has operated and maintained 46 mineral processing plants and commissioned 62 processing plants. DRA operates two distinct but interconnected operating divisions, namely Projects and Operations. DRA’s core business focuses on delivering these services to a diverse customer base from junior miners to global tier-1 multi commodity customers exclusively in the minerals, metals and mining resources sectors. Projects Division Operations Division The DRA Projects’ provide mine-to-port operational services across the Asia-Pacific region, Europe, the Middle East, Africa and the Americas. DRA’s team of talented professionals draw on comprehensive knowledge and extensive experience to deliver world-class, fit-for-purpose engineering solutions that add significant value. From scoping and pre-feasibility, to final hand-over, in addition to interim or ongoing operations and management, the DRA team of professionals adds value across the entire lifecycle of a project. Project delivery is provided in various contracting solutions including Engineering, Procurement and Construction Management (EPCM), Engineering, Procure and Construct (EPC), Cost reimbursable, Lump Sum Turnkey (LSTK), Agreed Target Cost (ATC) and Build, Own, Operate, Transfer (BOOT). DRA‘s leading design capabilities and excellent project management skills ensure the successful implementation of projects across multiple countries, commodities and sectors. Contract operations and maintenance is a unique business model for mineral processing throughout the world, as companies look for innovative ways to reduce operating and maintenance costs and improve productivity. DRA is a leader in contract operations and plant maintenance. The organisation adds value to mining operations across the world by meeting the unique needs of its customers. From coal, chromite and ferrous metals, to diamonds, gold and platinum, DRA offers a wide range of services designed to make mineral processing requirements more cost effective while maintaining product quality, plant integrity and worker safety. DRA delivers Operations and Projects across two main regions. Europe, Middle East and Africa (EMEA) This region includes the DRA Africa Projects business, and wholly owned subsidiaries Minopex and SENET. DRA Projects focuses on medium to large EPCM, EPC, engineering, studies and mining solutions across the region. SENET has a focus on hydrometallurgy, gold EPC projects in West Africa, selected long-term key customers and junior mining customers. Minopex provides operations and maintenance, and associated services of mineral processing plants, through multi-year contracts, as well as optimisation and advisory services. / 14 DRA Global Annual Report 2020 / ACN 622581935 DRA’s expansion into the Andean region in South America during 2020 continued its steady growth and is showing impressive results. In this market, the focus has been on securing and delivering successful outcomes to the Las Bambas and Antamina mines in Peru. Across the AMER market, DRA has continued to provide services to a range of customers from tier-1 multinationals, such as Anglo American and Kinross, to junior exploration companies. // Who is DRA Global / DRA’s operating business DRA’s portfolio in EMEA occupies a leading competitive position in this market. The Group’s position in the EMEA region is fundamental to the strategy of the Group. DRA’s suite of services in the EMEA region in 2020 comprised fully reimbursable and fixed-price work, providing customers with a best-for-project solution. The EMEA region is also DRA’s global centre of excellence in mining, hydrometallurgy (including proprietary heap leaching equipment), operations and maintenance, operational readiness and information modelling. Australia and Americas (APAC/AMER) Also divided into Projects and Operations divisions, APAC is a growth region within DRA and offers services to the Australian resources industry. Throughout 2020, DRA has grown its customer base across the APAC region. Within Australia, DRA provides maintenance and shut-down services, mainly on the Australian east coast, to tier-1 coal miners, through its wholly owned subsidiary, G&S Engineering Services (G&S). G&S is regionally based in central Queensland, enabling the ability to service a niche market in the Australian mining industry. In 2020, DRA established an Operations and Maintenance (O&M) division aimed at providing O&M services to the Australian market, leveraging the skills of Minopex and resources of G&S. DRA secured some small, initial O&M assignments and delivered these successfully. Transferring knowledge from Minopex has been a key component of the set-up of the O&M business in Australia in 2020. DRA’s EPCM, EPC and studies work in APAC is delivered through the Projects division. DRA has a diverse portfolio of service offerings in the APAC region and has in a very short time become recognised in the region. DRA’s presence in this market increased substantially in 2020 and the Group delivered projects at various stages for key customers including Newmont, Northern Star, BHP, Rio Tinto, Bravus Mining and Glencore. In 2020, the Americas region had a similar business model to the rest of DRA. In 2020, the Operations division, DRA Energy Operations, operated and maintained 18 refined coal processing facilities across several states in the USA. The Projects division delivered mostly studies, engineering and owners support across the AMER region. DRA Global Annual Report 2020 / ACN 622581935 / 15 // Who is DRA Global / Areas of operation Areas of operation In 2020, DRA continued to expand its geographic footprint. The Group established offices in Peru and Chile and expanded its Australian operations by opening a new office in Adelaide. DRA provides services to customers from 20 strategically positioned offices across the globe, offering a unique set of global and local market perspectives. / 16 DRA Global Annual Report 2020 / ACN 622581935 Areas of operation // Who is DRA Global / Areas of operation OFFICES AMER APAC EMEA DRA Global Annual Report 2020 / ACN 622581935 / 17 // Who is DRA Global / Strategy and outlook Strategy and outlook DRA will target controlled, long-term value appreciation by focusing relentlessly on delivering visible, value-add solutions that reinforce our reputation and demonstrate our values to our customers in markets, sectors or commodities where we have (or can build) a clear competitive advantage. Where we come from Between 2017 and 2020 DRA implemented a global expansion and diversification strategy, which significantly expanded global reach and capabilities. DRA achieved its strategic objective for this period by increasing scale, establishing an international platform for growth, maintaining a strong annuity earnings base and achieving revenue growth targets. Where are we now Over 4,500 employees across 20 offices, with a significant orderbook and pipeline of opportunities. Enhanced scale, capabilities and global diversity. Focus on a group-wide operating model. Where are we going Combine DRA’s extensive experience and world class expertise with a mature operating model to deliver operational excellence across the Group and position as a preferred partner to high value customers. Continue geographic and service offering expansion. / 18 DRA Global Annual Report 2020 / ACN 622581935 Strategy and outlook Acquire complementary businesses / Undertake selective M&A to expand capabilities and establish presence in new markets. Medium-term focus on building capacity and capability in the AMER region. / Other bolt-on type acquisitions will be pursued to acquire specific capability or expertise for the global business. Maintain and develop customer relationships / Focussed customer relationship management practices, with a focus on partnering with top and mid-tier miners (multi- asset owners) and select junior mining customers where deep expertise, delivery credibility and contracting flexibility are valued. / Focus on involvement throughout the project lifecycle, enhanced customer lifetime value. // Who is DRA Global / Strategy and outlook Key strategic growth areas: DRA’s market position and reputation in relevant markets will enable the Group to continue to grow through the award of new work and extension of existing contracts. In addition to growth through securing new work from existing markets and customers further growth as follows: Market positioning / Aspire to be the natural choice in the project delivery mid- market, targeting multi asset miners and emerging resource developers which value true expertise, credibility and flexibility. / An attractive alternative to owner-operation specifically for emerging resource developers, joint operations and developers reliant on external funding. / Maintain strong market position in EMEA. Position as an alternative provider to top and mid-tier mining groups in APAC/AMER with local presence, global expertise. Geographic expansion / Continued growth and execution in APAC: – The Australian metals and mining market represents a significant growth opportunity. DRA is still relatively new and low profile in the region with a significant and growing pipeline of opportunities. / Short-term focus on execution of current opportunities. / Build presence and profile in AMER: – The Andean region of South America is an attractive market for DRA’s services due to the commodity profile of copper and gold and scale of mines. – Medium-term focus on gold and copper. Service offering expansion/diversification / Develop advisory capacity in capital projects and operations by leveraging existing expertise, capabilities and IP. / Expand DRA’s underground mining service offering within EMEA and later into APAC/AMER. These are long-term capital projects which routinely present follow-on opportunities, resulting in annuity style earnings over long periods of three to five years (up to 15 years). / Develop a portfolio of sustaining capital management customer relationships. DRA Global Annual Report 2020 / ACN 622581935 / 19 // Who is DRA Global / Sustainability report Sustainability report Forward thinking, engineering a more sustainable future, together. DRA has delivered thousands of projects and studies across six continents with varying climates, cultures, legal systems and social conditions. DRA is aware of social, environmental and economic disparities across the world and it is uniquely positioned to deliver solutions that create tangible and lasting value for all its stakeholders. DRA‘s long-term success depends on operating in economically and socially sound environments and the Group strives to build a more sustainable, equitable and inclusive future. DRA is committed to acting in an ethical and responsible way that is in the interest of all its stakeholders, including its employees, customers, shareholders and the communities where it operates. The Group’s leading engineering design offering spans the full value chain, from mine-to-port. This allows DRA to help its customers meet their sustainability objectives and identify opportunities to widen their positive impact in the delivery of their projects. Against Environmental, Social and Governance (ESG) objectives. this backdrop DRA is disclosing its inaugural Climate change action Recognition in the understanding of the effects of climate change along with the physical and transition risks and opportunities present to tackle the challenges. Engineering services have an opportunity to play an important role in the transition to a lower carbon economy and climate change mitigation through solutions, service offerings and technical advice. Climate change will have significant implications for engineering services firms, directly through impacts to people and assets, and indirectly through implications for the industries serviced. Environmental impacts Managing, protecting and rehabilitating the environment across the life cycle of a project is critical to maintaining social licence to operate, and is a regulatory requirement in the majority of regions DRA operates across. DRA has an opportunity to contribute to sustainable development by planning, advising on and delivering projects that preserve natural resources, reduce GHG emissions, reduce waste, reduce the life cycle impacts of a project and more efficiently extract and process resources. Community investment Corporate responsibility in this industry includes investing in communities to improve livelihoods, contribute to economic and sustainable development and maintain social licence to operate. Supporting local suppliers, contractors and workers builds local capabilities and provides economic opportunities to local communities. Talent attraction and retention Diversity and inclusiveness is key to building a resilient organisation and enabling growth. Increasingly, diversity and inclusion is also necessary to attract talent, while equity, the fair treatment and elimination of systematic barriers, is vital for retaining talent and remaining competitive in the eyes of stakeholders. Health, safety and wellbeing Maintaining workforce health and safety is of paramount importance in the mining, engineering and infrastructure industry, and is key to maintaining an operational and social licence to operate. Increasingly, the definition of health and safety is being extended to include physical, emotional, financial and mental wellbeing. With regard to safety reporting, DRA has embraced the trend and moved away from lag indicators such as safety incidents (outputs), towards leading indicators that focus on pro-active, preventative measures (inputs). Sustainable supply chains Supply chain traceability is rising in importance, driven by new laws and the growing concerns of consumers. Customers,investors and employees are increasingly conscious of the foreign supply chain footprint of their organisation. Ethical business conduct Social licence to operate refers to the ongoing community and stakeholder acceptance of a company’s activities; an “informal licence”. Social licence to operate is often at the top of key business risks for many companies regardless of where they are operating. / 20 DRA Global Annual Report 2020 / ACN 622581935 Sustainability report // Who is DRA Global / Sustainability report DRA’s approach to ESG Governance and risk management Human rights Respect for human rights is fundamental to the sustainability of DRA and the communities where it operates. In accordance with its Code of Conduct and company values, DRA is committed to ensuring that people are treated with dignity and respect, always. This policy is guided by international human rights principles encompassed in the Constitution of the Republic of South Africa, the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the United Nations Global Compact and the United Nations Guiding Principles on Business and Human Rights. Charters Committee charters define the role and responsibility of the committee within the governance framework of DRA. Each member of the Audit and Risk Committee, the People, Culture and Remuneration Committee, and the Sustainability and HSEC Committee meet the independence requirements of Australian regulations. DRA‘s high standards are reflected in its Code of Conduct: / Board Charter; / Audit and Risk Committee Charter; / Sustainability and HSEC Charter; / People, Culture and Remuneration Charter; and / Nomination and Governance Committee Charter. to support the Group’s commitment DRA is committed to a code of conduct that meets good legal and ethical standards, and a commitment to doing business with integrity and honesty. Strict policies and practices are maintained to good corporate governance. DRA strives to create tangible value for its customers, employees, shareholders and the communities where it operates and the Group’s Board of Directors provide the necessary guidance to ensure these activities are in the best interests of these stakeholders. DRA prioritises transparency, accountability and responsibility in achieving its objectives, managing risks and ensuring compliance. Charters and policies DRA acknowledges that good corporate governance requires an ongoing commitment to structures and processes. The following charters and policies have been developed to assist all employees in the performance of their daily duties. Speak Up DRA strives to prevent any form of dishonest, irregular and unethical behaviour in business affairs. In order to live up to this commitment, DRA encourages employees and stakeholders to convey any serious business-related concerns they may have through the established reporting channels. Anti-bribery and anti-corruption DRA’s policies clearly state that the Group takes a zero- tolerance approach to bribery and corruption in both private and public sector transactions. This position extends to facilitation payments. DRA Global Annual Report 2020 / ACN 622581935 / 21 // Who is DRA Global / Sustainability report Strategy In 2020, DRA completed an ESG materiality assessment and strategy development process to ensure the Group is operating at the highest level, both now and in the future. The materiality assessment process combined the methodologies from the Global Reporting Initiative and the Sustainability Accounting Standards Board and enabled the Group to develop both outward and inward-looking perspectives of the most significant ESG risks and opportunities. The process involved the following key steps: / Identification: Value adding issues were identified by reviewing ESG trends in DRA’s operating context, including global megatrends, sector issues and the views of stakeholders, competitors and customers. / Prioritisation: A strategic workshop was hosted with senior leaders to prioritise DRA‘s material ESG issues. Workshop participants prioritised the issues in terms of the direct impact they have on the business performance and the significance of this impact, the scale of the societal challenge, and related stakeholder awareness and needs. This resulted in the identification of seven strategic focus areas and six responsible business items which are deemed material to DRA’s sustainability and that of its stakeholders. / Consolidation: Focus areas were grouped thematically, which led to the identification of three distinct, yet interconnected, pillars. Commitments were then developed based on DRA’s business model, value proposition and capabilities to ensure that the Group’s ESG activities leverage and serve the core of the business. DRA’s Strategic Pillars: Creating value for the business and society Empowering engineering talent, now and in the future Investing in our communities and local supply chains Building a resource-efficient, low-carbon future Setting people up for success and excellence by providing a safe, healthy and inclusive working environment promoting diversity and wellbeing Empowering people with their career development and encouraging ownership and innovation Investing in the future of engineering professionals to attract the best talent to serve customers Creating a positive and enduring impact on the local communities where DRA operates through visible and meaningful community engagement and investment Building capacity and capability in the community for supply chain resilience and lasting local economic self-sufficiency, in partnership with industry and governments Helping customers succeed in their decarbonisation commitments by delivering innovative, resource efficient and climate resilient engineering solutions and capital assets Assisting to produce the minerals and metals necessary in a low carbon future Acting responsibly to minimise impacts on the environment Prioritisation: What matters to DRA’s business and stakeholders Strategic focus areas Talent pipeline Mental health and wellbeing Community engagement Supply chain resilience Transition to a lower carbon economy Natural resource management Physical impacts of climate change Responsible business issues Employee value proposition Diversity and inclusion Zero harm and safety culture Local/regional economic development Responsible/ethical supply chain Environmental compliance (incl. pollution, and biodiversity) / 22 DRA Global Annual Report 2020 / ACN 622581935 // Who is DRA Global / Sustainability report Approach to Pillar 1: Empowering talent, now and in the future Zero harm and total safety culture / DRA pushes the boundaries of convention to develop new, smarter and safer ways of working in an ever-changing environment. The Group is committed to ensuring that every employee remains healthy and returns home safely every day. DRA takes every reasonable practical measure to eliminate workplace injuries and health risks. / DRA have also developed a health, safety and environmental (HSE) management system that is custom- made for its operations and aligned with the international standards of OHSAS 18001. This enables the Group to develop new initiatives and mindsets and to share its experiences and findings in this area. / Every employee at DRA forms part of the Group’s safety team ensuring there is a continued focus on driving the right behaviours across all levels resulting in exceptional safety records being achieved on projects of all sizes and complexities. Total Safety Culture Leadership Senior leaders are committed to cultivating a HSE culture and actively live DRA’s core values. Environment The physical environment (facilities, procedures and people) allow safe performance. Employee Engagement Employees are actively engaged with their work thereby gaining a full understanding of their workforce. Behaviour People perform “Safe” behaviours. People When people have positive perceptions of themselves, their co-workers and the organisation, they are willing to go beyond the call of duty. Systems Our HSE organisational systems support the “pin-pointed” behaviours required of our workforce. Mental health and wellbeing Talent pipeline / Employees are the cornerstone of DRA’s business. The mental health and wellbeing of employees was a priority for the Group before the outbreak of COVID-19 and the global pandemic has led to an even greater emphasis being placed on the holistic wellbeing of employees. / In 2020, DRA launched a Group-wide program that focuses on the five pillars of employee wellbeing, namely occupational health, mental and emotional wellbeing, financial wellness, physical health and social and community support. / The Group also repeated its successful mental health programs and events including Movember, World Suicide Prevention Month, R U OK? Day, CANSA Shavathon, Mandela Day and the MSWA Ocean Ride. / DRA values the expertise and capabilities of its employees and develops these capabilities to boost the Group’s performance and innovation. Employees are equipped with the necessary tools and knowledge and given the opportunities to develop into industry leaders. The Group has created a strong culture of encouraging employees to focus on performance, value their customers and their goals, and respect each other. The Group has a collaborative environment where people share their ideas and knowledge across departments and country offices to deliver innovative, world-class solutions. DRA Global Annual Report 2020 / ACN 622581935 / 23 // Who is DRA Global / Sustainability report DRA’s response to COVID-19 COVID-19 taskforce Wellness and safety The DRA COVID-19 taskforce meets regularly to review the latest data and take the necessary action to ensure that the Group follows international best practices in its response to the pandemic. Ongoing communication DRA is monitoring the situation daily to share insights and updates with employees and customers across the world. COVID-19 created a new wave of challenges to navigate, but none as dire as maintaining the wellness and safety of DRA people. Along with implementing remote work for our employees, DRA rolled out new ways of working on sites for employees who continued to provide critical services to customers. This included additional sanitation measures, physical distancing and additional PPE as well as temperature check and working with customers to create COVID-19 safe work bubbles The Group also increased communication with team members for regular check-ins, directed employees to the Employee Assistance Program and held Zoom fitness sessions to keep spirits up. Action in case of infection Resilience of the business to support customers DRA has procedures in place to swiftly isolate employees who may require medical treatment or testing. The Group implemented plans and procedures to help its workforce operate safely during the pandemic. Remote working To meet government requirements and protect the safety of its staff, DRA has implemented a remote working policy across all its offices and those of its subsidiaries, SENET, Minopex and G&S. DRA has implemented a work-from-home strategy in these locations to help ‘flatten the curve’ of the COVID-19 pandemic. DRA has implemented the use of technologies across its offices to conduct internal and external meetings. The Group is committed to a flexible work environment and has the technology, infrastructure and systems to support uninterrupted service to its customers. DRA continues to work toward completing current projects and studies on schedule. The Group actively identify risks that may disrupt the project and collaborate with its customers to achieve the best possible outcome. / 24 DRA Global Annual Report 2020 / ACN 622581935 // Who is DRA Global / Sustainability report Approach to Pillar 2: Investing in communities and local supply chains Approach to Pillar 3: Building a resource-efficient, low- carbon future Community engagement Transition to a lower carbon economy / DRA has developed strong and lasting relationships with host communities during its years in business. The Group continues to emphasise the importance of these relationships in its business strategy. / To have a long-term impact on economies and contribute to sustainable beneficial development, DRA engages with the community around the project tender process and includes them in various project phases through discussions and workshops. / DRA has a focus on utilising local talent so the community become an integral part of the Group’s projects and contribute to their success. / In 2020, DRA implemented a number of community upliftment initiatives through its integrated approach to project delivery. The Group continues to invest in people through socio- economic development. Supply chain resilience / DRA is committed to building capacity and capability in the community for supply chain resilience and lasting local economic self-sufficiency, in partnership with industry and governments. / DRA has a history of working with upstream suppliers to develop reliable and resilient supply chains. Furthermore, DRA recognises that sustainable supply chain processes and management is extremely beneficial to the communities in which we operate. / The metals and minerals required for the transition to a lower carbon future will require significant design, engineering, construction and operational expertise. / Building on DRA’s existing credentials both from a commodity perspective and presence in geographical locations where these commodities will be increasingly mined, the Group is well placed to support customers as part of this transition. / The Group recognises the importance of keeping pace with market and customer needs in the transition phase and ensuring it has the right expertise and solutions to meet the customer’s evolving needs. Natural resource management / DRA is well-positioned to help businesses understand the implications of their choices by offering a perspective on the end-to-end value chain. The Group is involved in the early design and development of projects through to operating and maintenance. / The Group’s businesses, DRA Nexus and SENERGY, have resource efficiency and innovation at their core. Their recent projects highlight the synergies between resource stewardship, community investment and responsible business practices. The carbon intensity of operations is also becoming a key area of focus, reflected by customer’s voluntary commitments to net zero targets and new tax incentives (e.g. the 12L energy efficiency incentive in South Africa). / DRA also contributes to environmental sustainability through its core service offering services in solar PV energy, wind energy, bio energy, hydro energy, conventional energy, transmission and distribution. An example of this during 2020 was the development of a Thermal, Solar PV and Battery storage hybrid system for the Kobada mine (African Gold Group/SENERGY (DRA)), which has led to annual savings and reductions of over five million litres of HFO and over 14 million kilograms of carbon dioxide emissions and other harmful emissions. DRA Global Annual Report 2020 / ACN 622581935 / 25 // Who is DRA Global / Sustainability report / DRA assisted Sycamore Mining to develop a power solution that leveraged the economic and environmental advantages of a Hybrid Power Plant at the Kiniero Gold project in the Kouroussa. The hybrid solution offers a 34% reduction in fuel consumption and emissions compared to a conventional diesel-only powered plant. The hybrid plant consists of five 1,500kW diesel generators, a 6.6MW Solar Photovoltaic Plant and a 2.5MW battery energy storage system. / The selection of a hybrid system over a pure thermal system will see the annual savings and reduction of five million litres of diesel and 13 million kilograms of carbon dioxide emissions, as well as other harmful emissions. The hybrid system will result in US$1.8 million of fuel cost savings annually, with no upfront capital costs and more than 30% of the power consumed will be generated through green energy. Physical impact of climate change DRA understands the importance of acting responsibly to protect the natural environment. DRA is committed to monitoring its environmental risk profile and developing innovative and sustainable solutions to minimise the impacts on the environments in which we operate. 2020 ESG achievements snapshot Health and Safety Total Recordable Injury Frequency Rate per million hours worked s c i t s i t a t S s t n e d c n I i Man-hours Worked FFR* LTIFR* TRIFR* Minor Injuries Recordable Injuries Lost Time Injuries Fatal Total Injuries * Frequency rates based on 200 000 man-hours DRA Group 2019 21,349,094 0.000 0.244 0.693 144 74 26 0 218 2020 15,444,807 0.000 0.324 0.881 118 68 25 0 186 / 26 DRA Global Annual Report 2020 / ACN 622581935 Females Headcount 173 32 576 Environment 1,127 258 3,026 DRA contributes to environmental sustainability through its core service offering by providing services in solar PV energy, wind energy, bio energy, hydro energy, conventional energy, transmission and distribution. / DRA designed the hybrid power solution for the Kobada gold mine which will yield over five million litres of HFO and over 14 million kilograms of carbon dioxide emissions and other harmful emissions. / DRA designed a hybrid power system which will ensure that 30% of power consumed on the Kiniero Gold project will be generated through green energy. This hybrid power system will result in US$1.8 million in fuel cost savings annually and will lead to reduction of five million litres of diesel and 13 million kilograms of carbon dioxide emissions. / DRA completed an ISO50002 energy audit for Royal Bafokeng at all their operations in which over $11.9m in potential energy savings were identified. DRA is currently implementing the first phase of the 24 initiatives identified. // Who is DRA Global / Sustainability report People and community Employees by region Region APAC AMER EMEA Males 954 226 2,450 / Launched a group-wide employee wellbeing program. / Supported several mental and physical health programs and events including Movember, World Suicide Prevention Month, R U OK? Day, CANSA Shavathon, Mandela Day and the MSWA Ocean Ride. / Donated to the community funded RACQ CQ rescue helicopter. / Supported the new Ronald McDonald family room at Mackay Base hospital to aid local sick children and their families. / Launched ‘Speak Up’ - an online platform to train and enable individuals to safely report information about misconduct without fear of retaliation or negative treatment. / Made donations, loans and investments to Black owned and Black female owned suppliers in South Africa. / During the COVID-19 lockdown, DRA paid the rent of the Compass Community Provision and Social Service, an organisation that takes care of abused and abandoned babies, children and woman. / DRA was officially recognised as a leading fundraiser by MSWA, a charity for people with neurological conditions. / DRA, in collaboration with Ivanplats, are building a new multi-discipline sports field for the Tshamahans Community in South Africa. / Financially supported the Chaeli Campaign, focused on growing access to a quality education for marginalised children. / Provided a total of 39 bursaries to the African Academy, one of Africa’s leading draughting education and training institutions, for students to study the Multi-Disciplinary Drawing Office Practice (MDDOP) course. / Provided 20 laptops, to support African Academy students learning remotely during the COVID-19 lockdown. / Partnered with the Gift of the Givers Foundation and distributed 450 food parcels to various communities. / Provided coronavirus ready” preventative “COVID-19 provisions to St Giles, an association for the physically disabled in South Africa. DRA Global Annual Report 2020 / ACN 622581935 / 27 // Leadership / Board of Directors* LEADERSHIP Board of Directors* Peter was previously a senior partner of the Australian law firm Freehills (the predecessor to Herbert Smith Freehills, which is currently engaged by the Group for corporate advisory matters), and served as the National Chairman of Freehills. Peter has significant experience in managing large organisations and over 20 years of experience as a Director of ASX and EuroNext listed companies, including ASX 100 companies. Peter’s international experience covers a broad range of industries and sectors including mining, media, agribusiness, energy, engineering services, oil and gas, technology, retail and property across Europe, Africa and Canada. In the engineering, resources and infrastructure sectors he is chairperson of Energy Resources of Australia Ltd and Ora Banda Mining Ltd, and was chairperson of the WA Electricity Networks Corporation (known as Western Power) and Zinifex Ltd. He has also been a Director of Aurecon Group Ltd, Nyrstar NV, OZ Minerals Ltd, Hardman Resources Ltd and Tap Oil Ltd. Peter is also currently a Director of Cancer Research Fund Pty Ltd (trustee of the Cancer Research Trust) and Foodbank of WA Inc. Peter Mansell Non-executive Director and Chairman Andrew was appointed as the CEO of DRA Global Limited in July 2019. Andrew is a Chartered Accountant who worked in financial services and corporate finance for 20 years, with a decade of his experience earned at executive and director level, as well as holding Non-executive Directorships. Andrew joined the Group in 2013 with responsibility for development and oversight of DRA’s strategic expansion, including mergers and acquisitions. Andrew has been extensively involved in growth initiatives within the Group’s international business, and served as interim CEO during 2016 and as CFO from 2016 to 2019. Andrew is an alumnus of Harvard Business School, where he completed the Advanced Management Program, as well as a graduate member of the Australian Institute of Company Directors. Andrew Naude Managing Director and Group Chief Executive Officer Greg is the Executive Vice President of the Asia Pacific region. Greg has over 35 years of experience in the design and construction of mineral processing facilities and associated infrastructure across a broad range of commodities. He has held positions including design engineering roles with Lycopodium, Minproc and GHD, and