162181 LINMAR 1
Front
Head Office
Level 3
71 Walters Drive
Osborne Park WA 6017
Australia
T +61 8 9420 0222
E corporate@emecogroup.com
emecogroup.com
2017
ANNUAL REPORT
|
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
7
Emeco Holdings Limited and its Controlled Entities
2
ABN 89 112 188 815
Annual Financial Report
30 June 2017
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
1
1
6
2
1
8
1
I
L
N
M
A
R
2
F
r
o
n
t
Contents
Chairmanʼs Report(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1007)
Managing Directorʼs Report(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1009)
Operating and Financial Review(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1011)
Regional Business Overview(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:1005)(cid:1007)
Financial Report(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:1005)(cid:1011)
k
c
a
B
2
R
A
M
N
I
L
1
8
1
2
6
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
2
k
c
a
B
2
R
A
M
N
I
L
1
8
1
2
6
1
Chairmanʼs Report
Dear Shareholder,
We are pleased to present the Emeco Holdings Limited Annual Report for financial year 2016/2017 (FY17).
Balance sheet restructure and a larger, younger Australian fleet
In March 2017, Emeco successfully restructured its balance sheet through the refinancing of its debt, a fully
underwritten capital raise, and the merger with Andyʼs Earthmovers (Asia Pacific) Pty Ltd (Andyʼs) and
Orionstone Holdings Pty Ltd (Orionstone). This was a complex transaction involving multiple stakeholders
from all three businesses. The successful completion of this transaction is testament to Ian Testrowʼs
leadership, the Emeco teamʼs commitment and the strong support from all of our major stakeholders.
The transaction addressed three key strategic initiatives for Emeco:
1. Extending the maturity of Emecoʼs debt obligations to FY22;
Improving our balance sheet to create operational flexibility;
2.
Increasing our fleet size while reducing its average age.
3.
Following a strategic review of the international operations, an asset swap was executed in Chile which allowed
the Group to exchange its underutilised fleet in Chile for 85 fleet in Australia. As a result, the location of our
fleet is now aligned with domestic demand, particularly in the coking coal industry on the Australian east coast.
The larger fleet provides Emeco with a stronger platform for short and long-term growth. In addition to the Chile
asset swap, Emeco sold its remaining fleet in Canada through completion of a rent-to-purchase agreement.
The repositioning of the Canada business and discontinuation of the Chile operations allows Emeco
management to focus on improving operational performance and capturing growth in an improving Australian
market.
As a result of the transaction and the recent Chilean asset swap, Emeco has an additional 400 pieces of
equipment and is focused on driving greater earnings and returns on its assets. The Companyʼs ongoing
strategic relationship with The Red Button Group enhances Emecoʼs ability to manage its larger fleet and focus
on operational excellence in asset management and maintenance, which is also facilitated by Emecoʼs EOS
technology.
Safety and sustainability
Emeco continues to maintain its commitment to its people, the environment and the communities in which we
operate. The effective induction of new employees and subcontractors following the merger with Andyʼs and
Orionstone was a priority of the integration programme in order to ensure that Emeco continues to adopt safety
practices of the highest standard.
Continued cost reduction initiatives and business integrations have not diminished our commitment to safety
or sustainability processes or procedures.
Overall, we continue to improve our safety record notwithstanding the increased number of employees and
operations. Our LTIFR reduced from 1.1 to zero which is an outstanding achievement for the team, while our
TRIFR decreased 61% to 2.2.
For more information on our sustainability performance and policies, please refer to Emecoʼs FY17
Sustainability Report available on our website.
Focus on synergies and deleveraging the business
In FY18, Emecoʼs key priorities are to achieve the A$15 million run-rate of operating synergies linked to the
merger with Andyʼs and Orionstone, continue to enhance our customer value proposition through innovation
and to reduce costs across the business.
The business ended the year with net debt of A$457.1 million. As a result of the FY17 restructure, Emeco is
now in a position to drive meaningful earnings and operating cash flows to further deleverage the Company to
create a strong and sustainable capital structure through the mining cycle.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
3
I would like to take the opportunity to thank our shareholders and noteholders for their continued support of
Emeco through challenging market conditions. The overwhelming shareholder and noteholder support of the
transaction coupled with the shareholder participation in the underwriting of the rights issue were critical to
Emecoʼs short and long-term success.
Finally, post-completion of the transaction, on behalf of Emeco, I would like to welcome Peter Frank, Keith
Skinner and Darren Yeates to the Board and extend our appreciation to John Cahill and Erica Smyth who
stepped down during the year after 8 years and 5 years of service respectively on the Board. Both John and
Erica made significant contributions to the successful restructuring of Emeco and we wish them all the best in
their future pursuits.
Peter Richards
Chairman
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
4
2
1
6
2
1
8
1
L
I
N
M
A
R
2
F
r
o
n
t
t
n
o
r
F
2
R
A
M
N
I
L
1
8
1
2
6
1
2
Managing Directorʼs Report
Dear Shareholder,
Over the past year, Emeco has undergone a significant transformation through the merger with two businesses
in Australia and the recapitalisation of all three companiesʼ debt profiles. I am especially proud that we were
able to continue to improve our safety performance, decreasing TRIFR from 5.6 at the end of FY16 to 2.2 at
the end of FY17 and currently at zero LTIFR, during this period.
I would like to thank the Emeco team for all of their hard work throughout the last 12 months, and thank our
shareholders and noteholders for their continued support.
Solid base for future Australian earnings
Emeco achieved an operating EBITDA of $83.5 million (up $29.3 million on FY16 operating EBITDA of $54.2
million) and an operating net loss after tax of $90.9 million. The benefits of cost reduction initiatives
implemented in FY16 were fully realised throughout FY17 and Emecoʼs focus on operational excellence
underpinned earnings growth across the business. Emeco also returned to positive operating EBIT of $12.0
million, which was the first positive EBIT since FY13.
In the first three quarters of FY17 (YTD Q3FY17), prior to the completion of the merger, Emeco reported
revenue of $137.5 million and operating EBITDA of $54.0 million. This strong result was delivered at the same
time as completing the complex restructure, which is a testament to the depth of expertise and commitment of
the Emeco operational management team.
After the completion of the recapitalisation and mergers on 31 March 2017, Emeco reported Q4FY17 revenue
and operating EBITDA of $94.3m and $29.5m respectively. Increased Q4FY17 revenue was a result of the
new scale of the business and with improving market conditions.
Emecoʼs average group operating utilisation for FY17 was 53%, representing an improvement on the FY16
average of 44% which was driven by growing demand across the Australian business as sentiment improves
in addition to greater customer relationships and understanding of their needs. Management has aligned its
nation-wide fleet to meet this increase in demand adding 85 pieces of equipment as a result of the Chile asset
swap in addition to the fleet acquired from the merger with Andyʼs and Orionstone. With an additional 400
pieces of equipment, Emeco is focused on increasing operating utilisation and driving greater returns on its
assets.
Emecoʼs New South Wales business continues to perform strongly ending the year with operating utilisation
of 68%. In Queensland, Emeco has significantly improved it operational utilisation to 62% and is positioned
well to capture new opportunities in FY18 due given its added scale. In Western Australia, Emeco has
increased its operating utilisation to 54% as new projects were secured in the iron ore and coal industries and,
as a result of the Andyʼs merger, Emeco now has a presence in South Australia and Victoria.
Emeco has wound down its exposure in both Chile and Canada, allowing management to focus on its
Australian operations. Canada is expected to provide a minimal earnings contribution moving forward.
Financial discipline
In FY17, cash generated from operating EBITDA was offset by the one-off costs associated with the merger
and working capital deficiencies of the acquired businesses. This resulted in Emeco generating free operating
cash flow of $36.9 million.
Emeco also released $15.2 million from the closure of the remaining cross-currency interest rate swaps. A
$20.0 million rights issue was completed during the period with the funds received being used to pay a portion
of the A$35.0 million transaction costs.
Emecoʼs debt structure consists of US$356m of bonds due March 2022 and the A$65m revolving credit facility
expiring in March 2020 which currently has $2.7 million of bank guarantees drawn against it. At 30 June 2017
Emeco had net debt of $457.1 million and leverage ratio of 5.5x (using Operating EBITDA of three quarters of
pre-merger and one quarter post-merger). Emeco is committed to optimising its cash flow and further
deleveraging its balance sheet to achieve a sustainable capital structure through the mining cycle.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
5
1
6
2
1
8
1
L
I
N
M
A
R
2
B
a
c
k
Emeco expects the leverage ratio to continue to decrease in FY18 with a full year contribution to EBITDA from
the merged businesses, earnings growth and cash flow generation.
Execution of strategic objectives
The recapitalisation of Emeco and extension of its debt to FY22 was a key strategic priority for Emeco as it
seeks to strengthen its balance sheet for the long-term. Emeco will continue to work towards improving
operational performance to generate cash to continue to reduce its leverage.
The merger transaction, together with the asset swaps, has also allowed Emeco to build on its portfolio of
projects and full mining fleet to promote sustainable growth over the long-term. The integration of the Andyʼs
and Orionstone businesses has been a focus of management and the business is on track to realise A$15
million in annualised operating synergies by the end of FY18.
With the implementation of an additional EOS project in FY17, Emeco will continue to enhance its customer
value proposition. With the help of Emecoʼs EOS technology, management is also focused on being the best
in class in asset and maintenance to improve our fleet capability and our performance while ensuring a strict
cost discipline. In FY18, our focus will remain on securing more full mining fleet projects and reducing costs to
improve margins and earnings.
Positioning for the future
The significant increase in revenue in Q4FY17 demonstrates both the new scale and future potential of Emeco
following the mergers with Andyʼs and Orionstone. Emecoʼs fleet has more than doubled as a result of the
merger and the recent asset swap provides Emeco with the platform for significant growth, boosted by
improving market sentiment. We are focused on ensuring that these additional pieces of equipment are put to
work at existing and new projects, and capturing the opportunity of increasing demand in the coal and base
metals industries in particular.
In FY18, Emeco will undertake a strategic review of its divisions of the acquired businesses to determine how
they fit with Emecoʼs strategy. We are conscious that there is still a lot of work required to extract merger
synergies and ensure Emecoʼs strict cost discipline and commitment to operational excellence is applied
across the integrated company to continue to reduce operating costs. Part of this also includes working with
our partner, The Red Button Group, to ensure we effectively manage our capital expenditure, particularly
through the significant capex synergy opportunities available as a result of doubling our fleet. The focus on
Emecoʼs capital and maintenance expenditure and will also assist in maximising our earnings and deleverage
this business.
I would like to thank all of our employees, shareholders, noteholders and wider stakeholder groups for their
continued support of Emeco.
Ian Testrow
Managing Director & Chief Executive Officer
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
6
1
6
2
1
8
1
L
I
N
M
A
R
2
B
a
c
k
Operating and Financial Review
The Emeco Group supplies safe, reliable and maintained equipment rental solutions to the mining industry.
Established in 1972, the business listed on the ASX in July 2006 and is headquartered in Perth, Western
Australia.
Emeco generates earnings from the provision of equipment rental solutions to the mining industry. Operating
costs principally comprise parts, labour and tooling associated with maintaining earthmoving equipment.
Capital expenditure principally comprises the purchase of equipment and replacement of major components
over the assetʼs life cycle while owned by Emeco.
Chart 1: Revenue by region
Chart 2: Revenue by
commodity
Chart 3: Fleet composition by
asset class
Chile, 12%
Canada,
5%
Bauxite, 2% Civil, 1%
Other, 17%
Iron Ore, 2%
Gold,
19%
Thermal Coal,
40%
Wheel
Loader, 7%
Grader, 7%
Dump Truck,
42%
Australia, 83%
Copper,
21%
Coking Coal, 15%
Dozer,
17%
Excavator, 9%
Note: Above analysis relates to 12 month period ended 30 June 2017 and includes discontinued operations.
Table 1: Group financial results
A$ millions
Revenue
EBITDA4
EBIT4
NPAT4
ROC4 %
EBIT margin
EBITDA margin
Operating results1,3
2017
2016
233.0
83.5
12.0
(90.9)
3.3%
5.2%
35.8%
208.0
54.2
(14.2)
(90.5)
(2.7)%
(6.8)%
26.1%
Statutory results
2017
233.0
69.6
(115.2)
(180.5)
(32.1)%
(49.4)%
29.9%
2016
206.6
47.6
(201.4)
(225.4)
(25.0)%
(97.5)%
23.1%
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. Operating and statutory results include discontinued operations.
3. Operating results are non-IFRS.
4. EBITDA: Earnings before interest, tax, depreciation and amortisation; EBIT: Earnings before interest and tax; NPAT: Net
profit after tax; ROC: Return on capital.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
7
t
n
o
r
F
2
R
A
M
N
I
L
1
8
1
2
6
1
2
Table 2: 2017 operating results to statutory results reconciliation
Tangible
asset
impairments
Goodwill
impairment
Redundancy
and
restructuring
costs
Long-term
incentive
program
(8.2)
(1.9)
(15.2)
(25.3)
(77.9)
-
-
(77.9)
(2.8)
(1.3)
(3.4)
(7.5)
(6.1)
(0.1)
(0.2)
(6.4)
A$
millions
Operating
Australia
Canada
Chile
Statutory
Transaction
costs
Tax
effect
NPAT
(10.1)
-
-
31.6
0.9
5.1
(90.9)
(73.5)
(2.4)
(13.7)
(10.1)
37.6
(180.5)
Reconciliation of differences between operating and statutory results:
1. FY17 operating results (non-IFRS) excludes the following:
(cid:882)
Tangible asset impairments: Over FY17 net impairments totalling $25.3 million were recognised across the business on
assets held for sale and subsequently disposed during the period. A small number of held for sale assets were reclassified
to the rental fleet in Australia to source growth in New South Wales and Queensland businesses, resulting in reversal of
impairments recognised in prior reporting periods.
(cid:882) Goodwill impairment: Goodwill recognised during the period and allocated to the Australia CGU was impaired which
(cid:882)
(cid:882)
(cid:882)
resulted in an impairment expense of $77.9 million before tax.
Redundancy and restructuring costs: One off costs related to redundancy and restructuring totalled $7.5 million before
tax.
Long-term incentive program: During FY17 Emeco recognised $6.4 million of non-cash expenses relating to the employee
long-term incentive plan.
Transaction costs: Costs incurred in relation to the mergers and recapitalisation during the period amounted to $10.1 million
before tax. These costs consist of $14.5 million in acquisition expense, $5.8 million in capitalised borrowing costs written off,
$10.2 million cost of equity provided to Black Diamond. Offsetting this is a gain realised on the discount on the debt for equity
swap of $20.4 million.
2. Refer to our 2016 Annual Report for reconciliation of differences between FY16 operating and statutory results.
3. All reconciling items relating to FY17 operating results are discussed in further detail later in the operating and financial review.
OPERATING UTILISATION TRENDING UPWARDS
Group operating utilisation increased over FY17 to an average of 53% compared to 44% in FY16 and ended
the year at 56%. Management is focused on increasing the operating utilisation of machines currently on rent
and looking for opportunities to redeploy underutilised fleet to generate greater returns.
Chart 4: 2017 Average Australia Operating Utilisation
80%
60%
40%
20%
0%
Operating Utilisation
Note:
1. Utilisation defined as % of fleet rented to customers (measured by written down value).
2. Operating utilisation defined as ratio of operating hours recognised over a month, compared to 400 hours a month.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
8
t
n
o
r
F
2
R
A
M
N
I
L
1
8
1
2
6
1
2
Group operating revenue from continuing operations increased in FY17 to $233.0 million (2016: $208.0
million). Rental revenue increased to $208.8 million (2016: $177.7 million) as a result of improvements in the
Australian business and the increased scale from the acquired fleet in 4Q17. Maintenance services revenue
decreased 5.6% to $22.0 million (2016: $23.3 million) primarily driven by the reduced scope of operations in
Canada. Sale of parts and machines decreased in FY17 to $2.6 million, down from $5.5 million in FY16 due
to rationalisation of the Australian inventory in FY16.
Operating EBITDA margins increased to 35.8% (2016: 26.1%) as the business realised a full year benefit of
the Project Fit initiatives implemented in FY16. The Companyʼs continued focus on operational excellence
and cost reduction contributed to the achievement of a 41% operating EBITDA margin in Q3FY17. This was
impacted in Q4FY17, partially by the merger transaction and in particular one-off expenses associated with
the acquired fleet, acquired low margin projects and cost inefficiencies experienced through integration.
EBITDA recovery improved operating return on capital (ROC) to 3.3% in FY17 (FY16: negative 2.7%).
Refer to the regional business overview on page 13 for further detail on regional operating and financial
performance.
REDUCTION IN EXPENSES IMPROVE OPERATING EBITDA
Table 3: Operating cost summary (operating results)
A$ millions
Revenue
Operating expenses
Changes in machinery and parts inventory
Repairs and maintenance
Employee expenses
Hired in equipment and labour
Net other expenses
Operating EBITDA
Depreciation expense
Amortisation
Operating EBIT
2017
2016
233.0
206.6
(9.5)
(77.0)
(21.3)
(20.3)
(21.4)
83.5
(70.6)
(0.8)
12.0
(8.9)
(71.0)
(34.0)
(21.1)
(17.4)
54.2
(68.3)
(0.1)
(14.2)
Operating EBITDA increased $29.3 million (54.1%) due to cost management within the business set
throughout FY16 in addition to increased rental revenue in Q4FY17. Although revenue increased 12.7% in
FY17, operating expenses decreased 1.9% which is evidence of the significant cost savings made over the
course of FY16. The business is on track to realise the $15 million of annualised operating synergies from the
transaction over the course of FY18. The full benefit of expected synergies will be recognised in FY19.
Repairs and maintenance expense increased 8.5% to $77 million (2016: $71.0 million). Fleet acquired from
Andyʼs and Orionstone required additional expenditure to bring the assets up to the high standards set by
Emeco for its equipment. These costs are one off in nature, with this maintenance program expected to
conclude by the end of 1H18.
Employee expenses decreased 37.4% in FY17 to $21.3 million (FY16: $34.0 million) as a full years savings
was realised from headcount rationalisation made throughout FY16.
Other expenses increased to $21.4 million (FY16: $17.4 million) predominately due to costs associated with
the outsourcing of some functions partially offsetting the decrease in employee expenses. Costs associated
with hired in equipment and labour remained relatively flat year on year as Emeco used external contractors
to reduce its fixed operating cost base. Refer to note 8 in the financial statements for further breakdown of net
other expenses (page 78).
Depreciation expense increased to $70.6 million in FY17 (FY16: $68.3 million) driven by the increased scale
of fleet and hours utilised from the merger with Andyʼs and Orionstone. However, the starting asset cost base
was reduced from the prior year through impairments recognised on the fleet in FY16, softening the
depreciation increase.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
9
1
6
2
1
8
1
L
I
N
M
A
R
2
B
a
c
k
INCREASED AUSTRALIAN FLEET
Table 4: Asset impairments (statutory results)
A$ millions
Rental fleet
Non-current assets held for sale
Asset impairments
Stock write down
Freehold land and buildings
Plant and equipment
Other assets
2017
2016
339.6
26.4
7.0
0.0
18.4
0.0
264.6
30.7
11.5
4.0
159.0
5.1
The written down value (WDV) of the rental fleet increased to $339.6 million over FY17 due to the merger with
Andyʼs and Orionstone adding $84.8 million and $64.1 million respectively.
In June 2017 the business executed a successful asset swap with a mining contractor in Chile which resulted
in the acquisition of $43.9 million of in-demand fleet for Australia in exchange for the fleet in Chile and cash
consideration. This fleet swap further supports equipment needs in Australia, particularly on the east coast
where utilisation in New South Wales and Queensland is currently over 90%. The remaining Canadian fleet
was disposed for consideration of $13.9 million during the period.
Impairment loss on plant and equipment decreased to $18.4 million in FY17, down from $159.0 million in FY16
(refer to note 22). FY16 impairment testing indicated all three cash generating units were impaired and the
value of the fleet was written down by $159.0 million. FY17 impairment testing resulted in the Australian CGU
being impaired. However this impairment was allocated to the goodwill recognised in the CGU and no
additional tangible asset impairment was recognised. The impairment of plant and equipment in FY17 of $18.4
million relates to the assets designated as held for sale during the period (refer to note 15).
Inventory was written down by $7.0 million (2016: $11.5 million), largely as a result of the disposal of the
Chilean assets as part of the asset swap to Australia.
We continually review our rental fleet, matching fleet mix to regional demand. Idle units identified as having
low rental demand and end of life machines are transferred to non-current assets held for sale and are actively
marketed through Emecoʼs global network of brokers.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
10
1
6
2
1
8
1
L
I
N
M
A
R
2
B
a
c
k
TRANSACTION IMPACTS OPERATING CASH FLOW
Table 5: Cash flow summary
A$ millions
Operating EBITDA
Non-Operating EBITDA
Working capital
Income tax cash flows
Operating free cash flow
Capital expenditure
Disposals
Net capital expenditure
Free cash flow
Note: 2016 results exclude discontinued operations
1H FY17
33.6
(2.2)
(11.9)
0.0
19.5
(12.0)
5.1
(6.9)
12.6
2H FY17
49.9
(11.7)
(20.8)
0.0
17.4
(19.4)
25.8
6.4
23.8
2017
2016
83.5
(13.9)
(32.7)
0.0
36.9
(31.4)
30.9
(0.5)
36.4
54.2
(6.6)
14.6
4.0
66.2
(38.2)
15.1
(23.1)
43.1
Operating EBITDA increased from $54.2 million in FY16 to $83.5 million in FY17 however increased one off
costs and significant working capital deficiencies associated with the merger with Andyʼs and Orionstone
affected the operating free cash flow for FY17. Significant expenditure was incurred in 4Q17 to bring the
acquired fleet from Andyʼs and Orionstone up to Emecoʼs operating standards. These cash outflows are
largely one off in nature and are expected to conclude by the end of 1H18 when Emecoʼs maintenance
program on acquired assets concludes.
Net capital expenditure decreased to $0.5m due to the disposal of the Chile fleet and the close out of two rent
to purchase options on the Canadian fleet. The Chile fleet was swapped for assets in Australia in addition to
$11.7 million cash whilst the Canadian disposals generated cash of $13.9 million during the period. Capital
expenditure was focused on major component expenditure on acquired machines as significant fleet was
added to the Australian business during the period via the merger with Andyʼs and Orionstone.
In addition, during the year Emeco released $15.2 million related to funds received from the closure of the
remaining cross-currency interest rate swaps. A $20.0 million rights issue was completed during the period
with the funds received being used to pay transaction costs which amounted to $35.0 million.
BALANCE SHEET RESTRUCTURE
The Company successfully completed its debt restructuring and the merger with two businesses in Australia
in March 2017. The transaction consisted of the following:
(cid:129) acquisition of Andyʼs for consideration of shares in Emeco;
(cid:129) acquisition of Orionstone for consideration of shares in Emeco;
(cid:129)
cancellation of Emeco 144A notes, Andyʼs long term debt obligations and Orionstone long term debt
obligations in exchange for new notes, for the value of 80% of the face value of the original debt, and 20%
received as shares in Emeco. The new notes mature in 2022 with an interest rate of 9.25%;
(cid:129) a refinanced A$65m revolving credit facility consisting of a A$35 million cash advance and a A$30 million
bank guarantee facility, replacing the A$75 million asset backed loan;
implementation of hedging arrangements against the US dollar denominated new notes;
(cid:129)
(cid:129) 5% of the total number of shares on issue provided to Black Diamond Capital Management LLC as the
major holder of Emeco new notes; and
(cid:129) A$20m rights offer to existing shareholders.
Goodwill of $77.9 million arose on the acquisition due to numerous factors including a 60% increase in the
Companyʼs share price over the transaction period and higher than expected short term liabilities acquired.
Impairment testing performed at June 2017 indicated the Australia cash generating unit was impaired and
consequently the $77.9 million of goodwill recognised on the acquisition was written off.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
11
t
n
o
r
F
2
R
A
M
N
I
L
1
8
1
2
6
1
2
Table 6: Net debt and gearing summary
A$ millions
Interest bearing liabilities (current and non-current)
2017
2016
Notes
144A notes
Revolving credit facility
Asset backed loan
Lease liabilities
Other
Cash
Net debt
Derivative asset / (liability)
Net debt (including hedging instruments)
Leverage ratio
Interest cover ratio
Note: Above figures based on facilities drawn – bank guarantees are excluded
Leverage ratio - Net debt : Operating EBITDA
Interest cover ratio - Operating EBITDA : Interest expense
462.7
0.0
0.0
0.0
9.8
1.6
17.0
457.1
(4.4)
461.5
5.5
1.5
0.0
380.7
0.0
0.0
9.0
0.5
24.8
365.4
18.9
346.5
6.7
1.1
The completion of Emecoʼs balance sheet restructure resulted in net debt increasing to $457.1 million.
Following the issuance of the notes, Emecoʼs debt structure consists of US$360.8 million of bonds of which
US$4.9 million are held by Emeco. The net amount outstanding at 30 June 2017 on the notes was US$355.9
million. The notes mature in March 2022 and a semi-annual coupon of 9.25% is payable in January and July
each year. The notes are secured and guaranteed by Emeco Holdings Limited and its operating subsidiaries.
The new notes do not contain maintenance covenants.
