Level 3, 71 Walters Drive
Osborne Park WA 6017, Australia
PO Box 1341, Osborne Park DC WA 6916, Australia
T +61 (0) 8 9420 0222 F +61 (0) 8 9420 0205
E corporate@emecogroup.com
emecogroup.com
Emeco Holdings Limited ACN 112 188 815
22 August 2013
ASX Market Announcements
ASX Limited
Level 4, 20 Bridge Street
SYDNEY NSW 2000
Emeco Holdings Limited (ASX:EHL) – Results For The Year Ended 30 June 2013
Attached for immediate release to the market are the following documents:
Emeco Holdings Limited’s Appendix 4E – preliminary final report for the financial year ended 30 June
2013; and
Emeco Holdings Limited’s annual financial report, auditor’s report and directors’ report.
Yours faithfully
Michael Kirkpatrick
Company Secretary
APPENDIX 4E
Preliminary Final report
Period Ended 30 June 2013
Name of entity
Emeco Holdings Limited
ABN or equivalent company reference
A.C.N. 112 188 815
Results for announcement to the market
Reporting Period: Year ended 30 June 2013 (Previous corresponding period: year ended 30 June 2012)
Revenues from ordinary activities
Profit from ordinary activities after tax attributable
to members of Emeco Group
Dividends
%
Change
(22.3)
(91.4)
2013
2012
$A million
$A million
439.7
6.0
565.7
69.7
The Directors have declared that no Final dividend will be paid and no amount has been paid or declared
by way of dividends since March 2013, or to the date of this report.
Amount per security
Final Dividend:
Current year
Previous year
nil
3.5 cents
nil
3.5 cents
Amount per security
Franked amount per security
Interim Dividend:
Current year
Ordinary – 2.5 cents
Ordinary – 2.5 cents
Previous year
Ordinary – 2.5 cents
Ordinary – 2.5 cents
Amount per security
Franked amount per security
Total Dividend:
Current year
Ordinary – 2.5 cents
Ordinary – 2.5 cents
Previous year
Ordinary – 6.0 cents
Ordinary – 6.0 cents
Amount per security
Franked amount per security
APPENDIX 4E
Preliminary Final report
Period Ended 30 June 2013
Ratios and Other Measures
NTA backing
Current Period
Previous
corresponding
Period
Net tangible asset backing per ordinary security
$0.76
$0.74
Details of loss of control of entities having material effect
No control over any entities was lost during the period that had a material effect.
Accounts
This report is based on accounts that have been audited.
Commentary on Results
For commentary on the results of the Emeco Group, refer to the accompanying media release, audited
financial report and directors’ report.
Emeco Holdings Limited and its Controlled Entities
ABN 89 112 188 815
Annual Financial Report
30 June 2013
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
1
Contents
Chairman’s Report ................................................................................................................ 3
Managing Director’s Report ................................................................................................... 5
Operating and Financial Review............................................................................................. 7
Sustainability Report ............................................................................................................18
Financial Report ...................................................................................................................31
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
2
Chairman’s Report
(cid:1) Business adapting to
(cid:1) Continued focus on safety,
dynamic shift in global
mining market
community and people generating
positive results
(cid:1) Executed 5% share buy-back
during FY13, returning capital
to shareholders
Dear Shareholder,
We are pleased to present the Emeco Holdings Limited Annual Report for financial year 2012/2013 (FY13).
ADAPTING OUR BUSINESS TO CHANGING MARKETS
Emeco has exposure to the mining industry across a range of commodities and geographies. Following a period of
strong activity across all parts of our business we experienced a sharp slow-down in activity across Australia and
Indonesia.
Emeco’s Canadian business grew in FY13 on the back of our strategy to align the business with oil majors and
indigenous contractors and we also executed a successful expansion into Chile. Our success in Canada and Chile
demonstrates Emeco’s ability to adapt the business to create value for customers and shareholders, while maintaining
our disciplined approach to managing our balance sheet.
Moving into FY14 Emeco is continuing to assess opportunities for further geographical expansion, working with our
customers to create innovative equipment solutions and focusing on growth opportunities which create greater value
for our shareholders. A key focus for us in these challenging times is to focus on cash flow generation in order to keep
our balance sheet in good shape.
SAFETY AND SUSTAINABILITY
The safety of our employees and those we work with is a key priority of the Board and business with our ultimate
objective to achieve “zero harm”. During FY13 Emeco continued to invest in safe work practices and initiatives to
further entrench a culture of “safety first” throughout the business. Emeco’s group Total Reportable Injury Frequency
Rate (TRIFR) improved by 39% during the period, however our Lost Time Injury Frequency Rate (LTIFR) increased to
3.5 (up from 1.7 in FY12). The Board is committed to continual improvement in our safety measures during FY14 and
beyond.
A key factor to Emeco’s future success is our ability to attract and retain high calibre people. We continue to focus on
training and development with individual training needs identified through our annual performance management
process. Due to the downturn in the market during the year resulting in reduced workload, particularly across our
Australian and Indonesian sites, the Company had to make a number of employee positions redundant. This is always
a difficult decision but unfortunately has been a consistent theme across the resources sector in FY13.
Diversity has been a focus of the Emeco Board for a number of years now. During the year we established our diversity
framework which is supported by an action plan to be driven by Management across the business. A number of
initiatives were implemented during the year to lay the foundation for improved diversity reporting, awareness and
more flexible work practices.
Emeco continued to actively and positively contribute to the communities in which it operates during the period.
Particular highlights include Emeco’s involvement with the Clontarf Foundation in Australia; the operator training
program developed by Women Building Futures in Canada; and the high level of employee participation in the mental
health and suicide awareness training offered at Emeco workplaces through our partnership with Lifeline Australia.
Emeco’s successes in engaging with employees, enhancing diversity, investing in community initiatives and improving
safety during FY13 are detailed further in our Sustainability Report (page 18).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
3
CONTINUALLY IMPROVING OUR REPORTING TO SHAREHOLDERS
The Emeco Board is committed to ensuring we keep shareholders informed of our performance. You’ll notice an
improved annual report structure tailored to providing our shareholders with key information required to make
informed decisions regarding their shareholdings. In particular, we have expanded our operational and financial
review with a focus on informing our readers of the key business risks facing Emeco today and how we intend to
mitigate these risks during FY14 (page 7).
DELIVERING RETURNS TO SHAREHOLDERS OVER THE LONG-TERM
The Board remains committed to Emeco’s dividend policy of a 40–60% payout ratio of annual Operating NPAT,
franked to the fullest extent possible. The Company delivered a 2.5 cent interim dividend which represents 42.5% of
FY13 annual Operating NPAT. With consideration given to Emeco’s current tough operating environment, the Board’s
focus on managing cashflows to maintain a strong financial position and the level of returns already made to
shareholders during FY13, the Board has declared a nil final dividend for FY13.
The Emeco Board is firmly focussed on delivering strong shareholder returns over the long term with a current aim of
positioning the business to benefit from strengthening commodity markets over the next few years. Our commitment
to delivering value for shareholders is evidenced by the special dividend of 5.0 cents paid during FY11 and more
recently through the 5% share buy-back conducted during the first half of FY13.
BUSINESS REMAINS WELL POSITIONED FOR THE FUTURE
Despite the challenging operating and economic environment Emeco endured during FY13, the business remains
motivated to build a solid foundation on which we can grow following the current downturn. As FY14 brings with it a
new set of challenges, the business is well positioned to execute its key strategies of diversifying our earnings base,
demonstrating greater flexibility in meeting our customer’s equipment needs and maintaining a disciplined approach
to balance sheet management.
I’d like to take this opportunity to thank Keith Gordon for his contribution to Emeco since December 2009. Under
Keith’s leadership Emeco has achieved its strategy of restructuring the business to focus on the global mining industry,
a strategy which has delivered significant returns to shareholders since 2010. The business has commenced a global
search to identify a successor for Keith, we look forward to reporting news of a replacement once this process is
completed.
Alec Brennan
Chairman
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
4
Managing Director’s Report
(cid:1) Challenging operating
environment contributing to
lower returns
(cid:1)
Successful expansion into Chile
executed in FY13
(cid:1)
Focus on generating cash flow
and maintaining balance
sheet flexibility in FY14
MANAGING THE BUSINESS DURING CHALLENGING TIMES
Coming off a period of strong mining activity in FY12, the operating landscape for Emeco changed rapidly across our
key regions during FY13. Lower commodity prices, the high value of the Australian dollar and a consequential change
in objectives of the global miners led to a rapid decline in mining activity. Over the past 12 months Emeco’s operating
return on capital fell from 13.2% at 30 June 2012 to 7.1% at 30 June 2013. The Company delivered Operating NPAT of
$35.2 million in FY13, down from $71.1 million in FY12.
The Australian and Indonesian businesses were both adversely impacted by the reduced activity in mining industries in
those markets. Flowing on from FY12, both businesses started FY13 in a strong position however the end of key
contracts during the second quarter, without extension to new terms, adversely impacted earnings. Off-rent fleet
remained idle for extended periods through the second half due to low levels of activity and a strong focus on
operating costs by customers. Managing idle fleet is a key focus for Emeco in FY14 with the business working closely
with customers to meet their equipment needs.
Our customer mix strategy in Canada has increased exposure to oil companies, indigenous contractors and coal
miners, improving utilisation over the FY12/13 summer and FY13 winter periods. The business is now supported by a
range of high quality customers. Investment in building our external maintenance services capability over FY13 will
generate non-capital intensive revenue streams as we move into FY14.
I am pleased to report that our expansion into Chile was a success with the Chilean business contributing positive
returns during its first year of operation in FY13. The team in Chile has done an exceptional job in winning work and
demonstrating to customers that Emeco can add value to their operations.
CONTINUING TO BUILD ON OUR SUCCESSES
Having successfully completed our expansion into Chile, the business is concentrating on identifying markets with
strong long term growth potential. Our goal of diversifying the earnings base across geographies and commodities
will focus on developing mining industries in areas including, but not limited to, the broader Latin America region.
Our expansion into Chile was founded on developing our strong relationship with local contractors and major mining
companies who know the benefits of the Emeco offering. Our high quality assets and strong maintenance support is
valued by customers globally, providing us a strong brand on which to build our diversification strategy.
This strategic initiative is enhanced by the appointment of Ian Testrow, formerly President of Emeco’s Americas
business, to the Position of President, New and Developing Businesses.
POSITIONING THE BUSINESS FOR FUTURE RECOVERY
Global utilisation has declined significantly over FY13 averaging 66%, down from an FY12 average of 86%. Essential to
the recovery of our business is a targeted approach to idle fleet management with Emeco assessing all avenues to
return value from assets. Over FY13 the business realised value from identifying equipment redeployment
opportunities with our existing operations transferring $37.8 million to Chile and releasing capital via asset disposals
of $49.8 million. Moving into FY14 Emeco continues to consider opportunities to redeploy idle fleet with this the first
consideration when entering new markets. In addition, the Company is collaborating with customers by offering a
range of rental and sales solutions which fit their business strategy and equipment needs.
An ongoing feature of the Emeco business is our disciplined approach to cash flow and capital management. During
FY13 Emeco further strengthened its balance sheet by refinancing its senior debt facility thereby increasing average
debt maturity profile to 4.9 years. Given the challenging environment in which Emeco currently operates it is critical
for the business to focus on cash flow and reducing debt levels.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
5
Excavator,
10%
Grader, 7%
Wheel Loader,
6%
Art. Dump
Truck, 7%
Operating and Financial Review
The Emeco Group supplies safe, reliable and maintained equipment rental solutions to the global mining industry.
Established in 1972 the business listed on the ASX in July 2006 and is headquartered in Perth, Western Australia.
Emeco currently employs 633 permanent and fixed term staff and owns 813 pieces of earthmoving equipment across
Australia, Indonesia, Canada and Chile.
Emeco generates earnings from two primary revenue streams, dry equipment rental and maintenance services.
Operating costs principally comprise parts, labour and tooling associated with maintaining earthmoving equipment.
Capital expenditure principally comprises the original purchase of equipment and replacement of major components
over the asset’s life cycle while owned by Emeco.
Chart 1: Revenue by Region
Chart 2: Revenue by Commodity
Chile, 4%
Canada,
21%
Other, 6% Copper, 4%
Coking Coal, 11%
Iron Ore, 7%
Oilsands,
20%
Chart 3: Fleet Composition by
Asset Class
Other,
10%
Dozer,
18%
Indonesia,
14%
Australia,
61%
Gold, 21%
Thermal Coal,
30%
Rigid Dump
Truck, 42%
Note: Above analysis relates to 12 month period to 30 June 2013
Table 1: Group Financial Results
Operating Results
Revenue
EBITDA
EBIT
NPAT
ROC %
EBIT margin
EBITDA margin
Var %
(22.2%)
(28.0%)
(40.0%)
(50.5%)
FY13
439.7
188.3
75.6
35.2
7.1%
17.2%
42.8%
FY12
565.2
261.7
126.0
71.1
13.2%
22.3%
46.3%
Statutory Results
FY12
565.2
260.5
124.8
70.0
13.0%
22.1%
46.1%
FY13
439.7
175.4
44.9
6.0
4.2%
10.2%
39.9%
Var %
(22.2%)
(32.7%)
(64.0%)
(91.4%)
Note: 1. Significant items have been excluded from the statutory result to aid the comparability and usefulness of the financial information.
This adjusted information (Operating Results) enables users to better understand the underlying financial performance of the
business in the current period.
2. FY12 statutory results exclude discontinued operations.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
7
Table 2: FY13 Operating Results to Statutory Results Reconciliation
A$ millions
Operating
Australia
Canada
Indonesia
Statutory
Tangible asset
impairments
Intangible asset
impairments
Redundancy
Bad debt
write-off
Debt establishment
costs write-off
Tax effect
NPAT
(10.5)
(10.5)
(1.7)
(1.7)
(0.7)
(0.7)
(17.8)
(17.8)
(0.7)
(1.0)
(0.2)
(1.9)
3.0
0.2
0.2
3.4
35.2
(9.9)
(0.8)
(18.5)
6.0
Reconciliation of differences between Operating and Statutory Results:
FY13 Operating Results (non-IFRS) excludes the following:
1.
-
Tangible asset impairments outside the ordinary course of business totalling $10.5 million across Sales inventory, Parts inventory and
Property impacting EBITDA, EBIT and NPAT (Tangible asset impairments incurred through ordinary course of business totalling $1.6
million were recognised during FY13, refer to Note 8 in the financial statements);
Intangible asset impairments of $17.8 million in the Indonesian business segment impacting EBIT and NPAT;
-
- One-off costs related to redundancies in the Australian business segment totalling $1.7 million impacting EBITDA, EBIT and NPAT;
-
Bad debt write-offs in Indonesia relating to prior years of $0.7 million impacting EBITDA, EBIT and NPAT;
- Write-off of debt establishment costs related to previous debt facility totalling $1.9 million impacting NPAT.
2.
3.
All reconciling items relating to FY13 Operating Results are discussed in further detail later in the Operating and Financial Review.
FY12 Operating Results (non-IFRS) excludes an expense of $1.2 million, impacting EBITDA, EBIT and NPAT in the Australian business segment,
which relates to unpaid employee superannuation from FY07 to FY11 arising from a payroll system error identified during an internal payroll
systems review which has now been rectified. Also excluded from the FY12 Operating NPAT is the loss from discontinued operations of $0.2
million.
MARKET SHIFTS IMPACTING OPERATING AND FINANICAL PERFORMANCE
Following a strong financial performance in FY12, the last twelve months has seen a change in Emeco’s key markets
which has adversely impacted earnings and returns. Non-renewal of several significant contracts in Australia and
contract terminations in Indonesia during FY13 resulted in average global utilisation falling to 67%, down from 86% in
FY12 (see chart below). Underlying this trend was a rapid decline in utilisation across Australia and Indonesia in early
2H13 which was partially offset by strong performance in Canada and the successful expansion into Chile, which
contributed positive earnings in its first year of operation.
Chart 4: FY13 Average Group Utilisation
Average: FY13: 67%, FY12: 86%
Year-end: FY13: 50%, FY12: 80%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Note: Utilisation defined as % of fleet rented to customers (measured by written down value)
Group operating revenue reduced by 22.2% to $439.7 million, down from $565.2 million in FY12. Rental and
Maintenance revenue was down 17.3% to $412.2 million (2012: $498.5m) due to a general reduction in industry
activity and customers focusing on reducing operating costs resulting in lower utilisation and pricing in Australia and
Indonesia. Sales and Parts revenue also reduced by 58.7% to $27.5 million (2012: $66.7m) as the Group downsized
these businesses in line with previous announcements regarding its strategy.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
8
Operating EBITDA and Operating EBIT margins in FY13 were 42.8% (FY12: 46.3%) and 17.2% (FY12: 22.3%)
respectively. Margins were impacted in FY13 through a combination of lower rental rates, and the impact of fixed
overheads and idle fleet depreciation expense being applied across less utilised fleet with a corresponding reduced
revenue base.
Operating return on capital (ROC) declined to 7.1% in FY13, down from 13.2% in FY12 primarily through lower
utilisation of the rental fleet.
Refer to the Regional Business Overview on page 13 for further detail on regional operating and financial
performance.
REDUCING COSTS IN RESPONSE TO LOWER OPERATING AND FINANCIAL PERFORMANCE
Table 3: Operating Cost Summary (Statutory Results)
A$ millions
Revenue
Operating expenses
Changes in machinery and parts inventory
Repairs & maintenance
Employee expenses
Hired in equipment & labour
Impairment of tangible assets
Doubtful debts / reversal
Net other expenses
EBITDA
Impairment of goodwill
Depreciation expense
Amortisation
EBIT
2013
2012
439.7
565.2
(29.0)
(122.2)
(48.1)
(7.8)
(12.1)
(13.1)
(31.9)
175.4
(17.8)
(112.5)
(0.2)
44.9
(68.9)
(155.1)
(47.9)
(3.2)
(1.5)
10.3
(38.4)
260.5
–
(135.5)
(0.2)
124.8
FY13 operating expenses declined 13.2% to $264.3 million from $304.6 million in FY12. The decline in operating
expenses was driven by reduced utilisation and cost saving initiatives across the business. Repairs and maintenance
expense, which primarily comprises parts and maintenance labour, was down 21.2% in line with lower Rental and
Maintenance Revenue. As a result, the Group reduced parts purchasing and scaled down the maintenance labour
workforce in Australia and Indonesia. Redundancies were initiated in both maintenance and support roles in Australia
and Indonesia resulting in one-off costs totalling $1.7 million. As the majority of redundancies were made during the
second half of FY13 the full impact of costs savings will not be realised until FY14.
Net other expenses increased 93.9% to $57.2 million in FY13. The increase is primarily attributable to doubtful debt
expense of $13.1 million and impairment of tangible assets totalling $12.1 million. Excluding these two items, net
other expenses decreased 16.9% in FY13. Refer to note 8 in the financial statements for further breakdown of net
other expenses (page 106).
Depreciation as a percentage of rental and maintenance services revenue remained flat at 27.3% in FY13. Although
depreciation reduces in line with utilisation, Emeco continues to recognise minimum depreciation per month on
equipment which has been idle for a period greater than 3 months. Given the rapid decline in utilisation in late 1H13,
margins were adversely impacted in 2H13 by the additional depreciation expense with no corresponding revenue.
Changes in machinery and parts inventory was down 58.0% which totalled $29.0 million in FY13 as a result of the
strategic decision in FY10 to wind down the Used Equipment Sales and Used Parts businesses over time.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
9
ASSET WRITE-DOWNS AND GOODWILL IMPAIRMENT
Table 4: Asset Impairments (Statutory Results)
A$ millions
Impairment loss on inventory
Impairment loss on PPE
Freehold land & buildings
Plant & equipment
Impairment of goodwill
2013
2012
8.7
3.0
0.4
17.8
2.8
–
0.2
–
Inventories were written down by $8.7 million in FY13 (FY12: $2.8 million) to reflect net realisable value (NRV),
comprising the following:
•
•
•
$6.7 million – as part of the strategy to finalise the exit from the Australia Used Parts business, remaining
inventory was impaired to reflect a rapid disposal plan;
$1.2 million – the residual inventory remaining in the Australia Used Equipment Sales business, comprising a
small number of non-core construction sized equipment which were impaired to reflect an expedient disposal;
$0.8 million - Represents stock write-downs on tyres and rental parts inventory transferred out of fixed assets
and into inventory during FY13 that were subsequently sold.
Impairment loss on property, plant and equipment relates to:
•
Emeco is undertaking a sale and leaseback of a major workshop facility. Based on indicative market valuations,
the property has been impaired by $3.0 million, representing a reduction in written down value to market value;
• Rental machine impairments of $0.4 million related to the sale of rental assets at market value.
Based on the Group’s annual impairment testing, the Indonesian business segment goodwill of $17.8 million was fully
impaired at 30 June 2013. The goodwill impairment was the result of a sharp decline in earnings over the past 12
months and uncertainty reflected in the expected recovery of future business performance. Refer to note 21 in the
accompanying financial statements for additional information.
CASHFLOW GENERATION A KEY FOCUS
Table 5: Cash Flow Summary
Operating cash flow
Sustaining capital expenditure
Other property, plant & equipment
Disposals
Free cash flow post sustaining capital expenditure
Growth capital expenditure
Free cash flow post growth capital expenditure
Dividends
Share buy-back
Free cash flow post shareholder returns
2013
173.8
(71.8)
(16.9)
49.8
134.9
(90.2)
44.7
(37.1)
(16.9)
(9.3)
2012
225.5
(127.1)
(19.5)
35.2
114.1
(170.4)
(56.3)
(34.7)
–
(91.0)
Operating cash flow was down 22.9% to $173.8 million in FY13 largely due to lower EBITDA as a result of lower
utilisation and rental rates.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
10
During 1H13 Emeco continued to invest in establishing the Chilean business and completed previously committed
plans for sustaining capital expenditure across the business. In response to a rapid contraction in market activity mid-
way through the year in Australia and Indonesia, the business ceased growth capital expenditure and reduced
sustaining capital expenditure to the minimum required for maintaining operating fleet during the second half.
Emeco intends to maintain minimum capital expenditure levels in FY14 given ongoing low utilisation levels in
Australia and Indonesia.
Cash flows from asset disposals totalled $49.8 million in FY13, which included the sale of one equipment package for
$23.0 million to a large mining customer in Australia. Emeco provided the customer an alternative which involved
purchasing high quality early life assets rather than higher priced new equipment. This is an example of Emeco
tailoring a solution for a customer which realised value from our idle assets. Emeco continues to assess other
opportunities where we can provide customers with an alternative solution which may not have been previously
considered.
The combination of strong underlying operating cash flows and the highly discretionary nature of future capital
investment provides Emeco with flexibility to expand or contract its balance sheet and gearing in light of prevailing
market conditions. This flexibility is a key asset of the business and is expected to help Emeco maintain positive cash
flows into FY14.
GEARING IMPACTED BY DEPRECIATION OF AUSTRALIAN DOLLAR
Table 6: Net Debt & Gearing Summary
Interest Bearing Liabilities (current & non-current)
Senior debt facilities
USPP notes
Working capital facility
Lease liabilities
Other
Cash
Net debt
Gearing ratio
Loan to value ratio
Interest cover ratio
2013
2012
252.7
149.6
5.3
12.4
0.5
5.8
414.7
2.15
48.1%
7.72
302.0
141.8
–
15.7
–
73.1
386.4
1.48
41.7%
11.38
Note: Gearing ratio - Net Debt : Operating EBITDA < 3.0x
Loan to value ratio - Net Debt : Net Realisable Value < 80%
Interest cover ratio - Operating EBITDA : Interest Expense > 4.0x
The Group’s net debt increased $28.3 million to $414.7 million at 30 June 2013. The increase was a combination of a
$19.0 million increase from the translation impact of the recent AUD devaluation on net debt (AUD:USD reduced
from $1.017 at 30 June 2012 to $0.927 at 30 June 2013, source: Westpac) and a $9.3 million increase in underlying
debt on a cash basis. Following a period of investment in FY12 and early FY13, net debt peaked at $455.1 million in
December 2012 before reducing significantly over 2H13 due to a reduction in capital expenditure and working capital
release.
In response to exchange rate movements, the Group rebalanced its currency mix of debt by reducing Canadian and
US dollar debt and increasing Australian dollar debt, thereby reducing Emeco’s exposure to foreign currency
translation risk of the Group debt. As at 30 June 2013 Emeco’s foreign currency denominated debt balance
comprised C$83 million and US$155 million (FY12: C$216 million, US$155 million).
Emeco refinanced its senior secured syndicated loan facility on 28 September 2012. Retaining a $450 million limit,
the debt facility comprises a three year $200 million, a four year $125 million and a five year $125 million revolving
multi-currency facility of AUD, USD and CAD.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
11
Emeco’s senior debt facility and USPP notes comprises three financial covenants:
• Gearing ratio – Total Debt: EBITDA < 3.0x
•
•
Interest cover ratio – EBITDA: Net Interest > 4.0x
Loan-to-Value ratio – Total Debt: Tangible Assets < 80%.
The Company’s key credit ratios have reduced headroom due to FY13 lower earnings, notwithstanding successful
reduction in debt through positive cash flow. The ratios remain well within their limits. Refer to note 24 in the
accompanying financial statements for additional information.
CAPITAL MANAGEMENT DELIVERING SHAREHOLDER RETURNS
Table 7: Shareholder Returns
Dividends declared during the period
Interim dividend (cents)
Final dividend (cents)
Total dividend (cents)
Dividend payout ratio
Value of share buy-back ($ million)
Average price of share buy-back (cents)
Per share statistics
Earnings per share (cents)
NTA per share ($)
Closing share price ($)
2013
2012
2.5
–
2.5
42.5%
16.5
53.4
5.9
0.76
0.28
2.5
3.5
6.0
53.2%
–
N/A
11.3
0.74
0.87
Note: Dividend payout ratio is measured as dividends paid as a percentage of Operating NPAT.
The Board declared and paid a 2.5c interim dividend, fully franked and declared a nil final dividend for FY13. Total
FY13 dividends of 2.5c represent a payout ratio of 42% (2012: 53%), which is in line with Emeco’s policy to distribute
between 40 – 60% of annual Operating NPAT, franked to the fullest extent possible.
As part of its overall capital management strategy, the Company completed a 5% share buyback during 1H13 at
average price of 53.4c per share.
The Board’s decision not to pay a final dividend for FY13 was driven by a combination of the current external market
conditions, the Group’s focus on maintaining a strong financial position and the level of shareholder returns made
during FY13.
TARGETED STRATEGIES TO BUILD FOR FUTURE GROWTH
As outlined in the Managing Director’s Report, Emeco’s strategic focus over the next twelve months will be to work
closely with customers in our existing markets to deliver innovative and competitive equipment solutions while
seeking to establish a presence in new international markets, which will provide an opportunity to redeploy idle fleet
and provide growth over the medium term. At the same time, the Company will focus on maintaining financial
discipline in managing the cash flow and balance sheet of the business. Further detail on Emeco’s strategy is included
in the Regional Business Overview starting on the following page.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
12
REGIONAL BUSINESS OVERVIEW
Chart 5: Rental Revenue by Region
Chart 6: EBITDA Contribution by
Region
Chart 7: Fleet by Region
Chile, 5%
Chile, 5%
Chile, 3%
Canada,
25%
Canada,
23%
Canada,
17%
Indonesia,
15%
Australia,
55%
Indonesia,
13%
Australia,
59%
Indonesia,
28%
Australia,
51%
AUSTRALIA
Table 8: Performance Indicators
Chart 8: Average Fleet Utilisation
Operating Results
Revenue
EBITDA
EBIT
Funds Employed
ROFE %
No. workforce
LTIFR
FY13
250.6
121.6
53.4
467.5
11.4%
286
6.5
FY12
383.3
215.7
115.6
508.1
22.7%
580
3.1
Var %
(34.6%)
(43.6%)
(53.8%)
Average: FY13: 60%, FY12: 92%
Year-end: FY13: 41%, FY12: 88%
Notes:
•
•
•
For a reconciliation of statutory to operating results refer to Table 2 on page 8 and accompanying notes
Utilisation defined as % of fleet rented to customers (measured by written down value)
Australia results in Table 2 represent the Australian Rental segment and do not include the Australian Sales and Parts results
Main markets
Operating across Western Australia, Queensland, New South Wales and South Australia, the Australian rental
business is well diversified across bulk commodities and metals. The business services high quality customers,
primarily blue-chip miners and large contractors, leveraged to the production phase of the mining cycle. Rental
revenue commodity mix is weighted toward thermal coal (34%), iron ore (11%), metallurgical coal (19%) and metals
(30%).
FY13 Performance
FY13 revenue was down 34.3% on the prior year due to a combination of falling utilisation and price reductions across
the fleet. Falling commodity prices and a focus on operating costs has given rise to reviews of future operating plans
by mining companies, which impacted short term earthmoving volumes at existing projects and limited new enquiries
for equipment rental.
The changing market dynamics lead global miners to shift focus toward controlling costs and improving capital
efficiency. As a result, Emeco has experienced downward pressure on pricing for equipment, which together with the
impact of fixed costs over lower revenue has reduced FY13 EBITDA margins to 48.3% (FY12: 56.2%). EBIT margins
were also down to 20.7% (FY12: 30.1%) due to continued depreciation on idle fleet.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
13
FY14 Focus Affecting Future Performance
In FY14 Emeco Australia is focussed on maintaining market share through innovative and competitive solutions that
meet its customers’ objectives. As part of the objective to deliver cost effective solutions for its customers, the
business will focus on cost and productivity improvements within the business.
Given current utilisation levels, sustaining capital expenditure will be limited to major component replacements
whereas replacement of assets which reach end of life will be curtailed until the outlook improves. The business will
also work with other Emeco businesses to identify fleet redeployment opportunities or where appropriate, dispose of
assets opportunistically.
Medium Term Outlook
Future demand for equipment in the Australian mining market will be primarily driven by growth in earthmoving
volumes. The outlook for volume growth remains unclear as a result of volatility in commodity prices and exchange
rates. The current oversupply of equipment in the Australian market could result in continued pressure on rental
rates until such time as the demand/supply dynamic for heavy equipment rebalances.
CANADA
Table 9: Performance Indicators
Chart 9: Average Fleet Utilisation
Revenue
EBITDA
EBIT
Operating Results
FY13
94.2
46.5
23.4
FY12
67.2
35.9
16.2
Var %
40.2%
29.5%
44.6%
Funds Employed
214.0
161.5
ROFE %
No. Employees
LTIFR
10.9%
102
4.1
10.0%
93
5.6
Average: FY13: 75%, FY12: 71%
Year-end: FY13: 51%, FY12: 77%
Notes:
•
•
For a reconciliation of statutory to operating results refer to Table 2 on page 8 and accompanying notes
Utilisation defined as % of fleet rented to customers (measured by written down value)
Main Markets
The Canadian business is strategically located in the Alberta region to service oil sands and coal projects in Western
Canada. The business primarily supplies rental equipment and external maintenance services to oil majors,
indigenous and non-indigenous contractors, and coal miners. Rental revenue composition in FY13 was heavily
weighted toward oil sands (83%) with the remainder derived from thermal coal.
FY13 Performance
Revenue increased 40.2% in FY13 with strong utilisation across the first three quarters of the year driven by an
increase in direct supply to oil majors, diversification into coal and the full year benefit from fleet investment in FY12.
FY13 revenue was also positively impacted by growth in external maintenance revenue to $3.3 million (FY12: $1.0
million).
EBITDA margin fell to 49.3% in FY13 (FY12: 53.4%) due to the larger contribution from lower margin external
maintenance services, and increased cross-hire of non-core equipment to customers which returns a low margin but
is essential to delivering a complete solution. Despite an adverse impact on EBITDA margins, these additional
revenue streams do not incur depreciation, resulting in a higher EBIT margin in FY13 of 24.8% (FY12: 24.1%).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
14
FY14 Focus Affecting Future Performance
The business will continue to build on its direct supply relationships with the oil majors with the primary objective to
be the preferred rental equipment supplier. Recent award of external maintenance services contracts with oil sands
producers will provide a platform to further grow this revenue stream in FY14 and provide further equipment rental
opportunities. We continue to assess opportunities for work outside the oil sands to reduce revenue seasonality in
this business.
The Canadian fleet is currently holding higher than optimal unit numbers in certain classes. Over FY14 Emeco will
assess opportunities to divest or transfer these assets to other regions.
Medium Term Outlook
Embodied in the Canada oil sands industry is the seasonal nature of earth works over a year. While this limits visibility
on future activity, the installed production capacity in long life oil sands projects underpins significant base load
volumes over the medium term.
INDONESIA
Table 10: Performance Indicators
Chart 10: Average Fleet Utilisation
Operating Results
Average: FY13: 67%, FY12: 75%
Year-end: FY13: 43%, FY12: 87%
Revenue
EBITDA
EBIT
Funds Employed
ROFE %
No. Employees
LTIFR
FY13
60.3
28.0
14.3
123.4
11.6%
236
0.0
FY12
49.9
25.2
10.0
77.5
12.8%
356
–
Var %
20.8%
11.2%
43.6%
Notes:
•
•
For a reconciliation of statutory to operating results refer to Table 2 on page 8 and accompanying notes
Utilisation defined as % of fleet rented to customers (measured by written down value)
Main Markets
The Indonesian business is positioned in an optimal location to service miners and contractors in the Kalimantan
region and in particular, Indonesia’s thermal coal and gold mines.
FY13 Performance
The business achieved strong utilisation during 1H13 however 2H13 utilisation was heavily impacted by the broad
based downturn in activity in the Indonesian thermal coal industry and the loss of two major rental contracts. Delays
in approvals for key projects and lower commodity prices impacted activity particularly in thermal coal where
overburden activity was significantly curtailed.
Midway through FY13 activity halted at two significant customers’ operations, one due to non-payment of invoices
and the other due to an early contract termination, which Emeco is currently disputing. These two contract losses
adversely impacted utilisation by approximately 40%. Negotiations are continuing with both parties to resolve the
respective matters.
Notwithstanding lower utilisation during the second half, a larger asset base and higher average utilisation across the
12 months delivered a 43.0% improvement in EBIT on FY12, however ROFE was slightly lower at 11.4% (2012: 12.8%).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
15
FY14 Focus Affecting Future Performance
The business continues to receive customer enquiries on rental for new and developing mining projects across
various commodities. However the recent loss of its major customer, PT Indo Muro Kencana, has placed significant
financial pressure on the business. As a result the business will immediately focus on reducing its cost base while it
reassesses the business development opportunities in this market.