senior project management roles for Roche Mining (previously JR Engineering Services). Greg was also previously Managing Director of Abesque Engineering and Construction Ltd and Managing Director of Minnovo Pty Ltd. Greg McRostie † Executive Director * As at 31 December 2020 † Resigned on 4 May 2021 / 28 DRA Global Annual Report 2020 / ACN 622581935 // Leadership / Board of Directors* Kathleen has over 25 years of experience as a finance professional, including as Chief Financial Officer or General Manager of listed and private mining and contracting companies, including BGC Contracting, Atlas Iron Ltd and Mt Gibson Iron Ltd. Kathleen was a partner of professional services firm, Deloitte, and is currently Non-executive Director of IGO Ltd, Great Southern Mining Ltd, Rugby WA, Future Force Foundation and the WA Health Department’s Child and Adolescent Health Service. Kathleen holds a Bachelor of Commerce from the University of Western Australia, is a member of the Institute of Chartered Accountants and a graduate and member of the Institute of Company Directors. Kathleen Bozanic Non-executive Director Les has over 45 years of experience in the project delivery space having held corporate executive and project management roles across the UK, Australia, North America and Asia for Rio Tinto, BHP, Fluor and Aker Kvaerner. Les is currently a Non-executive Director of Neometals Ltd and Australian Mines Limited. He is also Principal and Managing Director of Bedford Road Associates, where he has provided advice and delivery support to customers such as Rio Tinto in Mongolia, Hyundai Engineering and Samsung Engineering in S.Korea, Otakaro and CERA in New Zealand, and to Melbourne Water, the State government of Victoria and NBN Co in Australia. Les was also one of the founding contributors to the John Grill Centre for Project Leadership at The University of Sydney. Les holds a Bachelor of Science in Engineering and Marketing from the University of West of Scotland, Paisley. Les Guthrie Non-executive Director Leon joined the Group in 1987 after first gaining ten years of industry experience, and during his service was instrumental in the Group’s growth. After 27 years working for the Group he retired from his position as CEO in 2013. For the past seven years, Leon has acted in a Non-executive role and has been instrumental in guiding the organisation at Board level by setting the strategic direction for the global business. Leon registers as a Professional Engineer with ECSA (Engineering Council of South Africa) and holds a MDP Project Management from the University of Pretoria. Leon Uys † Non-executive Director DRA Global Annual Report 2020 / ACN 622581935 / 29 // Leadership / DRA’s Group Executives DRA’s Group Executives Andrew Naude is the Managing Director and Chief Executive Officer, based in Perth, Australia. Andrew joined DRA in 2013, bringing more than 20 years of strategic leadership, financial and commercial expertise and executive management experience to his role within the organisation. From April 2016 to July 2019, Andrew served as DRA’s Chief Financial Officer and Strategy Director responsible for Group- wide strategic expansion, including mergers and acquisitions and strategic investments, as well as the corporate function. In his role as CEO and MD, Andrew is accountable for the operational management of the Group’s business activities. Andrew is a Chartered Accountant who holds a Bachelor of Commerce Honours degree and is also an alumnus of the Harvard Business School, and a graduate member of the Australian Institute of Company Directors. Andrew Naude Managing Director and Chief Executive Officer / 30 DRA Global Annual Report 2020 / ACN 622581935 // Leadership / DRA’s Group Executives Adam Buckler Chief Financial Officer Adam joined DRA in 2020 as Chief Financial Officer. Adam is a highly regarded finance executive with extensive mining services, petroleum and engineering (EPCM) industry experience in multinational companies. Adam has successfully managed regional finance teams across multiple jurisdictions including Australia, New Zealand, PNG, Asia/China, and India. Adam is responsible for all finance, treasury, IT, risk and compliance functions at a group level. Greg is the Executive Vice President and Managing Director of the Asia Pacific region. Greg has over 30 years’ experience in the design and construction of mineral processing facilities and associated infrastructure across a broad range of commodities. He previously held positions including design engineering roles with Lycopodium, Minproc and GHD and senior project management roles for Roche Mining (previously JR Engineering Services). Greg was also previously Managing Director of Abesque Engineering and Construction Ltd, an Executive Director of Forge Group Ltd and Managing Director of Minnovo Pty Ltd. Greg McRostie Executive Vice President: Asia Pacific, Americas (APAC/AMER) Region Alistair has been involved in large scale mining and minerals implementing various processing projects across EMEA, greenfields and brownfields resources projects for more than two decades. Alistair holds a Bachelor of Science (Eng) (Mechanical) from the University of the Witwatersrand, an MBA from the University of Cape Town and is a registered professional engineer. Alistair Hodgkinson Executive Vice President: Europe, Middle East and Africa (EMEA) Region DRA Global Annual Report 2020 / ACN 622581935 / 31 OPERATIONAL OVERVIEW / 32 DRA Global Annual Report 2020 / ACN 622581935 // Operational Overview / EMEA region EMEA region Projects In the EMEA region, DRA delivers projects to customers under the DRA Projects and SENET brands. Organisational alignment has seen the integration of certain support functions to drive efficiencies, while the technical and project delivery capabilities of each remains unique. The SENET business is positioned to continue delivering projects and studies within Africa and across other jurisdictions, servicing select customers. DRA Project’s long track record in Mineral Processing is supported by its growing competency in the underground engineering and project delivery space. DRA employs a workforce of over 1,300 project staff within the EMEA region. The business invests heavily in a regional graduate program, ensuring availability of qualified and trained candidates for its future workforce. Top projects for the EMEA region in 2020 include Kamoa-Kakula, Northam Platinum Booysendal, Assmang Gloria and Black Rock, Managem Tri-K, Barrick Gold Pueblo Viejo, Hummingbird Resources Kouroussa Gold FEED project as well as various projects for Anglo Platinum in South Africa and Newmont Mining in Ghana. There were numerous innovations and notable achievements on these projects, such as: / The Booysendal conveyor system (RopeCon) – the longest in Africa – which facilitates material handling in mountainous terrain; and / Kamoa-Kakula with both the largest decline in Africa and the largest Paste backfill plant in the world. Kamoa will ultimately be one of the largest copper producers in the world. The region is advancing a number of key initiatives in the technological and innovation arenas by way of advisory services to global customers. Advisory support will be offered within key areas, namely: Mining: / Battery minerals and associated technologies; / Modernised extraction; and / Autonomous vehicles. Process: / Coarse and fine flotation; / Fine particle recovery; / Alternative crushing and dry milling; / Fine grinding; / Dry-stack disposal and backfill; and / KELL Process (PGM, Gold and Base-metal refining). DRA teams also offer the following capabilities: / Backfill Capability, Dry-stacked Tailings; / Process Control Offerings; / Remote support, real time remote consulting, remote operations; and / Digital/Virtual commissioning. DRA Global Annual Report 2020 / ACN 622581935 / 33 // Operational Overview / EMEA region Operations In EMEA, DRA is a leading specialist in the field of outsourced operations and maintenance (O&M) of minerals processing plants. DRA’s operations offering, Minopex, employs over 2,000 staff across seven countries in the EMEA region. All sites performed well operationally, despite the many disruptions of the year including a lengthy shut-down of most mine sites which affected revenues. Letšeng recorded a strong performance despite COVID-19 disruptions and a weak diamond market. Significant maintenance and engineering work was won in the Vale Moatize refurbishment program and Minopex continued to meet customer expectations in the DRC and Tanzania and exceeded expectations at the Ad Duwayhi site in Saudi Arabia. Strategically, 2020 was a year of re-positioning for future growth. While the business consolidated its core O&M offering, it also launched a number of new growth platforms: / Added underground mining capabilities to position the business in the mechanised mining space. / Develop an advisory service offering and completed a number of projects in both the Operational Readiness and the Operational Excellence arenas. / Launched a Supply Chain Services platform to offer procurement and supply chain services. Advisory services are centred around three distinct pillars, namely: / Operational Readiness Bridging the gap between construction and operations. / Optimisation Focus on excellence metrics within business, operations and processes. / Expert Advisory Access to industry technical experts to provide insights and solve complex problems within operations. There are clear synergies between the Operations division and the Projects division in DRA. These elements help to further advance this advisory space by leveraging off the distinct skill set, experience and technical prowess of both areas within the business. / 34 DRA Global Annual Report 2020 / ACN 622581935 // Operational Overview / EMEA region Gloria project Customer: Assmang Commodity: Manganese Contract Type: EPCM Value of Contract: $35M Location: South Africa In 2018, DRA secured the engineering, procurement and construction management contract with Assmang (Pty) Limited’s Black Rock Mine Operations for the replacement of the Gloria Manganese Mine’s underground rock handling infrastructure and surface plant in South Africa’s Northern Cape. DRA also implemented optimisation and modernisation strategies on the mine, which provided further flexibility to sustain the Life of Mine production expectations through the replacement of underground rock handling infrastructure as well as a new surface plant and its associated infrastructure. Letšeng project Customer: Gem Diamonds Commodity: Gold Contract Type: Fixed and Variable Value of Contract: $91M Location: Lesotho Since 2004, DRA has been responsible for the management, operation and maintenance of the processing facility at Letšeng diamond mine in Lesotho. DRA designed and built the 350t/h DMS (dense medium separation) plant and has since exclusively operated the plant. Letšeng diamond mine is fully enclosed to accommodate the extreme weather conditions prevalent on the Maluti mountain range. The plant complex includes primary crushing and scrubbing, secondary crushing and re-crushing, 800mm cyclones, wet x-ray recovery and integrated workshops and stores. Letšeng diamond mine consists of two diamond processing plants that are designed to have a throughput of 400tph and 450tph for plant one and two respectively. Annually, both plants combined are able to produce 5.8 million tonnes of ore, supported by a Primary Crusher Area plant (PCA), which consists of a feed-bin, vibrating grizzly feeder, a jaw crusher and three conveyors. The Letšeng project has been in operation since 2004 with the commissioning of plant one; production was ramped up in 2008 with the commissioning of plant two. DRA Global Annual Report 2020 / ACN 622581935 / 35 // Operational Overview / EMEA region Tri K Gold project Customer: Managem Group Commodity: Contract Type: Gold EPC Value of Contract: $110M Location: Guinea Managem Group awarded DRA its Guinean Tri-K Gold project following the successful completion of the Definitive Feasibility Study. Tri-K was a greenfields project that aimed to establish a new mine plant, including mining and site infrastructure, and a Carbon-in-Leach (CIL) Gold Plant. The Tri-K project, targeted a production of 120,000 ounces of gold per year. To achieve this, DRA undertook the construction of the CIL and onsite infrastructure. The Tri-K gold processing plant was designed to process 2.80 Mt/a of oxide ore and 2.30 Mt/a of sulphide ore and to recover gold through both gravity and CIL processes. An intensive leach reactor was included in the design to process the concentrate produced from the gravity circuit. Kroondal 1 and 2 project Customer: Sibanye Stillwater Commodity: PGMs Contract Type: Fixed and Variable Value of Contract: $40M Location: South Africa is a shallow underground PGM mining and Kroondal concentrators located in the North West Province of South Africa. In 1998/9 DRA built the original plant and was also responsible for the plant upgrade in 2001. DRA was the overall engineering, procurement and construction management contractor responsible for $200+ million expenditure, entailing the Group’s involvement in every aspect of the mine’s construction. The upgrade involved the installation of a regrind mill, a secondary flotation section and improvements to the dense medium separation plant. Kroondal was the first fully integrated platinum plant to operate a dense medium separation plant ahead of the milling circuit to remove waste rock. In 2002, DRA was awarded the ongoing operations and maintenance contract and has since provided procurement and inventory management, on site laboratory services, MF2 including chrome recovery and management of capital and continuous improvements projects. / 36 DRA Global Annual Report 2020 / ACN 622581935 // Operational Overview / EMEA region Kamoa-Kakula Copper Mine project Customer: Kamoa Copper Company S.A. Commodity: Copper Contract Type: EPCM Value of Contract: $89M Location: Democratic Republic of Congo The Kamoa-Kakula deposit is the world’s largest high grade, copper-only deposit, located in the Democratic Republic of Congo. Kamoa Copper SA, a joint venture between Ivanhoe Mines, Zijin Mining Group Co, Ltd. and the Government of the Democratic Republic of Congo, aimed to develop a new Copper Mine that could yield an estimated 6 Mtpa in its first phase alone. The Kakula deposit was independently ranked as the world’s largest, undeveloped, high yield, high-grade copper discovery. Kakula resource is estimated at 174 million tons at a grade of 5.62% copper. DRA’s project delivery relationship with Ivanhoe Mines started on the high-grade platinum-group metals, nickel and copper Platreef project in South Africa. It was on this project that DRA demonstrated its advanced capability in project delivery which proved to be a key differentiator for the organisation on Kakula. DRA was contracted to complete the Pre-Feasibility Study, for Kamoa Copper SA, in 2017. In October 2018, DRA was further awarded the contract to deliver a complete Basic Engineering package. DRA provided the Kamoa-Kakula project with a complete integrated solution for the mine, process and infrastructure scopes ensuring full value chain alignment, seamless design continuity and the financial benefit of shared project services. The engineering and design was developed to a level suitable to support early execution works and for the PFS in parallel. The contract scope included the Basic Engineering and design associated with all underground mining infrastructure, the concentrator plant and all supporting surface infrastructure. DRA Global Annual Report 2020 / ACN 622581935 / 37 // Operational Overview / EMEA region This growth was supported by contracts from key customers such as Minera Antamina and Minera Las Bambas. In October 2020, DRA opened a second South American office in Santiago, Chile. Copper and gold projects represent the majority of work being undertaken in the Andean region with awards from Anglo American, Barrick, Dundee Precious Metals and Waterton Global. Projects and studies were delivered by integrated teams across multiple DRA offices to Anglo American Quellaveco, Managem Tizert, Barrick Pueblo Viejo, Adventus Mining Curipamba and Aya Silver and Gold Zgounder. Across the APAC/AMER region, a number of key project wins were achieved throughout the year. The forward opportunity pipeline now exceeds $3 billion and there is a strong backlog of secured work. DRA’s APAC/AMER business continues to grow and increase its market share in line with its strategic objectives. 2021 will see the region focus on successful project delivery and the conversion of opportunities currently underway. APAC/AMER region Projects With over 300 personnel in the APAC/AMER region, safety remains one of the biggest challenges and highest priorities. In 2020, ongoing initiatives in safety and wellness, such as employee assistance programs and mental wellness campaigns, were implemented to achieve the goal of constant improvement in safety performance across the region. Despite COVID-19 disruptions and restrictions, the following projects were successfully completed: / EPC contract for processing facilities on the Dargues Gold Mine in New South Wales for Big Island Mining; / Jundee Expansion EPCM for Northern Star in Western Australia; and / Marawai coal EP for Adaro in Indonesia. In 2020, DRA maintained its market presence in Australia through its main regional offices in Perth, Western Australia and Brisbane, Queensland. A new office in Adelaide, South Australia was opened in July 2020 and acts as the support office for works being carried out at BHP’s Olympic Dam operation. The region demonstrated extraordinary resilience and delivered a growth year, despite pandemic conditions and restrictions. Opportunities were split almost evenly across projects and operations respectively, predominantly in the coal, precious metals and iron ore sectors, with the latter demonstrating the largest revenue growth area, for tier-1 customers such as BHP and Rio Tinto. Key projects currently in execution include the Coal Handling Proecssing Plant at Bravus’ Carmichael project, Kalium Lake’s Beyondie Potash project, projects at BHP’s Olympic Dam, BMA’s Hay Point, key sustaining capital projects for Rio Tinto’s iron ore operations, Glencore Coal operations, Newcrest mines’ Lihir Island in PNG and the FMG Iron Bridge Fabrication Management. DRA also successfully delivered services in Russia from the APAC region including for Polyus Gold, Russia’s largest gold miner. DRA’s Beijing office supported FMG’s Magnetite project. 2020 marked the first year of DRA’s presence in South America. The Lima office was established to support the future growth in this region and grew to over 100 employees and contractors in a very short time, despite COVID-19 lockdowns and constraints. DRA Global Annual Report 2020 / ACN 622581935 / 39 // Operational Overview / APAC/AMER region Operations division The APAC/AMER Operations over 1,000 people. 2020 prioritised skills retention and recruitment in a competitive environment. With the outbreak of COVID-19, a heightened focus was placed on wellbeing and safety and new protocols and measures were implemented across the region with great success. employs Operations, similar to projects focused 2020 on ongoing initiatives in safety and wellness. This include aspects such as employee assistance programs and mental wellness campaigns which were implemented to greatly contributed towards achieving the goal of constant improvement in safety performance across the region. Through G&S Engineering, DRA continued to offer major maintenance of draglines, minerals and metals sustaining capital, shut-down works for processing facilities and underground longwall overhauls across Australia. Key maintenance contracts for 2020 included work for Newmont, BHP, Rio Tinto and Anglo American among others. G&S continues to contribute strongly in the operations, maintenance and sustaining capital space and importantly provides the construction capability for DRA’s full in-house EPC delivery model which is gaining recognition in the market. DRA Energy Operations successfully operated and maintained 18 refined coal production facilities, across seven American states, providing daily plant operations and maintenance services. Health and safety measures within the business were outstanding with only one recorded LTI across the USA facilities in 11 years. / 40 DRA Global Annual Report 2020 / ACN 622581935 // Operational Overview / APAC/AMER region Carmichael project Customer: Bravus Mining and Resources Commodity: Contract Type: Coal EPC Value of Contract: $205M Location: Queensland, Australia In 2020 DRA was awarded the engineering, procurement and construction of the Coal Handling and Preparation Plant at the Carmichael project for Bravus Mining and Resources in Central Queensland, Australia. The $205 million project included the delivery of a ROM bin, crushing circuit, dry tailing and stackers, stockpile, train load-out facility and all associated plant infrastructure to process coal from the mine. DRA will provide all project management, engineering, procurement and construction of the project. Las Truchas project Customer: Commodity: Contract Type: Value of Contract: $8M Arcelor Mittal Iron Ore Definitive Feasibility Location: Mexico DRA worked with ArcelorMittal Mexico in 2020 in updating a definitive feasibility study on the improvement of an optimisation project at the Las Truchas Mine in Michoacán, Mexico. The study set out to increase iron ore concentrate production capacity and extend the life of the existing concentrator facility. The updated study improved the optimisation project by reducing its capital costs and making the best possible use of existing equipment. DRA designed a solution that allows the operation to continue production by processing ores with different mineralogical characteristics from new mining operations. DRA completed the project in July 2020 and is well placed for the detailed engineering in the execution phase. DRA Global Annual Report 2020 / ACN 622581935 / 41 // Operational Overview / APAC/AMER region Maruwai CHPP (EP) project Customer: Commodity: Contract Type: Adaro Coal Reimbursable (EP and Commissioning Support) Value of Contract: $51M Location: Indonesia DRA provided the engineering and procurement for PT Maruwai Coal’s coking coal handling and preparation plant in Lampunut, Central Kalimantan, Indonesia. The $51 million project enhanced capacity to handle 600 tonnes of coal per hour and process 525 tonnes per hour. DRA’s scope included all engineering disciplines, logistics and delivery to site and the construction surveillance and commissioning of the plant in the next phase. The Group’s delivery of the plant included a run of mine (ROM) sizing circuit, a run of mine bin, and three stage crushing (coal preparation plant) feed surge bin. Quellaveco project Customer: Commodity: Contract Type: Value of Contract: $7M Peru Location: Anglo American Copper Feasibility Study DRA completed the feasibility study for the Coarse Particle Recovery plant on the Quellaveco project between August 2019 and March 2020. Quellaveco was Anglo American’s first mine operation in southern Peru, located in Moquegua – an established copper-producing region. The project involved building a 60-million-cubic-metre dam in the high mountain region and a 95km overland gravity-fed pipeline to deliver water to the Quellaveco mine area, where an opencast mine is being developed along with a primary crusher, overland conveyors and truck maintenance workshops. Quellaveco is set to produce its first copper concentrate in 2022 and is expected to produce an average of 300 000 tonnes of copper per year over its first ten years of operation. The project has a mine life of 30 years. / 42 DRA Global Annual Report 2020 / ACN 622581935 // Operational Overview / APAC/AMER region Pueblo Viejo project Customer: Commodity: Barrick Gold EPCM Contract Type: Value of Contract: $20M Location: Dominican Republic Pueblo Viejo Gold Mine is located 100km from the capital city of Santo Domingo in the Dominican Republic. With proven and probable reserves of 25.3 million ounces, it is the second largest high sulphidation gold deposit in the world. A joint venture named Pueblo Viejo Dominicana Corporation (PVDC) was formed by Barrick Gold and Goldcorp in 2009 to develop the mine. The PVDC Expansion Program sought to expand processing operations from 8.5 Mt/a to 14 Mt/a in order to treat future lower grade feeds. This aimed to facilitate lower cut-off grades, an increased resource base, and extended mine life. In March 2020, DRA completed a feasibility study focusing on comminution, flotation, pressure oxidation circuits, thickening and associated reagents and services for the plant expansion. Dargues Reef project Customer: Diversified Minerals Commodity: Contract Type: Gold EPC Value of Contract: $47M Location: South Australia DRA completed the engineering, procurement and construction of the 355,000 tonnes per year gold processing facility and mine backfill plant at Dargues gold mine in New South Wales, Australia in 2020. DRA delivered the gold concentrate plant for Diversified Minerals following its detailed design of the facility in previous years. The plant comprised crushing, milling, flotation and filtration circuits. It produced the first sulphide concentrate for export in early 2020. DRA Global Annual Report 2020 / ACN 622581935 / 43 FINANCIAL OVERVIEW / 44 DRA Global Annual Report 2020 / ACN 622581935 // Financial Overview / Financial Performance Financial Performance Revenue and Gross Profit DRA’s headquarters re-domiciled from South Africa to Australia in FY18. Since then, revenue has been maintained above $900M. Revenue for FY20 was $938.2M, a decrease of 9% compared to FY19. The decrease in revenue was mainly due to the unprecedented challenges brought from COVID-19 which had a material negative impact on DRA’s Operations division in the early part of FY20. Additionally, projects were deferred by customers and site operations were shut-down. DRA reacted swiftly to these challenges and established an internal CEO and CFO led taskforce to mitigate risks to people and customers as well as to focus on business continuity and resilience. These measures allowed DRA to recover from the initial negative impact brought on by COVID-19. Strategic diversification enabled DRA to absorb the under-performance by parts of its businesses affected by COVID-19. The COVID-19 taskforce together with the capabilities of our people also enabled DRA to capture new opportunities that arose during this challenging period. Revenue ($M) 1,033.2 Breakdown of FY20 Revenue by services and geography 956.6 938.2 28% 30% FY18 FY19 FY20 15% 27% EMEA (Projects) EMEA (Operations) APAC & AMER (Projects) APAC & AMER (Operations) In the past two years, DRA has focused on improving its project management oversight and contract execution and this has resulted in improvements in its gross profit margin. Gross Profit ($M) Gross Margin (%) 203.4 188.0 19.7% 20.0% 73.2 7.7% FY18 FY19 FY20 FY18 FY19 FY20 DRA Global Annual Report 2020 / ACN 622581935 / 45 // Financial Overview / Financial Performance FY20 gross profit was $188.0M, a decrease of 7.6% compared to FY19. However, gross profit margin as a percentage increased in FY20 to 20.0% from 19.7% in FY19. The improvement in gross profit margin was a result of a continued focus on oversight, productivity and cost management. Going forward, DRA continues to focus on cost saving initiatives where possible, whilst delivering the highest quality service to customers in a safe environment. FY20 reconciliation of statutory to underlying results Profit after income tax for the year (NPAT) Adjusting for: Income tax expense Net finance income Earnings before interest and tax (EBIT) Adjusting for: Depreciation of right-of-use assets Depreciation of property, plant and equipment Amortisation of intangible assets Earnings before interests, taxes, depreciation, and amortisation (EBITDA) Statutory results Adjustments: IPO readiness and operational excellence programs Impairment of goodwill Impairment of loans Non-cash amortisation of customers relationship and brand name Restructuring costs Government grant Legal costs and onerous provisions Underlying results Statutory margin as a % of total revenue Underlying margin as a % of total revenue EBITDA FY19 $M 85.4 - - 0.9 - - - 4.5 90.8 8.3% 8.8% FY20 $M 64.9 3.3 5.7 0.4 - 0.7 (2.8) 4.7 76.9 6.9% 8.2% FY20 $M 39.0 3.3 5.7 0.4 6.6 0.7 (2.8) 4.7 57.6 4.2% 6.1% EBIT FY19 $M 59.0 - - 0.9 7.1 - - 4.5 71.5 5.7% 6.9% FY20 $M 25.6 16.5 (3.1) 39.0 9.0 7.9 9.0 64.9 FY20 $M 25.6 3.3 5.7 - 6.6 0.7 (2.8) 4.7 43.8 2.7% 4.7% FY19 $M 36.0 25.2 (2.2) 59.0 7.8 10.1 8.5 85.4 NPAT FY19 $M 36.0 - - - 7.1 - - 4.5 47.6 3.5% 4.6% Underlying EBITDA ($76.9M in FY20 vs $90.8M in FY19) and EBIT ($57.6M in FY20 vs $71.5M in FY19) was lower in FY20 compared to FY19. Lower revenue in FY20 had a direct impact on underlying EBITDA and EBIT. Underlying EBITDA and EBIT margins for DRA were 8.2% and 6.1% in FY20, respectively. These margins were slightly lower than FY19 due to the impact of COVID-19. DRA experienced site shut-downs in its Minopex operations and delay or deferral of projects by customers due to material uncertainty. Nevertheless, DRA achieved healthy results in this challenging year. Underlying NPAT margin as a percentage year on year is comparable (FY20:4.7% vs FY19: 4.6%) and has slightly improved from the prior year. / 46 DRA Global Annual Report 2020 / ACN 622581935 // Financial Overview / Financial Performance In arriving at the underlying EBITDA, EBIT and NPAT, several adjustments were made to the statutory results so as to reflect the underlying performance of DRA: / / / IPO Readiness and Operational Excellence Programs – DRA incurred approximately $3.3M of consulting and professional fees to review, improve and standardise the current existing processes in different parts of its businesses to prepare DRA for an IPO. These expenses are not expected to be recurring once the IPO is completed. Impairment of goodwill – an impairment loss of $5.7M was recorded in FY20 in relation to DRA’s Americas Cash Generating Unit (CGU). The impairment loss will not have a cash flow impact in the current and future period and is not representative of the DRA’s underlying financial performance in the current year as the impairment is based on future performance of the CGU. Impairment of loans – relates to capitalised interest income on existing loans which have been impaired. An adjustment was made to EBIT and EBITDA as the impairment losses distorted the underlying financial performance of DRA’s core operations. / Non-cash amortisation of customers relationship and brand name (intangible assets) – the adjustment was in relation to intangible assets acquired through business combinations which have no impact on the underlying financial performance of DRA. / Restructuring costs – DRA incurred restructuring costs in one of its partially owned subsidiaries to improve its profitability and operational effectiveness. These restructuring costs are not recurring and not reflective of underlying financial performance. / Government grant – DRA’s operations in Australia received Job Keeper payments in FY20 as part of the COVID-19 relief package introduced by the Australian Government. These payments were used to subsidise wages of employees during the period where the affected entities were facing project deferral and reduced work as a result of COVID-19. / Legal costs – DRA incurred or provided for legal expenses on claims relating to prior years on onerous contracts. These expenses have been adjusted to provide a better representation of the financial performance and operation of DRA in FY20 and FY19. Breakdown of underlying results by segments Revenue Statutory EBIT IPO readiness and operational excellence programs Impairment of goodwill Impairment of loans Non-cash amortisation of customers relationship and brand name Restructuring costs Government grant Legal costs and onerous provision EMEA 537.7 43.8 1.9 - 0.4 - 0.7 - - Underlying EBIT 46.8 FY20 APAC/ AMER 400.5 Other Total EMEA - 938.2 681.3 FY19 APAC/ AMER 351.9 Other Total - 1033.2 5.1 1.4 - - - - (2.8) 4.7 8.4 (9.9) 39.0 50.2 16.9 (8.1) 59.0 3.3 5.7 0.4 6.6 0.7 (2.8) 4.7 57.6 - - 0.9 - - - - 51.1 - - - - - - 4.5 21.4 - - - 7.1 - - - (1.0) - - 0.9 7.1 - - 4.5 71.5 6.1% 7.5% 6.1% N/A 6.9% 5.7 - 6.6 - - 2.4 N/A Underlying EBIT margin 8.7% 2.1% DRA Global Annual Report 2020 / ACN 622581935 / 47 // Financial Overview / Financial Performance EMEA Revenue decreased by 21% to $537.7M in FY20 compared to FY19. This was mainly due to the impact of COVID-19 as well as contract mix. Some project opportunities were deferred by customers due to global uncertainty and financing constraints. During the first half of 2020, site shut-downs by governments and customers severely impacted the outsourced operations services. These services have since recovered to business as usual. The results in the region were underpinned by major projects won in FY19 such as Kamoa-Kakula Copper project, Tri-K Gold project and Gloria Manganese project. Cost saving initiatives were introduced in all parts of the businesses which had a positive impact to the underlying EBIT margin. Underlying EBIT margin improved to 8.7% in FY20 as compared to 7.5% in FY19 which has minimised the impact of the decrease in revenue. Significant earnings in the EMEA region are from entities with South African Rand as the functional currency. In FY20, the South African Rand depreciated 13% against the Australian Dollar which also contributed to a decline in earnings in FY20 as compared to FY19. APAC/AMER In the APAC/AMER region, DRA is focusing on expanding its customer base and brand in order to drive the next phase of growth in the Group. Revenue increased by 14% in FY20 to $400.5M compared to FY19. However, EBIT decreased approximately 61% year on year to $8.4M as a result of an investment in overheads to support DRA’s growth strategy. The key highlights of this region are as follows: / The APAC region which forms more than 70% of the revenue in the APAC/AMER segment continued to experience revenue growth despite a challenging environment in FY20. Revenue grew approximately 9.1% to $316.9M in FY20 compared to FY19. The growth in revenue did not translate into a higher EBIT due to higher overheads invested to build capacity to secure and bid for new additional work. At the end of FY20, DRA has secured work of approximately $367M to be executed in APAC over the next two years; / A new presence in Latin America was established during the year and is expected to drive new opportunities for DRA in the next few years; and / The contribution from the Energy Operations services in North America declined due to a combination of factors including a mild winter and a reduction of industrial demand. The projects offering was affected by the deferral of projects due to COVID-19. FY20 - Work in hand by type of services and geography 41% $1,084M 41% $1,084M 59% 59% EMEA APAC/AMER Projects O&M DRA increased its work in hand (which represents secured work not yet performed ) by more than 80% compared to the prior year. More than 70% of this work in hand is expected to be executed in the coming FY21. Work in hand continues to reflect increased diversification across different services and geography. DRA’s work in hand was split 59% and 41% across EMEA and APAC/AMER respectively and 41% and 59% across Projects and Operations. Diversification of revenues has helped DRA to weather the challenges in FY20 and will remain a focus for future periods. / 48 DRA Global Annual Report 2020 / ACN 622581935 // Financial Overview / Financial Performance Financial position Cash Net working capital Intangible assets Fixed assets and investments Other financial assets Other financial liabilities Interest-bearing