As part of the transaction, A$75 million asset backed loan was replaced by a A$65 million revolving credit
facility (RCF) consisting of a A$35 million cash advance facility and a A$30 million bank guarantee facility
which matures in March 2020. The facility requires the Group to maintain a collateral coverage ratio greater
than 3.0x and a fixed charge coverage ratio greater than 1.2x. At 30 June 2017 the RCF was undrawn and
$2.7 million of the bank guarantee facility was utilised.
The cross-currency interest rate swaps associated with the 144A notes were closed out during the period
generating $15.2 million in cash. New hedging arrangements were entered into to hedge the FX movement
on the US$355.9 million outstanding notes. US$230 million of the semi-annual coupon has been hedged to
AUD in addition to US$100 million principal hedged. Due to the appreciation in the Australian dollar between
the inception of the hedge on 31 March 2017 and 30 June 2017, a net hedge liability of $4.4 million has been
recognised at June 2017.
Finance lease liabilities increased from $9.0 million at 30 June 2016 to $9.7 million at 30 June 2017 with
Emeco acquiring a number of finance lease assets via the merger with the Andyʼs and Orionstone businesses.
Emecoʼs cash balance was $17.0 million at 30 June 2017. The cash flow was impacted by the working capital
deficiencies of the acquired entities, combined with expenditure incurred in 4Q17 to bring the acquired fleet
from Andyʼs and Orionstone up to Emecoʼs operating standards.
Refer to note 24 in the accompanying financial statements for additional information on Emecoʼs financing
facilities.
Emecoʼs leverage ratio has improved from 6.7x to 5.5x at 30 June 2017 (which includes one quarter of the
consolidated Groupʼs Operating EBITDA post-transaction compared with the full post transaction net debt).
Similar to FY16 the board declared a nil interim and final dividend for FY17 as a result of the net operating
loss for the period.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
12
Regional Business Overview
Chart 5: Rental revenue by
region
(cid:18)(cid:346)(cid:349)(cid:367)(cid:286)(cid:853)(cid:3)
(cid:1005)(cid:1006)(cid:1081)
(cid:18)(cid:258)(cid:374)(cid:258)(cid:282)(cid:258)(cid:853)(cid:3)(cid:1009)(cid:1081)
Chart 6: Operating EBITDA
contribution by region
Chart 7: Fleet by region
Canada, 14%
Canada, 1%
Chile,
12%
(cid:4)(cid:437)(cid:400)(cid:410)(cid:396)(cid:258)(cid:367)(cid:349)(cid:258)(cid:853)(cid:3)(cid:1012)(cid:1007)(cid:1081)
Australia, 73%
Australia, 99%
AUSTRALIA
Table 7: Performance indicators
Chart 8: Average fleet utilisation
Operating results
A$ millions
Rental revenue
Contract mining
Revenue
EBITDA
EBIT
No. workforce
2017
185.3
2016
132.2
11.9
60.9
26.1
241
-
46.0
(8.3)
165
Var
53.1
11.9
34.5
34.4
76
80%
60%
40%
20%
0%
Operating Utilisation
Operating utilisation
Average: 2017: 53%, 2016: 50%
Year-end: 2017: 54%, 2016: 52%
2
For a reconciliation of statutory to operating results refer to table 1 on page 7, table 2 on page 8 and accompanying notes.
Utilisation defined as % of fleet rented to customers (measured by written down value).
Notes:
(cid:129)
(cid:129)
(cid:129) Operating utilisation defined as ratio of operating hours recognised over a month, compared to 400 hours a month.
(cid:129)
Australia results in table 7 represent the Australian Rental segment.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
13
1
6
2
1
8
1
L
I
N
M
A
R
2
F
r
o
n
t
Main markets
Comprised of five operating units, Queensland, New South Wales, Western Australia & South Australia,
Victoria and Contract Mining, the Australian rental business is well diversified across bulk commodities and
metals. The business services high quality customers leveraged to the production phase of the mining cycle.
Operating unit performance is summarised below:
Table 8: Operating unit average operating utilisation
Operating utilisation
Current
62%
68%
54%
23%
n/a
2017
53%
65%
48%
17%
n/a
2016
53%
59%
34%
n/a
n/a
Queensland
New South Wales
Western Australia &
South Australia
Victoria
Contract Mining
FY17 performance
Revenue ($ million)
2016
2017
52.8
86.0
40.2
6.3
11.9
29.4
72.3
30.4
n/a
n/a
The Australia business improved average operating utilisation over FY16 to 50%, which was led by increased
market share in both New South Wales and Queensland. Rental revenue improved by 40% to $185.3 million
with operating EBITDA margins increasing from 26.1% in FY16 to 35.8% in FY17. This is a significant
improvement in the business and shows the benefits received from cost reduction initiatives implemented in
FY16 and the impact of operational excellence efficiencies in FY17. Headcount in Australia increased from
165 at 30 June 2016 to 329 at 30 June 2017 as the business acquired the operations of Andyʼs and Orionstone.
Significant headcount rationalisation was made prior to the merger with the increase in headcount related to
the scale of the business in Australia.
The New South Wales business continues to remain a strong Australian business unit with FY17 operating
utilisation of 65% compared to 59% over FY16. Revenue increased 18.9% over this period to $86.0 million as
the region realises growth on existing projects through the strength of its relationships with customers.
Queensland continued to grow its earnings base through improved market conditions and access to increased
fleet and scale through merger with Orionstone. This has increased Emecoʼs customer base whilst diversifying
its commodity exposure to copper and bauxite. Revenue increased 79.6% during this period and the business
now holds 194 pieces of equipment in Queensland.
Western Australia has rebounded off the lows experienced in FY16 and has increased operating utilisation in
2HFY17 driven by contracts won in iron ore and coal. During FY17, the Western Region successfully extended
a key contract with an EOS customer and also acquired an EOS project site in South Australia. We see greater
optimism throughout the Western region and aim to capitalise on this by winning new contracts in the next
period.
In Q4FY17, Emeco acquired contract mining and civil businesses which provided revenue of $11.9 million and
$6.3 million respectively. Given the large direct costs and overheads associated with these business units,
EBITDA contribution to the Group result was marginal.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
14
k
c
a
B
2
R
A
M
N
I
L
1
8
1
2
6
1
The year ahead
The Australian business becomes managementʼs core focus for FY18 ensuring that fleet acquired during FY17
is put to work and operating utilisation of fleet is maximised. We expect strong growth in the New South Wales
and Queensland businesses, from market exposure to coking coal, which should drive demand and increased
utilisation of fleet. The asset transfer from Chile has provided $43.9 million of assets to support demand on the
east coast. The majority of assets acquired have already been placed on contract.
The EOS technology is being implemented on a new site in the Western Region which should see increased
operating utilisation on that site and significant positive impact to the customerʼs operations and earnings.
Management sees the EOS technology being able to provide improved asset maintenance and cost savings
via condition monitoring and operator usage.
Three contract mining projects were acquired from the merger of which two have already ended, with the last
expiring in September 2017. Management continues to assess the civil business acquired from Andyʼs given
its revenue contribution compared to its cost base. Opportunities to continue to support the east coast mining
and infrastructure customers will be assessed.
CANADA & CHILE
Table 9: Canada Results
Table 10: Chile Results
Operating results
Operating results
A$ millions
Revenue
EBITDA
EBIT
No. employees
2017
10.6
12.1
6.1
1
2016
36.6
3.5
(3.9)
64
Var
(26.0)
8.6
10.0
(63)
A$ millions
Revenue
EBITDA
EBIT
No. employees
2017
28.3
10.4
0.5
1
2016
39.1
14.6
(3.3)
25
Var
(10.8)
(4.2)
3.8
(24)
Notes:
(cid:129)
For a reconciliation of statutory to operating results refer to table 1 on page 7, table 2 on page 8 and accompanying notes.
Canada Summary
Emecoʼs Canadian strategic partner, Heavy Metal Equipment Rental (HMER), exercised two rent-to-purchase
options during FY17 effectively disposing of all of Emecoʼs Canadian assets during the period.
Emeco continues to hold several customer contracts in Canada which are managed by HMER which will
provide a services fee to Emeco over FY18. Emeco does not expect a material earnings contribution from the
Canadian business in the near-term. However, Emeco will continue to partner with HMER and maintain a
presence in Canada, allowing it to take advantage of potential project opportunities should they arise.
Chile Summary
In Chile, low operating utilisation impacted on earnings and returns. During the period, a strategic partnership
was entered into with a maintenance provider that allowed Emeco to significantly reduce operating and
overhead costs. Despite the management of cost, the earnings of the business did not improve over FY17
and the decision was made to reduce Emecoʼs exposure in Chile. Management took an opportunity to dispose
of the fleet in Chile in exchange for 85 assets located in Australia and a A$11.7 million cash payment.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
15
k
c
a
B
2
R
A
M
N
I
L
1
8
1
2
6
1
Table 11: Five year financial summary
REVENUE
Revenue from rental income
Revenue from sale of machines and parts
Revenue from maintenance services
Total
PROFIT
EBITDA2
EBIT2
NPAT2
Statutory Profit/(loss) for the year
Basic EPS
BALANCE SHEET
Total assets
Total liabilities
Shareholdersʼ 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
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
cents
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
2017
2016
2015
2014
2013
208,286
139,545
206,718
205,368
314,068
2,648
5,470
2,788
8,145
22,080
22,956
31,925
27,582
23,413
41,894
233,014
167,970
241,431
241,095
379,375
83,504
(97,066)
(90,891)
54,246
(14,219)
(90,519)
43,364
(59,225)
(94,813)
67,344
(10,879)
(213,543)
(180,463)
(225,389)
(127,703)
(275,309)
(3.7)
(15.1)
(15.8)
(3.6)
160,251
61,314
28,499
6,004
4.8
520,679
427,692
708,755
748,362
1,126,022
552,686
421,695
487,284
424,390
514,846
(32,007)
5,997
221,471
323,972
611,176
2
474,109
377,818
423,971
343,774
415,426
14,223
70,644
(2,894)
82,072
181,303
486
(23,112)
(13,013)
25,032
(129,124)
(21,318)
(49,311)
(6,733)
(71,364)
(119,281)
(6,609)
(1,779)
(22,640)
35,740
(67,102)
(334)
5,561
(18,495)
85,889
(9,273)
Number of ordinary shares at year end
'000
2,436,860
599,675
599,675
599,675
599,675
Total dividends paid in respect to financial year
$'000
Ordinary dividends per share declared
Special dividends per share declared
cents
cents
KEY RATIO'S
Average fleet utilisation
Average fleet operating utilisation
EBIT ROC
Net debt to operating EBITDA
%
%
%
x
0
0.0
0.0
87.3
52.9
3.3
5.47
0
0.0
0.0
76.5
44.0
(2.7)
6.74
0
0.0
0.0
69.0
45.7
(9.4)
10.29
0
0.0
0.0
48.0
32.9
(0.8)
4.78
15,109
2.5
0.0
67.0
44.3
7.1
2.15
Financial information as reported in the corresponding financial year and includes operations now discontinued.
1
2 Operating results. Please refer to previous annual reports for reconciliation between Statutory and Operating Results.
Includes capex funded via finance lease facilities (excluded from statutory cash flow).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
16
1
6
2
1
8
1
L
I
N
M
A
R
2
F
r
o
n
t
Financial Report
Directorsʼ Report(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1005)(cid:1012)(cid:3)
Directors(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1005)(cid:1012)(cid:3)
Company secretary(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1005)(cid:3)
Directorsʼ meetings(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1005)(cid:3)
Corporate governance statement(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1006)(cid:3)
Principal activities(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1006)(cid:3)
Operating and financial review(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1006)(cid:3)
Dividends(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1006)(cid:3)
Significant changes in state of affairs(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1006)(cid:3)
Events subsequent to report date(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1006)(cid:3)
Likely developments(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1006)(cid:3)
3
Directorsʼ interest(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1007)(cid:3)
Indemnification and insurance of officers and auditors(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1007)(cid:3)
Non-audit services(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1008)(cid:3)
Lead auditorʼs independence declaration(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1008)(cid:3)
Rounding off(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1008)(cid:3)
Remuneration report (audited)(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1006)(cid:1009)(cid:3)
Deloitte Touche Tohmatsu independence declaration(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1008)(cid:1004)(cid:3)
Financial Statements(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1008)(cid:1005)(cid:3)
Consolidated Statement of Profit or Loss and Other Comprehensive Income(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1008)(cid:1005)(cid:3)
Consolidated Statement of Financial Position(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1008)(cid:1007)(cid:3)
Consolidated Statement of Changes in Equity(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1008)(cid:1008)(cid:3)
Consolidated Statement of Cash Flows(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1008)(cid:1009)(cid:3)
Notes to the Consolidated Financial Statements(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1008)(cid:1010)(cid:3)
Directorsʼ Declaration(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1005)(cid:1006)(cid:1013)(cid:3)
Independent Auditorʼs Report(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1005)(cid:1007)(cid:1004)(cid:3)
Shareholder Information(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1005)(cid:1007)(cid:1008)(cid:3)
Company Directory(cid:3)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:856)(cid:3)(cid:1005)(cid:1007)(cid:1011)(cid:3)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
17
1
6
2
1
8
1
L
I
N
M
A
R
3
F
r
o
n
t
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
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) and the auditorʼs report for
the financial year ended 30 June 2017 (FY17).
Directors
The directors of the Company during FY17 were:
PETER RICHARDS BCom, 58
Appointment: Independent Non-Executive Director since June 2010. Chairman since January 2016.
Board committee membership: Chairman of the Remuneration and Nomination Committee since 1 April
2017 and Member of the Audit and Risk Management Committee.
Skills and experience: Peter has over 35 years of international business experience with global and regional
companies including British Petroleum (including its mining arm Seltrust Holdings), Wesfarmers Limited, Dyno
Nobel Limited and Norfolk Holdings 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 a Non-Executive Director (2009 to 2015) of Bradken Limited and a Non-
Executive Director (2010 to 2015) of Sedgman Limited.
Current appointments:
(cid:129)
(cid:129)
(cid:129)
Chairman of Baralaba Coal Company Limited (Administrators Appointed) (since 2014)
Non-Executive Director of NSL Consolidated Limited (since 2009, Chairman 2014 to 2017)
Non-Executive Director of Graincorp Limited (since 2015)
IAN TESTROW BEng (Civil), MBA, 47
Appointment: Managing Director since 20 August 2015.
Skills and experience: Ian was appointed Chief Executive Officer in August 2015. Prior to this, Ian was
Emecoʼs Chief Operating Officer, responsible for the Australian and Chilean operations as well as Global Asset
Management. Ian has also held the positions of President, New and Developing Business after establishing
Emeco's Chilean business in 2012 and President, Americas where Ian managed the exit of Emeco's USA
business in 2010 and Emecoʼs Canadian business commencing in 2009. Ian joined Emeco in 2005,
responsible for the business in Queensland and Northern Territory and, then in addition in 2007, New South
Wales. Prior to Emeco Ian worked for Wesfarmers Limited, BHP Billiton Ltd, Thiess Pty Ltd and Dyno Nobel.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
18
k
c
a
B
3
R
A
M
N
I
L
1
8
1
2
6
1
k
c
a
B
3
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
PETER FRANK BSEE, MBA, 69
Appointment: Non-Executive Director since April 2017
Skills and experience: Peter is a Senior Managing Director at Black Diamond. Prior to joining Black Diamond,
Peter was President of GSC Group, a SEC-registered investment adviser, where he worked since 2001. From
2005 until 2008, he served as the Senior Operating Executive for GSC's private equity funds. Prior to 2001,
Peter was the CEO of Ten Hoeve Bros Inc and was an investment banker at Goldman Sachs & Co. From April
2010 to May 2015, Peter was a director of Viasystems Group Inc and he is currently a director of Color Spot
Nurseries Inc, IAP Worldwide Services Inc, North Metro Harness Initiative LLC and White Birch Investment
LLC. Peter has also served as chairman of the board of Kolmar Labs Group Inc, Scovill Inc and Worldtex Inc.
Peter graduated from the University of Michigan with a BSEE degree and earned an MBA from the Harvard
Business School.
KEITH SKINNER B.Comm, FCA, FAICD, 64
Appointment: Independent Non-Executive Director since April 2017
Board committee membership: Chairman of the Audit and Risk Management Committee. Member of the
Remuneration and Nomination Committee.
Skills and experience: Keith was one of the leading Restructuring and Insolvency practitioners in Australia,
leading many corporate turnarounds. Keith was the Chief Operating Officer of Deloitte Australia for 13 years
until his retirement from the firm in May 2015. Keith was also a director of Deloitte Australia (1995 to 1997)
and a director of the Deloitte Global Firm (2013 to 2015), and a member of the Governance (2013 to 2015)
and Risk Committees (2013 to 2015) of both. Keith has also been the Chairman of Emue Technologies Limited
(2013 to 2015).
Current appointments:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Chairman of the Audit and Risk Committee of the Australian Digital Health Agency (since 2016)
Director of the North Sydney Local Health District (since 2017)
Director of the Lysicrates Foundation Limited (since 2015)
Advisory Board of SRX Global Pty Limited (since 2016)
DARREN YEATES B Eng., MBA, FAICD, Grad Dip Mgt, Grad Dip App. Fin , 56
Appointment: Independent Non-Executive Director since April 2017
Board committee membership: Member of the Audit and Risk Management Committee. Member of the
Remuneration and Nomination Committee.
Skills and experience: Darren has over 30 years' mining industry experience, most recently as CEO of
Hancock Coal. He has over 22 years' experience with Rio Tinto including as Acting Managing Director and
Chief Operating Officer for Coal Australia, General Manager Ports and Infrastructure for Pilbara Iron and
General Manager Tarong Coal. Prior to joining Rio Tinto he worked for 6 years for BHP in coal operations and
metalifferous exploration.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
19
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
JOHN CAHILL BBus, Grad Dip Bus, FCPA, GAICD, 61
Appointment: Independent Non-Executive Director from September 2008 until 1 April 2017.
Board committee membership: Chairman of the Audit and Risk Management Committee and member of the
Remuneration and Nomination Committee until 1 April 2017.
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 Ltd. John was previously
Non-Executive Director (2007 to 2013) and President and Chairman (2011 to 2013) of CPA Australia Ltd and
Non-Executive Director (2009 to 2014) and Deputy Chairman (2010 to 2014) of Electricity Networks
Corporation, Western Australia (trading as Western Power).
ERICA SMYTH MSc, FAICD, FTSE, 65
Appointment: Independent Non-Executive Director from December 2011 until 1 April 2017.
Board committee membership: Chair of the Remuneration and Nomination Committee and member of the
Audit and Risk Management Committee until 1 April 2017.
Skills and experience: With over 40 years' experience in the mineral and petroleum industries, Erica's career
highlights include her positions as Chair of Toro Energy, Manager Gas Market Development WA for BHP
Petroleum and General Manager Corporate Affairs with Woodside Petroleum Limited. In 2016 she was added
to the WA Womenʼs Hall of Fame and 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. Erica was elected as a Fellow of the Academy of Technological Science and Engineering in 2012.
GREGORY HAWKINS BCom, FCA, 49
Appointment: Executive Director Finance from 20 August 2015 until 19 August 2016.
Skills and experience: Greg joined Emeco as Chief Financial Officer in July 2014. Before joining Emeco,
Greg was Chief Executive Officer of African Barrick Gold plc based in London where he made significant
improvements to that business, dealt with considerable challenges in the African environment and set the
company on a solid platform of improvement in performance for its long term future. Prior to this he was Chief
Financial Officer at Barrick Gold Corporation's Australia Pacific division, based in Perth. Greg is a Fellow of
the Institute of Chartered Accountants.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
20
3
1
6
2
1
8
1
L
I
N
M
A
R
3
F
r
o
n
t
t
n
o
r
F
3
R
A
M
N
I
L
1
8
1
2
6
1
3
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Company secretary
The company secretaries of the Company during FY17 were:
PENELOPE YOUNG BBus, LLB, LLM
Appointment: Company Secretary since April 2017.
Penny was appointed General Counsel in July 2017 and Company Secretary to the Emeco Board in April
2017. Penny joined Emeco as Senior Legal Counsel in May 2015. Prior to joining Emeco, Penny spent the
majority of her career as a corporate and commercial lawyer in private practice in Melbourne. Penny holds a
Master of Laws, Bachelor of Laws and a Bachelor of Business.
THAO PHAM LLB (Hons), BCom
Appointment: Company Secretary from 1 July 2014 until 1 April 2017.
Thao was appointed Chief Strategy Officer in May 2017. Prior to this, Thao was Emeco's Chief Legal, Risk &
Business Transformation Officer since April 2016, and General Counsel and Company Secretary since July
2014. Thao joined Emeco as Legal Counsel in May 2011. Prior to joining Emeco, Thao spent several years as
a corporate and commercial lawyer with an Australian law firm. Thao holds a Bachelor of Law (with honours)
and a Bachelor of Commerce, majoring in Accounting and Finance.
Directorsʼ meetings
The number of board and committee meetings held and attended by each director in FY17 is outlined in the
following table below:
Table 12: Board and committee meetings held and director attendance
Director
Board meetings
Audit & risk
management
committee meetings
Peter Richards
Ian Testrow
John Cahill
Peter Frank
Gregory Hawkins
Keith Skinner
Erica Smyth
Darren Yeates
A
15
15
13
2
1
2
13
2
B
15
15
13
2
1
2
13
2
A
4
4 *
3
1 *
0 *
1
3
1
B
4
4
3
1
0
1
3
1
A
B
*
Number of meetings attended.
Number of meetings held during the time the director held office during the year.
Not a member of this committee.
Remuneration &
nomination committee
meetings
A
B
2
2 *
2
0 *
0 *
0
2
0
2
2
2
0
0
0
2
0
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
21
1
6
2
1
8
1
L
I
N
M
A
R
3
B
a
c
k
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Corporate governance statement
The Companyʼs corporate governance statement is located on the Companyʼs website at
https://www.emecogroup.com/investors-overview/corporate-governance.
Principal activities
The principal activity during FY17 of the Group was the provision of heavy earthmoving equipment rental
solutions to mining companies and contractors and associated services.
As set out in this report, the nature of the Groupʼs 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 FY17, is set out in the operating and
financial review section at pages 7 to 16 and in the accompanying financial statements.
Dividends
No dividends were declared or paid during FY17. No dividends have been declared or paid since the end of
FY17.
Significant changes in state of affairs
Other than those disclosed in the operating and financial review section or the financial statements and the
notes thereto, in the opinion of the directors, there were no significant changes in the Groupʼs state of affairs
that occurred during the financial year under review.
Events subsequent to report date
During the financial year under review there were no significant events after the balance date.
Likely developments
Likely developments in, and expected results of, the operations of the Group are referred to in the operating
and financial review section at pages 7 to 16. This report omits information on likely developments in the
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 Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
22
1
6
2
1
8
1
L
I
N
M
A
R
3
B
a
c
k
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Directorsʼ interest
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 13: Directorsʼ Interests
Director
Peter Richards
Ian Testrow
Peter Frank
Keith Skinner
Darren Yeates
Ordinary shares
Options or rights
52,264
757,831 [A]
-
-
-
-
123,246,461
[B]
-
-
-
[A] This comprises ordinary shares held directly by Mr Testrow and those which he acquired under the FY15 employee share ownership
plan but which are held by the trustee of the plan on his behalf. See section 5.6
[B] This comprises unvested performance shares issued under the Companyʼs long term incentive plans after shareholder approval. See
section 5.3, 5.4 and 5.5.
Indemnification and insurance of officers and auditors
The Company has entered into a deed of access, indemnity and insurance with each of its current and former
directors, the chief financial officer and the company secretary. Under the terms of the deed, the Company
indemnifies the officer or former officer, to the extent permitted by law, for liabilities incurred as an officer of
the Company. The deed provides that the Company must advance the officer reasonable costs incurred by
the officer in defending certain proceedings or appearing before an inquiry or hearing of a government agency.
Since the end of the previous financial year, the Company has paid premiums in respect of contracts insuring
current and former officers of the Emeco Group, including executives, against liabilities incurred by such an
officer to the extent permitted by the Corporations Act 2001. The contracts of insurance prohibit disclosure of
the nature of the liability cover and the amount of the premium.
The Group has not indemnified its auditor, Deloitte Touche Tohmatsu.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
23
t
n
o
r
F
3
R
A
M
N
I
L
1
8
1
2
6
1
3
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Non-audit services
During the year, Deloitte Touche Tohmatsu, the Groupʼs auditor, has performed certain other services in
addition to their statutory duties.
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:
(cid:129) All non-audit services were subject to the corporate governance procedures adopted by the Group and
have been reviewed by the audit and risk management committee to ensure they do not impact the integrity
and objectivity of the auditor.
(cid:129) 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 auditorʼs own work, acting in a management or decision making capacity for the Group, acting
as an advocate for the Group or jointly sharing the risks and rewards.
Details of the amounts paid to the auditor of the Group, Deloitte Touche Tohmatsu and its network firms, for
audit and non-audit services provided during the year are found in note 9 of the notes to the financial
statements.
Lead auditorʼs independence declaration
A copy of the auditorʼs independence declaration as required under section 307C of the Corporations Act 2001
is set out on page 40 and forms part of the directorsʼ report.