Medium Term Outlook
In light of the recent developments in the Indonesian business, the Company is reviewing the various options for the
ongoing management and operation of this business.
CHILE
Table 11: Performance Indicators
Chart 11: Average Fleet Utilisation
Revenue
EBITDA
EBIT
Funds Employed
ROFE %
No. Employees
LTIFR
Var %
Operating Results
FY13
17.4
11.1
6.4
78.5
8.2%
8
0.0
FY12
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Average: FY13: 86%
Year-end: FY13: 95%
Notes:
•
•
For a reconciliation of statutory to operating results refer to Table 2 on page 8 and accompanying notes
Utilisation defined as % of fleet rented to customers (measured by written down value)
Main Markets
Leveraged to the growing copper mining region of Antofagasta, Emeco services large international and domestic blue-
chip miners and contractors in Chile.
FY13 Performance
Emeco’s expansion into Chile has been a success with approximately $100 million now invested in this business and
achieving average utilisation of 86% over FY13. Approximately $40 million of Chile’s fleet was redeployed from other
Emeco businesses, demonstrating the value of market diversification. Chile contributed $6.4 million of EBIT in FY13 at
a 36.8% margin (EBITDA: 63.8%).
FY14 Focus Affecting Future Performance
The strategy for FY14 is to continue building alliances with contractors and increase direct supply to the major miners.
As part of growing the customer base the Chilean team will be looking to source equipment internally from other
Emeco businesses to optimise Group utilisation. Having deliberately entered the market with low overhead cost to
reduce risk, with a solid revenue base the business will now focus on establishing a strong maintenance capability to
support its customers.
Medium Term Outlook
The Chilean mining industry maintains a strong cost curve position which is expected to underpin activity over the
medium term. The recent announcement of expansions in the copper sector in Chile should deliver ongoing growth
in earthmoving volumes over the medium term, however this is subject to broader global economic conditions. On
the basis that volumes continue to grow in this market, Emeco is well positioned to maintain and grow earnings in
this business in the medium term.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
16
Table 12: Five Year Financial Summary
REVENUE
Revenue from rental income
Revenue from sale of machines and parts
Revenue from maintenance services
Total
PROFIT
EBITDA
EBIT
PBIT
NPAT from continuing operations
Profit/Loss from discontinued operations
Profit for the year
One-off significant items
Operating profit
Basic EPS
BALANCE SHEET
Total Assets
Total Liabilities
Shareholders Equity
Total Debt
CASH FLOWS
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Free Cash Flow after repayment/(drawdown) of net debt
Free Cash Flow before repayment/(drawdown) of net debt1
DIVIDENDS
Number of ordinary shares at year end
Total Dividends paid in respect to Financial Year
Ordinary dividends per share declared
Special dividends per share declared
KEY RATIO'S
Average fleet utilisation
EBIT ROC
EBIT ROFE (pre goodwill)
Net Debt to EBITDA
Total Debt to equity
2013
2012
2011
2010
2009
370,025
440,299
386,530
302,355
304,380
27,533
42,132
66,689
58,182
62,795
53,170
64,328
38,276
97,212
42,131
439,690
565,170
502,495
404,959
443,723
175,441
260,507
215,379
167,685
193,594
44,858
124,820
16,084
100,406
6,004
69,972
-
6,004
(29,243)
35,247
5.9
(227)
69,745
(1,375)
71,120
11.3
93,206
70,247
49,974
48,510
25,785
12,300
99,988
77,380
55,025
(365)
(61,613)
(41,756)
49,609
(49,313)
13,269
(6,395)
(90,456)
(44,472)
56,004
41,143
57,741
8.2
2.0
2.1
1,126,022 1,216,116
981,152 1,014,754 1,119,953
514,846
575,729
378,918
392,011
437,087
611,176
640,387
602,234
622,743
682,866
415,426
459,484
297,005
305,472
341,669
181,303
230,467
214,931
147,462
175,435
(129,124)
(281,817)
(146,088)
(119,281)
118,958
(68,947)
(107,527)
(45,377)
(94,199)
(88,204)
(67,102)
67,608
(104)
(5,442)
(6,968)
(9,273)
(90,958)
(17,800)
24,900
45,500
599,675
631,238
631,238
631,238
631,238
37,146
2.5
37,874
6.0
0.0
0.0
63,124
5.0
5.0
12,625
2.0
25,250
4.0
0.0
0.0
67.0
7.1
8.5
2.15
68.0
86.0
13.2
15.7
1.47
71.8
85.0
11.3
14.0
1.38
49.3
72.0
8.3
10.5
1.82
49.1
74.0
9.4
11.6
1.76
50.0
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
cents
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
'000
$'000
cents
cents
%
%
%
x
%
Financial information as reported in the corresponding financial year and includes operations now discontinued.
1 Includes capex funded via finance lease facilities (excluded from statutory cash flow).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
17
Sustainability Report
(cid:1) TRIFR improved by 39% in
(cid:1) Diversity Action Plan initiatives
(cid:1) National community
FY13
implemented
partnerships established with
Clontarf and Lifeline Australia
IMPROVED SUSTAINABILITY
This is the third Sustainability Report produced by Emeco and the third data capture and reporting process we have
been through to measure the sustainability of our global operations.
In FY13, there has been a notable shift at the local and regional level in relation to our performance in the areas of
safety, people, community and environment. We still have work to do in each of these areas and, in keeping with our
value of Continuous Improvement, we continue to look for ways to improve the sustainability of our business. This
Sustainability Report demonstrates that as our business evolves, so too do our behaviours and performance in relation
to operating as a responsible business for our stakeholders.
CONSISTENT AND REGULAR REPORTING
Our 2013 Sustainability Report has once again been developed using the Global Reporting Initiative (GRI) G3
Framework and the principles of materiality and completeness to determine the information that should be included
in this Report.
This Report is self-declared as a C level report in accordance with the GRI G3 Guidelines and details information
relating to our performance in the areas of safety, people, community and environment for the FY13 period.
We have also set our performance targets for the year ahead (see table 13) and will continue to provide our
stakeholders with relevant and meaningful information regarding the performance of our global operations from a
sustainability perspective.
To this end, a major highlight for the year has been the development of a new monthly sustainability reporting tool for
the Emeco Board. We have improved upon the monthly Health, Safety and Environment (HSE) report template of the
past to capture our safety, people, community and environmental data in a more structured format which is closely
aligned to our Annual Sustainability Report. We believe that this proactive management of our sustainability issues
and greater sharing of regional information will help us achieve our objective of ongoing continuous improvement.
The new tool will also streamline our annual reporting by collecting relevant data on a regular basis throughout the
year.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
18
Table 13: Sustainability Performance and Targets
Performance Areas
People
Safety
Further reading page
20 to 23
FY13 Performance Highlights
• TRIFR improved by 39%
• Established the Global HSE Forum
• Increased adoption of behaviour-based safety
approaches
• Audit of contractor compliance and contractor
safety management improvements conducted
FY14 Performance Targets
• Further reduce injury frequency rates
Employee
Development
Further reading page
24 & 25
• Employee satisfaction improved (32%
improvement since 2010)
• Implemented new training management system
to enhance recording, analysis and management
of employee training in Australia
• Delivered leadership development program in
• Establish a Global HR Forum
• Undertake fourth employee culture
survey
• Implement consistent on-boarding
process for new employees across the
Australian business
Australia and Canada
Diversity
Further reading page
25 & 26
• Implemented global gender diversity
measurement framework in Australia
• Implemented initiatives from the Diversity Action
• Implement gender diversity
measurement framework globally
• Implement FY14 diversity initiatives
Community
Community
Participation
Further reading page
26 to 29
Plan
• Analysed gender-based results from the 2012
employee culture survey
• Established two national partnerships in Australia
• Appointed community engagement
representatives in Australia, Indonesia and
Canada
• Pleasing levels of employee involvement in
community engagement activities
Environment
Environmental
Management
Further reading page
29 & 30
• No reportable environmental incidents
• Implemented a number of localised
environmental improvements
• Improve regional alignment with
global community engagement
strategy
• Increase profile of community
engagement representatives
• Review existing national partnerships
agreements in Australia
• Implement consistent approach to
collecting waste and water-related
data
• Review and improve waste water
management practices
OUR STAKEHOLDERS
In FY13, we have identified our key stakeholder groups (see table 14), the ways in which we engage with each and the
key topics and concerns of our different stakeholders in relation to their dealings with Emeco.
In future years, this will assist us in better identifying the matters that are material to Emeco from a sustainability
perspective as well as the relevant GRI indicators for a particular period. In some cases this will also help us to
proactively identify our sustainability risks and opportunities.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
19
HOW WE ENGAGE
TOPICS AND CONCERNS (FY13)
Table 14: Stakeholder Engagement
STAKEHOLDER
GROUP
Employees
Face to face, intranet, MD newsletter, employee culture
survey, inductions, performance management process, in-
house training, community engagement activities, pre-start
safety and toolbox meetings.
Job security
•
• Safety
• Communication
• Training and development
• Work prioritisation
• Workplace satisfaction and desired values
• Company performance
• Safety
• Hire terms and conditions
• Equipment supply
• Equipment performance
• Workforce supply
• Company performance
• Value creation
• Financial and non-financial risk mitigation
• Capital management
• Corporate governance
• Supply chain opportunities and/or issues
• Social impact of operations
• Community investment and support
Customers
Face to face through business development managers, site
managers and tender responses.
Shareholders
Investor relations team, annual financial performance
reporting, annual general meeting, annual meetings with
proxy advisory firms.
Suppliers
Community
members
Supply related enquiries and tender/quote responses.
Community
activities.
focussed
sponsorship and partnership
PEOPLE
Health and Safety
Emeco’s Occupational Health & Safety Policy is publicly disclosed on our website at www.emecogroup.com. The Policy
is supported by the Emeco Safety Health Environmental Management System (ESHEMS) and monthly reporting to the
Executive Leadership Team and the Board.
In FY13 we established a global HSE Forum which is dedicated to the sharing of HSE information across Emeco’s four
operating regions and ensuring consistency and continuous improvement in relation to HSE performance.
Members of the HSE Forum report on regional HSE performance regularly to the Board through the new monthly
sustainability report tool (see page 18) and participate in a quarterly teleconference which allows general managers
and senior HSE advisors from each region to compare their experiences and share learnings.
In FY13 we enhanced our approach to behavioural-based HSE programs through the global implementation of a Safe
Act Observation (SAO) program which involved training our Emeco leaders (from the Executive Leadership Team to
frontline supervisors) and is supported by Key Performance Indicators (KPIs). The focus on safe behaviours
commences each day for our operational teams through behaviour-based safety programs such as the Positive
Attitude Safety System (PASS) and pre-shift meetings. This is tied to our SAO program with positive feedback and
opportunities for improvement being communicated across our global workforce.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
20
Improving Safety Behaviours
Australia
During FY13, we implemented the following safety improvements across Emeco’s largest operation, the Australian
business:
• A review of Emeco’s HSE risk management approach delivered the following:
-
-
-
Alignment of our HSE Risk Matrix with our Enterprise Risk Matrix to better integrate HSE risks into the group
Enterprise Risk Register.
All risk assessments and HSE Management Plans (HSEMPs) for each state and site within the Australian
business were reviewed and updated.
To complement the HSEMPs, the development of several hundred Safe Work Method Statements was
prioritised, providing a step-by-step procedure for each regular task and outlining the hazards and controls
associated with each task.
• An audit of contractor compliance was carried out, including a review of the type of contractor services provided.
Strategies and processes were developed to improve risk management in the areas of HSE, human resources,
legal, commercial and procurement. Further improvements are planned for FY14.
• All employees and contractors now receive hazard/risk booklets containing HSE information and reporting forms
at their induction, improving our hazard reporting process and in-field risk management tools.
• A number of high risk activities were identified including tagging and isolations, working at heights, tyre/rim
handling and management. Fifteen Core Risk Control Protocols are currently being developed to better manage
safety in relation to the identified risk activities.
•
Following the incorporation of safety training into Emeco’s broader training framework, a new training
management and reporting database is being implemented which will improve the management of HSE and
training information (see page 24). The new database will track all training requirements (safety or otherwise) of
each individual Australian employee and critical HSE/Licence to Operate training of contractor personnel.
• Child and baby first aid training was provided free of charge for employees and their family members at our
Osborne Park, Guildford, Mackay and Rutherford sites.
In FY14, we will focus on enhancing PASS leadership by providing coaching and support to all levels of management
within the Australian business. We also aim to better utilise PASS meetings to address a number of other HSE
improvements including HSE lead indicators, SAOs, risk assessments and training.
Canada
In May 2013, the Canadian team also implemented a behaviour-based safety program consisting of the following:
•
•
Job safety observation and management observations to recognise strong safety performance, establish two-way
communication and to provide safety improvement opportunities for all employees.
Take 5’s which engage all administrative staff, management and supervisors to stop and think though various
tasks before commencing the activity, helping to proactively identify potential hazards.
• Hazard assessments:
-
-
Stop & Think allows the worker to verify that all required actions have been thoroughly considered and
addressed with before they begin a task.
Last Minute Risk Assessment used during a task to assist in identifying any new conditions such as scope of
work, unexpected events, weather conditions and additional people. With every change in condition,
hazards must be identified and controls put in place.
• New Worker Mentorship Program ensures that new employees are provided with the necessary knowledge,
familiarity and skills to perform their job in a safe manner and in accordance with Emeco’s standards. This
program also aims to ensure that new employees have a full support system to assist them in adjusting to their
new position and role with the Company.
In addition, formal job hazard assessments are being created for all positions within the Canadian business. This began
with the high safety sensitive positions (such as welders) and has been rolled out to the maintenance team.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
21
In FY14, the Canadian business will review and continue to monitor the implementation and adoption of this new
behaviour-based safety approach across the region.
Chile
Since the delivery of our first fleet in July 2012, the Chilean business has focussed on providing a safe work
environment for our employees and sub-contractors and is proud to have completed its first year of operation injury
free. During the year the team focussed on:
•
•
Translating and implementing Emeco’s global safety policy and procedures.
Subcontractor pre-qualification and the use of safety management systems including JHA, Take 5 and daily
meetings.
• Delivering pre-qualification and ongoing reporting requirements to governing bodies.
• Complying with mine owner regulations and procedures for both tender processes and throughout rental
contracts.
Indonesia
The knowledge and awareness of safe work practices was increased during the period through the provision of HSE
training for new and existing employees. As in all other regions, pre-work meetings are now being held at the
commencement of each work shift in Indonesia and monthly inspection programs are also being conducted at each
site which is an improvement since prior reporting periods.
Safety Performance
Region
Table 15: FY13 Safety Performance Measures by Region
LTIFRB
TRIFRA
6.5
Australia
20.5
Canada
Chile
Indonesia
Emeco Group
8.3
0
0
10.6
Table 16: 5 Year LTIFR Performance
LTIFR
Emeco Group
FY13
3.5
Table 17: 3 Year TRIFR Performance
TRIFR
Emeco Group
FY13
10.6
4.1
0
0
3.5
FY12
1.7E
FY12
17.4
* Emeco commenced reporting TRIFR in FY11.
FY11
2.4
FY11*
12.4
DIFRC
10.8
0
0
0
5.0
MTIFRD
3.2
4.1
0
0
2.0
FY10
3.4
FY09
12.8
During the period, Emeco’s global Lost Time Injury Frequency Rate (LTIFR) increased to 3.5 due to a number of lost
time injuries sustained within our Australian and Canadian businesses. However, other safety indicators including
Total Reportable Injury Frequency Rate (TRIFR) and Medical Treatment Injury Frequency Rate (MTIFR) reflected an
overall improvement in safety performance throughout FY13 (see table 15).
Our Chilean and Indonesian operations recorded zero incident rates across all of our safety indicators.
No fatalities were recorded and there were no lost days due to work-related illness.
A Total Recordable Injury Frequency Rate
B Lost Time Injury Frequency Rate
C Disabling Injury Frequency Rate
D Medical Treatment Injury Frequency Rate
E In the 2012 Annual Report we reported that our LTIFR for FY12 was 2.2. This was incorrect and the error was identified through the injury
reclassification and HSE data audit carried out in early FY13.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
22
Looking back on our safety performance over the past five years, there has been a definite improvement across the
business. We expect ongoing improvement as the new HSE Forum picks up momentum and as the ESHEMS and
associated initiatives for safe systems, safe equipment and safe people are implemented.
Case Study: AED and St John Community First Responder Program
Sudden Cardiac Arrest (SCA) is the leading cause of death in Australia with deaths from SCA being estimated in excess
of 20,000 each year. SCA occurs when the electrical system of the heart malfunctions and causes irregular heart
rhythm and or cardiac arrest. Victims can face irreversible damage in just four to six minutes after experiencing
cardiac arrest.
Automated External Defibrillators (AEDs) are the only known device that can help restore the heart to its natural
rhythm. AEDs are portable and virtually anyone can use an AED to save a life. Emeco provided training in advanced
first aid and resuscitation during FY13 and installed AEDs at all Australian branch locations.
Emeco also joined the St John Ambulance ‘Community First Responder’ Program in Western Australia which provides
a direct link between Emeco AED locations, St John Ambulance and the triple zero (000) call centre. Our AEDs and our
trained first aiders are available to assist in the community and can be called to provide assistance to any SCA that
occurs within proximity of an Emeco branches or office.
EMPOWERED PEOPLE
The greatest difference in the FY13 reporting period compared to prior reporting periods relates to the establishment
of our operations in Chile. This has added further geographical and cultural diversification to our business. We remain
focused on building supportive and culturally sensitive workplaces which empower Emeco people to achieve and
which reflect the broader diversity of the communities in which we operate.
Table 18: Employees by Region and Contract
Region
Australia
Canada
Indonesia
Chile
US
Total
Total number of employees (2013)
Full time
(perm)
278
Part timeF
(perm)
6
Full time
(fixed term)
-
101
213
7
1
600
1
-
-
-
7
-
23
1
-
24
Part time
(fixed term)
-
-
-
-
-
-
Casual
Total
2
-
-
-
-
2
286G
102
236
8
1
633
As at 30 June 2013, our global workforce comprised of 633 permanent and fixed term employees spread across
Australia, Canada, Indonesia and Chile.
At all of our workplaces we stress the importance of equality and treating each other with respect.
Table 19: FY13 Turnover by Region
Turnover Number
Turnover Rate H
Region
Australia
Canada
Indonesia
Chile
Male
140
12
68
1
Female
37
3
7
0
Male
39.25%
11.8%
23.5%
12.5%
Female
10.37%
2.9%
1.9%
0
F Part-time is assessed as anything less than 38 hours week.
G Non-executive directors are not included in Australian employee numbers.
H 12 month rolling average including voluntary and involuntary turnover.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
23
A Clear People Strategy
Empowering Emeco people to achieve and succeed in their roles remains the ultimate goal of our Empower people
strategy.
Over the period, employee development and diversity were the two main Empower workstreams focussed on at a
global level.
Listening to Our People
In August 2012, we conducted our third annual employee culture survey which relates to employee satisfaction over
FY12, with the highest number of responses from Emeco people achieved to date. This survey was conducted prior to
the implementation of a significant redundancy program in the Australian business in late 2012 and early 2013 and so
while employee satisfaction improved again in 2012 (a 32 per cent improvement since 2010) we expect the results of
our 2013 survey, which is currently underway, will differ significantly from the 2012 results.
The 2012 survey results highlighted that our Emeco values are reflected in our culture through Teamwork, Continuous
Improvement, Accountability and Customer Satisfaction. However, employee feedback also told us that in some
workplaces communication between managers and employees could improve, particularly in regards to work
prioritisation.
The Emeco Foundations of Leadership program developed in FY13 for front-line managers and supervisors is one way
in which we will be addressing this issue (see page 25). An internal toolkit is also being developed and trialled during
FY14 to help Emeco managers in Australia be more active and visible leaders. If successful this toolkit will be rolled out
across all regions.
EMPLOYEE DEVELOPMENT
Performance Management
Following the implementation of a new Performance Management Process (PMP) in the Australian and Canadian
businesses in FY12, Personal Performance Plans (PPP) including objectives, behavioural assessments and training
plans) were developed for 95 per cent of employees. The number of PPPs conducted across the Australian and
Canadian businesses fell in FY13. We are currently reviewing the reasons for this decline. The PMP was implemented
in Indonesia and Chile for positions at supervisor level or higher in FY13. Overall, we are on track for an improvement
in the number of PPP conversations carried out in FY14.
Training and Development Reporting
As a result of the downturn in resources markets during the period, particularly in Australia, opportunities to reduce
operational costs were explored. This included a review and prioritisation of training activity. As a result, the decision
was made to limit external training to focus on job critical HSE, licence to operate and essential technical/professional
training. This also delayed the implementation of a consistent on-boarding process for new employees across the
Australian business, however, this has been set as a target for delivery in FY14.
To assist with our FY13 target of establishing an “integrated process to record employee training and to report on
training key performance indicators”, a new training management and reporting database, enabling both HSE and
broader training data management, was implemented. The new database harmonises and tracks the training Emeco
delivers to all functions and avoids the duplication and technical deficiencies associated with the two databases
previously used.
The development of training matrices for key maintenance and operational roles has also been incorporated into the
database. Implementation of our enhanced training management system continues in FY14 and we plan to define
core role-based training requirements for all Emeco job families of the Australian business.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
24
Leadership Development
The most significant investment in training and development for the period was the implementation of the
Foundations of Leadership program.
The rollout of this program commenced in Australia and Canada during the period and is designed to complement
theory-based external courses by providing Emeco’s frontline supervisors and team leaders with a practical
experience around what successful leadership means at Emeco.
Module 1 (Leading the Emeco Business) was rolled out in FY12. In FY13, four of six modules in the program were
delivered to Australian and Canadian front line supervisors and team leaders. Modules 5 and 6 are under
development and planned for delivery in early 2014. The aim is that the Foundations of Leadership program will be
run at least once every two years for eligible team leaders, supervisors and leading hands.
DIVERSITY
In keeping with the diversity commitments made in the 2012 Sustainability Report, Emeco achieved the following
during the period:
•
•
•
Developed a gender diversity measurement framework for the Australian business. In FY14, we will start
capturing the same information across all operating regions.
Analysed gender based results of our employee culture survey to more specifically understand the views,
experience and needs of the women in our workforce.
Implemented initiatives from the Diversity Action Plan.
In addition, we submitted our second report to the Australian Workplace Gender Equality Agency (formerly the Equal
Opportunity in the Workplace Agency).
Diversity Actions
Emeco’s Diversity Action Plan (available at www.emecogroup.com) was approved by the Board in June 2012. The
following three initiatives from the Plan were implemented in FY13:
•
The Australian Recruitment and Selection Policy was reviewed to ensure it contained an explicit commitment to
promote diversity in our workforce. Following the review a new Recruitment and Selection Policy and Procedure
was implemented.
• A Flexible Workplace Arrangements Policy and Procedure was also developed in Australia to assist employees
and managers in applying for, assessing the business viability of, and responding to requests for flexible work
arrangements.
• Diversity training commenced at the executive leadership level in FY13. We have committed to develop and roll
out relevant diversity awareness training to the broader workforces of each operating region in FY14.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
25
Table 20: Group Workforce by Job Classification, Gender and Age
Job classification
Total
Gender
Female
Male
Age
< 30 yrs
31-40
41-50
51+ yrs
Non-Executive Director
Senior Executive
Senior Manager
Managers/Supervisors
Business Development & Sales
Business Support
Admin Support
Trade & Non Trade
Gender Diversity
6
6
27
53
17
41
87
397
1
0
6
10
0
14
57
5
5
6
21
43
17
27
30
392
0
0
6
4
1
11
31
176
0
2
7
23
6
13
26
134
1
3
10
15
6
8
21
62
5
1
4
11
4
9
9
25
Women represent 14.7 per cent of our global workforce and hold 18.6 per cent of senior management positions. The
majority of women working at Emeco are employed in administrative and business support roles. We feel this is a fair
representation considering the overall composition of the industry.
Our goal for FY14 is to increase the profile and career prospects of women in our workplaces by implementing the
following diversity initiatives:
•
•
•
Implement a structured and coordinated annual mentoring program for women leaders in the business.
Identify and invest in targeted leadership development training for current and potential women leaders.
Improve the way we profile and raise awareness of all high achievers in the business through our internal
communication channels with a target set for 50 per cent of all people profiled to be women.
CASE STUDY: Building Futures for Women
Through our working relationship with Imperial Oil in Canada, Emeco partnered with Women Building Futures (WBF)
to empower and help provide training to women who seek careers in Canada’s heavy industrial sector.
Like Emeco, WBF is focussed on empowerment. WBF works to empower women to succeed in non-traditional careers,
inspire positive economic change for women and forever transform the face of industry in Canada.
In February 2012, 16 women were selected to participate in the new WBF Imperial Oil Limited Heavy Equipment
Operator Program, for which Emeco provided and maintained the heavy equipment that was used throughout the 12-
week training program.
The students graduated on 10 May, equipped with five safety certificates and over 60 hours of seat time having spent
three months training on articulated haul trucks, loaders, dozers and graders.
COMMUNITY
From a community perspective, in FY13 the focus was on establishing the foundation of our global Community
Engagement Strategy, recruiting internal community engagement representatives and establishing supporting
processes.
The major achievements delivered during the period were:
•
•
•
The appointment of locally-based community engagement representatives for each state in which we operate in
Australia, Indonesia and Canada.
Establishing working relationships and running activities with our national partners in Australia, the Clontarf
Foundation and Lifeline Australia.
Receiving positive feedback from a number of local community groups who received support from Emeco.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
26
Importantly, the real value of our community-focussed activities in FY13 came from the pleasing level of employee
engagement and involvement. This suggests that the structure we have implemented with an overarching global
strategy and approval process, with application and activities being coordinated at a local level by Emeco’s own
internal community engagement representatives, really works.
We see this as an achievement because our Community Engagement Strategy recognises that Emeco employees and
broader stakeholders, live and work in the communities where we operate and as such, employee engagement is a
large part of our community engagement approach.
Throughout the year, we remained focussed on partnership and sponsorship activities which meet the following
criteria:
•
•
•
Improve standards of health, wellbeing and/or education.
Support environmental remediation and/or sustainability practices.
Support sustainable Indigenous business operations.
These remain our focus areas for support in FY14.
LOCAL COMMUNITY SUPPORT
In FY13 we continued to provide both financial and in-kind assistance to local community causes across our operating
locations (see table 21). We also encouraged the active involvement of our employees in their local communities.
Table 21: FY13 Community Activity by Region
Region
Partnership or Sponsorship
Bupa Walk to Work Day
Camp Quality
Clontarf Foundation (National Partnership)
Cowell Hospital
Fremantle Hospital
Lifeline Australia (National Partnership
Mackay Animal Rescue
Mine Rovers Football Club
National Breast Cancer Foundation
Pioneer Valley Car Show – Dad’s Day in the Park
Princess Margaret Hospital Foundation – Big Walk
PWR Mine Emergency Response Competition (MERC)
Roar Cricket Club
Rock Eisteddford
Ronald McDonald House
Rotary
Shave for a Cure
Stress Down Day
Indonesia Young National Committee
Radio Between Indonesia People
Manggar People Empower Council
P. Antasari Technical High School
Mining Suppliers Association of Canada
Stony Plain Minor Hockey
United Way
Breast Cancer Support
Teenage Survival Handbook
U16/18 Girls Soccer Club
South Side Athletic Club APEX Geoscience Hockey team
Women Building Futures (see case study page 26)
Community engagement activities not yet commenced.
Australia
Indonesia
Canada
Chile
In FY14 we will be working to establish greater consistency across our operating regions in terms of the types of
causes we support and to improve alignment with our global Community Engagement Strategy. We will also be
seeking more formal feedback from the organisations and community groups that we support in FY14 to assist with
reviewing and developing our Community Engagement Strategy going forward.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
27
PARTNERING FOR CHANGE
Mental Health & Wellbeing
In Australia during FY13, Emeco established national partnerships with the Clontarf Foundation and Lifeline Australia.
Emeco’s support of Lifeline delivers the following:
•
•
•
•
Financial support which enables Lifeline to sustainably operate its 13 11 14 crisis support line.
Improved access to Lifeline’s essential crisis services for the Australian public.
Improved awareness and open communication lines with Emeco stakeholders about mental health and suicide.
Structured, optional training for Emeco employees in Australia.
80 per cent of the funding provided to Lifeline by Emeco goes towards employing and training permanent Lifeline
employees to work the crisis lines between the hours of 10pm and 6am. This is the most difficult time for volunteers
to work, yet also the time of night when Australians in need become lonely and at high risk of suicide.
The remaining 20 per cent of funding goes towards training of Emeco employees to better understand the issue of
mental health and suicide. These optional sessions have been a huge success with between 60 and 80 per cent of
employees at each location where the training has been held, choosing to attend. Following the training, employees
who choose to attend are equipped with the confidence, skills and tools they may one day need to help themselves, a
colleague or loved one, who may be struggling with a mental health issue or contemplating suicide.
Indigenous Engagement
Our Aboriginal and Torres Strait Islander Engagement Strategy outlines our commitment to developing and providing
culturally aware and welcoming Australian workplaces.
During FY13 in Australia, we were focused on developing our relationship with the Clontarf Foundation (Clontarf)
following the establishment of a community partnership in July 2012 (see case study page 29). Clontarf exists to
improve the education, discipline, self-esteem, life skills and employment prospects of young Aboriginal men.
Through the partnership Emeco is working with Clontarf to develop career pathways for Indigenous youth and hopes
to provide employment opportunities for Clontarf graduates within Emeco in the coming years. In FY13, Emeco
assisted Clontarf with:
•
•
Facilitating an excursion for Clontarf students to Emeco’s Guildford site, providing the boys with an insight into
the mining services industry and heavy equipment (see case study page 29).
Exploring opportunities for career pathways though work experience at Emeco, for boys attending Clontarf
Academies in proximity to Emeco’s major sites.
In Canada, Emeco has been working in a commercial relationship with the Fort McKay Group of Companies for a
number of years, a company which is 100 per cent owned and controlled by the Fort McKay First Nation indigenous
people. At the end of FY13, our Canadian business had commenced further discussions with the Fort McKay Group to
explore the co-development of a fleet maintenance program which would assist the Group in providing equipment to
various oil sands producers.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
28
Case Study: Clontarf Students See Emeco First Hand
In early 2012, students from the Sevenoaks Clontarf Academy visited Emeco’s Guildford operation in Western
Australia.
After a site induction which explained the importance of safety and the safety practices which were to be followed at
site, the Emeco team spoke with the boys about the various roles and functions required to run a business like Emeco
and how the boys could one day have similar roles in a company.
The boys were taken on a tour of Emeco’s workshop which gave them a chance to see large mining equipment up
close, as well as a variety of tools and engines which are used by Emeco to deliver its equipment rental services to
customers.
The visit concluded with a morning tea. This was a great opportunity for the boys from Clontarf to interact with Emeco
employees from Guildford and to ask questions about some of the jobs and activities they heard about on their tour of
the site.
ENVIRONMENT
Responsible Environmental Management
Globally, we continue to work towards improving the consistency and efficiency of our environmental data collection
and reporting processes. The new monthly sustainability reporting tool will not only assist from a consistency and
efficiency perspective, we hope that it will also promote the sharing and adoption of environmental initiatives and
improvements across Emeco’s operating regions.
In FY13, all major sites in the Australian business improved waste management practices. Following are some
examples of the steps taken:
•
•
•
•
•
Using double-skin containers for lube storage at Carosue Dam (a maintained project site in Western Australia) to
prevent uncontrolled release of hydrocarbons.
Switching to a single-supplier of oil and waste oil removal in Western Australia resulting in more efficient
management of oil usage and disposal.
Introducing a biodegradable cleaner and a non-hydrocarbon degreaser at our Rutherford branch in New South
Wales, reducing the use of hazardous chemicals.
Redesigning the wash pad workshop grid at our Mackay branch in Queensland to ensure waste flows correctly
into the waste oil area, avoiding uncontrolled releases.
Introducing a dust suppressant at our Rutherford branch to reduce the dust flowing from our workshop to the
surrounding area.
Across our Australian business water is captured, cleaned and reused in all wash bay facilities. Our water carts
(following repair/refurbishment) now use recycled water from wash bays, rather than potable fresh water. Canada
captures and uses rainwater in wash bays.
Indonesia has begun more regular monitoring of the waste water that is released back into the environment. Waste
water management practices have also been reviewed and a number of improvements are currently being initiated in
the region.
As yet, we do not however have the systems in place to reliably capture waste, water usage data or quantify water
savings globally. We have set a target to improve our waste and water reporting approaches in FY14.
Across the business we continue to look for ways to reduce the impacts of our vehicles while in use at customer sites.
In Australia, as reported in FY12, we implemented Global Positioning System (GPS) units on our Caterpillar fleet and
are still investigating the viability of similar units for other OEMI models. Testing to date has uncovered some technical
issues, however, we remain committed to providing fuel usage reports to those customers who require such
information.
I OEM means original equipment manufacturer
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
29
In Canada, Emeco manages excessive idling of equipment, particularly during the busy winter period, by utilising
technology which helps keep equipment ready to start. Rental customers who are able to minimise the occurrence of
idling equipment are positively rewarded with a discounted rental rate.
FY13 was the first year of operation for our Chilean business and as such, they have only recently begun tracking and
reporting environmental data which we will report on in future reporting cycles.
No significant spills were reported by any of our operations in FY13.
ENERGY AND GREENHOUSE GAS EMISSIONS (GHG)
Table 22: FY12 Energy Consumption by Source
Energy consumption
Electricity
Natural Gas
Fleet Fuel
Total energy consumed
Direct energy (GJ)
(Scope 1 & 2)
14,040
8,762
54,358
77,289
tCO2-e
(Scope 1 & 2)
3,332
450
3,761
7,543
Table 23: 2010-12 Group Emissions (Scope 1 & 2)
Year
2010
2011
2012
tCO2-eJ
7,397
6,447
7,543
Table 24: 2012 Group Energy Consumption and GHG Emissions by Region
Region
Australia
Canada
Indonesia
Chile
Total
Direct energy (GJ)
(Scope 1 & 2)
36,835
32,616
7,709
tCO2-e
(Scope 1&2)
4,672
2,166
705
Available in 2014.