borrowings Provision Net lease liabilities Net tax assets Net assets (a) Cash FY20 $M 204.8 (31.3) 117.8 20.1 19.6 (19.9) (1.2) (49.6) (3.3) 51.6 FY19 $M Variance $M % Note 126.7 21.7 138.8 23.1 23.3 - (0.3) (56.4) (3.1) 58.3 78.1 (53.0) (21.0) (3.0) (3.7) (19.9) (0.9) 6.8 (0.2) (6.7) 62% (244%) (15%) (13%) (16%) NA 274% (12%) 6% (11%) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) 308.6 332.1 (23.5) Cash increased by 62% to $204.8M during the year. DRA has put significant effort on improving cashflows generation from its underlying operations. The cash balance increased predominately through the increase in cash flows from operations, and better working capital management including advanced payment from customers. (b) Net working capital Net working capital comprises trade and other receivables, contract assets and inventories. This is offset by trade and other payables, contract liabilities and employee benefits. Net working capital invested in FY20 reduced by $53M to $31.3M compared to FY19. The decrease in net working capital was substantially due to the focus on improving recovery of trade receivables and receiving higher advance payments from customers’ major projects. (c) Intangible assets Intangible assets comprise goodwill, brand, customer relationship, software and patents. The majority of intangible assets were acquired through business consolidations. In FY20, a non-cash impairment of $5.7M was made to DRA’s Energy Operation unit. Energy Operations still expect to be profitable in FY21, but is expected to reduce its activities significantly from FY22 onwards unless the tax incentive scheme in relation to its operation is renewed beyond FY21. The remaining movement in intangible assets was due to annual amortisation expenses of $9M translation losses of $8.7M on DRA’s intangible assets, net addition of software of $1.4M and addition of goodwill of $1M from a small acquisition made in FY20. (d) Fixed assets and investments Fixed assets and investments were approximately 3% of total assets in FY20 (FY19: 4%). Most of DRA’s activities are not capital intensive and do not require high capital expenditure. (e) Other financial assets Other financial assets comprise of investments in listed shares and non-listed shares, loans due from employees and legacy loans to customers. The decrease of $3.7M in FY20 to $19.6M in FY19 was mainly due to a share buyback which offset some of these loans due from employees. DRA Global Annual Report 2020 / ACN 622581935 / 49 // Financial Overview / Financial Performance (f) Other financial liabilities The increase in other financial liabilities in FY20 of $19.9M compared to FY19 was due to the recognition of a put option liability during the year. The liability arose from a put option agreement entered into with the former Minnovo Shareholders to purchase their shares in the Group should the Group not be listed by 30 June 2021. DRA is not expecting any cash outflows from this transaction as it is in the process of preparing for listing in the first half of FY21. The put option liability was required to be recorded under AASB 132 Financial instruments – Presentation as the Group cannot be considered to fully control the outcome of the listing process. DRA also recorded $1.0M of contingent consideration in relation to a small business consolidation in FY20. (g) Interest-bearing borrowings DRA has minimal borrowings in FY20 and FY19 and has sufficient liquidity. The interest-bearing borrowings amount was $1.2M in FY20 (FY19: $0.3M). These borrowings relate to funding provided by minority shareholders of partially owned subsidiaries controlled by DRA and insurance premium funding arrangements entered into by some of DRA’s subsidiaries for their annual insurance premiums. (h) Provisions DRA continues to hold provisions for loss making contracts identified in prior years and new warranty obligations that arose from its current contracts. The amount of provision decreased by $6.8M to $49.6M in FY20 compared to FY19. The decrease was mainly due to the utilisation of provisions during the year. There were no new loss-making contracts identified in FY20. (i) Net lease liabilities Net lease liabilities comprise right-to-use assets offset by lease liabilities which mainly consist of the lease of buildings, premises and motor vehicles. Net lease liabilities were $3.3M in FY20 comparable to FY19 of $3.1M. Right-to-use assets depreciated slightly faster than the reduction of the lease liabilities through lease payments at the early stage of the lease periods resulting in net lease liabilities. The addition of right-to-use assets during the year was $27.2M as a result of signing a long-term new office lease space in South Africa which is offset by the recognition of the same amount in lease liabilities. (j) Net tax assets Net tax assets comprise deferred tax assets and current tax receivables offset by deferred tax liabilities and current tax payable. Net tax assets decreased by $6.7M in FY20 to $51.6M as compared to FY19. The decrease in net tax assets was mainly due to higher current tax payable as DRA continued to be profitable. Cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents Opening cash position Closing cash position FY20 $M 101.8 (8.5) (4.1) (11.1) 126.7 204.8 FY19 $M 25.0 (79.1) 56.0 (0.8) 125.6 126.7 / 50 DRA Global Annual Report 2020 / ACN 622581935 // Financial Overview / Financial Performance FY2020 Cash movements ($M) Total Increase Decrease 101.8 (8.5) (4.1) (11.1) 126.7 FY19 Operating activities Investing activities Financing activities Effect of exchange rate 204.8 FY20 Cash flows from operating activities Operating cash flows improved significantly by more than 340% from $25.0 in FY19 to $101.8M in FY20. This was achieved through a strict focus on cash conversion from EBITDA, negotiation of advance payments for large projects and collection of receivables at the start of FY20. The improvement in cash inflows from operating activities demonstrated strong underlying cash flow capabilities across the businesses in DRA in an uncertain and challenging economic environment. Cash flows from investing activities Net cash outflows from investing activities were $8.5M in FY20, a significant reduction from $79.1M in FY19. Net cash outflows from investing activities have reduced significantly as DRA did not make any material acquisitions in FY20. A large portion of the cash in FY19 was used to acquire New Senet Pty Ltd (SENET). Cash flows from financing activities Net cash outflows from financing activities were $4.1M in FY20 compared to net cash inflows of $56.0M in FY19. The net cash inflows from FY19 arose from the proceeds of the issue of shares used to finance the acquisition of SENET. The net cash outflows in FY20 were due to lease payments of $8.4M partially offset by proceeds from share issues. In FY20, there was additional cash inflows of $3.9M through shares issued to management of SENET. The additional buy-in from management of SENET was designed to retain and motivate management of SENET beyond the earn-out periods after the acquisition made in FY19. Foreign exchange effect on cash and cash equivalents As of 31 December 2020, 73% of cash was denominated in United States Dollars (USD) and South African Rand (ZAR). The Australian Dollar (AUD), which is the Group’s presentation currency, has strengthened against these two currencies by approximately 9% and 12.2% respectively in FY20 when compared to FY19. The appreciation of AUD against USD and ZAR have resulted in an exchange loss when translating cash to AUD for cash flow presentation purposes. DRA Global Annual Report 2020 / ACN 622581935 / 51 // Financial Overview / Business and risks Business and risks Risk management Overview of the Framework Overview of DRA’s risk approach DRA views risks from both a positive and negative perspective. A negative risk is one where if the risk is realised, it will adversely affect the business. A positive risk is seen as an opportunity where, if realised, will improve DRA business outcomes. DRA has a systematic approach to managing both of these types of risks, consistently applied across its business. A strong, conscious and robust risk management process maximises DRA’s ability to achieve and outperform on its business objectives and to realise sustainable and predictable outcomes. DRA’s risk management practices are a critical business function and value- adding activity. In order to manage risk, a number of enablers have been put in place to reduce the uncertainty of DRA in achieving its strategic objectives. This is achieved through a Group-wide framework (the “Framework”) that defines how DRA both manages and embraces risk, through seven linked pillars. Risk governance and management structures Risk management is the responsibility of the Board, providing oversight of management’s focus on risk. The Board adopts various standards and structures through which it fulfils its responsibility and instils a desired risk culture within DRA, including the Audit and Risk Committee. Management are tasked to put in place processes and procedures to manage risks within the limits set out by DRA’s risk appetite statement, including risk considerations in key decision making forums as well as via formal risk management structures. Risk appetite The Board sets DRA’s appetite for risk that it is willing to accept, having regard to, inter alia, DRA’s risk capacity, strategy, capabilities and the expectations of DRA’s stakeholders. DRA’s risk appetite statement sets out a qualitative measure per each of DRA’s six risk areas that DRA is willing to accept to pursue its strategic objectives, providing a framework within which management must operate at all levels. Risk governance and management structures DRA’s six key risk areas: Risk appetite Embedding of risk into governance Supervision, monitoring and reporting of risk Risk culture Crisis management capability Continuous review of unknown/emerging risks / Strategy Risk: The risk that DRA does not achieve its strategic objectives through strategic and tactical decisions taken. / Cash Flow and Financial Risk: The risk that DRA is not able to meet its financial targets/covenants and cash flow obligations. / Regulatory and Compliance Risk: The risk that DRA is unable to meet its financial reporting, tax, legal and statutory commitments. / Operational Risk: The risk of loss arising from failed or inadequate internal processes, people, systems or external events arising in respect of the day-to-day business. / People Risk: The risk that DRA does not adequately protect its staff and related parties (their safety and wellbeing) as well as attract and retain its staff or treat them fairly. / ESG Risk: The risk that DRA fails to achieve its expected sustainability and ethical impact arising from failure to meet best practices associated with environmental and social issues, failed or inadequate governance processes and any political positions adopted. / 52 DRA Global Annual Report 2020 / ACN 622581935 Business and risks // Financial Overview / Business and risks Embedding of risk into governance Management’s decision-making processes and procedures throughout DRA includes risk, and the management thereof, as a key consideration. DRA’s governance documentation follows a risk-based approach to decision-making, seeking to leverage multi-disciplinary skills set to improve business decisions. Governance documentation includes not only DRA’s Board and committee charters, Code of Conduct and policies but also the various operating frameworks and standards that exist at both a Group-wide and business level. Key decisions are underpinned by DRA’s Delegation of Authority framework that sets out the basis for taking certain key decisions across the business, including the necessary involvement of relevant SMEs. DRA’s risk management process is aligned to ISO 31000 standards and is as follows: n o i t a t l u s n o c d n a n o i t a c i n u m m o C 2. Identity risk Identify risks and opportunities (known or emerging), then underlying causes and the relevant risk category. 4. Evaluate risk Determine whether the risk can be accepted or if new treatment plans are required to reduce the residual risk rating. 6. Recording and reporting Communicate risk management activities and outcomes to inform decision making. Establish the context Risk assessment Identify risk Assess risk Evaluate risk Treat risk Recording and reporting M o n i t o r i n g a n d r e v i e w 1. Establish the context Clarify business objectives and understand the operating environment and stakeholder needs and perspectives. 3. Assess risk Identify existing controls and owners. Assess the likelihood and consequence of the risk to determine the residual risk rating. Identify the risk velocity and risk confidence. 5. Treat risk If the risk cannot be accepted, develop treatment plans and assign control owners. DRA Global Annual Report 2020 / ACN 622581935 / 53 // Financial Overview / Business and risks Supervision, monitoring and reporting of risk Management continually focuses on ensuring that effective processes are in place to manage all risks. This includes the pro-active identification, management and reporting of risks, maximising the ability of DRA to timeously respond to risks and suitably protect DRA, should a risk materialize. This includes escalation protocols to ensure that key risks receive the correct level of timeous attention and input from management and the Board. Risks are reported to the Board and management through various risk forums by a variety of stakeholders. DRA establishing an internal audit function that will provide further reporting and recommendations to both the Board and management to improve DRA’s system of internal controls. Board of Directors Senior management First line Second line Third line Risk management and management control Risk control and compliance Independent assurance Management functions with a focus on specific risks Management functions with a focus on risk and compliance oversight Independent function with a focus on the effectiveness of governance, risk management and controls Ownership, responsibility and accountability for identifying, assessing, managing, mitigating risk inherent in the business processes Monitors, challenges and advises on the implementation of risk management practices to ensure first line is adequately designed. Monitors and reports risk profiles with appropriate consequence management Providing independent assurance to senior management and the Board over the effectiveness of achieving risk management and control objectives within the first and second line R e g u l a t o r s E x t e r n a l a u d i t s Risk culture Management needs to ensure that DRA’s organisational culture is aligned to its risk appetite and the desired risk culture set by the Board. A conscious risk culture and a commitment to risk management within DRA seeks to promote accountability, amongst not only management but all employees, to manage risk via the various processes and procedures outlined in the Framework, including various risk forums, risk and opportunity assessments as well as various risk documentation and templates. A key component of DRA’s risk culture is the effectiveness and independence of its speak-up standard, put in place by management. All eligible parties are encouraged to report on, or escalate, matters that constitute misconduct or an improper state of affairs within DRA. / 54 DRA Global Annual Report 2020 / ACN 622581935 // Financial Overview / Business and risks Crisis management capability Management has developed organisational resilience within DRA, including a robust crisis management capability. To pro- actively address a potential crisis event, crisis event management plans have been put in place across the businesses to address potential crisis events identified. All crisis event management plans are aimed at ensuring that critical services are continued during a crisis event, minimising the potential downtime and impact on the Group. Continuous review of unknown/emerging risks Management need to continually assess and report on new and emerging sources of risk and the mitigating actions in place to manage those risks. Whilst it is difficult to predict unknown risks, management continuously reviews emerging risks that may materialise in future from a source outside of the Group. In response, relevant SMEs within the Group develop business and DRA strategies to pro-actively assess, monitor and manage such risks. Key risks DRA operates across multiple geographical locations and as a result is exposed to both global and local risks factors which may have an adverse effect on DRAs medium and long term objectives. Set out below is a number of key risks that have been identified by DRA. Safety risks relate to DRA meeting its adopted safety standards and protecting the health of its workforce. Safety remains DRA’s core value, our people are our single most important asset and are critical to DRA’s ongoing success. DRA has a number of safety initiatives to reduce the risk of accidents in the workplace. Whilst this resulted in improved safety statistics, DRA continues to focus on enhancing its safety protocols, including the rollout of improved group-wide safety standards. In addition, DRA is currently finalizing its ISO 45001 safety accreditation across its business as a means to implement best practice safety measures across the group. Project management risks involve the execution of DRA’s work to ensure that it meets with the customers satisfaction as well as DRA’s internal performance criteria set for each project. Failure to achieve this may result in financial losses being incurred and/ or reputational impacts if customer expectations are not met. DRA performs ongoing monitoring and oversight to ensure that DRA’s project-related risks are understood and are appropriately managed. This includes monthly contract assessments and reviews that are stress tested, independently of the project teams. Business continuity risks are associated with disruptions to DRA’s business and/or projects in such a manner that could potentially cause significant loss to DRA. DRA relies on its ability to continue uninterrupted or with the potential of significant threats that may impact its ability to continue to operate sustainably. DRA’s contracts are actively managed to ensure that non- performance by either DRA, its customers or subcontractors are managed and issues addressed pro-actively. To the extent that disputes may result, formal dispute resolution processes are in place and appropriately documented in DRA’s contracts to ensure that the impact on the overall contract is minimised and managed and disputes are amicably resolved with customers. Should DRA’s services be suspended or terminated, or should legal action be taken, DRA engages the necessary in-house or external legal and commercial support to ensure that such matters are managed optimally and in a fair and transparent manner. Foreign exchange risks relate to changes in exchange rates of DRA’s key contracting and reporting currencies that may have a financial or cash flow impact on DRA’s results and financial position. The Treasury Framework was implemented by DRA’s treasury and establishes clear processes to minimise DRA’s exposure to foreign exchange rate fluctuations. Controls in place include avoidance of limiting contracting outside of DRA’s key functional currencies, the use of natural hedges and the use of hedging products on a selected basis. foreign exchange risks altogether, Liquidity risks are associated with DRA having sufficient cash flows to meet its return, capital and cash flow obligations. During the financial year, a Business Resilience Plan was defined in conjunction with the set-up of a COVID-19 Task Force to support business critical activities, anticipate macro- outcomes, overcome short-term uncertainties and position DRA for future growth. The Business Resilience Plan successfully achieved its objectives and impact on DRA’s customers, staff and commercial interests. DRA continues to closely monitor the impact of COVID-19 across the business and we will continue to stay vigilant to protect our people and financial viability. DRA Global Annual Report 2020 / ACN 622581935 / 55 // Financial Overview / Business and risks DRA understands and seeks to comply with all relevant legislation, engaging relevant external regulatory experts as required for assistance. To the extent that legislation changes and presents a risk to DRA, DRA will engage relevant stakeholders to fully understand the impact thereof. This may lead to a restructuring of DRA’s presence in such country or jurisdiction. Governance risks involve the ethical management of DRA’s business, both at a Board and an operating level. DRA has an established governance framework in place and clear parameters between the Board and DRA management as to key decisions that can be undertaken. DRA has also implemented a number of frameworks and standards across the group that establish the boundaries within such decisions can be undertaken, requiring the input from key internal stakeholders to ensure that fully-informed, multi-disciplinary decisions can be taken. Staff attraction and retention risks relate to risks associated with attracting and retaining suitable staff and the levels of staffing required to achieve DRA’s strategy. DRA’s ability to continue to attract and retain high calibre staff is key for DRA to deliver on its growth aspirations. DRA regularly undertakes staff and other surveys to understand its position in the marketplace, with a view to improving its attractiveness as an employer. DRA also has a number of wellbeing initiatives aimed at improving DRA’s attractiveness as a place to work and that our people receive the necessary support, including work-life balance improvements, flexible working arrangements, graduate recruitment/learnership programs, free counselling and manager support sessions. Industry risks associated with changes to DRA’s operating environment impact the ability of DRA and its competitors to compete. DRA operates in various markets linked to its industry (notably the mining services market) that are subject to a variety of external factors not fully within DRA’s direct control. These risks would directly impact DRA’s ability to secure new work and/ or execute on its strategy. DRA regularly assesses the markets in which it operates, including the countries in which it has a temporary or permanent presence, the services it offers to customers and the commodities/ capabilities it chooses to provide. Competition risks relate to the ability of existing or new competitors to disrupt DRA’s core markets and thus DRA’s ability to compete on an equal basis. DRA operates across a number of highly competitive markets and our ability to continue to secure new work is the lifeblood of DRA. DRA’s business development activities continuously focuses on replenishing our pipeline through targeted customer engagement and marketing initiatives, demonstrating DRA’s long-term value- add as a partner to its customers. Regulatory risks that may affect DRA include changes in rules, legislation, regulations and other requirements that may directly impact on DRA’s existing or prospective business. / 56 DRA Global Annual Report 2020 / ACN 622581935 DIRECTOR’S REPORT / 58 DRA Global Annual Report 2020 / ACN 622581935 // Director's Report The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as ‘the Group’) consisting of DRA Global Limited (referred to hereafter as ‘DRA’, ‘the Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 31 December 2020 (FY2020). Directors The following persons were Directors of DRA Global Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Peter Mansell Andrew Naude Greg McRostie Kathleen Bozanic Kenneth Thomas Leon Uys Les Guthrie Paul Salomon Rafael Eliasov Jean Nel Information on Directors Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: (Chairman) (Managing Director and Chief Executive Officer) (appointed 2 January 2020) (appointed 1 February 2020, resigned 11 January 2021) (appointed 2 January 2020) (resigned 11 March 2020) (appointed 6 April 2020, resigned 28 January 2021) (resigned 29 January 2021) Peter Mansell Chairman Independent Non-executive Director Bachelor of Commerce, Bachelor of Laws, Higher Diploma in Tax Law Peter was previously a senior partner of the Australian law firm Freehills (the predecessor to Herbert Smith Freehills, which is currently engaged by the Group for corporate advisory matters), and served as the National Chairman of Freehills. Peter has significant experience in managing large organisations and over 20 years of experience as a Director of ASX and EuroNext listed companies, including ASX 100 companies. Peter’s international experience covers a broad range of industries and sectors including mining, media, agribusiness, energy, engineering services, oil and gas, technology, retail and property across Europe, Africa and Canada. In the engineering, resources and infrastructure sectors he is chairperson of Energy Resources of Australia Ltd and Ora Banda Mining Ltd, and was chairperson of the WA Electricity Networks Corporation (known as Western Power) and Zinifex Ltd. He has also been a Director of Aurecon Group Ltd, Nyrstar NV, OZ Minerals Ltd, Hardman Resources Ltd and Tap Oil Ltd. Peter is also currently a Director of Cancer Research Fund Pty Ltd (trustee of the Cancer Research Trust) and Foodbank of WA Inc. Chairman of Ora Banda Mining Ltd Chairman of Energy Resources of Australia Ltd None Chairman Member of Audit and Risk Committee Member of People, Culture and Remuneration Committee Chairman of Nomination and Governance Committee No shares in DRA Global Limited No options in DRA Global Limited Other: Entitled to be issued options under the DRA Global Limited Employee Share Scheme to the value of 25% of his cash remuneration if the Group is listed on the ASX by 30 June 2021, otherwise will receive a lump sum cash payment unless a later date is agreed. DRA Global Annual Report 2020 / ACN 622581935 DRA Global Annual Report 2020 / ACN 622581935 / 59 / 59 // Director's Report Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Andrew Naude Managing Director and Chief Executive Officer Bachelor of Commerce (Finance, Honours), Chartered Accountant (ANZ&SA), Graduate AICD Andrew was appointed as the CEO of DRA Global Limited on 15 July 2019. Andrew is a Chartered Accountant who worked in financial services and corporate finance for 20 years, with a decade of his experience earned at executive and director level, as well as holding several Non-executive Directorships. Andrew joined the Group in 2013 with responsibility for development and oversight of the Group’s strategic expansion, including mergers and acquisitions. Andrew has been extensively involved in growth initiatives within the Group’s international business, and served as interim CEO during 2016 and as CFO from 2016 to 2019. Andrew is an alumnus of Harvard Business School, where he completed the Advanced Management Program, as well as a graduate member of the Australian Institute of Company Directors. None None Chief Executive Officer Member of Major Project Approvals Committee Ordinary shares in DRA Global Limited: 1,358,267 Other: Potential future participation in shares via the VMF Investment Trust * Other: Granted options under the DRA Global Limited Employee Share Scheme to the maximum value of $862,500 where the number of options to be issued will be determined based on the Group’s share price after listing. Greg McRostie Executive Director Bachelor of Engineering (Mechanical), Member Institute of Engineers Australia Greg is the Executive Vice President of the Asia Pacific region. Greg has over thirty five years of experience in the design and construction of mineral processing facilities and associated infrastructure across a broad range of commodities. He has held positions including design engineering roles with Lycopodium, Minproc and GHD, and senior project management roles for Roche Mining (previously JR Engineering Services). Greg was also previously Managing Director of Abesque Engineering and Construction Ltd and Managing Director of Minnovo Pty Ltd. None None Member of Sustainability, Health, Safety, Environment and Community Committee Ordinary shares in DRA Global Limited: 461,640 Other: Granted options under the DRA Global Limited Employee Share Scheme to the maximum value of $338,062 where the number of options to be issued will be determined based on the Group's share price after listing. / 60 DRA Global Annual Report 2020 / ACN 622581935 // Director's Report Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Kathleen Bozanic Independent Non-executive Director (Appointed 2 January 2020) Bachelor of Commerce, Chartered Accountant (ANZ), Graduate AICD Kathleen has over 25 years of experience as a finance professional, including as Chief Financial Officer or General Manager of listed and private mining and contracting companies, including BGC Contracting, Atlas Iron Ltd and Mt Gibson Iron Ltd. Kathleen was a partner of professional services firm, Deloitte, and is currently Non-executive Director of IGO Ltd, Great Southern Mining Ltd, Rugby WA, Future Force Foundation and the WA Health Department’s Child and Adolescent Health Service. Kathleen holds a Bachelor of Commerce from the University of Western Australia, is a member of the Institute of Chartered Accountants and a graduate and member of the Institute of Company Directors. Non-executive Director IGO Limited Non-executive Director Great Southern Mining Limited None Chair of Audit and Risk Committee Member of Nomination and Governance Committee Member of Major Project Approvals Committee No shares in DRA Global Limited No options in DRA Global Limited Other: Entitled to be issued options under the DRA Global Limited Employee Share Scheme to the value of 25% of her cash remuneration if the Group is listed on the ASX by 30 June 2021, otherwise will receive a lump sum cash payment unless a later date is agreed. Dr Kenneth Thomas Independent Non-executive Director (Appointed 1 February 2020, Resigned 11 January 2021) Doctorate in Technical Sciences, Bachelor of Science (Honours), Master of Science (Business) Dr. Thomas has over 45 years of experience in the mining industry across project development, construction and operations. Until July 2012 he was Senior Vice President of Projects for Kinross Gold Corporation and before that a Global Managing Director and Board Director at Hatch Ltd, a leading international engineering and construction firm. Ken also held progressively senior roles at Barrick Gold Corporation through to Senior Vice President of Technical Services, and served as Chief Operating Officer for Crystallex International Corporation with operations and projects in Venezuela and Uruguay. Ken has extensive knowledge of the Americas, gained from operations management and mine building for Barrick, Crystallex and Hatch. In addition to a Doctorate in Technical Sciences (Project Implementation) from Delft University of Technology (Netherlands,1994), Ken holds several industry awards including, Mill Man of the Year 1991, Airey Award 1999 and the Selwyn G. Blaylock Medal 2001, awarded by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) for advances internationally in the mining and metallurgical industry. Ken also holds a Bachelor of Science (Honours) in Metallurgy from the University College Cardiff and a Master of Science (Business) from Imperial College, both in the United Kingdom. In addition, he is the Past President, CIM. Non-executive Director of Cardinal Resources Limited (unlisted public company) None Chair of Sustainability, Health, Safety, Environment and Community Committee (until 11 January 2021) Member of Audit and Risk Committee (until 11 January 2021) Member of Major Project Approvals Committee (until 11 January 2021) No shares in DRA Global Limited No options in DRA Global Limited DRA Global Annual Report 2020 / ACN 622581935 / 61 // Director's Report Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Leon Uys Non-executive Director Professional Engineer (Engineering Council of South Africa, HNTD, MDP Project Management Leon joined the Group in 1987 after first gaining ten years of industry experience, and during his service was instrumental in the Group’s growth. After 27 years working for the Group he retired from his position as CEO in 2013. For the past 7 years, Leon has acted in a Non-executive role and has been instrumental in guiding the organisation at Board level by setting the strategic direction for the global business. Leon registers as a Professional Engineer with ECSA (Engineering Council of South Africa) and holds a MDP Project Management from the University of Pretoria. None None Chair of Major Project Approvals Committee Member of People, Culture and Remuneration Committee (until 31 December 2020) Member of Nomination and Governance Committee (until 31 December 2020) Ordinary shares in DRA Global Limited: 4,123,340 No options in DRA Global Limited Lee (Les) Guthrie Independent Non-executive Director (Appointed 2 January 2020) Bachelor of Science (Engineering and Marketing) Les has over 45 years of experience in the project delivery space having held corporate executive and project management roles across the UK, Australia, North America and Asia for Rio Tinto, BHP, Fluor and Aker Kvaerner. Les is currently a Non-executive Director of Neometals Ltd and Australian Mines Limited. He is also Principal and Managing Director of Bedford Road Associates, where he has provided advice and delivery support to customers such as Rio Tinto in Mongolia, Hyundai Engineering and Samsung Engineering in S.Korea, Otakaro and CERA in New Zealand, and to Melbourne Water, the State government of Victoria and NBN Co in Australia. Les was also one of the founding contributors to the John Grill Centre for Project Leadership at The University of Sydney. Les holds a Bachelor of Science in Engineering and Marketing from the University of West of Scotland, Paisley. Non-executive Director of Neometals Ltd Non-executive Director of Australian Mines Limited None Chair of People, Culture and Remuneration Committee Chair of Sustainability, Health, Safety, Environment and Community Committee Member of Major Project Approvals Committee No shares in DRA Global Limited No options in DRA Global Limited Other: Entitled to be issued options under the DRA Global Limited Employee Share Scheme to the value of 25% of his cash remuneration if the Group is listed on the ASX by 30 June 2021, otherwise will receive a lump sum cash payment unless a later date is agreed. / 62 DRA Global Annual Report 2020 / ACN 622581935 // Director's Report Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Paul Salomon Non-executive Director (Resigned 11 March 2020) Chartered Accountant (ANZ), Chartered Financial Analyst, Bachelor of Business Science (Honours) Paul joined Stockdale Street South Africa (formerly Southern Cross Capital) in 2011. Prior to joining Stockdale Street, Paul was the co-founder of Altirah Capital, a South African private equity and venture capital house and before that the Chief Financial Officer of Everest Capital Pty Ltd, an Australian hedge fund business. Prior to his involvement in the hedge fund industry, Paul worked at ABN AMRO in Australia and Investec Bank Ltd in South Africa in their corporate finance divisions. Paul qualified as a Chartered Accountant in Australia, is a Chartered Financial Analyst and charter holder, and earned a Bachelor of Business Science (Honours) from the University of Cape Town. None None None No shares in DRA Global Limited** No options in DRA Global Limited Rafael Eliasov Non-executive Director (Appointed 6 April 2020, Resigned 28 January 2021) Bachelor of Commerce (Finance), Bachlor of Law, Higher Diploma in Tax Rafael has Bachelor degrees in Commerce and Law from Witwatersrand University and