Rounding off
The amounts contained in the financial report have been rounded to the nearest $1,000 (unless otherwise
stated) under the option available to the Company as referred to in ASIC Corporations (Rounding in
Financial/Directorsʼ Reports) Instrument 2016/191, dated 24 March 2016. The Company is an entity to which
the class order applies.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
24
t
n
o
r
F
3
R
A
M
N
I
L
1
8
1
2
6
1
3
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Remuneration report (audited)
Remuneration report contents
This report covers the following matters:
1.
2.
3.
4.
5.
6.
Introduction
Remuneration governance
Executive remuneration
Non-executive director remuneration
Details of remuneration
Service contracts
1.
Introduction
This report details the Groupʼs remuneration objectives, practices and outcomes for key management
personnel (KMP), which includes directors and executives, for the year ended 30 June 2017. Any reference
to ʻexecutivesʼ in this report refers to KMP who are not non-executive directors.
The following persons were directors of the Company during FY17:
Non-executive directors
Peter Richards
Chair
Peter Frank
Keith Skinner
(Commenced role on 1 April 2017)
(Commenced role on 1 April 2017)
Darren Yeates
(Commenced role on 1 April 2017)
John Cahill
Erica Smyth
(Ceased role on 1 April 2017)
(Ceased role on 1 April 2017)
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
Gregory Hawkins
Executive Director, Finance (ceased role on 19 August 2016)
The following persons were also employed as executives of the Company during FY17:
Other executives
Position
Thao Pham
Justine Lea
Chief Strategy Officer (commenced role on 17 May 2017), previously Chief
Legal, Risk & Business Transformation Officer (ceased role as Company
Secretary on 1 April 2017).
Chief Financial Officer (commenced role 24 October 2016), previously
Acting Chief Financial Officer (commenced role on 1 July 2016)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
25
1
6
2
1
8
1
L
I
N
M
A
R
3
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
2.
Remuneration governance
The board is committed to implementing KMP remuneration structures which achieve a balance between:
(cid:129)
(cid:129)
(cid:129)
rewarding executives for the achievement of the Companyʼs short and long term financial, strategic and
safety goals;
incentivising executives to remain with the Group; 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 and nomination committee is responsible for reviewing and suggesting recommendations
to the board in relation to:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
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 Companyʼs public materials including ASX filings and the annual
report; and
retirement payments.
The members of the remuneration and nomination committee in FY17 until 1 April 2017 were Ms Erica Smyth
(Chair), Mr John Cahill and Mr Peter Richards. The members of the remuneration and nomination committee
from 1 April 2017 were Mr Peter Richards (Chair), Mr Keith Skinner and Mr Darren Yeates.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
26
1
6
2
1
8
1
L
I
N
M
A
R
3
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
3.
Executive remuneration
3.1 Remuneration policy
The Group remuneration policy is substantially reflected in the objectives of the Companyʼs remuneration and
nomination committee. The committeeʼs objectives are summarised in the following table:
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.
Provide a significant proportion of 'at risk' remuneration to ensure that
executive reward is directly linked to the creation of shareholder value.
Align executive interests with
those of shareholders
Ensure human resources policies and practices are consistent and
complementary to the strategic direction of the Company.
Attract, retain and develop
proven performers
Prohibit the hedging of unvested equity to ensure alignment with
shareholder outcomes.
Provide total remuneration which is sufficient to attract and retain proven
and experienced executives who are capable of:
(cid:129)
fulfilling their respective roles with the Group;
(cid:129) achieving the Groupʼs strategic objectives; and
(cid:129) maximising Group earnings and returns to shareholders.
The remuneration structure for the Companyʼs executives consists of fixed and variable components. The
variable component ensures that a proportion of pay varies with Company performance.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
27
t
n
o
r
F
3
R
A
M
N
I
L
1
8
1
2
6
1
3
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
3.2 Fixed remuneration
Fixed remuneration comprises base salary, employer superannuation contributions and other non-cash
benefits.
Each executiveʼs fixed remuneration is reviewed and benchmarked annually in August. In FY17, this process
did not result in any change in any Executiveʼs fixed remuneration. However, fixed remuneration of executives
was reviewed as a result of expanded responsibilities on and from, and once executive remuneration
restrictions ceased upon, completion the Groupʼs recapitalisation and the acquisitions of Andyʼs Earthmovers
(Asia Pacific) Pty Ltd (Andyʼs) and Orionstone Holdings Pty Ltd and its subsidiaries (Orionstone) (together,
Transaction).
The level of remuneration is set to enable the Company to attract and retain proven performers once they are
working within the business. An executiveʼs responsibilities, experience, qualifications, performance and
geographic location are also taken into account.
Fixed remuneration for executives has previously been 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.
3.3 Variable remuneration
Generally, executives are entitled to variable remuneration which consists of short and long term incentives.
At the start of FY17 when the board set the FY17 remuneration structure for executives, the employee share
trust already held a significant amount of shares for employees pursuant to existing plans. This left little
headroom to offer a meaningful long-term equity-based incentive given the Companyʼs share price at that
time. Further, there was uncertainty around the Companyʼs capital structure in light of the Companyʼs
corporate development activities and the potential Transaction. Therefore, the executive remuneration
structure for FY17 did not include a long term, equity-based retention incentive plan. Instead, the percentage
of variable remuneration usually offered to executives in respect of long term incentive plans was offered as
an additional short term incentive (STI). Increasing the STI component ensured executives remained
incentivised to maintain a clear focus on day-to-day operations and financial performance in order to create
shareholder value, notwithstanding the work required to complete the note refinancing and mergers with
Andyʼs and Orionstone.
The below table sets out the maximum remuneration for each executive in FY17 attributable to STIs as a
percentage of total fixed remuneration (TFR) if maximum performance is achieved.
Table 14: STI remuneration
Executive
Ian Testrow
Position
Managing Director & Chief
Executive Officer
Thao Pham
Chief Strategy Officer
Justine Lea
Chief Financial Officer
STI
200%
100%
100%
LTI
-
-
-
Maximum total
variable
remuneration
200%
100%
100%
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
28
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Further, on 13 March 2017 the Company held extraordinary general meeting (EGM) for the purpose of
approving a series of interrelated resolutions required in order to approve the Transaction. At that meeting,
shareholders approved the establishment of the Companyʼs new management incentive plan (MIP) as part of
the Transaction.
In FY17 after completion of the Transaction, 303,603,596 awards were made to senior management under the
MIP in recognition of their contribution to the Transaction and also their ability to drive the long term objectives
of the Emeco Group and increase shareholder wealth. This offer differed from other long-term incentive offers
given its connection to the Transaction and also as the awards were not determined by reference to a
percentage of remuneration. Approximately 75% of the MIP awards are performance shares which are already
on issue. A performance share is a fully paid ordinary share on issue, the vesting of which is subject to a
performance condition being met. See section 3.3.2.
3.3.1 STI remuneration
Cash
STIs are usually used to reward the performance of executives over a full financial year. However, for FY17,
in light of the acquisition of Andyʼs and Orionstone on 30 March 2017, STIs were assessed against Company
performance in respect of key performance indicators (KPIs) over the:
(cid:129)
(cid:129)
first three quarters of FY17 for financial KPIs as these related to FY17 budget (the fourth quarter budget
became irrelevant upon completion of the Transaction); and
the full financial year for non-financial KPIs.
The actual amount of STI awarded is determined after the end of the financial year in light of the Companyʼs
performance against the KPIs. All executive STI awards require review and approval by the remuneration and
nomination committee and the board.
An executiveʼs maximum achievable STI award is set as a percentage of TFR (see table 14 above for details).
FY17 STI awards are made 100% in cash.
Key performance indicators
As noted above, due to the Transaction completing on 30 March 2017 resulting in the earnings of Andyʼs and
Orionstone being included in the fourth quarter financials, the financial KPI (which was based on budget
EBITDA) was assessed over the first three quarters of FY17.
Along with the financial performance indicator, a safety KPI was included given the importance of safety to the
Groupʼs workforce, customers and therefore the long term sustainability and success of the Group.
In respect of the FY17 STI plan, the executives had identical KPIs and no personal KPIs. This was designed
to focus executive efforts on the overall performance of the Company and promote collaboration and support
between executives, senior managers and the Group as a whole.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
29
3
1
6
2
1
8
1
L
I
N
M
A
R
3
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Table 15 below sets out the KPIs for the FY17 STI plan and the weightings attributable to each of them. In the
boardʼs view, these KPIs align the reward of executives with the interests of shareholders.
Table 15: FY17 STI plan KPI weightings and entitlements
Weighting
80%
KPI
EBITDA
for Q1, Q2
and Q3
Safety [A]
20%
Entitlement
0% if actual EBITDA less than
90% of budget EBITDA
100% if actual EBITDA more
than 110% of budget EBITDA
Pro-rata payments between
these levels
0% if TRIFR as at 30 June 2017
is an improvement of less than
10% or less on FY16
performance.
100% if TRIFR as at 30 June
2017 is a 25% or more
improvement on FY16
performance.
Pro-rata payments between
these levels.
Rationale
Reflects the financial
performance and the ability
of the Company to pay STI
awards.
Achievement
100%
100%
The board regularly reviews
the Companyʼs safety
performance in detail and is
striving to achieve a 'zero-
harm' workplace at Emeco.
TRIFR measures progress
towards this aspiration.
[A]
TRIFR = Number of recordable injuries x 1,000,000 hours
Total hours worked
3.3.2 MIP remuneration
Allocation of MIP awards to executives formed an important aspect of the Transaction to incentivise
management to stay with the Group post-Transaction and this award aligns the interests of senior managers
with the long term interests of shareholders.
MIP awards are in the form of performance shares or performance rights (MIP awards). A performance share
is a fully paid ordinary Emeco share on issue, the vesting of which is subject to service conditions being met.
A performance right is a right to receive a fully paid ordinary Emeco share, the vesting of which is subject to
service conditions being met.
After completion of the Transaction, selected participants were offered performance rights under the MIP.
These were offered both as a recognition of their contribution to the Transaction and as an incentive to remain
with the Group in order to achieve timely integration of the Emeco, Andyʼs and Orionstone businesses,
forecasted synergies and to deliver the Groupʼs long term objectives.
The number of performance rights offered to executives was determined by reference to a percentage of the
issued capital of the Company. The number of performance shares ultimately granted to Mr Testrow was
reduced as part of the Transaction and calculated in accordance with description set out in the notice of
meeting for the EGM and as approved by the shareholders at the EGM. This calculation reflected a reduction
in Mr Testrowʼs entitlement of 5% of the issued capital of the Company under his executive services agreement
by the corresponding number of shares that were issued to a transaction party under a top-up placement (see
the EGM notice of meeting for further information).
Performance shares and performance rights were offered at no cost, however, vesting is subject to the service
condition described below being satisfied.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
30
k
c
a
B
3
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Service condition
MIP awards vest at the end of a three year period to encourage senior management to remain with the Group
for the three year vesting period. Retaining senior management is particularly important to the Company given
integration of the Andyʼs and Orionstone businesses, the significant increase in equipment numbers and
personnel as well as the long term objectives of the Group.
Performance shares which vest will be transferred to the participant. In respect of performance rights which
vest, corresponding shares will be transferred to the participant.
MIP awards that do not vest will lapse and any associated shares on issue will continue to be held in trust for
subsequent reallocation.
Vesting on involuntary termination
If an executiveʼs employment is terminated due to death, total and permanent disability, retrenchment or
retirement, then the executiveʼs unvested MIP awards will vest, pro-rated based on the period that the
executive has been employed with Emeco during the vesting period.
All unvested MIP awards lapse if an executive resigns or is terminated for cause.
3.4
Prohibition of hedging securities
Emecoʼs share trading policy prohibits executives, directors, officers and employees of the Company from
entering into transactions intended to hedge their exposure to Emeco securities which have been issued as
part of remuneration.
3.5 Relationship between remuneration and Company performance
Emecoʼs remuneration objectives effectively align the interests of Emecoʼs executives with the interests of the
Company and its shareholders.
This has been achieved by setting STI KPIs which are focussed on the overall performance of the Company
and which promote collaboration and support between executives, senior managers and the Group as a whole.
In respect of FY17, 100% of the executivesʼ target STI was awarded as a result of the improved financial
performance of the Group.
MIP awards are dependent on continued employment with the Group over, and the value of which are
ultimately dependent on the share price at the end of, the vesting period. No incentives under the Companyʼs
previous long term incentive plans vested in FY17. See section 5.5 for more detail.
In FY17, the Company continued to focus on cash generation through reducing costs, disposing surplus fleet
and managing capital expenditure and working capital in order to deleverage and strengthen its balance sheet.
EBITDA is a good indicator of the Companyʼs cash generating ability. Further deleveraging was achieved
through the recapitalisation and mergers with Andyʼs and Orionstone and the Companyʼs new senior secured
notes and revolving credit facility have provided financial flexibility to generate cash to continue to reduce debt.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
31
k
c
a
B
3
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Retaining senior management during this period was integral to the Companyʼs achievements and in placing
the Group in a leading market position from which to benefit from the improving market conditions and hence
greater shareholder returns.
Details of the KPIs for the FY17 STI and MIP plans are set out in the following table:
KPI
Financial
Non-financial
STI
EBITDA
Safety
MIP
Share price
Continued employment
Further details regarding Emecoʼs executive remuneration structure are set out in sections 3.2 and 3.3.
In FY17, the STI awards to executives increased from FY16 due to the Companyʼs improved financial
performance. However, the extent to which Emeco has set financial KPIs which are genuinely challenging,
and which mean that STI remuneration is genuinely at risk, is highlighted by the fact that in FY16 all executives
only received 25% of their target STI as the operating EBITDA target was not reached. No executive subject
to the financial hurdle in FY15 received a STI payment in that year. In FY14, the STIs were awarded for safety
and personal goals and the sale of idle assets KPIs being met, however, no STIs in respect of financial KPIs
were awarded. STI payments to executives decreased in FY13 partially due to financial KPIs not being met.
Details of the FY17 KPIs are set out above in section 3.3.1.
3
Details of the Groupʼs performance and benefits for shareholder wealth are set out in the following table:
Profit/(loss) from continuing operations ($m)
(156.2)
(168.4)
(123.1)
(224.2)
FY17
FY16
FY15
FY14
FY13
(0.0)
Profit/(loss) from discontinuing operations ($m)
(24.3)
(56.9)
Statutory EBITDA
69.6
47.6
(4.6)
32.8
(51.1)
6.0
27.2
148.3
Statutory profit/(loss) ($m)
(180.5)
(225.3)
(127.7)
(275.3)
Total dividends declared ($m)
-
-
-
-
6.0
15.0
Statutory return on capital employed
(50.2%)
(61.6%)
(20.7%)
(30.7%)
4.2%
Closing share price as at 30 June
$0.11
$0.03
$0.08
$0.20
$0.28
Macroeconomic uncertainty, a downturn in the resources sector globally, difficult trading conditions in Emecoʼs
markets and a resultant decline in the Companyʼs earnings saw the Companyʼs share price close at 28 cents,
20 cents, 8 cents and 3 cents on 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016 respectively.
In FY17, market conditions improved, contributing to an increase in the Companyʼs earnings. The Companyʼs
share price also increased and closed at 10.5 cents on 30 June 2017. No long term securities have vested in
the last five years as a result of the Companyʼs performance.
The change to retention based long term incentive plans provides senior managers with a more meaningful
incentive to remain with the Group over the longer term. The Company considers retaining senior managers
will be a key factor in the performance of the Group. The Companyʼs innovative technological platforms, in
addition to the enhanced fleet and capability as a result of the Transaction, positions the Group well to add
further value for Emeco customers and increase Company earnings. The value of the MIP awards upon
vesting will be wholly dependent on the Companyʼs share price, which aligns executivesʼ interests with that of
shareholders.
The primary means available to the Company to grow shareholder wealth, whether by way of dividend
distributions or increases in the Companyʼs 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 2017
32
1
6
2
1
8
1
L
I
N
M
A
R
3
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
4.
Non-executive director remuneration
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 August. In FY17, 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 Companyʼs 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 Companyʼs operations,
the skill sets of board members, the quantum of fees paid to non-executive directors of comparable companies
and participation in board committee work.
4
The chair is entitled to an annual fee of $158,238. All other non-executive directors receive an annual fee of
$90,422. An additional annual fee of $6,782 is paid to a director who is a member of a board committee. This
fee is increased to $9,042 for a director who chairs a committee. All amounts specified in this section are
inclusive of superannuation contributions.
Due to the small number of Australian based non-executive directors in FY17, all Australian non-executive
directors sit on more than one committee. However non-executive directors only get paid for sitting on one
committee.
5.
Details of remuneration
5.1 Remuneration received in relation to FY17
Details of the elements comprising the remuneration of the Groupʼs KMP in FY17 are set out in table 16 below.
The table does not include the following components of remuneration because they were either not provided
to KMP during FY17 or were not available to KMP by reason of their executive role:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Short term cash profit sharing bonuses.
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 2017
33
1
6
2
1
8
1
L
I
N
M
A
R
4
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Also, payments made in respect of a period before the appointment, or after the cessation, of a person as
KMP are not included in table 16.
Table 16: FY17 KMP remuneration (Company and consolidated)
Short-term em ployee benefits
Post-em ploym ent benefits
Share based
paym ents
Superan-
nuation
benefits
$
Other long
term
benefits
$
Term ination
benefits
$
Long term
equity
incentives [2]
$
Salary and
fees
$
Short term
bonus
paym ents [1]
$
151,219
68,126
20,644
22,709
68,126
22,193
353,017
-
-
-
-
-
-
-
Non-
m onetary
$
-
-
-
-
-
-
-
14,366
6,472
1,961
2,157
6,472
2,108
33,536
-
-
-
-
-
-
-
801,002
51,834
3,060,000 [E]
-
60,275
-
32,302
5,839
60,173
-
335,398
318,365
1,506,599
600,400 [F]
428,500 [F]
4,088,900
-
-
60,275
26,775
29,086
94,002
-
22,551
82,724
Non-executive directors
Peter Richards
John Cahill [A]
Peter Frank [B]
Keith Skinner [B]
Erica Smyth [A]
Darren Yeates [B]
TOTAL NON-EXECUTIVE
DIRECTORS
Executive directors
Ian Testrow [C]
Gregory Haw kins [D]
Other executives
Thao Pham
Justine Lea
TOTAL ALL EXECUTIVES
TOTAL
1,859,616
4,088,900
60,275
127,538
82,724
% of
rem uneration
perform ance
related
-
-
-
-
-
-
-
81%
n/a
70%
57%
Total
$
165,585
74,598
22,605
24,866
74,598
24,301
386,553
-
-
-
-
-
-
-
969,333
(134,442)
4,983,085
(76,768)
232,462
69,905
1,137,258
1,195,035
868,407
6,969,758
1,137,258
7,356,311
-
-
-
-
-
-
-
-
-
-
-
-
-
[1]
[2]
[A]
[B]
[C]
[D]
[E]
[F]
This figure includes: (i) STI awards under the FY17 plan which were finally determined on 24 August 2017 after completion of
performance reviews (refer to table 17) and (ii) Transaction related bonuses and payments (see notes E and F below).
This figure includes equity based incentives offered under the Companyʼs long-term equity based incentive plans in FY15, FY16
and FY17.
Mr John Cahill and Ms Erica Smyth ceased as non-executive directors on 1 April 2017.
Mr Peter Frank, Mr Keith Skinner and Mr Darren Yeates commenced as non-executive directors on 1 April 2017.
Mr Ian Testrow received non-monetary benefits including housing in respect of his relocation arrangement back to Australia in
2014. These benefits ceased in February 2017.
Mr Gregory Hawkins ceased his role as Executive Director, Finance on 19 August 2016. All unvested long term securities offered
to Mr Hawkins were forfeited in accordance with their terms and expensed through the income statement.
This figure includes the following one-off cash bonuses paid to Mr Ian Testrow after completion of the Transaction: (i) $650,000
in recognition of Mr Testrowʼs partial MIP sacrifice during the Transaction (see section 3.3.2 for further information); and (ii)
Transaction bonus of $650,000 (in accordance with Mr Testrowʼs executive services agreement, completion of the Transaction
on 31 March 2017 gave rise to an entitlement to a transactional bonus of $1,000,000. The transactional bonus was entirely
dependent on the Transaction completing and therefore was either payable in full or not payable at all. Mr Testrow elected to
exercise his option to share, and directed portions of, the transactional bonus to other KMPs in recognition of their significant
contributions to completion of the Transaction (see note F below).
This figure includes one-off transactional cash bonuses of $250,000 and $100,000 paid to Ms Thao Pham and Ms Justine Lea
respectively in recognition of their significant contributions to completion of the Transaction (see note E above).
k
c
a
B
4
R
A
M
N
I
L
1
8
1
2
6
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
34
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Comparative information relating to remuneration of the Groupʼs KMP for the prior financial year is set out
below:
Short-term em ployee benefits
Post-em ploym ent benefits
Share based
paym ents
Non-executive directors
Alec Brennan [A]
John Cahill
Peter Richards
Erica Smyth
Executive directors
Ian Testrow [B]
Gregory Haw kins
Kenneth Lew sey [C]
TOTAL ALL DIRECTORS
Other executives
Thao Pham
Christopher Hayman [D]
Kalien Selby [E]
TOTAL ALL EXECUTIVES
Salary
and fees
$
113,495
97,853
123,388
92,589
611,000
484,121
259,747
1,782,193
290,767
69,431
53,906
414,104
STI
[1]
$
-
-
-
-
130,000
-
-
130,000
26,857
-
-
26,857
Super-
Other
annuation long term
benefits
$
benefits
$
Non-
m onetary
$
-
-
-
-
10,782
9,296
11,721
8,795
97,995
-
-
97,995
32,938
31,321
24,675
129,528
-
-
-
-
31,011
-
18,435
49,446
Term ina-
tion
benefits
$
-
-
-
-
-
-
501,539
501,539
-
174,081
190,935
365,016
% of
rem uneration
perform ance
related
%
-
-
-
-
20%
16%
50%
20%
-161%
9%
LTIs
[2]
$
-
-
-
-
Total
$
124,277
107,149
135,109
101,384
219,761
94,583
783,723
1,098,067
1,091,694
610,025
1,569,684
3,739,322
89,065
(150,083)
24,983
(36,035)
437,700
93,429
288,259
819,388
866,555
1,062,032
4,558,710
-
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL
2,196,297
156,857
97,995
178,974
k
c
a
B
4
R
A
M
N
I
L
1
8
1
2
6
1
[1]
[2]
[A]
[B]
[C]
[D]
[E]
STI awards under the FY16 plan were finally determined on 24 August 2016 after completion of performance reviews.
This figure includes long term incentives offered under the Companyʼs previous long term incentive plan and, in respect of Ms
Thao Pham, RIs offered in FY16.
Mr Alec Brennan ceased his role as non-executive director on 22 April 2016.
Mr Testrow received non-monetary benefits including housing in respect of his relocation arrangement back to Australia is 2014.
Mr Kenneth Lewsey ceased his role as managing director and chief executive officer on 20 August 2015. All unvested long term
securities granted to Mr Lewsey were forfeited in accordance with the terms of the grant and expensed through the income
statement.
Mr Christopher Haymanʼs remuneration has been converted to Australian dollars on the basis of an AUD/CAD exchange rate of
0.9890. Mr Hayman ceased his employment on 6 November 2015. All unvested long term securities granted to Mr Hayman were
forfeited in accordance with the terms of the grant and reversed through the income statement.
Ms Kalien Selby ceased her employment on 28 August 2015. All unvested long term securities granted to Ms Selby were forfeited
in accordance with the terms of the grant and expensed through the income statement.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
35
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
5.2 FY17 STI grants
The terms of the FY17 STI plan are discussed at pages 28 to 30.
Details of the vesting profile of the STI grants awarded to executives in respect of FY17 are set out below:
Table 17: FY17 executive STI vesting information
Executive [A]
Ian Testrow
Thao Pham
Justine Lea
Maximum total
STI value [1]
$1,760,000
$350,400
$328,500
% of STI awarded
% of STI forfeited
100%
100%
100%
0%
0%
0%
[A]
[1]
Mr Gregory Hawkins ceased employment with the Group on 19 August 2016 and did not have FY17 STI entitlements.
The minimum STI value for each KMP is zero. All STI awards will be paid in cash.
5.3 MIP grants
The terms of the MIP are discussed at page 30 to 31.
Grants and vesting of MIP awards made to executives under the MIP in FY17 are set out in the following table:
Table 18: MIP award grants and vesting to executives
Executive
Grant
date
Equity instrument
Number
granted
Maximum
value [1]
Vesting
date
Fair value
per
share/right
at grant
date [2]
Number
held
at year end
Ian Testrow
[A] 31/03/2017 Performance shares
108,674,758
$9,020,005
1/04/2020
$0.083
108,674,758
Thao Pham
31/03/2017
Performance rights
24,368,606
$2,022,594
1/04/2020
$0.083
24,368,606
Justine Lea
31/03/2017
Performance rights
8,122,868
$674,198
1/04/2020
$0.083
8,122,868
[A]
[1]
[2]
Mr Ian Testrowʼs grant of performance shares was approved by shareholders at the EGM as part of the interrelated resolutions
to approve the Transaction. As set out above, performance shares are fully paid ordinary Emeco shares already on issue, the
vesting of which is subject to service conditions being met (see section 3.3.2).
The minimum value of each grant is zero.