77,160
7,543
Emeco provides dry hire equipment to mining companies and contractors operating in the mining industry. As such,
emissions associated with the use of our equipment falls under the reporting responsibility of our customers. We are
not required to report greenhouse emissions or energy usage under the Australian Government’s National
Greenhouse and Energy Reporting legislation or Energy Efficiency Opportunities legislation as our activities fall below
the current reporting thresholds. Nonetheless, we track and report energy usage and GHG emissions information each
year, for the prior financial year, through submission to the Carbon Disclosure Project (CDP). www.cdproject.net
Our most recent CDP submission shows that our 2012 GHG emissions (scopes 1 and 2) were 7,543 tCO2e (see table
23) which represents an increase of 17 per cent on FY11 emissions. The increase in emissions was primarily due to the
growing fleet of the time and associated energy usage in Canada and Indonesia.
In an effort to improve the accuracy of our emissions data and respond more effectively to increasing trends,
commencing in FY14 each region now reports environmental data on a regular basis, as opposed to annually, through
our new monthly sustainability reporting tool.
We continue to look for opportunities to improve our environmental performance and to reduce the carbon and
energy impacts of our operations where possible. Importantly, we remain committed to working with our customers
to mitigate environmental impacts, increase energy efficiency and reduce emissions associated with the operation our
equipment.
J Carbon footprint is calculated using the international best practice Greenhouse Gas Protocol.
National Greenhouse Accounts (NGA) Factors July 2010 – Department of Climate Change and Energy Efficiency
National Greenhouse and Energy Reporting (Measurement) Determination 2008
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
30
Financial Report
Directors’ Report..................................................................................................................32
Directors .............................................................................................................................. 32
Company Secretary ............................................................................................................. 35
Directors’ Meetings ............................................................................................................. 36
Corporate Governance Statement ...................................................................................... 37
Nature of operations and principal activities ...................................................................... 48
Operating and financial review ........................................................................................... 48
Dividends paid ..................................................................................................................... 48
Significant changes in state of affairs .................................................................................. 48
Significant events after balance date .................................................................................. 48
Likely developments and expected results ......................................................................... 48
Directors’ interest in shares of the Company ..................................................................... 49
Remuneration report (audited)........................................................................................... 50
Indemnification and insurance of directors, officers and auditors ..................................... 68
Non-audit services ............................................................................................................... 68
Lead Auditor’s Independence Declaration .......................................................................... 68
Rounding ............................................................................................................................. 68
KPMG’s Independence Declaration .................................................................................... 69
Consolidated Statement of Profit or Loss and Other Comprehensive Income .........................70
Consolidated Statement of Financial Position .......................................................................72
Consolidated Statement of Changes in Equity .......................................................................73
Consolidated Statement of Cash Flows .................................................................................74
Notes to the Financial Statements ........................................................................................75
Directors’ Declaration ........................................................................................................ 152
Independent Auditor’s Report ............................................................................................ 153
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
31
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Directors
The Directors of Emeco Holdings Limited (Emeco or Company) present their report together with the financial reports
of the consolidated entity, being Emeco and its controlled entities (Group) for the financial year ended 30 June 2013
(FY13).
The Directors of the Company during FY13 were:
ALEC BRENNAN
AM, BSc Hons, MBA, FAICD, Age 66
Appointment: Independent Non-Executive Director since August 2005. Chairman since November 2006.
Board committee membership:
•
•
Chairman of the Remuneration and Nomination Committee.
Member of the Audit and Risk Committee.
Skills and experience: Alec was Chief Executive Officer of CSR from April 2003 until March 2007, prior to which he held
a range of positions with CSR and related companies, including time as Director of Finance & Investments and Chief
Executive Officer of the Readymix Group. Alec has been a public company director for more than 20 years. Alec was
made a Member of the Order of Australia in the 2013 Queen's Birthday Honours for significant service to business and
commerce, tertiary education administration and to the community. Alec is also a former member of the Australian
Securities and Investments Commission Advisory Panel.
Current appointments:
•
•
Director of the New South Wales Environmental Protection Authority (since 2012).
Fellow of the Senate of Sydney University. Chair of the University's Finance and Human Resources committees
(since 2006).
KEITH GORDON
BSc (Agric) Hons, MBA, MAICD, Age 49
Appointment: Managing Director since December 2009.
Skills and experience: Keith brings senior leadership skills and experience to Emeco, gained through an extensive
career in the industrials sector. Keith joined Emeco after a decade with Wesfarmers Limited, where he held a number
of senior roles and was heavily involved in major corporate transactions. Keith has a strong record of achieving value-
creating growth through innovation and disciplined strategies.
Current appointments:
•
Director of EDGE Employment Solutions (since 2009).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
32
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
ROBERT BISHOP
BSc, MSc Eng, FAICD, MIEAust, MIET(UK), Age 68
Appointment: Independent Non-Executive Director since June 2009.
Board committee membership:
•
Member of the Audit and Risk Committee.
Skills and experience: Robert has extensive international business experience having worked in the United Kingdom,
South Africa and Europe with particular focus on mergers and acquisitions, new business start-ups and international
business development in the manufacturing and mining sectors. Robert held the position of Chief Executive Officer of
the global mining and tunnelling division of DYWIDAG Systems International GmbH from 2003 to 2008 and was a
member of the Group’s Supervisory Board. He is a former Managing Director of Dorsogna Limited (1994 to 1997) and
Joyce Corporation Limited (1989 to 1994).
Current appointments:
•
Director of Newcastle Regional Art Gallery and a member of its Investment Committee (since 2011).
JOHN CAHILL
BBus, Grad Dip Bus, FCPA, GAICD, Age 57
Appointment: Independent Non-Executive Director since September 2008.
Board committee membership:
•
•
Chairman of the Audit and Risk Committee.
Member of the Remuneration and Nomination Committee.
Skills and experience: John has over 25 years' experience working in senior treasury, finance, accounting and risk
management positions, predominantly in the energy utility sector. John is a past Chief Executive Officer of Alinta
Infrastructure Holdings and past Chief Financial Officer of Alinta Limited.
Current appointments:
•
Non-Executive Director (since 2009) and Deputy Chairman (since 2010) of Electricity Networks Corporation,
Western Australia (trading as Western Power). Chair of its Finance and Risk Committee and a member of its
People and Performance Committee.
Non-Executive Director (since 2007) and President and Chairman (since 2011) of CPA Australia Limited.
Councillor of Edith Cowan University and Chair of the University's Resources Committee (since 2011).
•
•
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
33
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
PETER JOHNSTON
BA, FAusIMM, FAICD, Age 62
Appointment: Independent Non-Executive Director since September 2006. Retired on 30 June 2013.
Board committee membership:
•
Member of the Remuneration and Nomination Committee.
Skills and experience:
Peter brought to Emeco more than 30 years' experience in the Australian resources industry. Peter was appointed
Head of Nickel Assets for Glencore in May 2013. Prior to his current role he was Managing Director and Chief
Executive Officer of Minara Resources Pty Limited. Peter held senior executive positions with WMC Resources Limited
and Alcoa of Australia Limited. Peter is a former Chairman of the Minerals Council of Australia (2010 to 2013) and a
former Vice President of the Australian Mines and Metals Association (2010 to 2013).
Current appointments:
•
•
•
Non-Executive Director Silver Lake Resources Limited (since 2007).
Non-Executive Director of Tronox Limited (since 2012).
Director of the Nickel Institute (since 1995).
PETER RICHARDS
BCom, Age 54
Appointment: Independent Non-Executive Director since June 2010.
Board committee membership:
•
Member of the Audit and Risk Committee.
Skills and experience: Peter has over 30 years of international business experience with global companies including
British Petroleum (including its mining arm Seltrust Holdings), Wesfarmers Limited and Dyno Nobel Limited. During his
time at Dyno Nobel, he held a number of senior positions with the North American and Asia Pacific business, before
being appointed as Chief Executive Officer in Australia (2005 to 2008). Peter was previously Chairman of Kangaroo
Resources Limited (2010 to 2013), Chairman of Minbos Resources Limited (2010 to August 2013) and former Non-
Executive Director (2010 to 2013) and Managing Director (February 2013 to July 2013) of Norfolk Group Limited.
Current appointments:
• Non-Executive Director of Sedgman Limited (since 2010).
• Non-Executive Director of Bradken Limited (since 2009).
• Non-Executive Director of NSL Consolidated Limited (since 2009).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
34
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
ERICA SMYTH
MSc, FAICD, FTSE, Age 61
Appointment: Independent Non-Executive Director since December 2011.
Board committee membership:
•
Member of the Remuneration and Nomination Committee.
Skills and experience: With over 30 years' experience in the mineral and petroleum industries, Erica's career highlights
include her positions as Principal Geologist for BHP Minerals, Project Manager of BHP-Utah Minerals International's
Beenup Project, Manager - Gas Market Development WA for BHP Petroleum and General Manager - Corporate Affairs
with Woodside Petroleum Limited. In 2012 Erica was elected as a Fellow of the Academy of Technological Science and
Engineering and in 2010, the Chamber of Mines & Energy Western Australia awarded Erica a Lifetime Achievement
Award for her contribution to the industry as part of the Women in Resources Awards 2010. In 2008, Erica was
awarded a Honourary Doctor of Letters from the University of Western Australia.
Current appointments:
•
•
•
•
•
•
Chair of Diabetes Research Foundation of Western Australia (since 2007).
Chair of Scitech, Western Australia's interactive science centre (since 2008).
Chair of the UWA Centenary Trust for Women (since 2008).
Chair of Toro Energy Limited (since 2009).
Director of the Australian Nuclear Science and Technology Organisation (since 2009).
Director Royal Flying Doctor Service Western Operations (since 2010).
Company Secretary
Michael Kirkpatrick
BA, BEc, LLB (Hons)
Michael was appointed as Company Secretary to the Emeco Board in April 2005. Prior to joining Emeco, Michael was
a corporate lawyer with several Australian law firms and the Legal Counsel and Company Secretary of a large industry
superannuation fund. Michael is admitted to practice as a barrister and solicitor of the Supreme Court of Western
Australia. In his capacity as General Manager Corporate Services for Emeco, Michael is responsible for the Company's
in-house legal counsel, global human resources and corporate affairs functions. Michael has been a member of the
Law Society of Western Australia since 2002.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
35
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Directors’ Meetings
The number of Board and Committee meetings held and attended by each Director in FY13 is outlined in the following
table below:
Table 25: Board and Committee Meetings Held and Director Attendance
Board Meeting Attendance
(14 Meetings Held)
Audit & Risk Committee
Meeting Attendance
(5 Meetings Held)
Remuneration & Nomination
Committee Meeting
Attendance
(2 Meetings Held)
13
14
14
14
11
13
14
4
5
5
5 *
4 *
5
5 *
1 *
2
2
2 *
1
2 *
2 [A]
Director
Robert Bishop
Alec Brennan
John Cahill
Keith Gordon
Peter Johnston
Peter Richards
Erica Smyth
*
[A]
Not a member of this Committee
Dr Erica Smyth was appointed to the Remuneration & Nomination Committee on 20 February 2013. Dr Smyth attended these meetings
prior to her appointment as Committee member.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
36
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Corporate Governance Statement
Under ASX Listing Rule 4.10.3, the Company is required to include in its annual report a statement disclosing the
extent to which it has followed the Corporate Governance Principles and Recommendations with 2010 Amendments
set by the ASX Corporate Governance Council (ASX Principles and Recommendations).
Emeco is pleased to report that it has followed each of the ASX Principles and Recommendations as set out in this
Corporate Governance Statement.
Principle 1
Lay solid foundations for management and oversight
Roles and responsibilities of the Board and management
Board Charter
The Company’s Board Charter, which has been adopted by the Board, sets out the functions and responsibilities of the
Board, each Director and the Chairman.
Under the Charter, the Board is accountable to shareholders for the overall performance of the Company and
management of its affairs. Key responsibilities of the Board include:
•
•
•
•
•
•
•
•
•
•
developing, providing input into and final approval of, corporate strategy;
evaluating, approving and monitoring the strategic and financial plans and performance objectives of the
Company;
determining dividend policy and the amount and timing of all dividends;
evaluating, approving and monitoring major capital expenditure, capital management and all major acquisitions,
divestitures and other corporate transactions, including the issue of securities;
reviewing, ratifying and monitoring systems of risk management and internal compliance and control, codes of
conduct and legal compliance;
evaluating and monitoring annual budgets and business plans;
ensuring appropriate resources are available to senior executives;
approving all accounting policies, financial reports and external communications by the Group;
appointing, re-appointing or removing the Company’s external auditors (on recommendation from the Audit and
Risk Committee); and
appointing, monitoring and managing the performance and remuneration of Executive Directors.
The Charter sets a minimum number of Board meetings and provides for the establishment of the Audit and Risk
Committee and the Remuneration and Nomination Committee. The Charter also sets minimum standards of ethical
conduct of the Directors, which are further elaborated on in the Company’s Code of Conduct, and specifies the terms
on which Directors are able to obtain independent professional advice at the Company’s expense.
A copy of the Board Charter and the Company’s Code of Conduct is available on the Emeco website.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
37
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Delegated Financial Authority
Under the terms of the Board Charter, the Chief Executive Officer is responsible to the Board for the day-to-day
management of the Group. The Board has formally adopted a structured Delegated Financial Authority (DFA) which
outlines the specific financial authority limits delegated to the Chief Executive Officer. The Board approves and
monitors this delegation of financial authority.
The DFA ensures that contract commitments and expenditure is limited to:
•
•
•
contractual commitments in the ordinary course of business;
operational expenditure incurred in the day-to-day running of the business; and
capital expenditure, being the purchase of assets for the purpose of deriving income.
The DFA also sets levels of permitted contractual and expenditure commitment delegated by the Chief Executive
Officer to employees across the Group. Authority limits have been set as a risk management tool to ensure adequate
controls are in place when committing the Group to a contract or incurring costs.
Evaluating the performance of senior executives
The performance of the Chief Executive Officer is regularly monitored by the Non-Executive Directors.
Formal reviews of the performance of each senior executive within the Emeco Group are conducted by the Chief
Executive Officer in July/August each year. These performance reviews provide the Chief Executive Officer and each
senior executive with the opportunity not only to review the senior executive’s performance against a range of
financial and operational benchmarks but also to review and assess the senior executive’s personal and professional
development objectives. A review of the performance of each senior executive was undertaken during FY13.
The Group has formal induction procedures in place to introduce new senior executives to the Group and gain an
understanding of the Group’s financial position, strategies, operations, risks and other policies and responsibilities.
Principle 2
Structure the Board to add value
Skills, experience and expertise of the Directors
With the retirement of Mr Johnston effective from 30 June 2013, the Board is currently comprised of six Directors –
five Non-Executive Directors, including the Chairman, and one Executive Director. The Directors consider that
collectively they have the relevant skills, experience and expertise to fulfil their obligations to the Company, its
shareholders and other stakeholders.
All Directors are expected to maintain the skills required to discharge their duties to the Company. Directors are
provided, on an “as needed” basis, with papers, presentations and briefings on Group businesses and on matters
which may affect the operations of the Group.
The Directors and a brief description of their skills, experience and expertise are set out at pages 32 to 35 of this
report.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
38
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Status of the Directors
The table below sets out details of the status of each of the current Directors:
Table 26: Status of Current Directors
Director
Date of Appointment
Independent?
Non-Executive?
Seeking Re-election
at 2013 AGM?
Robert Bishop
Alec Brennan
John Cahill
Keith Gordon
Peter Richards
Erica Smyth
22/06/2009
16/08/2005
15/09/2008
1/12/2009
14/06/2010
15/12/2011
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
No
No
No
Yes
No
Five of the six Directors are Independent Directors. Independent Directors are expected to bring independent views
and judgement to the Board’s deliberations. All of the Company’s Independent Directors satisfy the criteria for
independence set out in the ASX Principles and Recommendations. In considering whether a Director is independent,
the Board has had regard to the relationships affecting his or her independent status and other facts, information and
circumstances that the Board considers to be relevant.
The Board assesses the independence of new Directors upon appointment and reviews the independence of the
Directors annually and as appropriate. The test of whether a relationship is material is based on the nature of the
relationship and the circumstances of the Director. Materiality is considered from the perspective of the Company,
the Director, and the person or entity with which the Director has a relationship.
The one Director who is not considered to be independent, due to his involvement in the management and operations
of the Group, is Mr Gordon, the Chief Executive Officer and Managing Director.
The Chairman of the Board is Mr Brennan, an Independent Director.
Directors’ retirement and re-election
Under the terms of the Company’s constitution, a Director other than the Managing Director must retire from office
or seek re-election by no later than the third annual general meeting after his or her election or three years,
whichever is the later. Further, at least one Director must retire from office at each annual general meeting, unless
determined otherwise by a resolution of the Company’s shareholders. Mr Richards will seek re-election at the 2013
annual general meeting under these provisions.
Under the Company’s constitution the Directors have the power to appoint Directors to fill a vacancy or as an addition
to the Board. Any Director, except a Managing Director, appointed in this way must retire from office, and is eligible
for re-election, at the next annual general meeting following his or her appointment.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
39
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
The Board has established the following criteria for the appointment of Non-Executive Directors of the Company:
• No actual or potential conflicts of interest at the time of appointment.
• No prior adverse history, including bankruptcy, conviction for an offence of dishonesty or any other serious
criminal conviction, ASIC or APRA disqualification.
• Deserved reputation for honesty, integrity and competence.
•
Extensive experience at a senior executive level in a field relevant to the Group’s operations and preferably with a
listed company.
• High level strategic, financial and commercial capability.
• Available and willing to devote the time required to meetings and Company business and a real commitment to
the Group and its success.
• Able to work harmoniously with fellow Directors and management.
•
Skills, experience and knowledge which complement the skills, experience and knowledge of incumbent Directors.
In addition to the above criteria, the Board aims to achieve a mix of skills and diversity in its members. Candidates
recommended for appointment as new Non-Executive Directors are considered by the Board as a whole. If it is
necessary to appoint a new Director to fill a vacancy on the Board or to complement the existing Board, a wide
potential base of possible candidates is considered.
Procedures for seeking information and taking independent and professional advice
Under the Board Charter, a Director is entitled to seek professional advice at the Company’s expense on any matter
connected with the discharge of his or her duties in accordance with the procedure set out in the Charter, a copy of
which is available on the Emeco website.
In addition, all Directors have unrestricted access to employees of the Group and, subject to law, access to all records
of the Company and information held by Group employees and external advisors. The Board receives regular detailed
financial and operational reports from senior executives to enable it to carry out its duties.
The General Counsel is Mr Kirkpatrick. Each of the Directors has access to the General Counsel as and when required.
Remuneration and Nomination Committee
The Board has established a Remuneration and Nomination Committee, whose responsibilities include the following:
• Critically reviewing the performance and effectiveness of the Board and its individual members.
•
Periodically assessing the skills required to discharge the Board’s duties, having regard to the strategic direction of
the Company.
• Reviewing the membership and performance of other Board Committees and making recommendations to the
Board.
The members of the Remuneration and Nomination Committee in FY13 were Mr Brennan (Chair), Mr Cahill, and Mr
Johnston. Dr Smyth was also appointed to the Remuneration and Nomination Committee effective from 20 February
2013, however, there were no Remuneration and Nomination Committee meetings held in FY13 after her
appointment. Each member’s attendance at the two meetings held by the Committee in FY13 is set out at page 36.
The Charter of the Remuneration and Nomination Committee is available on the Emeco website.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
40
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Process for evaluating the Board, its Committees and Directors
Generally a review of the performance of the Board is completed annually by the Chairman with the assistance of the
Remuneration and Nomination Committee. The review is undertaken in accordance with the Charter of the
Remuneration and Nomination Committee using a questionnaire, the scope of which covers the performance of the
Board, its Committees, the Chairman and individual Directors. Directors’ questionnaire responses are collated and
analysed by the Chairman and then presented to, and discussed with, the Board. This internal review was not
undertaken in FY13 because it was superseded by an external review of Emeco’s governance structures, processes and
systems conducted by Baker & Baptist Pty Ltd.
Baker & Baptist Pty Ltd completed its review of the performance of the Board, its Committees and individual Directors
in November 2012. As part of the review, Directors completed comprehensive questionnaires regarding the
performance of the Board and each member of the Board. Interviews were conducted with each of the Directors, the
Chief Financial Officer and the Company Secretary/General Manager Corporate Services. Each Non-Executive Director
received an individual feedback report.
Baker & Baptist Pty Ltd also reviewed various charters, policies, codes, registers, Board and Committee papers
including minutes, management job descriptions and reports, annual reports and other documents available on the
Emeco website. A report on the Board and Committee performance, together with recommendations, prepared by
Baker & Baptist Pty Ltd was presented to, and discussed with, the Board. All recommendations accepted by the Board
have been implemented.
Principle 3
Promote ethical and responsible decision-making
The Company considers that confidence in its integrity can only be achieved if its employees and officers conduct
themselves ethically in all of their commercial dealings on the Company’s behalf. The Company has therefore
recognised that it should actively promote ethical conduct amongst its employees, officers and contractors.
The Company has adopted a Code of Conduct, a Share Trading Policy and a Diversity Policy. The Code of Conduct,
Share Trading Policy and Diversity Policy apply to all Directors, officers, employees, consultants and contractors of the
Group.
The Code of Conduct
The objectives of the Code of Conduct are to ensure that:
•
•
•
high standards of corporate and individual behaviour are observed by all employees in the context of their
employment with the Group;
employees are aware of their responsibilities under their contract of employment and always act in an ethical and
professional manner; and
all persons dealing with the Group, whether it be employees, shareholders, suppliers, clients or competitors, can
be guided by the stated values and practices of Emeco.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
41
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Under the Code of Conduct, employees of the Group must, amongst other things:
•
•
•
•
•
act honestly and in good faith at all times and in a manner which is in the best interests of the Company as a
whole;
conduct their personal activities in a manner that is lawful and avoids conflicts of interest between the
employee’s personal interests and those of the Company;
always act in a manner that is in compliance with the laws and regulations of the country in which they work;
report any actual or potential breaches of the law, the Code of Conduct or the Company’s other policies to the
Company Secretary; and
not permit or condone the making of payments, gifts, favours, bribes, facilitation payments or kick-backs in the
expectation of preferred treatment for themselves or the Company.
The Company actively promotes and encourages ethical behaviour and protection for those who report violations of
the Code of Conduct or other unlawful or unethical conduct in good faith. The Company ensures that employees are
not disadvantaged in any way for reporting violations of the Code of Conduct or other unlawful or unethical conduct
and that matters are dealt with promptly and fairly.
Directors are required to avoid conflicts of interest and immediately inform their fellow Directors should a conflict of
interest arise. Directors are also required to advise the Company of any relevant interests that may result in a conflict.
The Board has adopted the use of formal standing notices in which Directors disclose any material personal interests
and the relationship of these interests to the affairs of the Company. A Director is required to notify the Company of
any new material personal interests or if there is any change in the nature or extent of a previously disclosed interest.
Where a matter in which a Director has a material personal interest is being considered by the Board, that Director
must not be present when the matter is being considered or vote on the matter, unless all of the other Directors have
passed a resolution to enable that Director to do so or the matter comes within a category of exception under the
Corporations Act 2001.
The Company will only use an employee’s personal information for the purposes for which it has been disclosed
(unless it is necessary to protect health and safety, or as required by law).
The Company’s approach to community investments (for example sponsorships and donations) is approved and
managed at a corporate level with input from the business. The Company seeks to conduct its operations in a
sustainable manner, and with due consideration of its social, environmental and economic impacts. Further, the
Company is committed to establishing and maintaining mutually beneficial and sustainable relationships with the
indigenous communities in regions where the Company operates.
A copy of the Code of Conduct is available on the Emeco website.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
42
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
The Share Trading Policy
The principal objective of the Share Trading Policy is to raise awareness, and minimise any potential for breach, of the
prohibitions on insider trading contained in the Corporations Act 2001. The policy is also intended to minimise any
possible misunderstandings or suspicions arising from employees and officers trading in the Company’s shares, by
limiting trading to fixed periods commencing after the release of half and full year results and after the annual general
meeting.
The Company has appropriate compliance standards and procedures in place to ensure the policy is properly adhered
to. Employees are advised of the opening and closing dates of each trading period after the release of half and full
year results, and after the annual general meeting. Employees are reminded of the relevant dates for these trading
periods, and a copy of the Share Trading Policy accompanies these reminder notifications.
A copy of the Share Trading Policy is available on the Emeco website.
Diversity Policy
The principal objective of the Diversity Policy is to support a corporate culture of workplace diversity, and to work
towards establishing a framework for diversity awareness and reporting. A copy of the Diversity Policy is available on
the Emeco website.
The Diversity Policy requires the Board to establish measureable objectives for achieving gender diversity. The
Remuneration and Nomination Committee is responsible for assessing and reporting to the Board on the Company’s
progress towards achieving its measurable diversity objectives on an annual basis.
Further details regarding:
•
•
the Company’s annual measureable objectives for achieving gender diversity set by the Board in accordance with
the Diversity Policy and progress towards achieving them; and
the proportion of women employees in the Group, in senior executive positions and on the Board,
are included in the Sustainability Report at pages 18 to 30.
Principle 4
Safeguard integrity of financial reporting
The Board has established an Audit and Risk Committee to support and advise the Board in fulfilling its responsibilities
to shareholders, employees and other stakeholders of the Company by:
•
•
assisting the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of
internal control relating to all matters affecting the Company’s financial performance, the audit process, and the
Company’s process for monitoring compliance with laws and regulations and the Code of Conduct; and
implementing and supervising the Company's risk management framework.
During FY13, the Committee comprised of four Independent Non-Executive Directors, all of whom have financial
expertise. Members of the Audit and Risk Committee are Mr Cahill (Chairman), Mr Bishop, Mr Brennan and Mr
Richards. The qualifications of the Audit and Risk Committee members are set out at pages 32 to 35 of this report.
The Audit and Risk Committee Charter sets out the role and responsibilities of the Committee and is available on the
Emeco website.
In FY13, the Audit and Risk Committee held five meetings. Each Committee member’s attendance at these meetings is
set out at page 36. The Managing Director and Chief Executive Officer, Chief Financial Officer, Company Secretary and
any other persons considered appropriate may attend the meetings of the Audit and Risk Committee by invitation.
The Committee also meets from time to time with the external auditor in the absence of management.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
43
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Independence of the external auditor
The Company’s external auditor is KPMG. The effectiveness, performance and independence of the external auditor
are reviewed by the Audit and Risk Committee. If it becomes necessary to replace the external auditor for
performance or independence reasons, the Audit and Risk Committee will formalise a procedure and policy for the
selection and appointment of a new auditor.
Independence declaration
Section 307C of the Corporations Act 2001 requires the external auditor to make an annual independence declaration
addressed to the Board declaring that the auditor has maintained its independence in accordance with the
Corporations Act 2001 and the rules of the professional accounting bodies. KPMG has provided an independence
declaration to the Board for FY13. This independence declaration forms part of the Directors’ report and is provided
on page 69 of this annual report.
Non-Audit Services
During the year, KPMG, the Company’s auditor, has performed certain other services in addition to the audit and
review of the financial statements.
The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the
provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the
auditor independence requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services were subject to the corporate governance procedures adopted by the Company and have
been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the
auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the
auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate
for the Company or jointly sharing the risks and rewards.
Details of the amounts paid to the Company’s auditor, KPMG, and its network firms, for audit and non-audit services
are found in Note 9 of the Notes to the Financial Statements.
Rotation of lead external audit partner
Mr Rob Gambitta is the lead audit partner for KPMG in relation to the audit of the Company. Mr Gambitta was first
appointed as the Lead Partner responsible for Emeco for the 30 June 2009 year end audit. After FY13, Mr Gambitta’s
five year rotation will expire and he will be replaced as the lead audit partner.
Attendance of external auditors at the annual general meeting
The lead audit partner of KPMG attends and is available to answer shareholder questions about the conduct of the
audit and the preparation and content of the Independent Auditor’s Report at the Company’s annual general meeting.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
44
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Principle 5
Make timely and balanced disclosure
The Company is committed to complying with its continuous disclosure obligations under the ASX Listing Rules and
disclosing to investors and other stakeholders all material information about the Company in a timely and responsive
manner.
The Company has adopted a Continuous Disclosure Policy which is available on the Emeco website.
The Continuous Disclosure Policy specifies the processes by which the Company ensures compliance with its
continuous disclosure obligations. The policy sets out the internal notification and decision making procedures in
relation to these obligations, and the roles and responsibilities of the Company’s officers and employees in the context
of these obligations. It emphasises a proactive approach to continuous disclosure and requires the Company to
comply with the spirit as well as the letter of the ASX continuous disclosure requirements. The Company Secretary is
responsible for overseeing and coordinating the disclosure of information by the Company to the ASX and for
administering the policy.
The policy specifies the Company representatives who are authorised to speak publicly on behalf of the Company and
procedures for dealing with analysts. It also sets out how the Company deals with market rumour and speculation.
Compliance with the policy is reviewed and monitored by the Audit and Risk Committee, and also by the Board.
Principle 6
Respect the rights of shareholders
The Company has adopted a formal Communications Policy which describes the processes and systems implemented
by the Company to facilitate communication between the Company,
investors. The
Communications Policy is available on the Emeco website.
its shareholders and
The Company acknowledges the importance of effective communication with its shareholders.
All public announcements are also posted on the Company’s website after they have been released to the ASX. The
Company also places the full text of notices of meetings and explanatory material on its website, as well as copies of
its annual report and the Chairman’s address at the annual general meeting.
The Company offers to shareholders a number of options to receive electronic communications. Shareholders can
elect to receive notification by email when payment advices, annual reports, notices of meetings and proxy forms are
available online. They can also elect to receive email notification of important announcements.
The Company also encourages effective shareholder participation at general meetings, which is the major forum for
shareholders to ask questions of the Directors about the performance of the Group. The Company provides its
auditor with notice of general meetings of the Company, as required by section 249K of the Corporations Act 2001,
and requests that its auditor to attend its annual general meetings to answer shareholder questions about the
conduct of the audit and the preparation and content of the Independent Auditor’s Report.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
45
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Principle 7
Recognise and manage risk
The Board believes that risk management is fundamental to sound management and that oversight of such matters is
an important responsibility of the Board. The Board, with assistance from the Audit and Risk Committee, is responsible
for ensuring there are adequate processes and policies in place to identify, assess and mitigate risk.
Emeco has adopted a Risk Management Policy which is available on the Emeco website.
Emeco has also implemented a formal Enterprise Risk Management programme to ensure that risk management
concepts and awareness are embedded into the culture of the Group. This programme includes the involvement of
senior executives and senior operational management. The key elements of Emeco’s Enterprise Risk Management
programme are as follows:
• Classification of risk into strategic, operational, financial and compliance risks.
• Quantification and ranking of risk consequences and likelihood.
•
•
Identification of strategic risk issues.
Identification of operational risk issues through formalised regional-based risk workshops.
• Development of a Company database for communicating and updating activity and progress on risk matters and
maintaining risk registers.
•
Identification, enhancement and development of key internal controls to address risk issues, including risk
treatment plans and assigning accountabilities for identified risks to senior Emeco employees.
• Comprehensive insurance programme.
The Audit and Risk Committee is responsible for reviewing the effectiveness of the overall risk management
framework. It is also required to review the Risk Management Policy on an annual basis.
Internal assurance and the establishment of an internal audit function
In May 2010, the Board approved the appointment of Ernst & Young as a supplier of internal audit services. The
Company considered there was a clear link between the internal audit function and delivering business improvement
outcomes (noting that the focus of assurance also remains central to this function). Management formally reviews the
performance of the internal auditor on an annual basis and reports its findings to the Audit and Risk Committee.
The overall internal assurance process is overseen by the Chief Financial Officer who manages the process, and
reports to the Audit and Risk Committee and the Board on the effectiveness of the Emeco Group’s risk management,
governance and control frameworks.
In respect of FY13, the Board has received an assurance from the Managing Director and the Chief Financial Officer
that the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound
system of risk management and internal control and that the system is operating effectively in all material respects in
relation to financial reporting risks. Management has also reported to the Board that the Group’s risk management
and internal compliance and control system is operating efficiently and effectively in all material respects.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
46
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Principle 8
Remunerate fairly and responsibly
The Board has established a Remuneration and Nomination Committee. The Committee is currently comprised of four
Independent Non-Executive Directors. Details regarding membership of the Committee are set out under Principle 2.
Each member’s attendance at the two meetings held by the Committee in FY13 is set out at page 36.
The Emeco Group remuneration policy is substantially reflected in the objectives of the Remuneration and
Nomination Committee. The Committee’s remuneration objectives are to endeavour to ensure that:
•
•
•
the Directors and senior executives of the Group are remunerated fairly and appropriately;
the remuneration policies and outcomes strike an appropriate balance between the interests of the Company's
shareholders, and rewarding and motivating the Group's executives and employees in order to secure the long
term benefits of their energy and loyalty; and
the human resources policies and practices are consistent with and complementary to the strategic direction and
human resources objectives of the Company as determined by the Board.
Under its Charter, the Remuneration and Nomination Committee is required to review and make recommendations to
the Board about:
•
•
•
•
•
•
•
•
the general remuneration strategy for the Group so that it motivates the Group's executives and employees to
pursue the long term growth and success of the Group and establishes a fair and transparent relationship
between individual performance and remuneration;
the terms of remuneration for the Executive Directors and other senior executives of the Group from time to time
including the criteria for assessing performance;
diversity policy compliance and reporting;
remuneration reviews for Executive and Non-Executive Directors;
the outcomes of remuneration reviews for executives collectively, individual Executive Directors and other senior
executives of the Group;
changes in remuneration policy and practices, including superannuation and other benefits;
employee equity plans and allocations under those plans; and
the disclosure of remuneration requirements in the Company's public materials including ASX filings and the
annual report.
The Charter of the Remuneration and Nomination Committee is available on the Emeco website.
Emeco clearly distinguishes the structure of Non-Executive Directors’ remuneration from that of Executive Directors
and senior executives. Non-Executive Directors are remunerated by way of fees in the form of cash benefits and
superannuation contributions. They do not receive options or bonus payments, or retirement benefits other than
superannuation.