a Higher Diploma in Tax from the University of Johannesburg. He worked at Investec Equity Partners for nearly 6 years and was recently a Director of Cliff Dekker Hofmeyer. Rafael joined Stockdale Street in 2018. None None Member of Audit and Risk Committee (until 28 January 2021) Member of Nomination and Governance Committee (until 28 January 2021) No shares in DRA Global Limited** No options in DRA Global Limited Jean Nel Non-executive Director (Resigned 29 January 2021) Bachelor of Accountancy (Honours), Chartered Accountant (SA), Chartered Financial Analyst (AIMR) Jean held numerous executive level positions for major companies in the South African mining industry. He currently co-owns and manages a number of investments in South Africa, Namibia and the United Kingdom, and also serves as Non-executive Director of public companies. Jean is a qualified Chartered Accountant and holds a Bachelor of Accountancy (Honours) from the University of Stellenbosch. Jean obtained the Chartered Financial Analyst (CFA) qualification administered by the AIMR (Association for Investment Management and Research) in the United States and became a CFA charter holder. Jean also completed the Advanced Management Program (AMP) at Insead in Fontainebleau, France. Non-executive Director Northam Platinum Ltd Non-executive Director of DRD Gold Limited Non-executive Director of Tongaat Hulett None Member of Sustainability, Health, Safety, Environment and Community Committee (until 29 January 2021) Member of People, Culture and Remuneration Committee (until 29 January 2021) No shares in DRA Global Limited** No options in DRA Global Limited DRA Global Annual Report 2020 / ACN 622581935 / 63 // Director's Report ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. * VMF Investments Ltd holds 7,286,011 shares in DRA Global Limited. This entity is owned and controlled by the VMF Investment Trust, a trust established for the benefit of international management of the Group. VMF Investments Ltd is managed by the VMF Investment Trust. At the date of these financial statements, the beneficiaries of the VMF Investment Trust include members of DRA management. The shares in VMF Investments Ltd were acquired with capital contributed by the beneficiaries and a loan from the Group, on the same terms as extended to other employee shareholders at the time. Family entities associated with Andrew Naude, Chief Executive Officer of the Group is one of the beneficiaries of the VMF Investment Trust. Andrew Naude is not a trustee of the VMF Investment Trust nor does he exercise control over VMF Investments Ltd or the VMF Investment Trust. Distributions are at the discretion of the trustee and contingent on factors determined by the trustee. Final attributable interests in DRA shares by beneficiaries of the VMF Trust cannot be quantified as long as these shares are owned by VMF Investments Ltd. The shareholdings disclosed for Andrew Naude thus excludes any shares held by VMF Investments Ltd. ** Paul Salomon, Rafael Eliasov and Jean Nel were Directors appointed by BPESAM IV M Ltd and BPESAM IV N Ltd, in which they have a contingent indirect interest. BPESAM IV M Ltd and BPESAM IV N Ltd own 15,000,000 shares each in DRA Global Limited. BPESAM IV M Ltd and BPESAM IV N Ltd are registered in Mauritius. Company secretary Ben Secrett (Appointed 1 January 2021) Ben has over 10 years of practice as a legal, corporate advisory and governance professional for Australian and foreign listed and unlisted entities. Ben has experience as a corporate lawyer at Ashurst and Gilbert+Tobin law firms, compliance adviser at ASX, and as company secretary for a number of ASX listed entities in the resources and technology sectors. Ben holds a Bachelor of Economics from the University of Western Australia, a Juris Doctor law degree from the University of Notre Dame Australia, and a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia. Carol Marinkovich (Resigned 31 December 2020) Carol has over 25 years experience in the mining industry. She has extensive experience in company secretary and corporate governance practice both within Australia and internationally, including with Gold Road Resources Ltd and Sundance Resources Ltd in Western Australia and has worked for other junior mining companies, both listed and unlisted. Carol is a Member of the Governance Institute of Australia and the Institute of Chartered Secretaries and Administrators. Andrew Naude (Resigned 13 March 2020) Andrew acted as joint secretary from 9 April 2019. Principal activities The Group is a multi-disciplinary engineering group that delivers consulting, project execution and operations management services in mining, minerals processing and related infrastructure. Operating and financial review Information on the operations and financial position of the Group and its business strategies and prospects is set out in the review of operations and activities on pages 32-56 of this annual report. / 64 DRA Global Annual Report 2020 / ACN 622581935 // Director's Report Significant changes in the state of affairs Minnovo put option In 2017, the Group entered into a share purchase agreement with Minnovo Pty Ltd (Minnovo) to acquire 100% of the issued share capital in Minnovo. The acquisition of Minnovo was completed in July 2018 and the former shareholders of Minnovo accepted cash and shares of DRA Global Limited as full consideration. The share-based consideration was accepted only on the basis that the shares of DRA Global Limited would be liquid within 18 months. The original period of 18 months has since lapsed. Whilst the Group has no obligation under the share purchase agreement to buy-back the shares, the Group has entered into a formal put option agreement with the former shareholders of Minnovo. The put option agreement grants these former shareholders the right to sell their shares obtained from the acquisition back to the Group at the same price that the shares were issued in terms of the share purchase agreement only in the event that the listing process has not completed by 30 June 2021. The put option agreement was approved by the shareholders at the Annual General Meeting on 29 July 2020. A put option liability of $18.9M was recorded based on 2,539,015 number of shares at $7.44 per share. Refer to note 21. Shares issued and Share Buy-back during the period On 5 May 2020, DRA Global Limited issued an additional 646,464 fully paid ordinary shares to management of New Senet Pty Ltd (SENET) with a subscription price of $6.12 per share. The additional subscription by management of SENET will seek to motivate and retain key employees of SENET beyond the earn-out period. On 6 April 2020, the Group bought back 570,051 fully paid ordinary shares with a total value of $4,196,818 as settlement of employee loans owing to the Group. Refer to note 22. Impairment of intangible assets The Group impaired $5.7M of goodwill relating to the Americas region’s cash generating unit (CGU). The Americas region was profitable in the past and is expected to be profitable in the next 12 months. However, the operation in the Clean Energy sector is expected to reduce significantly from FY2022 onwards due to expiration of tax incentives in the United States. At the date of this report, the tax incentive has not been renewed and therefore has not been taken into account in the value-in-use calculations to determine the recoverable amount of the CGU beyond FY2022. Refer to note 16. There were no other significant changes in the state of affairs of the Group during the financial year. Likely developments and expected results of operations The Group plans to continue to provide diversified engineering and operation and maintenance services globally. Distributions There were no dividends paid, recommended or declared during the current or previous financial year. DRA Global Annual Report 2020 / ACN 622581935 / 65 // Director's Report Meetings of Directors The number of meetings of the Group’s Board of Directors (‘the Board’) and of each Board Committee held during the year ended 31 December 2020, and the number of meetings attended by each Director were: Board Audit and Risk Committee People, Culture and Remuneration Committee Eligible* Attended** Eligible* Attended** Eligible* Attended** 9 9 9 9 9 9 9 1 7 9 9 9 9 9 9 9 9 1 7 7 4 - - 4 4 - 1 - 3 1 4 4 4 4 3 4 4 - 4 4 6 - - - - 6 6 - - 6 6 6 6 6 3 6 6 - 6 6 Sustainability, Health, Safety, Environment and Community Committee Nomination and Governance Committee Major Project Approvals Committee Eligible* Attended** Eligible* Attended** Eligible* Attended** - - 3 - 3 - 3 - - 3 3 3 2 3 3 3 3 - 1 2 3 - - 3 - 3 - - 3 - 3 3 2 3 1 3 3 - 3 3 - 8 - 8 8 8 8 - - - 1 8 8 8 7 8 8 - 2 - Peter Mansell Andrew Naude Greg McRostie Kathleen Bozanic Kenneth Thomas Leon Uys Les Guthrie Paul Salomon Rafael Eliasov Jean Nel Peter Mansell Andrew Naude Greg McRostie Kathleen Bozanic Kenneth Thomas Leon Uys Les Guthrie Paul Salomon Rafael Eliasov Jean Nel Member Chair * The number of meetings held during the period the Director was a member of the Board and/or Committee. ** The number of meetings attended by the Director during the period the Director was a member of the Board and/or Committee. Environmental regulation The Group is subject to environmental regulation in respect of its projects and operations business activities in different regions. The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so that it is aware of, and is in compliance with, relevant environmental legislation. There were no breaches of environmental legislation for the year. / 66 DRA Global Annual Report 2020 / ACN 622581935 // Director's Report Matters subsequent to the end of the financial year BEE restructure DRA South Africa Proprietary Limited (“DRA South Africa”) and its subsidiaries which are controlled by the Group are implementing a restructure of DRA’s South African operations to facilitate the conclusion of a broad-based black economic empowerment (“B-BBEE”) ownership transaction in terms of which private equity funds managed by Ascension Capital Partners Proprietary Limited (“Ascension Funds”) will acquire the following interest in the relevant South African group entities: / 35% ordinary share interest in DRA South African Group Holdings Proprietary Limited (“DRA SA Group”); / 25% ordinary share interest in Minerals Operations Executive Proprietary Limited (“Minopex SA”) and DRA Plant Operations Holdings Proprietary Limited (“DRA Plant Operations”); and / 25% ordinary share interest in DRA Projects Group Holdings Proprietary Limited (“DRA Projects Group”). Main Street 798 Proprietary Limited (RF) (“Main Street”), DRA SA Group’s previous B-BBEE shareholder, will remain indirectly invested in DRA South Africa as an investor in Ascension. In terms of the aforementioned restructure, DRA South Africa Group Holdings will replace DRA South Africa as the holding company of the Group’s South African interests and DRA Projects Group will become the holding vehicle for the Group’s South African projects business. The result of the restructure of the B-BBEE shareholding and introduction of Ascension as a B-BBEE partner in South Africa is that DRA’s major operating businesses in South Africa will be certified 51% B-BBEE-owned and address the main procurement criteria set out in the South African Mining Charter (Mining Charter 3). By addressing these criteria DRA will be able to continue to effectively compete within the South African market, ensuring a platform for sustained growth. At the date of this report the restructure had not been completed. Stockdale Street’s Selective Share Buy-back On 28 January 2021, the Group entered into a Share Buy-back Agreement with BPESAM IV M Ltd (IVM) and BPESAM IV N Ltd (IVN) (together known as Limited Partners of Stockdale Street Investment Partnership IV) to purchase 30,000,000 of the shares in the Group. The Buy-back consideration includes an initial cash consideration of ZAR 550,000,000 ($47,720,000) payable at completion date, a further cash consideration of $30,280,000 payable prior to 31 December 2021, totalling approximately $78,000,000 and 25,000,000 Upside Participants Rights (UPR). The UPRs have an exercise price of $3.10 per share with a price ceiling of $6.5 per share. Consequently, the maximum gain of the UPRs is limited to $3.40 per UPR. In total, the transaction has a maximum value of approximately $163M which equates to a maximum value of $5.43 per share receivable by BPESAM IV M Ltd and BPESAM IV N Ltd. A report was obtained from an independent expert that the selective Buy-back was fair and reasonable to the shareholders of the Group (excluding IVM, IVN and their Associates) and approval of the transaction was obtained at a meeting of the shareholders on 1 April 2021. Impact of COVID-19 Refer to Operating and Financial Review for the impact of COVID-19 on the Group’s result in the current year. The Group will continue to assess the impact of COVID-19 on existing Projects and Operations businesses. The duration and spread of the pandemic and regulations imposed by governments continue to be closely monitored to determine any future impact on the Group. The Group has a stable cash balance and did not require the use of additional credit facilities. Other Kenneth Thomas, Rafael Eliasov and Jean Nel resigned from the position of Non-executive Directors on 11 January 2021, 28 January 2021 and 29 January 2021 respectively. Ben Secrett was appointed as Company Secretary on 1 January 2021. No other matter or circumstance has arisen since 31 December 2020 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. DRA Global Annual Report 2020 / ACN 622581935 / 67 // Director's Report Shares under option The number of unissued ordinary shares of DRA Global Limited under option at the date of this report are as follows: Grant date 14 May 2020 Expiry date 30 June 2024 Exercise Price Number of options $0.00 495,000 The above disclosure on the number of unissued ordinary shares under option does not include options to be issued to Non-executive Directors and employees where the number of options to be issued have not yet been determined. The Non-executive Directors are entitled to options based on 25% of cash remuneration if the Group is listed on the ASX by 30 June 2021, otherwise they will receive a lump sum cash payment unless a later date is agreed. The total accumulated value of options that may be issued as at 31 December 2020 was $132,000. Certain employees including key management personnel have been granted options on 31 December 2020 under the DRA Global Limited Employee Share Scheme. Options to a maximum value of $7,240,585 were granted. The number of options to be issued will be determined based on 10-day volume weighted average share price of the Group from the date of listing. The options expire on 31 March 2025. No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Group or of any other entities. Included in these options were options granted as remuneration to the Directors and the five most highly remunerated officers during the year. Details of options granted to Directors and key management personnel are disclosed on the remuneration report. In addition, the following options were granted to officers who are among the five highest remunerated officers of the Group, but are not key management personnel and hence not disclosed in the remuneration report: Name of officer Pierre Julien Date Issue price of shares Number of options granted Fair value of options granted 11 May 2020 $0.00 25,000 31 December 2020 To be determined To be determined $100,000 $224,473(i) (i) Options to a maximum value of $338,062 were granted to Pierre Julien on 31 December 2020 under the DRA Global Limited Employee Share Scheme with a fair value of $224,473. The number of options to be issued will be determined based on 10-day volume weighted average share price of the Group from the date of listing. Shares issued on the exercise of options There were no ordinary shares of DRA Global Limited issued on the exercise of options during the year ended 31 December 2020 and up to the date of this report. Indemnity and insurance of officers In accordance with the constitution, except as may be prohibited by the Corporations Act 2001 every officer of the Group shall be indemnified out of the property of the Group against any liability incurred by him or her in his or her capacity as officer of the Group or any related corporation in respect of any act or omission whatsoever and howsoever occurring or in defending any proceedings, whether civil or criminal. The contracts of insurance contain confidentiality provisions that preclude disclosure of the premiums paid, the nature of the liability covered by the policies, the limit of liability and the name of the insurer. Indemnity and insurance of auditor To the extent permitted by law, the Group has agreed to indemnify its auditors BDO Audit (WA) Pty Ltd, as part of the terms of its audit engagement agreement against claims by third parties arising from the DRA Global Limited’s breach of their agreement. No payment has been made to indemnify BDO Audit (WA) Pty Ltd during or since the end of the financial year. / 68 DRA Global Annual Report 2020 / ACN 622581935 // Director's Report Proceedings on behalf of the Group No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 37 to the financial statements. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in note 37 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: / all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and / none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as advocate for the Group or jointly sharing economic risks and rewards. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 144. Remuneration report (audited) The audited remuneration report is set out on pages 70 - 83 and forms part of this Directors’ report. This report is made in accordance with a resolution of Directors, pursuant to Section 298(2)(a) of the Corporations Act 2001. 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. On behalf of the Directors ___________________________ ___________________________ Peter Mansell Chairman 15 April 2021 Andrew Naude Chief Executive Officer DRA Global Annual Report 2020 / ACN 622581935 / 69 REMUNERATION REPORT / 70 DRA Global Annual Report 2020 / ACN 622581935 // Remuneration report The remuneration report is set out under the following main headings: / Principles used to determine the nature and amount of remuneration; / Details of remuneration; / Service agreements; / Share-based payments; / Additional information; and / Additional disclosures relating to key management personnel. Principles used to determine the nature and amount of remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: / / acceptability to shareholders; / performance linkage/alignment of executive compensation; and / competitiveness and reasonableness; transparency. The People, Culture and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for the Directors and Executives. The performance of the Group depends on the quality of its Directors and Executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. In consultation with external remuneration consultants (refer to the section ‘Use of remuneration consultants’ below), the People, Culture and Remuneration Committee has commenced and completed a review of the Group Executive remuneration framework to ensure that it is market competitive and complementary to the reward strategy of the Group. The reward framework is designed to align executive reward to shareholders’ interests. The Board have considered that it should seek to enhance shareholders’ interests by: / focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the Executive on key non-financial drivers of value; / attracting and retaining high calibre Executives; and / reflecting good corporate governance which is aligned to the Group’s values and risk appetite aligning Executive and other key employee interests with that of shareholders through fair and substantial incentives for delivery against agreed and measurable long and short term objectives. Additionally, the reward framework should seek to enhance Executives’ interests by: rewarding capability and experience; / / / providing a clear structure for earning rewards. reflecting competitive reward for contribution to growth in shareholder wealth; and In accordance with best practice corporate governance, the structure of Non-executive Director and Executive Director remuneration is separate. DRA Global Annual Report 2020 / ACN 622581935 / 71 // Remuneration report Non-executive Directors remuneration Fees and payments to Non-executive Directors reflect the demands and responsibilities of their role. Non-executive Directors’ fees and payments are reviewed annually by the People, Culture and Remuneration Committee. The People, Culture and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure Non-executive Directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of other Non- executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to the determination of his own remuneration. The aggregate Non-executive Directors’ remuneration is determined periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 31 May 2019, where the shareholders approved a maximum annual aggregate remuneration of $700,000. The independent Non-executive Directors are entitled to a deferred lump sum payment equivalent to 25% of their cash remuneration from appointment to 30 June 2021, which will be payable on 30 June 2021, by the issue of options under the DRA Global Limited Employee Share Scheme if the Group is listed on the ASX by 30 June 2021 (unless a later date is agreed), or otherwise in cash. Executive remuneration The Group aims to reward Executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has five components: / Base pay and non-monetary benefits; / Cash and non-cash allowances; / Short-term performance incentives; / Long-term performance incentives; and / Other remuneration such as superannuation and long service leave. The combination of these comprises the Executive’s total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the People, Culture and Remuneration Committee based on comparable market remuneration and cost of living indicators with the Executive’s level of proficiency in the role as well as the sustained performance of the individual and the Group. Executives may receive their fixed remuneration in the form of cash or other fringe benefits where it does not create any additional costs to the Group and provides additional value to the Executive. The new short-term incentives (‘STI’) program is designed to align the targets of the business units with the performance hurdles of Executives. STI payments shall be granted to Executives based on specific annual targets and key performance indicators (‘KPI’s’) being achieved. KPI’s have been developed on the pillars of safety and operational delivery, people and growth, financial and fiscal discipline and customer reputation. The program is designed to drive financial performance without encouraging undue risk-taking. The new long-term incentives (‘LTI’) program is designed to include equity instruments such as performance share options. Share options are awarded to Executives if performance targets over a period of three years are achieved. These include achieving a targeted increase in shareholders’ value and earning per share over a period of three years. The program is designed to promote long-term stability in shareholder returns. Consolidated entity performance and link to remuneration Variable component for certain individuals is directly linked to the performance of the Group. A portion of cash bonus and incentive payments are dependent on defined targets being met. The remaining portion of the cash bonus and incentive payments are at the recommendation of the People, Culture and Remuneration Committee. Refer to the section ‘Additional information’ below for details of the earnings and total shareholders return for the past three years. Due to the capital reorganisation, only three years are disclosed. The People, Culture and Remuneration Committee is of the opinion that the continued high financial performance can be attributed in part to the adoption of performance based compensation and is satisfied that this improvement will continue to increase shareholder wealth if maintained over the coming years. For more information on FY2020 results, refer to operating and financial review section. / 72 DRA Global Annual Report 2020 / ACN 622581935 // Remuneration report Use of remuneration consultants During the financial year ended 31 December 2020, the Group, through the People, Culture and Remuneration Committee, engaged BDO Reward Pty Ltd, remuneration consultants, to review its existing executive pay structures and remuneration policies in comparison to a relevant peer and competitor group, and provide recommendations on how to improve both the STI and LTI programs. BDO Reward Pty Ltd was paid $153,900 (2019: $108,399) for these services. An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue influence from key management personnel. These protocols include requiring that the consultant not communicate with affected key management personnel without a member of the People, Culture and Remuneration Committee being present, and that the consultant not provide any information relating to the outcome of the engagement with the affected key management personnel. The Board is also required to make inquiries of the consultant’s processes at the conclusion of the engagement to ensure that they are satisfied that any recommendations made have been free from undue influence. The Board is satisfied that these protocols were followed and as such there was no undue influence. Voting and comments made at the last year’s Annual General Meeting (‘AGM’) The Group is currently not a listed entity. There is no requirement under the Corporations Act 2001 to put the remuneration report to vote at the Group’s most recent AGM. Details of remuneration (from 16 September 2019) (from 19 July 2019) - Executive Director (from 1 August 2019) - Non-executive Director - Non-executive Director - Non-executive Chairman - Managing Director and Chief Executive Officer The key management personnel of the Group consisted of the following Directors of DRA Global Limited: / Peter Mansell / Andrew Naude / Greg McRostie / Kathleen Bozanic / Kenneth Thomas / Leon Uys / Les Guthrie / Paul Salomon / Rafael Eliasov / Jean Nel And the following persons: / Adam Buckler / Alistair Hodgkinson - Executive Vice President - Non-executive Director - Non-executive Director - Non-executive Director - Non-executive Director - Chief Financial Officer - Non-executive Director (until 11 March 2020) (from 6 April 2020) (from 2 January 2020) (from 2 January 2020) (from 2 January 2020) (from 1 February 2020) (from 18 December 2019) Darren Naylor, James Smith and Pierre Julien have been assessed as no longer being key management personnel following an organisational restructure. Kenneth Thomas, Rafael Eliasov and Jean Nel resigned from the position of Non-executive Directors on 11 January 2021, 28 January 2021 and 29 January 2021 respectively. Other than that, there is no further changes to Directors and key management personnel during the period from the end of the reporting period, 31 December 2020 up to the date of financial statements being signed. DRA Global Annual Report 2020 / ACN 622581935 / 73 // Remuneration report Amounts of remuneration Details of the remuneration of Directors and key management personnel of the Group are set out in the following tables: 2020 Cash salary and fees $ Cash bonus $ Cash allowance $ Non-cash allowance $ Super- annuation $ Termination benefits $ Short-term benefits Post-employment benefits Non-executive Directors: Peter Mansell Kathleen Bozanic Kenneth Thomas Leon Uys Les Guthrie Paul Salomon Rafael Eliasov Jean Nel 192,000 96,000 88,000 - 96,000 - - - - - - - - - - - Executive Directors: Andrew Naude* Greg McRostie* 728,997 378,997 805,650 320,000 Other key management personnel: Adam Buckler* Alistair Hodgkinson* 415,000 315,255 218,002 384,168 2,310,249 1,727,820 - - - - - - - - - - - - - - - - - - - - - 17,460 - - 2,177 19,637 18,240 9,120 - - 9,120 - - - 21,348 21,348 21,348 - 100,524 - - - - - - - - - - - - - Share- based payments Equity- settled $ 48,000 24,000 22,000 - Total $ 258,240 129,120 110,000 - 24,000 129,120 - - - - - - 149,924 1,723,379 56,118 776,463 65,139 142,561 719,489 844,161 531,742 4,689,972 * In FY2020, the People, Culture and Remuneration Committee made a change in the presentation of STI cash bonus to include the approved accrued bonus for key management personnel in relation to their performance for FY2020. Going forward, this change is expected to align the presentation of cash bonus in the remuneration report with the current year performance of the Group and provide more relevant information for shareholders. As a result of this transition, the cash bonus included in FY2020 included the accrued bonus for FY2020 and the bonus paid for FY2019 which previously were not accrued specifically for these key management personnel. Refer to page 76 for table showing the breakdown of each bonus award. / 74 DRA Global Annual Report 2020 / ACN 622581935 // Remuneration report Short-term benefits Post-employment benefits 2019 Cash salary and fees $ Cash bonus $ Cash allowance $ Non-cash allowance $ Super- annuation $ Termination benefits $ Non-executive Directors: 14,000 5,251 Peter Mansell Kathleen Bozanic Kenneth Thomas Leon Uys Les Guthrie Paul Salomon Rafael Eliasov Jean Nel Tim Netscher Clive Hart Peter Maw Sharon Warburton Cliff Lawrenson 56,000 - - 15,165 - - - - 40,333 15,165 - 25,000 33,000 - - - - - - - - - - - - - Executive Directors: Andrew Naude** Greg McRostie Wray Carvelas** 654,388 382,249 570,527 209,510 49,093 114,542 Other key management personnel: Adam Buckler Alistair Hodgkinson** Darren Naylor* James Smith Pierre Julien** - 328,502 345,829 321,094 406,531 - - 28,819 80,399 81,325 - - - - - - - - - - - - - - - - - - 16,129 - - - - - - - - - - - - - - 123,942 - 2,175 - 5,089 7,583 - 2,175 3,193,783 563,688 16,129 154,964 - - - - - - - - - - 2,375 - 52,227 23,538 - - - - - 10,098 93,489 Share- based payments Equity- settled $ - - - - - - - - - - - - - Total $ 75,251 - - 15,165 - - - - 40,333 15,165 - 27,375 33,000 24,670 1,064,737 - 454,880 - - - - - - - - - - - - - - - 884,863 24,670 1,596,777 - - - - - 884,863 - 7,754 - - 20,321 77,415 - 341,345 398,360 401,493 520,450 4,984,331 * Remuneration reflected from 1 April 2019, the date of acquisition of New Senet Pty Ltd. ** Share-based payments recorded were related to Legacy Long-term Incentive Plan (Legacy LTIP) issued on 1 July 2016. The amounts disclosed in FY2019 Annual Report were the cash-settled amounts recorded at the employing entity (subsidiary) level. The Legacy LTIP constituted a group share-based payment transaction and was deemed as equity-settled at the consolidated entity in accordance with AASB 2. Accordingly, the amounts disclosed previously have been restated to reflect the equity-settled share-based payment expenses recorded at the consolidated entity. DRA Global Annual Report 2020 / ACN 622581935 / 75 // Remuneration report The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Non-executive Directors: Peter Mansell Kathleen Bozanic Kenneth Thomas Leon Uys Les Guthrie Paul Salomon Rafael Eliasov Jean Nel Tim Netscher Clive Hart Peter Maw Sharon Warburton Cliff Lawrenson Executive Directors: Andrew Naude Greg McRostie Other key management personnel: Adam Buckler Alistair Hodgkinson Pierre Julien James Smith Darren Naylor Fixed remuneration At risk - STI At risk - LTI 2020 2019 2020 2019 2020 2019 100% 100% 100% - 100% - - - - - - - - 44% 52% 61% 37% - - - 100% - - 100% - - - - 100% 100% - 100% 100% 78% 89% - 97% 80% 80% 93% - - - - - - - - - - - - - 47% 41% 30% 46% - - - - - - - - - - - - - - - - 20% 11% - - 16% 20% 7% - - - - - - - - - - - - - 9% 7% 9% 17% - - - - - - - - - - - - - - - - 2% - - 3% 4% - - The table below shows of each key management personnel how much of their STI cash bonus was awarded and how much was forfeited: FY2020 award accrued in FY2020 Andrew Naude Adam Buckler Greg McRostie Alistair Hodgkinson FY2019 award paid in FY2020 Andrew Naude Adam Buckler Greg McRostie Alistair Hodgkinson Total opportunity* $ 626,400 305,202 280,000 224,098 Total opportunity* $ 600,000 - 280,000 224,098 Awarded* % Awarded $ Forfeited % Forfeited $ 68.8% 71.4% 50.0% 71.4% 430,650 218,002 140,000 160,070 31.3% 28.6% 50.0% 28.6% 195,750 87,201 140,000 64,028 Awarded* % Awarded $ Forfeited % Forfeited $ 62.5% - 64.3% 100.0% 375,000 - 180,000 224,098 37.5% - 35.7% - 225,000 - 100,000 - * The dollar value of total opportunity is determined based on maximum STI opportunity calculated as a percentage of total fixed remuneration and the Awarded percentage reflects percentage of total opportunity, and not the actual STI opportunity. Refer to ‘Service agreements’ section for an understanding of the maximum STI opportunities for these key management personnel. / 76 DRA Global Annual Report 2020 / ACN 622581935 // Remuneration report Service agreements Remuneration and other terms of employment for key management personnel are formalised in employment contracts. The following outlines the details of contracts with Executives: CEO The CEO is employed under a contract which can be terminated with notice by either the Group or the CEO. Under the terms of the present contract: / The CEO receives fixed remuneration of $750,000 per annum. / The CEO’s target STI opportunity is 50% of fixed remuneration and maximum STI opportunity is 80% of total fixed remuneration. / The CEO is eligible to participate in the LTI plan on terms determined by the Board, subject to receiving any required or appropriate shareholder approval. Other Executives The other Executives are employed under a contract which can be terminated with notice by either the Group or themselves. Under the terms of their present contracts: / The other Executives receive fixed remuneration which range from $320,000 to $440,000 per annum. / The other Executives’ target STI opportunity is 45% of fixed remuneration and maximum STI opportunity is 70% of total fixed remuneration. / The other Executives are eligible to participate in the LTI plan on terms determined by the Board, subject to receiving any required or appropriate shareholder approval. Termination provisions The CEO and Executives’ termination provisions are as follows: CEO Resignation 6 months’ notice Executive Director (Greg McRostie) 3 months’ notice Other Executives notice period 3 months’ notice Termination with cause Termination without cause No notice No notice No notice 16 months 6 - 12 months depending on certain conditions 3 months’ notice Should Executives not provide sufficient notice, they will forfeit the monetary equivalent (calculated based on Total Fixed Remuneration) of any shortfall in the notice period. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. DRA Global Annual Report 2020 / ACN 622581935 / 77 // Remuneration report Share-based compensation (i) Issue of shares There were no shares issued to Directors and other key management personnel as part of compensation during the year ended 31 December 2020. (ii) Legacy LTIP Certain key management personnel were granted share appreciation rights (SARs) under the Legacy Long-Term Incentive Plan (Legacy LTIP) on 1 July 2016. In July 2018, the Legacy LTIP was restructured when DRA Group Holdings Pty Ltd (DRAGH) was acquired by DRA Global Limited through a Scheme of Arrangement. The Group restructured the SARs arrangement and replaced the remaining SARs with an issue of 5,076,620 ordinary DRAGH shares at a ratio of approximately 0.6 shares per SAR. The modification has not resulted in an incremental fair value adjustment under AASB 2 Share-Based Payments (AASB 2) and consequently the expense for the original grant will continue to be recognised as if the terms had not been modified. These ordinary DRAGH shares participated in the Scheme of Arrangement as ordinary shareholders in DRAGH and were replaced by ordinary shares in DRA Global Limited. The Participants agreed to restrictions on the sale of the shares received pursuant to this restructure, specifically restrictions on the sale of these shares prior to specific dates replicating the original vesting profile of the SARs - i.e. sale of 1/3rd restricted until after each of 30 June 2018, 2019, 2020, and further agreed to sell these shares back to the Group at nominal value if they leave the employment of the Group before these dates. The fair value per SAR for each tranche, determined at grant date (1 July 2016), using the Black-Scholes model are as follows: Grant date Date of vesting Fair value per SAR Tranche 1 1 July 2016 30 June 2018 $0.21 Tranche 2 1 July 2016 30 June 2019 $0.22 Tranche 3 1 July 2016 30 June 2020 $0.22 All the shares issued to replace the SARs were either fully vested or forfeited as at 31 December 2020. (iii) Options The table below shows for each key management personnel the fair value of options was granted and exercised during FY2020: Peter Mansell Kathleen Bozanic Kenneth Thomas Les Guthrie Andrew Naude Greg McRostie Adam Buckler Alistair Hodgkinson Fair value granted* $ Value exercised** $ 48,000 24,000 22,000 24,000 572,700 224,473 260,555 224,473 - - - - - - - - * These options were granted from various plans during the year as part of remuneration. The fair value of these options at grant date is calculated in accordance with AASB 2. The fair value of these options are is allocated as share-based payment expenses over the vesting period. ** The value at the exercise date of options that were granted as part of remuneration and were exercised during the year has been determined as the intrinsic value of the options at that date. / 78 DRA Global Annual Report 2020 / ACN 622581935 // Remuneration report The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Plan Grant date Vesting and exercise date Expiry date Exercise price Value per option at grant date Performance achieved % vested One-off Share Option Plan(a) 14 May 2020 30 June 2022 30 June 2024 NED Share Option Plan(b) TBD TBD TBD FY2020 Share Option Plan(c) 31 December 2020 31 March 2023 31 March 2025 $0 $0 $0 $4 TBD TBD N/A N/A TBD Nil 100% Nil TBD- To be determined, N/A - Not applicable. (a) The Company granted a one-off share option offer to certain key management personnel and employees on 14 May 2020. The options will vest at the end of 30 June 2022 subject to the employees remaining in the Group. The fair value per option at grant date is determined using an internal valuation based on earnings multiples method and market conditions at the grant date. (b) Certain Non-executive Directors (NED) are entitled to be issued options under the DRA Global Limited Employee Share Scheme to the value of 25% of their cash remuneration if the Group is listed on the ASX by 30 June 2021, otherwise they will receive a lump sum cash payment unless a later date is agreed. This arrangement is accounted as equity-settled at the reporting date as the likelihood of achieving the listing on the ASX is considered probable. There is no vesting condition attached to this plan. (c) FY2020 Share Option Plan was granted to certain employees including key management personnel for a certain value where the number of options to be issued will be determined based on the Group’s share price after listing. The options are subject to performance hurdles in relation to Absolute Total Shareholders’ Return (ATSR) (50% of the grant value) and Earning Per Share(EPS) (50% of the grant value) over a period of three years in order to vest. These performance hurdles are mutually exclusive so that if only one of the hurdles is satisfied, vesting occurs for that performance hurdle. EPS performance will be assessed against compound annual growth rate targets set by the Board. The target set for FY2020 Employee Share Plan is currently 8% compound average growth rate. If the compound average growth rate over FY2020 to FY2022 is 8% or greater, the grant will become 100% performance qualified. A minimum of 25% or 50% will vest if at least 2% or 4% compound growth over FY2020 to FY2022 performance period is achieved respectively. ATSR performance is measured based on 10-day volume weighted average share price (VWAP) of the Group from date of listing and compare to the 30-day VWAP till 31 March 2023 (inclusive) assuming dividends are reinvested. If the ATSR from the date of listing to 31 March 2023 is 8% or greater, the grant will become 100% performance qualified. A minimum of 25% or 50% will vest if at least 2% or 4% of ATSR is achieved from the date of listing to 31 March 2023 respectively. DRA Global Annual Report 2020 / ACN 622581935 / 79 // Remuneration report Additional information The earnings of the Group for the three years to 31 December 2020 are summarised below: Sales revenue EBIT Profit/(loss) after income tax The factors that are considered to affect total shareholders return are summarised below: Total dividends declared (cents per share) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2020 $’000 2019 $’000 938,249 1,033,219 39,014 25,619 59,004 36,009 2018 $’000 956,655 (39,168) (42,129) 2020 - 27.49 27.39 2019 - 43.78 43.78 2018 2.88 (57.22) (57.22) / 80 DRA Global Annual Report 2020 / ACN 622581935 // Remuneration report Additional disclosures relating to key management personnel Shareholding The number of shares in the Group held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: Ordinary shares Peter Mansell Kathleen Bozanic Kenneth Thomas Leon Uys Les Guthrie Paul Salomon Rafael Eliasov Jean Nel Andrew Naude* Greg McRostie Adam Buckler Alistair Hodgkinson Balance at the start of the year Granted as part of remuneration Additions Share Buy-back Balance at the end of the year - - - 4,123,340 - - - - 1,421,241 461,650 - 1,015,760 7,021,991 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (62,974) (10) - (19,802) (82,786) - - - 4,123,340 - - - - 1,358,267 461,640 - 995,958 6,939,205 * VMF Investments Ltd owns 7,286,011 shares in DRA Global Limited. This entity is owned and controlled by the VMF Investment Trust. Family entities associated with Andrew Naude, Chief Executive Officer of the Group is one of the beneficiaries of the VMF Investment Trust. Andrew Naude is not a trustee of the VMF Investment Trust nor does he exercise control over VMF Investments or the VMF Investment Trust. Final attributable interests in DRA shares by beneficiaries of the VMF Investment Trust cannot be quantified as long as these shares are owned by VMF Investments Ltd. The shareholdings disclosed for Andrew Naude excludes any shares held by VMF Investments Ltd. DRA Global Annual Report 2020 / ACN 622581935 / 81 // Remuneration report Options The number of options over ordinary shares in the Group held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Granted as part of remuneration Exercised Expired/ forfeited/ other Balance at the end of the year Vested and exercisable Unvested Options over ordinary shares Peter Mansell# Kathleen Bozanic# Kenneth Thomas# Les Guthrie# Andrew Naude* Greg McRostie* Adam Buckler* Alistair Hodgkinson* ^ - - - - - - - 70,000 70,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 70,000 70,000 # These independent Non-executive Directors are entitled to be issued options under the DRA Global Limited Employee Share Scheme to the value of 25% of their cash remuneration from appointment to 30 June 2021 if the Group is listed on the ASX by 30 June 2021, otherwise they will receive a lump sum cash payment unless a later date is agreed. No options have been issued to the Non-executive Directors as at 31 December 2020. * These individuals have been granted options over ordinary shares under the FY2020 Share Option Plan to a certain value where the number of options to be issued will be determined based on the Group’s share price after listing and therefore not included in the above table. Refer to “share-based payments” section of the remuneration report for more details. ^ Alistair Hodgkinson was granted 70,000 options under the One-Off Share Option Plan. Loans to key management personnel and their related parties Loans were advanced to certain employees including key management personnel to enable the purchase of shares in the Group, or to settle tax liabilities incurred by these employees as a result of the Group electing to settle Legacy LTIP by issuing shares in DRA Global Limited to these employees in prior years. In May 2019, DRA Global Limited’s shareholders approved a Buy-back of sufficient shares from these employees to settle the loans owing to the Group arising from payment of tax liabilities on behalf of these employees. The share Buy-back was completed during the year. The remaining loans were loans to purchase shares. These loans accrue interest at the South African official prime interest rate less 2.5%, currently 4.5% (2019: 7.25%) and do not have fixed terms of repayment. Dividends declared (if any) that accrue to the underlying shares are applied to service these loans. / 82 DRA Global Annual Report 2020 / ACN 622581935 // Remuneration report These loans owing from key management personnel are as follow: Balance at the start of the year $ Interest paid and payable for the year $ 526,456 2,552,571 3,079,027 8,487 119,814 128,301 Settlement of loan with share Buy- back $ (461,599) (145,075) (606,674) Interest not charged $ - - - Exchange difference $ (73,344) (314,154) (387,498) Balance at the end of the year $ - 2,213,155 2,213,155 Highest indebtedness during the year $ 526,456 2,552,571 3,079,027 Andrew Naude* Alistair Hodgkinson * The above does not include a loan owed by VMF Investments Ltd of $23,839,389 in relation to purchase of shares in the Company where family entities associated with Andrew Naude is one of the named beneficiaries. This entity is owned and controlled by the VMF Investment Trust. Andrew Naude is not a trustee of the VMF Investment Trust nor does he exercise control over VMF Investments Ltd or the VMF Investment Trust. Other transactions with key management personnel and their related parties Greg McRostie, an Executive Director of the Group, is one of the former shareholders of Minnovo Pty Ltd (Minnovo) entered into a transaction with the Group during the year. Refer to the details below. In 2017, the Group entered into a Share Purchase Agreement with Minnovo to acquire 100% of the issued share capital in Minnovo. The acquisition of Minnovo was completed in July 2018 and the former shareholders of Minnovo accepted cash and shares of DRA Global Limited as full consideration. The share-based consideration was accepted only on the basis that the shares of DRA Global Limited would be liquid within 18 months. The original period of 18 months has since lapsed. Whilst the Group has no obligation under the share purchase agreement to buy-back the shares, the Group has executed a formal put option agreement with the former shareholders of Minnovo. The put option agreement grants these former shareholders the right to sell their shares obtained from the acquisition back to the Group at the same price that the shares were issued in terms of the Share Purchase Agreement only in the event that the Group is not being listed on the ASX by 30 June 2021. The value of this put option is $18,890,271. The put option agreement was approved at the Annual General Meeting on 29 July 2020. This concludes the remuneration report, which has been audited. DRA Global Annual Report 2020 / ACN 622581935 / 83 FINANCIAL STATEMENTS / 84 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Consolidated statement of profit or loss Consolidated statement of profit or loss For the year ended 31 December 2020 Continuing operations Revenue Cost of sales Gross profit Other income Other gains/(losses) – net Advertising and marketing expenses General and administrative expenses Note 2020 $’000 2019 $’000 3 4 5 938,249 (750,211) 188,038 1,033,219 (829,785) 203,434 5,080 7,546 2,849 (221) (851) (1,122) (161,166) (146,516) Share of net profit of associates accounted for using the equity method 33 367 580 Earnings before interest and tax Net finance income Profit before income tax expense Income tax expense Profit after income tax expense for the year Profit for the year is attributable to: Non-controlling interest Owners of DRA Global Limited Earnings per share for profit attributable to the owners of DRA Global Limited Basic earnings per share Diluted earnings per share 39,014 59,004 3,111 2,194 42,125 61,198 (16,506) (25,189) 25,619 36,009 2,474 23,145 160 35,849 25,619 36,009 Cents Cents 27.49 27.39 43.78 43.78 7 6 8 9 9 The above consolidated statement of profit or loss should be read in conjunction with the accompanying notes DRA Global Annual Report 2020 / ACN 622581935 / 85 Consolidated statement of other comprehensive income For the year ended 31 December 2020 Profit after income tax expense for the year Other comprehensive (loss)/income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations Other comprehensive (loss)/income for the year, net of tax Total comprehensive (loss)/income for the year Total comprehensive (loss)/income for the year is attributable to: Non-controlling interest Owners of DRA Global Limited // Financial Statements / Business and risks 2020 $’000 25,619 2019 $’000 36,009 (32,406) 3,219 (32,406) 3,219 (6,787) 39,228 2,511 (9,298) 161 39,067 (6,787) 39,228 The above consolidated statement of other comprehensive income should be read in conjunction with the accompanying notes / 86 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Business and risks Consolidated statement of financial position As at 31 December 2020 Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Inventories Financial assets at fair value through profit or loss Other financial assets at amortised cost Current income tax assets Assets of disposal groups classified as held for sale Total current assets Non-current assets Trade and other receivables Investments accounted for using the equity method Other financial assets at amortised cost Property, plant and equipment Right-of-use assets Intangibles and goodwill Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Interest-bearing borrowings Leases liabilities Current income tax liabilities Employee benefits Provisions Other financial liabilities Total current liabilities Non-current liabilities Interest-bearing borrowings Leases liabilities Deferred tax liabilities Employee benefits Other financial liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Equity attributable to the owners of DRA Global Limited Non-controlling interests Total equity Note 2020 $’000 2019 $’000 10 11 3 12 13 11 33 13 14 15 16 8 17 3 18 15 19 20 21 18 15 8 19 21 22 23 204,809 125,210 38,587 4,099 3,160 3,822 5,505 385,192 59 385,251 - 2,154 12,642 17,889 37,338 117,891 57,031 244,945 126,735 145,503 21,982 4,916 3,454 7,914 10,912 321,416 302 321,718 8,234 2,318 11,919 20,414 20,022 138,822 62,912 264,641 630,196 586,359 108,515 53,718 932 9,013 7,212 35,887 49,600 18,890 283,767 250 31,659 3,615 1,269 1,004 37,797 77,394 45,289 321 7,699 3,343 34,741 56,395 - 225,182 - 15,409 12,200 1,495 - 29,104 321,564 254,286 308,632 332,073 162,547 6,000 133,935 302,482 6,150 162,788 55,322 110,790 328,900 3,173 308,632 332,073 The above consolidated statement of financial position should be read in conjunction with the accompanying notes DRA Global Annual Report 2020 / ACN 622581935 / 87 // Financial Statements / Business and risks Consolidated statement of changes in equity For the year ended 31 December 2020 Balance at 1 January 2019 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share-based payments (note 36) Business combinations Reallocation from retained earnings to non-distributable reserve Earnings to non-distributable reserve Issue of ordinary shares (note 22) Buy-back shares (note 22) Balance at 31 December 2019 Issued capital $’000 99,548 Reserves $’000 Retained profits $’000 Non- controlling interests $’000 Total equity $’000 51,637 74,942 3,012 229,139 - - - - 64,548 - - 250 (1,558) - 3,218 35,849 - 3,218 35,849 301 - 1 165 - - - - (1) - - - 160 1 161 - - - - - - 162,788 55,322 110,790 3,173 36,009 3,219 39,228 301 64,548 - 165 250 (1,558) 332,073 Issued capital $’000 Reserves $’000 Retained profits $’000 Non- controlling interests $’000 Total equity $’000 Balance at 1 January 2020 162,788 55,322 110,790 3,173 332,073 Profit after income tax expense for the year Other comprehensive (loss)/income for the year, net of tax Total comprehensive (loss)/income for the year Transactions with owners in their capacity as owners: Share-based payments (note 36) Business combinations Put option (note 21) Issue of ordinary shares (note 22) Buy back shares (note 22) Balance at 31 December 2020 - - - - - - 3,956 (4,197) 162,547 - 23,145 (32,443) - 2,474 37 25,619 (32,406) (32,443) 23,145 2,511 (6,787) 2,011 - (18,890) - - - - - - - - 466 - - - 6,000 133,935 6,150 2,011 466 (18,890) 3,956 (4,197) 308,632 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes / 88 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Business and risks Consolidated statement of cash flows For the year ended 31 December 2020 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Finance income received Finance cost paid Income tax paid Net cash from operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payment received from finance lease Payment for intellectual property and software development costs Net sale of software Business combinations, net of cash acquired Repayment of loans by third party Proceeds from sale of other financial assets Loans to shareholders (employees) Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Principal elements of borrowings Principal elements of lease payments Proceeds from issues of shares Net cash (used in)/from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Note 2020 $’000 2019 $’000 960,955 1,064,130 (853,626) (1,009,160) 107,329 3,333 (2,391) (6,397) 35 101,874 (8,373) 2,330 - (1,868) 441 (140) 559 451 (1,946) (8,546) 2,579 (2,157) (8,456) 3,956 (4,078) 89,250 126,735 (11,176) 54,970 2,749 (3,361) (29,312) 25,046 (5,137) 2,681 1,668 (3,074) 763 (81,394) 1,540 3,843 - (79,110) 12,242 (14,701) (6,097) 64,548 55,992 1,928 125,626 (819) Cash and cash equivalents at the end of the financial year 10 204,809 126,735 Refer to note 35 for information on non-cash financing and investing activities. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes DRA Global Annual Report 2020 / ACN 622581935 / 89 // Financial Statements / Business and risks Notes to the consolidated financial statements Note 1. Basis of preparation ....................................................................................................... 92 Results Note 2. Operating segments ............................................................................................................. 93 Note 3. Revenue .................................................................................................................................. 96 Note 4. Other income ............................................................................................................................. 99 Note 5. Other gains/(losses) – net ............................................................................................................ 99 Note 6. Expenses ........................................................................................................................................ 99 Note 7. Net finance income ......................................................................................................................... 100 Note 8. Income tax ........................................................................................................................................ 100 Note 9. Earnings per share (EPS) ................................................................................................................. 103 Financial position Note 10. Cash and cash equivalents ............................................................................................................. 104 Note 11. Trade and other receivables ............................................................................................................ 104 Note 12. Financial assets at fair value through profit or loss ......................................................................... 105 Note 13. Other financial assets at amortised cost ......................................................................................... 105 Note 14. Property, plant and equipment ........................................................................................................ 106 Note 15. Leases ............................................................................................................................................108 Note 16. Intangibles and goodwill ................................................................................................................. 110 Note 17. Trade and other payables ............................................................................................................... 113 Note 18. Interest-bearing borrowings ............................................................................................................ 114 Note 19. Employee benefits .......................................................................................................................... 115 Note 20. Provisions ....................................................................................................................................... 116 Note 21. Other financial liabilities .................................................................................................................. 117 Capital and risk management Note 22. Issued capital .................................................................................................................................. 118 Note 23. Reserves ......................................................................................................................................... 120 Note 24. Dividends ........................................................................................................................................121 Note 25. Financial instruments ...................................................................................................................... 121 Note 26. Contingencies ................................................................................................................................. 124 Note 27. Commitments .................................................................................................................................. 125 Note 28. Events after the reporting period..................................................................................................... 125 Group structure and other information Note 29. Related party transactions .............................................................................................................. 126 Note 30. Parent entity information ................................................................................................................. 127 Note 31. Business combinations ................................................................................................................... 128 Note 32. Interests in subsidiaries .................................................................................................................. 128 Note 33. Interests in associates .................................................................................................................... 130 Note 34. Interests in joint operations ............................................................................................................. 131 Note 35. Cash flow information ..................................................................................................................... 132 Note 36. Share-based payments ................................................................................................................... 133 Note 37. Remuneration of auditors................................................................................................................ 137 Note 38. New standards and interpretations ................................................................................................. 138 Note 39. Other significant accounting policies............................................................................................... 139 DRA Global Annual Report 2020 / ACN 622581935 / 91 // Financial Statements / Notes to the consolidated financial statements Note 1. Basis of preparation Introduction DRA Global Limited (the Company) is a company domiciled in Australia. The consolidated financial statements of the Company comprise the Company and its controlled entities (the Group) and the Group’s interest in associates and joint arrangements. DRA Global Limited is a for-profit entity for the purpose of preparing the financial statements. These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements of the Group also complies with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board (IASB). The financial statements have been prepared under the historical cost convention, except for financial instruments, property, plant and equipment that have been measured at fair value in initial accounting of a business combination. The Group 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 these financial statements have been rounded off in accordance with that Corporations Instrument to the nearest thousand Dollars, or in certain cases, the nearest Dollar. Basis of consolidation The consolidated financial statements comprise the financial statements of the Group. A list of significant controlled entities (subsidiaries) at year end is contained in note 32 Interest in subsidiaries. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Foreign currency translation The financial statements are presented in Australian Dollars, which is DRA Global Limited’s functional and presentation currency. Transactions denominated in foreign currencies are initially recorded in the functional currency using the exchange rate ruling at the date of the underlying transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange at year end. Exchange gains or losses on retranslation are included in profit or loss, with the exception of foreign exchange gains or losses on foreign currency provisions for closure and rehabilitation which are capitalised in property, plant and equipment for operating sites. The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows: / assets and liabilities for each reporting period presented are translated at the closing rate at the reporting date, / income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and / all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. / 92 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 1. Basis of preparation (continued) Accounting judgements and estimates In preparing the Group annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the Group annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the Group annual financial statements. Significant estimates and judgements include: - Revenue recognition - Taxation - Useful lives of assets - Impairment of non-financial assets - Intangibles and goodwill - Provision for loss making contracts - Estimation of contingent consideration and option liabilities - Impairment of financial assets - Contingent liabilities - Share-based payments (note 3) (note 8) (note 14) (note 14) (note 16) (note 20) (note 21) (note 25) (note 26) (note 36) Comparative figures Where required by the Australian Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Significant accounting policies Significant accounting policies are included in the respective notes or note 39. Results Note 2. Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) in DRA. The CODM assesses the financial performance and position of the Group and makes strategic decisions. The CODM consists of the Chief Executive Officer, the Chief Financial Officer and the Executive Vice President of each operating segment. Identification of reportable operating segments The CODM has identified its operating segments based on the internal reports that are used in assessing performance and in determining the allocation of resources. Operating segments are identified based on the geographical regions of operation. The Group aggregates two or more operating segments into a single reportable operating segment when the Group has assessed and determined the aggregates operating segments share similar economic and geographical characteristics, such as the type of customers for the Group’s services and similar expected growth rates and regulatory environment. The Group has the following reportable segments: / Europe, Middle East and Africa (EMEA) - this part of the business provides project and/or operation services in the mining industries throughout the EMEA region. / Asia Pacific and Americas (APAC/AMER) - this part of the business provides project and/or operation services in the mining and energy industries in the Asia Pacific, North and South Americas regions. DRA Global Annual Report 2020 / ACN 622581935 / 93 // Financial Statements / Notes to the consolidated financial statements Note 2. Operating segments (continued) Information technology; The following items are not allocated to operating segments as they are not considered part of the core trading operations of any segment: / Corporate overheads; / Group finance; / / Origination; / Treasury; / Corporate secretarial; and / Certain strategic investments. These amounts are presented in the ‘Others (unallocated)’ column in the operating segment information below. The performance of each segment forms the basis of all reporting to the CODM and the Board. The CODM and the Board primarily uses Earnings Before Interest and Tax (EBIT) to assess the performance of a segment. It will also review the assets and working capital of each segment on a regular basis. The accounting policies adopted for internal reporting to the CODM and the Board are consistent with those adopted in the financial statements. In reporting the EBIT to the CODM and the Board, results for the normal operations of the segment separately show reporting of the effect of significant items of income and expenditure which may have an impact on the quality of earnings such as depreciation and amortisation, impairment losses, share-based payments and others. Operating segment information 2020 Revenue Segment revenue Inter-segment revenue Total revenue EBIT Finance income Finance expense Profit/(loss) before income tax expense Income tax expense Profit after income tax expense Material items include: Share of profits of associates Share-based payment expenses Net impairment losses on trade receivables and contract assets Impairment of goodwill Depreciation of property, plant and equipment Amortisation of intangible assets Assets Segment assets Total assets Total assets include: Investments in associates Acquisition of non-current assets Liabilities Segment liabilities Total liabilities EMEA $’000 549,323 (11,561) 537,762 43,834 3,309 (1,309) 45,834 367 - (2,774) - (6,772) (806) APAC/ AMER $’000 Others (unallocated) $’000 404,361 (3,874) 400,487 5,101 1,311 (2,615) 3,797 - - (419) - (8,472) (7) 21,910 (21,910) - (9,921) 881 1,534 (7,506) - (2,011) 819 (5,713) (1,635) (8,177) 347,034 146,424 136,738 2,318 26,966 - 9,528 - 2,167 195,506 122,168 3,890 Total $’000 975,594 (37,345) 938,249 39,014 5,501 (2,390) 42,125 (16,506) 25,619 367 (2,011) (2,374) (5,713) (16,879) (8,990) 630,196 630,196 2,318 38,661 321,564 321,564 / 94 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 2. Operating segments (continued) 2019 Revenue Segment revenue Inter-segment revenue Total revenue EBIT Finance income Finance expense Profit/(loss) before income tax expense Income tax expense Profit after income tax expense Material items include: Share of profits of associates Share-based payment expenses Net impairment losses on trade receivables and contract assets Depreciation of property, plant and equipment Amortisation of intangible assets Assets Segment assets Total assets Total assets include: Investments in associates Acquisition of non-current assets Liabilities Segment liabilities Total liabilities APAC/ AMER* $’000 Others (unallocated) $’000 Total $’000 13,263 (13,263) 1,053,333 (20,114) - 1,033,219 EMEA* $’000 685,847 (4,541) 681,306 50,175 3,652 (1,874) 51,953 580 - (6,283) (8,854) (1,732) 354,223 (2,310) 351,913 16,891 1,313 (1,858) 16,346 - - (835) (7,442) (6) (8,062) 590 371 (7,101) - (301) 1,694 (1,515) (6,807) 305,896 137,405 143,058 2,318 11,310 - 6,417 - 79,403 176,566 118,014 (40,294) 59,004 5,555 (3,361) 61,198 (25,189) 36,009 580 (301) (5,424) (17,811) (8,545) 586,359 586,359 2,318 97,130 254,286 254,286 * FY2019 reportable segment information is restated to conform with the current period presentation as required by AASB 8 Operating Segments. DRA Global Annual Report 2020 / ACN 622581935 / 95 // Financial Statements / Notes to the consolidated financial statements Note 3. Revenue Disaggregation of revenue by major service lines and geographical regions: 2020 Revenue recognised over time: Projects Operations Other 2019 Revenue recognised over time: Projects Operations Other EMEA $’000 APAC/ AMER $’000 Others (unallocated) $’000 286,201 249,128 2,433 537,762 380,833 297,125 3,348 681,306 141,598 258,889 - 400,487 150,823 201,090 - 351,913 - - - - - - - - Total $’000 427,799 508,017 2,433 938,249 531,656 498,215 3,348 1,033,219 Recognition and measurement The Group provides project and operation services to its customers. Revenue is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group is expected to be entitled in exchange of those goods or service. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods and services before transferring them to the customer. Project revenue The Group is principally involved in the projects through provision of consulting services that includes the assessment of mineral projects through the completion of feasibility studies and design and construction of mineral process plants. These activities involve extensive engineering expertise in the engineering disciplines of process, electrical and instrumentation, mechanical, civil and structural and infrastructure as well as the associated disciplines of project management, materials handling and procurement. These projects generally contain one performance obligation due to the highly integrated activities, that in combination, forms the deliverable for the contract with the customer. The activities cannot easily be distinguished one from the other. In rare circumstances, some projects will have multiple performance obligations. For these contracts, the total value of the contract will be allocated to the individual performance obligations based on standalone selling price. Work is typically performed on assets that are controlled by the customers or on assets that have no alternative use to the Group, with the Group having right to payment for performance to date. As performance obligations are satisfied over time, project revenue is recognised over time using input methods such as labour hours expended or costs incurred. Operation revenue The Group also derives operation revenue from fixed term contracts involving the operation and maintenance of mineral process plants, which includes associated services relating to metallurgical quality management, control and analysis as well as process optimisation. Under these contracts, the services are delivered through the provision of labour and specialist capabilities in systems integration, recruitment and human resource management, skills development and training, purchasing and cost control, stores and asset management, health and safety and environmental management. These services provided are the performance obligation in respect of each contract. The contracts are typically structured at a fixed price per month over the contract period. Additional costs incurred on behalf of a customer on an ad hoc basis are recoverable from the customer on a reimbursable basis. These additional costs are a separate distinct performance obligation per the contract. / 96 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 3. Revenue (continued) Performance obligations are fulfilled over time as the Group largely enhances assets which the customer controls. Operation revenue is recognised when the services are rendered based on the amount of the expected transaction price allocated to each performance obligation noted above typically based a schedule of rates or a cost-plus basis. Customers are generally invoiced monthly as per the structure of the contract, which are aligned with the stand-alone selling prices for each performance obligation. Payment is received following invoice on normal commercial terms. Costs to fulfil a contract Costs incurred prior to the commencement of a contract may arise due to mobilisation or site setup costs. Where these costs are expected to be recovered, they are capitalised and amortised over the course of the contract consistent with the transfer of service to the customer. Variable consideration It is common for contracts to include performance bonuses or penalties assessed against the timeliness or cost effectiveness of work completed or other performance related indicators. Where consideration in respect of a contract is variable, the expected value of revenue is only recognised when any uncertainty associated with the variable consideration is subsequently resolved. Variable consideration is typically billed based on the achievability of agreed metrics in terms of clearly defined parameters. Once achieved, the Group will bill the customer for the agreed amount. In relation to variable consideration, the expected value of revenue is only recognised when it is highly probable that a significant reversal will not occur. Expected revenue is recognised consistently in a contract based on the expected value method or the most likely amount method whichever is more appropriate. Certain contracts are subject to claims which are enforceable under the contract. If the claim does not result in any additional goods or services, the transaction price is updated and the claim accounted for as variable consideration. Warranty and defect liability Generally, contracts include defect and warranty periods following completion of the project. These obligations are not deemed to be separate performance obligations and are therefore estimated and included in the total costs of the contracts. Where required, amounts are recognised accordingly in line with AASB 137 Provisions, Contingent Liabilities and Contingent Assets. A provision is made for the difference between the expected cost of fulfilling a contract and the expected unearned portion of the Group’s transaction price where the forecast costs are greater than the forecast revenue. Financing components The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money. Significant judgements and estimates Expected costs to complete For project revenue recognised using an input method based on costs incurred, management is required to estimate the expected forecast costs to complete. Fundamental to this calculation, is a reliable estimate of the total forecast costs to complete the project. The Group estimates its forecast costs to complete based on its budget derived from the tender process and reassessed at each reporting period by its project manager based on the best available information and the current progress of the project. Transaction price In determining transaction price (total contract revenue), variable consideration including bonuses, penalties, claims and contract variations are only included to the extent it is highly probable that a significant reversal in revenue will not occur in the future. The estimate of variable consideration is determined using the expected value method or the most likely amount depending on which method better predicts the amount of consideration to which it will be entitled. DRA Global Annual Report 2020 / ACN 622581935 / 97 // Financial Statements / Notes to the consolidated financial statements Assets and liabilities related to contracts with customers The Group has recognised the following assets and liabilities related to contracts with customers: Current assets Contract assets - Projects Contract assets - Operations Current liabilities Contract liabilities - Projects Contract liabilities - Operations Contract assets and liabilities Note 3. Revenue (continued) 2020 $’000 2019 $’000 25,179 13,408 38,587 48,507 5,211 53,718 15,789 6,193 21,982 44,533 756 45,289 Contract assets and contract liabilities refer to what is commonly known as ‘unbilled or accrued revenue’ and ‘deferred revenue’ respectively. Contract assets represent the Group’s right to consideration which is conditional on something other than the passage of time (for example, the Group’s future performance). If the Group’s right to an amount of consideration is unconditional (other than the passage of time), the contract asset is reclassified as a receivable. Contract liabilities arise where payment received from the customer ahead of scheduled transfer of goods and services transferred to the customers. Contract assets have increased as the Group has provided services ahead of the agreed payment schedules on some EPC projects. Contract liabilities have increased as the Group has received advance payments for some of its EPC and EPCM projects. Revenue recognised in relation to contract liabilities Revenue recognised that was included in the contract liability balance at the beginning of the year Revenue recognised from performance obligation satisfied in previous periods Remaining performance obligations (work in hand) Contracts which have remaining performance obligations as at 31 December 2020 are set out below: Project revenue Operations revenue 2020 $’000 45,289 - 2019 $’000 50,404 - 2020 $’000 443,511 640,415 2019 $’000 233,298 365,342 1,083,926 598,640 Contracts in different segments have different lengths. Revenue is typically earned over these varying time frames. The average duration of contracts is given below. Some contracts will vary from these typical lengths. Projects revenue 1 - 4 years Operations revenue 1 - 5 years / 98 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 4. Other income Fair value adjustments to other financial assets at fair value through profit or loss (FVTPL) Government grants Other Other income Note 5. Other gains/(losses) – net Profit on sale of property, plant and equipment Foreign exchange gain/(loss) (Loss)/profit on foreign currency contracts Profit on disposals - other financial assets Note 6. Expenses 2020 $’000 634 3,786 660 5,080 2020 $’000 1,053 7,421 (1,227) 299 7,546 2019 $’000 1,031 797 1,021 2,849 2019 $’000 378 (2,498) 967 932 (221) Included in cost of sales and general and administrative expenses are expenses of the following nature: Employee benefit expense Net impairment losses on trade receivables and contract assets Impairment - other financial assets Impairment of goodwill Share-based payment expenses Depreciation of right-of-use assets Depreciation of property, plant and equipment Amortisation of intangible assets Notes 2020 $’000 2019 $’000 (509,290) (524,898) 11 16 36 15 14 16 (2,374) (366) (5,713) (2,011) (8,978) (7,901) (8,990) (5,424) (866) - (301) (7,709) (10,102) (8,545) DRA Global Annual Report 2020 / ACN 622581935 / 99 // Financial Statements / Notes to the consolidated financial statements Note 7. Net finance income Finance income Bank Other Finance costs Bank Other 2020 $’000 3,030 2,471 5,501 (1,067) (1,323) (2,390) 2019 $’000 2,413 3,142 5,555 (1,739) (1,622) (3,361) Net finance income 3,111 2,194 Note 8. Income tax a) Income tax expense Income tax expense/(benefit) Current tax on profits for the year Adjustments for current tax of prior periods Foreign withholding tax written off Deferred tax - Originating and reversing temporary differences Adjustments for deferred tax of prior periods Aggregate income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Difference in overseas tax rates Assessable tax loss not recognised Non-deductible expenses Income not subjected to tax Adjustments for current and deferred taxes of prior periods Foreign withholding tax written off Branch tax paid Tax credits/incentives (including foreign income tax credits) Others Income tax expense 2020 $’000 19,029 352 4,430 (2,927) (4,378) 16,506 2019 $’000 25,571 (1,657) 4,628 (4,671) 1,318 25,189 42,125 61,198 12,638 18,359 835 1,199 3,272 (319) (4,026) 4,430 (515) (1,308) 300 44 (405) 2,993 722 (29) 4,628 (892) (969) 738 16,506 25,189 / 100 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 8. Income tax (continued) b) Deferred tax balances Deferred tax assets Deferred tax liabilities Net deferred tax assets Type of temporary difference: Assessable tax losses Employee benefits liabilities Allowance for expected credit losses Contracts in progress Lease liabilities Property, plant and equipment and right-of-use assets Provision Other Movements: Opening balance Credited to profit or loss Additions through business combinations Foreign currency exchange adjustment Closing balance c) Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit at statutory tax rate 2020 $’000 57,031 (3,615) 53,416 2019 $’000 62,912 (12,200) 50,712 Net deferred tax 2020 $’000 Net deferred tax 2019 $’000 (Charged)/ credited to profit or loss 2020 $’000 (Charged)/ credited to profit or loss 2019 $’000 22,764 13,314 5,838 437 651 (5,263) 14,971 704 53,416 21,131 12,727 3,899 6,043 2,612 (9,762) 15,582 (1,520) 50,712 1,900 2,072 (776) (1,538) 572 3,160 1,094 821 7,305 2020 $’000 50,712 7,305 (54) (4,547) 53,416 3,523 5,018 2,023 848 90 3,150 (11,060) (239) 3,353 2019 $’000 53,636 3,353 (5,047) (1,230) 50,712 2020 $’000 16,355 4,437 2019 $’000 9,634 2,616 The unused tax losses were incurred by subsidiaries that are not likely to generate taxable income in the foreseeable future. They can be carried forward indefinitely. Recognition and measurement The income tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income, directly in equity or a business combination. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. DRA Global Annual Report 2020 / ACN 622581935 / 101 // Financial Statements / Notes to the consolidated financial statements Note 8. Income tax (continued) Current tax assets and liabilities Current tax comprises normal income tax on companies. Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities/(assets) for the current and prior periods are measured at the amount expected to be paid to/(recovered from) the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which, at the time of the transaction, affects neither accounting profit nor taxable profit/(tax loss). A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit/(tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: / a transaction or event which is recognised, in the same or a different period, to other comprehensive income, or / a business combination. Current and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income. Current and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity. Tax consolidation legislation DRA Global Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The parent entity, DRA Global Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, the entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Significant judgments and estimates Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due, when the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. / 102 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 8. Income tax (continued) The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted. Deferred tax assets that relate to carried-forward tax losses of the Group are recognised on the basis that the Group will satisfy applicable tax legislation requirements at the time of proposed recoupment of those tax losses. An assessment will be performed at the time when those tax losses are utilised. Note 9. Earnings per share (EPS) Profit after income tax Non-controlling interest Profit after income tax attributable to the owners of DRA Global Limited Basic earnings per share Diluted earnings per share Weighted average number of ordinary shares Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares Weighted average number of ordinary shares used in calculating diluted earnings per share 2020 $’000 25,619 (2,474) 23,145 Cents 27.49 27.39 2019 $’000 36,009 (160) 35,849 Cents 43.78 43.78 Number Number 84,191,873 81,882,380 313,770 - 84,505,643 81,882,380 Basic EPS Basic EPS is calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year. Diluted EPS Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. The adjustment for the calculation of diluted EPS in the table above does not take into account any options issued under the Non- executive Directors Share Option Plan and the FY2020 Employee Share Option plan. The potential number of ordinary shares that could be issued under these arrangements were excluded from the adjustment for the calculation of diluted EPS in the table above given the number of options over ordinary shares to be issued will only be determined at a future date based on future valuations which are unable to be reliably estimated at the date of this report. Refer to note 36. DRA Global Annual Report 2020 / ACN 622581935 / 103 // Financial Statements / Notes to the consolidated financial statements Financial position Note 10. Cash and cash equivalents Current assets Cash at bank and in hand Restricted cash 2020 $’000 2019 $’000 204,809 126,735 The cash balance above includes issued cash-backed bank guarantees to the value of $8,568,136 (2019: $9,320,205). These cash balances are restricted and not available for general use by the Group. Recognition and measurement Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. Note 11. Trade and other receivables Current assets Trade receivables Less: Allowance for expected credit losses Net trade receivables Prepayments Deposits Withholding taxes Other receivables Retention debtors Non-current assets Retention debtors Income tax expense 2020 $’000 2019 $’000 144,742 (35,095) 109,647 177,400 (41,947) 135,453 5,824 992 1,404 2,984 4,359 3,656 1,134 4,976 284 - 125,210 145,503 - 125,210 8,234 153,737 Recognition and measurement Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of the business. If collection of the amounts is expected in one year or less they are classified as current assets, otherwise they are classified as non-current. / 104 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 11. Trade and other receivables (continued) Allowance for expected credit losses Movements in the allowance for expected credit losses are as follows: Opening balance Increase through business combinations Net increase in loss allowance recognised in profit or loss during the year Receivables written off during the year as uncollectible Foreign exchange differences Closing balance Note 12. Financial assets at fair value through profit or loss Current assets Derivative financial instruments - foreign exchange currency (FEC) contracts Listed shares Shares in non-listed entities Note 13. Other financial assets at amortised cost Current assets Loan receivable - at amortised cost (i) Loans to shareholders (employees) - at amortised cost (ii) Other loans Non-current assets Loan receivable - at amortised cost (iii) Loans receivable 2020 $’000 41,947 50 2,374 (2,182) (7,094) 35,095 2019 $’000 32,974 344 5,424 (1,229) 4,434 41,947 2020 $’000 876 1,750 534 3,160 2020 $’000 772 2,081 969 3,822 2019 $’000 1,518 1,327 609 3,454 2019 $’000 1,517 5,083 1,314 7,914 12,642 16,464 11,919 19,833 (i) The loan accrues interest at a rate of 15% per annum secured by assets of the counterparty. The loan is currently in default and has been impaired to the value recoverable from the security. (ii) These loans accrue interest at the prime lending rate in South Africa, currently 7% per annum and are repayable 60 days after the Group is listed on the ASX. The majority of the loans have been paid through share buy-back during the year. Refer to note 22. (iii) The loan is subject to interest at a rate ranging from 15% - 27.78% secured by assets of the counterparty. The loan is repayable no later than 6 years after the anniversary of the loan, being June 2023. DRA Global Annual Report 2020 / ACN 622581935 / 105 // Financial Statements / Notes to the consolidated financial statements Note 14. Property, plant and equipment Buildings $’000 Leasehold improve- ments $’000 Plant and equipment $’000 Furniture and fixtures $’000 Motor vehicles $’000 3,918 (557) 3,361 2,963 (462) 2,501 2,704 (1,227) 1,477 2,762 (1,474) 1,288 22,250 (17,632) 4,618 23,266 (18,195) 5,071 7,249 (4,205) 3,044 6,915 (5,373) 1,542 16,393 (13,126) 3,267 13,446 (11,248) 2,198 Site establish- ment $’000 31,947 (27,300) 4,647 33,601 (28,312) 5,289 Balance at 31 December 2019 Cost Accumulated depreciation Balance at 31 December 2020 Cost Accumulated depreciation Reconciliations Reconciliations of the net book values at the beginning and end of the current and previous financial year are set out below: Buildings $’000 3,467 93 - (42) (13) - - - Leasehold improve- ments $’000 668 1,004 35 - 1 - - - Plant and equipment $’000 Furniture and fixtures $’000 Motor vehicles $’000 Site establish- ment $’000 3,868 3,405 114 (37) 85 - (5) (43) 4,252 436 63 (48) 5 - - - 6,687 2,705 - (1,928) 106 (1,432) - - (144) (231) (2,769) (1,664) (2,871) 3,361 1,477 18 - (39) (787) - (52) 192 - (6) (53) - (322) 2,501 1,288 4,618 3,160 72 (36) (492) (52) (2,199) 5,071 3,044 3,267 89 - (6) (55) 52 (1,582) 1,542 608 - (492) (568) - (617) 2,198 7,180 924 - (213) 73 - (937) 43 (2,423) 4,647 4,304 - (331) (202) - (3,129) 5,289 Balance at 1 January 2019 Additions Additions through business combinations Disposals Exchange differences Transfer to Right-of-use assets Transfer to intangible assets Transfers in/(out) Depreciation expense Balance at 31 December 2019 Additions Additions through business combinations Disposals Exchange differences Transfers in/(out) Depreciation expense Balance at 31 December 2020 Total $’000 84,461 (64,047) 20,414 82,953 (65,064) 17,889 Total $’000 26,122 8,567 212 (2,268) 257 (1,432) (942) - (10,102) 20,414 8,371 72 (910) (2,157) - (7,901) 17,889 / 106 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 14. Property, plant and equipment (continued) Recognition and measurement The cost of an item of property, plant and equipment is recognised as an asset when: / / it is probable that future economic benefits associated with the item will flow to the Group; and the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories. Major spare parts and stand-by equipment which are expected to be used for more than one period are included in property, plant and equipment. In addition, spare parts and stand by equipment which can only be used in connection with an item of property, plant and equipment are accounted for as property, plant and equipment. Major inspection costs which are a condition of the continuing use of an item of property, plant and equipment and which meet the recognition criteria above are included as a replacement in the cost of the item of property, plant and equipment. Any remaining inspection costs from the previous inspection are derecognised. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. Refer to note 39 for impairment policy of non-financial assets. Land is not depreciated. All other property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value. The useful lives of items of property, plant and equipment have been assessed as follows: Buildings Furniture and fixtures Motor vehicles Plant and equipment Leasehold improvements 20 - 40 years 4 - 10 years 4 - 5 years 3 - 6 years 4 - 10 years Site establishment Varies depending on life of mine or contract The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. Significant judgment and estimates The Group depreciates or amortises its assets over their estimated useful lives, as described in the accounting policies for property, plant and equipment and intangible assets. The estimation of the useful lives of assets is based on historic performance as well as expectations about future use and therefore requires a significant degree of judgement to be applied by management. The actual lives of these assets can vary depending on a variety of factors, including technological innovation, product life cycles and maintenance programs. DRA Global Annual Report 2020 / ACN 622581935 / 107 // Financial Statements / Notes to the consolidated financial statements Note 14. Property, plant and equipment (continued) Significant judgement is applied by management when determining the residual values for property, plant and equipment. When determining the residual value for property, plant and equipment, the following factors are taken into account: / External residual value information (if applicable) / Internal technical assessments for complex plant and machinery. Impairment At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. No impairment loss was recorded in property, plant and equipment during the year (2019: nil). Note 15. Leases Amounts recognised in the statement of financial position The statement of financial position shows the following amounts relating to leases: Right-of-use assets Buildings Vehicles Lease liabilities Current Non-current Additions to the right-of-use assets during the 2020 financial year were $27,221,575 (2019: $6,420,016). Amounts recognised in the statement of profit or loss Depreciation charge of right-of-use assets Buildings Vehicles Interest expense (included in finance cost and cost of sales) Expense relating to short-term, low-value and variable lease rentals (included in cost of sales, general and administrative expenses) 2020 $’000 34,812 2,526 37,338 2019 $’000 18,590 1,432 20,022 2020 2019 9,013 31,659 40,672 7,699 15,409 23,108 2020 $’000 (8,219) (759) (8,978) 2020 $’000 (2,173) (1,610) 2019 $’000 (7,709) - (7,709) 2019 $’000 (1,884) (2,035) The total cash outflow for leases in 2020 was $12,239,523 (2019: $10,015,158). The total cash outflow includes principal elements of lease payments, interest expense and expense relating to short-term, low-value and variable lease rentals. / 108 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 15. Leases (continued) Recognition and measurement The Group leases buildings and vehicles. Rental agreements are typically for fixed periods but may have extension options. The lease agreements do not impose any covenants. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: variable lease payment that are based on an index or a rate; fixed payments (including in-substance fixed payments), less any lease incentives receivable; / / / amounts expected to be payable by the lessee under residual value guarantees; / the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and / payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate. Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability; / / any lease payments made at or before the commencement date less any lease incentives received; / any initial direct costs; and / restoration costs. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The Group applies AASB 136 Impairment of Assets to determine whether a right-of-use asset is impaired. At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. No impairment loss of right-to-use assets was recorded during the year (2019: nil). Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise office equipment. DRA Global Annual Report 2020 / ACN 622581935 / 109 // Financial Statements / Notes to the consolidated financial statements Note 16. Intangibles and goodwill Goodwill $’000 127,019 (16,738) 110,281 120,549 (22,452) 98,097 Brand names $’000 Computer software $’000 Customer relationship $’000 Intellectual property $’000 7,567 (2,032) 5,535 7,248 (3,824) 3,424 9,869 (6,091) 3,778 9,844 (7,389) 2,455 40,538 (21,310) 19,228 39,893 (26,082) 13,811 - - - 134 (30) 104 Balance at 31 December 2019 Cost Accumulated amortisation and impairment Balance at 31 December 2020 Cost Accumulated amortisation and impairment Reconciliations Reconciliations of the net book values at the beginning and end of the current and previous financial year are set out below: Balance at 1 January 2019 Additions Additions through business combinations Disposals Exchange differences Transfers in/(out) Amortisation expense Goodwill $’000 47,677 - 60,535 - 2,069 - - Computer software $’000 Customer relationship $’000 Intellectual property $’000 Brand names $’000 1,935 - 5,145 - - - 1,917 3,074 - (763) 38 942 11,845 - 12,953 - - - (1,545) (1,430) (5,570) Balance at 31 December 2019 110,281 5,535 Additions Additions through business combinations Disposals Exchange differences Impairment loss Amortisation expense Balance at 31 December 2020 - 1,081 - (7,552) (5,713) - 98,097 - - - (307) - (1,804) 3,424 3,778 1,734 - (441) (230) - (2,386) 2,455 19,228 - - - (647) - (4,770) 13,811 - - - - - - - - 134 - - - - (30) 104 Total $’000 184,993 (46,171) 138,822 177,668 (59,777) 117,891 Total $’000 63,374 3,074 78,633 (763) 2,107 942 (8,545) 138,822 1,868 1,081 (441) (8,736) (5,713) (8,990) 117,891 Recognition and measurement Goodwill Business combination principles apply to entities over which the Group obtains control. The Group obtains control of a subsidiary when it becomes exposed to, or gains rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. / 110 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 16. Intangibles and goodwill (continued) Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which arise as a result of the contingent consideration are not affected against goodwill, unless they are valid measurement period adjustments. The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of AASB 3 Business Combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal group) that are classified as held-for-sale in accordance with AASB 5 Non-current Assets Held-For-Sale and Discontinued Operations, which are recognised at fair value less costs to sell. Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date. On acquisition, the Group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for Group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date. Non-controlling interest arising from a business combination is measured either at their share of the fair value of the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in the note for business combinations. In cases where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value as at the acquisition date. The measurement to fair value is included in profit or loss for the year. Where the existing shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustments previously recognised to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment. Goodwill is determined as the consideration paid plus the fair value of any shareholding held prior to obtaining control; plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed. Goodwill is allocated to cash-generating units (CGU) for the purpose of impairment testing. The allocation is made to those CGU or groups of CGU that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the different regions. Brand names and customer relationship Separately acquired brand names and customer relationship are shown at historical cost. Brand names and customer relationship acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses. Identifiable intangible assets with a finite life are amortised on a straight-line basis over their expected useful life from when the asset is ready for use. The useful lives are as follows: Brand names 1 - 5 years Customer relationship 2 - 10 years Computer software Computer software is initially measured at cost and amortised on a straight-line basis over the estimated useful life of each asset. Impairment testing is conducted annually. Computer software is amortised on a straight-line basis over 1 to 3 years. DRA Global Annual Report 2020 / ACN 622581935 / 111 // Financial Statements / Notes to the consolidated financial statements Note 16. Intangibles and goodwill (continued) Significant judgements and estimates Amortisation rates and residual values Significant judgement is applied by management when determining the residual values for intangible assets. In the event of contractual obligations in terms of which a termination consideration is payable to the Group, management will apply a residual value to the intangible asset. Key assumptions used for value-in-use calculations Significant judgements and estimates on key assumptions used for value-in-use calculations are presented in impairment testing below. Impairment testing The Group monitors goodwill on a CGU level. During the year, as part of the Group’s listing readiness process, the CODM undertook an organisational restructure by eliminating the business units for management reporting and allocation of resources purposes. The businesses of the Group are simplified and reorganised into different regions which represent separate CGU to deliver optimal solutions and services that are tailored to meet the Group’s customers’ needs. Goodwill is attributed to: CGU AMER region APAC region EMEA region* 2020 $’000 2019 $’000 - 41,962 56,135 98,097 5,713 41,962 62,606 110,281 * In FY2019, goodwill in relation to the EMEA region is allocated to three separate former business units (BU) of the following amounts: Senet Business Unit EMEA Business Unit Minopex Business Unit 2019 $’000 30,289 13,894 18,423 62,606 The recoverable amount of all CGUs is based on value in use calculations, using cash flow projections covering up to five-year period based on forecast operating results. The recoverable amount of each cash-generating unit exceeds its carrying amount. The Group determines the recoverable amount, being the higher of the fair value less cost to sell and the value in use, of individual cash- generating units by discounting the expected future cash flows of each of the identified cash-generating units. The recoverable amount is then compared to the carrying value of the respective cash-generating unit and an impairment loss is raised if required. Based on the impairment testing performed by management in the current year, an impairment charge of $5.7M arose in the Americas region CGU. The Americas region was profitable in the past and is expected to be profitable in the next 12 months. However, the operation in the Energy Sector is expected to reduce significantly from FY2022 onwards due to expiration of tax incentives in the United States. At the date of this report, the tax incentive has not been renewed and therefore has not been taken into account in the value-in-use calculations to determine the recoverable amount of the CGU beyond FY2022. There was no impairment loss recorded in FY2019. / 112 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 16. Intangibles and goodwill (continued) The key assumptions used in the value in use calculations and the approach to determining the recoverable amount of all CGUs in the current and previous period are: Assumptions Approach used to determining values Revenue growth rate: Relevant to the market conditions and business plan Budgeted gross profit rate: Based on past performance and management’s expectations for the future Long term growth rate: Typically consistent with the long term growth rate of the economic environment or country within which the CGU operates Discount rate (Pre-tax): Risk in the industry and country in which each CGU operates 2020 Revenue growth rate (% annual growth rate) from FY2023-FY2025 (i) Budgeted gross margin (%) Long-term growth rate (%) Pre-tax discount rate (%) AMER region APAC region EMEA region (ii) 25% N.A 15% 4% 14% 4% 18% 5%-8% growth 19% -21% 4% 22% (i) Revenue forecast for FY2021 to FY2022 is based on actual forecast derived from work in hand and tender opportunities. (ii) Cash flow projection of Americas region covering a two year period is used for impairment testing. 2019 AMER BU APAC BU Senet BU EMEA BU Minopex BU Revenue growth rate (% annual growth rate) Budgeted gross margin (%) Long-term growth rate (%) Pre-tax discount rate (%) 3% - 5% 42% N.A 22% 5% 17% 3% 16% 5% - 63% 7% - 8% 4% 21.1% 5% 25% 4% 26% 5% - 7% 14% - 15% 4% 19% Note 17. Trade and other payables Current liabilities Trade payables Accrued expenses and contract costs Other payroll accruals VAT/GST payable Other payables 2020 $’000 54,960 23,280 16,849 3,407 10,019 108,515 2019 $’000 40,756 13,149 12,824 548 10,117 77,394 Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. DRA Global Annual Report 2020 / ACN 622581935 / 113 // Financial Statements / Notes to the consolidated financial statements Note 18. Interest-bearing borrowings Current liabilities Loan from non-controlling interests (i) Other borrowings Non-current liabilities Other borrowings Refer to note 25 for further information on financial instruments. Opening balance 1 January Additional loans raised Business combinations Repayment of borrowings Interest capitalised Exchange differences 2020 $’000 689 243 932 250 1,182 2020 $’000 321 2,579 478 2019 $’000 321 - 321 - 321 2019 $’000 - 15,022 - (2,185) (14,725) 29 (40) 1,182 24 - 321 (i) The loan carries interests at the prime lending rate in South Africa of 7% per annum and is repayable on demand. Financing arrangements Significant borrowing facilities at the reporting date: Total facilities Derivative Products Trading Facility Vehicle and Asset Finance Revolving Credit Facility Global Banking Facility Used at the reporting date Derivative Products Trading Facility Vehicle and Asset Finance Revolving Credit Facility Global Banking Facility Unused at the reporting date Derivative Products Trading Facility Vehicle and Asset Finance Revolving Credit Facility Global Banking Facility 2020 $’000 23,908 6,669 39,943 13,314 83,834 1,470 2,908 - - 2019 $’000 16,325 7,318 45,495 - 69,138 2,763 1,650 - - 4,378 4,413 22,438 3,761 39,943 13,314 79,456 13,562 5,668 45,495 - 64,725 / 114 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 18. Interest-bearing borrowings (continued) Recognition and measurement Borrowings are initially measured at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption value is recognised over the term of the borrowings in terms of the effective interest rate method. Borrowing costs are recognised as an expense in the period in which they are incurred unless required to be capitalised in terms of AASB 123 Borrowing Costs. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. Note 19. Employee benefits Current liabilities Employee benefits liabilities Non-current liabilities Employee benefits liabilities Recognition and measurement Short-term employee benefits 2020 $’000 2019 $’000 35,887 34,741 1,269 37,156 1,495 36,236 The employee benefits liabilities for wages and salaries including non-monetary benefits, incentives, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The employee benefits liabilities for long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. DRA Global Annual Report 2020 / ACN 622581935 / 115 // Financial Statements / Notes to the consolidated financial statements Note 20. Provisions Current liabilities Loss making contracts Claims Warranty provision Others 2020 $’000 46,870 160 1,964 606 49,600 Movements in provisions Movements in each class of provision during the current financial year are set out below: 2020 Carrying amount at the start of the year Additional provisions recognised Amounts released Amounts utilised Exchange differences Carrying amount at the end of the year Claims Loss making contracts $'000 Claims $’000 Warranty provision $’000 51,181 2,657 - (3,186) (3,782) 46,870 193 - - (18) (15) 160 4,307 491 (2,459) (260) (115) 1,964 2019 $’000 51,181 193 4,307 714 56,395 Others $’000 714 454 (173) (375) (14) 606 The provision for claims relates to a claim against a subsidiary in the United States. Loss making contracts The provision for loss making contracts relates to expected unavoidable losses on projects. The calculation of the provision is based on the additional losses expected to be incurred to complete the contracts per the agreed scope or the compensation or penalties arising from failure to fulfil the contracts whichever is lower. Some of these contracts are subject to disputes and claims by the customers and counter-claims by the Group. Should the Group be successful in recovering amounts, this may result in a reduction in the loss previously recorded. The status of these contracts and the adequacy of provisions are assessed at each reporting date. Refer to note 26 for information on contingencies. Warranty provision The provision for warranty relates to the estimated liabilities on certain contracts still under warranty or defect liability period at the reporting date. Recognition and measurement Provisions are recognised when: the Group has a present legal or constructive obligation as a result of a past event; / / / a reliable estimate can be made of the obligation. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. / 116 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 20. Provisions (continued) Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision. Provisions are not recognised for future operating losses. If an entity has a contract that is onerous, a provision is recognised when expected benefits to be derived from a contract of meeting its obligation under the contract are less than the unavoidable costs. Depending on the circumstances of the onerous contract, the provision is measured at either the present value of the expected cost of terminating the contract (if permitted) or the expected net cost of completing the contract, whichever is less. Contingent assets and contingent liabilities are not recognised unless the contingent liability is acquired as part of a business combination. After their initial recognition, contingent liabilities recognised in business combinations that are recognised separately are subsequently measured at the greater of: / / the amount that would be recognised as a provision; and the amount initially recognised less cumulative amortisation. Significant judgements and estimates In arriving to the estimate of provision for loss making contracts, management applies judgements to estimate the costs to complete the onerous contracts which include estimation of labour, technical costs, penalties from impact of delays and productivity. Note 21. Other financial liabilities Current liabilities Put option liability (i) Non-current liabilities Contingent consideration (ii) (i) Put option liability 2020 $’000 18,890 1,004 19,894 2019 $’000 - - - In 2017, the Company entered into a Share Purchase Agreement with Minnovo Pty Ltd (Minnovo) to acquire 100% of the issued share capital in Minnovo. The acquisition of Minnovo was completed in July 2018 and the former shareholders of Minnovo accepted cash and shares of DRA Global Limited as full consideration. The share-based consideration was accepted only on the basis that the shares of DRA Global Limited would be liquid within 18 months. The original period of 18 months has since lapsed. Whilst the Company has no obligation under the share purchase agreement to buy-back the shares, the Company has executed a formal put option agreement with the former shareholders of Minnovo. The put option agreement grants these former shareholders the right to sell their shares obtained from the acquisition back to the Company at the same price that the shares were issued in terms of the Share Purchase Agreement only in the event that the Company is not being listed on the ASX by 30 June 2021. The put option agreement was approved by the shareholders at the Annual General Meeting on 29 July 2020. As the Company cannot be considered to control the outcome of the listing process on the ASX, the Company does not have the unconditional right to avoid delivering cash. Accordingly, under AASB 132 Financial Instruments: Presentation, the Company has recognised a put option liability. The put option liability of $18.9M is calculated based on 2,539,015 number of shares at $7.44 per share. (ii) Refer to note 31 ‘Business combinations’. DRA Global Annual Report 2020 / ACN 622581935 / 117 // Financial Statements / Notes to the consolidated financial statements Note 21. Other financial liabilities (continued) Recognition and measurement Financial liabilities are measured at amortised costs or fair value at through profit or loss (FVTPL). A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss A financial instrument that creates an obligation or potential obligation for an entity to purchase its own equity instruments for cash or another financial assets also gives rise to a financial liability. The amount of the financial liability is measured at the present value of the redemption amount with a corresponding adjustment to equity. Significant judgements and estimates The Group entered into a business acquisition agreement which required additional payments based on meeting certain earnings targets and net working capital position. The Group estimated these amounts payable based on its forecasts. It is reasonably possible that these forecasts may change which may then impact management’s estimations and may then require a material adjustment in the contingent consideration. Capital and risk management Note 22. Issued capital Balance at 1 January 2019 Ordinary no par value shares Movements in fully paid share capital Ordinary shares (acquisition of New Senet Pty Ltd) Issue of ordinary shares for services provided Buy-back of shares Balance at 1 January 2020 Ordinary shares Movements in fully paid share capital Issue of ordinary shares Buy-back of shares Balance at 31 December 2020 Ordinary shares Ordinary shares Number $’000 75,852,983 99,548 8,888,889 33,784 (185,796) 8,736,877 64,548 250 (1,558) 63,240 84,589,860 162,788 646,464 (1,135,129) (488,665) 3,956 (4,197) (241) 84,101,195 162,547 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. / 118 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 22. Issued capital (continued) Share Buy-back At the Annual General Meeting on 31 May 2019, the shareholders approved the selective buy-back of shares for the certain share schemes and for the Legacy LTIP, subject to approval from the South African Reserve Bank where applicable. During the year, 562,573 shares in relation to Legacy LTIP were bought back at nominal value in accordance with the terms and conditions of Legacy LTIP Share Buy Back Agreement. Another 572,556 with a total value of $4,196,818 were bought back at an average rate of $7.33 ranging from $7.04 to $7.42 (2019: 185,796 shares with a total value of $1,157,709 at an average rate of $8.25 ranging from $7.99 to $8.40). Loan shares Included in the ordinary shares are shares purchased by employees including certain key management personnel between 2014 and 2017 through loans provided by the Group. The loans were denominated in South African Rand and accrue interest at the South African Official Prime rate less 2.5%, currently 4.5% (2019: 7.25%) and do not have fixed terms of repayment. Dividends that accrue to the underlying shares are applied to service the loans. These loans provided to employees are deemed as limited recourse loans and in substance are accounted like a share-based payment. The amount of unrecognised loan receivables and accrued interest was $38,182,855 at 31 December 2020 (2019: $41,287,704). Accordingly, until the full repayment of the shares issued to employees has been made, the loan receivable from the employees and the corresponding share capital amount are not recognised in the statement of financial position. Refer to note 36 for accounting policy on share-based payments. Capital risk management The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The capital risk management policy remains unchanged from the 31 December 2019 Annual Report. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total borrowings divided by total equity. Total borrowings is calculated as total borrowings including ‘current and non-current borrowings’ and ‘current and non-current lease liabilities’ as shown in the statement of financial position. Total equity is the total equity as shown in the statement of financial position. The gearing ratio at the reporting date was as follows: Total borrowings Total equity Gearing ratio 2020 $’000 41,854 308,632 2019 $’000 23,429 332,073 13% 7% The gearing ratio increased from 7% to 13% as a result of addition to new right-to-use assets which increased the lease liabilities during the year. Excluding the lease liabilities, the Group has very minimal external borrowings as at 31 December 2020. Refer to note 18. Recognition and measurement Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares purchased by the employees through a limited recourse loans from the Group is accounted as a share-based payment and no loan receivables, related interest expenses and share capital are recognised. Any repayments made are treated as the exercise price for the shares and accounted as equity when received. DRA Global Annual Report 2020 / ACN 622581935 / 119 // Financial Statements / Notes to the consolidated financial statements Note 23. Reserves Foreign currency reserve Share-based payment reserve - Broad Based Black Economic Empowerment Structure Share-based payment reserve Put option reserve Foreign currency reserve 2020 $’000 17,638 3,214 4,038 (18,890) 6,000 2019 $’000 50,082 3,214 2,026 - 55,322 Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. Broad Based Black Economic Empowerment Structure Share-based payment reserve to account for the liability in terms of Broad Based Black Economic Empowerment legislation within South Africa. Share-based payment reserve The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration, and other parties as part of their compensation for services. Put option reserve The reserve is used to recognise the value of the put option arising from a transaction with the Company’s shareholders. Refer to note 21. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Balance at 1 January 2019 Foreign currency translation Reallocation from Retained Earnings to Non-distributable reserve Arising through joint operations Share-based payment expenses Balance at 31 December 2019 Foreign currency translation Share-based payment expenses Put option Balance at 31 December 2020 Foreign currency reserve $’000 46,698 3,218 1 165 - 50,082 (32,443) - - Broad Based Black Economic Empower- ment Structure $’000 Share-based payment reserve $’000 Put option reserve $’000 3,214 1,725 - - - - 3,214 - - - - - - 301 2,026 - 2,011 - 4,037 - - - - - - - - (18,890) (18,890) 17,639 3,214 Total $’000 51,637 3,218 1 165 301 55,322 (32,443) 2,011 (18,890) 6,000 / 120 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 24. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Franking credits Franking credits of the Company available for subsequent financial years based on a tax rate of 30% 2020 $’000 3,821 2019 $’000 3,821 Recognition and measurement Distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in which the distributions are appropriately authorised and no longer at the discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting period. Note 25. Financial instruments Financial risk management objectives The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include: sensitivity analysis for interest rate, foreign exchange and other price risks; / / ageing analysis for credit risk; / / beta analysis in respect of investment portfolios for market risk. rolling cash flow forecasts for liquidity risk; and The Group’s financial risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board. The central treasury department identifies, evaluates, and hedges financial risks in close co-operation with the Group’s operating units. The Board is responsible for the governance framework and oversight of the risk management within the Group. The Audit and Risk Committee is responsible for reviewing the governance framework and risk management within the Group. The day to day responsibility for risk management is carried out by the senior management in the Group. Market risk Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD) and South African Rand (ZAR). Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations by an operating entity that are denominated in currencies other than its own functional currency (FC). Where possible, The Group does not take on foreign exchange risk. The Group manages its exposure to foreign currency risk by minimising excess foreign currency balances in overseas jurisdictions not required for working capital, minimising contracting outside of its functional currencies, entering into hedging arrangement via exchange forward contracts if necessary and passing on foreign exchange risks to customers where possible. DRA Global Annual Report 2020 / ACN 622581935 / 121 // Financial Statements / Notes to the consolidated financial statements Note 25. Financial instruments (continued) The Group’s significant exposure to foreign currency risk at the end of the reporting period, expressed in Australian Dollars (AUD), was as follows: 2020 Net financial assets/(liabilities) FEC contracts (notional amounts) 2019 Net financial assets/(liabilities) FEC contracts (notional amounts) USD held in AUD FC $’000 USD held in GNF FC$’000 USD held in ZAR FC $’000 ZAR held in AUD FC $’000 ZAR held in MZN FC $’000 (35,899) 10,539 - - 23,951 13,637 2,436 - (3,391) - USD held in AUD FC $’000 USD held in GNF FC$’000 USD held in ZAR FC $’000 ZAR held in AUD FC $’000 ZAR held in MZN FC $’000 (34,297) (4,121) - - 43,793 20,705 3,375 - (1,792) - As shown in the table above, the Group is primarily exposed to financial assets and liabilities denominated in USD and ZAR held by entities in the Group that have different functional currencies to these financial assets and liabilities. The significant exposure arises from changes in USD/AUD, USD/GNF (Guinea Franc), USD/ZAR, ZAR/AUD and ZAR/MZN exchange rates. The sensitivity of profit or loss to changes in these exchange rates is shown below: USD/AUD exchange rate - increase 10% USD/GNF exchange rate - increase 10% USD/ZAR exchange rate - increase 10% ZAR/AUD exchange rate - increase 10% ZAR/MZN exchange rate - increase 10% Profit/(loss) before tax 2020 $’000 (3,590) 1,054 1,031 244 (339) 2019 $’000 (3,430) 412 2,308 338 (179) A 10 percent weakening of the ZAR/AUD, USD/ZAR, USD/GNF and USD/AUD would have the equal but opposite effect on the above currencies to the amounts shown above, on the basis of all other variables held constant. Interest rate risk The Group’s main interest rate risk arises from long-term borrowings. Cash, cash equivalents and borrowings issued at variable rates expose the Group to cash flow interest rate risk. As at the end of the reporting period, the Group had no material variable interest borrowings. Credit risk Credit risk is the risk of financial loss due to counterparties to financial instruments not meeting their contractual obligation. Each local entity is responsible for managing and analysing the credit risk for each of their new customers before standard payment and delivery terms and conditions are offered. During the year, the Group has also increased its monitoring of debt recovery as there is an increased probability of customers delaying payment or being unable to pay, due to COVID-19. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to trade customers, including outstanding receivables and committed transactions. The Group only deposits cash with major banks with a high quality credit rating. Significant judgements and estimates The Group applies the AASB 9 Financial Instruments (AASB 9) simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. / 122 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 25. Financial instruments (continued) In determining the recoverability of a trade receivable and contract assets, the local management considers any change in the credit quality of these financial assets from the date credit was granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and geographically diverse. Accordingly, the Group has assessed for any expected credit losses under AASB 9, and believe that there is no further credit provision required in excess of the allowed provision for impairment of these financial assets. Management does not expect any material loss from non-performance by counterparties on credit granted during the financial year under review that has not been provided for. The expected loss rates are based on the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors including economic conditions due to COVID-19 affecting the ability of the customers to settle the receivables. All other financial assets at amortised costs which are considered to have low credit risk, and the loss allowance recognised during the period was therefore limited to 12 month expected credit losses. These instruments are considered to be low risk when they have a low risk of default or the counterparty has a strong capacity to meets its obligations within the short term. For those other financial assets in default and non-performing, a lifetime expected losses was recognised during the period if these assets have not been previously impaired. Financial assets exposed to credit risk at year end were as follows: Contract assets Trade and other receivables (excluding prepayments) Cash and cash equivalents Other financial assets - loans receivable Other financial assets - FEC contracts 2020 $’000 38,587 119,386 204,809 16,464 876 380,122 2019 $’000 21,982 150,081 126,735 19,833 1,518 320,149 Expected credit loss rates used for trade and other receivables and contract assets Average rate Current More than 30 days past due More than 60 days past due More than 90 days past due Allowance for expected credit losses Refer to note 11 for reconciliation of allowance for expected credit losses. Trade and other receivables past due but which are not considered to be impaired at 31 December: 60 - 90 days past due 90 days and over past due Liquidity risk 1.7% 1.0% 7.6% 66.7% 2020 $’000 3,564 16,214 19,778 2019 $’000 9,083 25,378 34,461 Liquidity risk is the risk that an entity in the Group will not be able to meet its obligations as they become due. Group treasury manages liquidity risk of the Group. The Group’s liquidity risk is mitigated by the availability of funds to cover future commitments. Liquidity is reviewed continually by the Group’s treasury department through daily cash monitoring, review of available credit facilities and rolling cash flow forecasts. DRA Global Annual Report 2020 / ACN 622581935 / 123 // Financial Statements / Notes to the consolidated financial statements Note 25. Financial instruments (continued) The Group’s liquidity risk is mitigated by the availability of funds to cover future commitments. The Group manages liquidity risk through an ongoing review of future commitments and credit facilities. Surplus cash held by the operating entities over and above balances required for working capital management, is invested in interest bearing current accounts, term deposits and money market deposits. The Group has sufficient cash funds to meet its identified ongoing operating expenses and commitments. Remaining contractual maturities The table below analyses the Group’s financial liabilities and net-settled non-derivative financial liabilities into relevant maturity groupings, based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash outflows. 2020 Non-derivatives Trade and other payables Interest-bearing borrowings Lease liabilities Other financial liabilities 2019 Non-derivatives Trade and other payables Interest-bearing borrowings Lease liabilities Carrying amount $’000 Less than 1 year $’000 Between 1 and 5 years $’000 108,515 108,515 1,182 40,672 19,894 965 11,565 18,890 170,263 139,935 - 250 20,321 1,004 21,575 Over 5 years $’000 - - 18,894 - Remaining contractual maturities $’000 108,515 1,215 50,780 19,894 18,894 180,404 Carrying amount $’000 77,394 321 23,108 100,823 Less than 1 year $’000 77,394 321 9,308 87,023 Between 1 and 5 years $’000 Over 5 years $’000 Remaining contractual maturities $’000 - - 16,092 16,092 - - 971 971 77,394 321 26,371 104,086 Note 26. Contingencies The Group has guarantee facilities of $206.5M (2019: $181.2M) available for utilisation. The Group has issued financial guarantees as security to various landlords and customers for leases and construction projects, to the value of $82.8M (2019: $59.3M). Provisions provided for the bank guarantees in FY2020 was $15M (2019: nil) included in provision for loss making contracts. On 1 April 2019, the Group acquired a 72.7% interest in New Senet Pty Ltd (”Senet”). The business combination is accounted for as an acquisition of 100% interest in New Senet Pty Ltd due to the existence of a call and put option agreement which was entered at the same time to acquire the remaining interest in New Senet Pty Ltd. In the event that Senet meets certain earnings targets in the next three years, additional consideration of up to $52.8M may be payable in cash. The Group has estimated this liability as nil based on the earnings forecasts (2019: nil). The Group occasionally receives legal claims arising from its operations in the course of its normal business. Group entities may also have potential financial liabilities that could arise from historical commercial contracts. At the date of this report the Group has a number of claims in progress, however it is not possible to estimate the financial effects of these claims should they be successful and, at the date of this report, the Directors have assessed the possibility of any net outflow of resources embodying economic benefits, which have not / 124 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 26. Contingencies (continued) already been provided in this report, in relation to these matters to be unlikely. The Directors are of the opinion that the disclosure of any further information on these matters would be prejudicial to the interests of the Group. Significant judgements and estimates The Group assessed and applied judgements to determine whether it has a possible or a present obligation and the likelihood of an outflow of resources being required. A provision is recognised when there is a present obligation that probably requires an outflow of resources (refer to note 20). Disclosures are made for any possible obligations or present obligations that may, but probably will not, require an outflow of resources unless the disclosures will prejudice the position of the Group in a dispute with the other party. Note 27. Commitments The Group is a lessee of various office properties as well as motor vehicles under non-cancellable lease agreements. Leases are accounted for as lease liabilities under AASB 16 Leases. Refer to note 15. Note 28. Events after the reporting period Black Economic Empowerment Restructure DRA South Africa Proprietary Limited (“DRA South Africa”) and its subsidiaries which are controlled by the Group are implementing a restructure of DRA’s South African operations to facilitate the conclusion of a broad-based black economic empowerment (“B-BBEE”) ownership transaction in terms of which private equity funds managed by Ascension Capital Partners Proprietary Limited (“Ascension Funds”) will acquire the following interest in the relevant South African group entities: / 35% ordinary share interest in DRA South African Group Holdings Proprietary Limited (“DRA SA Group”) / 25% ordinary share interest in Minerals Operations Executive Proprietary Limited (“Minopex SA”) and DRA Plant Operations Holdings Proprietary Limited (“DRA Plant Operations”) / 25% ordinary share interest in DRA Projects Group Holdings Proprietary Limited (“DRA Projects Group”) Main Street 798 Proprietary Limited (RF) (“Main Street”), DRA SA Group’s previous B-BBEE shareholder, will remain indirectly invested in DRA South Africa as an investor in Ascension. In terms of the aforementioned restructure, DRA South Africa Group Holdings will replace DRA South Africa as the holding company of the Group’s South African interests and DRA Projects Group will become the holding vehicle for the Group’s South African projects business. The result of the restructure of the B-BBEE shareholding and introduction of Ascension as a B-BBEE partner in South Africa is that DRA’s major operating businesses in South Africa will be certified 51% B-BBEE-owned and address the main procurement criteria set out in the South African Mining Charter (Mining Charter 3). By addressing these criteria DRA will be able to continue to effectively compete within the South African market, ensuring a platform for sustained growth. At the date of this report the restructure had not been completed. Stockdale Street’s Selective Share Buy Back On 28 January 2021, the Company entered into a Share Buy Back Agreement with BPESAM IV M Ltd (IVM) and BPESAM IV N Ltd (IVN) (together known as Limited Partners of Stockdale Street Investment Partnership IV) to purchase 30,000,000 of the shares in the Company. The Buy-back consideration includes an initial cash consideration of ZAR 550,000,000 ($47,720,000) payable at completion date, a further cash consideration of $30,280,000 payable prior to 31 December 2021, totalling approximately $78,000,000 and 25,000,000 Upside Participants Rights (UPR). The UPRs have an exercise price of $3.10 per share with a price ceiling of $6.5 per share. Consequently, the maximum gain of the UPRs is limited to $3.40 per UPR. In total, the transaction has a maximum value of approximately $163M which equates to a maximum value of $5.43 per share receivable by BPESAM IV M Ltd and BPESAM IV N Ltd. DRA Global Annual Report 2020 / ACN 622581935 / 125 // Financial Statements / Notes to the consolidated financial statements Note 28. Events after the reporting period (continued) A report was obtained from an independent expert that the selective Buy-back was fair and reasonable to the shareholders of the Company (excluding IVM, IVN and their Associates) and approval of the transaction was obtained at a meeting of the shareholders on 1 April 2021. Impact of COVID-19 Refer to Operating and Financial Review for the impact of COVID-19 on the Group’s result in the current year. The Group will continue to assess the impact of COVID-19 on existing Projects and Operations businesses. The duration and spread of the pandemic and regulations imposed by governments continue to be closely monitored to determine any future impact on the Group. The Group has a stable cash balance and did not require the use of additional credit facilities. Other Kenneth Thomas, Rafael Eliasov and Jean Nel resigned from the position of Non-executive Directors on 11 January 2021, 28 January 2021 and 29 January 2021 respectively. Ben Secrett was appointed as Company Secretary on 1 January 2021. No other matter or circumstance has arisen since 31 December 2020 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Group structure and other information Note 29. Related party transactions Parent entity DRA Global Limited is the parent entity. Parent entity information is set out in note 30. Subsidiaries Interests in material subsidiaries are set out in note 32. Associates Interests in associates are set out in note 33. Joint operations Interests in joint operations are set out in note 34. Key management personnel compensation Short-term employee benefits Post-employment benefits Long-term benefits Termination benefits Share-based payments Transactions with related parties 2020 $’000 4,057,706 100,524 - - 531,742 2019 $’000 3,928,564 93,489 - 884,863 77,415 4,689,972 4,984,331 During the year, a total of 82,786 shares at an average price of $7.33 each have been bought back from key management personnel. / 126 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 29. Related party transactions (continued) Mr Greg McRostie, an Executive Director of the Company, is one of the former Minnovo Shareholders. During the year, the Company executed a formal put option agreement with the former Minnovo Shareholders. Refer to note 21 for more information. Loans to related parties The following balances are outstanding at the reporting date in relation to loans with related parties: Loans to key management personnel 2020 $ 2019 $ 2,213,155 3,079,027 The loans were advanced to key management personnel (KMP) to enable the purchase of ordinary shares in the Group between 2014 and 2017. No further such loans were advanced since then. Some of these transactions took place indirectly with KMP nominated family trusts, family corporate entities or authorised entities as approved by the shareholders. The loans are South African Rand denominated and accrue interest at the South African official prime interest rate less 2.5%, currently 4.5% (2019: 7.25%) and do not have fixed terms of repayment. Dividends that accrue to the underlying shares are applied to service the loans. Refer to note 22. The above does not include a loan owed by VMF Investments Ltd of $23,839,389, in relation to purchase of the shares in the Company where Andrew Naude is the one of the named beneficiaries. This entity is owned and controlled by the VMF Investment Trust. Andrew Naude is not a trustee of the VMF Investment Trust nor does he exercise control over VMF Investments Ltd or the VMF Investment Trust. Note 30. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Profit/(loss) after income tax Total comprehensive (loss)/income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Non-distributable reserve Put option reserve Retained profits Total equity 2020 $’000 (3,320) (3,320) 2020 $’000 25,135 691,137 38,296 38,606 Parent 2019 $’000 52,831 52,831 Parent 2019 $’000 9,279 668,447 (4,269) (5,627) 617,079 617,147 11 (18,890) 54,331 652,531 (723) - 57,650 674,074 DRA Global Annual Report 2020 / ACN 622581935 / 127 // Financial Statements / Notes to the consolidated financial statements Note 30. Parent entity information (continued) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 31 December 2020 (2019: nil). Contingent liabilities DRA Global Limited has provided certain parent company undertakings and indemnities in respect of contract performance by members of the Group. DRA Global Limited is not party to a Deed of Cross Guarantee but has provided letters of support to certain entities of the Group. Note 31. Business combinations UMM Contracting On 1 September 2020, the Group acquired a 60% interest in UMM Contracting Pty Ltd (“UMM”) for a net consideration of $1.5M, comprising cash consideration ($0.4M) and contingent consideration ($1.1M) payable in FY2022. The Group has the option to acquire a further 20% of UMM’s shares from the sellers expiring a year after the issuing of UMM’s 31 December 2021 financial statements. Prior year The Group acquired New Senet Pty Ltd in FY2019 which was provisionally accounted under AASB 3 Business Combinations. No adjustments were required for the purchase price allocation accounting made in FY2019. Note 32. Interests in subsidiaries Material subsidiaries of the Group, which are those with the most significant contribution to the Group’s net profit/(loss) or net assets, are as follows: Name DRA Pacific Pty Ltd G&S Engineering Services Pty Ltd G&S Projects Australia Pty Ltd DRA Americas Inc. (Canada) Senet Guinea SARLU Minopex Lesotho Pty Ltd Ensermo Ltd DRA Saudi Arabia LLC DRA Projects Pty Ltd DRA Projects SA Pty Ltd New SENET Pty Ltd Minerals Operations Executive Pty Ltd DRA Americas Inc. (USA) Principal place of business/Country of incorporation Australia Australia Australia Canada Guinea Lesotho Mozambique Saudi Arabia South-Africa South-Africa South-Africa South-Africa United States Ownership interest 2020 % 2019 % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% / 128 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 32. Interests in subsidiaries (continued) Recognition and measurement Subsidiaries are all entities (including structured or special purpose entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. In determining whether control exists the Group considers all relevant facts and circumstances, including: / The size of the company’s voting rights relative to both the size and dispersion of other parties who hold voting rights / Substantive potential voting rights held by the company and by other parties / Other contractual arrangements / Historic patterns in voting attendance. The results of subsidiaries (including special purpose entities) are included in the consolidated Group annual financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the Group annual financial statements of subsidiaries to bring their accounting policies in line with those of the Group. Subsidiaries with different year-ends have been consolidated on the same accounting period. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the Group’s interest therein, and are recognised within equity. The proportion of the loss of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest. Changes in ownership interest in subsidiaries without a change in control Transactions which result in changes in ownership levels, where the Group has control of the subsidiary both before and after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity. The difference between the fair value of the consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent. Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to fair value, with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the controlling interest. Disposal of subsidiaries When the Group ceases to have control of any retained interest in the entity, it is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. DRA Global Annual Report 2020 / ACN 622581935 / 129 // Financial Statements / Notes to the consolidated financial statements Note 33. Interests in associates Individually immaterial associates Interests in associates are accounted for using the equity method of accounting. No individual associates is material to the Group. Name LSL Consulting (Pty) Ltd Tekpro Projects (Pty) Ltd FineTech Minerals (Pty) Ltd Principal place of business/Country of incorporation South-Africa South-Africa South-Africa Aggregate carrying amount of individually immaterial associates Aggregate amounts of the Group's share of: Profit from continuing operations Dividends paid Cost of initial investment Other comprehensive income Balance at 31 December 2020 Ownership interest 2020 % 25.00% 25.00% 25.00% 2020 $’000 2,154 367 (372) 124 (283) (164) 2019 % 25.00% 25.00% - 2019 $’000 2,318 580 (730) - 66 (84) There were no impairments of equity accounted associates recognised during the reporting period (2019: nil). Recognition and measurement An investment in associate is accounted for using the equity method, except when the investment is classified as held-for-sale in accordance with AASB 5 Non-current Assets Held-For-Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost adjusted for post acquisition changes in the Group’s share of net assets of the associate, less any impairment losses. Any goodwill on acquisition of an associate is included in the carrying amount of the investment, however, a gain on acquisition is recognised immediately in profit or loss. Profits or losses on transactions between the Group and an associate are eliminated to the extent of the Group’s interest therein. When the Group reduces its level of significant influence or loses significant influence, the Group proportionately reclassifies the related items which were previously accumulated in equity through other comprehensive income to profit or loss as a reclassification adjustment. In such cases, if an investment remains, that investment is measured to fair value, with the fair value adjustment being recognised in profit or loss as part of the gain or loss on disposal. / 130 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 34. Interests in joint operations The Group has recognised its share of jointly held assets, liabilities, revenues and expenses of joint operations. These have been incorporated in the financial statements under the appropriate classifications. No individual joint operation is material to the Group. Name Principal place of business/Country of incorporation Nokeng Joint Venture (Unincorporated) South-Africa Ownership interest 2020 % 2019 % 50.00% 50.00% Recognition and measurement Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Investments in joint operations are proportionately consolidated from the date on which the Group has the power to exercise joint control, up to the date on which the power to exercise joint control ceases. This excludes cases where the investment is classified as held-for-sale in accordance with AASB 5 Non-current Assets Held-For-Sale and Discontinued Operations. The Group’s share of assets, liabilities, income, expenses and cash flows of jointly controlled entities are combined on a line by line basis with similar items in the consolidated Group annual financial statements. When the Group loses joint control, the Group proportionately reclassifies the related items which were previously accumulated in equity through other comprehensive income to profit or loss as a reclassification adjustment. In such cases, if an investment remains, that investment is measured to fair value, with the fair value adjustment being recognised in profit or loss as part of the gain or loss on disposal. Significant judgements and estimates The two parties have direct rights to the assets of the joint arrangement and are jointly and severally liable for the liabilities incurred by the joint arrangement. This entity is therefore classified as a joint operation and the Group recognises its direct right to the jointly held assets, liabilities, revenues and expenses. DRA Global Annual Report 2020 / ACN 622581935 / 131 // Financial Statements / Notes to the consolidated financial statements Note 35. Cash flow information Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year Adjustments for: Impairment of goodwill Net gain on disposal of property, plant and equipment Net fair value gain on other financial assets Depreciation Amortisation Finance income Foreign exchange differences (i) Services rendered paid in shares Non-cash employee benefits expense – share-based payments Change in operating assets and liabilities: Decrease in trade and other receivables Increase in contract assets Decrease/(increase) in inventories Increase/(decrease) in trade and other payables Increase/(decrease) in contract liabilities Decrease in other provisions Increase/(decrease) in tax Net cash from operating activities 2020 $’000 25,619 5,714 (1,053) (566) 16,879 8,990 (2,167) (7,248) - 2,011 26,068 (16,605) 1,019 32,278 8,429 (7,604) 10,110 101,874 2019 $’000 36,009 - (378) (1,096) 17,811 8,545 (2,806) 1,003 250 301 38,205 (4,545) (947) (33,023) (5,147) (25,013) (4,123) 25,046 (i) The adjustment of foreign exchange differences relate to non-cash related foreign exchange gain/loss recorded in profit or loss. Non-cash investing and financing activities Non-cash investing and financing activities disclosed in other notes are: / Addition of right-of-use assets - note 15 / Settlement of shareholder loans with share buy-back - note 22. / 132 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 35. Cash flow information (continued) Changes in liabilities arising from financing activities Balance at 1 January 2019 Net cash used in financing activities Loans received New leases Changes through business combinations Balance at 31 December 2019 Net cash used in financing activities Loans received New leases Changes through business combinations Exchange differences Balance at 31 December 2020 Lease liabilities $’000 22,421 (6,097) - 6,420 364 23,108 (8,456) - 27,222 49 (1,251) 40,672 Other interest bearing liabilities $’000 - (14,701) 15,022 - - 321 (2,157) 2,579 - 478 (39) 1,182 Total $’000 22,421 (20,798) 15,022 6,420 364 23,429 (10,613) 2,579 27,222 527 (1,290) 41,854 Note 36. Share-based payments The expense recognised for share-based payments during the year is shown in the table below: Legacy Long-Term Incentive Plan (Legacy LTIP) Non-executive Directors Share Option Plan One-off Share Option Plan Employee Share Option Plan Legacy LTIP 2020 $ 80,571 132,000 596,907 1,201,937 2,011,415 2019 $ 300,608 - - - 300,608 On 1 July 2016, a group of management personnel (Participants) were issued 10,000,000 share appreciation rights (SARs) of DRA Group Holdings Pty Ltd (DRAGH). The rights to acquire shares at ZAR 30 (A$2.73) each were intended to vest in three equal tranches on the 2nd, 3rd and 4th anniversary of the grant date based on service conditions only and the options to acquire shares at ZAR 30 would remain exercisable for a period of 5 years thereafter. The share-based payment in respect of the SARs was determined at grant date (1 July 2016) using the Black-Scholes model with the following inputs: Grant date Expected volatility Dividend Yield Risk-free interest rate Date of vesting Share price of DRAGH at grant date* Fair value per SAR Tranche 1 Tranche 2 Tranche 3 1 July 2016 1 July 2016 1 July 2016 10% 7% 7.7% 10% 7% 7.8% 10% 7% 7.9% 30 June 2018 30 June 2019 30 June 2020 $2.73 $0.21 $2.73 $0.22 $2.73 $0.22 * As a private company, the DRAGH share price at grant date was not determined based on an observable market price. The share price was determined with reference to recent arms-length share transactions at the time. DRA Global Annual Report 2020 / ACN 622581935 / 133 // Financial Statements / Notes to the consolidated financial statements Note 36. Share-based payments (continued) In July 2018, DRAGH was acquired by DRA Global Limited through a Scheme of Arrangement. DRAGH restructured the SARs arrangement and replaced the remaining SARs with an issue of 5,076,620 ordinary DRAGH shares at a ratio of approximately 0.6 shares per SAR. The modification has not resulted in an incremental fair value under AASB 2 Share-Based Payments and consequently the expense for the original grant will continue to be recognised as if the terms had not been modified. These ordinary DRAGH shares participated in the Scheme of Arrangement as ordinary shareholders in DRAGH and were replaced by ordinary shares of DRA Global Limited. The Participants agreed to restrictions on the sale of the shares received pursuant to this restructure, specifically restrictions on the sale of these shares prior to specific dates replicating the original vesting profile of the SARs - i.e. sale of 1/3rd restricted until after each of 30 June 2018, 2019, 2020, and further agreed to sell these shares back to the Company at nominal value if they leave the employment of the Group before these dates. The following table shows the number of DRA Global Limited’s shares vested and outstanding at the beginning and end of the reporting period after it replaced DRAGH shares and the SARs: As at 1 January Granted during the year Vested during the year Forfeited during the year As at 31 December Employee Incentive Scheme 2020 Number 2019 Number 1,331,244 3,409,126 - - (1,331,244) (1,515,309) - - (562,573) 1,331,244 A new DRA Global Limited Employee Share Scheme titled “Incentive Option Plan” (the Plan) was established by the Group and approved by shareholders at the 2019 Annual General Meeting, whereby the Group may, at the discretion of the People, Culture and Remuneration Committee, grant options over ordinary shares in the Company to certain eligible key employees of the Group. The options are issued for nil exercise price and are granted in accordance with performance guidelines established by the People, Culture and Remuneration Committee. One-off Share Option Plan On 14 May 2020, the Company granted a one-off share option offer to certain key employees who may not have qualified as participants of the 2016 Legacy LTIP in recognition of their significant contribution to the Group. A total of 495,000 of these zero exercise price options (ZEPO) were granted. The ZEPO will vest at the end of 30 June 2022 subject to the employees remaining in the Company. Once vested, the options remain exercisable for a period of two years. The assessed fair value at grant date of options granted was $4 per option. Given there was no observable price for the share price of the Company, the fair value at grant date was determined using internal valuation model using earnings multiples method based on market conditions at grant date. The average earning multiple was determined to be 5.7 times on grant date. / 134 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 36. Share-based payments (continued) A summary of the options granted under the Plan is set up below: As at 1 January Granted during the year As at 31 December Forfeited during the year Vested and exercisable at 31 December Number of options 2020 - 495,000 495,000 - - Weighted average exercise price 2020 $0.00 $0.00 $0.00 $0.00 No options expired during the period covered by the above tables. Share options outstanding at the end of the year have the following expiry dates and exercise prices: Grant date 14 May 2020 Total Expiry date Exercise Price 30 June 2024 $0.00 Weighted average remaining contractual life of options outstanding at end of period Non-executive Directors (NED) Share Option Plan Number of Share options 31 December 2020 495,000 495,000 3.5 years Four Non-executive Directors were granted options to the value of 25% of their remuneration. The options will only be issued when the Company is listed on the ASX by 30 June 2021 or a lump sum cash payment will be paid unless a later date has been agreed. The number of options to be issued is based on the fair value of the options to be determined after the Company is listed on the ASX. The arrangement is accounted as equity-settled at the reporting date as the likelihood of listing on the ASX is considered probable at the reporting date. There are no vesting conditions attached. FY2020 Share Option Plan On 31 December 2020, the Company granted options to the value of $7,240,585 to key employees where the number of options to be issued will be determined based on the Company’s share price after listing. FY2020 Share Option Plan will vest subject to satisfaction of Absolute Total Shareholders Return (ATSR) (50% of the grant value) and Earnings Per Share (EPS) (50% of the grant value) performance hurdles. These performance hurdles are mutually exclusive so that if only one of the hurdles is satisfied, vesting occurs for that performance hurdle. EPS performance will be assessed against compound annual growth rate targets set by the Board. The target set for FY2020 Share Option Plan is currently 8% compound average growth rate. If the compound average growth rate over FY2020 to FY2022 is 8% or greater, the grant will become 100% performance qualified. A minimum of 25% or 50% will vest if at least 2% or 4% compound growth over FY2020 to FY2022 performance period is achieved respectively. ATSR performance is measured based on 10-day volume weighted average share price (VWAP) of the Company from date of listing and compare to the 30-day VWAP till 31 March 2023 (inclusive) assuming dividends are reinvested. If the ATSR from the date of listing to 31 March 2023 is 8% or greater, the grant will become 100% performance qualified. A minimum of 25% or 50% will vest if at least 2% or 4% of ATSR is achieved from the date of listing to 31 March 2023 respectively. The expiry date of the options is 31 March 2025 with a weighted average remaining contractual life of options of 4.25 years at the reporting period. DRA Global Annual Report 2020 / ACN 622581935 / 135 // Financial Statements / Notes to the consolidated financial statements Note 36. Share-based payments (continued) The assessed fair value at grant date for the options issued to the value of $7,240,585 was independently determined to be $4,807,748 after taking into account the performance hurdles and other assumptions. The fair value per option can only be determined once the number of options to be issued is determined after the Company is listed on the ASX. The fair value of the options is measured using Monte-Carlo simulation and Binomial models with the following inputs as at 31 December 2020: Assumptions Grant Date Amount granted Fair value on amount granted Vesting Date Expiry Date Expected Future Volatility Exercise Price Risk Free Rate Dividend Yield Share price at grant date* ATSR Performance Hurdle EPS Performance Hurdle 31-Dec-20 $3,620,293 $1,419,154 31-Mar-23 31-Mar-25 35% Nil 0.34% 3% N/A 31-Dec-20 $3,620,293 $3,388,594 31-Mar-23 31-Mar-25 35% Nil 0.34% 3% N/A * Whilst the share price of the Company has not been determined at the grant date, the share price has an inverse relationship between the number of options and the share price of the Company, due to the product of the number of options and the share price being equal to the value of the options to be issued. Therefore a range of different indicative share prices were used in determining the share-based payment expenses of the options. Recognition and measurement The fair value of equity-settled share-based payments granted to employees under the Employee Incentive Scheme is recognised as an employee benefit expense over the relevant service period, being the vesting period of the share-based payments with a corresponding increase in equity. The fair value is measured at the grant date of the share-based payments including any market performance condition and impact of any non-vesting conditions if any. At the end of each period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. Significant judgements and estimates Valuation of share-based payments The Group is required to estimate the fair value of equity-settled share-based payment transactions with employees at the grant date. Estimating the fair value requires determination of the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the earning multiples, expected life of the share rights, volatility and dividend yield where applicable. The Group has applied the earning multiples model or Black Scholes option pricing model and Binomial Model to estimate the fair value of the rights with non-market-based vesting conditions. A hybrid employee share option pricing model and the Monte Carlo simulation have been applied to estimate the fair value of rights with market-based vesting conditions. Share-based payment expense The recognition of share-based payment expense involves making estimates and assumptions about the number of equity instruments being vested. The vesting of these equity instruments is subject to achievement of predetermined market, non-market performance conditions and service conditions. If the non-market performance conditions or service conditions are not met during the vesting period then the estimated number of equity instruments can be revised, reducing the share-based payment expense. / 136 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 37. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by BDO Audit (WA) Pty Ltd, the auditor of the Company, its network firms and unrelated firms: Audit services - BDO Audit (WA) Pty Ltd Audit or review of the financial statements Other services - BDO Audit (WA) Pty Ltd Tax advice services Corporate advisory services Remuneration advisory services Total services - BDO Audit (WA) Pty Ltd Audit services - BDO network firms Audit or review of the financial statements Other services - BDO network firms Tax advice services Corporate advisory services Total services - BDO network firms Audit services - other firms (non-BDO) Audit or review of the financial statements Other services - other firms (non-BDO) Preparation of the tax return Total services from other firms (non-BDO) 2020 $ 2019 $ 901,923 686,655 237,455 25,228 153,900 416,583 155,246 205,552 108,399 469,197 1,318,506 1,155,852 870,798 979,885 268,070 198,373 466,443 206,377 64,711 271,088 1,337,241 1,250,973 135,013 192,395 98,460 233,473 18,564 210,959 DRA Global Annual Report 2020 / ACN 622581935 / 137 // Financial Statements / Notes to the consolidated financial statements Note 38. New standards and interpretations New or amended Accounting Standards and Interpretations adopted The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2020: / AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material AASB 101 and AASB 108; / AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business AASB 3; / AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform AASB 7, AASB 9 and AASB 139. / AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet issued in Australia AASB 1054 / Conceptual Framework for Financial Reporting and AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. New Accounting Standards and Interpretations issued but not yet effective A number of new standards, amendments to standards and interpretations are effective for annual reporting periods beginning on or after 1 January 2021, and have not been applied in preparing these consolidated financial statements. The Group’s assessment of the impact of these new standards, amendments to standards and interpretations is set out below. Description AASB 2020-4 Amendments to Australian Accounting Standards –COVID-19-related Rent Concessions (AASB 16) AASB 2020-7 Amendments to Australian Accounting Standards –COVID-19-related Rent Concessions: Tier 2 Disclosures (AASB 16 & AASB 1060) Impact on Group Financial Report It is not expected that there will be a material impact to the Group as a result of this amendment to the standard. Application of standard 1 June 2020 Description AASB 2020-8 Amendments to Australian Accounting Standards –Interest Rate Benchmark Reform Phase 2 (AASB 9, AASB 139, AASB 7, AASB 4 and AASB 16) Impact on Group Financial Report It is not expected that there will be a material impact to the Group as a result of this amendment to the standard. Application of standards 1 January 2021 Description AASB 2020-3 Amendments to Australian Accounting Standards –Annual Improvements 2018– 2020 and Other Amendments (AASB 1, AASB 3, AASB 9, AASB 116, AASB 137 & AASB 141) AASB 2020-3 Amendments to Australian Accounting Standards –Annual Improvements to IFRS Standards 2018–2020 and Other Amendments (AASB 1, AASB 3, AASB 9, AASB 116, AASB 137 & AASB 141) Impact on Group Financial Report It is not expected that there will be a material impact to the Group as a result of this amendment to the standard. Application of standards 1 January 2022 / 138 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 38. New standards and interpretations (continued) Description AASB 2014-10 Amendments to AASs – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (AASB 10 & AASB 128) Impact on Group Financial Report It is not expected that there will be a material impact to the Group as a result of this amendment to the standard. Application of standards 1 January 2022 Description AASB 2020-1 AASB 2020-6 Amendments to Australian Accounting Standards –Classification of Liabilities as Current or Non-current (AASB 101) Impact on Group Financial Report It is not expected that there will be a material impact to the Group as a result of this amendment to the standard. Application of standards 1 January 2023 Several other amendments to standards and interpretations will apply on or after 1 January 2021, and have not yet been applied, however they are not expected to impact the Group’s annual consolidated financial statements. Note 39. Other significant accounting policies Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Dividends Dividends are recognised, in profit or loss, when the Group’s right to receive payment has been established. Interest Interest is recognised, in profit or loss, using the effective interest rate method unless it is doubtful. Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. 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 the Group’s 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 Group’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. Deferred tax assets and liabilities are always classified as non-current. DRA Global Annual Report 2020 / ACN 622581935 / 139 // Financial Statements / Notes to the consolidated financial statements Note 39. Other significant accounting policies (continued) Derivative financial instruments Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in profit or loss and are included in other gains/(losses). Investments and financial assets Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Financial assets are classified according to their business model and the characteristics of their contractual cash flows and are initially measured at fair value adjusted for transaction costs (where applicable). Subsequent measurement of financial assets For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified into the following three categories: / Financial assets at amortised cost / Financial assets at fair value through profit or loss (FVTPL) / Equity instruments at fair value through the statement of other comprehensive income (FVTOCI) Financial assets at FVTPL Financial assets at FVTPL comprise quoted and unquoted equity instruments which the Group had not irrevocably elected, at initial recognition or transition, to classify at FVOCI. This category would also include debt instruments whose cash flow characteristics fail the SPPI (Solely Payments of Principal and Interest) criterion or are not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell. Financial assets at amortised cost Financial assets with contractual cash flows representing SPPI and held within a business model of ‘hold to collect’ contractual cash flows are accounted for at amortised cost using the effective interest method. The Group’s trade and most other receivables fall into this category of financial instruments. A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial asset represent contractual cash flows that are solely payments of principal and interest. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the Group intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. / 140 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Notes to the consolidated financial statements Note 39. Other significant accounting policies (continued) Impairment The Group assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments carried at amortised cost and FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward looking information to calculate the expected credit losses using a provision matrix. For other financial assets, the ECL is based on either the 12-month or lifetime ECL. The 12-month ECL is the portion of lifetime ECLs that results from default events on a financial instrument that are possible within 12 months after the reporting date. When there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECL. In all cases, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 30 days past due. The Group considers a financial asset in default when contractual payment are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. Leases Group as lessor The Group enters into lease agreements as a lessor with respect to some of its water treatment plants. Leases for which the Group is a lessor are classified as finance leases. Whenever the terms of the lease transfers substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. Impairment of non-financial assets The Group assesses, at the end of each reporting period, whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the Group also: / / tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period. tests goodwill acquired in a business combination for impairment annually. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value-in-use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the acquiree are assigned to those units or groups of units. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being operating segments. DRA Global Annual Report 2020 / ACN 622581935 / 141 // Financial Statements / Notes to the consolidated financial statements An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order: / / first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit. The Group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase. / 142 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Directors’ declaration Directors’ declaration In the Directors’ opinion: / / / / the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the Group’s financial position as at 31 December 2020 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. On behalf of the Directors ___________________________ ___________________________ Peter Mansell Chairman 15 April 2021 Andrew Naude Chief Executive Officer DRA Global Annual Report 2020 / ACN 622581935 / 143 // Financial Statements / Auditor’s independence declaration Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY NEIL SMITH TO THE DIRECTORS OF DRA GLOBAL LIMITED As lead auditor of DRA Global Limited for the year ended 31 December 2020, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of DRA Global Limited and the entities it controlled during the period. Neil Smith Director BDO Audit (WA) Pty Ltd Perth, 15 April 2021 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. / 144 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Independent auditor’s report to the members of DRA Global Limited Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of DRA Global Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of DRA Global Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss, the consolidated statement of 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 report, 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) (ii) Giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial performance for the year ended on that date; and 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 Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. DRA Global Annual Report 2020 / ACN 622581935 / 145 // Financial Statements / Independent auditor’s report to the members of DRA Global Limited Revenue from Contracts with Customers Key audit matter How the matter was addressed in our audit The Group generates a significant portion of its Our procedures included, but were not limited to the revenue from long-term customer contracts for the following: design, procurement, construction and the operation and maintenance of mineral process plants in the form of EPC and EPCM contracts (“construction contracts”) as disclosed in Note 3 of the financial report. Revenue recognition is a key audit matter due to the significance of revenue generated from construction contracts and the accounting for construction contracts involving significant levels of judgement around: Identifying the performance obligation; • Evaluating management’s processes in the preparation, review and authorisations of monthly project review reports for significant contracts; • Obtaining an understanding of the terms and conditions of a sample of contracts with customers and comparing to management’s assessment of the contract; • Assessing forecast costs to complete through     Determining the transaction price; discussions with project managers and Assessing the stage of completion of satisfying the identified performance obligation; Forecasting the costs to complete the contractual works. commercial personnel and through these discussions enquiring as to challenges or issues faced in completing the contractual work and considering any resulting impact on revenue recognition; Testing a sample of actual costs incurred on contracts with customers and agreeing to supporting documentation; Assessing management’s determination of the transaction price for a sample of contracts with customers and challenging the estimates made on variable consideration and uncertified claims; Considering exposure to penalties and liquidated damages for late delivery of contract works; Reviewing the accounting for foreign exchange on amounts invoiced in advance of recognition of revenue; and Considering the adequacy of disclosures in Note 3 of the financial report. • • • • • / 146 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Independent auditor’s report to the members of DRA Global Limited Impairment testing of Goodwill Key audit matter How the matter was addressed in our audit Note 16 of the financial report discloses the carrying Our procedures included, but were not limited to the value of goodwill and the assumptions which have been following: used by the Group in testing for impairment. As required by Australian Accounting Standards, the Group has performed an annual impairment test for each cash generating unit (“CGU”) to which goodwill has been allocated to determine whether the recoverable amount exceeds or is below the carrying amount. Impairment testing of goodwill was assessed as being a key audit matter as management’s assessment of the recoverable amount is based on value in use (“VIU”) cash flow forecasts which requires estimates and judgements about future financial performance. The VIU calculations include significant judgements such as:     Contract pipeline; Long term growth rates; Forecast gross profit margins; and Discount rates. • Evaluating management’s determination of the Group’s CGU’s, including the change in CGU allocation from the prior year to ensure they are appropriate, including being at a level no higher than the operating segments of the Group; • Evaluating the processes and controls in place over the Groups budgeting process which produces the forecasts for FY21 and FY22 which the VIU cash flow forecasts are based on; • • • • • • • • Understanding the business processes undertaken by management in assessing for impairment; Holding discussions with management to understand the financial performance of each CGU and whether there were any events or circumstances that would indicate that goodwill is impaired; Challenging key assumptions used in the VIU such as gross profit margins and probabilities applied to pipeline opportunities; Involving our internal valuation specialists in assessing the discount rates applied to each CGU; Testing the arithmetic accuracy of the VIU models, including cash flow forecasts; Re-calculating the impairment charge recognised for the Americas CGU and comparing against the recorded amount; Performing sensitivity analysis to stress test the recoverable amount using different key assumptions; and Considering the adequacy of disclosures in Note 16 of the financial report. DRA Global Annual Report 2020 / ACN 622581935 / 147 // Financial Statements / Independent auditor’s report to the members of DRA Global Limited Onerous Contract Provisions and Contingent Liabilities Key audit matter How the matter was addressed in our audit At 31 December 2020, the Group’s statement of Our procedures included, but were not limited to the financial position includes a provision for loss making following: contracts as disclosed in Note 20. In addition, at times the Group is exposed to risks associated with claims, counterclaims, disputes and litigation for its contracts with customers that may be material. There is a significant level of estimation and judgement involved in the calculation of the provision. While the assessment of potential liabilities associated with claims, counterclaims, disputes and litigation can • • Read the minutes of the Group’s key governance meetings (Audit & Risk Committee, Board of Directors) and reviewing the Group risk register; Reviewed position papers prepared by management on key EPC contracts with customers, including the updated assessment of provisions and contingent liabilities; require significant judgement to be exercised based on • Agreeing details included in management’s the information available to the Group at the time. This was determined to be a key audit matter due to the nature of the provision and its material impact on the financial report. position papers to relevant supporting documentation and holding discussion with project managers and regional executives to obtain an update on the status; • • Reviewing the year end provisions balance and obtaining support for movements in the provision during the year; Holding discussions with in-house legal counsel and external legal advisors on the status of certain matters relevant to the provisions and contingent liabilities; • Considering the adequacy of disclosures in Note 20 and Note 26 of the financial report. Other information The directors are responsible for the other information. The other information comprises the information contained in the Company’s 2020 Annual Report, but does not include the directors’ report, remuneration report, financial report and our auditor’s report thereon, which we obtained prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after that date. / 148 DRA Global Annual Report 2020 / ACN 622581935 // Financial Statements / Independent auditor’s report to the members of DRA Global Limited Our opinion on the financial report does not cover the other information and 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 identified above 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 on the other information that we obtained prior to the date of this auditor’s report, 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. When we read the full annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and will request that it is corrected. If it is not corrected, we will seek to have the matter appropriately brought to the attention of users for whom our report is prepared. 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 has 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. DRA Global Annual Report 2020 / ACN 622581935 / 149 // Financial Statements / Independent auditor’s report to the members of DRA Global Limited A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 31 December 2020. In our opinion, the Remuneration Report of DRA Global Limited, for the year ended 31 December 2020, 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. Neil Smith Director Perth, 15 April 2021 / 150 DRA Global Annual Report 2020 / ACN 622581935 // Corporate Directory CORPORATE DIRECTORY Directors* Peter Mansell Andrew Naude Non-executive Director and Chairman Managing Director and Chief Executive Officer Kathleen Bozanic Non-executive Director Lee (Les) Guthrie Non-executive Director Paulus (Paul) Lombard Non-executive Director Company secretary Ben Secrett Registered office and business address Level 8, 256 Adelaide Terrace Perth WA 6000 Australia Telephone: +61 (0)8 6163 5900 Postal address PO Box 3130 East Perth WA 6892 Australia Auditor BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 Australia Share register Computershare Investor Services Pty Ltd Level 11, 172 St Georges Terrace Perth WA 6000, Australia and at Rosebank Towers 15 Biermann Avenue, Rosebank 2196, Gauteng South Africa Telephone: +61 (0)8 9323 2000 (Inside Australia) Telephone: +61 (0)3 9415 4000 (Outside Australia) Facsimile: +61 (0)3 9473 2500 www.computershare.com Banker HSBC Level 1, 188-190 St George’s Terrace Perth WA 6000, Australia Website www.draglobal.com * As at 14 May 2021 DRA Global Annual Report 2020 / ACN 622581935 / 151 Head office Level 8, 256 Adelaide Terrace Perth WA 6000 / Australia Telephone / +61 (0)8 6163 5900 Postal address PO Box 3130 East Perth WA 6892 / Australia DRA Global Annual Report 2020 / ACN 622581935 draglobal.com / 152 

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