The fair value of the securities was determined using the share price at market open on 31 March 2017, 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
16) is the portion of the fair value of the securities recognised in FY17.
5.4 Retention Incentives
In FY16 the Company offered executives retention incentives (RI). The awards offered under the RI Plan are
not conditional on Company performance but rather vest at the end of a three year period (performance
period). This was to encourage senior management to remain with the Group for the performance period.
Historically most of the Companyʼs long term incentive plans included a performance condition based on the
relative total shareholder return (TSR) of the Company measured against a peer group over a three year
vesting period. TSR performance conditions became particularly difficult to satisfy given the downturn in the
mining sector and seemingly affected the value of these plans as a retention tool. Since, the Company has
offered long term incentive plans with service conditions rather than TSR performance conditions. Turnover
in senior management has decreased during FY16 and FY17 as a result.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
36
4
1
6
2
1
8
1
L
I
N
M
A
R
4
F
r
o
n
t
t
n
o
r
F
4
R
A
M
N
I
L
1
8
1
2
6
1
4
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
RI remuneration is in the form of performance shares or performance rights (RI securities). All RI securities
are backed by ordinary shares on issue and, as such, RI securities which vest will not impact the issued capital
of the Company. As set out in section 3.3.2, a performance share is a fully paid ordinary Emeco share, the
vesting of which is subject to the performance condition being met. A performance right is a right to receive a
fully paid ordinary Emeco share on issue, the vesting of which is subject to the performance condition being
met.
RI securities that do not vest at the end of the vesting period will lapse. Shares associated with these RI
securities will be held in trust for subsequent reallocation.
Performance shares which vest are transferred to the employee. In respect of performance rights which vest,
corresponding shares are transferred to the employee.
Grants and vesting of RI securities made to executives under the Companyʼs RI Plan are set out in the following
table:
Table 19: RI securities grants and vesting to executives
Executive [A]
Grant
date
Equity instrument
Number
granted
Maximum
value [1]
Vesting
date
Fair value
per
share/right
at grant
date [2]
Number
held
at year
end
Ian Testrow
14/12/2016 Performance shares
13,021,703
$780,000 Sep-18
$0.030
13,021,703
Thao Pham
05/02/2016 Performance shares
3,330,756
$199,525 Sep-18
$0.030
3,330,756
[A]
[1]
[2]
The performance share offer made to Mr Ian Testrow in FY16 was approved by shareholders at the Companyʼs 2016 annual
general meeting. Mr Hawkins ceased employment with the Group on 19 August 2016 and his offer of performance shares was
forfeited prior to shareholder approval for the grant being sought. Ms Justine Lea was not offered performance shares in FY16.
The minimum value of each grant is zero.
The fair value of the RI 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
16) is the portion of the fair value of the securities recognised in FY17.
5.5 Long Term Incentives
During FY08 to FY15, the Company offered long term incentives (LTIs) to executives to reward them for
Company performance over a three year period (vesting period).
LTI remuneration was in the form of performance shares or performance rights (LTI securities).
The performance condition for the vesting of LTI securities was 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 end of the vesting period, the TSR for Emeco and each company in the peer group will be measured
and ranked. Emeco will be allocated a percentile rank representing the percentage of companies in the peer
group that has a lower TSR than Emeco (percentile rank).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
37
1
6
2
1
8
1
L
I
N
M
A
R
4
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
LTI securities 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:
Percentile rank
50% or lower
Percentage of LTI securities that vest
Nil
Between 50% and 75%
50% plus 2% for each percentile rank over 50%
75% or higher
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 held in trust for subsequent reallocation.
Performance shares which vest are transferred to the employee. In respect of performance rights which vest,
corresponding shares are transferred to the employee.
Grants and vesting of LTI securities made to executives under the Companyʼs LTI plans are set out in the
following table:
Executive [A]
Grant
date
Equity instrument
Number
granted
Maximum
value [1]
Ian Testrow
04/12/2013
Performance rights
1,633,151
$228,641
14/12/2016
Performance shares
1,550,000
$232,500
Thao Pham
07/10/2013
Performance shares
199,456
$33,908
24/11/2014
Performance shares
640,000
$96,000
Justine Lea
07/10/2013
Performance shares
215,294
$36,600
24/11/2014
Performance shares
244,000
$36,600
%
vested
in
FY17
-
-
-
-
-
-
%
forfeited
in FY17
Vesting
date [2]
100%
Sep-16
-
100%
-
100%
Sep-17
Sep-16
Sep-17
Sep-16
-
Sep-17
Fair value
per
share/right
at grant
date [3]
$0.15
$0.12
$0.18
$0.12
$0.18
$0.12
Number
held
at year
end
0
1,550,000
0
640,000
0
244,000
[A]
[1]
[2]
[3]
The LTI securities offer made to Mr Ian Testrow in FY15 was approved by shareholders at the Companyʼs 2016 annual general
meeting on 14 December 2016. Mr Hawkins ceased employment with the Group on 19 August 2016 and his offer of LTI securities
was forfeited prior to shareholder approval.
The minimum value of each grant is zero.
For LTI securities granted in FY15 the vesting date is the twentieth trading day after the announcement of the Companyʼs annual
results in 2017.
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
16) is the portion of the fair value of the securities recognised in FY17.
5.6 Emeco employee share ownership plan
Emecoʼs employee share ownership plan (ESOP) was an elective plan which was open to all Australian
employees between FY08 and FY15. Under the ESOP, for every five shares acquired and paid for by the
employee under the ESOP (ESOP shares), Emeco acquired one matching share on market 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 resigns from the Group before the expiry of the restriction
period, the matching shares are forfeited. All matching shares automatically vest if an employee is made
redundant before the expiry of the restriction period.
The ESOP shares are held in escrow by the trustee during the restriction period. The ESOP administrator,
Link Market Services, releases the ESOP shares from escrow at the earlier of the expiry of the restriction
period and the termination of the employeeʼs employment with Emeco.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
38
1
6
2
1
8
1
L
I
N
M
A
R
4
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Report
For the year ended 30 June 2017
Emeco has not offered any shares under the ESOP since FY14. However, shares acquired in 2015 under
previous ESOPs vested for participating employees that remain employed with Emeco at 31 December 2016.
During FY17 ESOP shares were released from escrow, and matching shares vested, under previous ESOPs
as set out below:
Executive
Ian Testrow
Thao Pham
Released ESOP shares
Vested matching shares
24,886
24,886
4,973
4,973
6.
Service contracts
Each executive is employed pursuant to contracts which provide for an indefinite term. In respect of Mr
Testrow, his employment contract is terminable by either party giving notice of the greater of: (i) 12 months;
and (ii) a period expiring on 30 March 2020 (Notice Period) or on the payment to Mr Testrow of the Notice
Period in lieu of notice (subject to shareholder approval where required). The employment contracts of the
other executives are terminable on either party giving six monthsʼ notice or on the payment to the executive of
up to six monthsʼ 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.
Signed in accordance with a resolution of the directors.
Ian Testrow
Managing Director
Dated at Perth, 30th day of August 2017
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
39
t
n
o
r
F
4
R
A
M
N
I
L
1
8
1
2
6
1
4
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
The Board of Directors
Emeco Holdings Limited
3/71 Walters Drive
Perth WA 6017
3(cid:19) August 2017
Dear Board Members
Emeco Holdings Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Emeco Holdings Limited.
As lead audit partner for the audit of the financial statements of Emeco Holdings Limited for the
financial year ended 30 June 2017, I declare that to the best of my knowledge and belief, there
have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Leanne Karamfiles
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
t
n
o
r
F
4
R
A
M
N
I
L
1
8
1
2
6
1
4
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2017
Note
2017
$'000
2016
$'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
Depreciation expense
Gross profit
Other income
Other expenses
Impairment of tangible assets
Amortisation expense
Business acquisition and restructuring transaction expenses
Finance income
Finance costs
Net foreign exchange gain/(loss)
Loss before tax expense
Tax benefit/(expense)
Loss from continuing operations
Discontinued operations
Loss from discontinued operations (net of tax)
Loss from discontinued operations
Loss for the year
Other comprehensive (loss)/income
Items that are or may be reclassified to profit and loss:
Foreign currency translation differences for foreign operations
(net of tax)
Changes in fair value of cash flow hedges (net of tax)
Total other comprehensive income/(loss) for the year
8
8
7
8
8
21
8b
8
8
8
10
14
183,248
1,639
20,156
205,043
(8,322)
(68,648)
(20,689)
(16,108)
(60,721)
30,555
2,716
(31,362)
(10,153)
(826)
(87,997)
14,112
(48,441)
(10,079)
(141,475)
(14,672)
(156,147)
(24,316)
(24,316)
(180,463)
139,545
5,470
22,956
167,970
(8,502)
(63,144)
(30,890)
(14,873)
(51,282)
(721)
1,227
(18,420)
(130,789)
(148)
-
79,053
(55,132)
(41,666)
(166,596)
(1,858)
(168,454)
(56,935)
(56,935)
(225,389)
14,397
(15,400)
(1,003)
(3,403)
11,821
8,418
Total comprehensive income/(loss) for the year
(181,466)
(216,971)
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 46 to 128.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
41
1
6
2
1
8
1
L
I
N
M
A
R
4
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
(continued)
For the year ended 30 June 2017
Loss attributable to:
Owners of the Company
Loss for the year
Total comprehensive loss attributable to:
Owners of the Company
Total comprehensive loss for the year
Loss per share:
Basic loss per share
Diluted loss per share
Loss per share from continuing operations
Basic loss per share
Diluted loss per share
Note
35
35
2017
$'000
2016
$'000
(180,463)
(180,463)
(225,389)
(225,389)
(181,466)
(181,466)
(216,971)
(216,971)
Note
2017
cents
2016
cents
35
35
35
35
(18.66)
(18.66)
(16.15)
(16.15)
(40.42)
(40.42)
(30.21)
(30.21)
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 46 to 128.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
42
1
6
2
1
8
1
L
I
N
M
A
R
4
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Financial Position
as at 30 June 2017
Current Assets
Cash assets
Trade and other receivables
Derivative financial instruments
Inventories
Prepayments
Assets held for sale
Total current assets
Non-current Assets
Trade and other receivables
Derivative financial instruments
Intangible assets
Property, plant and equipment
Deferred tax assets
Investments
Total non-current assets
Total assets
Current Liabilities
Trade and other payables
Liabilities directly associated with assets classified as held for sale
Derivative financial instruments
Interest bearing liabilities
Provisions
Total current liabilities
Non-current Liabilities
Interest bearing liabilities
Provisions
Total non-current liabilities
Total liabilities
Net (liabilities)/assets
Equity
Share capital
Reserves
Retained losses
Total equity attributable to equity holders of the Company
Note
2017
$'000
2016
$'000
17
18
19
20
15
18
19
21
22
12
23
15
19
24
26
24
26
13
16,978
113,535
-
3,114
2,956
26,421
163,004
237
4,015
2,887
349,737
-
799
357,675
520,679
82,545
449
8,366
6,894
6,383
104,637
447,145
904
448,049
552,686
24,854
37,734
6,315
5,333
1,832
30,728
106,796
6,234
12,629
2,344
280,182
19,507
-
320,896
427,692
38,035
883
-
4,579
3,469
46,966
373,239
1,490
374,729
421,695
(32,007)
5,997
749,117
(537)
(780,587)
(32,007)
593,616
12,505
(600,124)
5,997
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 46 to 128.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
43
t
n
o
r
F
4
R
A
M
N
I
L
1
8
1
2
6
1
4
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Balance at 1 July 2015
Total com prehensive incom e for the period
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 period
Transactions w ith ow ners, recorded directly
Contributions by and distributions to owners
Ow n shares acquired by employee share plan trust
Share-based payment transactions
Total contributions by and distributions to ow ners
Balance at 30 June 2016
Balance at 1 July 2016
Total com prehensive incom e for the period
Profit or (loss)
Other comprehensive income
Foreign currency translation differences
Changes in fair value of cash
flow hedge, net of tax
Total comprehensive income/(loss) for the period
Transactions w ith ow ners, recorded directly
Contributions by and distributions to owners
Shares issued during the period
Ow n shares acquired by employee share plan trust
Share-based payment transactions
Total contributions by and distributions to ow ners
Balance at 30 June 2017
Share
based
paym ent
reserve
$'000
Hedging
reserve
$'000
Foreign
currency
translation for ow n Accum ulated
Reserve
reserve
$'000
shares
$'000
(20,634)
losses
$'000
(374,735)
Total
equity
$'000
221,471
15,247
(8,219)
16,196
-
-
-
-
-
(3,257)
11,821
8,564
-
(146)
-
(146)
-
-
-
-
(225,389)
(225,389)
-
(3,403)
-
(225,389)
11,821
(216,971)
Share
capital
$'000
593,616
-
-
-
-
-
-
-
593,616
-
1,497
1,497
16,744
-
-
-
345
-
-
-
16,050
-
-
-
(20,634)
-
-
-
(600,124)
-
1,497
1,497
5,997
Share
based
paym ent
reserve
$'000
Hedging
reserve
$'000
Foreign
currency
translation for ow n Accum ulated
Reserve
reserve
$'000
shares
$'000
(20,634)
losses
$'000
(600,124)
Total
equity
$'000
5,997
16,744
345
16,050
-
-
-
-
-
-
12,581
1,816
(15,400)
(2,819)
-
1,816
-
-
-
-
(180,463)
(180,463)
-
14,397
-
(180,463)
(15,400)
(181,466)
Share
capital
$'000
593,616
-
-
-
-
155,501
-
-
155,501
749,117
-
-
6,401
6,401
23,145
-
-
-
-
(2,474)
-
-
-
-
17,866
-
(18,440)
-
(18,440)
(39,074)
-
-
-
-
(780,587)
155,501
(18,440)
6,401
143,462
(32,007)
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 46 to 128.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
44
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Finance income received
Finance expense paid
Cash receipts from derivatives sold
Taxes received
Net cash inflow from operating activities of discontinued operations
Net cash from operating activities
Cash flows from investing activities
Proceeds on disposal of non-current assets
Payment for property, plant and equipment
Cash acquired from acquired business
Acquisition costs
Net cash inflow from investing activities of discontinued operations
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Repurchase of issued debt
Payment for debt establishment costs
Payment of finance lease liabilities
Net cash outflow from financing activities of discontinued operations
Net cash (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effects of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the financial period
Note
2017
$'000
2016
$'000
157,376
(133,646)
228,558
(166,245)
14
30
36
8b
14
14
23,730
54
(38,010)
15,206
-
13,243
14,223
15,404
(31,371)
942
(14,445)
15,511
(13,959)
20,000
-
(20,598)
(4,558)
(1,717)
(6,873)
(6,609)
24,854
(1,267)
16,978
62,313
702
(44,503)
48,167
3,965
-
70,644
15,103
(38,215)
-
-
-
(23,112)
-
(41,971)
-
(7,340)
-
(49,311)
(1,779)
27,800
(1,167)
24,854
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements
set out on pages 46 to 128.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
45
4
1
6
2
1
8
1
L
I
N
M
A
R
4
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
1 Reporting entity
Emeco Holdings Limited (the ʻCompanyʼ) is domiciled in Australia. The address of the Companyʼs
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 2017 comprise the Company and its
subsidiaries (together referred to as the ʻGroupʼ). 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 financial statements are general purpose financial statements which have been
prepared in accordance with Australian Accounting Standards (AAS) 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 30
August 2017.
(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:131) derivative financial instruments are measured at fair value;
(cid:131) assets held for sale at fair value less costs of disposal; and
(cid:131)
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 Companyʼs
functional currency.
The company is a company of the kind referred to in ASIC Corporations (Rounding in Financial
/Directorsʼ Reports) Instrument, dated 24 March 2016, and in accordance with that Corporations
Instrument amounts in the financial report are rounded off to the nearest thousand unless otherwise
stated.
(d) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with the AASB 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. The impact of 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:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
46
k
c
a
B
4
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
2 Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
Recognition of tax losses
In accordance with the Companyʼs 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,
capital structure 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.
Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment or more frequently if events or changes in circumstances indicate that they
might be impaired. Other assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the assetʼs carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an assetʼs fair value less
costs of disposal and value in use, in accordance with the Companyʼs accounting policy note 3(h)(ii).
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units). The Company applies significant
judgement and assumptions in determining the recoverable amount of assets. Changes in these
assumptions could impact the recoverable amount and accordingly impairment.
Assets held for sale
In accordance with the Companyʼs accounting policies for assets held for sale (refer note 3(i)), non-
current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if
it is highly probable that they will be recovered primarily through sale rather than through continuing
use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount
and fair value less costs of disposal. Fair value less costs of disposal includes estimates and
judgements about the market value of these assets. Changes in these estimates and assumptions
could impact on the carrying amount of these assets held for sale. The carrying amount of assets
held for sale are set out note 15.
Business combinations
In accordance with the Companyʼs accounting policies for business combinations (refer note 3(r)),
assets and liabilities acquired under business combinations are recognised at their fair value at the
date of acquisition. Estimates and assumptions have been made about the collectability of trade and
other receivables and fair value of inventory and items of property, plant and equipment and
provisions. Refer to note 36 for further information on business combinations and note 5(h) for details
on determination of fair value.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
47
k
c
a
B
4
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
2 Basis of preparation (continued)
(e) Going Concern
The directors note that as at 30 June 2017 the Group has positive net current assets of $58,367,000.
Additional debt acquired during the period in addition to the impairment of goodwill acquired from
business combinations has resulted in a net asset deficiency of $32,007,000. The Group has also
made a net loss after tax of $180,463,000 during the period.
Notwithstanding, the Consolidated Financial Statements for the year ended 30 June 2017 has been
prepared on a going concern basis. This assumes the Company and the Group will be able to realise
their assets and discharge their liabilities in the normal course of business.
The directors believe this is appropriate on the basis that the notes do not mature until March 2022
and the current cash reserves along with forecasted cash flows are sufficient to cover the Companyʼs
obligations including the payment of interest due on the notes in July 2017 and January and July
2018.
3 Significant accounting policies
4
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.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed
to, or has the rights to variable returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date on which control commences until the date
on which control ceases.
(ii) 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.
(b) Foreign currency
(i) 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 translated 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.
(ii) 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 average exchange rates for the period.
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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
48
1
6
2
1
8
1
L
I
N
M
A
R
4
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(c) Financial instruments
(i) Non-derivative financial assets and financial liabilities recognition and
derecognition
The Group initially recognises loans and receivables and deposits and debt securities issued on the
date when they are originated. All other financial assets and financial liabilities are recognised
initially on the trade date.
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.
5
The Group derecognises a financial liability when its contractual obligations are discharged or
cancelled, or expire.
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.
(ii) Non-derivative financial assets - measurement
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.
(iii) Non-derivative financial liabilities - measurement
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 cost
using the effective interest rate method unless the Group has applied fair value hedging, in which
case amortised cost is adjusted to reflect the movement in the fair value of the underlying hedge
item. This adjustment is recorded in the statement of profit and loss.
Other financial liabilities comprise loans and borrowings, debt securities issued, and trade and other
payables.
(iv) 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 generally recognised in profit or loss unless
designated as a hedging instrument.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
49
1
6
2
1
8
1
L
I
N
M
A
R
5
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(c) Financial instruments (continued)
(iv) 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 hedging 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 ʻhighly effectiveʼ 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.
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 Groupʼs 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 Groupʼs 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 2017
50
k
c
a
B
5
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(c) Financial instruments (continued)
(v) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
ordinary shares net of any tax effects are recognised as a deduction from equity.
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 shares recognised as equity are repurchased, the amount of the consideration paid, which
includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.
Repurchased 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) Property, plant and equipment
(i) 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;
(cid:129)
(cid:129) any other costs directly attributable to bringing the assets to a working condition for their
intended use;
(cid:129) 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.
(cid:129)
k
c
a
B
5
R
A
M
N
I
L
1
8
1
2
6
1
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 2017
51
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(d) Property, plant and equipment (continued)
(ii) 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 ongoing 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
reassessments 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 and residual value 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 on a units of production method and charged on machine hours worked
over their estimated useful life. In certain specific contracts, depreciation methodology on some
items of plant and equipment are reassessed in line with their effective lives. In these situations,
depreciation is recognised in line with the pattern of economic benefits expected to be consumed.
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
Research and Development
Expenditure on research activities is recognised in profit and loss as incurred. Development
expenditure is capitalised only if the expenditure can be measured reliably, the product or process
is technically and commercially feasible, future economic benefits are probable and the Group
intends to and has sufficient resources to complete development and to use or sell the asset.
Otherwise, it is recognised in profit and loss as incurred. Subsequent to initial recognition,
development expenditure is measured at costs less accumulated amortisation and any accumulated
impairment losses.
(ii) Goodwill
Goodwill arises on the acquisition of subsidiaries. Goodwill represents the excess of the cost of the
acquisition over the Groupʼs interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities of the acquiree. When the excess is negative, the gain on bargain purchase is
recognised immediately in profit or loss.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
52
5
1
6
2
1
8
1
L
I
N
M
A
R
5
F
r
o
n
t
t
n
o
r
F
5
R
A
M
N
I
L
1
8
1
2
6
1
5
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
Intangible assets (continued)
(e)
(iii) 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.
(iv) Amortisation
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 from the date that they are available for use. The estimated useful lives for the
current and comparative periods are as follows:
(cid:129) 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
ʻcapital work in progressʼ. Upon work completion the balance is capitalised.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
53
1
6
2
1
8
1
L
I
N
M
A
R
5
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
Impairment
(h)
(i) Non-derivative financial assets
Financial assets not classified as at fair value through profit or loss are assessed at each reporting
date to determine whether there is objective evidence of impairment.
Objective evidence that financial assets are impaired includes:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
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;
adverse changes in the payment status of borrowers or issuers;
the disappearance of an active market for a security; or
observable data indicating that there is measurable decrease in expected cash flows from a
group of financial assets.
For an investment in an equity security, objective evidence of impairment includes a significant or
prolonged decline in its fair value below its cost. The Group considers a decline of 20% to be
significant and a period of nine months to be prolonged.
Financial assets measured at amortised cost
The Group considers evidence of impairment for these assets measured at both an individual asset
and a collective level. All individually significant assets are individually assessed for specific
impairment. Those found not to be impaired are then collectively assessed for any impairment that
has been incurred but not yet individually identified. Assets that are not individually significant are
collectively assessed for impairment. Collective assessment is carried out by grouping together
assets with similar risk characteristics.
In assessing collective impairment, the Group uses historical information on the timing of recoveries
and the amount of loss incurred, and makes an adjustment if current economic and credit conditions
are such that the actual losses are likely to be greater or lesser than suggested by historical trends.
An impairment loss is calculated as the difference between an assetʼs carrying amount and the
present value of the estimated future cash flows discounted at the assetʼs original effective interest
rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group
considers that there are no realistic prospects of recovery of the asset, the relevant amounts are
written off. If the amount of the impairment loss subsequently decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised, then the previously
recognised impairment loss is reversed through profit or loss.
(ii) Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other
than inventories and deferred tax assets) to determine whether there is any indication of impairment.
If any such indication exists, then the assetʼs recoverable amount is estimated.
For impairment testing, assets 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
cash generating units (CGUs).
The Groupʼs 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 2017
54
1
6
2
1
8
1
L
I
N
M
A
R
5
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
Impairment (continued)
(h)
(ii) Non-financial assets (continued)
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less
costs of disposal. Value in use is based on the estimated future cash flows, discounted to their
present value using a post-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable
amount.
Impairment losses are recognised in profit or loss. They are allocated to reduce the carrying
amounts of the assets in the CGU on a pro rata basis.
(i)
Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-
sale if it is highly probable that they will be recovered primarily through sale rather than through
continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and
fair value less costs of disposal. Any impairment loss on a disposal group is allocated to the assets
and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets,
deferred tax assets, employee benefit assets which continue to be measured in accordance with the
Groupʼs other accounting policies. Impairment losses on initial classification as held-for-sale and
subsequent gains and losses on re-measurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer
amortised or depreciated, and any equity-accounted investee is no longer equity accounted.
(j) Employee benefits
(i) 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 Groupʼs 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. Re-measurements are recognised in profit or loss in
the period in which they arise.
(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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
55
t
n
o
r
F
5
R
A
M
N
I
L
1
8
1
2
6
1
5
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(j) Employee benefits (continued)
(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 with 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) A Retention Incentive (RI) plan allows certain management personnel to receive shares or
rights of the Company. Under the RI, rights or shares granted to each RI participant vest to
the employee after three years. The 2015 long term incentive plan (LTIP), included a
performance condition included a performance hurdle based on relative total shareholder
return (TSR). The peer group that the Companyʼs TSR is measured against consists of 123
Companies (this number may change as a result of takeovers, mergers etc.) and includes 16
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.
(c)
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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
56
t
n
o
r
F
5
R
A
M
N
I
L
1
8
1
2
6
1
5
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(j) Employee benefits (continued)
(v) Share based payment transactions (continued)
(d) 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 Groupʼs 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.
(e) A short term incentive (STI) plan allows the executive leadership team to receive, on board
approval, cash or shares of the Company upon satisfying performance conditions. This is
determined at the end of each financial year based on the executiveʼs performance. The
performance conditions related to KPIs include EBITDA, direct costs, overheads, capital
expenditure, working capital, free cash flow, sale of idle assets, safety and personal goals.