A remuneration report detailing the information required by section 300A of the Corporations Act 2001 in relation to
FY13 is included in the Directors’ Report on pages 50 to 67.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
47
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Nature of operations and principal activities
The principal activity during FY13 of the Group was the provision of heavy earthmoving equipment rental solutions to
mining companies and contractors.
As set out in this report, the nature of the Group’s operations and principal activities, have been consistent
throughout the financial year.
Operating and financial review
A review of Group operations, and the results of those operations for FY13, is set out on pages 7 to 17 and in the
accompanying financial statements.
Dividends paid
In relation to FY12, the Directors declared a fully franked final dividend of 3.5 cents per share which was paid on 28
September 2012.
During FY13, the Directors declared a fully franked interim dividend of 2.5 cents per share which was paid on 27
March 2013. No further dividends have been declared or paid since the end of FY13.
Significant changes in state of affairs
During the financial year under review there were no significant changes in the Group’s state of affairs other than
those disclosed in the operating and financial review section or in the financial statements and the notes thereto.
Significant events after balance date
On 30 July 2013 Mr Keith Gordon announced his intention to step down from his role as Managing Director. Mr
Gordon will remain in his current position until a new Managing Director is appointed.
Likely developments and expected results
Likely developments in, and expected results of, the operations of the Emeco Group are referred to at pages 7 to 17.
This report omits information on likely developments in the Emeco Group in future financial years and the expected
results of those operations the disclosure of which, in the opinion of the Directors, would be likely to result in
unreasonable prejudice to the Emeco Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
48
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Directors’ interest in shares of the Company
The relevant interests of each Director in the shares, debentures, and rights or options over such shares or debentures
issued by the companies within the Group and other related bodies corporate, as notified by the Directors to the ASX
in accordance with section 205G(1) of the Corporations Act 2001, at the date of this report are as follows:
Table 27: Directors’ Interests
Director
Ordinary Shares
Options or Rights
Robert Bishop
566,600
Alec Brennan
1,581,700
John Cahill
120,000
-
-
-
Keith Gordon
1,125,000
3,590,149*
Peter Johnston
100,000
Peter Richards
40,000
Erica Smyth
71,049
-
-
-
* Unvested performance shares issued under the Company’s LTI plan as approved by shareholders.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
49
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Remuneration report (audited)
Remuneration Report Contents
This report covers the following matters:
1.
2.
3.
4.
5.
6.
7.
Introduction
Remuneration Governance
Executive Remuneration
Non-Executive Director Remuneration
Details of Remuneration
Details of Share-Based Payments
Service Contracts
1.
Introduction
This report details the Emeco Group’s remuneration objectives, practices and outcomes for key management
personnel (KMP), which includes directors and senior executives, for the year to 30 June 2013. Any reference to
“Executives” in this report refers to KMP who are not non-executive directors.
1.1
Emeco’s KMP
The following persons were directors of the Company during FY13:
Table 28: Emeco Directors
Non-Executive Directors
Robert Bishop
Alec Brennan
John Cahill
Peter Johnston (ceased directorship on 30 June 2013)
Peter Richards
Erica Smyth
Executive Director
Keith Gordon, Managing Director & Chief Executive Officer
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EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
The following persons were also employed as Executives of the Company during FY13:
Table 29: Emeco Executives
Other Executives
Stephen Gobby, Chief Financial Officer
Anthony Halls, General Manager Australian Rental
Michael Kirkpatrick, General Manager Corporate Services
Christopher Mossman, President Director Indonesia (ceased employment with Emeco on 31 May 2013)
Grant Stubbs, General Manager Global Asset Management (commenced role on 1 May 2013)
Ian Testrow, President Emeco Americas (ceased role on 25 April 2013) / President New & Developing Business
(commenced role on 26 April 2013)
Michael Turner, General Manager Global Asset Management (ceased role on 31 December 2012)
1.2
Summary of changes to the remuneration structure
The following changes were made to the Company’s remuneration structure:
•
•
•
•
Mr Ian Testrow’s maximum short term incentive (STI) cash entitlement and long term incentive (LTI)
entitlement increased from 40% to 50% of his total fixed remuneration (TFR). TFR comprises base salary,
employer superannuation contributions and other allowances and non-cash benefits.
All Executives (except for Mr Keith Gordon) became entitled to an additional STI deferred equity component,
resulting in maximum total STI entitlements increasing to 60% of respective TFR.
For the FY11, FY12 and FY13 LTI grants, the total shareholder return (TSR) at the end of the three year vesting
period (Vesting Period) will be measured by reference to the volume weighted average share price (VWAP)
during the 20 trading days after the announcement of Emeco’s annual results. Respective vesting dates of each
grant will be deferred to the expiry of the 20 day VWAP period.
In respect of Mr Christopher Mossman and all other Indonesian resident LTI plan participants, vested
performance rights will automatically convert into shares on the vesting date. The terms of the FY11 and FY12
LTI plans provide that vested performance rights can be converted to shares at any time within five years of the
grant date at the participant’s election.
See sections 3.3.1 and 3.3.2 for more information.
With the exception of Mr Ian Testrow, there was no increase in any KMP fixed remuneration in FY13. Mr Testrow’s
fixed remuneration increased as a result of the expansion of Mr Testrow’s role as President Emeco Americas to
include overall responsibility for, in addition to Emeco’s Canadian business, the Chilean business.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
51
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
2.
Remuneration governance
2.1
The Role of the Board and the Remuneration and Nomination Committee
The Board is committed to implementing KMP remuneration structures which achieve a balance between:
•
•
rewarding Executives for the achievement of the Company’s short and long term financial, strategic and safety
goals; and
aligning the interests and expectations of Executives, shareholders and other stakeholders.
The Board engages with shareholders, management and other stakeholders as required to continuously refine and
improve KMP remuneration policies and practices.
The Remuneration & Nomination Committee is responsible for reviewing and suggesting recommendations to the
Board in relation to:
•
•
•
•
•
•
the general remuneration strategy of the Company;
the terms of KMP remuneration and the outcomes of remuneration reviews;
employee equity plans and the allocations under those plans;
recruitment, retention, performance measurement and termination policies and procedures for all KMP;
disclosure of remuneration in the Company’s public materials including ASX filings and the Annual Report; and
retirement payments.
The members of the Remuneration and Nomination Committee in FY13 were Mr Alec Brennan (Chair), Mr John Cahill
and Mr Peter Johnston. Dr Erica Smyth was also appointed to the Remuneration and Nomination Committee effective
from 20 February 2013, however, there were no Remuneration and Nomination Committee meetings held in FY13
after her appointment.
2.2
Services from Remuneration Consultants
The Chairman of the Remuneration and Nomination Committee engaged Guerdon Associates Pty Ltd as a
remuneration consultant to the Board to review the maximum STI entitlements for Executives. Guerdon Associates
Pty Ltd was paid $12,403.88 for its services and provided no other services during FY13.
The engagement of Guerdon Associates Pty Ltd was based on a documented set of protocols to be followed by
Guerdon Associates Pty Ltd, members of the Remuneration and Nomination Committee and KMP for the way in which
remuneration recommendations would be developed by Guerdon Associates Pty Ltd and delivered to the Board.
These arrangements were implemented to ensure Guerdon Associates Pty Ltd would be able to carry out its work,
including information capture and the formation of recommendations, free from undue influence by KMP.
The Board undertook its own enquiries and review of the processes and procedures followed by Guerdon Associates
Pty Ltd during the course of the engagement and is satisfied that the remuneration recommendations were made free
from undue influence. These inquiries included arrangements under which Guerdon Associates Pty Ltd was required
to provide the Board with a summary of the way in which it carried out its work, details of its interaction with KMP in
relation to the engagement and other services.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
52
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
3.
Executive remuneration
3.1
Remuneration policy
The Group remuneration policy is substantially reflected in the objectives of the Company’s Remuneration and
Nomination Committee. The Committee’s objectives are summarised in the following table:
Table 30: Summary of Group remuneration objectives
Objective
Practices aligned with Objective
Remunerate fairly and
appropriately
Maintain balance between the interests of shareholders and the reward of
Executives in order to secure the long term benefits of Executive energy and loyalty.
Benchmark remuneration structures to ensure alignment with industry trends.
Align Executive interests
with those of shareholders
Provide a significant proportion of “at risk” remuneration to ensure that Executive
reward is directly linked to the creation of shareholder value.
Ensure human resources policies and practices are consistent and complementary
to the strategic direction of the Company.
Prohibit the hedging of unvested equity to ensure alignment with shareholder
outcomes.
Attract, retain and develop
proven performers
Provide total remuneration which is sufficient to attract and retain proven and
experienced Executives who are capable of:
fulfilling their respective roles with the Group;
achieving the Group’s strategic objectives; and
•
•
• maximising Group earnings and returns to shareholders.
The remuneration structure for the Company’s Executives consists of fixed and variable components. The variable
component ensures that a proportion of pay varies with Company and personal performance.
3.2
Fixed remuneration
Fixed remuneration comprises base salary, employer superannuation contributions and other allowances and non-
cash benefits.
Each Executive’s fixed remuneration is reviewed and benchmarked annually in September. In FY13, this process did
not result in any change in any Executive’s fixed remuneration.
However, Mr Ian Testrow’s fixed remuneration increased in FY13 as a result of the expansion of Mr Testrow’s role as
President Emeco Americas to include overall responsibility for, in addition to Emeco’s Canadian business, the Chilean
business.
The level of remuneration is set to enable the Company to attract and retain proven performers once they are
working within the business.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
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EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Fixed remuneration for Executives is set by reference to the fixed remuneration of comparable positions in
comparable sized companies in the mining and mining services sectors. These sectors are considered to be
appropriate as they are the key source of talent for the Company. The Company’s policy is to set the fixed
remuneration for Executive positions at or near the 75th percentile of the fixed remuneration for the relevant
comparable position in these sectors.
An Executive’s responsibilities, experience, qualifications, performance and geographic location are also taken into
account.
3.3
Variable remuneration
Variable remuneration is performance linked remuneration which consists of STIs and LTIs.
STI entitlements are for performance assessed over one year. See section 3.3.1 for more information.
LTI entitlements are for performance over a three year period. See section 3.3.2 for more information.
If maximum performance is achieved, the maximum remuneration attributable to each incentive component (as a
percentage of TFR) for each Executive is shown in the following table:
Table 31: Components of variable remuneration
Executive [A]
Maximum STI
Cash
Component
(% of TFR)
Maximum STI
Equity
Component Maximum STI Maximum LTI
(% of TFR)
(% of TFR)
(% of TFR)
Maximum
Total Variable
Remuneration
(% of TFR)
Keith Gordon, M anaging Director & Chief Executive
Officer
100
Stephen Gobby, Chief Financial Officer
Anthony Halls, General Manager Australian Rental
M ichael Kirkpatrick, General M anager Corporate
Services
Christopher Mossm an, President Director Indonesia
Ian Testrow, President Emeco Americas / President
New & Developing Business
M ichael Turner, General M anager Global Asset
M anagement [B]
50
40
40
40
50
40
-
10
20
20
20
10
20
100
60
60
60
60
60
60
75
50
40
40
40
50
40
175
110
100
100
100
110
100
[A]
[B]
Mr Grant Stubbs was appointed as an Executive on 1 May 2013. Mr Stubbs had no FY13 STI or LTI entitlement as an Executive.
Mr Michael Turner ceased his role as an Executive on 31 December 2012. Mr Turner’s maximum STI entitlement was adjusted on a pro-
rata basis.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
54
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
3.3.1
STI remuneration
Cash and Equity
STIs are used to reward the performance of Executives over a full financial year. The actual amount of STI granted is
determined at the end of the financial year in light of the Executive’s performance against agreed key performance
indicators (KPIs). An Executive’s maximum STI entitlement is set as a percentage of TFR (refer to table 31 above for
details).
In respect of FY13, STI entitlements are made in cash up to the maximum STI cash component (refer to table 31
above) after the financial year audit is completed and following review and approval by the Remuneration and
Nomination Committee and the Board.
Any STI entitlements above the maximum STI cash component are made to Executives in equity. The number of shares
issued to each Executive is based on the Company’s June 2013 VWAP. However, the grant of the shares are deferred
to, and is subject to the Executive remaining employed by the Group, the day after the announcement of Emeco’s
annual results in 2014.
Key performance indicators
The STI KPIs are chosen to ensure that important non-financial metrics which are aligned with the long term
sustainability and strategic success of the Company are included, along with financial performance indicators.
The financial KPIs for the FY13 STI plan are:
•
•
Budgeted Net Profit After Tax (NPAT) – This profit figure quantifies the Company’s financial performance.
Budgeted Return on Capital (ROC) – This ratio indicates the efficiency and profitability of the Company's capital
investments and is a good measure of the quality of the Company’s financial performance.
The non-financial KPIs for the FY13 STI plan are:
•
•
•
Safety – The Board reviews the Company’s safety performance in detail at each Board meeting and is striving to
achieve a “zero-harm” workplace at Emeco. Progress towards this aspiration is included in the STI plan KPIs for
Executives. The primary metrics include total recordable injury frequency rates (TRFIR) and the successful
implementation of a range of positive safety initiatives, including the completion of safety audits, the
enhancement of contractor management systems and the establishment of, and participation in, behavioural
based safety programs.
Business Improvement Initiatives – The Board wants to ensure that effective risk management frameworks and
internal controls are in place to protect the Company's assets and shareholder value and to improve efficiency
and profitability by streamlining operational and business processes. Implementation of business improvement
initiatives is included in the STI plan to reflect its importance to Emeco’s performance.
Personal Goals – The Board recognises each Executive contributes to the Company’s business strategy
differently. Progress of each Executive’s personal set goals is monitored by the Board and is included in the STI
plan to ensure that an appropriate balance is maintained between the Company’s short term and long term
objectives.
In the Board’s view, the above KPIs align the reward of Executives with the interests of shareholders.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
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EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
The following table sets out the KPIs for the FY13 STI plan and the weightings attributable to each of them:
Table 32: FY13 STI plan KPI weightings and entitlements
KPI
Group Net Profit After Tax
(NPAT)
[A]
Weighting
27.5%
Group Return on Capital
(ROC)
[A]
32.5%
Entitlement
0% if NPAT is less than 85% of budgeted outcomes.
25% if NPAT is equal to 85% of budgeted outcomes.
50% if NPAT is equal to 90% of budgeted outcomes.
75% if NPAT is equal to 100% of budgeted outcomes.
100% if NPAT is greater than or equal to 110% of budgeted outcomes.
Pro rata payments between these levels.
0% if ROC is less than 85% of budgeted outcomes.
25% if ROC is equal to 85% of budgeted outcomes.
50% if ROC is equal to 90% of budgeted outcomes.
75% if ROC is equal to 100% of budgeted outcomes.
100% if ROC is greater than or equal to 110% of budgeted outcomes.
Pro rata payments between these levels.
Safety
TRIFR [B]
7.5%
0% if FY13 TRIFR in the relevant region is less than 10% lower than FY12 TRIFR.
100% if FY13 TRIFR in the relevant region is more than 20% lower than FY12 TRIFR.
Pro rata payments between these levels.
Notwithstanding the above, no entitlement if there is a serious, permanently disabling injury or a
fatality.
Positive Initiatives
7.5%
Managing Director’s entitlement is assessed by the Board.
Executives’ entitlement is assessed by the Managing Director and approved by the Board.
Business Improvement
Personal Goals
15.0%
Managing Director’s entitlement is assessed by the Board.
Executives’ entitlement is assessed by the Managing Director and approved by the Board.
10.0%
Managing Director’s entitlement is assessed by the Board.
Executives’ entitlement is assessed by the Managing Director and approved by the Board.
[A]
[B]
The Board has discretion to adjust NPAT and ROC for abnormal items. Any such adjustment may have a positive or negative impact on the
NPAT and ROC outcomes used by the Board to assess STI entitlements. In FY13 there was no award in respect of the NPAT and ROC
components of the STI.
TRIFR = Number of recordable injuries x 1,000,000 hours
Total hours worked in 12 months
Changes from Prior Period
The FY13 STI grant to Executives includes the following changes:
•
•
Following the expansion of Mr Ian Testrow’s role as President Emeco Americas to include overall responsibility
for, in addition to Emeco’s Canadian business, the Chilean business, Mr Testrow’s maximum STI entitlement
increased from 40% to 50% of TFR.
Following a review of the Company’s STI plan and advice from Guerdon Associates Pty Ltd, the Company
introduced the additional STI deferred equity component. Notwithstanding this change to the STI plan, the
actual STI outcomes for Executives in FY13 are significantly less than the outcomes for FY12. See section 5.2 for
more information.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
56
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
3.3.2
LTI remuneration
Performance Shares and Performance Rights
Emeco has established an equity-based LTI plan that provides for a reward that varies with Company performance
over a three year Vesting Period. The LTI plan applies to the Company’s senior managers (which includes Executives).
LTI remuneration aligns the interests of Emeco’s senior managers with the long term interests of its shareholders by
providing Emeco’s senior managers with an ongoing incentive to deliver the long term objectives of the Emeco Group.
LTI remuneration is in the form of performance shares or performance rights (LTI Securities).
A performance share is a fully paid ordinary Emeco share, the vesting of which is subject to the performance condition
described below being met. A performance right is a right to receive a fully paid ordinary Emeco share, the vesting of
which is subject to the performance condition being met.
Australian-based executives
In FY13, performance shares were granted to Australian-based Executives, with the number of shares granted being
determined by reference to the Executive’s maximum LTI entitlement and the fair value of the share as at the
commencement of the Vesting Period. Performance shares were granted at no cost to the Executive.
Executives based outside Australia
In FY13, Emeco Executives who were resident outside Australia were issued performance rights instead of
performance shares due to the complexity and cost of the compliance issues associated with the issue of shares in the
relevant foreign jurisdictions. These grants were on substantially identical terms to that of the performance shares
issued to Australian-based Executives.
Performance condition
The performance condition for the vesting of LTI Securities under the FY13 LTI plan (and the FY12 and FY11 LTI plans)
is based on the relative TSR of the Company measured against a peer group (Peer Group) over the Vesting Period.
TSR is a performance measure that calculates the return to a shareholder taking into account share price growth,
dividend payments and capital returns.
At the time of the FY13 LTI grant, the Peer Group comprised a total of 94 companies from the S&P/ASX Small
investment property
Industrials
trusts/companies and other stapled securities), including 18 companies that were considered direct peers to Emeco.
insurance companies, property
trusts/companies and
(excluding banks,
At the end of the Vesting Period, the TSR for each company in the Peer Group, including Emeco, will be measured and
ranked. Emeco will be allocated a percentile rank accordingly, which represents the percentage of companies in the
Peer Group that has a lower TSR than Emeco (Percentile Rank).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
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EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
LTI Securities will only vest if a certain Percentile Rank is achieved by Emeco. There is a maximum and minimum
vesting range and vesting occurs in this range on a sliding scale as set out in the following table:
Table 33: TSR vesting schedule
Percentile Rank
50% or lower
Between 50% and 75%
75% or higher
Percentage of LTI Securities that Vest
Nil
50% plus 2% for each Percentile Rank over 50%
100%
LTI Securities that do not vest at the end of the Vesting Period will lapse. The shares associated with these LTI
Securities will be transferred to a nominee of the Company and held on trust for subsequent re-allocation.
Performance shares which vest will automatically be transferred into the name of the participant. Performance rights
which vest will automatically be converted into shares on the vesting date and transferred into the name of the
participant.
Vesting on involuntary termination
If an Executive’s employment is terminated due to death, total and permanent disability, retrenchment or retirement
then the TSR of the Executive’s unvested LTI Securities will be tested at the date of termination. If the performance
condition has been met then the LTI Securities will vest based on the vesting schedule. The actual amount of LTI
Securities that vest will be pro-rated based on the period that the Executive has been employed with Emeco during
the Vesting Period.
All unvested LTI Securities lapse if an Executive resigns or is terminated for cause.
Prohibition of hedging LTI securities
Emeco’s share trading policy prohibits Executives, directors and other officers of the Company from entering into
transactions intended to hedge their exposure to Emeco securities which have been issued as part of remuneration.
Changes from Prior Period
The FY13 LTI grant to Executives includes the following changes:
•
•
•
Dividends and shadow dividends in respect of Performance Shares and Performance Rights respectively will
accumulate during the LTI Vesting Period and will be paid at the end of the Vesting Period if and only if there is
a vesting and only in respect of vested LTI Securities. This was outlined in the Company’s 2012 Annual Report.
If there is an absolute change in control of the Company, unvested LTI Securities will automatically vest only if
the performance condition has been met at the date of the change of control, provided that the Board will
retain discretion to vest a greater amount. This was outlined in the Company’s 2012 Annual Report.
Following the expansion of Mr Ian Testrow’s role as President Emeco Americas to include overall responsibility
for, in addition to Emeco’s Canadian business, the Chilean business, Mr Testrow’s maximum LTI entitlement
increased from 40% to 50% of TFR.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
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EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
•
•
In respect of Mr Christopher Mossman (and all other Indonesian resident LTI plan participants), vested
performance rights will automatically convert into shares on the vesting date. The terms of the FY11 and FY12
LTI plans provide that vested performance rights can be converted to shares at any time within five years of the
grant date at the participant’s election. The reason for the change relates to the operation of Indonesian
taxation laws.
The total shareholder return at the end of the Vesting Period will now be measured by reference to the VWAP
during the 20 trading days (increased from ten trading days) after the announcement of Emeco’s annual
results. This change has been made to the FY11, FY12 and FY13 LTI plans in light of the high volatility of
Emeco’s share price as the longer VWAP period reduces the likelihood of anomalous TSR outcomes. The
extension of the VWAP period results in the deferral of the vesting date for each grant by two weeks.
3.4
Relationship between Remuneration and Company Performance
Emeco’s remuneration objectives effectively align the interests of Emeco’s Executives with the interests of the
Company and its shareholders.
This has been achieved by ensuring that a significant proportion of Executives’ remuneration is “at risk” in the form of
STI and LTI components. STI entitlements are linked to the achievement of financial measures of the Company’s
profitability and return on capital, and to the achievement of non-financial measures of operational and strategic
outcomes. LTI entitlements are linked to performance relative to a comparator group of similar companies.
The KPIs used to determine STI entitlements have been devised to ensure that Executives are rewarded for robust
earnings performance and the achievement of key strategic objectives.
Details of the KPIs for the FY13 STI and LTI plans are set out in the following table:
Table 34: Financial and Non-Financial LTI and STI measures
LTI
Financial
Total shareholder return
Non-financial
Not Applicable
STI
Budgeted NPAT
Budgeted ROC
Safety
Business improvement
Personal goals
Further details regarding Emeco’s Executive remuneration structure are set out in sections 3.2 and 3.3.
The extent to which Emeco has set financial KPIs which are genuinely challenging - and which entail that STI
entitlements are genuinely at risk - is highlighted by the fact that only two Executives received a STI payment in FY09
and no Executive received a STI payment in FY10. In FY11 all Executives received a STI payment in line with the
improved performance of the Group and the successful execution of its strategy. STI payments to Executives in FY12
decreased from the amounts paid in FY11, with a further decrease in FY13, principally because FY12 and FY13 financial
KPIs were not met to the same extent as they were in FY11. Details of these KPIs are set out above in section 3.1.1.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
59
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Details of the Group’s performance and benefits for shareholder wealth are set out in the following table:
Table 35: Consequences of performance on shareholder wealth
Profit/Loss from Continuing Operations ($m)
Profit/Loss from Discontinued Operations ($m)
Statutory Profit ($m)
Total Dividends Declared ($m)
Statutory Return on Capital Employed
Closing Share Price as at 30 June
FY13
6.0
-
6.0
15.0
4.2%
$0.28
FY12
70.0
(0.2)
69.7
37.9
13.0%
$0.87
FY11
50.0
(0.4)
49.6
63.1
10.3%
$1.13
FY10
12.3
(61.6)
(49.3)
12.6
-1.1%
$0.58
FY09
55.0
(41.8)
13.3
25.3
6.0%
$0.41
The primary focus of the Company is to increase its return on capital to levels acceptable to shareholders. After two
consecutive years of significant improvement in FY 11 and FY12, statutory return on capital employed decreased from
13.0% to 4.2% in FY13. Similarly, statutory profit decreased from the five year record high in FY12 by 91.4% in FY13 to
$6.0 million.
As noted above, the STI entitlements of Emeco’s Executives significantly increased in FY11 and FY12 compared with
FY09 and FY10 in line with the improved performance of the Company. However, the recent decline in the Company’s
financial performance has resulted in a significant reduction in STI entitlements in FY13.
The Company’s share price declined significantly in FY09 and FY10 before increasing nearly 100% from 58 cents at
close of trading on 30 June 2010 to $1.13 at close of trading on 30 June 2011. During FY12 the Company’s share price
peaked at $1.18 and ended the financial year at 87 cents. A factor which was a primary cause of the volatility in the
Company’s share price during FY12 was the uncertainty in the global macroeconomic environment. In FY13, continued
macroeconomic uncertainty, a downturn in the resources sector globally, difficult trading conditions in Emeco’s
markets and a resultant decline in the Company’s earnings saw the Company’s share price close at 28 cents on 30 June
2013.
The Company’s dividend policy (which was amended in FY12) is to pay shareholders between 40% and 60% of the
Company’s profit, franked to the fullest extent possible. The Board has decided not to declare a dividend for the half
year ended 30 June 2013. The total dividend in respect of FY13 is, therefore, 2.5 cents per share.
The primary means available to the Company to grow shareholder wealth, whether by way of dividend distributions or
increases in the Company’s share price, is to strive to increase earnings and return on capital. In this regard, the
Company will maintain remuneration policies and practices which reward strong financial performance and align the
interests of management with the interests of shareholders.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
60
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
4.
Non-Executive Director Remuneration
There has been no change to the basis of setting non-executive director fees since the prior reporting period.
Fees for non-executive directors are fixed and are not linked to the financial performance of the Company. The Board
believes this is necessary for non-executive directors to maintain their independence.
Non-executive director fees are reviewed and benchmarked annually in September. In FY13, this process did not result
in any change in non-executive director fees.
An annual cap of $1,200,000 is currently prescribed in the Company’s constitution as the total aggregate
remuneration available to non-executive directors.
The allocation of fees to non-executive directors within this cap has been determined after consideration of a number
of factors including the time commitment of directors, the size and scale of the Company’s operations, the skillsets of
Board members, the quantum of fees paid to non-executive directors of comparable companies and participation in
Board Committee work.
The Chairman is entitled to an annual fee of $197,798. All other non-executive directors receive an annual base fee of
$113,027. An additional annual fee of $8,477 is paid to a director who is a member of a Board Committee. This fee is
increased to $11,303 for a director who chairs a Committee. All amounts specified in this section are inclusive of
superannuation contributions.
5.
Details of Remuneration
5.1
Remuneration received in relation to FY13
Details of the elements comprising the remuneration of the Group’s KMP in FY13 are set out in Table 36 below. The
table does not include the following components of remuneration because they were not provided to KMP during
FY13:
•
•
•
•
•
Short term cash profit-sharing bonuses.
Payments made to KMP or in respect of a period before or after the person held the KMP position.
Long term incentives distributed in cash.
Post-employment benefits other than superannuation
Share based payments other than shares and units and share based payments in the form of options.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
61
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
Table 36: FY13 KMP remuneration (Company and Consolidated)
Post-employment benefits
Short-term employee benefits
Share based paym ents
Salary
and Fees
$
STI cash
Non-
bonuses [1] monetary
$
$
Super-
annuation
benefits
$
O ther
long term
benefits
$
Term ina-
tion
benefits
$
LTIP
$
MISP
$
% of remuneration Value of options
as a % of total
remuneration
%
performance
related
%
Total
$
Non-Executive Directors
Alec Brennan
Robert Bishop
John Cahill
Peter Johnston
Peter Richards
Erica Smyth
Executive Director
Keith Gordon
TO TAL ALL D IRECTO RS
Executives
Stephen G obby
Anthony Halls
M ichael Kirkpatrick
Christopher M ossm an [A]
Grant Stubbs [B]
Ian Testrow [C]
M ichael Turner [D]
TO TAL ALL EXECUTIVES
199,612
119,189
121,841
111,472
111,472
106,327
-
-
-
-
-
-
894,360
1,664,273
228,691
228,691
-
-
-
-
-
-
-
-
464,276
363,960
342,212
312,162
58,493
464,398
209,633
2,215,134
74,229
59,511
55,561
49,344
-
82,617
26,735
347,997
-
-
-
117,729
-
80,807
-
198,536
17,965
2,315
10,966
10,032
10,032
9,569
25,000
85,879
25,000
25,000
21,788
-
-
-
18,867
90,655
TO TAL
3,879,407
576,688
198,536
176,534
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
509,113
509,113
180,058
113,714
106,977
(62,128)
5,330
112,667
74,635
531,253
1,040,366
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
217,577
121,504
132,807
121,504
121,504
115,896
1,657,164
2,487,956
743,563
562,185
526,538
417,107
63,823
740,489
329,870
3,383,575
5,871,531
-
-
-
-
-
-
44.5
29.7
34.2
30.8
30.9
(3.1)
-
26.4
30.7
26.0
27.5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
[1]
[A]
[B]
[C]
[D]
The amount awarded to each Executive under the FY13 STI plan was finally determined on 21 August 2013 after completion of
performance reviews (Refer to Table 38).
Mr Christopher Mossman’s remuneration has been converted to Australian dollars on the basis of an AUD/USD exchange rate of 1.0334.
Mr Mossman ceased employment with Emeco on 31 May 2013.
Mr Grant Stubbs commenced his role as KMP on 1 May 2013.
Mr Ian Testrow’s remuneration has been converted to Australian dollars on the basis of an AUD/CAD exchange rate of 1.0306.
Mr Michael Turner ceased his role as KMP on 31 December 2012.
Comparative information relating to remuneration of the Group’s KMP for the prior financial year is set out below:
Table 37: FY12 KMP remuneration (Company and Consolidated)
Post-employment benefits
Short-term employee benefits
Share based payments
Salary
and Fees
$
STI cash
Non-
bonuses [A] monetary
$
$
Super-
annuation
benefits
$
Other
long term
benefits
$
Termina-
tion
benefits
$
LTIP
$
MISP
$
% of remuneration Value of options
as a % of total
remuneration
%
performance
related
%
Total
$
Non-Executive Directors
Alec Brennan
Robert Bishop
John Cahill
Peter Johnston
Peter Richards
Erica Sm yth [B]
Executive Director
Keith Gordon
TO TAL ALL DIRECTO RS
197,545
111,089
120,580
110,318
110,318
54,639
-
-
-
-
-
-
884,673
1,589,162
531,140
531,140
-
-
-
-
-
-
-
-
Executives
Stephen Gobby
M ichael Kirkpatrick
Anthony Halls
M ichael Turner
Christopher Mossm an [C]
Ian Testrow [D]
David Tilbrook [E]
Ham ish Christie-Johnston [F]
TO TAL ALL EXECUTIVES
458,739
330,487
360,560
428,129
349,377
332,278
131,538
139,771
2,530,879
143,641
85,573
89,885
107,437
76,084
97,386
-
-
600,006
-
-
-
-
119,204
120,852
-
-
240,056
17,779
9,157
10,430
9,928
9,928
4,917
25,000
87,139
25,000
29,744
24,372
24,294
-
-
11,838
12,579
127,827
4,120,041
1,131,146
240,056
214,966
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,182
26,182
-
-
-
-
-
-
563,540
563,540
217,934
130,896
124,556
167,719
72,187
147,901
75,285
66,322
1,002,800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(31,669)
(31,669)
215,324
120,246
131,010
120,246
120,246
59,556
2,004,353
2,770,981
845,314
576,700
599,373
727,579
616,852
698,417
218,661
213,185
4,496,081
26,182
1,566,340
(31,669)
7,267,062
-
-
-
-
-
-
54.6
39.5
42.8
37.5
35.8
37.8
24.0
35.1
34.4
16.3
34.9
36.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(14.9)
(0.7)
(0.4)
TO TAL
[A]
[B]
[C]
[D]
[E]
[F]
The amount awarded to each Executive under the FY12 STI plan was finally determined on 20 August 2012 after completion of
performance reviews.
Dr Erica Smyth was appointed as a non-executive director on 15 December 2011.
Mr Christopher Mossman’s remuneration has been converted to Australian dollars on the basis of an AUD/USD exchange rate of 1.0319.
Mr Ian Testrow’s remuneration has been converted to Australian dollars on the basis of an AUD/CAD exchange rate of 1.0342.
Mr David Tilbrook ceased employment with Emeco on 7 October 2011.
Mr Hamish Christie-Johnston ceased employment with Emeco on 26 November 2011.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
62
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
5.2
FY13 STI grants
The terms of the FY13 STI Plan are discussed at pages 55 to 56.
Details of the vesting profile of the STI grants awarded to Executives in respect of FY13 are set out below:
Table 38: FY13 Executive STI Vesting Information
Executive [A]
Keith Gordon
Stephen Gobby
Anthony Halls
M ichael Kirkpatrick
Christopher M ossm an [B]
Ian Testrow [C]
M ichael Turner [D]
Maximum STI
Value [1]
STI Cash
Awarded [2]
STI Equity
Awarded
% of STI
Awarded
% of STI
Forfeited [3]
$
919,360
293,280
233,376
218,400
224,289
246,618
137,100
$
$
228,691 -
74,229 -
59,511 -
55,561 -
49,344 -
82,617 -
26,735 -
%
24.88
25.31
25.50
25.44
22.00
33.50
19.50
%
75.13
74.69
74.50
74.56
78.00
66.50
80.50
[1]
[2]
[3]
[A]
[B]
[C]
[D]
The minimum STI value for each KMP is zero.
These payments were made in cash in respect of FY13 and approved on 21 August 2013 based on the achievement of KPIs.
Amounts forfeited were due to KPIs not being met.
Mr Grant Stubbs was appointed as an Executive on 1 May 2013. Mr Stubbs was not entitled to an FY13 STI grant in his capacity as an
Executive.
Mr Christopher Mossman’s remuneration has been converted to Australian dollars on the basis of an AUD/USD exchange rate of 1.0334.
Mr Ian Testrow’s remuneration has been converted to Australian dollars on the basis of an AUD/CAD exchange rate of 1.0306.
Mr Michael Turner ceased his role as an Executive on 31 December 2012. Mr Turner’s maximum STI value and STI awards were adjusted
on a pro-rata basis.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
63
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
6.
Details of Share-Based Payments
6.1
Equity instruments
6.1.1 LTI grants
The terms of the LTI plan are discussed at pages 57 to 58.
Grants of LTI Securities made to Executives under the Company’s LTI Plan in FY10, FY11, FY12 and FY13 are set out in
the following table:
Table 39: LTI Security Grants to Executives
Executive
Keith Gordon
[A]
Stephen Gobby
Anthony Halls
Michael Kirkpatrick
Christopher Mossman [B]
Grant Stubbs
[C]
Ian Testrow
Michael Turner
Grant
Date
19/04/2010
19/11/2010
18/11/2011
20/11/2012
19/04/2010
19/11/2010
18/11/2011
19/10/2012
19/04/2010
19/11/2010
18/11/2011
19/10/2012
19/04/2010
19/11/2010
18/11/2011
19/10/2012
19/04/2010
19/11/2010
23/12/2011
19/10/2012
19/11/2010
23/12/2011
19/10/2012
19/04/2010
19/11/2010
18/11/2011
19/10/2012
19/04/2010
19/11/2010
18/11/2011
19/10/2012
Equity
Instrument
Rights
Shares
Shares
Shares
Rights
Shares
Shares
Shares
Rights
Shares
Shares
Shares
Rights
Shares
Shares
Shares
Rights
Rights
Rights
Rights
Shares
Shares
Shares
Rights
Rights
Rights
Rights
Rights
Shares
Shares
Shares
925,926
Number
Granted
Maximum
Value [1]
456,131
1,183,929 $663,000
907,263 $689,520
1,498,957 $410,714
300,926 $148,243
419,643 $235,000
321,579 $244,400
531,304 $244,400
166,667
$82,104
267,143 $149,600
204,716 $155,584
338,226 $155,584
$91,226
185,185
250,000 $140,000
191,579 $145,600
316,522 $145,600
$34,766
70,574
107,012
$59,927
192,093 $145,991
323,875 $148,983
$39,000
$52,200
$52,200
239,077 $117,775
269,393 $150,860
189,000 $143,640
451,371 $207,631
240,741 $118,594
314,286 $176,000
240,526 $182,800
397,391 $182,800
69,643
68,684
93,214
% Vested in
FY13
51.3%
-
-
-
51.3%
-
-
-
51.3%
-
-
-
51.3%
-
-
-
51.3%
0%
0%
0%
-
-
-
51.3%
-
-
-
51.3%
-
-
-
% Forfeited
in FY13
48.7%
-
-
-
48.7%
-
-
-
48.7%
-
-
-
48.7%
-
-
-
48.7%
100.0%
100.0%
100.0%
-
-
-
48.7%
-
-
-
48.7%
-
-
-
Vesting
Date [2]
30/09/2012
Sep-13
Sep-14
Sep-15
30/09/2012
Sep-13
Sep-14
Sep-15
30/09/2012
Sep-13
Sep-14
Sep-15
30/09/2012
Sep-13
Sep-14
Sep-15
30/09/2012
Sep-13
Sep-14
Sep-15
Sep-13
Sep-14
Sep-15
30/09/2012
Sep-13
Sep-14
Sep-15
30/09/2012
Sep-13
Sep-14
Sep-15
Fair Value Per
Share/Right at
Grant Date [3]
$0.49
$0.56
$0.76
$0.27
$0.49
$0.56
$0.76
$0.46
$0.49
$0.56
$0.76
$0.46
$0.49
$0.56
$0.76
$0.46
$0.49
$0.56
$0.76
$0.46
$0.56
$0.76
$0.56
$0.49
$0.56
$0.76
$0.46
$0.49
$0.56
$0.76
$0.46
[1]
[2]
[3]
[A]
[B]
[C]
The minimum value of each grant is zero.
For LTI Securities granted in FY11, FY12 and FY13 the earliest vesting date is the twentieth trading day after the announcement of the
Company’s annual results in 2013, 2014 and 2015 respectively.
The fair value of the LTI Securities was determined using a Monte Carlo share price simulation model, and is allocated to each reporting
period evenly over the period from Grant Date to vesting date. The value disclosed in the KMP remuneration table (table 36) is the portion
of the fair value of the LIT Securities recognised in FY13.
The number of performance shares granted to Mr Keith Gordon (and all Executives except for Mr Grant Stubbs) in respect of the FY13 LTI
grant was determined by reference to the fair value of $0.46 per share as at 18 September 2012, being the commencement of the Vesting
Period.
Mr Christopher Mossman ceased employment with Emeco on 31 May 2013. Accordingly, all unvested LTI Securities granted to Mr
Mossman were forfeited in accordance with the terms of the respective grants.
Mr Grant Stubbs commenced his role as KMP on 1 May 2013, after the FY13 grant date. The number of performance shares granted to Mr
Stubbs in respect of the FY13 LTI grant was $0.56 per share, which was the value of the performance shares issued to non-KMP.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
64
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
6.1.2 Management Incentive Share Plan
Emeco established a Management Incentive Share Plan (MISP) in 2005. The MISP was closed in 2008 at which time the
last allocation of shares was made to KMP.
MISP Terms and Conditions
The Company provided each MISP participant with an interest-free, limited recourse loan (Loan) to enable them to
subscribe for the MISP shares.
The shares vest over a five year period as set out in the following table:
Table 40: TSR Vesting Schedule
Vesting Date
% of Shares Which Vest
Total % of Vested Shares
% of Unvested Shares
2 years after the issue date
3 years after the issue date
4 years after the issue date
5 years after the issue date
6.25%
18.75%
31.25%
43.75%
6.25%
25.00%
56.25%
100.00%
93.75%
75.00%
43.75%
0.00%
If a MISP participant ceases employment with the Group before all of the MISP shares vest on the fifth anniversary of
the issue date, the Company is required to buy back, cancel or transfer to a nominee of the Board all of the shares for
a purchase price which is subject to the Company setting off the Loan amount outstanding in respect of the shares. In
relation to the unvested shares, the purchase price is the Loan amount outstanding in respect of these shares. In
relation to the vested shares, the purchase price is the market value of these shares.
Subject to the approval of the Board, the Loan can be repaid at any time but must be repaid by the tenth anniversary
of the commencement date of the MISP, being 1 July 2015.
Any dividends or capital distributions which may become payable in respect of the MISP shares may be applied by the
Company in reducing the amount of the Loan.
The share issues under the MISP to each MISP participant, and the time based vesting conditions in respect of the
shares, are not dependent on the satisfaction of a performance condition because the issue of shares and the
inclusion of time based vesting conditions in the terms of issue were intended to provide participants with an
incentive to remain with the Group. That is, the terms upon which the shares were issued to the participants were
intended to operate as a retention incentive arrangement rather than a performance incentive arrangement.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
65
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
2013 MISP entitlements
The last allocation of shares to KMP under the Company’s MISP was made to Mr Ian Testrow in June 2006. During
FY13, the Company recognised share based payments to Mr Testrow under the MISP as set out below:
Table 41: MISP grant to Ian Testrow
MISP Grant to Ian Testrow
Number of shares issued
Issue price of shares
Grant date
Amount of Loan outstanding as at 30 June 2013
Highest amount of indebtedness during FY13
Fair value recognised as remuneration during FY13
6.1.3
Emeco Employee Share Ownership Plan
300,000
$1.16
12/06/2006
$249,000
$267,000
$0.00
Emeco’s Employee Share Ownership Plan (ESOP) is an elective plan which is open to all Australian employees. During
FY13 several Executives participated in the ESOP.
Details of the shares purchased on their behalf and the matching shares allocated to them under the ESOP are set out
below:
Table 42: ESOP shares purchased and acquired by executives
Executive
Stephen Gobby
Anthony Halls
Michael Turner
Grant Stubbs
ESOP Terms and Conditions
Shares Purchased
Matching Shares Granted
8,974
8,974
8,974
8,974
1,790
1,790
1,790
1,790
Australian-based employees may salary sacrifice a minimum of $500 and a maximum of $5,000 of pre-tax salary or
wage to acquire Emeco ordinary shares in accordance with the terms of the ESOP.
For every 5 shares acquired by the employee under the ESOP, Emeco provides one matching share at no cost to the
employee.
The matching shares are subject to a vesting condition. Under the ESOP, a participating employee must remain
employed with Emeco for one year after the end of the calendar year in which the matching shares are acquired
(Restriction Period). If an employee leaves the Company before the expiry of the Restriction Period, the matching
shares are forfeited.
All shares acquired under the ESOP are held in a trust on behalf of ESOP participants by the trustee, Pacific Custodians
Pty Limited, which is an independent party separate from the Company.
The ESOP shares are held by the trustee during the Restriction Period. The ESOP administrator, Link Market Services,
releases the ESOP shares from the trust at the earlier of the expiry of the Restriction Period and the termination of the
employee’s employment with Emeco.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
66
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Directors’ Report
For the year ended 30 June 2013
7.
Service contracts
7.1 Managing Director & Chief Executive Officer: Mr Keith Gordon
Mr Gordon’s employment is for an indefinite term. Mr Gordon’s employment may be terminated by 6 months’ notice
from either party. However, Emeco may terminate Mr Gordon’s employment with a lesser period of notice on
payment in lieu of notice not given.
Under Mr Gordon’s employment agreement the following terms apply if there is a change of control event in respect
of Emeco Holdings Ltd:
•
•
•
FY11 and FY12 LTI grants will automatically vest. The FY13 LTI grant and all future LTI grants will vest only if the
performance condition is met at the date of the change of control, provided that the Board will retain
discretion to vest a greater amount.
For a period of two years following a change of control event in respect of Emeco Holdings Ltd, Mr Gordon will
be entitled to 12 months’ notice of termination. At the expiry of the two year period, the notice period will be
reduced to 6 months.
If, within two years of a change of control event in respect of Emeco Holdings Ltd, Emeco materially and
substantially changes Mr Gordon’s duties beyond the duties ordinarily performed by a Chief Executive Officer
(other than with Mr Gordon’s agreement), Mr Gordon may serve written notice on the Board advising that the
change in duties constitutes a repudiation of the contract and that Mr Gordon elects to bring his employment
to an end, in which case Mr Gordon will be entitled to receive a payment equivalent to 12 months’ base salary
in lieu of notice.
7.2
Chief Financial Officer: Mr Stephen Gobby
Mr Gobby’s contract is for an indefinite term and provides that it is terminable on either party giving 6 months’ notice
or on the payment to him of up to 6 months’ salary in lieu of notice. If, however, a change of control of Emeco
Holdings Ltd occurs or his duties are materially changed, then he is entitled to terminate the contract and to be paid a
maximum amount of 6 months’ base salary and the full amount of his STI bonus on a pro-rata basis.
7.3 Other Executives
Except as outlined above in sections 7.1 and 7.2, each Executive is employed pursuant to contracts which provide for
an indefinite term and which are terminable on either party giving 6 months’ notice or on the payment to the
Executive of up to 6 months’ salary in lieu of notice. No termination payments other than salary in lieu of notice and
accrued statutory leave entitlements are payable under these contracts.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
67
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2013
Note
2013
$'000
2012
$'000
Continuing operations
Revenue from rental income
Revenue from the sale of machines and parts
Revenue from maintenance services
Changes in machinery and parts inventory
Repairs and maintenance
Employee expenses
Hired in equipment and labour
Gross profit
Other income
Other expenses
Impairment of tangible assets
EBITDA (1)
Impairment of goodwill
Depreciation expense
Amortisation expense
EBIT (2)
Finance income
Finance costs
Profit before tax expense
Tax expense
Profit from continuing operations
Discontinued operations
Loss from discontinued operations (net of tax) before equity transfers
FCTR of discontinued operations disposed (3)
Loss on sale of discontinued operations (net of tax)
Loss from discontinued operations
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit and loss:
Foreign currency translation differences for foreign operations
FCTR of discontinued operations disposed (3)
Effective portion of changes in fair value of cash flow hedges
Total other comprehensive income/(loss) for the period
7
8
8
8
8
8
8
8
10
14
14
14
370,025
27,533
42,132
439,690
(28,953)
(122,225)
(48,139)
(7,762)
232,611
3,352
(48,406)
(12,116)
175,441
(17,844)
(112,547)
(192)
44,858
1,449
(30,223)
16,084
(10,080)
6,004
-
-
-
-
440,299
66,689
58,182
565,170
(68,887)
(155,101)
(47,937)
(3,231)
290,014
3,900
(31,920)
(1,487)
260,507
-
(135,470)
(217)
124,820
361
(24,775)
100,406
(30,434)
69,972
(71)
(156)
-
(227)
6,004
69,745
16,731
-
1,697
18,428
3,252
156
(54)
3,354
Total comprehensive income for the period
24,432
73,099
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the
notes to and forming part of the financial statements set out on pages 75 to 151.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
70
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Consolidated statement of profit or loss and other comprehensive income (continued)
For the year ended 30 June 2013
Profit attributable to:
Equity holders of the Company
Profit for the year
Total comprehensive income attributable to:
Equity holders of the Company
Total comprehensive income for the year
Earnings per share:
Basic earnings per share
Diluted earnings per share
Earnings per share-continuing operations
Basic earnings per share
Diluted earnings per share
2013
$'000
2012
$'000
6,004
6,004
69,745
69,745
24,432
24,432
73,099
73,099
Note
2013
Cents
2012
Cents
35
35
35
35
1.03
1.02
1.03
1.02
11.4
11.2
11.5
11.2
(1) EBITDA - Earnings before interest expense, tax, depreciation and amortisation.
(2) EBIT - Earnings before interest expense and tax.
(3) FCTR - Transfer of Foreign Currency Translation Reserve (FCTR) from equity reserve to profit upon foreign
operations of the Group being disposed.
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the
notes to and forming part of the financial statements set out on pages 75 to 151.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
71
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Financial Position
as at 30 June 2013
Note
2013
$'000
2012
$'000
Current Assets
Cash assets
Trade and other receivables
Derivatives
Inventories
Prepayments
Current tax asset
Assets held for sale
Total current assets
Non-current Assets
Trade and other receivables
Derivatives
Intangible assets and goodwill
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current Liabilities
Trade and other payables
Derivatives
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current Liabilities
Other payables
Derivatives
Interest bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity attributable to equity holders of the Company
17
18
19
20
11
15
18
19
21
22
12
23
19
24
11
26
23
19
24
12
26
13
5,754
97,073
691
14,758
2,975
13,940
7,200
142,391
856
4,489
158,076
820,210
-
983,631
73,091
99,009
776
35,114
3,180
563
405
212,138
1,057
3,643
173,948
825,220
110
1,003,978
1,126,022
1,216,116
40,562
1,281
9,308
-
3,388
54,539
1,284
1,502
406,118
50,159
1,244
460,307
64,296
2,239
3,339
14,100
3,966
87,940
-
3,369
452,270
31,106
1,044
487,789
514,846
575,729
611,176
640,387
593,616
(10,717)
28,277
611,176
610,424
(29,456)
59,419
640,387
The consolidated statement of financial position is to be read in conjunction with the notes to and forming part of the
financial statements set out on pages 75 to 151.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
72
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Changes in Equity
For the year ended 30 June 2013
Share
based
Foreign
currency
Reserve
Share
capital
$'000
payment
Hedging
translation
for own
Retained
reserve
reserve
reserve
$'000
$'000
$'000
shares
$'000
earnings
$'000
Total
equity
$'000
Balance at 1 July 2011
610,304
6,462
(3,987)
(24,222)
(10,715)
24,392
602,234
Total comprehensive income for the year
Profit or (loss)
Other comprehensive income
Foreign currency translation differences
Exchange differences of disposed foreign operations
Effective portion of changes in fair value of cash
flow hedge, net of tax
Total comprehensive income/(loss) for the year
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Own shares acquired by employee share plan trust
Dividends to equity holders
Share-based payment transactions
Total contributions by and distributions to owners
Balance at 30 June 2012
-
-
-
-
-
-
(1)
98
22
120
610,424
-
-
-
-
-
-
-
2,693
2,693
9,155
-
-
-
(54)
(54)
-
-
-
-
-
3,252
156
-
3,408
-
-
-
-
(3,041)
-
-
-
(3,041)
(34,718)
-
(34,718)
59,419
(3,041)
(34,620)
2,715
(34,946)
640,387
(4,041)
(20,814)
(13,756)
-
-
-
-
-
69,745
69,745
-
-
-
3,252
156
(54)
69,745
73,099
(1) Payments made in satisfaction of outstanding loans on vested shares under the Company’s Management
Incentive Share Plan.
Share
based
Foreign
currency
Reserve
Share
capital
$'000
payment
Hedging
translation
for own
Retained
reserve
reserve
reserve
$'000
$'000
$'000
shares
$'000
earnings
$'000
Total
equity
$'000
Balance at 1 July 2012
610,424
9,155
(4,041)
(20,814)
(13,756)
59,419
640,387
Total comprehensive income for the year
Profit or (loss)
Other comprehensive income
Foreign currency translation differences
Effective portion of changes in fair value of cash
flow hedge, net of tax
Total comprehensive income/(loss) for the year
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Own shares acquired by employee share plan trust
Share Buy-back
Dividends to equity holders
Share-based payment transactions
Total contributions by and distributions to owners
Balance at 30 June 2013
-
-
-
-
-
(16,919)
96
15
(16,808)
593,616
-
-
-
-
-
-
-
2,989
2,989
12,144
-
-
1,697
1,697
-
-
-
-
-
16,731
-
16,731
-
-
-
-
6,004
6,004
-
-
6,004
16,731
1,697
24,432
-
-
-
-
(2,678)
-
-
-
-
-
(37,146)
-
(37,146)
28,277
(2,678)
(16,919)
(37,050)
3,004
(53,643)
611,176
-
(2,344)
-
(4,083)
(2,678)
(16,434)
The consolidated statement of changes in equity is to be read in conjunction with the notes to and forming part of the
financial statements set out on pages 75 to 151.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
73
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Cash Flows
For the year ended 30 June 2013
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Taxes paid
Net cash from operating activities
Cash flows from investing activities
Proceeds on disposal of non-current assets
Payment for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of notes (USPP US$140m)
Purchase of own shares
Payment for debt establishment costs
Payment of finance lease liabilities
Dividends paid
Net cash from/(used in) financing activities
Net increase/(decrease) in cash
Cash at 1 July
Effects of exchange rate fluctuations on cash held
Cash at 30 June
30 June
2013
$'000
30 June
2012
$'000
Note
449,976
(221,779)
228,197
1,449
(27,408)
(20,935)
181,303
544,227
(277,481)
266,746
361
(22,857)
(13,783)
230,467
49,776
(178,900)
(129,124)
35,191
(317,008)
(281,817)
553,453
(607,943)
-
(19,597)
(4,709)
(3,339)
(37,146)
(119,281)
(67,102)
73,091
(235)
5,754
181,302
(162,195)
144,022
(3,042)
(1,849)
(4,562)
(34,718)
118,958
67,608
5,502
(19)
73,091
30(ii)
24
30(i)
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set
out on pages 75 to 151.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
74
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
1 Reporting entity
Emeco Holdings Limited (the “Company”) is a company domiciled in Australia. The address of the Company’s
registered office is Level 3, 71 Walters Drive, Osborne Park WA 6017. The consolidated financial statements of
the Company as at and for the year ended 30 June 2013 comprise the Company and its subsidiaries (together
referred to as the “Group”). The Group is a for profit entity and primarily involved in the provision of safe, reliable
and maintained heavy earthmoving equipment solutions to customers in the mining industry (refer note 16).
2 Basis of preparation
(a)
Statement of compliance
The consolidated statements are general purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with
International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards
Board (IASB).
The consolidated financial statements were authorised for issue by the Board of Directors on 21 August
2013.
(b)
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the
following material items in the statement of financial position:
(cid:1)
(cid:1)
derivative financial instruments are measured at fair value;
financial instruments at fair value through profit or loss are measured at fair value.
The methods used to measure fair values are discussed further in note 5.
(c)
Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s
functional currency and the functional currency of the majority of the Group.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with
that Class Order, all financial information presented in Australian dollars has been rounded to the nearest
thousand unless otherwise stated.
(d) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with the IFRSs requires
management to make judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are revised and in any future periods affected.
The estimates and judgements that have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year are discussed below:
Impairment of assets
The recoverable amount of each non financial asset is determined as the higher of the value-in-use and fair
value less costs to sell, in accordance with the Company’s accounting policy note 3(h)(ii). Determination of
the recoverable amount of an asset based on a discounted cash flow model, requires the use of estimates
and assumptions, including; the appropriate rate at which to discount the cash flows, the timing of the cash
flow, market risk premium, interest rates, exchange rates, growth rates, future capital requirements and
future operating performance. Changes in these estimates and assumptions impact the recoverable
amount of the asset, and accordingly could result in an adjustment to the carrying amount of that asset.
The carrying amount of such assets is set out in note 21.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
75
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
2 Basis of preparation (continued)
(d)
Use of estimates and judgements (continued)
Impairment of assets (continued)
In light of the recent developments in the Indonesian CGU, the Company is reviewing the various options
for the ongoing management and operation of this CGU. The outcome of the review may not be known for
some time. Impairment testing of the Indonesian CGU has been assessed on a value in use methodology on
the basis the business continues to operate in its current form. Should the review conclude a different
strategy for the CGU, the estimates and assumption that impact the recoverable amount of the assets may
change, which could result in an adjustment to the carrying amount of that asset.
Recognition of tax losses
In accordance with the Company’s accounting policies for deferred taxes (refer note 3(o)), a deferred tax
asset is recognised for unused tax losses only if it is probable that future taxable profits will be available to
utilise these losses. This includes estimates and judgements about future profitability and tax rates.
Changes in these estimates and assumptions could impact on the amount and probability of unused tax
losses and accordingly the recoverability of deferred tax assets. The carrying amount of deferred tax assets
are set out in note 12.
Share based payments
The share based payments are recognised in accordance with the Company’s accounting policies (refer
note 3(j)(v)) where the value of the share based payment is expensed from the grant date to vesting date.
This valuation includes estimates and judgements about volatility, risk free rates, dividend yields, total
shareholder return (TSR) and underlying share price. Changes in these estimates and assumptions could
impact on the measurement of the share based payment as set out in note 27.
Changes in accounting policies
From 1 July 2012 the Group applied amendments to AASB 101 Presentation of Financial Statements
outlined in AASB 2011-9 Amendments to Australian Accounting Standards - Presentation of Items of
Other Comprehensive Income. The change in accounting policy only relates to disclosures and has had
no impact on consolidated earnings per share or net income. The changes have been applied
retrospectively and require the Group to separately present those items of other comprehensive income
that may be reclassified to profit or loss in the future from those that will never be reclassified to profit or
loss. These changes are included in the statement of profit or loss and other comprehensive income.
Going concern basis of accounting
The financial statements have been prepared using the going concern assumption which contemplates the
realization of assets and the settlement of liabilities in the ordinary course of business. As at 30 June 2013
the Group has a working capital position of A$76.6m, unused debt facilities of $214.1m and was in
compliance with its borrowing facility covenants.
The Group has forecast the continued compliance with its financial covenants. That compliance is
dependent on the Group achieving its revenue and EBITDA forecasts which the Directors consider
reasonable. However, the present economic environment, where mining industry activity has slowed and
the pace of recovery remains uncertain, increases the risk to the Group achieving its forecasts and in turn
meeting its financial covenants. The Directors believe the operational strategies being implemented will
mitigate this risk and ensure continued compliance with covenants.
(e)
(f)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
76
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by Group entities except for the changes in
accounting policies as explained in note 2(e).
Certain comparative amounts in the consolidated statement of profit or loss and other comprehensive income
have been reclassified to conform with the current years presentation.
(a)
(i)
(ii)
(b)
(i)
(ii)
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in
the consolidated financial statements from the date that control commences until the date that control
ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of
impairment.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are retranslated to the functional currency at the exchange rate at that
date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the
functional currency at the beginning of the period, adjusted for effective interest and payments during the
period, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition, are translated to the functional currency at exchange rates at the reporting date. The income
and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of
the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign
currency translation reserve (FCTR) in equity. When a foreign operation is disposed of such that control,
significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign
operation is reclassified to profit or loss as part of the gain or loss on disposal.
(c)
(i)
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All
other financial assets are recognised initially on the trade date at which the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in such
transferred financial assets that is created or retained by the Group is recognised as a separate asset or
liability.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
77
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
(c)
(i)
Financial instruments (continued)
Non-derivative financial assets (continued)
Financial assets and liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either to
settle them on a net basis or to realise the asset and settle the liability simultaneously.
The Group has non-derivative financial assets being: loans and receivables.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are recognised initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the
effective interest method, less any impairment losses.
Loans and receivables comprise trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three
months or less from the acquisition date that are subject to an insignificant risk of changes in their fair
value, and are used by the Group in the management of its short-term commitments.
(ii)
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss)
are recognised initially on the trade date at which the Group becomes a party to the contractual provisions
of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or
expire.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such
financial liabilities are recognised initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortised costs using the
effective interest rate method unless the Group has applied fair value hedge accounting, in which case the
non-derivative financial liability or a portion is recognised at fair value in profit or loss.
Other financial liabilities comprise loans and borrowings, debt securities issued, bank overdrafts, and trade
and other payables.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management
are included as a component of cash and cash equivalents for the statement of cash flows.
(iii) Derivative financial instruments, including hedge accounting
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk
exposures. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in
profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and
changes therein are accounted for as described below.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
78
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
Financial instruments (continued)
(c)
(iii) Derivative financial instruments, including hedge accounting (continued)
On initial designation of the derivative as the hedging instrument, the Group formally documents the
relationship between the hedging instrument and hedged item, including the risk management objectives
and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will
be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at
the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments
are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the
respective hedged items attributable to hedged risk and whether the actual results of each hedge are
within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should
be highly probable to occur and should present an exposure to variations in cash flows that could
ultimately affect reported profit or loss.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or
loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes
therein are accounted for as described below.
Fair value hedges
The risk being hedged in a fair value hedge is a change in the fair value of an asset or liability or
unrecognised firm commitment that may affect the income statement. Changes in fair value might arise
through changes in interest rates or foreign exchange rates. The Group’s fair value hedges principally
consist of interest rate swaps that are used to protect against changes in the fair value of fixed-rate long-
term financial instruments due to movements in market interest rates. The application of fair value hedge
accounting results in the fair value adjustment on the hedged item attributable to the hedged risk being
recognised in the income statement at the same time the hedging instrument impacts the income
statement. If a hedging relationship is terminated, the fair value adjustment to the hedged item continues
to be recognised as part of the carrying amount of the item or group of items and is amortised to the
income statement as a part of the effective yield over the period to maturity. Where the hedged item is
derecognised from the Group’s balance sheet, the fair value adjustment is included in the income
statement as a part of the gain or loss on disposal.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows
attributable to a particular risk associated with the recognised asset or liability or a highly probable forecast
transaction that could affect profit or loss, the effective portion of changes in the fair value of the
derivative is recognised in other comprehensive income and presented in the hedging reserve in equity.
Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or
loss.
When the hedged item is a non-financial asset, the amount accumulated in equity is retained in other
comprehensive income and reclassified to profit or loss in the same period or periods during which the
non-financial item affects profit or loss. In other cases the amount accumulated in equity is reclassified to
profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no
longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the
designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is
no longer expected to occur, then the balance in equity is reclassified in profit or loss.
Other non-trading derivatives
When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge
accounting, all changes in its fair value are recognised immediately in profit or loss.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
79
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
Financial instruments (continued)
(c)
(iv) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects.
Purchase of share capital (treasury shares)
When share capital recognised as equity is purchased by the employee share plan trust, the amount of the
consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a
deduction from equity. Purchased shares are classified as treasury shares and are presented in the reserve
for own shares net of any tax effects. When treasury shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is
transferred to/from retained earnings.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Repurchase and reissue of share capital (treasury shares)
When share capital recognised as equity is repurchased, the amount of the consideration paid, which
includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.
Repurchasing shares are classified as treasury shares and are presented in the reserve for own shares.
When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase
in equity, and the resulting surplus or deficit on the transaction is presented in retained earnings.
(d)
(i)
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the following:
•
•
the cost of materials and direct labour,
any other costs directly attributable to bringing the assets to a working condition for their intended
use,
• when the Group has an obligation to remove the assets or restore the site, and estimate of the costs of
dismantling and removing the items and restoring the site on which they are located, and
capitalised borrowing costs.
•
Cost includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment. Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for
as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference
between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or
loss.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
80
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
(d)
(ii)
Property, plant and equipment (continued)
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits
associated with the expenditure will flow to the Group. Expenditure on major overhauls and
refurbishments of equipment is capitalised in property, plant and equipment as it is incurred, where that
expenditure is expected to provide future economic benefits. The costs of the day-to-day servicing of
property, plant and equipment and on-going repairs and maintenance are expensed as incurred.
(iii) Depreciation
Items of property, plant and equipment, excluding freehold land, are depreciated over their estimated
useful lives and are charged to the statement of comprehensive income. Estimates of remaining useful
lives, residual values and the depreciation method are made on a regular basis, with annual re-assessments
for major items.
Assets are depreciated from the date of acquisition or, in respect of internally constructed assets, from the
time an asset is completed and held ready for use. Where subsequent expenditure is capitalised into the
asset, the estimated useful life of the total new asset is reassessed and depreciation charged accordingly.
Depreciation on buildings, leasehold improvements, furniture, fixtures and fittings, office equipment,
motor vehicles and sundry plant is calculated on a straight-line basis. Depreciation on plant and equipment
is calculated and charged on machine hours worked over their estimated useful life.
The estimated useful lives are as follows:
Leasehold Improvements
Plant and Equipment
Furniture, Fixtures and Fittings
Office Equipment
Motor Vehicles
Sundry Plant
15 years
3 – 15 years
10 years
3 – 10 years
5 years
7 – 10 years
(e)
(i)
Intangible assets and goodwill
Goodwill
Goodwill (negative goodwill) arises on the acquisition of subsidiaries.
Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative
(negative goodwill), it is recognised immediately in profit or loss.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses.
(ii)
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortisation and any accumulated impairment losses.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
81
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3
Significant accounting policies (continued)
Intangible assets and goodwill (continued)
(e)
(iii) Amortisation
Except for goodwill, intangible assets are amortised on a straight line basis in profit or loss over their
estimated useful lives, from the date they are available for use.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
intangible assets, other than goodwill, from the date that they are available for use. The estimated useful
lives for the current and comparative periods are as follows:
(cid:1)
Software
0 – 3 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
(f)
Inventories
Inventories are measured at the lower of cost and net realisable value.
The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in
acquiring the inventories and other costs incurred in bringing them to their existing location and condition.
In the case of manufactured inventories and work in progress, cost includes an appropriate share of
production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and estimated costs necessary to make the sale.
Inventory is occasionally sold under a Rental Purchase Option (RPO). Under the RPO the purchaser is
entitled to a rebate upon exercising the option. A charge is recognised against the carrying value of
inventory on RPOs to reflect the consumption of economic benefits related to that inventory.
(g) Work in progress
Progressive capital work to inventory and fixed assets are carried in work in progress accounts within their
respective statement of financial position classifications with fixed assets being disclosed as a “capital work
in progress”. Upon work completion the balance is capitalised.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
82
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
(h)
(i)
Impairment
Non-derivative financial assets
A financial asset not carried at fair value through profit or loss, including an interest in an equity accounted
investee, is assessed at each reporting date to determine whether there is objective evidence that it is
impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or
more events that occurred after the initial recognition of the asset, and that the loss events had an impact
on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor,
restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy and economic conditions that correlate the
defaults.
The Group considers evidence of impairment for financial assets measured at amortised cost (loans and
receivables) at both a specific asset and collective level. All individually significant assets are assessed for
specific impairment.
In assessing collective impairment, the Group uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current
economic and credit conditions are such that the actual losses are likely to be greater or less than
suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and
reflected in an allowance account against receivables. Interest on the impaired asset continues to be
recognised. When an event occurring after the impairment was recognised causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
(ii) Non-financial assets
The carrying amounts of the Group’s non-financial assets, excluding inventories and deferred tax assets,
are reviewed at each reporting date to determine whether there is any indication of impairment. If any
such indication exists, then the asset’s recoverable amount is estimated. Goodwill and indefinite life
intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying
amount of an asset or cash generating unit (CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to
sell. In assessing fair value, the Group has assessed the amount it could obtain on disposal, less realisation
costs. Fair value is calculated with regard to the discounted post tax cash flows or comparable transactions
for similar businesses. For the purpose of impairment testing, assets that cannot be tested individually are
grouped together into the smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or CGUs. For the purposes of goodwill
impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which
impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting
purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to
benefit from the synergies of the combination.
The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one
CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for
impairment as part of the testing of the CGU to which the corporate asset is allocated.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
83
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
Impairment (continued)
(h)
(ii) Non-financial assets (continued)
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and
then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.
Goodwill assets were tested for impairment at 30 June 2013 as part of the Group’s process of annually
testing goodwill for impairment.
(i)
Assets held for sale or distribution
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered
primarily through sale or distribution rather than through continuing use, are classified as held for sale or
distribution. Immediately before classification as held for sale or distribution, the assets, or components of
a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally
the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost to
sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets
and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred
tax assets, employee benefit assets and investment property which continue to be measured in accordance
with the Group’s accounting policies. Impairment losses on initial classification as held for sale or
distribution and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are
not recognised in excess of any cumulative impairment loss.
Once classified as held for sale or distribution, intangible assets and property, plant and equipment are no
longer amortised or depreciated.
(j)
(i)
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and has no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution plans are recognised as an employee benefit expense
in profit or loss in the periods during which related services are rendered by employees. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments
is available.
(ii) Other long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that
employees have earned in return for their service in the current and prior periods. That benefit is
discounted to determine its present value, and the fair value of any related assets is deducted. The
discount rate is the yield at the reporting date on Commonwealth Government bonds that have maturity
dates approximating the terms of the Group’s obligations and that are denominated in the same currency
in which the benefits are expected to be paid.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
84
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
Employee benefits (continued)
(j)
(iii) Termination benefits
Termination benefits are recognised as an expense when the Group is committed demonstrably, without
realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal
retirement date. Termination benefits for voluntary redundancies are recognised as an expense if the
Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the
number of acceptances can be estimated reliably.
(iv) Short-term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the obligation can be estimated reliably.