These benefits are accounted for in accordance with AAS 2 and AAS119.
(k) 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.
(i)
Restructure provision
A provision for restructuring is recognised when the Group has approved a detailed and formal
restructuring plan, and the restructuring either has commenced or has been announced publicly.
Future operating costs are not provided for.
(l) Revenue
(i)
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. Customers are billed monthly.
(ii) 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
57
1
6
2
1
8
1
L
I
N
M
A
R
5
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(l) Revenue (continued)
(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.
(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 Groupʼs 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
The Groupʼs finance income and finance costs include:
interest income;
interest expense;
dividend income;
discount on repurchased debt;
the net gain or loss on financial assets at fair value through profit or loss;
the foreign currency gain or loss on financial assets and liabilities;
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129) withholding tax;
(cid:129)
(cid:129) amortisation of borrowing costs capitalised using the effective interest method.
the net gain or loss on hedging instruments that are recognised in profit or loss; and
Interest income or expense is recognised using the effective interest method. Dividend income is
recognised in profit or loss on the date that the Groupʼs right to receive payment is established.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
58
1
6
2
1
8
1
L
I
N
M
A
R
5
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(o)
Income tax
Income 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 comprises the expected tax payable or receivable on the taxable income or loss for
the year and any adjustment to tax payable or receivable in respect of previous years. It is
measured using tax rates enacted or substantively enacted at the reporting date.
(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:
(cid:129)
(cid:129)
(cid:129)
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; or
taxable temporary differences arising on the initial recognition of goodwill.
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, using tax rates enacted or substantively enacted at 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 entities acquired during the period were added to the tax consolidated group on the
date of acquisition. The head entity within the tax consolidated group is Emeco Holdings Limited.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
59
t
n
o
r
F
5
R
A
M
N
I
L
1
8
1
2
6
1
5
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
3 Significant accounting policies (continued)
(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:
(cid:129)
(cid:129)
(cid:129)
represents a separate major line of business or geographical area of operations;
is part of a single coordinated 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 resale.
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.
(r) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of
the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity interests issued by the Group in
exchange for control of the acquiree. Acquisition related costs are generally recognised in profit or
loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised
at their fair value, except that deferred tax assets or liabilities, and assets or liabilities related to
employee benefit arrangements are recognised and measured in accordance with AAS 112
Income Taxes and AAS 119 respectively.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity
interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable
assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair
value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
60
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
4 New standards and interpretations not yet adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June
2017. Those which may be relevant to the Group are set out below.
(i) AASB 16 Leases (2016)
AASB16 introduces a single lessee accounting model and requires a lessee to recognise assets and
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low
value. A lessee is required to recognise a right of use asset representing its right-to-use the
underlying leased asset and a lease liability representing its obligations to make lease payments.
Management is in the process of assessing the potential impact of the changes to AASB. The Group
holds commitments that would be impacted by the change to this standard however does not
consider them to be material as they expire prior to the adoption date of the standard. The Group
continues to assess the potential impact when reviewing new contracts that would be accounted for
under this standard.
(ii) AASB 15 Revenue from Contracts with Customers (2015)
The new standard replaces AASB 118 which covers the revenues arising from the sale of goods and
the rendering of services and AASB 111 which covers construction contracts. The new standard is
based on the principle that revenue is recognised when control of a good or service transfers to a
customer. Management is in the process of assessing the likely impact of the changes to AASB 15
and does not believe the changes to the standard will have a material impact on the financial
performance and financial position of the Group.
(iii) AASB 9 Financial Instruments (2014)
AASB 9 will replace AASB 139: Financial Instruments: Recognition and Measurement. The key
changes that may affect the Group on initial application of AASB 9 and associated amending
Standards include:
(cid:129)
simplifying the general classifications of financial assets into those carried at amortised cost and
those carried at fair value;
(cid:129) permitting entities to irrevocably elect on initial recognition to present gains and losses on an
(cid:129)
(cid:129)
(cid:129)
equity instrument that is not held for trading in other comprehensive income (OCI);
requiring an entity that chooses to measure a financial liability at fair value to present the portion
of the change in its fair value due to changes in the entityʼs own credit risk in OCI, except when
it would create an ʻaccounting mismatchʼ;
introducing a new model for hedge accounting that permits greater flexibility in the ability to
hedge risk, particularly with respect to non-financial items; and
requiring impairment of financial assets carried at amortised cost based on an expected loss
approach.
Management has assessed the likely impact of AASB 9 and does not believe the changes to the
standard will have a material impact on the financial performance and financial position of the Group.
There is the potential for increased impairment of receivables under the standard which is yet to be
assessed by Management.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
61
5
1
6
2
1
8
1
L
I
N
M
A
R
5
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
5 Determination of fair values
A number of the Groupʼs 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.
(a) 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 armʼs length transaction after proper marketing wherein the
parties had each acted knowledgeably. The fair value of property, plant and equipment has been
determined with reference to an independent external valuation in addition to comparisons to similar
assets currently on market.
(b) 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 and interim reporting date.
(c) 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.
(d) 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 and interim 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.
(e) Share based payment transactions
The fair value of employee share options, management incentive plan shares, long term incentive
plan and retention 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 market price at purchase date.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
62
k
c
a
B
5
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
5 Determination of fair values (continued)
(f)
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.
(g) Assets held for sale
The fair value of assets designated as held for sale are determined with reference to an
independent external valuation, market demand and costs of disposal.
(h) Business combinations
The fair value of consideration supplied for the acquisition of entities has been determined using the
market price of the Companyʼs listed share price. The methodology has also been applied to the
valuation of investments acquired though the business combination. The fair value of property, plant
and equipment has been determined with reference to an independent external valuation in addition
to comparisons to similar assets currently on market. The fair value of inventory acquired has been
valued determined with reference to the most recent purchase of similar items from external
suppliers. The collectability of trade and other receivables has been assessed and compared to
subsequent receipt of payment in determining the fair value of this asset class.
k
c
a
B
5
R
A
M
N
I
L
1
8
1
2
6
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
63
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments
Overview
The Group has exposure to the following risks from their use of financial instruments:
credit risk;
liquidity risk; and
(cid:129)
(cid:129)
(cid:129) market risk.
This note presents information about the Groupʼs exposure to each of the above risks, the Groupʼs
objectives, policies and processes for measuring and managing risk, and the Groupʼs management of
capital.
Risk management framework
The board of directors has overall responsibility for the establishment and oversight of the Groupʼs risk
management framework. The board of directors has established the audit and risk management committee
(Committee), which is responsible for developing and monitoring the Groupʼs risk management policies.
The Committee reports regularly to the board of directors on its activities.
5
The Groupʼs 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 Groupʼs
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 Groupʼs 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.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
or financial asset fails to meet its contractual obligations, and arises principally from the Groupʼs
receivables from customers.
Exposure to credit risk
The carrying amount of the Groupʼs financial assets represents the maximum credit exposure. The
Groupʼs maximum exposure to credit risk at the reporting date was:
Trade receivables
Other receivables
Cash and cash equivalents
Derivatives
Consolidated
Carrying amount
2017
2016
$'000
$'000
87,821
26,151
16,978
4,015
134,965
32,803
12,255
24,854
18,944
88,856
Note
18
18
17
19
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
64
1
6
2
1
8
1
L
I
N
M
A
R
5
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Credit risk (continued)
6
Trade and other receivables
The Groupʼs exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the demographics of the Groupʼs 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 and Chile, and generally operates on a ʻcash for keysʼ policy for the sale of equipment and
parts.
Both insured and uninsured debtors are subject to the Groupʼs credit policy. The Groupʼs credit policy
requires each new customer to be analysed individually for creditworthiness before the Groupʼs standard
payment and delivery terms and conditions are offered. The Groupʼs 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 Groupʼs creditworthiness and the Group is unable to
secure credit insurance, future transactions with the customer will only be assessed on a case by case basis
and where possible, prepayment 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
$700,000,000 (2016: $700,000,000). The Australian and Chilean businesses held insurance for the entire
financial year ended 30 June 2017.
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 2017 the Groupʼs doubtful debts provision for continuing and discontinued operations was
$200,000 (2016: $1,090,000). As at 30 June 2017 the Group recognised bad debt write offs for continuing
and discontinued operations for a total amount of $23,000 (2016: $4,924,000).
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 analysis of the underlying customersʼ credit
ratings.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
65
1
6
2
1
8
1
L
I
N
M
A
R
6
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Credit risk (continued)
The Groupʼs maximum exposure to credit risk for trade receivables at the reporting date by geographic
region was:
Australia
North America
South America
Consolidated
Consolidated
Gross
2017
$'000
78,794
526
8,501
87,821
Impairment
provision
2017
$'000
(200)
-
-
(200)
Gross
2016
$'000
21,070
4,095
7,638
32,803
Impairment
provision
2016
$'000
(37)
(938)
(115)
(1,090)
Trade and other receivables (continued)
The Groupʼs 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
Consolidated
Carrying amount
2017
2016
$'000
$'000
27,529
36,595
-
23,697
87,821
15,205
15,294
-
2,304
32,803
The aging of the Groupʼs trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61 days
Consolidated
Consolidated
Gross
2017
$'000
Impairment
2017
$'000
Gross
2016
$'000
Impairment
2016
$'000
45,420
17,890
13,112
11,399
87,821
-
-
-
(200)
(200)
25,338
2,993
2,414
2,058
32,803
-
-
-
(1,090)
(1,090)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
66
k
c
a
B
6
R
A
M
N
I
L
1
8
1
2
6
1
k
c
a
B
6
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6
Financial instruments (continued)
Credit risk (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
2017
$'000
2016
$'000
1,090
(24)
(866)
200
5,874
(4,924)
140
1,090
Derivatives
The Group also held derivative liabilities in relation to cross currency interest rate swaps and forward
exchange rate swaps to the total value of $4,351,000 (2016: asset $18,944,000) at 30 June 2017, 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-.
Cash
The Group held cash and cash equivalents of $16,978,000 at 30 June 2017 (2016: $24,854,000), 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-.
Collateral
Collateral is held for customers that are assessed to be a higher risk. At 30 June 2017 the Group held
$116,000 of bank guarantees (2016: $116,000) and $Nil of prepayments (2016: $Nil).
Guarantees
Financial guarantees are generally only provided to wholly owned subsidiaries or when entering into a
premise rental agreement or performance bonds for completion of contract. Details of outstanding
guarantees are provided in note 29. At 30 June 2017 $4,172,000 guarantees were outstanding (2016:
$11,504,000).
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 Groupʼs 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 Groupʼs 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 2017
67
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Liquidity risk (continued)
The Group has issued secured fixed interest notes to the value of US$360,818,000 which matures on 30
March 2022. The nominal fixed interest rate is 9.25%. These notes will remain fully drawn until maturity.
Of the notes on issue, the Group holds US$4,890,000 which has been netted off against the total notes
outstanding.
The Group has an A$65,000,000 facility that matures in March 2020 which has two sub facilities consisting
of a Revolving Cash Advance Facility (RCF) of A$35,000,000 and a Bank Guarantee Facility of
A$30,000,000. The bank guarantee facility attracts a fee of 2.75% on the unutilised portion of the facility
and a fee of 5.5% on the outstanding balance of guarantees on issue. The nominal interest rate on the
RCF is equal to the aggregate of the bank bill swap rate (BBSY) plus a margin of between 5% and 7%
dependant on the calculated leverage ratio. The facility also attracts an undrawn line fee of between 2.5%
and 3.5% dependant on the calculated leverage ratio on the undrawn available balance of the facility.
The facilities require the Group to maintain a collateral coverage ratio greater than 3.0x and a fixed charge
coverage ratio greater than 1.2x. At year end the Group had drawn $Nil of the RCF but had utilised
$2,729,000 of the bank guarantee facility.
The Group has a facility agreement comprising a credit card facility with a limit of A$60,000 and foreign
exchange forward contracts. The facility matures in December 2016 and will be available for general
corporate purposes. The facility is secured via a cash cover account. The Group has a separate bank
guarantee facility of $560,000 which is fully utilised and secured via a cash cover account.
The Group has finance lease facilities totalling A$9,801,000 (2016: A$9,006,000) which have various
maturities up to November 2020.
The Group has financed its insurance payments with A$1,584,000 remaining at year end which matures
in January 2018.
The following are the contractual maturities of financial liabilities, including estimated interest payments
and excluding the impact of netting agreements.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
68
6
1
6
2
1
8
1
L
I
N
M
A
R
6
F
r
o
n
t
t
n
o
r
F
6
R
A
M
N
I
L
1
8
1
2
6
1
6
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Liquidity risk (continued)
Consolidated
30 June 2017
Non-derivative financial
liabilities
Secured notes issue
Finance lease liabilities
Insurance financing
Trade and other payables
Liabilities directly associated with
assets classified as held for sale
Derivative financial
asset/(liability)
Cross currency interest rate
swaps used for hedging
asset/(liability)
Carrying
amount
$'000
Contract-
ual cash 6 mths or
More than
flows
$'000
less
$'000
6-12 mths 1-2 years 2-5 years 5 years
$'000
$'000
$'000
$'000
443,284
9,801
1,584
24,491
676,734
10,458
1,584
24,491
14,267
2,426
1,584
24,491
21,401
2,609
-
-
42,802
3,207
-
-
598,264
2,216
-
-
449
479,609
449
713,716
449
43,217
-
24,010
-
46,009
-
600,480
(4,351)
(4,351)
(12,275)
(12,275)
(8,363)
(8,363)
(832)
(832)
(2,323)
(2,323)
(757)
(757)
-
-
-
-
-
-
-
-
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or
at significantly different amounts.
Consolidated
30 June 2016
Non-derivative financial
liabilities
Secured notes issue
Finance lease liabilities
Insurance financing
Trade and other payables
Liabilities directly associated with
assets classified as held for sale
Derivative financial
assets
Cross currency interest rate
swaps used for hedging
asset/(liability)
Carrying
amount
$'000
Contract-
ual cash 6 mths or
More than
flows
$'000
less
$'000
6-12 mths 1-2 years 2-5 years 5 years
$'000
$'000
$'000
$'000
368,277
9,006
535
13,658
493,504
9,692
535
13,658
18,798
2,823
535
13,658
18,798
1,551
-
-
37,596
1,689
-
-
418,312
3,642
-
-
883
392,359
896
518,285
896
36,710
-
20,349
-
39,285
-
421,954
18,944
18,944
19,805
19,805
29
29
114
114
19,662
19,662
-
-
-
-
-
-
-
-
-
-
The gross inflows/(outflows) disclosed in the previous table represents 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. cross currency interest rate swaps.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
69
1
6
2
1
8
1
L
I
N
M
A
R
6
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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 Groupʼs 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 Groupʼs 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) and Chilean Peso (CLP).
In respect of other monetary assets and liabilities held in currencies other than the AUD, the Group aims
to keep the net exposure to an acceptable level by matching foreign denominated financial assets with
matching financial liabilities and vice versa.
Interest on borrowings from the debt facility is generally denominated in currencies that match the cash
flows generated by the underlying operations of the Group, primarily AUD and USD. This provides an
economic hedge without derivatives being entered into and therefore no application of hedge accounting.
The Groupʼs investments in its subsidiaries and their earnings for the year are not hedged as these
currency positions are considered long term in nature.
In March 2017 the Group cancelled US$282,720,000 of notes in the 144A high yield market and were
replaced with US$360,818,000 new notes of which US$4,890,000 were held by the Group. The net
exposure of the notes to the Group at 30 June 2017 is US$355,927,000 of which US$230,000,000 face
value of the annual coupon has been hedged and US$100,000,000 face value of the principal has been
hedged to Australian Dollars. As derivatives have been entered into, hedge accounting has been applied
to these instruments. At 30 June 2017, the group was unhedged US$125,928,000 face value of the annual
coupon and US$255,927,000 face value of the net principal outstanding.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
70
1
6
2
1
8
1
L
I
N
M
A
R
6
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Market risk (continued)
Exposure to currency risk
The Groupʼs exposure to foreign currency risk at balance date was as follows, based on notional amounts:
Cash
Secured notes issued (1)
Gross balance sheet exposure
Cross currency interest rate swap to hedge the
secured notes issued
30 June 2017
30 June 2016
USD
$'000
3,727
(355,927)
(352,200)
100,000
100,000
CAD
$'000
15
-
15
-
-
USD
$'000
13
(218,902)
(218,889)
CAD
$'000
72
90,551
90,623
71,500
71,500
-
-
Net exposure
(252,200)
15
(147,389)
90,623
(1) Net USD exposure of US$355,927,000 (2016: US$282,720,000) in an AUD denominated entity.
Balance is net of notes held by the Group and intercompany loans.
The following significant exchange rates applied during the year:
CAD
USD
EURO
IDR
CLP
GBP
Average rate
Reporting date spot rate
2017
2016
2017
2016
1.0102
0.7554
0.7448
10,052
502.65
0.5911
0.9890
0.7316
0.6602
9,911
503.77
0.4918
0.9990
0.7692
0.6730
10,252
510.14
0.5913
0.9632
0.7426
0.6699
9,867
492.52
0.5549
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
71
t
n
o
r
F
6
R
A
M
N
I
L
1
8
1
2
6
1
6
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Market risk (continued)
Sensitivity analysis
A weakening of the Australian dollar, as indicated below, against the following currencies at 30 June 2017
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 2016, as indicated below:
30 June 2017
USD (10 percent movement)
CAD (10 percent movement)
30 June 2016
USD (10 percent movement)
CAD (10 percent movement)
Consolidated
Strengthening
Weakening
Equity
$'000
Profit or loss
$'000
Equity
$'000
Profit or loss
$'000
(10,747)
-
20,430
-
5,426
-
(24,970)
-
(1,470)
-
21,224
7,256
1,796
-
(25,940)
(5,937)
Interest rate risk
In accordance with the boardʼs policy the Group is required to maintain an appropriate exposure to
changes in interest rates on borrowings on a fixed rate basis, taking into account assets with exposure to
changes in interest rates. This is achieved by entering into cross currency interest rate swaps and the
issue of fixed interest notes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
72
t
n
o
r
F
6
R
A
M
N
I
L
1
8
1
2
6
1
6
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Market risk (continued)
Profile
At the end of the reporting date the interest rate profile of the Groupʼs interest bearing financial instruments
as reported to the management of the Group was:
Variable rate instruments:
Cash at bank
Effective interest rate swaps to hedge interest rate risk
Australian dollars 144A
Fixed rate instruments:
Interest bearing liabilities (notes)
Interest bearing finance leases
Insurance financing
Note
17
24
24
24
Consolidated
2017
$'000
2016
$'000
16,978
24,854
4,015
20,993
18,944
43,798
(462,724)
(9,801)
(1,584)
(474,109)
(380,716)
(9,006)
(535)
(390,257)
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. These instruments were disposed of in September 2016.
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. These instruments
were disposed of in September 2016.
The cross currency interest rate swaps (hedging instrument) are accounted for as cash flow 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 of the USD fixed rate interest
payments on the debt principal amount of the Companyʼs outstanding debt and the foreign currency
remeasurement risk arising on the principal balance every 6 months on the Companyʼs outstanding debt.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
73
1
6
2
1
8
1
L
I
N
M
A
R
6
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Market risk (continued)
Fair value sensitivity analysis for fixed rate instruments
The Group accounts for a portion of its fixed rate financial liabilities at fair value through profit or loss, as
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 2017
Fixed rate instruments (144A notes)
Interest rate swap
Cash flow sensitivity (net)
30 June 2016
Fixed rate instruments (144A notes)
Interest rate swap
Cash flow sensitivity (net)
Profit or loss
100bp
increase
$'000
100bp
decrease
$'000
Equity
100bp
increase
$'000
100bp
decrease
$'000
-
-
-
23
(23)
-
-
-
-
(24)
24
-
-
-
-
-
-
-
-
-
-
-
-
-
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
74
1
6
2
1
8
1
L
I
N
M
A
R
6
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Market risk (continued)
Cash flow sensitivity analysis for fixed 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 2016.
Cash flow hedges
30 June 2017
Variable rate instruments
Interest rate swap
fixed rate foreign currency instruments
Cash flow sensitivity (net)
30 June 2016
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
-
-
-
-
-
5
5
-
-
-
-
-
(6)
(6)
-
-
(7,846)
(7,846)
-
69
69
-
-
6,279
6,279
-
(70)
(70)
Detailed below is the profit and loss impact of cash flow hedges during the year.
Financial instrument
Cross currency interest rate swap
- Swap
- Hedged item (debt)
Net profit and loss impact before tax
Profit or loss
2017
$'000
2016
$'000
1,349
-
1,349
1,296
-
1,296
During the year the hedging relationships were highly effective and no ineffectiveness was recognised in
the profit or loss for the year. The hedge relationship is expected to be highly effective throughout the life
of the hedge and is not expected to impact the profit and loss until the hedge reserve is transferred to the
profit and loss at the maturity of the hedge.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
75
t
n
o
r
F
6
R
A
M
N
I
L
1
8
1
2
6
1
6
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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
Leases
144A notes
0.1%
0.1%
4.5%
9.3%
2017
-
-
-
-
2.3%
3.5%
8.1%
9.9%
0.1%
0.1%
4.5%
9.9%
2016
-
-
-
-
2.3%
3.5%
8.1%
9.9%
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:
Assets carried at fair value
Interest rate swaps used for hedging
Assets carried at amortised cost
Receivables
Cash and cash equivalents
Liabilities carried at fair value
Interest rate swaps used for hedging
Liabilities carried at amortised cost
Secured bank loans
Secured notes issue
Secured notes issue (1)
Insurance financing
Finance lease liabilities
Trade and other payables
30 June
2017
30 June
2016
Carrying
amount
$'000
Fair
value
$'000
Carrying
amount
$'000
Fair
value
$'000
4,015
4,015
4,015
4,015
18,944
18,944
18,944
18,944
113,535
16,978
113,535
16,978
130,513
130,513
37,734
24,854
62,588
37,734
24,854
62,588
(8,366)
(8,366)
(8,366)
(8,366)
-
-
-
-
630
(443,284)
-
(1,584)
(9,801)
(82,545)
-
(462,724)
-
(1,584)
(10,458)
(82,545)
1,310
(278,168)
(91,420)
(535)
(9,006)
(38,035)
-
(284,433)
(96,283)
(535)
(9,692)
(38,035)
(536,584)
(557,311)
(415,853)
(428,978)
Note
19
18
17
19
24
24
24
24
24
23
(1) Carried at amortised cost with movements in fair value of the underlying hedge item recorded in the
profit and loss statement.
All fair values above have been determined with the use of level 3 inputs which are unobservable. The
basis for determining fair values is disclosed in note 5.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
76
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
6 Financial instruments (continued)
Market risk (continued)
Fair value hierarchy
The Groupʼs 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 with the exception of certain investments in shares that are
categorised at Level 1.
Capital management
Underpinning Emecoʼs strategic framework is consistent value creation for shareholders. Central to this
is the continual evaluation of the Companyʼs capital structure to ensure it is optimised to deliver value to
shareholders. The boardʼs 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.
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 increase levels of cash held to maintain a strong capital position.
The Companyʼs 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.
7 Other income
Net profit on sale of non current assets (1)
Sundry income (2)
Consolidated
2017
$'000
2016
$'000
504
2,212
2,716
400
1,391
1,791
(1)
(2)
Included in net profit on the sale of non-current assets is the sale of rental equipment, including those
non-current assets classified as held for sale. The gross proceeds from the sale of this equipment in
2017 was $93,518,000 (2016: $18,049,000) which included $64,430,000 of non-cash assets sales.
Included in sundry income are fees charged on overdue accounts and bad debts and fees earned on
through the strategic relationship in Canada.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
77
6
1
6
2
1
8
1
L
I
N
M
A
R
6
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
8 Loss before income tax expense for continuing operations
Loss before income tax expense has been arrived at after
charging/(crediting) the following items:
Cost of sale of machines and parts
Impairment of tangible assets:
- inventory
- property, plant and equipment
- reversal of impairment on property, plant and equipment
Note
20
Employee expenses:
- superannuation
Other expenses:
- bad debts
- doubtful debts/(reversal)
- insurance
- motor vehicles
- rental expense
- safety expenses
- travel and subsistence expense
- telecommunications
- workshop consumables, tooling and labour
- restructuring
- corporate development expenses
- consulting fees
- employee share plan expenses
- 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
less discontinuing operations depreciation expense
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
14
Consolidated
2017
$'000
2016
$'000
8,322
8,502
387
10,997
(1,231)
10,153
7,857
130,565
(7,634)
130,789
2,128
2,500
24
(591)
1,467
1,572
3,376
567
2,847
1,035
1,378
1,101
687
4,568
6,164
7,167
31,362
368
66,667
1,744
21
205
674
245
684
(9,887)
60,721
4,924
(5,335)
2,036
2,497
3,176
718
2,469
1,089
895
3,046
1,812
1,276
1,665
(1,850)
18,420
535
62,796
2,976
89
239
1,128
331
1,100
(17,912)
51,282
78
k
c
a
B
6
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
8 Loss before income tax expense for continuing operations (continued)
Finance costs:
- interest expense
- witholding tax expense
- amortisation of debt establishment costs using effective interest rate
- write off facility costs (1)
- other facility costs
Net financial costs
Finance income:
- interest income
- hedge gains (2)
- discount on repurchased debt (3)
Net financial income
Foreign exchange (gain)/loss:
Net realised foreign exchange loss
Net unrealised foreign exchange (gain)/loss
Net foreign exchange loss
Consolidated
2017
$'000
2016
$'000
42,596
767
3,456
-
1,622
48,441
47,105
2,559
3,186
1,251
1,031
55,132
(54)
(14,058)
-
(14,112)
(414)
(46,976)
(31,663)
(79,053)
69,024
(58,945)
10,079
1,481
40,184
41,666
(2)
(1) This balance relates to the write off of capitalised borrowing costs related to the 144A notes
cancelled during the period and replaced with new notes. The previous period balance relates to
accelerated debt establishment costs expensed in relation to the repurchase of US$52,280,000
144A notes in December 2015.