(v)
Share based payment transactions
(a)
A management incentive share plan (MISP) allows certain consolidated entity employees to acquire
shares of the Company. Employees have been granted a limited recourse 10 year interest free loan
in which to acquire the shares. The loan has not been recognised as the Company only has recourse
to the value of the shares. The arrangement is accounted for as an in-substance option over ordinary
shares. The grant date fair value of the shares granted to employees is recognised as an employee
expense with a corresponding increase in equity, over the period during which the employees
become unconditionally entitled to the shares. The fair value of the MISP granted is measured using
a Black Scholes pricing model, taking into account the terms and conditions upon which the in-
substance options were granted. The amount recognised as an expense is adjusted to reflect the
actual number of shares that vest except where forfeiture is only due to shares prices not achieving
the threshold for vesting.
(b)
(c)
increase
The share option programme allows certain employees to acquire shares of the Company. The grant
date fair value of options granted to employees is recognised as an employee expense with a
in equity, over the period during which the employees become
corresponding
unconditionally entitled to the options. The fair value of the options granted is measured using an
option-pricing model, taking into account the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted to reflect the actual number of share
options that vest except where forfeiture is only due to market conditions not being met, i.e. share
prices not achieving the threshold for vesting. The share option programme concluded on 4 August
2011.
A long term incentive plan (LTIP) allows certain management personnel to receive shares or rights of
the Company upon satisfying performance conditions. Under the LTIP rights or shares granted to
each LTIP participant vest to the employee after 3 years if the prescribed performance condition is
met. The performance condition is a performance hurdle based on relative total shareholder return
(TSR). The peer group that the Company’s TSR is measured against consists of 93 Companies (this
number may change as a result of takeovers, mergers etc) and includes 18 Companies that are
considered direct peers to Emeco, in addition to the S&P/ASX Small Industrials (excluding banks,
insurance companies, property trust companies and investment property trust/companies and other
stapled securities). The fair value of the performance rights or shares granted under the LTIP have
been measured using Monte Carlo simulation analysis and are expensed evenly over the period from
grant date to vesting date.
If the terms of the LTIP are modified, as a minimum an expense is recognised as if the terms had not
been modified. An additional expense is recognised for any modification that increases the total fair
value of the share based payment arrangement, or is otherwise beneficial to the employee, as
measured at the date of modification.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
85
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
(j)
(v)
(k)
(l)
(i)
(ii)
Employee benefits (continued)
Share based payment transactions (continued)
(d)
In FY11 an employee share ownership plan (ESOP) was established to allow certain employees to
acquire shares in the Company via salary sacrifice up to a limit of $5,000 each year. For every five
shares purchased by the employee, recognised as treasury shares, the Company provides one
matching share, recognised as a share based payment. Under the ESOP, the matching share will vest
to the employee after one year after the end of calendar year in which the matching shares are
acquired. These matching shares are fair valued and are expensed evenly over the period from
grant date to vesting date. ESOP employees are entitled to dividends on the matching share when
the dividends are declared.
(e)
Dividends received while satisfying the performance conditions of share issues under the MISP are
allocated against the employee outstanding loan. For all previous LTIP and ESOP plans, all LTIP and
ESOP recipients are entitled to any dividends that are declared during the vesting period. For the
Group’s Executives, commencing with the FY13 grant and all subsequent grants, dividends or
shadow dividends will not be paid on any unvested securities and dividends or shadow dividends will
accrue on unvested LTI securities and will only be paid at the time of vesting on those LTI securities
that vest, provided all vesting conditions are met.
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability.
Revenue
Rental revenue
Revenue from the rental of machines is recognised in profit and loss based on the number of hours the
machines operate each month. Contracts generally have a minimum hour clause which is triggered should
the machine operate under these hours during each month. Customers are billed monthly. Revenue is
measured at the fair value of consideration received or receivable.
Goods sold
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the
consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Revenue is recognised when significant risks and rewards of ownership have been transferred to the
customer, recovery of the consideration is probable, the associated costs and possible return of goods can
be estimated reliably, there is no continuing management involvement with the goods, and the amount of
revenue can be measured reliably.
(iii) Maintenance services
Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of
the transaction at the reporting date.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
86
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
(m) Leases
Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are
classified as finance leases. On initial recognition the leased asset is measured at an amount equal to the
lower of its fair value and the present value of the minimum lease payments. Subsequent to initial
recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and are not recognised in the Group’s statement of financial position.
Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the
term of the lease. Lease incentives received are recognised as an integral part of the total lease expense,
over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and
the reduction of the outstanding liability. The finance expense is allocated to each period during the lease
term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
(n)
Finance income and finance costs
Finance income comprises interest income, dividend income, fair value gains on financial assets at fair
value through profit or loss and gains on hedging instruments that are recognised in profit or loss. Interest
income is recognised as it accrues in profit or loss using the effective interest method. Dividend income is
recognised on the date that the Group’s right to receive payment is established, which in the case of
quoted securities is the ex-dividend date.
Finance costs comprise interest expense on borrowings, fair value losses on financial assets at fair value
through profit or loss, losses on hedging instruments that are recognised in profit or loss and impairment
losses recognised on financial assets (other than trade receivables). All borrowing costs are recognised in
profit or loss.
Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis in
either finance income or finance expense depending on whether foreign currency movements are in a net
gain or net loss position.
(o)
Tax
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss
except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
(i) Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
tax is not recognised for:
•
•
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss
temporary differences related to investments in subsidiaries to the extent that it is probable that
they will not reverse in the foreseeable future
taxable temporary differences arising on the initial recognition of goodwill.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
87
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
3 Significant accounting policies (continued)
(o)
Tax (continued)
(ii) Deferred tax (continued)
The measurement of deferred tax reflects the tax consequences that would follow the manner
in which the Group expects, at the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by the
reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on
a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which
they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
(iii) Tax exposures
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group
with effect from 16 December 2004 and are therefore taxed as a single entity from that date. The
head entity within the tax-consolidated group is Emeco Holdings Limited.
(p) Discontinued operations
A discontinued operation is a component of the Group's business, the operations and cash flows
of which can be clearly distinguished from the rest of the Group and which:
•
•
•
represents a separate major line of business or geographical area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or
geographical area of operations; or
is a subsidiary acquired exclusively with a view to re-sale.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be
classified as held for sale or distribution, if earlier.
When an operation is classified as a discontinued operation, the comparative statement of comprehensive
income is re-presented as if the operation had been discontinued from the start of the comparative year.
(q)
Segment reporting
Segment results that are reported to the Board of Directors include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly
cash, interest bearing liabilities and finance expense.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
88
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
4 New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning after 1 July 2012, and have not been applied in preparing these consolidated financial statements.
Those which may be relevant to the Group are set out below. The Group does not plan to adopt these
standards early.
(i) AASB 9 Financial Instruments (2010), AASB 9 Financial instruments (2009)
AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets.
Under AASB 9 (2009), financial assets are classified and measured based on the business model in which
they are held and the characteristics of their contractual cash flows. AASB 9 (2010) introduces additions
relating to financial liabilities. The IASB currently has an active project that may result
in limited
amendments to the classification and measurement requirements of AASB 9 and add new
requirements to address the impairment of financial assets and hedge accounting.
AASB 9 (2010 and 2009) are effective for annual periods beginning on or after 1 January 2015 with early
adoption permitted. The adoption of AASB 9 (2010) is expected to have an impact on the Group's
financial assets, but no impact on the Group's financial liabilities.
(ii) AASB 13 Fair Value Measurement (2011)
AASB 13 provides a single source of guidance on how fair value is measured, and replaces the fair value
measurement guidance that is currently dispersed throughout Australian Accounting Standards. Subject
to limited exceptions, AASB 13 is applied when fair value measurements or disclosures are required or
permitted by other AASBs. The Group is currently reviewing its methodologies in determining fair values
(note 5). AASB 13 is effective for annual periods beginning on or after 1 January 2013 with early
adoption permitted.
(iii) AASB 119 Employee Benefits (2011)
AASB 119 (2011) changes the definition of short-term and other long-term employee benefits to clarify the
distinction between the two. For defined benefit plans, removal of the accounting policy choice for
recognition of actuarial gains and losses is not expected to have any impact on the Group. However, the
Group may need to assess the impact of the change in measurement principles of expected return on
plan assets. AASB 119 (2011) is effective for annual periods beginning on or after 1 January 2013 with
early adoption permitted.
5 Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. When applicable, further information about the
assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(i)
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is the
estimated amount for which a property could be exchanged on the date of acquisition between a willing
buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had
each acted knowledgeably. The fair value of items of plant, equipment, fixtures and fittings is based on the
market approach and cost approaches using quoted market prices for similar items when available and
depreciated replacement cost when appropriate. Depreciated replacement cost estimates reflects
adjustments for physical deterioration as well as functional and economic obsolescence.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
89
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
5 Determination of fair values (continued)
(ii)
(iii)
(iv)
Intangible assets
The fair value of contract intangibles acquired in a business combination is based on the discounted
estimated net future cash flows that are expected to arise as a result of the contracts that are in place
when the business combination was finalised.
Inventory
The fair value of inventory acquired in a business combination is determined based on its estimated selling
price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable
profit margin based on the effort required to complete and sell the inventories.
Trade and other receivables
The fair value of trade and other receivables, excluding construction work in progress, are estimated as the
present value of future cash flows, discounted at the market rate of interest at the measurement date.
Short-term receivables with no stated interest rate are measured at the original invoice amount if the
effect of discounting is immaterial. Fair value is determined at initial recognition and, for disclosure
purposes, at each annual reporting date.
(v)
Forward exchange contracts and interest rate swaps
The fair value of forward exchange contracts is based on the discounted value of the difference between
the rate the contractual forward price and the current forward price for the residual maturity of the
contract using a credit adjusted risk free rate.
The fair value of interest rate swaps is based on third party valuations provided by financiers. Those
valuations are tested for reasonableness by discounting estimated future cash flows based on the terms
and maturity of each contract and using market interest rates for a similar instrument at the measurement
date. Fair values reflect the credit risk of the instrument and include adjustments to take account of the
credit risk of the Group entity and counterparty when appropriate.
(vi) Other non-derivative financial liabilities
Other non-derivative financial liabilities are measured at fair value, at initial recognition and for disclosure
purposes, at each annual reporting date. Fair value is calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of interest at the measurement date. For
finance leases the market rate of interest is determined by reference to similar lease agreements.
(vii) Share-based payment transactions
The fair value of employee share options, management incentive plan shares, and long term incentive plan
shares are measured using an option pricing model. Measurement inputs include share price on issue,
exercise price of the instrument, expected volatility, weighted average expected life of the instruments,
market performance conditions, expected dividends, and the risk-free interest rate. Service and non-
market performance conditions attached to the transactions are not taken into account in determining fair
value. The employee share ownership plan shares are measured at cost.
(viii) Equity and debt securities
The fair value of equity and debt securities is determined by reference to their quoted closing bid price at
the reporting date, or if unquoted determined using a valuation technique. Valuation techniques employed
include market multiples and discounted cash flow analysis using expected future cash flows and a market
related discount rate. The fair value of held to maturity investments is determined for disclosure purposes
only.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
90
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments
Overview
The Group has exposure to the following risks from their use of financial instruments:
(cid:1)
credit risk
(cid:1)
liquidity risk
(cid:1) market risk
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,
policies and processes for measuring and managing risk, and the Group’s management of capital.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The Board of Directors has established the Audit and Risk Committee (Committee),
which is responsible for developing and monitoring the Group’s risk management policies. The Committee
reports regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group,
through its training, management standards and procedures, aims to develop a disciplined and constructive
control environment in which all employees understand their roles and obligations.
The Committee oversees how management monitors compliance with the Group’s risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The Committee is assisted in its oversight role by the Internal Audit function. Internal Audit undertakes reviews of risk
management controls and procedures at the direction of the Committee. The results of the reviews are reported to
the Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group’s receivables from customers.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s
maximum exposure to credit risk at the reporting date was:
Trade receivables
Other receivables
Cash and cash equivalents
Derivatives
Consolidated
Carrying amount
2013
$'000
2012
$'000
86,357
27,486
5,754
5,180
124,777
91,695
9,403
73,091
4,419
178,608
Note
18
18
17
19
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
91
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6
Financial instruments (continued)
Credit risk (continued)
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the demographics of the Group’s customer base, including the default risk
of the industry and country in which customers operate, as these factors may have an influence on credit risk.
The Group sets individual counter party limits and where possible insures its rental income within Australia,
Indonesia, Chile and Canada, and generally operates on a “cash for keys” policy for the sale of equipment and
parts.
Both insured and uninsured debtors are subject to the Group’s credit policy. The Group’s credit policy requires each
new customer to be analysed individually for creditworthiness before the Group’s standard payment and delivery
terms and conditions are offered. The Group’s review includes external ratings, when available, and in some cases
bank references. Purchase limits are established for each customer according to the external rating and are
approved by the appropriate management level dependent on the size of the limit. In the instance that a customer
fails to meet the Group’s creditworthiness and the Group is unable to secure credit insurance, future transactions
with the customer will only be on a prepayment basis, or appropriate security such as a bank guarantee or letter of
credit.
Where commercially available the Group aims to insure the majority of rental customers that are not considered
either blue chip customers, subsidiaries of blue chip companies or Government. Blue chip customers are
determined as those customers who have a market capitalisation of greater than $750 million (2012: $750
million). The Australian business held insurance for the entire financial year ended 30 June 2013. The Indonesian
and Chilean businesses established insurance on its receivables in November 2011 and October 2012 respectively.
The Canadian business does not have credit risk insurance.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of
trade and other receivables. The main components of this allowance are a specific loss component that relates to
individually significant exposures. The specific loss component is made up of the insurance excess for insured
debts that have been classified as doubtful and uninsured customers that are classified as doubtful.
As at 30 June 2013 the Group’s doubtful debts provision was $16.8 million (2012: $2.1 million). The change in
provision for doubtful debts was $16.8 million during the financial year comprising the following:
•
•
•
$13.5 million related to contract disputes with two customers in Indonesia where the Company continued
invoicing in accordance with contract terms, after the equipment had been stood down. The Company is
continuing negotiations with the respective parties on these matters.
$0.7 million related to the unrecovered portion of a legal settlement with an Indonesian customer relating to
a prior period.
$2.6 million represents provision for doubtful debts in the ordinary course in Australia and Canada totalling
$1.7 million and $0.9 million respectively.
As at 30 June 2013 the Group recognised bad debt write-offs for a total amount of $2.1 million (2012: $11.1
million) of which $1.7 million related to two customers in the Indonesian business and $0.4 million related to one
customer in the Australian business. $1.3 million was provided for as doubtful debts at 30 June 2012.
The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectible,
based on historic payment behaviour and extensive analyses of the underlying customers’ credit ratings.
The Group held cash and cash equivalents of $5.8 million at 30 June 2013 (2012: $73.1 million), which represents
its maximum credit exposure on these assets. The cash and cash equivalents are held with bank and financial
institution counterparties which are rated greater than AA-.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
92
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Credit risk (continued)
Trade and other receivables (continued)
The Group also held derivative assets in relation to interest rate swaps and cross currency interest rate swaps of
$Nil (2012: $1.8 million) and $5.2 million (2012: $2.5 million) respectively at 30 June 2013, which represents its
maximum credit exposure on these assets. The interest rate swaps and cross currency interest rate swaps are
held with bank and financial institution counter parties which are rated greater than A-.
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region
was:
Consolidated
Gross
2013
$'000
Impairment
2013
$'000
Consolidated
Gross
2012
$'000
Impairment
2012
$'000
Australia
Asia
North America
South America
34,359
29,536
14,876
7,586
86,357
(1,675)
(13,503)
(1,592)
-
(16,770)
55,281
18,814
17,600
-
91,695
(412)
(933)
(744)
-
(2,089)
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
Insured
Blue Chip (including subsidiaries)
Other security
Uninsured
The aging of the Group’s trade receivables at the reporting date was:
Consolidated
Carrying amount
2013
$'000
2012
$'000
49,103
22,628
319
14,307
86,357
47,962
36,552
2
7,179
91,695
Consolidated
Consolidated
Gross
2013
$'000
Impairment
2013
$'000
Gross
2012
$'000
Impairment
2012
$'000
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61 days
19,311
26,625
15,213
25,208
86,357
(1,667)
-
(415)
(14,688)
(16,770)
35,614
39,491
5,896
10,694
91,695
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
(22)
(155)
(101)
(1,811)
(2,089)
93
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Credit risk (continued)
Trade and other receivables (continued)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 July
Bad debt written off
Change in provision for doubtful debts
Balance at 30 June
Consolidated
2013
$'000
2012
$'000
2,089
(2,053)
16,734
16,770
12,165
(11,083)
1,007
2,089
Collateral
Collateral is held for customers that are assessed to be a higher risk. At 30 June 2013 the Group held $Nil of bank
guarantees (2012: $2.8 million) and $0.3 million of prepayments (2012: $0.1 million).
Guarantees
Financial guarantees are generally only provided to wholly-owned subsidiaries or when entering into a premise
rental agreement. Details of outstanding guarantees are provided in note 29. At 30 June 2013 $75,000 guarantees
were outstanding (2012: $122,500).
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage
to the Group’s reputation.
The Group monitors working capital limits and employs maintenance planning and life cycle costing models to
price its rental contracts. These processes assist it in monitoring cash flow requirements and optimising cash
return in its operations. Typically the Group ensures that it has sufficient cash on demand to meet expected
operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the
potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
94
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Liquidity risk (continued)
The Group’s syndicated senior debt facility (debt facility) comprises a three year $200.0 million tranche, which
matures on 28 September 2015, a four year $125.0 million tranche which matures on 28 September 2016 and a
five year $125.0 million tranche which matures on 28 September 2017. The debt facility also comprises of one
year $22.1 million (2012: $22.1 million) working capital facility. The debt facility is a revolver. At year end the
undrawn portion of the debt facilities was $214.1 million (2012: $169.9 million). In May 2012, the Group issued
secured fixed interest notes in the United States Private Placement market (USPP) comprising US$140.0 million of
which US$40.0 million matures on 22 May 2019 and US$100.0 million which matures 22 May 2022. These notes
will remain fully drawn until maturity (refer note 24). The Group has finance lease facilities totalling $12.4 million
(2012: $15.7 million) which matures on 15 August 2015. The Group has also financed its insurance payments with
$0.5 million remaining at year end which matures in August 2013.
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements.
Consolidated
30 June 2013
Non-derivative financial
liabilities
Secured bank loans
Secured notes issue
Finance lease liabilities
Insurance financing
Working capital facility
Trade and other payables
Derivative financial
liabilities
Interest rate swaps used
for hedging asset/(liability)
Interest rate swaps used
for hedging asset/(liability)
Cross-currency interest rate swaps
used for hedging asset/(liability)
Forward exchange
contracts used for hedging:
Outflow
Inflow
Carrying
amount
$'000
Contract-
ual cash
flows
$'000
6 mths or
less
$'000
6-12 mths 1-2 years 2-5 years
$'000
$'000
$'000
More than
5 years
$'000
(249,646)
(147,702)
(12,358)
(464)
(5,256)
(41,846)
(457,272)
(283,689)
(214,075)
(13,696)
(464)
(5,256)
(41,846)
(559,026)
(5,645)
(3,832)
(2,181)
(464)
(5,256)
(40,562)
(57,940)
(5,645)
(3,832)
(2,181)
-
-
-
(11,658)
(11,289)
(7,665)
(4,362)
-
-
-
(23,316)
(261,110)
(22,994)
(4,973)
-
-
(1,284)
(290,361)
-
(175,752)
-
-
-
-
(175,752)
(1,700)
(1,844)
(1,578)
(161)
(148)
(1,063)
(1,434)
407
399
688
43
9
-
(2,937)
5,180
5,722
(422)
(262)
(854)
(5,306)
12,566
(20)
-
2,397
(9,477)
9,497
2,464
(9,477)
9,497
(1,573)
-
-
(24)
-
-
(314)
-
-
(5,254)
-
-
9,629
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at
significantly different amounts.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
95
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Liquidity risk (continued)
Consolidated
30 June 2012
Non-derivative financial
liabilities
Secured bank loans
Secured notes issue
Finance lease liabilities
Trade and other payables
Derivative financial
liabilities
Interest rate swaps used
for hedging asset/(liability)
Interest rate swaps used
for hedging asset/(liability)
Cross-currency interest rate swaps
used for hedging asset/(liability)
Forward exchange
contracts used for hedging:
Outflow
Inflow
Carrying
amount
$'000
Contract-
ual cash
flows
$'000
6 mths or
less
$'000
6-12 mths 1-2 years 2-5 years
$'000
$'000
$'000
More than
5 years
$'000
(299,920)
(139,992)
(15,697)
(64,296)
(519,905)
(324,327)
(201,990)
(18,058)
(64,296)
(608,671)
(6,372)
(3,491)
(2,181)
(64,296)
(76,340)
(6,372)
(3,491)
(2,181)
-
(12,044)
(249,059)
(6,982)
(4,362)
-
(260,403)
(62,524)
(20,946)
(9,334)
-
(92,804)
-
(167,080)
-
-
(167,080)
(5,608)
(5,725)
(1,902)
(1,998)
(1,589)
(236)
-
1,801
1,803
2,519
10,436
303
511
327
375
612
1,340
(779)
821
3,694
5,035
106
(7)
(1,189)
(6,339)
6,241
6,416
(6,339)
6,241
(1,186)
-
-
(1,296)
-
-
(156)
-
-
4,798
-
-
4,256
The gross inflows/(outflows) disclosed in the previous table represent the contractual undiscounted cash flows
relating to derivative financial liabilities held for risk management purposes and which are usually not closed out
prior to contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash
settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement,
e.g. forward exchange contracts.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
96
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while optimising
the return.
The Group enters into derivatives, and also incurs financial liabilities, in order to manage market risks. All such
transactions are carried out within the guidelines set by the Group’s hedging policy. Generally the Group seeks to
apply hedge accounting in order to manage volatility in profit or loss.
Currency risk
The Group is exposed to currency risk on revenue, expenditure, assets and borrowings that are denominated in a
currency other than the respective functional currencies of Group entities, primarily the Australian dollar (AUD),
but also the United States Dollars (USD) and Canadian Dollars (CAD). The currencies in which these transactions
primarily are denominated are AUD, USD, CAD, Euro dollars (EURO), Indonesian Rupiah (IDR), Chilean Peso (PSO)
and Japanese Yen (YEN).
The Group hedges all trade receivables and trade payables that are denominated in a currency that is not the
functional currency of the respective subsidiary exposed to the transaction, and is an amount greater than
$50,000. The Group uses forward exchange contracts to hedge this currency risk. Most of the forward exchange
contracts have maturities of less than 6 months.
In respect of other monetary assets and liabilities held in currencies other than the AUD, the Group ensures that
the net exposure is kept to an acceptable level by matching foreign denominated financial assets with matching
financial liabilities and vice versa.
Interest on borrowings from the syndicated debt facility is denominated in currencies that match the cash flows
generated by the underlying operations of the Group, primarily AUD, but also USD and CAD. This provides an
economic hedge without derivatives being entered into and therefore no application of hedge accounting.
The Group’s investments in its subsidiaries and their earnings for the year are not hedged as these currency
positions are considered long term in nature.
The Group’s foreign currency exposure denominated on the senior debt facility is not hedged to manage the risk
of breaching its syndicated debt facility limit of $450.0 million as the Group considers there to be appropriate
headroom for any adverse movement in exchange rates (refer note 25).
In May 2012 the Group issued US$140.0 million of notes in the USPP market of which US$20.0 million and
US$30.0 million of the 7 and 10 year maturities, respectively, were swapped back to AUD through the use of cross
currency interest rate swaps. As derivatives have been entered into, hedge accounting will apply to these
instruments. The remainder of the USD foreign exchange exposure at 30 June 2013 is expected to be offset by
financial assets denominated in the same currency providing an economic hedge without derivatives being
entered into. In addition, some of the Group’s subsidiaries operate in USD which further mitigates the USD
foreign currency exposure.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
97
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Exposure to currency risk
The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
30 June 2013
30 June 2012
USD
$'000
CAD
$'000
USD
$'000
CAD
$'000
Cash
Senior secured debt
Secured notes issued
Gross balance sheet exposure
Cross currency interest rate swap to
hedge the secured notes issued
Forecast purchases
Forward exchange contracts (1)
Net exposure
124
(15,000)
(43,802)
(58,678)
50,000
-
8,800
58,800
122
-
-
-
-
-
-
-
-
-
44,212
-
(94,336)
(50,124)
49,155
(4,471)
4,389
49,073
(1,051)
-
-
-
-
-
(1,108)
1,091
(17)
(17)
(1) Forecast purchases for which the forward exchange contracts were entered into are disclosed.
Trade payables does not include future purchase commitments denominated in foreign currencies. The
Group hedges these purchases in accordance with its hedging policy. The payable is not recognised until the
asset is received. The fair value of outstanding derivatives are recognised in the balance sheet at period end.
The following significant exchange rates applied during the year:
CAD
USD
EURO
IDR
YEN
CLP
GBP
Average rate
2012
2013
Reporting date spot rate
2013
2012
1.0306
1.0266
0.7947
9,885
89.70
491.47
0.6545
1.0342
1.0319
0.7704
9,231
81.12
-
-
0.9701
0.9266
0.7100
9,254
91.58
467.24
0.6075
1.0423
1.0172
0.8084
9,545
80.34
-
-
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
98
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Sensitivity analysis
A strengthening of the Australian dollar, as indicated below, against the following currencies at 30 June 2013
would have affected the measurement of financial instruments denominated in a foreign currency and
increased/(decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign
currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting
period. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is
performed on the same basis for 2012, as indicated below:
Consolidated
Strengthening
Weakening
Equity
$'000
Profit or loss
$'000
Equity
$'000
Profit or loss
$'000
(703)
35
(2,398)
-
(78)
-
(90)
180
860
(43)
96
-
2,398
-
90
(180)
30 June 2013
USD (10 percent movement)
CAD (10 percent movement)
30 June 2012
USD (10 percent movement)
CAD (10 percent movement)
Interest rate risk
In accordance with the Board’s policy the Group is required to maintain a range between a maximum of 70% and
a minimum of 30% of its exposure to changes in interest rates on borrowings on a fixed rate basis, taking into
account assets with exposure to changes in interest rates for an average tenure of no less than 2 years into the
future. This is achieved by entering into interest rate swaps and the issue of fixed interest notes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
99
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Profile
At the end of the reporting date the interest rate profile of the Group’s interest-bearing financial instruments as
reported to the management of the Group was:
Variable rate instruments:
Cash at bank
Working capital facility
Interest bearing liabilities
Effective interest rate swaps to hedge interest rate risk
Australian dollars (USPP US$50m)
United States dollars (USPP US$40m)
Australian dollars (A$80M)
Canadian dollars C$80M (2012: C$120M)
United States dollars USD$15M (2012: USD$15M)
Fixed rate instruments:
Interest bearing liabilities (notes)
Interest bearing finance leases
Insurance financing
Note
17
24
24
Consolidated
2013
$'000
2012
$'000
5,754
(5,256)
(252,746)
5,180
(1,063)
(1,061)
(557)
(82)
(249,831)
(149,557)
(12,358)
(464)
(162,379)
73,091
-
(299,920)
2,519
1,801
(2,607)
(2,827)
(174)
(228,117)
(141,807)
(15,697)
-
(157,504)
The Group classifies its debt related derivatives into three categories being floating-to-fixed interest rate swaps,
fixed-to-floating interest rate swaps and cross currency interest rate swaps.
Cash flow hedges and fair value hedges
The floating-to-fixed interest rate swaps (hedging instrument) are designated as cash flow hedges through equity.
Therefore a change in interest rates at the reporting date would not affect profit or loss to the extent they are
effective hedges. The interest rate swaps are designated to hedge the exposure to variability in cash flows
attributed to market interest rate risk.
The fixed-to-floating interest rate swaps (hedging instrument) are accounted for as fair value hedges. Therefore a
change in interest rates at the reporting date affects profit or loss. The interest rate swaps are designated to
hedge the exposure to liquidity risk through the benchmark interest rate.
The cross currency interest rate swaps (hedging instrument) are accounted for as both cash flow hedges and fair
value hedges. The cross currency interest rate swaps are designated to hedge the exposure to variability in
foreign exchange rates and exposure to liquidity risk through the benchmark interest rate.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
100
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Fair value sensitivity analysis for fixed rate instruments
The Group accounts for certain fixed rate financial liabilities at fair value through profit or loss, and the Group
designates derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model.
Therefore a change in interest rates at the reporting date would affect profit or loss and not equity on these
instruments.
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or loss
by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates,
remain constant.
Fair Value Hedges
30 June 2013
Fixed rate instruments (USPP)
Interest rate swap
Cash flow sensitivity (net)
30 June 2012
Fixed rate instruments (USPP)
Interest rate swap
Cash flow sensitivity (net)
Profit or loss
100bp
increase
$'000
100bp
decrease
$'000
Equity
100bp
increase
$'000
100bp
decrease
$'000
8,241
(8,241)
-
(6,723)
6,723
-
7,996
(7,996)
-
(7,996)
7,996
-
-
-
-
-
-
-
-
-
-
-
-
-
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
101
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Detailed below is the profit and loss impact of fair value hedges during the year.
Financial Instrument
Floating to fixed
- Swap
- Hedged Item (debt)
Fixed to floating
- Swap
- Hedged item (debt)
Cross currency interest rate swap
- Swap
- Hedged item (debt)
Net profit and loss impact before tax
Profit or loss
2013
$'000
2012
$'000
-
-
-
-
(1,063)
1,085
1,801
(1,875)
(472)
448
2,519
(2,299)
(2)
146
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and
profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular foreign
currency rates, remain constant. The analysis is performed on the same basis for 2012.
Cash Flow Hedges
30 June 2013
Variable rate instruments
Interest rate swap
Cash flow sensitivity (net)
30 June 2012
Variable rate instruments
Interest rate swap
Cash flow sensitivity (net)
Profit or loss
100bp
increase
$'000
100bp
decrease
$'000
Equity
100bp
increase
$'000
100bp
decrease
$'000
522
-
522
(708)
-
(708)
(543)
-
(543)
708
-
708
-
(1,181)
(1,181)
-
458
458
-
(2,139)
(2,139)
-
2,139
2,139
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
102
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Fair values
Interest rates used for determining fair value
The range of interest rates used to discount estimated cash flows, when applicable, are based on the Government
yield curve at the reporting date plus an adequate credit spread excluding margins, and were as follows:
Derivatives
Loans and borrowings
USPP
Leases
2013
2012
0.3%
0.2%
4.6%
7.2%
-
-
-
-
4.2%
3.6%
5.3%
7.2%
0.3%
0.2%
4.6%
7.2%
-
-
-
-
5.0%
5.0%
5.3%
7.2%
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet,
are as follows:
30 June 2013
30 June 2012
Carrying
Amount
$'000
Fair
Value
$'000
Carrying
Amount
$'000
Fair
Value
$'000
Note
Assets carried at fair value
Interest rate swaps used for hedging
Forward exchange contracts used for hedging
Assets carried at amortised cost
Receivables
Cash and cash equivalents
Liabilities carried at fair value
Secured notes issue (USD $90m)
Interest rate swaps used for hedging
Forward exchange contracts used for hedging
Liabilities carried at amortised cost
Secured bank loans
Secured notes issue (USD $50m)
Insurance financing
Finance lease liabilities
Trade and other payables
19
19
18
17
24
19
19
24
24
24
23
The basis for determining fair values is disclosed in note 5.
5,180
-
5,180
5,180
-
5,180
4,320
99
4,419
4,320
99
4,419
97,073
5,754
102,827
97,073
5,754
102,827
99,009
73,091
172,100
99,009
73,091
172,100
(94,403)
(2,763)
(20)
(97,186)
(95,596)
(2,763)
(20)
(98,379)
(91,485)
(5,608)
-
(97,093)
(92,652)
(5,608)
-
(98,260)
(249,646)
(53,299)
(464)
(12,358)
(41,846)
(357,613)
(252,746)
(53,961)
(464)
(14,181)
(41,846)
(363,198)
(299,920)
(48,507)
-
(15,697)
(69,906)
(434,030)
(301,980)
(51,473)
-
(18,058)
(69,906)
(441,417)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
103
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Fair value hierarchy
All the Group’s financial instruments carried at fair value would be categorised at level 2 in the fair value
hierarchy as their value is based on inputs other than the quoted prices that are observable for these
assets/(liabilities), either directly or indirectly.
Capital management
Underpinning Emeco’s strategic framework is consistent value creation for shareholders. Central to this is the
continual evaluation of the Company’s capital structure to ensure it is optimised to deliver value to shareholders.
The Board’s policy is to maintain diversified, long-term sources of funding to maintain investor, creditor and
market confidence and to support the future growth of the business. This policy is being achieved through
optimising the mix of debt and equity to match the Company’s requirements and through a blended maturity
profile of employing a mixture of 3 year, 4 year and 5 year tranches with a syndicate of investment grade financial
institutions. The issue of US$140.0 million notes in the USPP market diversifies the Group’s source of debt funding
and extends the Group’s debt maturity profile with the notes being tranches of 7 and 10 years.
The Board of Directors also evaluates and monitors the level of distributions to ordinary shareholders in the form
of dividends or other capital initiatives such as the payment of dividends in FY13 and the Board approved an on-
market buyback of 5% (31,561,879) of the Company’s shares for consideration of $16.9 million.
Historically, the Board maintained a balance between higher returns possible with higher levels of borrowings and
the security afforded by a sound capital position. However, given current market condition, the Board seeks to
reduce the levels of borrowings to maintain a strong capital position and protect the gearing ratio. Throughout
the year the Group monitors its gearing ratio determined as total debt excluding the effects of hedge accounting
and fair value adjustments over the last twelve months divided by normalised EBITDA. The gearing ratio is
targeted to be at a level of less than 3.0 times as defined by the Company’s banking covenant. During the year
the gearing ratio remained within the range of 1.7 times to 2.5 times (2012: 1.4 – 1.8 times).