In September 2016, the Group closed out US$71,500,000 face value of cross currency interest rate
swaps which generated a cash inflow of A$15,206,000 (US$11,794,000). The balance of the hedge
reserve was transferred to the consolidated statement of profit or loss and other comprehensive
income during the period resulting in a net gain of $14,058,000.
In December 2015, the Group closed out US$138,500,000 face value of cross currency interest rate
swaps which generated a cash inflow of A$48,167,000. These proceeds were used to finance the
purchase of US$52,280,000 144A notes for consideration of A$41,971,000 (US$29,799,000) with
a resulting gain on repurchase of A$31,663,000.
(3)
k
c
a
B
6
R
A
M
N
I
L
1
8
1
2
6
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
79
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
8b Business acquisition and restructuring transaction expenses
In March 2017, the Company completed a transaction that involved the following:
(cid:129) acquisition of Andyʼs Earthmovers (Asia Pacific) Pty Ltd (Andyʼs) and Orionstone Holdings Pty Ltd
(Orionstone). Refer to note 36 for further details;
(cid:129) cancellation of the existing Emeco 144A notes, Andyʼs long term debt and Orionstone long term debt
obligations in exchange for new notes for the value of 80% of the face value of the original debt and
20% as shares in Emeco. Refer to notes 13 and 24 for further details;
refinance of its asset backed loan facility. Refer to note 24 for further details; and
rights issue of $20,000,000. Refer to note 13 for further details.
(cid:129)
(cid:129)
Together referred to as (The Transaction).
The below table details the items recognised through the consolidated statement of profit or loss and
other comprehensive income:
6
Business acquisition and restructuring transaction expenses
- cost of shares issued to Black Diamond Capital Management LLC (1)
- acquisition expenses (2)
- write off facility costs (2)
- impairment of goodwill (3)
- discount on refinanced debt (4)
Net financial costs
Consolidated
2017
$'000
2016
$'000
10,253
14,445
5,778
77,880
(20,359)
87,997
-
-
-
-
-
-
(1) 123,526,158 shares were provided to Black Diamond Capital Management LLC in consideration for
the successful completion of the transaction. The share price at 31 March 2017 has been used in
determining the cost of this transaction.
(2) The company incurred $35,043,000 in costs related to the transaction of which $14,445,000 has
been recognised as acquisition costs and expensed through the consolidated statement of profit or
loss and other comprehensive income. $20,598,000 of this expenditure related to the cancellation
of the 144A notes and ABL facility and the issuance of the new notes and RCF facility and have
been capitalised. The remaining balance of previously capitalised borrowing costs related to the
cancelled 144A notes and ABL facility have been expensed through the consolidated statement of
profit or loss and other comprehensive income amounting to $5,778,000. Refer to note 24 for further
information.
(3) Goodwill of $77,880,000 was recognised on the acquisition of Andyʼs and Orionstone (refer to note
36 for details of the business combination) and allocated to the Australia CGU. Impairment testing
conducted at 30 June 2017 on the Australia CGU resulted in an impairment loss of $77,880,000
which was allocated against the goodwill of the Australia CGU. Refer to note 22 for further
information on the impairment testing process.
(4) The long term debt (excluding finance leases) refinanced via the acquisition of Andyʼs ($66,558,000)
and Orionstone ($137,359,000) in addition to the Groupʼs US$282,720,000/A$365,779,000 144A
the value of
notes were exchanged
US$360,818,000/A$469,082,000 and 966,563,209 ordinary shares in the Company which were
issued at fair value resulting in a gain of $20,359,000.
issued Emeco new notes
for newly
to
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
80
1
6
2
1
8
1
L
I
N
M
A
R
6
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
9 Auditorʼs remuneration
7
Audit services
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
- audit and review of financial reports
KPMG Australia:
- audit and review of financial reports
Overseas Deloitte Firms:
- other assurance services
Other services
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
- taxation services
- independent expert services
KPMG Australia:
- taxation services
Overseas Deloitte Firms:
- taxation services
- account preparation
Overseas KPMG Firms:
- taxation services
Consolidated
2017
$
2016
$
540,965
333,780
-
32,000
11,000
551,965
4,903
370,683
146,160
388,890
41,215
-
-
190,740
35,033
3,741
10,465
-
-
573,824
205,777
448,197
1,125,789
818,880
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
81
1
6
2
1
8
1
L
I
N
M
A
R
7
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
10 Taxes
a. Recognition in the income statement
Current tax benefit/(expense):
Current year
Adjustments for prior years
Deferred tax benefit/(expense):
Reversal of temporary differences
Increase in tax rate
Tax benefit/(expense)
Tax benefit/(expense) from continuing operations
Tax benefit/(expense) from discontinued operations
Total tax benefit/(expense)
Consolidated
2017
$'000
2016
$'000
Note
-
-
-
(14,672)
-
(14,672)
(14,672)
(14,672)
(5,150)
(19,822)
-
3,915
3,915
(9,841)
-
(9,841)
(5,926)
(5,926)
-
(5,926)
12
14
b. Current and deferred tax expense recognised directly in equity
Share issue costs
Cashflow hedges
Foreign currency translation reserve
Consolidated
2017
$'000
2016
$'000
-
1,056
119
1,175
(512)
15,864
-
15,352
k
c
a
B
7
R
A
M
N
I
L
1
8
1
2
6
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
82
k
c
a
B
7
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
10 Taxes (continued)
c. Numerical reconciliation between tax expense and pre-tax net profit/(loss)
Prima facie tax benefit/(expense) calculated
at 30% on net profit
Decrease/(increase) in income tax expense due to:
Effect on tax rate in foreign jurisdictions
Non-deductible interest
Non-deductible foreign taxes
DTA from temporary differences and losses not recognised
Non-deductible acquisition costs
Other non-deductible expenses
Goodwill impairment
Non-assessable debt forgiveness gain
Under/(over) provided in prior years
Tax benefit/(expense)
Consolidated
2017
$'000
2016
$'000
48,192
65,840
(468)
(499)
(232)
(41,091)
(7,409)
(99)
(23,364)
5,148
-
(19,822)
(6,842)
(3,658)
(757)
(57,965)
-
(238)
-
-
(2,306)
(5,926)
11 Current tax assets and liabilities
The current tax asset for the Group of $Nil (2016: $Nil) represents income taxes recoverable in respect of
prior periods and that arise from payment of taxes in excess of the amount due to the relevant tax authority.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
83
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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
Receivables
Accrued revenue
Inventories
Payables
Derivatives - hedge payable
Derivatives - hedge receivable
Interest bearing loans and borrowings
Employee benefits
Unearned revenue
Equity - capital raising costs
Provisions
Employee share costs
Tax losses carried forward
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Movement in deferred tax balances
Property, plant and equipment
Receivables
Inventories
Payables
Derivatives - hedge payable
Derivatives - hedge receivable
Interest bearing loans and borrowings
Employee benefits
Equity - capital raising costs
Unearned revenue
Provisions
Employee share costs
Tax losses carried forward
Balance
1 July 16
$'000
(23,555)
(5,192)
(849)
1,546
-
(5,382)
25,323
980
363
-
487
-
25,786
19,507
Assets
Liabilities
Net
2017
$'000
-
3,363
-
-
1,971
-
1,305
-
1,418
-
-
311
-
6,535
14,903
(14,903)
-
2016
$'000
578
295
-
-
1,546
-
-
25,323
980
-
363
487
-
27,643
57,215
(72,456)
(15,241)
2017
$'000
(9,097)
(1,130)
-
(67)
-
-
-
(891)
-
-
-
-
(3,718)
-
(14,903)
14,903
-
2016
$'000
(24,134)
(4,912)
(575)
(849)
-
-
(5,382)
-
-
-
-
-
-
(1,857)
(37,708)
72,456
34,748
2017
$'000
(9,097)
2,233
-
(67)
1,971
-
1,305
(891)
1,418
-
-
311
(3,718)
6,535
-
-
-
2016
$'000
(23,555)
(4,617)
(575)
(849)
1,546
-
(5,382)
25,323
980
-
363
487
-
25,786
19,507
-
19,507
Consolidated
Balances Recognised Recognised
in profit
acquired
or loss
31 March 17
$'000
$'000
Recognised
in other
comprehensive
income
$'000
Included in
discontinued
operations
(note 14)
$'000
Balance
30 June 17
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,333
(80)
427
(41)
-
-
-
(34)
-
575
-
-
(19,330)
(5,150)
(9,097)
2,233
(67)
1,971
-
1,305
(891)
1,418
-
-
311
(3,718)
6,535
-
directly
in equity
$'000
-
-
-
-
-
6,600
(5,425)
-
-
-
-
-
-
1,175
(6,050)
3,530
(19)
107
-
-
1,197
-
-
-
375
-
-
(860)
7,175
3,975
374
359
-
87
(21,986)
472
(363)
(575)
(551)
(3,718)
79
(14,672)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
84
7
1
6
2
1
8
1
L
I
N
M
A
R
7
F
r
o
n
t
t
n
o
r
F
7
R
A
M
N
I
L
1
8
1
2
6
1
7
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
12 Deferred tax assets and liabilities (continued)
Movement in deferred tax balances
Consolidated
Recognised Recognised
Balance
1 July 15
$'000
Balances
acquired
$'000
in profit
or loss
$'000
(65,615)
(4,983)
120
1,062
459
(14,203)
20,965
857
477
188
548
74,121
13,996
-
-
-
-
-
-
-
-
-
-
-
-
55,393
(289)
(542)
443
(459)
-
(2,685)
89
398
387
(61)
(67,665)
(14,991)
directly
in equity
$'000
-
-
-
-
-
-
-
-
(512)
-
-
-
(512)
Recognised
in other
comprehensive
income
$'000
Included in
discontinued
operations
(note 14)
$'000
Balance
30 June 16
$'000
-
-
-
-
-
8,821
7,043
-
-
-
-
-
15,864
(13,333)
80
(427)
41
-
-
-
34
-
(575)
-
19,330
5,150
(23,555)
(5,192)
(849)
1,546
-
(5,382)
25,323
980
363
-
487
25,786
19,507
Property, plant and equipment
Receivables
Inventories
Payables
Derivatives - hedge payable
Derivatives - hedge receivable
Interest bearing loans and borrowings
Employee benefits
Equity - capital raising costs
Unearned revenue
Provisions
Tax losses carried forward
Unrecognised deferred tax assets
The following deferred tax assets have not been
brought to account as assets:
Tax losses
Consolidated
2017
$'000
2016
$'000
132,532
53,211
Unutilised tax losses are in Australia, Chile, Canada, Indonesia, the United Kingdom, United States and
Europe. $38,187,000 of these losses are related to the Australian tax jurisdiction and do not expire. The
remaining losses are not expected to be utilised by the Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
85
1
6
2
1
8
1
L
I
N
M
A
R
7
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
13 Capital and reserves
Share capital
2,436,860,480 (2016: 599,675,707 ) ordinary shares, fully paid
Acquisition reserve
Consolidated
2017
$'000
2016
$'000
825,004
(75,887)
749,117
669,503
(75,887)
593,616
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.
Movements in ordinary share capital
Details
Balance
Balance
Issue of shares for consideration of Andy's
Earthmovers (Asia Pacific) Pty Ltd
Issue of shares for consideration of
Orionstone Holdings Pty Ltd
Issue of shares in exchange for cancellation
of external debt
Issue of shares to Black Diamond Capital
Management LLC
Issue of shares for underwriting of rights
issue
Issue of shares for rights issue
Issue of shares to Employee Share
Ownership Plan Trust
Less: share issue costs, net of deferred tax
Date
Shares
Issue price
$'000
1 July 2015
599,675,707
1 July 2016
599,675,707
669,503
669,503
30 March 2017
105,887,545
$
0.083
8,789
30 March 2017
214,380,704
$
0.083
17,794
30 March 2017
966,563,209
$
0.083
80,225
30 March 2017
123,526,158
$
0.083
10,253
30 March 2017
12,844,038
$
0.083
20 April 2017
183,486,238
$
0.109
1,066
20,000
28 April 2017
230,496,881
$
0.080
18,440
(1,066)
Balance
30 June 2017
2,436,860,480
825,004
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
86
1
6
2
1
8
1
L
I
N
M
A
R
7
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
13 Capital and reserves (continued)
Reserve of own shares (1)
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 Companyʼs MISP due to employees not meeting
the service vesting requirement will remain in the reserve. 230,496,881 treasury shares were issued to
the share trust during the year and 51,541,768 treasury shares were released from the share trust in
satisfaction of the incentive plans. As at 30 June 2017 the Company held 210,690,767 treasury shares
(2016: 30,581,304) in satisfaction of the employee share plans.
Foreign Currency Translation Reserve (1)
The translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
Hedging reserve (1)
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 (1)
The share based payment reserve comprises the expenses incurred from the issue of the Companyʼs
securities under its employee share/option plans (refer note 3(j)(v)).
Dividends (1)
No dividends were paid or declared during the year (2016: $Nil) or prior to the release of this report.
Franking account
Dividend franking account
30% franking credits available to shareholders of
Emeco Holdings Limited for subsequent financial years
The Company
2017
$'000
2016
$'000
46,215
25,518
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 (2016: $Nil). 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 $46,215,000 (2016: $25,518,000) franking credits.
________________________
(1) Refer to Consolidated Statement of Changes in Equity.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
87
t
n
o
r
F
7
R
A
M
N
I
L
1
8
1
2
6
1
7
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
14 Discontinued operations
In June 2017 the board resolved to exit the Chilean business after a strategic review of the operations.
The boardʼs decision to close this business was to address the underperformance in returns being
generated by this business unit. An asset swap was conducted with a third party in June 2017 allowing the
Company to increase the size of its Australian fleet by 85 units and dispose of the Chilean fleet. The asset
swap agreement took effect on 30 June 2017 and accordingly as at this date the Chile assets were
derecognised and the acquired assets were recognised in the Australia CGU. The fair value of these
assets acquired was determined with reference to an independent third party valuation. The FY16
comparative information has been restated.
Losses of discontinued operations
Revenue
Other income
Direct costs
Profit on sale of assets
Impairment of tangible assets
- Inventories
- Property, plant and equipment
Other expenses
Employee expenses
Depreciation
Finance income
Finance costs
Income tax (expense)/benefit
Loss for the year
2017
$'000
2016
$'000
27,971
347
(13,686)
86
(6,617)
(8,614)
(7,071)
(621)
(9,887)
280
(1,354)
(5,150)
(24,316)
38,594
557
(14,470)
7
(3,596)
(45,225)
(7,350)
(3,105)
(17,913)
292
(659)
(4,067)
(56,935)
The loss from discontinued operation of $24,316,000 (2016: $56,935,000) 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
2017
$'000
2016
$'000
13,243
15,511
(1,717)
27,037
23,579
(7,414)
(4,010)
12,155
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
88
t
n
o
r
F
7
R
A
M
N
I
L
1
8
1
2
6
1
7
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
15 Disposal groups and non-current assets held for sale
During the year $98,755,000 of non-current assets were transferred from property, plant and equipment
into non-current assets held for sale. Assets previously classified as held for sale were further impaired by
$18,380,000 to their fair value less cost to sell based on market prices of similar equipment.
As at 30 June 2017, the non-current assets held for sale comprised assets of $26,421,000 (2016:
$30,728,000). These relate to plant and equipment in Australia and one piece of equipment in Chile. Level
2 fair value hierarchy has been used in determining the fair value with reference to an independent
valuation utilising observable market valuations. The Group is actively marketing these assets and they
are expected to be disposed of within 12 months.
Assets classified as held for sale
Property, plant and equipment - continuing operations
Property, plant and equipment - discontinuing operations
Liabilities directly associated with assets classified as held for sale
Continuing operations
Net assets classified as held for sale
2017
$'000
2016
$'000
25,834
587
26,421
30,728
-
30,728
(449)
(449)
(883)
(883)
25,972
29,845
Liabilities directly associated with assets classified as held for sale relate to assets designated as held for
sale that have outstanding finance lease repayments remaining. All remaining payments are due within
six months.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
89
1
6
2
1
8
1
L
I
N
M
A
R
7
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
16 Segment reporting
The Group has two (2016: three) reportable segments, as described below, which are the Groupʼs 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 Groupʼs
reportable segments:
Australia
Canada
Provides a wide range of earthmoving equipment and maintenance services to
customers in Australia.
Provides a wide range of maintenance services to customers who are predominately
within Canada.
Chile
(discontinued)
Provides a wide range of earthmoving equipment and maintenance services to
customers in Chile. This segment was discontinued in June 2017.
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 Groupʼs managing director and board of directors. Segment earnings before
interest, income tax, depreciation and amortisation 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 armʼs
length basis.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
90
1
6
2
1
8
1
L
I
N
M
A
R
7
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
16 Segment reporting (continued)
Information about reportable segments 2017
Australia
Canada
$'000
$'000
Chile
(discont'd)
$'000
Total
$'000
Year ended 30 June 2017
Revenue from external customers
Other Income
Impairment of tangible assets
Segm ent earnings before interest, tax, depreciation and am ortisation
Impairment of goodw ill
Depreciation and amortisation
Segm ent result (EBIT)
Corporate overheads
196,043
581
8,206
50,299
(77,880)
(55,573)
(83,154)
9,000
1,632
1,946
8,924
-
(5,974)
2,950
27,971
347
15,231
(8,205)
-
(9,887)
(18,092)
EBIT
Finance income/(expense) (net)
Foreign exchange movements
Net loss before tax
Tax expense
Net loss after tax
Total Assets for reportable segm ents
Unallocated assets
Total Group Assets
499,614
4,038
12,854
233,014
2,560
25,383
51,018
(77,880)
(71,434)
(98,296)
(16,861)
(115,157)
(35,403)
(10,079)
(160,639)
(19,822)
(180,463)
516,506
4,173
520,679
Net capital Expenditure
(27,962)
10,852
15,511
(1,599)
Total Liabilities for reportable segm ents
Unallocated liabilities
Total Group Liabilities
60,591
6,081
16,405
83,077
469,609
552,686
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
91
t
n
o
r
F
7
R
A
M
N
I
L
1
8
1
2
6
1
7
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
16 Segment reporting (continued)
Information about reportable segments 2016
Australia
Canada
$'000
$'000
Chile
(discont'd)
$'000
Total
$'000
Year ended 30 June 2016
Revenue from external customers
Other Income
Impairment of tangible assets
Segm ent earnings before interest, tax, depreciation and am ortisation
Depreciation and amortisation
Segm ent result (EBIT)
Corporate overheads
EBIT
Finance income/(expense) (net)
Foreign exchange movements
Net loss before tax
Tax expense
131,746
427
36,435
(5,824)
(43,875)
(49,699)
36,229
394
93,999
38,589
568
48,820
206,564
1,389
179,254
(91,563)
(7,406)
(98,969)
(34,685)
(17,913)
(52,598)
(132,072)
(69,194)
(201,266)
(86)
(201,352)
23,554
(41,666)
(219,464)
(5,925)
(225,389)
394,972
32,720
427,692
Net loss after tax
Total Assets for reportable segm ents
Unallocated assets
Total Group Assets
244,321
48,097
102,554
Net capital expenditure
(24,512)
8,615
(7,415)
(23,312)
Total Liabilities for reportable segm ents
Unallocated liabilities
Total Group Liabilities
32,322
6,246
5,239
43,807
377,888
421,695
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
92
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
16 Segment reporting (continued)
Major customer
In the year ended 30 June 2017 the Group had four major customers that represented $104,486,000
(2016: three customers representing $83,742,000) of the Groupʼs total revenues, as indicated below:
Segment
Australia
Canada
Chile
Total
17 Cash and cash equivalents
Cash at bank
18 Trade and other receivables
Current
Trade receivables
Less: Impairment of receivables
VAT/GST receivable
Other receivables
Non-Current
Other receivables
2017
$'000
68,844
9,474
26,168
104,486
2016
$'000
37,321
18,340
28,081
83,742
Consolidated
2017
$'000
2016
$'000
16,978
24,854
Consolidated
2017
$'000
2016
$'000
87,821
(200)
87,621
3,805
22,109
113,535
237
237
32,803
(1,090)
31,713
2,849
3,172
37,734
6,234
6,234
The Groupʼs 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 2017
93
7
1
6
2
1
8
1
L
I
N
M
A
R
7
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
19 Derivatives
Current Assets
Cross currency interest rate swaps
Non Current Assets
Cross currency interest rate swaps
Current Liabilities
Cross currency interest rate swaps
20
Inventories
Work in progress - at cost
Consumables, spare parts - at cost
Total at cost
Equipment and parts - at NRV (1)
Total inventory
Consolidated
2017
$'000
2016
$'000
-
-
4,015
4,015
8,366
8,366
6,315
6,315
12,629
12,629
-
-
Consolidated
2017
$'000
2016
$'000
2,199
222
2,421
693
3,114
596
1,732
2,328
3,005
5,333
(1) During the year ended 30 June 2017 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 $387,000 (2016: $10,072,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
94
k
c
a
B
7
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
21
Intangible assets
Goodwilll
Less: Impairment
Contract intangibles - at cost
Less: Accumulated amortisation
Other intangibles - at cost
Less: Accumulated amortisation
Consolidated
2017
$'000
77,880
(77,880)
-
2016
$'000
-
-
-
-
-
-
5,006
(2,119)
2,887
712
(712)
-
3,636
(1,292)
2,344
Total intangible assets
2,887
2,344
Amortisation and impairment of intangible assets
The amortisation charge and impairment of intangible assets are recognised in the following line item in
the income statement:
Amortisation expense
Goodwill Impairment
Total expense for the year for continuing operations
Consolidated
2017
$'000
2016
$'000
826
77,880
78,706
148
-
148
Impairment testing at 30 June 2017 indicated that the goodwill assigned to the Australian CGU was
impaired. The Goodwill has been impaired to nil at 30 June 2017 and an impairment expense of
$77,880,000 has been recognised in the consolidated statement of profit or loss and other
comprehensive income. Refer to note 36 for details of goodwill recognised during the period and note
22 for details on impairment testing. Refer to note 8b for details of the transaction.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
95
k
c
a
B
7
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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
7
Consolidated
2017
$'000
2016
$'000
1,712
(866)
846
4,601
(3,916)
685
6,046
(3,904)
2,142
4,869
(3,935)
934
637,588
(297,975)
339,613
622,142
(357,505)
264,637
6,812
(1,251)
5,561
469
(426)
43
2,495
(2,090)
405
7,462
(5,601)
1,861
6,946
(6,223)
723
23,139
(13,941)
9,198
667
(605)
62
2,378
(2,038)
340
7,800
(6,673)
1,127
10,812
(9,070)
1,742
Total property, plant and equipment - at net book value
349,737
280,182
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
96
1
6
2
1
8
1
L
I
N
M
A
R
7
F
r
o
n
t
0
1
8
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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
Additions from acquisition (Andy's)
Depreciation
Disposals
Impairment
Effects of movement in foreign exchange
Carrying amount at the end of the year
Leasehold improvements
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
Plant and equipment
Carrying amount at the beginning of the year
Additions
Additions from acquisition (Orionstone)
Additions from acquisition (Andy's)
Net movement in capital work in progress
Net movement in rental inventory (1)
Depreciation
Impairment loss on continuing and discontinuing operations (2)
Movement from/(to) assets held for sale
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
2017
$'000
2016
$'000
2,142
-
450
(368)
(1,321)
-
(57)
846
934
19
(21)
(245)
-
(2)
685
264,637
88,426
85,344
62,277
6,169
(1,531)
(66,540)
-
(96,217)
(2,952)
339,613
62
-
-
(21)
-
2
43
6,613
199
-
(535)
(85)
(3,982)
(68)
2,142
1,362
93
-
(331)
(188)
(2)
934
458,580
41,788
-
-
(3,488)
(2,306)
(62,796)
(150,615)
(21,897)
5,371
264,637
155
14
-
(89)
(17)
(1)
62
(cid:894)(cid:1005)(cid:895) Included in this movement are purchases totalling $356,000 for the year ended 30 June 2017 (2016:
$302,000). Included in this movement is an impairment charge of nil for the year ended 30 June
2017 (2016: $2,503,000).
(cid:894)(cid:1006)(cid:895) Relates to impairment recognised on the Australia, Chile and Canada CGU for the year ended 30
June 2016.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
97
1
6
2
1
8
1
L
I
N
M
A
R
8
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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
Impairment
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
Additions from acquisition (Orionstone)
Disposals
Depreciation
Impairment
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
Additions from acquisition (Orionstone)
Additions from acquisition (Andy's)
Disposals
Depreciation
Impairment
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
Additions
Additions from acquisition (Orionstone)
Additions from acquisition (Andy's)
Disposals
Depreciation
Movement from/(to) assets held for sale
Impairment
Effects of movement in foreign exchange
Carrying amount at the end of the year
Consolidated
2017
$'000
2016
$'000
340
275
(5)
(205)
-
-
405
1,127
46
1,686
(307)
(674)
-
(17)
1,861
1,742
46
144
10
(506)
(684)
-
(29)
723
9,198
264
-
6,345
(727)
(1,871)
(7,573)
-
(75)
5,561
408
552
(48)
(239)
(333)
-
340
2,021
921
-
(179)
(1,128)
(504)
(4)
1,127
3,460
885
-
-
(41)
(1,100)
(1,458)
(4)
1,742
9,752
8,362
-
-
-
(2,976)
(2,313)
(3,627)
-
9,198
Security
The Groupʼs assets are subject to a fixed and floating charge under the terms of the new notes issued.
Refer note 24 for further details.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
98
k
c
a
B
8
R
A
M
N
I
L
1
8
1
2
6
1
1
6
2
1
8
1
L
I
N
M
A
R
8
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
22 Property, plant and equipment (continued)
Impairment tests for cash generating units
The Group conducts impairment testing annually at 30 June each year and when impairment indicators
exist, such as when market capitalisation is lower than the net assets of the Group. The Group has
determined the recoverable amount of its cash generating units (CGU) using a value in use and fair
value less costs to sell methodologies (2016: value in use). CGUʼs are classified as the operating
segments of the Group. The Australia CGU was valued on a value in use methodology which is based
on discounted cash flows for five years plus a terminal value. The Chile CGU was discontinued in June
2017 and consequently has been valued at Fair Value less Costs to Sell. The Canada CGU was valued
on a Fair Value less Costs to Sell basis.
Determining recoverable amount requires the exercise of significant judgements for both internal and
external factors. Judgements for external factors, including but not limited to equipment hire rates and
utilisation, have been made with reference to historical data and observable market data using a
combination of consensus views. The recoverable amount estimate is particularly sensitive to hire rates
and utilisation rates. Judgements for internal factors, including but not limited to applicable discount rate
and operating costs, have been made with reference to historical data and forward looking business
plans. Changes in the long term view of both internal and external judgements may impact the estimated
recoverable value.
Impairment testing is intended to assess the recoverable amount of both tangible and intangible assets.
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 2017. 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 Australia rental CGU valuation was 9.5% (2016:
8.9%). For future cashflows of the Australia 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 Emecoʼs five year outlook
taking into account all available information at this current time and are subject to change over time. A
compound annual growth rate (CAGR) of 1.3% (2016: 2.2%) has been used over the five years of the
forecast.
Impairment testing conducted during the year ending 30 June 2017 determined that the Australia CGU
was impaired by $77,880,000. The impairment was first allocated to the goodwill in the CGU of
$77,880,000. No impairment was made to the tangible assets of the Australia CGU. Refer to note 8b for
details of the impairment expense recognised in the consolidated statement of profit or loss and other
comprehensive income.
Write down to fair value of assets designated as held for sale
The table below outlines the amount recognised in the consolidated statement of profit or loss and other
comprehensive income for each CGU during the year ended 30 June 2017 in relation to the designation
and disposal of assets designated as held for sale.
CGU
Australia rental
Canada rental
Chile rental
Total
Impairment recognised
A$ʼ000
8,207
1,946
15,231
25,384
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
99
t
n
o
r
F
8
R
A
M
N
I
L
1
8
1
2
6
1
8
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
22 Property, plant and equipment (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 presents the amount by
which the impairment recognised for each CGU increases due to a 1 percent drop in CGU average
utilisation over the forecast period and a 1 percent increase in discount rates.
CGU
Australia rental
23 Trade and other payables
Current
Trade payables
Trade payables
Other payables and accruals
Impact on impairment from
1% decline in CGU
utilisation
A$million
Impact on impairment from
1% increase in discount
rate
A$million
16.8
41.1
Consolidated
2017
$'000
2016
$'000
24,491
58,054
82,545
13,658
24,377
38,035
The Groupʼs 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 38. 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 38.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
100
1
0
t
n
o
r
F
8
R
A
M
N
I
L
1
8
1
2
6
1
8
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
24
Interest bearing liabilities
Current
Amortised cost
Other financing
Lease liabilities - secured
Non-current
Amortised cost
USD notes - secured
Notes issue - secured
Notes issue - secured (2)
Debt raising costs (2)
Debt raising costs
OID (1)
Debt raising costs (revolving credit facility)
Debt raising costs (asset backed loan)
Lease liabilities - secured
Consolidated
2017
$'000
2016
$'000
1,584
5,310
6,894
535
4,044
4,579
462,724
-
-
(19,440)
-
-
(630)
-
4,491
447,145
-
284,433
96,283
(2,121)
(6,265)
(2,743)
-
(1,310)
4,962
373,239
(1) Originating issue discount – the discount from par value at the time the 144A notes were issued. This
is amortised using the effective interest rate method over the life of the notes.
(2) Carried at amortised cost with movements in fair value of the underlying hedge item recorded in the
profit and loss statement.
Bank loans
The Group extinguished its A$75,000,000 asset backed loan on 31 March 2017 and was replaced with
a A$65,000,000 revolving credit facility (RCF) consisting of two sub facilities of A$30,000,000 available
for the issuance of bank guarantees and A$35,000,000 available as a revolving cash advance facility.
The facility matures in March 2020.
The bank guarantee facility attracts a fee of 2.75% on the unutilised portion of the facility and a fee of
5.5% on the outstanding balance of guarantees on issue.
The nominal interest rate on the RCF is equal to the aggregate of the bank bill swap rate (BBSY) plus a
margin of between 5% and 7% dependant on the calculated leverage ratio. The facility also attracts an
undrawn line fee of between 2.5% and 3.5% dependant on the calculated leverage ratio on the undrawn
available balance of the facility.
The facilities require the Group to maintain a collateral coverage ratio greater than 3.0x and a fixed
charge coverage ratio greater than 1.2x.
At year end the Group had drawn $Nil of the revolving cash advance facility but had utilised $2,729,000
of the bank guarantee facility.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
101
1
0
1
6
2
1
8
1
L
I
N
M
A
R
8
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
24
Interest bearing liabilities (continued)
144A notes issue
As part of the acquisition of Andyʼs and Orionstone, the Group acquired A$66,558,000 and
A$137,360,000 of long term debt respectively from each of these businesses. These amounts, in
addition to the US$282,720,000 outstanding on the Groupʼs 144A notes were exchanged for newly
issued Emeco new notes to the value of US$360,818,000/A$469,082,000 and 966,563,209 ordinary
shares in the Company. The refinancing of the long term debt was a condition of the Transaction. Of
these newly issued notes, US$4,890,000/A$5,357,000 is held by the Group and has been netted off
against the total debt of the group. The original 144A notes were cancelled on completion of the
transaction.
The notes attract a nominal interest rate of 9.25% and mature on 30 March 2022. The notes will remain
fully drawn until maturity. Under the terms of the note agreement, the noteholders hold a joint fixed and
floating charge with the revolving credit facility bank over the assets and undertakings of the Group. The
notes are measured at amortised cost. The notes have a limitation on capital expenditure to the amount
of A$77,500,000 for the 10 months ending 31 January 2018, A$87,500,000 for the 12 months ending 31
January 2019 and A$92,500,000 for the 12 months ending 21 January 2019 and for each preceding 12
month period. Any unused limit can be carried forward for the preceding 12 month period.
The Group designated derivatives (cross currency interest rate swaps) as hedge instruments against
this underlying debt.
FY17
USD
$ʼ000
USD Notes
144A notes
Hedged (Asset)/Liability
Net Exposure
US$355,927
-
-
US$355,927
AUD
$ʼ000
$462,724
-
$4,351
$467,075
FY16
USD
$ʼ000
-
US$282,720
-
US$282,720
AUD
$ʼ000
-
$380,715
($18,944)
$361,771
Working capital facilities
The Group has a credit card facility with a limit of A$60,000. The facility is secured via a cash cover
account. The Group has a separate bank guarantee facility of A$560,000 which is fully utilised and
secured via a cash cover account.
Finance leases
At 30 June 2017, the Group held finance lease facilities totalling A$9,801,000 (2016: A$9,006,000) which
have various maturities up to November 2020. Liabilities under the facility are secured by the assets
leased.
Other financial liabilities
At year end the Group financed its insurance premium totalling A$1,584,000 which matures in January
2018.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
102
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
24
Interest bearing liabilities (continued)
Finance lease liabilities
Finance lease liabilities of the Group are payable as follows:
Future
minimum
lease
Present
value of
minimum minimum
Future
lease
lease
Present
value of
minimum
lease
payments Interest payments
payments Interest payments
2017
$'000
2017
$'000
5,769 (459)
4,689 (198)
2017
$'000
5,310
4,491
-
-
-
10,458
(657)
9,801
2016
$'000
2016
$'000
2016
$'000
4,361
5,331
-
9,692
(317)
(369)
-
(686)
4,044
4,962
-
9,006
Consolidated
Less than one year
Between one and five years
More than five years
The Group leases plant and equipment under finance leases. The Groupʼs lease liabilities are secured
by the leased assets of $5,561,000 (2016: $9,198,000). In the event of default, the leased assets revert
to the lessor.
k
c
a
B
8
R
A
M
N
I
L
1
8
1
2
6
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
103
0
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
25 Financing arrangements
The Group has the ability to access the following lines of credit:
Total facilities available:
Revolving credit facility
Bank guarantee facility
Bank loans
USD notes (1)
144A notes
Finance leases
Insurance financing
Working capital
Facilities utilised at reporting date:
Revolving credit facility $35m
Bank guarantee facility $30m
Bank loans (2)
USD notes (1)
144A notes
Finance leases
Insurance financing
Working capital
Facilities not utilised or established at reporting date:
Revolving credit facility $35m
Bank guarantee facility $30m
Bank loans
USD notes
144A notes (1)
Finance leases
Insurance financing
Working capital
8
Consolidated
2017
$'000
2016
$'000
35,000
30,000
-
462,724
-
9,801
1,584
866
539,975
-
2,729
-
462,724
-
9,801
1,584
866
477,704
35,000
27,271
-
-
-
-
-
-
62,271
-
-
75,000
-
451,118
9,006
535
1,616
537,275
-
-
11,504
-
451,118
9,006
535
866
473,029
-
-
63,496
-
-
-
-
750
64,246
(1) The facility of US$360,818,000/A$469,082,000 was fully drawn at 30 June 2017. The Group holds
US$4,890,000/A$5,357,000 face value of bonds which have not been cancelled and are available
for re-issue. The notes held by the Group have reduced the total outstanding balance attributed to
the notes on issue in the consolidated statement of financial position.
(2) The facility was undrawn at 30 June 2016 however had issued $11,504,000 of guarantees backed
by the facility.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
104
1
6
2
1
8
1
L
I
N
M
A
R
8
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
26 Provisions
Current
Employee benefits:
- annual leave
- long service leave
Provision for restructuring
9
Non-current
Employee benefits - long service leave
Provision for restructuring
Consolidated
2017
$'000
2016
$'000
3,381
903
2,099
6,383
494
410
904
2,214
480
775
3,469
454
1,036
1,490
Defined contribution superannuation funds
The Group makes contributions to defined contribution superannuation funds. The expense recognised
for the year was $2,128,000 (2016: $2,513,000).
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 RI (refer note 3(j)(v)).
Prior to establishing the LTIP certain key management personnel and senior employees were issued
shares in the Company under the Companyʼs MISP (refer note 3(j)(v)).
During the year the Company issued matching shares to certain employees of the Group under its ESOP
(refer note 3(j)(v)).
Performance shares, performance rights, options and shares issued under the MISP are all equity settled.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
105
1
6
2
1
8
1
L
I
N
M
A
R
9
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
27 Share based payments (continued)
Long term incentive plan
Grant date / employees
entitled
Matured in FY17:
Performance shares/rights 2014
Number of
instruments Vesting conditions
Contractual life
of performance
shares/rights
24,491,074 3 years service TSR ranking to a
3 years
basket of direct and indirect peers
of 99 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. No shares/rights
vested due to TSR being less than
75%.
Unvested plans:
Performance shares/rights 2015
19,681,416 3 years service TSR ranking to a
3 years
basket of direct and indirect peers
of 123 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.
Performance shares/rights 2016
38,612,893 3 years service TSR ranking to a
3 years
basket of direct and indirect peers
of 123 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.
Retention incentive plan
Grant date / employees entitled
instruments Vesting conditions
Number of
Contractual life
of performance
shares/rights
Performance shares/rights 2017
303,603,596 3 years service
3 years
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
106
k
c
a
B
9
R
A
M
N
I
L
1
8
1
2
6
1
k
c
a
B
9
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
27 Share based payments (continued)
The movement of performance shares and performance rights on issue during the year were 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
Management incentive share plan
Number of
performance
shares/rights
2017
49,289,980
(19,544,793)
(121,843,024)
303,602,694
211,504,857
-
Number of
performance
shares/rights
2016
34,399,732
(23,722,645)
-
38,612,893
49,289,980
-
Grant date / employees
entitled
MISP 2006
Number of
instruments Vesting conditions
4,010,000 Service requirement. Partial
vesting entitlement after 2 years
with full vesting after 5 years.
Contractual
life
of MISP loan
10 years
MISP 2007
1,240,000 Service requirement. Partial
10 years
vesting entitlement after 2 years
with full vesting after 5 years.
MISP 2008
560,000 Service requirement. Partial
10 years
vesting 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
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
Number of
MISP
2017
-
-
-
-
-
-
Number of
MISP
2016
1,060,000
(1,060,000)
-
-
-
-
107
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
27 Share based payments (continued)
Employee share ownership plan
Grant date / employees
entitled
Matured in January 2016
ESOP 2015
Number of
instruments Vesting conditions
88,469 Service requirement. Full
vesting entitlement after 1 year
after the end of the calendar
year in which they are acquired.
88,469
Contractual
life
of ESOP
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
2017
49,831
-
(49,831)
-
-
-
Number of
ESOP
2016
71,260
(7,859)
(13,570)
-
49,831
-
(1) The shares are not considered exercisable until the full vesting period has been satisfied.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
108
9
1
6
2
1
8
1
L
I
N
M
A
R
9
F
r
o
n
t
t
n
o
r
F
9
R
A
M
N
I
L
1
8
1
2
6
1
9
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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 RIʼs granted, measured using a Black Scholes pricing model (2016: RIʼs
granted, measured using a Black Scholes pricing model). Expected volatility is estimated by considering
the Companyʼs historical daily and monthly share price movement and an analysis of comparable
companies. Volatility has not been included in the 2016 and 2017 valuation due to the incentives not
containing market vesting conditions. 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)
Chief
executive
officer
2017
Chief
executive
officer
2016
Incentive Plans
Key
manage-
ment
personnel
2017
Key
manage-
ment
personnel
2016
Senior
employees
2017
Senior
employees
2016
$0.08
$0.08
$Nil
n/a
$0.03
$0.03
$Nil
n/a
$0.08
$0.08
$Nil
n/a
$0.03
$0.03
$Nil
n/a
$0.08
$0.08
$Nil
n/a
$0.03
$0.03
$Nil
n/a
36 months
31 months
36 months
31 months
36 months
31 months
Expected dividends
Risk-free interest rate (based on
government bonds)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
The fair value assumptions for MISPs have no further expense to be recognised and have not changed
since the fair value was determined at grant date in previous years.
For the Groupʼs CEO and key management personnel the following applies:
Dividends:
(cid:129) dividends (or shadow dividends) will not be paid on unvested LTI or RI securities;
(cid:129) 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:
(cid:129)
(cid:129)
(cid:129)
the proportion of vesting LTI or RI securities will be pro-rated to reflect the performance achieved;
the proportion of vesting LTI or RI 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
109
1
6
2
1
8
1
L
I
N
M
A
R
9
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
27 Share based payments (continued)
Employee expenses
in AUD
Performance shares/rights
Total expense recoginsed as employee costs (1)
Consolidated
2017
6,401,305
6,401,305
2016
1,707,382
1,707,382
(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. Should an
employee be made redundant, the remaining share based payment expense for the vesting period will
be accelerated and recognised in the period the employee was made redundant.
28 Commitments
(a) Operating lease commitments
Future non-cancellable operating leases not provided for
in the finanical statements and payable:
Less than one year
Between one and five years
More than five years
Consolidated
2017
$'000
2016
$'000
14,145
10,589
-
24,734
12,265
17,018
-
29,283
The Group leases the majority of their operating premises. The terms of the lease are negotiated in
conjunction with the Groupʼs internal and external advisors and are dependent upon market forces.
During the year ended 30 June 2017 an amount of $17,954,000 was recognised as an expense in
profit or loss in respect of operating leases (2016: $14,789,000).
(b) Capital commitments
The Group has not entered into commitments for purchases of fixed assets, primarily rental fleet
assets, in the year ended 30 June 2017 (2016: $Nil).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
110
1
6
2
1
8
1
L
I
N
M
A
R
9
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
29 Contingent liabilities
Guarantees
The Group has provided bank guarantees in the amount of $4,172,000 (2016: $11,504,000) in relation to
obligations under operating leases and rental premises.
Indonesia
Since the Group announced it would exit its Indonesian operations, the Indonesian tax office commenced
routine VAT and Corporate income tax audits. As a consequence the Indonesian tax office have issued
an assessment which the Group have disputed. Under local laws an assessment does not become final
until all appeal avenues have been exhausted.
The process to liquidate the Indonesian entity has commenced and the Group continues to manage its
on-going tax and legal obligations in Indonesia. The Group does not believe any potential exposure exists
in relation to the Indonesian entity.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
111
t
n
o
r
F
9
R
A
M
N
I
L
1
8
1
2
6
1
9
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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
2017
$'000
16,978
2016
$'000
24,854
Note
17
(ii) Reconciliation of net profit to net cash provided by operating activities
Net loss - continuing operations
Note
2017
$'000
(156,147)
2016
$'000
(225,389)
Add/(less) items classified as investing/financing activities:
Net profit on sale of non-current assets
Acquisition costs
Add/(less) non-cash items:
Amortisation
Depreciation
Amortisation of borrowing costs using effective interest rate
Write off previous deferred borrowing costs
(Gain)/loss on hedge
Discount on repurchased debt
Discount on refinanced debt
Shares issued to BDCM
Withholding tax expense
Foreign exchange (gain)/loss
Impairment losses on property, plant and equipment
Bad debts
Provision for doubtful debts/(reversal)
Impairment of goodwill
Other non-cash items and reclassifications
Equity settled share based payments
(Decrease)/increase in income taxes payable
(Decrease)/increase in deferred tax asset
Net cashflow from operating activities of discontinued operations
Net cash from operating activities before change in assets/(liabilities)
adjusted for assets and (liabilities) acquired
7
36
21
8
8
8
6
8
8
8
8
8
8
8
8
8
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in payables
Increase/(decrease) in provisions
Net cash from/(used in) operating activities
(504)
14,445
826
60,721
5,078
5,778
1,349
-
(20,359)
10,253
767
10,079
9,766
24
(591)
77,880
(4,449)
6,164
-
(13,491)
13,243
(400)
-
148
69,194
4,217
1,251
1,191
(31,663)
-
-
2,559
42,002
168,156
4,924
(5,555)
-
6,740
1,707
-
(5,510)
-
20,832
33,572
(44,012)
5,475
26,990
4,939
14,224
26,463
17,498
(6,445)
(444)
70,644
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
112
t
n
o
r
F
9
R
A
M
N
I
L
1
8
1
2
6
1
9
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
31 Controlled entities
(a) Particulars in relation to controlled entities
Parent entity
Emeco Holdings Limited
Controlled entities
Country
of
incorporation
Ownership interest
2016
2017
%
%
Pacific Custodians Pty Ltd as trustee for Emeco
Employee Share Ownership Plan Trust
Emeco Pty Limited
Emeco International Pty Limited
EHL Corporate Pty Ltd
Emeco Parts Pty Ltd
Emeco Finance Pty Ltd
Andyʼs Earthmovers (Asia Pacific) Pty Ltd
Orionstone Holdings Pty Ltd
Orionstone Pty Ltd
Ironstone Group Pty Ltd
Orion (WA) Pty Ltd
RPO Australia Pty Ltd
Emeco Equipment (USA) LLC
Emeco Canada Ltd
Emeco (UK) Limited
PT Prima Traktor IndoNusa (PTI)
Emeco International Europe BV
Emeco Europe BV
Emeco BV
Emeco Holdings South America SpA
Enduro SpA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Canada
United Kingdom
Indonesia
Netherlands
Netherlands
Netherlands
Chile
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
100
-
-
-
-
-
-
100
100
100
100
100
100
100
100
100
(b) Acquisition of entities in the current year
The following entities were acquired in the current year:
(cid:129) Andyʼs Earthmovers (Asia Pacific) Pty Ltd
(cid:129) Orionstone Holdings Pty Ltd
(cid:129) Orionstone Pty Ltd
(cid:129)
(cid:129) Orion (WA) Pty Ltd
(cid:129) RPO Australia Pty Ltd
Ironstone Group Pty Ltd
Refer to note 36 for details on the acquisition of these entities.
(c) Acquisition of entities in the prior year
There was no acquisition of entities in the prior year.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
113
1
6
2
1
8
1
L
I
N
M
A
R
9
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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
Peter Richards
Chair
Peter Frank
Keith Skinner
(Commenced role on 1 April 2017)
(Commenced role on 1 April 2017)
Darren Yeates
(Commenced role on 1 April 2017)
John Cahill
Erica Smyth
(Ceased role on 1 April 2017)
(Ceased role on 1 April 2017)
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
Gregory Hawkins
Executive Director, Finance (ceased role on 19 August 2016)
Other executives
Position
Thao Pham
Justine Lea
Chief Strategy Officer (commenced role on 17 May 2017), previously
Chief Legal, Risk & Business Transformation Officer (ceased role as
Company Secretary on 1 April 2017).
Chief Financial Officer (commenced role 24 October 2016), previously
Acting Chief Financial Officer (commenced role on 1 July 2016)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
114
1
6
2
1
8
1
L
I
N
M
A
R
9
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
32 Key management personnel disclosure (continued)
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
2017
6,008,791
-
210,262
-
1,137,258
7,356,311
2016
2,451,149
-
178,974
866,555
1,062,032
4,558,710
Remuneration of key management personnel by the Group
The compensation disclosed above represents an allocation of the key management personnelʼs
compensation from the Group in relation to their services rendered to the Company.
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation and some equity instruments
disclosures as required by Corporations Regulations 2M.3.03 and 2M.6.04 are provided in the
remuneration report section of the directorsʼ report on pages 25 to 39.
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 directorsʼ 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 three years depending upon the Companyʼs total
shareholder return ranking against a peer group of 99 Companies. The shares have been accounted for
as an option in accordance with AASB 2 Share Based Payments.
Shares and rights over equity instruments granted as compensation under retention incentive
plan
The Company has an ongoing retention incentive plan in which shares have been granted to certain
employees of the Company. The shares vest after three years.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
115
t
n
o
r
F
9
R
A
M
N
I
L
1
8
1
2
6
1
9
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
32 Key management personnel disclosure (continued)
The movement during the reporting year in the number of shares issued under the long term incentive
plan, retention 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 personnelʼs equity holdings.
2017 Shares
Directors & executives
Ian Testrow
Gregory Hawkins (1)
Thao Pham
Jusitine Lea (4)
2016 Shares
Directors & executives
Ian Testrow
Gregory Hawkins (1)
Thao Pham
Kenneth Lewsey (2)
Stuart Jenner (3)
Kalien Selby (3)
Held at
1 July 2016
Granted as
compensation
Vested
during
the year
Forfeited/
lapsed
Held at
30 June
2017
14,571,703 108,674,758
7,860,434
4,187,320
459,294
-
-
-
- -
- (7,860,434)
- (199,456)
- (215,294)
123,246,461
n/a
3,987,864
244,000
Held at
1 July 2015
Granted as
compensation
Vested
during
the year
Forfeited/
lapsed
Held at
30 June
2016
1,550,000 13,021,703
6,260,434
1,600,000
3,330,756
915,489
-
8,803,571
-
-
-
260,000
- -
- -
- (58,925)
- (8,803,571)
- -
- (260,000)
14,571,703
7,860,434
4,187,320
n/a
n/a
n/a
Dividends paid under the management incentive share plan are paid against the employeeʼs outstanding
loan and is reflected in issued capital.
(1) Mr Hawkins ceased to be a key management personnel on 19 August 2016.
(2) Mr Lewsey ceased to be a key management personnel on 20 October 2015.
(3) Mr Jenner and Ms Selby ceased to be a key management on 1 July 2015 and 28 August 2015
respectively.
(4) Ms Lea became key management personnel 1 July 2016.
n/a Not applicable as not in a position of key management at relevant reporting date.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
116
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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.
2017 Rights
Directors & executives
Ian Testrow
Thao Pham
Jusitine Lea (2)
2016 Rights
Directors & executives
Ian Testrow
Christopher Hayman (1)
Held at
1 July 2016
Granted as
compensation
Vested
during
the Year
Forfeited/
lapsed
Held at
30 June
2017
1,633,151
-
-
-
24,368,605
8,122,868
- (1,633,151)
- -
- -
-
24,368,605
8,122,868
Held at
1 July 2015
Granted as
compensation
Vested
during
the Year
Forfeited/
lapsed
Held at
30 June
2016
2,084,522
1,831,007
-
-
- (451,371)
- (1,831,007)
1,633,151
n/a
(1) Mr Hayman became a key management personnel on 8 July 2013 and ceased to be a key
management personnel on 6 November 2015.