The Company’s primary return metric is return on capital (ROC), which the Group defines as earnings before
interest and tax (EBIT) divided by Invested Capital defined as the average over the period of equity, plus interest
bearing liabilities, less cash and cash equivalents. The Group’s ROC for the year was 4.2% (2012: (13.0%)). This
includes non-recurring items of $29.2 million (2012: $1.1 million) (after tax). Had the non-recurring items not
been included the Group EBIT return on capital for the year would have been 7.1% (2012: 13.2%).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
104
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
6 Financial instruments (continued)
Market risk (continued)
Capital management (continued)
The Group’s return on invested capital at the end of the reporting period was as follows:
Consolidated
2013
$'000
2012
$'000
EBIT (for continuing and discontinued operations)
44,858
124,566
Average invested capital
1,066,423
955,595
EBIT return on capital at 30 June
4.2%
13.0%
In order to satisfy potential future obligations under its employee share plans the Group purchases, via an
employee share trust, its own shares on market. The quantum of these purchases depends on the number of
securities that have been issued under its employee share plans. The purchase of shares by the employee share
trust is done on a periodic basis by Emeco’s share registry service provider acting as agent for the trustee of the
employee share trust.
There have been no changes to externally imposed capital restrictions or the Board’s approach to capital
management during the year other than referred to above.
7 Other income
Net profit on sale of non current assets (1)
Sundry income (2)
Consolidated
2013
$'000
2012
$'000
1,999
1,353
3,352
3,503
397
3,900
(1)
(2)
Included in net profit on the sale of non-current assets is the sale of rental equipment. The gross proceeds
from the sale of this equipment in 2013 is $49.8 million (2012: $35.0 million).
Included in sundry income are fees charged on overdue accounts, bad debts recovered and procurement fees
on machines sourced for third parties.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
105
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
8
Profit before income tax expense for continuing operations
Profit before income tax expense
has been arrived at after charging/
(crediting) the following items:
Cost of sale of machines and parts
Cost of sales inventory on rent
Impairment of tangible assets:
- inventory
- property, plant and equipment
Employee expenses:
- superannuation
Other expenses:
- bad debts (1)
- doubtful debts/(reversal) (2)
- insurance
- motor vehicles
- rental expense
- safety
- travel and subsistence expense
- telecommunications
- workshop consumables, tooling and labour
- other expenses
Depreciation of:
- buildings
- plant and equipment - owned
- plant and equipment - leased
- furniture fittings and fixtures
- office equipment
- motor vehicles
- leasehold improvements
- sundry plant
Amortisation of:
- other intangibles
Impairment of:
- goodwill
Consolidated
2013
$'000
2012
$'000
Note
20
20
22
28,953
-
8,664
3,452
12,116
3,424
2,053
13,108
4,347
4,370
4,015
1,664
3,239
1,911
3,557
10,142
48,406
957
103,953
3,167
187
543
1,649
548
1,543
112,547
68,887
1,478
1,277
210
1,487
4,839
11,083
(10,348)
3,616
4,125
3,574
1,612
3,021
1,718
4,732
8,787
31,920
1,732
126,143
3,810
140
445
1,040
680
1,480
135,470
192
217
17,844
18,036
-
217
Total depreciation, amortisation and impairment of goodwill
130,583
135,687
(1) $1.7 million of the $2.1 million bad debt expense in FY13 related to two debtors in the Indonesian business
of which $1 million was provided for as a doubtful debt in FY12 (refer note 6). $10.9 million of the $11.1
million bad debt expense in FY12 related to two debtors in the Indonesian business that was provided for as
a doubtful debt in FY11.
(2) Included in the movement of the provision for Doubtful debts is $13.5 million related to contract disputes
with two customers in Indonesia where the Company continued invoicing in accordance with contract
terms, after the equipment had been stood down. The Company is continuing negotiations with the
respective parties on these matters.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
106
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
8
Profit before income tax expense for continuing operations (continued)
Financial expenses:
- interest expense
- ineffective hedge expense/(reversal)
- amortisation of debt establishment costs
- write off previous facility costs
- other facility costs
Financial income:
- interest income
Net financial expenses
Net foreign exchange (gain)/loss
9
Auditor’s remuneration
Audit services
Auditors of the Company
KPMG Australia:
- audit and review of financial reports
Overseas KPMG Firms:
- audit and review of financial reports
Other services
Auditors of the Company
KPMG Australia:
- taxation services (1)
Overseas KPMG Firms:
- taxation services
Consolidated
2013
$'000
2012
$'000
24,926
32
1,141
1,910
2,214
30,223
21,451
3
1,180
-
2,141
24,775
(1,449)
28,774
(361)
24,414
(235)
(416)
Consolidated
2013
$
2012
$
458,300
441,200
195,536
653,836
181,123
622,323
174,016
192,280
134,896
308,912
64,841
257,121
962,748
879,444
(1) The increase in taxation services during FY12 represents the taxation advice relating to the Group’s entry
into the Chile market. It is also due to the taxation advice required for expatriate employees participating
in the Group’s employee share scheme.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
107
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
10 Taxes
a. Recognition in the income statement
Current tax expense:
Current year
Adjustments for prior years
Deferred tax expenses:
Origination and reversal of temporary differences
Tax expense
Tax expense from continuing operations
Tax expense/(benefit) from discontinued operations
Total tax expense
b. Current and deferred tax expense recognised directly in equity
Share purchase costs
Tax recognised in other comprehensive income
Consolidated
Note
2013
$'000
2012
$'000
27,302
(130)
27,172
(17,092)
(17,092)
10,080
10,080
-
10,080
36,784
82
36,866
(6,460)
(6,460)
30,406
30,434
(28)
30,406
12
14
Consolidated
2013
$'000
2012
$'000
374
374
641
641
Consolidated
2013
Tax
(expense)
benefit
$'000
Net of
tax
$'000
Before
Tax
$'000
Consolidated
2012
Tax
(expense)
benefit
$'000
Net of
tax
$'000
-
-
(1,697)
(1,697)
16,731
-
1,697
18,428
3,252
156
(102)
3,306
-
-
48
48
3,252
156
(54)
3,354
Before
Tax
$'000
16,731
-
3,394
20,125
Foreign currency translation differences for
foreign operations
FCTR of discontinued operations disposed (1)
Cash flow hedges
(1) FCTR – transfer of Foreign Currency Translation Reserve (FCTR) from equity reserve to profit upon foreign
operations of the Group being disposed.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
108
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
10 Taxes (continued)
(c) Numerical reconciliation between tax expense and pre tax net profit/(loss)
Prima facie tax expense calculated
at 30% on net profit
Increase/(decrease) in income tax expense due to:
Effect on tax rate in foreign jurisdictions
Current year losses for which no deferred tax asset
was recognised
Bad debt expense
Superannuation adjustment
Goodwill impairment
Tangible asset impairment
Sundry
Under/(over) provided in prior years
Tax expense
Consolidated
2013
$'000
2012
$'000
4,825
30,122
(1,205)
(286)
53
-
-
5,353
938
246
(130)
10,080
3
294
366
-
-
(175)
82
30,406
11 Current tax assets and liabilities
The current tax asset for the Group of $13,940,000 (2012: $563,000) represents income taxes and withholding tax
recoverable in respect of prior periods and that arise from payment of taxes in excess of the amount due to the
relevant tax authority. The current tax liability for the Group of $Nil (2012: $14,100,000) represents the amount
of income taxes payable in respect of current and prior financial periods.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
109
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
12 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
Property, plant and equipment
Intangible assets
Receivables
Accrued revenue
Inventories
Payables
Derivatives - hedge payable
Derivatives - hedge receivable
Interest-bearing loans and borrowings
Employee benefits
Equity - capital raising costs
Provisions
Tax losses carried forward
Tax (assets)/liabilities
Set off of tax
Net tax (assets)/liabilities
Movement in deferred tax balances
Property, plant and equipment
Intangible assets
Receivables
Inventories
Payables
Derivatives - hedge payable
Derivatives - hedge receivable
Interest-bearing loans and borrowings
Employee benefits
Equity - capital raising costs
Provisions
Tax losses carried forward
Assets
2013
$'000
2012
$'000
Liabilities
2013
$'000
2012
$'000
Net
2013
$'000
2012
$'000
(16)
(30)
(8,481)
-
(3)
(1,280)
(510)
-
(2,081)
(1,475)
(24)
(15)
(3,473)
(17,388)
17,388
-
(84)
(37)
(4,124)
-
(4)
(6,707)
(1,683)
-
(1,391)
(1,710)
(8)
(110)
(3,272)
(19,130)
19,020
(110)
59,060
-
2,781
215
571
-
-
1,695
3,054
171
-
-
-
67,547
(17,388)
50,159
40,881
-
222
-
1,365
-
-
1,296
6,358
4
-
-
-
50,126
(19,020)
31,106
59,044
(30)
(5,700)
215
568
(1,280)
(510)
1,695
973
(1,304)
(24)
(15)
(3,473)
50,159
-
50,159
40,797
(37)
(3,902)
-
1,361
(6,707)
(1,683)
1,296
4,967
(1,706)
(8)
(110)
(3,272)
30,996
-
30,996
Consolidated
Balance
1 July 12
$'000
Recognised
in profit
or loss
$'000
Recognised
directly
in equity
$'000
Recognised
in other
comprehensive
income
$'000
Balance
30 June 13
$'000
40,797
(37)
(3,902)
1,361
(6,707)
(1,683)
1,296
4,967
(1,706)
(8)
(110)
(3,272)
30,996
18,247
7
(1,583)
(793)
5,427
-
(125)
(3,994)
402
(390)
95
(201)
17,092
-
-
-
-
-
-
-
-
-
374
-
-
374
-
-
-
-
-
1,173
524
-
-
-
-
-
1,697
59,044
(30)
(5,485)
568
(1,280)
(510)
1,695
973
(1,304)
(24)
(15)
(3,473)
50,159
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
110
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
12 Deferred tax assets and liabilities (continued)
Movement in deferred tax balances
Consolidated
Balance
1 July 11
$'000
Recognised
in profit
or loss
$'000
Recognised
directly
in equity
$'000
Recognised
in other
comprehensive
income
$'000
Balance
30 June 12
$'000
33,642
(17)
(2,962)
1,141
(3,860)
(1,709)
-
4,151
(1,525)
(30)
(2,871)
(2,017)
23,943
7,155
(20)
(940)
220
(2,847)
-
1,370
816
(181)
(619)
2,761
(1,255)
6,460
-
-
-
-
-
-
-
-
-
641
-
-
641
-
-
-
-
-
26
(74)
-
-
-
-
-
(48)
40,797
(37)
(3,902)
1,361
(6,707)
(1,683)
1,296
4,967
(1,706)
(8)
(110)
(3,272)
30,996
Property, plant and equipment
Intangible assets
Receivables
Inventories
Payables
Derivatives - hedge payable
Derivatives - hedge receivable
Interest-bearing loans and borrowings
Employee benefits
Equity - capital raising costs
Provisions
Tax losses carried forward
Unrecognised deferred tax assets
The following deferred tax assets have not been
brought to account as assets:
Tax losses
Unutilised tax losses are in the United Kingdom, United States and Europe.
Consolidated
2013
$'000
2012
$'000
18,308
16,530
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
111
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
13 Capital and reserves
Share capital
599,675,707 (2012: 631,237,586 ) ordinary shares, fully paid
Acquisition reserve
Consolidated
2013
$'000
2012
$'000
669,503
(75,887)
593,616
686,311
(75,887)
610,424
Share buy back
On 23 August 2012 the Board announced an on market share buy back program to acquire up to 5% of shares on
issue. The share buy back was completed on 23 November 2012 having acquired a total of 31,561,879 shares at
an average price of 53.4 cents. As a result of all acquired shares being cancelled, shares on issue at 30 June 2013
totalled 599,675,707 (30 June 2012: 631,237,586).
Terms and conditions
Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled
to one vote per share at shareholders' meetings. Shares have no par value.
In the event of winding up of the Company, the ordinary shareholder ranks after all other creditors are fully
entitled to any proceeds of liquidation.
Reserve of own shares
The reserve of own shares comprises of shares purchased on market to satisfy the vesting of shares and rights
under the LTIP. Shares that are forfeited under the Company’s MISP due to employees not meeting the service
vesting requirement will remain in the reserve. As at 30 June 2013 the Company held 16,804,359 treasury
shares (2012: 17,943,211) in satisfaction of the employee share plans.
Foreign Currency Translation Reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial
statements of foreign operations.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in fair value of hedging
instruments used in cash flow hedges pending subsequent recognition of hedged cash flows.
Share based payment reserve
The share based payment reserve comprises the expenses incurred from the issue of the Company’s securities
under its employee share/option plans (refer note 3(j)(v)).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
112
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
13 Capital and reserves (continued)
Dividends
(i) The following dividends were declared and paid by the Group:
2013
Final 2012 ordinary
Interim 2013 ordinary
Cents
per share
Total
amount
$'000
Franked/
unfranked
Date of
payment
3.5
2.5
22,154
14,992
37,146
Franked
Franked
28 September 2012
27 March 2013
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
Subsequent to 30 June 2013
The Directors have declared that no Final dividend will be paid and no amount has been paid or declared by
way of dividends since March 2013, or to the date of this report.
The following dividends were declared and paid by the Group in the prior year:
2012
Final 2011 ordinary
Interim 2012 ordinary
Cents
per share
Total
amount
$'000
Franked/
unfranked
Date of
payment
3.0
2.5
18,937
15,781
34,718
Franked
Franked
30 September 2011
29 March 2012
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
113
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
13 Capital and reserves (continued)
Dividends (continued)
(ii)
Franking account
The Company
2013
$'000
2012
$'000
Dividend franking account
30% franking credits available to shareholders of Emeco Holdings Limited
for subsequent financial years
29,391
59,733
The above available amounts are based on the balance of the dividend franking account at year-end
adjusted for:
(a)
(b)
(c)
(d)
franking credits that will arise from the payment of current tax liabilities and recovery of current tax
receivables;
franking debits that will arise from the payment of dividends recognised as a liability at the year end;
franking credits that will arise from the receipt of dividends recognised as receivables by the tax
consolidated group at the year-end; and
franking credits that the entity may be prevented from distributing in subsequent years.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to
declare dividends. The impact on the dividend franking account of dividends proposed after the balance
sheet date but not recognised as a liability is to reduce it by $Nil (2012: $9,468,000). In accordance with
the tax consolidation legislation, the Company as the head entity in the Australian tax-consolidated group
has also assumed the benefit of $29,391,000 (2012: $59,733,000) franking credits.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
114
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
14 Discontinued operations
As at 30 June 2013 the Victorian Rental business was no longer in operation.
As at 30 June 2012 the discontinued operations consisted of the Victorian Rental business and Emeco Europe.
The Victorian Rental business had significantly decreased its assets and held minimal assets available for sale.
The Emeco Europe business was materially disposed of in FY12 and was presented as a discontinued operation for
this prior comparative period. During FY13, the Group reclassified the Emeco Europe discontinued operations to
continuing operations, which is now a dormant entity.
Losses of discontinued operations
Revenue
Other income
Direct costs
Profit/(loss) on sale of assets
Impairment of fixed assets
Other expenses
Employee expenses
FCTR on discontinued operations disposed
EBITDA
Depreciation
EBIT
Income tax
Loss for the period
Earnings per share
2013
$'000
2012
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
523
10
(208)
220
(365)
(24)
(113)
(156)
(113)
(142)
(255)
28
(227)
0.00
The loss from discontinued operation of $Nil (2012: loss of $227,000) is attributable entirely to the owners of the
Company.
Cash flows from/(used in) discontinued operation
Net cash used in operating activities
Net cash from investing activities
Net cash from financing activities
Net cash from (used in) discontinued operation
2013
$'000
2012
$'000
-
-
-
-
(282)
7,569
(7,349)
(62)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
115
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
15 Disposal groups and non-current assets held for sale
At 30 June 2013 the disposal groups and non-current assets held for sale comprised assets of $7.2 million (2012:
$0.4 million) being Australian land and buildings. The Group has engaged real estate agents to actively market
these assets and they are expected to be disposed of within 12 months. These assets were impaired by $3.04
million and are disclosed at its fair value less costs to sell.
Assets classified as held for sale
Property, plant and equipment - land and building
16 Segment reporting
2013
$'000
2012
$'000
7,200
7,200
405
405
The Group has four reportable segments, as described below, which are the Group’s strategic business units. The
strategic business units offer different products and services, and are managed separately because they require
different operational strategies for each geographic region. For each of the strategic business units, the
Managing Director and Board of Directors review internal management reports on a monthly basis. The following
summary describes the operations in each of the Group’s reportable segments:
Australia
Indonesia
Canada
Chile
Provides a wide range of earthmoving equipment and maintenance services to
customers in Australia.
Provides a wide range of earthmoving equipment and maintenance service to
customers in Indonesia.
Provides a wide range of earthmoving equipment and maintenance services to
customers who are predominately within Canada.
Provides a wide range of earthmoving equipment and maintenance service to
customers in Chile.
Information regarding the results of each reportable segment is included below. Performance is measured based
on segment profit before interest and income tax as included in the internal management reports that are
reviewed by the Group’s Managing Director and Board of Directors. Segment profit before interest and income
tax is used to measure performance as management believes that such information is the most relevant in
evaluating the results of certain segments relative to other entities that operate within these industries. Inter-
segment pricing is determined on an arm’s length basis.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
116
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
16 Segment reporting (continued)
Information about reportable segments 2013
Australia
Indonesia
Canada
Chile
Victorian
Other
Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Rental (1)
(discont'd)
External revenues
Inter-segment revenue
Depreciation
Reportable segment profit/(loss)
before interest and income tax
Other material non-cash items:
Impairment of receivables
Impairment on property, plant and
equipment
Impairment of intangible assets
Reportable segment assets
Capital expenditure
Reportable segment liabilities
267,829
27,156
60,316
5,102
94,179
17,198
17,366
3,182
(70,317)
(14,390)
(23,131)
(4,709)
45,375
-
(8,162)
23,340
6,281
(1,675)
(13,503)
(990)
(3,257)
-
(116)
(17,844)
(79)
-
-
-
-
607,637
135,011
233,661
143,477
(56,295)
(37,369)
(14,363)
(23,665)
(63,995)
(12,887)
(32,045)
(16,671)
-
-
-
-
-
-
-
-
-
-
-
285
-
439,690
52,923
(112,547)
(399)
-
66,435
-
(602)
(16,770)
-
-
(3,452)
(17,844)
482
1,120,268
-
(158,318)
(448)
(99,420)
Information about reportable segments 2012
Australia
Indonesia
Canada
Chile
Victorian
Other
Total
Rental (1)
(discont'd)
(discont'd)
$'000
$'000
$'000
$'000
$'000
$'000
$'000
448,042
10,896
49,931
67,197
1,853
-
(100,515)
(15,223)
(19,732)
-
-
-
505
-
(142)
-
-
565,675
18
12,767
(135,612)
118,363
-
9,955
16,155
(597)
(92)
(480)
143,304
-
(412)
(934)
(195)
(203)
-
(7)
-
-
-
-
-
-
746,077
141,978
248,119
6,278
(138,058)
(72,645)
(118,409)
(5,203)
(56,384)
(36,980)
(20,853)
(5,784)
-
(548)
(2,089)
(365)
-
405
-
-
-
-
(575)
-
169
1,143,026
-
(334,315)
(119)
(120,120)
External revenues
Inter-segment revenue
Depreciation
Reportable segment profit/(loss)
before interest and income tax
Other material non-cash items:
Impairment of receivables
Impairment on property, plant and
equipment
Impairment of intangible assets
Reportable segment assets
Capital expenditure
Reportable segment liabilities
(1) Victorian Rental forms part of Australia segment but has been separated out as it was discontinued in 30
June 2012.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
117
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
16 Segment reporting (continued)
Reconciliation of reportable segment revenues, profit or loss, assets and liabilities and other material items
Revenues
Total revenue for reportable segments
Elimination of inter-segment revenue
Elimination of discontinued operations
Consolidated revenue from continuing operations
Profit or loss
Total EBIT for reportable segments
Elimination of discontinued operations
Unallocated amounts:
Other corporate expenses
Net interest expense
Consolidated profit before income tax from continuing
operations
Assets
Total assets for reportable segments
Unallocated assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated liabilities
Consolidated total liabilities
Other material items 2013
Capital expenditure
Depreciation
Other material items 2012
Capital expenditure
Depreciation
2013
$'000
2012
$'000
492,612
(52,922)
-
439,690
66,435
-
(21,577)
(28,774)
578,442
(12,767)
(505)
565,170
143,304
254
(18,738)
(24,414)
16,084
100,406
1,120,268
5,754
1,126,022
1,143,026
73,091
1,216,117
99,420
415,426
514,846
120,120
455,609
575,729
Reportable
segment Discontinued Consolidated
totals
$'000
operations
$'000
Total
$'000
(158,318)
(112,547)
-
-
(158,318)
(112,547)
(334,315)
(135,612)
-
142
(334,315)
(135,470)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
118
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
16 Segment reporting (continued)
Geographical information
Operating segments are the same as the geographical segments. Refer to the segment table for the geographical
segments.
Major customer
In the year ended 30 June 2013 the Group had no single major customer that would amount to 10% or more of
the Group’s total revenues.
17
Cash assets
Cash at bank
18
Trade and other receivables
Current
Trade receivables
Less: Impairment of receivables
VAT/GST receivable
Other receivables
Non-Current
Other receivables
Consolidated
2013
$'000
2012
$'000
5,754
73,091
Consolidated
2013
$'000
2012
$'000
86,357
(16,770)
69,587
21,100
6,386
97,073
856
856
91,695
(2,089)
89,606
-
9,403
99,009
1,057
1,057
The Group’s exposure to credit risks, currency risks and impairment losses associated with trade and other
receivables are disclosed in note 6.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
119
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
19
Derivatives
Current Assets
Forward exchange contract
Interest rate swaps
Cross currency interest rate swaps
Non Current Assets
Interest rate swaps
Cross currency interest rate swaps
Current Liabilities
Forward exchange contract
Interest rate swaps
Non Current Liabilities
Interest rate swaps
20
Inventories
Equipment and parts - at cost
Work in progress - at cost
Consumables, spare parts - at cost
Total at cost
Equipment and parts - at NRV (1)
Total inventory
Balance at 1 July
Additions
Impairment loss on inventory (1)
Cost of sales inventory on rent (1)
Disposals
Balance at 30 June
Consolidated
2013
$'000
2012
$'000
-
-
691
691
-
4,489
4,489
(20)
(1,261)
(1,281)
(1,502)
(1,502)
99
308
369
776
1,493
2,150
3,643
-
(2,239)
(2,239)
(3,369)
(3,369)
Consolidated
2013
$'000
2012
$'000
1,130
4,496
2,851
8,477
6,281
14,758
35,114
9,476
(8,664)
-
(21,168)
14,758
26,797
2,730
2,729
32,256
2,858
35,114
48,569
44,758
(1,277)
(1,478)
(55,458)
35,114
(1)
During the year ended 30 June 2013 the write-down of inventories to net realisable value (NRV)
recognised as an expense in the consolidated statement of profit or loss and other comprehensive
income amounted to $8,664,000 (2012: $2,755,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
120
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
21
Intangible assets and goodwill
Goodwill
Carrying amount at the beginning of the year
Impairment of goodwill
Effects of movement in foreign exchange
Contract intangibles - at cost
Less: Accumulated amortisation
Other intangibles - at cost
Less: Accumulated depreciation
Consolidated
2013
$'000
2012
$'000
173,636
(17,844)
2,008
157,800
172,830
-
806
173,636
712
(712)
-
1,306
(1,030)
276
712
(712)
-
2,062
(1,750)
312
Total intangible assets
158,076
173,948
Amortisation and impairment losses
The amortisation charge and impairment of goodwill are recognised in the following line item in the income
statement:
Consolidated
2013
$'000
2012
$'000
Amortisation expense
Impairment of goodwill
Total expense for the year for continuing operations
192
17,844
18,036
217
-
217
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
121
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
21
Intangible assets and goodwill (continued)
Impairment tests for cash generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s geographical operating divisions.
The aggregate carrying amounts of goodwill allocated to each unit are as follows:
Australian rental
Canada rental
Asian rental
Total rental
Consolidated
2013
$'000
2012
$'000
151,744
6,056
-
157,800
151,745
5,637
16,255
173,637
The Group has determined the recoverable amount of its cash generating units (CGU) using a value in use
methodology (2012: value in use) which is based on discounted cash flows for five years plus a terminal value.
Impairment testing is intended to assess the recoverable amount of both tangible and intangible assets. As such,
although the Chile Rental CGU has nil goodwill, impairment testing has been performed for this CGU. Nominal
post tax discount rates have been derived as a weighted cost of equity and debt. Cost of equity is calculated
using country specific ten year bond rates plus an appropriate market risk premium. The cost of debt is
determined using the appropriate CGU three year swap rate plus a margin for three year tenor debt of
equivalently credit rated businesses at 30 June 2013. The three year swap rates were used as the base rate to
reflect the relative illiquidity for longer tenure debt in the current market. The nominal post tax discount rates
for determining the rental CGU’s valuations range between 9.2% and 12.8% (2012: 7.4% and 11.7%). For future
cashflows of each CGU, the revenue growth in the first year of the business reflects the best estimate for the
coming year taking account of macroeconomic, business model, strategic and market factors. Growth rates for
subsequent years are based on Emeco’s five year outlook taking into account all available information at this
current time and are subject to change over time. Compound annual growth rates (CAGR) over the five years of
the forecast range between negative 0.5% and 1.0% (2012: 2.0% and 10%). The range excludes the Chilean CGU
given its full first year of operation will be FY14.
30 June 2013 impairment testing which resulted in the estimated recoverable amount of a CGU exceeding its
carrying amount are as follows:
Amount by which CGU recoverable
amount exceeds its carrying amount
(in $ millions)
6.2
32.7
7.5
Australian rental
Canada rental
Chile rental
Impairment loss
For the interim period ended 31 December 2012, impairment testing indicated the Indonesian Rental CGU was
not impaired. Following capital investment in Indonesia during FY12, the business suffered significant utilisation
decline during the year which
in
FY14. Consequently, annual impairment testing conducted at 30 June 2013 has identified a total goodwill
impairment charge of $17.8 million for the financial year ended 30 June 2013. The impairment charge is included
in the Consolidated Statement of Profit or Loss and Other Comprehensive Income (page 70). Refer to note 2(c).
into revenue growth of negative 75%
is expected to translate
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
122
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
21
Intangible assets and goodwill (continued)
Impairment testing sensitivities
The CGU valuations are sensitive to changes in the discount rate and underlying fleet utilisation assumptions for
cashflow forecasts and terminal value. The following table shows the amount by which these two assumptions
would need to change individually in order for the estimated recoverable amount of the CGU to be equal to the
carrying amount:
CGU
Australian rental
Canada rental
Chile rental
Change required for carrying amount to equal the
recoverable amount (in percent)
Discount Rate %
0.1
1.4
0.9
Utilisation %
(0.4)
(7.3)
(3.9)
22
Property, plant and equipment
Freehold land and buildings - at cost
Less: Accumulated depreciation
Leasehold improvements at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less : Accumulated depreciation
Leased plant and equipment - at capitalised cost
Less : Accumulated depreciation
Furniture, fixtures and fittings - at cost
Less : Accumulated depreciation
Office equipment - at cost
Less : Accumulated depreciation
Motor vehicles - at cost
Less : Accumulated depreciation
Sundry plant - at cost
Less : Accumulated depreciation
Total property, plant and equipment - at net book value
Consolidated
2013
$'000
2012
$'000
12,808
(3,223)
9,585
4,950
(2,748)
2,202
23,801
(3,918)
19,883
4,936
(2,398)
2,538
1,284,734
(498,572)
786,162
1,254,698
(476,671)
778,027
21,228
(9,294)
11,934
1,378
(690)
688
2,606
(1,637)
969
9,644
(5,005)
4,639
21,228
(6,127)
15,101
1,373
(614)
759
2,510
(1,433)
1,077
8,682
(4,117)
4,565
14,171
(10,140)
4,031
820,210
11,984
(8,714)
3,270
825,220
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
123
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
22
Property, plant and equipment (continued)
Reconciliations
Reconciliations of the carrying amounts for each class of
property, plant and equipment are set out below:
Freehold land and buildings
Carrying amount at the beginning of the year
Additions
Depreciation
Disposals
Effects of movement in foreign exchange
Impairment
Reclassified to assets held for sale
Carrying amount at the end of the year
Leasehold improvements
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation
Effects of movement in foreign exchange
Impairment
Reclassified to assets held for sale
Carrying amount at the end of the year
Plant and equipment
Carrying amount at the beginning of the year
Additions
Net movement in capital work in progress
Transferred from leased plant and equipment
Net movement in rental inventory (1)
Disposals
Depreciation
Impairment loss
Effects of movements in foreign exchange
Carrying amount at the end of the year
Furniture, fixtures and fittings
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation
Impairment
Effects of movement in foreign exchange
Carrying amount at the end of the year
Consolidated
2013
$'000
2012
$'000
19,883
643
(957)
(468)
686
(3,031)
(7,171)
9,585
2,538
367
(124)
(548)
5
(7)
(29)
2,202
778,027
132,504
(13,270)
-
(376)
(46,679)
(103,953)
(377)
40,286
786,162
758
178
(41)
(187)
(37)
17
688
26,142
239
(1,732)
(4,844)
78
-
-
19,883
2,859
398
(40)
(680)
1
-
-
2,538
591,721
309,772
6,449
10,049
12,052
(26,050)
(126,143)
(210)
388
778,027
680
237
(19)
(140)
-
-
758
(1)
Included in this movement are purchases totalling $19.9 million for the year ended 30 June 2013.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
124
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
22
Property, plant and equipment (continued)
Reconciliations (continued)
Reconciliations of the carrying amounts for each class of
property, plant and equipment are set out below:
Office equipment
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation
Effects of movement in foreign exchange
Carrying amount at the end of the year
Motor vehicles
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation
Effects of movement in foreign exchange
Carrying amount at the end of the year
Sundry plant
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation
Effects of movement in foreign exchange
Carrying amount at the end of the year
Leased plant and equipment
Carrying amount at the beginning of the year
Transferred to owned plant and equipment
Depreciation
Carrying amount at the end of the year
Consolidated
2013
$'000
2012
$'000
1,077
432
(17)
(543)
20
969
4,565
1,881
(234)
(1,649)
76
4,639
3,270
2,379
(214)
(1,543)
139
4,031
1,059
545
(88)
(445)
6
1,077
4,412
1,590
(397)
(1,040)
-
4,565
2,700
2,264
(250)
(1,480)
36
3,270
15,101
-
(3,167)
11,934
28,960
(10,049)
(3,810)
15,101
Security
The Group’s assets are subject to a fixed and floating charge under the terms of the syndicated debt facility.
Refer note 24 for further details.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
125
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
23
Trade and other payables
Current
Trade payables
Trade payables
Other payables and accruals (1)
Non-current
Other payables
Other payables and accruals
Consolidated
2013
$'000
2012
$'000
13,780
26,782
40,562
20,558
43,738
64,296
1,284
1,284
-
-
(1)
This includes $Nil accruals for equipment received but not yet paid for at 30 June 2013 (2012: $26.8
million).
The Group’s exposure to currency and liquidity risk associated with trade and other payables is disclosed in
note 6.
The Company has also entered into a Deed of Cross Guarantee with certain subsidiaries as described in note
37. Under the terms of the Deed, the Company has guaranteed the repayment of all current and future
creditors in the event any of the entities party to the Deed are wound up. Details of the consolidated financial
position of the Company and subsidiaries party to the Deed are set out in note 37.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
126
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
24
Interest bearing liabilities
Current
Amortised cost
Working capital facility
Insurance financing
Lease liabilities - secured
Non-current
Fair value
Notes issue - secured (USPP)
Debt raising costs (USPP)
Amortised cost
Bank loans - secured
Notes issue - secured (USPP)
Lease liabilities - secured
Debt raising costs (bank loans)
Debt raising costs (USPP)
Consolidated
2013
$'000
2012
$'000
5,256
464
3,588
9,308
-
-
3,339
3,339
95,596
(1,193)
92,652
(1,167)
252,746
53,961
8,770
(3,100)
(662)
406,118
301,980
49,155
12,358
(2,060)
(648)
452,270
Bank loans
The Group refinanced its senior secured syndicated loan facility with a limit of $450 million (2012: $450 million)
on 28 September 2012. The debt facility comprises a three year $200 million, a four year $125 million and a
five year $125 million revolving multi-currency facility of AUD, USD and CAD that matures on September 2015,
September 2016 and September 2017 respectively. The syndicated facility allows for funds to be drawn in
Australian, United States and Canadian dollars. The nominal interest rate is based on USD Libor, BBSW and CAD
CDOR (2012: USD Libor, BBSW and CAD Libor) for their respective currencies, plus a margin. The Group’s
syndicated loan facility is measured at amortised cost. At year end the Group had the following drawn:
FY13
FY12
Funds drawn in
functional currency
$’000
Funds drawn
translated to AUD
$’000
Funds drawn in
functional currency
$’000
Funds drawn
translated to AUD
$’000
AUD
CAD
USD
$151,000
C$83,000
US$15,000
$151,000
$85,558
$16,188
$80,000
C$216,000
US$15,000
$80,000
$207,234
$14,746
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
127
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
24
Interest bearing liabilities (continued)
USPP notes issue
Under the terms of the note purchase agreement, the noteholders hold a joint fixed and floating charge with
the syndicated bank group over the assets and undertakings of the Group. The US$140.0 million notes were
issued on 22 May 2012 and comprises a 7 year US$40.0 million tranche and a US$100.0 million 10 year tranche
which matures 22 May 2019 and 22 May 2022 respectively. The nominal interest rate for the 7 and 10 year
notes are 4.63% and 5.25% respectively. Of the notes, US$20.0 million, with a maturity of 7 years, and US$30.0
million of notes, with a maturity of 10 years, are measured at amortised cost. The remaining notes are
measured at fair value through profit and loss and the Group designated derivatives (interest rate swaps and
cross currency interest rate swaps) as hedge instruments against this underlying debt.