(2) Ms Lea became a key management personnel on 1 July 2016.
n/a Not applicable as not in a position of key management personnel at relevant reporting date.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
117
9
1
6
2
1
8
1
L
I
N
M
A
R
9
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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 transactions disclosed occurred
whilst they were deemed to be a key management person. 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.
Held at
1 July 2016
Ordinary
Shares
Transferred
from
Share
Plan
Purchases
Sales
Held at
30 June 2017
Ordinary
Shares
750,817 7,014
522,238
120,000
40,000
71,049
- 757,831
n/a
- - -
n/a
- - -
- 52,264
- 12,264
n/a
- - -
- - - - -
- - - - -
- - - - -
38,014 40,224
4,000
- - 78,238
- - - 4,000
2017
Directors
Ian Testrow
Gregory Hawkins (1)
John Cahill (2)
Peter Richards
Erica Smyth (2)
Peter Frank (3)
Keith Skinner (3)
Darren Yeates (3)
Other executives
Thao Pham
Justine Lea (4)
(1) Mr Hawkins ceased to be key management personnel on 19 August 2016.
(2) Mr Cahill and Ms Smyth ceased to be key management personnel on 1 April 2017.
(3) Mr Frank, Mr Skinner and Mr Yeates became key management personnel on 1 April 2017.
(4) Ms Lea became a key management personnel on 1 July 2016.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
118
k
c
a
B
9
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
32 Key management personnel disclosure (continued)
Held at
1 July 2015
Ordinary
Shares
Transferred
from
Share
Plan
Purchases
Sales
Held at
30 June 2016
Ordinary
Shares
1,581,700
750,817
522,238
120,000
40,000
71,049
1,028,690
- - - 1,581,700
- - - 750,817
- - 522,238
- - - 120,000
- - - 40,000
- - - 71,049
n/a
- - -
9,332
35,103
35,103
38,014
- - -
n/a
- - -
n/a
n/a
- - -
- - - 38,014
2016
Directors
Alec Brennan
Ian Testrow
Gregory Hawkins
John Cahill
Peter Richards
Erica Smyth
Kenneth Lewsey (1)
Other executives
Christopher Hayman (1)
Stuart Jenner (1)
Kalien Selby (1)
Thao Pham
(1) Mr Jenner, Mr Lewsey, Ms Selby and Mr Hayman ceased to be key management personnel on 1
July 2015, 20 August 2015, 28 August 2015 and 6 November 2015 respectively.
n/a Not applicable as not in a position of key management personnel at relevant reporting date.
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 2017
119
k
c
a
B
9
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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.
The terms and conditions or the transactions with management persons and their related parties were no
more favourable than those available, or which might be reasonably expected to be available, on similar
transaction to non-director related entities on an armʼs 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
Balance outstanding
as at 30 June
9
2017
$'000
2016
$'000
2017
$'000
2016
$'000
Revenue
Key management person
and their related parties
Mr P Richards
-Sedgman Limited
Total
Expense
Key management person
and their related parties
Mr P Richards
-Bradken Limited
Total
Transaction
Rental of heavy earthmoving
equipment
Transaction
Purchase of heavy
earthmoving equipment parts
n/a
n/a
21
21
n/a
n/a
-
-
n/a
n/a
251
251
n/a
n/a
12
12
Mr Richards ceased to be a director of Sedgman Limited and Bradken Limited in November 2015.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
120
1
6
2
1
8
1
L
I
N
M
A
R
9
F
r
o
n
t
t
n
o
r
F
8
R
A
M
N
I
L
1
8
1
2
6
1
8
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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 an armʼs length rate.
Ultimate parent entity
Emeco Holdings Limited is the ultimate parent entity of the Group.
34 Subsequent events
1
0
No significant events have occurred subsequent to the year ended 30 June 2017.
35 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 30 June 2017 was based on the loss attributable to ordinary
shareholders of $180,463,000 (2016: $225,389,000) and a weighted average number of ordinary shares
outstanding less any treasury shares for the year ended 30 June 2017 of 967,114,525 (2016:
557,569,229).
Profit attributed to ordinary shareholders
Consolidated
2017
2016
Continuing Discontinued
operations operations
$'000
(156,147)
$'000
(24,316)
Total
$'000
(180,463)
ContinuingDiscontinued
operations operations
$'000
(168,454)
$'000
(56,935)
Total
$'000
(225,389)
Profit/(loss) for the year
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
121
1
6
2
1
8
1
L
I
N
M
A
R
8
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
35 Earnings per share (continued)
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effect of shares issued during the period
Effect of vested employee share plans
Effect of purchased treasury shares
Weighted average number of ordinary shares at 30 June
Consolidated
2017
'000
557,569
457,628
3,460
(51,542)
967,115
2016
'000
631,238
-
-
(73,669)
557,569
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2017 was based on the loss attributable to ordinary
shareholders of $180,463,000 (2016: $225,389,000) and a weighted average number of ordinary shares
outstanding less any treasury shares during the financial year ended 30 June 2017 of 967,114,525 (2016:
557,569,229).
Profit attributed to ordinary shareholders (diluted)
Consolidated
2017
2016
Continuing Discontinued
operations operations
$'000
$'000
ContinuingDiscontinued
operations operations
$'000
$'000
Total
$'000
Total
$'000
Profit/(loss) attributed to ordinary
shareholders (basic)
(156,147)
(24,316)
(180,463)
(168,454)
(56,935)
(225,389)
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 1 July
Effect of shares issued during the period
Effect of vested employee share plans
Effect of unvested employee share plans
Effect of purchased treasury shares
Weighted average number of ordinary shares (diluted) at 30 June
Consolidated
2017
'000
557,569
457,628
3,460
76,556
(51,542)
1,043,671
2016
'000
631,238
-
-
-
(73,669)
557,569
Comparative information
The average market value of the Companyʼs 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 2017
122
1
6
2
1
8
1
L
I
N
M
A
R
8
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
36 Business combinations
Andyʼs Earthmovers (Asia Pacific) Pty Ltd
On 31 March 2017, Emeco Holdings Limited acquired 100% of the shares in Andyʼs Earthmovers (Asia
Pacific) Pty Ltd (Andyʼs) for total consideration transferred of $8,788,666 arising from the issue of
105,887,545 shares. The issue of Emeco shares was at the market price of $0.083.
Goodwill of $4,947,000 represents the residual value of the purchase price of the company over the fair
value of identified tangible and intangible assets.
The trade and other receivables acquired in this transaction with a fair value of $15,439,000 had a gross
contractual amount of $23,845,517. The best estimate at acquisition date of the contractual cash flows not
expected to be collected is $8,407,000.
Orionstone Holdings Pty Ltd
On 31 March 2017, Emeco Holdings Limited acquired 100% of the shares in Orionstone Holdings Pty Ltd
(Orionstone) for total consideration transferred of $17,793,598 arising from the issue of 214,380,704
shares. The issue of Emeco shares was at the market price of $0.083.
Goodwill of $72,933,000 represents the residual value of the purchase price of the company over the fair
value of identified tangible and intangible assets.
The trade and other receivables acquired in this transaction with a fair value of $10,017,000 had gross
contractual amounts of $15,349,942. The best estimate at acquisition date of the contractual cash flows
not expected to be collected is $5,332,690.
Goodwill
Goodwill of $77,880,000 was recognised on the acquisition of Andyʼs ($4,947,000) and Orionstone
($72,933,000) and was allocated to the Australia cash generating unit (CGU). Goodwill arose in the
acquisition of Andyʼs and Orionstone due to an increase in the Companyʼs share price over the period that
completion of transaction was delayed in addition to an increase in short term liabilities acquired from both
businesses. The Company did not intend to provide consideration for the transaction in excess of the fair
value. Impairment testing indicated the Australia CGU was impaired by $77,880,000. In accordance with
AASB 136, the impairment was first allocated against the goodwill recognised in the Australia CGU. The
resulting impairment resulted in the goodwill acquired during the period being impaired to zero. An
impairment expense of $77,880,000 was recognised in the consolidated statement of profit or loss and
other comprehensive income during the period.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
123
t
n
o
r
F
8
R
A
M
N
I
L
1
8
1
2
6
1
8
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
36 Business combinations (continued)
The values identified in relation to the acquisition are final as at reporting date 30 June 2017. Details of
the acquisition are as follows:
Andy's
Orionstone
Earthm overs
Holdings
(Asia Pacific) Pty Ltd
Pty Ltd
$'000
$'000
Total
$'000
Cash assets
Trade and other receivables
Inventories
Prepayments
Plant and equipment
Tax assets/(liabilites)
Investments
Trade and other payables
Provisions
Interest bearing liabilities
Net assets /(liaibilities) acquired
Goodw ill
Acquisition date fair value of consideration transferred
Representing:
Emeco Holdings Limited shares
Acquisition costs expensed to profit or loss
Cash used to acquire the business, net of cash aquired:
Acquisition date fair value of consideration transferred
Less: cash and cash equivalents
Less: Emeco Holdings Limited shares
Net Cash received
159
15,439
156
12
64,557
2,202
799
(9,049)
(905)
(69,529)
3,841
4,947
8,788
8,788
4,776
8,788
(159)
(8,788)
159
783
11,740
350
54
91,699
(3,063)
-
(14,403)
(343)
(141,957)
(55,140)
72,933
17,793
17,793
9,669
17,793
(783)
(17,793)
783
1
0
942
27,179
506
66
156,256
(861)
799
(23,452)
(1,248)
(211,486)
(51,299)
77,880
26,581
26,581
14,445
26,581
(942)
(26,581)
942
Impact of acquisitions on the results of the Group
The Group has fully integrated the acquisition of the two businesses from the acquisition date and is
therefore unable to accurately quantify the additional revenue and earnings contributed to the Group by
the acquired businesses.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
124
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
37 Parent entity disclosure
As at and throughout the financial year ending 30 June 2017 the parent entity (the ʻCompanyʼ) 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
1
1
Financial position of parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-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
2017
$'000
2016
$'000
(63,730)
-
(63,730)
(76,560)
-
(76,560)
20
322,589
322,609
20
243,168
243,188
-
-
-
-
-
-
749,117
23,145
(39,074)
(410,579)
322,609
593,616
17,055
(20,634)
(346,849)
243,188
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 38.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
125
1
6
2
1
8
1
L
I
N
M
A
R
1
0
F
r
o
n
t
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38 Deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, Emeco International Pty Ltd
is relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial
reports, and directorsʼ 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:131) Emeco Pty Ltd
(cid:131) Emeco International Pty Limited
(cid:131) Andyʼs Earthmovers (Asia Pacific) Pty Ltd
(cid:131) Orionstone Holdings Pty Ltd
(cid:131) Orionstone Pty Ltd
(cid:131)
(cid:131) Orion (WA) Pty Ltd
(cid:131) RPO Australia Pty Ltd
Ironstone Group Pty Ltd
k
c
a
B
0
1
R
A
M
N
I
L
1
8
1
2
6
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
126
k
c
a
B
0
1
R
A
M
N
I
L
1
8
1
2
6
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
38 Deed of cross guarantee (continued)
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 2017 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
Other income
Impairment of goodwill
Finance income
Finance costs
Impairment of assets
Impairment of investment
Profit before tax
Tax expense
Net profit after tax
Other comprehensive income
Total comprehensive income for the period
Retained earnings at beginning of year
Retained earnings at end of year
Attributable to:
Equity holders of the Company
Profit/(loss) for the period
Consolidated
2017
$'000
196,043
(124,126)
71,917
(77,002)
581
77,880
34,454
(62,902)
(157)
(31,690)
13,080
(14,671)
(1,591)
(1,003)
(1,003)
2016
$'000
131,746
(82,768)
48,978
(63,387)
667
79,037
(54,683)
(36,435)
(210,196)
(236,020)
(20,126)
(256,146)
8,418
8,418
(569,535)
(571,126)
(313,389)
(569,535)
(571,126)
(1,591)
(569,535)
(256,146)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
127
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
39 Deed of cross guarantee (continued)
Statement of financial position
Current assets
Cash assets
Trade and other receivables
Derivatives
Inventories
Assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Derivatives
Intangible assets
Investments
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Derivatives
Interest bearing 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/(losses)
Consolidated
2017
$'000
2016
$'000
12,332
107,022
-
3,515
25,833
148,702
119,524
4,015
2,888
157,173
348,783
12,218
644,601
8,886
32,193
6,315
2,429
8,692
58,515
173,949
12,629
2,344
78,391
182,034
14,370
463,717
793,303
522,232
62,189
9,149
3,714
5,136
80,188
-
456,122
11,311
-
467,433
32,341
-
2,079
3,882
38,302
-
373,655
21,875
-
395,530
547,621
433,832
245,682
88,400
749,117
22,935
44,586
(570,956)
593,616
16,744
47,575
(569,535)
Total equity attributable to equity holders of the parent
245,682
88,400
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
128
1
1
1
6
2
1
8
1
L
I
N
M
A
R
1
0
F
r
o
n
t
t
n
o
r
F
0
1
R
A
M
N
I
L
1
8
1
2
6
1
1
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Directorsʼ Declaration
1.
In the opinion of the directors of Emeco Holdings Limited (the ʻCompanyʼ):
(a)
the consolidated financial statements and notes as set out on pages 41 - 128, and
remuneration report in the directorsʼ report, set out on pages 25 to 39 are in accordance with
the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Groupʼs financial position as at 30 June 2017 and of
its performance for the financial year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001;
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
There are reasonable grounds to believe that the Company and the group entities identified in note 38
will be able to meet any obligation or liabilities to which they are or may become subject to by virtue of
the deed of cross guarantee between the Company and those group entities pursuant to ASIC Class
Order 98/1418.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the chief executive officer and chief financial officer for the financial year ended 30 June 2017.
The directors draw attention to note 2(a) to the consolidated financial statements, which includes a
statement of compliance with international financial reporting standards.
2.
3.
4.
Dated at Perth, 30th day of August 2017
Signed in accordance with a resolution of the directors:
Ian Testrow
Managing Director
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
129
1
6
2
1
8
1
L
I
N
M
A
R
1
0
B
a
c
k
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report to the members
of Emeco Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Emeco Holdings Limited (the “Company”) and its subsidiaries
(the “Group”), which comprises the consolidated statement of financial position as at 30 June 2017,
the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies, and
the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
1
6
2
1
8
1
L
I
N
M
A
R
1
0
B
a
c
k
How the scope of our audit responded to the Key
Audit Matter
Our procedures included, but were not limited to:
(cid:120)
(cid:120)
(cid:120)
Reading the purchase agreements to understand
key terms and conditions and confirming our
understanding of the transaction with
management;
Assessing the reliability of third party valuations
including consideration of their competency and
experience which were utilised by management in
the determination of fair value of acquired assets;
and
Reviewing the opening balances of Orionstone and
Andy’s working capital balances and the fair value
adjustments.
We also assessed the appropriateness of the
disclosures in note 36 to the financial statements.
Our procedures included, but were not limited to:
(cid:120) Understanding the process that management
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
undertakes to develop the model;
Comparing the forecasts to Board approved
business plans;
Assessing historical forecasting accuracy by
comparing actual performance to budgets;
In conjunction with our valuation specialists we:
challenged the assumptions and
methodologies used by management;
assessed the discount rate against that of
the industry;
evaluated the operating utilisation
forecasts against historic levels; and
evaluated forecast costs against historic
levels;
o
o
o
o
Testing on a sample basis management’s
impairment model for mathematical accuracy;
Performing sensitivity analysis on forecast cash
flows for changes to the operating utilisation and
discount rate; and
We also assessed the appropriateness of the
disclosures in notes 8b and 22 to the financial
statements.
Key Audit Matter
Acquisition Accounting
On 31 March 2017 Emeco Holdings Limited
merged with Orionstone Holdings Pty Ltd
and Andy's Earthmovers (Asia Pacific) Pty
Ltd as disclosed in note 36.
Accounting for this transaction is complex,
requiring management to exercise
judgement to determine the fair value of
acquired assets and liabilities, including
separately identifiable intangible assets such
as customer contracts and determining the
allocation of purchase consideration to
goodwill.
Carrying value of non-current assets
As disclosed in notes 8b and 22, an
impairment of $77.9 million was recorded
against the goodwill recognised from the
acquisition during the year within the
Australian Rental Cash Generating Unit
(CGU).
Management prepared a value in use model
to assess the recoverable value of the CGU.
The preparation of a value in use model
requires management to exercise significant
judgement, with key assumptions including
discount rate, operating margins, and
forecast operating utilisation.
t
n
o
r
F
0
1
R
A
M
N
I
L
1
8
1
2
6
1
1
1
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
(cid:120)
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
(cid:120) Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
(cid:120)
(cid:120)
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
t
n
o
r
F
0
1
R
A
M
N
I
L
1
8
1
2
6
1
1
1
(cid:120)
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
(cid:120) Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 25 to 39 of the Directors’ Report for
the year ended 30 June 2017.
In our opinion, the Remuneration Report of Emeco Holdings Limited, for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Leanne Karamfiles
Partner
Chartered Accountants
Perth, 3(cid:19) August 2017
1
6
2
1
8
1
L
I
N
M
A
R
1
0
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
Financial calendar
The annual general meeting of Emeco Holdings Limited will be held at Bendat Parent and Community
Centre, 36 Dodd Street, Wembley WA on Thursday, 23 November 2017 commencing at 10.30am (Perth
time).
Event
Annual general meeting
Half year
Half year profit announcement
Year end
*Timing of events is subject to change and board discretion.
Shareholder statistics
Substantial shareholders
Date*
23 November 2017
31 December 2017
February 2018
30 June 2018
Details regarding substantial holders of the Companyʼs ordinary shares as at 8 August 2017, as disclosed in
the substantial holding notices, are as follows:
Name
Shares
% Issued capital
Black Diamond Capital Management LLC
Black Diamond CLO 2012-1 Ltd
Black Diamond Credit Strategies Master Fund Ltd
Black Diamond CLO 2006-1 (Cayman) Ltd
BDCM Opportunity Fund IV LP
BDCM Opportunity Fund III LP
Brookfield Credit Opportunities Master Fund L.P;
Brookfield Credit Opportunities Holdings, L.P;
Brookfield Credit Opportunities Offshore Fund, L.P;
BLCF Credit Funding L.P;
Brookfield Private Equity Holdings L.L.C;
Brookfield Asset Management Private Institutional Capital
Adviser (Credit), L.L.C;
Brookfield Credit Opportunities Onshore Fund, L.P;
Brookfield Private Equity Group Holdings L.P;
Brookfield Credit Opportunities Fund GP;
Brookfield Private Equity Inc.;
Brookfield Asset Management Inc.;
2518154 Ontario Limited; and
PF Fund Limited Partnership
571,923,330
25.92
316,961,271
13.01
First Samuel Limited
Black Crane Asia Opportunities Fund
269,141,867
168,474,369
12.20
8.38
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
134
1
6
2
1
8
1
L
I
N
M
A
R
1
0
B
a
c
k
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Shareholder information
Distribution of shareholders
As at 8 August 2017, there were 4,832 holders of the Companyʼs ordinary shares. The distribution as at 8
August 2017 was as follows:
Range
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Investors
445
1,439
813
1,371
764
4,832
Securities
2,378,747,168
47,467,253
6,329,982
3,969,047
347,030
2,436,860,480
% Issued Capital
97.62
1.95
0.26
0.16
0.01
100.00
The number of security investors holding less than a marketable parcel of 3,449 securities ($0.145 on 8
August 2017) is 1,689 and they hold 2,346,220 securities.
20 largest shareholders
The names of the 20 largest holders of the Companyʼs ordinary shares as at 8 August 2017 are:
Rank
1
Name
CITICORP NOMINEES PTY LIMITED
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
BDCM OPPORTUNITY FUND IV LP
J P MORGAN NOMINEES AUSTRALIA LIMITED
PACIFIC CUSTODIANS PTY LIMITED
BDCM OPPORTUNITY FUND III LP
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED
NATIONAL NOMINEES LIMITED
MACQUARIE BANK LIMITED
NATIONAL NOMINEES LIMITED
FGI HOLDINGS PTY LTD
BROOKFIELD CREDIT OPPORTUNITIES MASTER
FUND L.P.
CIGNA HEALTH AND LIFE INSURANCE COMPANY
LIFE INSURANCE COMPANY OF NORTH AMERICA
UBS NOMINEES PTY LTD
BLACK DIAMOND CLO 2012-1 LTD
MR RICHARD NORMAN HARDING
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED-GSCO ECA
RBC INVESTOR SERVICES AUSTRALIA
NOMINEES PTY LTD
BLACK DIAMOND CREDIT STRATEGIES MASTER
FUND LTD
CS FOURTH NOMINEES PTY LIMITED
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
Equity securities % Issued Capital
443,934,676
422,860,224
340,048,460
204,611,825
117,051,449
104,002,840
97,712,044
64,593,216
57,184,635
56,232,573
48,741,208
21,532,131
17,225,705
13,473,827
13,386,693
13,299,098
13,230,115
11,999,329
11,640,603
10,911,379
18.22
17.35
13.95
8.40
4.80
4.27
4.01
2.65
2.35
2.31
2.00
0.88
0.71
0.55
0.55
0.55
0.54
0.49
0.48
0.45
135
t
n
o
r
F
0
1
R
A
M
N
I
L
1
8
1
2
6
1
1
1
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Shareholder information
Voting rights of ordinary shares
Voting rights of shareholders are governed by the Companyʼs constitution. The constitution provides that on
a show of hands every member present in person or by proxy has one vote and on a poll every member
present in person or by proxy has one vote for each fully paid ordinary share held by the member.
Closing share price ($)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
136
(cid:3)
(cid:3)
(cid:3)
Emeco Holdings Limited and its Controlled Entities
Company Directory
DIRECTORS
Peter Richards
Ian Testrow
Peter Frank
Keith Skinner
Darren Yeates
SECRETARY
Penelope Young
REGISTERED OFFICE
Level 3, 71 Walters Drive
Osborne Park WA 6017
Phone: +61 8 9420 0222
+61 8 9420 0205
Fax:
SHARE REGISTRY
Link Market Services Limited
Level 12 QV1 Building,
250 St Georges Terrace
Perth WA 6000
Phone: 1800 689 300
www.linkmarketservices.com.au
AUDITORS
Deloitte Touche Tohmatsu
Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
SECURITIES EXCHANGE LISTING
Emeco Holdings Ltd ordinary shares are listed on the Australian Securities Exchange Ltd. ASX code: EHL
EMECO HOLDINGS LIMITED ANNUAL REPORT 2017
137
1
1
1
6
2
1
8
1
L
I
N
M
A
R
1
0
F
r
o
n
t
(cid:55)(cid:43)(cid:44)(cid:54)(cid:3)(cid:51)(cid:36)(cid:42)(cid:40)(cid:3)(cid:43)(cid:36)(cid:54)(cid:3)(cid:37)(cid:40)(cid:40)(cid:49)(cid:3)(cid:47)(cid:40)(cid:41)(cid:55)(cid:3)(cid:37)(cid:47)(cid:36)(cid:49)(cid:46)(cid:3)(cid:44)(cid:49)(cid:55)(cid:40)(cid:49)(cid:55)(cid:44)(cid:50)(cid:49)(cid:36)(cid:47)(cid:47)(cid:60)
k
c
a
B
0
1
R
A
M
N
I
L
1
8
1
2
6
1
(cid:55)(cid:43)(cid:44)(cid:54)(cid:3)(cid:51)(cid:36)(cid:42)(cid:40)(cid:3)(cid:43)(cid:36)(cid:54)(cid:3)(cid:37)(cid:40)(cid:40)(cid:49)(cid:3)(cid:47)(cid:40)(cid:41)(cid:55)(cid:3)(cid:37)(cid:47)(cid:36)(cid:49)(cid:46)(cid:3)(cid:44)(cid:49)(cid:55)(cid:40)(cid:49)(cid:55)(cid:44)(cid:50)(cid:49)(cid:36)(cid:47)(cid:47)(cid:60)
k
c
a
B
0
1
R
A
M
N
I
L
1
8
1
2
6
1
(cid:55)(cid:43)(cid:44)(cid:54)(cid:3)(cid:51)(cid:36)(cid:42)(cid:40)(cid:3)(cid:43)(cid:36)(cid:54)(cid:3)(cid:37)(cid:40)(cid:40)(cid:49)(cid:3)(cid:47)(cid:40)(cid:41)(cid:55)(cid:3)(cid:37)(cid:47)(cid:36)(cid:49)(cid:46)(cid:3)(cid:44)(cid:49)(cid:55)(cid:40)(cid:49)(cid:55)(cid:44)(cid:50)(cid:49)(cid:36)(cid:47)(cid:47)(cid:60)
1
1
1
6
2
1
8
1
L
I
N
M
A
R
1
0
F
r
o
n
t
162181 LINMAR 1
Front
Head Office
Level 3
71 Walters Drive
Osborne Park WA 6017
Australia
T +61 8 9420 0222
E corporate@emecogroup.com
emecogroup.com
2017
ANNUAL REPORT
|
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
7