FY13
FY12
Funds drawn in
functional currency
$’000
Funds drawn
translated to AUD
$’000
Funds drawn in
functional currency
$’000
Funds drawn
translated to AUD
$’000
USD
US$140,000
$149,557
US$140,000
$141,807
Working capital facility
The working capital facility is secured under the syndicated facility mentioned above, and has a limit of $20.0
million (2011: $25.0 million). The Group also obtained working capital facilities for Emeco Canada Limited of
C$2.0 million (2011: C$2.0 million). The $20.0 million facility expires on 16 November 2013 and it is the
intention that it will be renegotiated for another 12 months. The C$2.0 million facility expires 11 December
2013. The working capital facility is drawn to $5.3 million at 30 June 2013 (2012: $Nil).
Other financial liabilities
Under the terms of the syndicated loan facility, the Group can enter into other permitted indebtedness of
A$100.0 million, which is incurred in the ordinary course of business, and asset backed indebtedness for the
higher of A$100.0 million or 15% of total tangible assets up to a maximum of A$200 million and can be
increased to a maximum of A$200.0 million. These limits are subject to an aggregate financial indebtedness
limit not exceeding A$800.0 million. At year end the Group had established finance lease facilities totalling
$12.4 million (2012: $15.7 million), financed its insurance premium totalling $0.5 million and issued notes in the
USPP market totalling US$140.0 million (A$149.6 million) (2012: US$140.0 million (A$141.8 million)) which are
included within this permitted indebtedness limit. Assets leased under the facility are secured by the assets
leased.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
128
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
24
Interest bearing liabilities (continued)
Finance lease liabilities
Finance lease liabilities of the Group are payable as follows:
Consolidated
Future
minimum
lease
Present
value of
minimum
lease
payments Interest payments
Future
minimum
lease
payments
Present
value of
minimum
lease
Interest payments
2013
$'000
2013
$'000
2013
$'000
2012
$'000
2012
$'000
2012
$'000
Less than one year
Between one and five years
More than five years
4,362
9,334
-
13,696
(774)
(564)
-
(1,338)
3,588
8,770
-
12,358
4,362
13,696
-
18,058
(1,023)
(1,338)
-
(2,361)
3,339
12,358
-
15,697
The Group leases plant and equipment under finance leases. The Group’s lease liabilities are secured by the
leased assets of $11,934,000 (2012: $15,139,000). In the event of default, the leased assets revert to the
lessor.
25
Financing arrangements
The Group has the ability to access the following lines of credit:
Total facilities available:
Bank loans
USPP Notes
Finance leases
Insurance financing
Working capital
Facilities utilised at reporting date:
Bank loans
USPP Notes
Finance leases
Insurance financing
Working capital
Facilities not utilised or established at reporting date:
Bank loans
USPP Notes
Finance leases
Insurance financing
Working capital
Consolidated
2013
$'000
2012
$'000
450,000
149,557
12,358
464
22,062
634,441
252,746
149,557
12,358
464
5,256
420,381
197,254
-
-
-
16,805
214,059
450,000
141,807
15,697
-
21,919
629,423
301,980
141,807
15,697
-
-
459,484
148,020
-
-
-
21,919
169,939
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
129
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
26 Provisions
Current
Employee benefits:
- annual leave
- long service leave
- other
Non-current
Employee benefits - long service leave
Consolidated
2013
$'000
2012
$'000
2,807
533
48
3,388
3,404
447
115
3,966
1,244
1,044
Defined contribution superannuation funds
The Group makes contributions to defined contribution superannuation funds. The expense recognised for the
year was $3,424,000 (2012: $4,879,000). During the prior period there was a one-off expense totalling $1.2
million (post tax) which relates to unpaid employee superannuation from prior years arising from a payroll
system error identified during an internal payroll systems review which has now been rectified.
27 Share-based payments
During the year the Company issued performance shares and performance rights to key management personnel
and senior employees of the Group under its LTIP (refer note 3j(v)). During the prior years LTIP performance
shares and rights were also issued under similar terms and conditions and priced relative to the time of issue.
Prior to establishing the LTIP certain key management personnel and senior employees were issued shares in the
Company under the Company’s MISP (refer note 3j(v)).
During the year the Company issued matching shares to certain employees of the Group under its ESOP (refer
note 3j(v)).
Performance shares, performance rights, options and shares issued under the MISP are all equity settled.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
130
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
27 Share-based payments (continued)
Long term incentive plan
Grant date / employees entitled
Matured in FY11:
Performance shares/rights 2008
Number of
Instruments
1,290,000
Matured in FY12:
Performance shares/rights 2009
9,819,790
Matured in FY13:
Performance shares/rights 2010 (1)
4,608,076
Unvested plans:
Performance shares/rights 2011 (1)
5,889,200
Performance shares/rights 2012
4,246,661
Performance shares/rights 2013
6,881,251
Contractual life
of performance
shares/rights
5 years
5 years
3 years
3 years
3 years
3 years
Vesting conditions
3 years service TSR ranking to a basket of
direct and indirect peers of 98 listed
companies.
50% entitlement for a 50.1% ranking
within TSR group. Pro rata entitlement
up to 100% vesting for a ranking of 75%
better to TSR group
3 years service TSR ranking to a basket of
direct and indirect peers of 98 listed
companies.
50% entitlement for a 50.1% ranking
within TSR group. Pro rata entitlement
up to 100% vesting for a ranking of 75%
better to TSR group
3 years service TSR ranking to a basket of
direct and indirect peers of 98 listed
companies.
50% entitlement for a 50.1% ranking
within TSR group. Pro rata entitlement
up to 100% vesting for a ranking of 75%
better to TSR group
3 years service TSR ranking to a basket of
direct and indirect peers of 97 listed
companies.
50% entitlement for a 50.1% ranking
within TSR group. Pro rata entitlement
up to 100% vesting for a ranking of 75%
better to TSR group
3 years service TSR ranking to a basket of
direct and indirect peers of 97 listed
companies.
50% entitlement for a 50.1% ranking
within TSR group. Pro rata entitlement
up to 100% vesting for a ranking of 75%
better to TSR group
3 years service TSR ranking to a basket of
direct and indirect peers of 93 listed
companies.
50% entitlement for a 50.1% ranking
within TSR group. Pro rata entitlement
up to 100% vesting for a ranking of 75%
better to TSR group
(1) On 16 November 2010 shareholders approved the grant of 925,926 performance rights and 1,183,929
performance shares for nil consideration for the 2010 and 2011 financial year respectively to the Managing
Director. The 925,926 and 1,183,929 instruments have been included in the number of instruments for the
performance shares/rights 2010 and 2011 respectively above.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
131
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
27 Share-based payments (continued)
The movement of performance shares and performance rights on issue during the year were as follows:
Number of
performance
shares/rights
2013
Number of
performance
shares/rights
2012
16,970,271
(3,355,878)
(3,598,452)
6,881,251
16,897,192
3,364,390
15,794,934
(798,954)
(2,272,370)
4,246,661
16,970,271
4,955,409
Outstanding at 1 July
Forfeited during the period
Exercised during the period
Granted during the period
Outstanding at 30 June
Exercisable at 30 June
Management incentive share plan
Grant date / employees entitled
Number of
Instruments
Vesting conditions
Contractual life
of MISP
MISP 2006
4,010,000 Service requirement. Partial vesting
10 years
entitlement after 2 years with full
vesting after 5 years.
MISP 2007
1,240,000 Service requirement. Partial vesting
10 years
entitlement after 2 years with full
vesting after 5 years.
MISP 2008
560,000 Service requirement. Partial vesting
10 years
entitlement after 2 years with full
vesting after 5 years.
5,810,000
The number of MISPs are as follows:
Outstanding at 1 July
Forfeited during the period
Exercised during the period
Granted during the period
Outstanding at 30 June
Exercisable at 30 June (1)
Number of
MISP
2013
1,600,000
-
-
-
1,600,000
1,600,000
Number of
MISP
2012
2,160,000
(375,000)
(185,000)
-
1,600,000
1,040,000
(1) While satisfying the service requirements under the MISP, the shares are not considered exercisable until the
full vesting period has been satisfied.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
132
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
27 Share-based payments (continued)
Employee share ownership plan
Grant date / employees entitled
Matured in January 2012
ESOP 2011
Matured in January 2013
ESOP 2012
ESOP 2013
Number of
Instruments
Vesting conditions
Contractual life
of MISP
26,976 Service requirement. Full vesting
entitlement after 1 year after the
end of the calendar year in which
they are acquired.
28,898 Service requirement. Full vesting
entitlement after 1 year after the
end of the calendar year in which
they are acquired.
75,388 Service requirement. Full vesting
entitlement after 1 year after the
end of the calendar year in which
they are acquired.
131,262
1 year
1 year
1 year
The number of ESOPs are as follows:
Outstanding at 1 July
Forfeited during the period
Exercised during the period
Granted during the period
Outstanding at 30 June
Exercisable at 30 June (1)
Number of
ESOP
2013
Number of
ESOP
2012
44,215
(3,584)
(26,333)
75,388
89,686
-
23,752
(2,120)
(6,315)
28,898
44,215
-
(1) The shares are not considered exercisable until the full vesting period has been satisfied.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
133
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
27 Share-based payments (continued)
The fair value of services received in return for the performance shares and rights granted during the year are
based on the fair value of the LTIPs granted, measured using Monte Carlo simulation analysis. Expected volatility
is estimated by considering the Company’s historical daily and monthly share price movement and an analysis of
comparable companies. Market conditions are detailed in note 3(j)(v). The inputs used in the measurement of
the fair values at grant date are as follows:
Fair value of performance
shares/rights
Fair value at grant date
Share price
Exercise price
Expected volatility (weighted
average volatility)
Maturity (expected weighted
average life)
Expected dividends
Risk-free interest rate (based
on government bonds)
Chief
Executive
Officer
2013
Key
management
personnel
2013
Key
management
personnel
2012
Senior
employees
2013
Senior
employees
2012
ESOP
2013
ESOP (1)
2012
$0.27
$0.51
$Nil
$0.46
$0.70
$Nil
$0.76
$0.98
$Nil
$0.56
$0.70
$Nil
$0.76
$0.98
$Nil
$0.28 - $0.86
$0.28 - $0.86
$Nil
$0.86 - $1.16
$0.86 - $1.16
$Nil
40% - 60%
40% - 60%
40% - 60%
40% - 60%
40% - 60%
3 years
7.6%
3 years
8.7%
3 years
4.8%
3 years
8.7%
3 years
4.8%
2.6%
2.7%
3.8%
2.7%
3.8%
n/a
1 year
n/a
n/a
n/a
1 year
n/a
n/a
(1) The ESOP was established in November 2010.
The fair value assumptions for unvested MISPs that continued to be expensed have not changed since the fair
value was determined at grant date in previous years.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
134
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
27 Share-based payments (continued)
For the Group’s key management personnel commencing with the FY13 grant and all subsequent grants of LTI
securities the following applies:
Dividends:
•
•
dividends (or shadow dividends) will not be paid on unvested LTI securities;
dividends (or shadow dividends) will accrue on unvested LTI securities and will only be paid at the time of
vesting on those LTI securities that vest, provided all vesting conditions are met; and
Absolute change in control:
•
•
•
the proportion of vesting LTI securities will be pro-rated to reflect the performance achieved;
the proportion of vesting LTI securities will be in accordance with the relevant TSR vesting schedule for each
grant; and
the Board retains the discretion to vest a greater amount.
Employee expenses
In AUD
Consolidated
2013
2012
Performance shares/rights
2,811,633
2,492,552
MISP
ESOP
583
(29,517)
41,188
25,153
Total expense recognised as employee costs (1)
2,853,404
2,488,188
(1) Included in share based employee expenses for the year is the write back of prior year share based employee
expenses as a result of the shares, rights or options being forfeited during the year because the employee
does not meet the required performance hurdles or service requirements.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
135
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
28 Commitments
(a) Operating lease commitments
Future non-cancellable operating leases
not provided for in the financial statements
and payable:
Less than one year
Between one and five years
More than five years
Consolidated
2013
$'000
2012
$'000
7,850
19,491
3,351
30,692
3,981
5,682
2,991
12,654
The Group leases the majority of their operating premises. The terms of the lease are negotiated in
conjunction with the Group’s internal and external advisors and are dependent upon market forces.
During the year ended 30 June 2013 an amount of $5,703,000 was recognised as an expense in profit or
loss in respect of operating leases (2012: $4,091,000).
(b) Capital commitments
The Group has entered into commitments with certain suppliers for purchases of fixed assets, primarily
rental fleet assets, in the amount of $1,413,000 (2012: $77,107,000) payable within one year.
29 Contingent Liabilities
Guarantees
The Group has guaranteed the repayments of $75,000 (2012: $122,500) in relation to office premises with
varying expiry dates out to 30 June 2014.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
136
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
30 Notes to the statement of cash flows
(i)
Reconciliation of cash
For the purposes of the statements of cash flow, cash includes cash on hand and at bank and short term
deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the
statements of cash flows is reconciled to the related items in the statements of financial position as
follows:-
Cash assets
Consolidated
2013
$'000
2012
$'000
5,754
73,091
Note
17
(ii) Reconciliation of net profit to net cash provided by operating activities
Consolidated
2013
$'000
2012
$'000
Note
8
21
22
8
8
8
22
21
20
8
8
8
Net profit
Add/(less) items classified as investing/financing activities:
Net profit on sale of non-current assets
Add/(less) non-cash items:
Amortisation
Depreciation
Amortisation of borrowing costs
Write off previous deferred borrowing costs
(Gain)/loss on fair value hedge
Realised foreign currency exchange (gain)/loss
Unrealised foreign exchange (gain)/loss
Impairment losses on property, plant & equipment
Impairment of goodwill
Write down on inventory
Cost of sales equipment on rent
Bad debts
Provision for doubtful debts (1)
FCTR of discontinued operations disposed
Other non-cash items
Equity settled share based payments
(Decrease)/increase in income taxes payable
(Decrease)/increase in deferred taxes
Net cash provided by operating activities before change in
assets/(liabilities) adjusted for assets and (liabilities) acquired
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in payables
Increase/(decrease) in provisions
Net cash provided by operating activities
6,004
69,745
(1,999)
(3,723)
192
112,547
1,141
1,910
32
452
(235)
3,452
17,844
8,664
-
2,053
13,108
-
237
2,849
(27,476)
19,162
217
135,611
1,180
-
3
-
416
785
-
1,277
1,478
11,083
(10,348)
156
342
2,488
7,310
7,053
159,937
225,073
2,273
20,355
(884)
(378)
181,303
(21,980)
13,456
13,784
134
230,467
(1)
Included in the movement of the provision for Doubtful debts is $13.5 million related to contract
disputes with two customers in Indonesia where the Company continued invoicing in accordance with
contract terms, after the equipment had been stood down. The Company is continuing negotiations
with the respective parties on these matters.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
137
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
31 Controlled entities
(a) Particulars in relation to controlled entities
Parent entity
Emeco Holdings Limited
Controlled entities
Country
of
Incorporation
Ownership Interest
2013
%
2012
%
Note
Pacific Custodians Pty Ltd as trustee for Emeco
Employee Share Ownership Plan Trust
Emeco Pty Limited
Emeco International Pty Limited
Emeco Sales Pty Ltd
Emeco Parts Pty Ltd
Emeco (UK) Limited
Emeco Equipment (USA) LLC
PT Prima Traktor IndoNusa (PTI)
Emeco International Europe BV
Emeco Europe BV
Euro Machinery BV
Emeco Canada Ltd
Enduro SPA
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Australia
Australia
Australia
Australia
Australia
United Kingdom
United States
Indonesia
Netherlands
Netherlands
Netherlands
Canada
Chile
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Emeco (UK) Limited was incorporated in and carries on business in the United Kingdom. Emeco (UK)
Limited is the parent entity of Emeco Equipment (USA) LLC, PT Prima Traktor IndoNusa (PTI), Emeco
International Europe BV and Emeco Canada Limited.
Emeco Equipment (USA) LLC was incorporated in and carries on business in the United States. This was
classified as a discontinued operation in 2010 but was reclassified as a continuing operation at 30 June
2012.
PT Prima Traktor IndoNusa was incorporated in and carries on business in Indonesia.
Emeco International Europe BV was incorporated in and carries on business in the Netherlands.
Emeco International Europe BV is the parent entity of Emeco Europe BV, and Euro Machinery BV. This
was classified as a discontinued operation in 2012 but was reclassified as a continuing operation in
2013.
Emeco Europe BV was incorporated in and carries on a business in the Netherlands. This was
classified as a discontinued operation in 2012 but was reclassified as a continuing operation in 2013.
Euro Machinery BV was acquired on 4 January 2007 and carries on business in the Netherlands. This
was classified as a discontinued operation in 2012 but was reclassified as a continuing operation in
2013.
Emeco Canada Ltd was incorporated and carries on business in Canada. On 2 August 2005 Emeco
Canada Ltd acquired River Valley Equipment Company Ltd, which operates within Emeco Canada Ltd.
Enduro SpA was incorporated on 24 February 2012 and carries on business in Chile.
(b) Acquisition of entities in the current year
There was no acquisition of entities this financial year.
(c) Acquisition of entities in the prior year
There was no acquisition of entities in the prior year.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
138
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure
The following were key management personnel of the Group at any time during the reporting period and unless
otherwise indicated were key management personnel for the entire period.
Non-Executive Directors
Robert Bishop
Alec Brennan, Chairperson
John Cahill
Peter Johnston (ceased directorship on 30 June 2013)
Peter Richards
Erica Smyth
Executive Director
Keith Gordon, Managing Director & Chief Executive Officer
Other Executives
Stephen Gobby, Chief Financial Officer
Anthony Halls, General Manager Australian Rental
Michael Kirkpatrick, General Manager Corporate Services
Christopher Mossman, President Director Indonesia (ceased employment with Emeco on 31 May 2013)
Grant Stubbs, General Manager Global Asset Management (commenced role on 1 May 2013)
Ian Testrow, President Emeco Americas (ceased role on 25 April 2013) / President New & Developing Business
(commenced role on 26 April 2013)
Michael Turner, General Manager Global Asset Management (ceased role on 31 December 2012)
Key management personnel compensation
The key management personnel compensation is as follows:
In AUD
Short-term employee benefits
Other long term benefits
Post-employment benefits
Termination benefits
Equity compensation benefits
Consolidated
2013
2012
4,654,631
5,491,243
-
176,534
-
1,040,366
5,871,531
-
214,966
26,182
1,534,671
7,267,062
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
139
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure (continued)
Remuneration of key management personnel by the Group
The compensation disclosed above represents an allocation of the key management personnel’s compensation
from the Group in relation to their services rendered to the Company.
Individual Directors and Executives compensation disclosures
Information regarding
instruments
disclosures as required by Corporations Regulations 2M.3.03 and 2M.6.04 are provided in the Remuneration
Report section of the Directors’ report on pages 50 to 67.
individual Directors and Executives compensation and some equity
Apart from the details disclosed in this note, no Director has entered into a material contract with the Company
or the Group since the end of the previous financial year and there were no material contracts involving
Directors’ interests existing at year-end.
Equity Instruments
Shares and rights over equity instruments granted as compensation under management incentive share plan
The Company has an ongoing management incentive share plan in which shares have been granted to certain
Directors and employees of the Company. The shares vest over a five year period and are accounted for as an
option in accordance with AASB 2 Share Based Payments. The Company has provided a ten year interest free
loan to facilitate the purchase of the Shares under the management incentive share plan.
Shares and rights over equity instruments granted as compensation under long term incentive plan
The Company has an ongoing long term incentive plan in which shares have been granted to certain employees
of the Company. The shares vest after 3 years depending upon the Company’s total shareholder return ranking
against a peer group of 97 Companies. The shares have been accounted for as an option in accordance with
AASB 2 Share Based Payments.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
140
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure (continued)
The movement during the reporting year in the number of shares issued under the management incentive share
plan, performance shares under the long term incentive plan and matching employee share ownership plan in
the Company held, directly, indirectly or beneficially, by each key management person, including their related
parties, is as follows. These plans have been combined for the purposes of this note as they represent direct
interests over the shares. Directors or Executives with no holdings are not included in the following tables. The
disclosure table has included all vested shares to the key management personnel’s equity holdings. The prior
year comparatives have been restated to reflect this change.
2013 Shares
Directors & Executives
Stephen Gobby
Michael Turner (2)
Ian Testrow
Michael Kirkpatrick
Anthony Halls
Christopher Mossman (2)
Keith Gordon
Grant Stubbs (3)
2012 Shares
Directors & Executives
Hamish Christie-Johnston
Stephen Gobby
David Tilbrook
Michael Turner
Ian Testrow (1)
Michael Kirkpatrick
Anthony Halls
Christopher Mossman
Keith Gordon
Held at
Granted as
1 July 2012 compensation
Vested
during
the year
Forfeited/
lapsed
Held at
30 June
2013
743,127
556,717
-
441,579
473,764
-
2,091,192
n/a
531,304
397,391
-
316,522
338,226
-
1,498,957
n/a
-
-
-
-
-
-
-
n/a
- 1,274,431
-
n/a
-
-
-
758,101
811,990
-
-
n/a
- 3,590,149
138,327
n/a
Held at
Granted as
1 July 2011 compensation
Vested
during
the year
Forfeited/
lapsed
Held at
30 June
2012
1,261,408
1,152,538
1,039,714
900,785
540,541
700,450
430,218
171,667
1,183,929
413 (727,849) (533,972)
-
322,571 (731,982)
- (812,495) (227,219)
-
-
-
-
-
241,518 (585,586)
- (540,541)
191,579 (450,450)
205,708 (162,162)
- (171,667)
n/a
743,127
n/a
556,717
-
441,579
473,764
-
907,263
-
- 2,091,192
Dividends paid under the Management Incentive Share Plan are paid against the employees outstanding loan
and is reflected in issued capital.
(1)
Included in this balance of equity instruments Mr Testrow held 300,000 MISP shares at 30 June 2011.
These shares vested during FY12.
(2) Mr Turner and Mr Mossman ceased to be key management personnel on 31 December 2012 and 31
May 2013 respectively.
(3) Mr Stubbs became a key management personnel on 1 May 2013. The shares held at 30 June 2013
were granted as compensation prior to Mr Stubbs becoming a key management personnel.
n/a Not applicable as not in a position of key management at reporting date.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
141
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure (continued)
The movement during the reporting year in the number of performance rights issued under the long term
incentive plan in the Company held, directly, indirectly or beneficially, by each key management person,
including their related parties, is as follows. Directors or Executives with no holdings are not included in the
following tables.
2013 Rights
Directors & Executives
Stephen Gobby
Michael Turner (1)
Ian Testrow
Michael Kirkpatrick
Anthony Halls
Christopher Mossman (1)
Keith Gordon
Held at
Granted as
1 July 2012 compensation
Vested
during
the Year
Forfeited/
lapsed
Held at
30 June
2013
300,926
240,741
697,470
185,185
166,667
369,679
925,926
- (154,375) (146,551)
- (123,500) (117,241)
451,371 (122,647) (116,430)
- (95,000) (90,185)
- (85,500) (81,167)
323,875 (36,204) (34,370)
- (475,000) (450,926)
-
n/a
909,764
-
-
n/a
-
2012 Rights
Held at
Granted as
1 July 2011 compensation
Vested
during
the Year
Forfeited/
lapsed
Held at
30 June
2012
Directors & Executives
Hamish Christie-Johnston
Stephen Gobby
David Tilbrook
Michael Turner
Ian Testrow
Michael Kirkpatrick
Anthony Halls
Christopher Mossman
Keith Gordon
203,704
300,926
281,481
240,741
508,470
185,185
166,667
177,586
925,926
-
- (146,273) (57,431)
-
- (189,437) (92,044)
-
189,000
-
-
192,093
-
n/a
- 300,926
n/a
- 240,741
- 697,470
- 185,185
- 166,667
- 369,679
- 925,926
-
-
-
-
-
-
(1) Mr Turner and Mr Mossman ceased to be key management personnel on 31 December 2012 and 31 May
2013 respectively.
n/a Not applicable as not in a position of key management personnel at time of compilation.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
142
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure (continued)
Options over equity instruments granted as compensation under a share option programme
The movement during the reporting year in the number of options held, directly, indirectly or beneficially, by
each former key management person, including their related parties is as follows:
2013
Held at
Granted as
1 July 2012 compensation Exercised
Options
Forfeited
Other
Changes
Held at
30 June
2013
Vested and
Vested exercisable
at 30 June
during
2013
the year
Directors & Executives
L C Freedman
R L C Adair
-
-
-
-
- - -
- - -
-
-
-
-
-
-
2012
Held at
Granted as
1 July 2011 compensation Exercised
Options
Forfeited
Other
Changes
Held at
30 June
2012 (1)
Vested and
Vested exercisable
at 30 June
during
2012
the year
Directors & Executives
L C Freedman
R L C Adair
1,600,000
533,334
-
-
- (1,600,000)
- (533,334)
-
-
-
-
-
-
-
-
(1) The options issued to Mr Freedman and Mr Adair expired 5 years after their date of issue on 4 August 2011.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
143
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure (continued)
Equity holdings and transactions
The shares in the Company held, directly, indirectly or beneficially, by each key management person, including
their personally-related entities at year end, are as follows. The disclosure table has been adjusted to include the
transfer of vested shares from the employee share plans to the equity holdings of the members of key
management personnel. The prior year comparatives have been restated to reflect this change.
2013
Directors
K D Gordon
A N Brennan
P B Johnston
J R Cahill
R P Bishop
P I Richards
E L Smyth
Executives
M A Turner
S G Gobby
I M Testrow
M R Kirkpatrick
A G Halls
C Mossman
G Stubbs
Held at
1 July 2012
Ordinary
Shares
Transferred
from
Share
Plan
Purchases
Sales
Held at
30 June 2013
Ordinary
Shares
650,000
1,581,700
100,000
120,000
300,000
40,000
-
-
475,000
-
-
-
-
-
-
- 266,600
-
-
- 71,049
- 1,125,000
- 1,581,700
- 100,000
- 120,000
- 566,600
- 40,000
- 71,049
3,187,151
201,547
892,541
-
171,817
184,167
n/a
124,903 3,816 (1,190,000)
155,778 8,974
-
-
-
-
86,813 8,974
-
36,204
n/a 1,869
n/a
- 366,299
- 892,541
-
-
- 267,604
n/a
-
- 19,942
n/a Not applicable as not in a position of key management personnel at time of compilation.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
144
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure (continued)
2012
Directors
K D Gordon
A N Brennan
P B Johnston
J R Cahill
R P Bishop
P I Richards
E L Smyth
Held at
1 July 2011
Ordinary
Shares
Transferred
from
Share
Plan
Purchases
Sales
Held at
30 June 2012
Ordinary
Shares
650,000
1,581,700
100,000
120,000
300,000
40,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 650,000
- 1,581,700
- 100,000
- 120,000
- 300,000
- 40,000
-
-
Executives
D O Tilbrook
M A Turner
S G Gobby
I M Testrow
H A Christie-Johnston
M R Kirkpatrick
A G Halls
C Mossman
3,352,000
3,056,578
465,578
352,000
92,067
-
24,668
12,500
812,495
585,586
731,982
540,541
727,849
450,450
162,162
171,667
n/a
n/a
4,987 (460,000)
4,987 (1,001,000)
n/a
3,187,151
201,547
- 892,541
n/a
-
171,817
184,167
-
-
n/a
-
n/a
- (450,450)
4,987 (20,000)
Loans
Other than the loan issued under the management incentive share plan no specified Director or Executive has
entered into any loan arrangements with the Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
145
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
32 Key management personnel disclosure (continued)
Other key management personnel transactions
A number of key management persons, or their related parties, hold positions in other entities that result in
them having control or significant influence over the financial or operating policies of those entities.
A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms
and conditions of the transactions with management persons and their related parties were no more favourable
than those available, or which might reasonably be expected to be available, on similar transactions to non-
director related entities on an arm’s length basis.
The aggregate value of transactions recognised during the year related to key management personnel and their
related parties were as follows:
Transaction value
year ended
30 June
2013
$'000
2012
$'000
Balance
outstanding as
at 30 June
2013
$'000
2012
$'000
Note
Key management
person and their
related parties
Mr P Richards
- Kangaroo Resources
Limited
Total current assets
Transaction
Rental of heavy
earthmoving
equipment
(1)
399
399
4,408
4,408
-
-
947
947
(1) PT Prima Traktor IndoNusa (refer note 31) rents heavy earthmoving equipment to PT Mamahak Coal Mining,
a subsidiary of Kangaroo Resources Limited for an annual revenue of A$399,000 (2012: A$4,408,000)
(inclusive of VAT) translated at an AUD/USD average exchange rate of 1.0378 for FY13 (2012: 1.0319). The
balance outstanding as at 30 June 2013 was A$Nil (2012: A$947,238) translated at the 30 June 2013
AUD/USD rate of N/A (2012: 1.0172). The rental contract was negotiated on an arm’s length basis. One of
the Group’s Non-Executive Directors, Mr Peter Richards, was a Non-Executive Director of Kangaroo Resources
Limited.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
146
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
33 Other related party transactions
Subsidiaries
Loans are made between wholly owned subsidiaries of the Group for capital purchases. Loans outstanding
between the different wholly owned entities of the Company have no fixed date of repayment. Loans made
between subsidiaries within a common taxable jurisdiction are interest free. Cross border subsidiary loans are
charged at LIBOR plus a relevant arm’s length mark up.
Ultimate parent entity
Emeco Holdings Limited is the ultimate parent entity of the Group.
34 Subsequent events
On 30 July 2013 Mr Keith Gordon announced his intention to step down from his role as Managing Director. Mr
Gordon will remain in his current position until a new Managing Director is appointed.
35 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 30 June 2013 was based on the profit/(loss) attributable to ordinary
shareholders of $6,004,000 (2012: $69,745,000) and a weighted average number of ordinary shares outstanding
less any treasury shares for the year ended 30 June 2013 of 585,137,181 (2012: 609,182,029).
Profit attributed to ordinary shareholders
Consolidated
2013
2012
Continuing Discontinued
operations
$'000
operations
$'000
Total
$'000
Continuing Discontinued
operations operations
$'000
$'000
Total
$'000
Profit/(loss) for the period
6,004
-
6,004
69,972
(227)
69,745
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
147
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
35 Earnings per share (continued)
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effect of purchased treasury shares
Weighted average number of ordinary shares at 30 June
Consolidated
2013
'000
2012
'000
631,238
(46,101)
585,137
631,238
(22,056)
609,182
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2013 was based on profit attributable to ordinary
shareholders of $6,004,000 (2012: $69,745,000) and a weighted average number of ordinary shares outstanding
less any treasury shares during the financial year ended 30 June 2013 of 588,094,138 (2012: 624,198,215).
Profit attributed to ordinary shareholders (diluted)
Consolidated
2013
2012
Continuing Discontinued
operations
$'000
operations
$'000
Total
$'000
Continuing Discontinued
operations operations
$'000
$'000
Total
$'000
Profit/(loss) attributed to ordinary
shareholders (basic)
6,004
-
6,004
69,972
(227)
69,745
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 30 June
Effect of the vesting of contingently issuable shares
Effect of purchased treasury shares
Weighted average number of ordinary shares (diluted) at 30 June
Consolidated
2013
'000
2012
'000
631,238
2,957
(46,101)
588,094
631,238
15,016
(22,056)
624,198
Comparative information
The average market value of the Company’s shares for the purpose of calculating the dilutive effect of ordinary
share was based on quoted market prices for the period during which the shares were outstanding.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
148
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
36 Parent entity disclosure
As at and throughout the financial year ending 30 June 2013 the parent entity (the “Company”) of the Group was
Emeco Holdings Limited.
Result of the parent entity
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Share based payment reserve
Reserve for own shares
Retained earnings
Total equity
Company
2013
$'000
2012
$'000
(96,802) 44,654
-
-
-
-
10,595
22
544,519 710,376
458,312 710,398
-
-
15,627
15,627
593,616 610,424
9,155
12,144
(16,433) (13,757)
(121,047) 12,840
468,280 618,662
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees
debts in respect of its subsidiaries.
Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed in Note 37.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
149
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
37 Deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed
below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of
Financial reports, and Directors’ reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross
Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in
the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a
winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six
months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event
that the Company is wound up.
The subsidiaries subject to the Deed are:
(cid:1)
(cid:1)
Emeco Pty Ltd
Emeco International Pty Limited
A consolidated statement of comprehensive income and consolidated statement of financial position, comprising
the Company and controlled entities which are a party to the Deed, after eliminating all transactions between
parties to the Deed of Cross Guarantee, for the year ended 30 June 2013 is set out as follows:
Statement of profit or loss and other comprehensive income and retained earnings
Revenue
Cost of sales
Gross profit
Operating expense
Finance income
Finance costs
Impairment of investment
Profit before tax
Tax expense
Net profit after tax
Consolidated
2013
$'000
2012
$'000
270,757
(188,210)
455,183
(289,730)
82,547 165,453
(62,213)
5,377
(21,048)
(64,455)
2,522
(18,727)
(120,278) -
(115,615) 84,793
(25,861)
(118,507) 58,932
(2,892)
Other comprehensive income
Total comprehensive income for the period
1,697
1,697
546
546
Retained earnings at beginning of year
Dividends recognised during the year
Retained earnings at end of year
83,165
107,925
(37,146)
(34,718)
(46,031) 107,925
Attributable to:
Equity holders of the Company
Profit/(loss) for the period
(46,031) 107,925
(118,507) 58,932
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
150
EMECO HOLDINGS LIMITED AND ITS CONTROLLED ENTITIES
Notes to the Financial Statements
For the year ended 30 June 2013
37 Deed of cross guarantee (continued)
Statement of financial position
Current assets
Cash assets
Trade and other receivables
Derivatives
Current tax assets
Inventories
Assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Derivatives
Intangible assets
Investments
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Derivatives
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Derivatives
Interest bearing liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share based payment reserve
Reserves
Retained earnings
Total equity attributable to equity
holders of the parent
Consolidated
2013
$'000
2012
$'000
218
37,717
691
11,376
9,739
-
59,741
101,138
4,489
151,555
211,310
400,556
869,048
69,483
60,050
776
-
32,926
405
163,640
58,692
3,643
151,622
158,388
497,687
870,032
928,789
1,033,672
23,486
1,281
9,308
-
2,327
36,402
1,502
321,399
27,050
1,484
351,435
30,688
2,239
3,339
15,627
3,158
55,051
3,369
248,106
15,970
1,478
268,923
387,837
323,974
540,952
709,698
593,616
12,144
(18,777)
(46,031)
610,424
9,155
(17,806)
107,925
540,952
709,697
EMECO HOLDINGS LIMITED ANNUAL REPORT 2013
151