Emeco Holdings Limited and its Controlled Entities
ABN 89 112 188 815
Annual Financial Report
30 June 2018
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
1
Contents
Chairman’s Report ............................................................................................................ 3
Managing Director’s Report ............................................................................................. 4
Operating and Financial Review ..................................................................................... 6
Segment Business Overview..........................................................................................11
Financial Report ...............................................................................................................13
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
2
Chairman’s Report
Dear Shareholder,
I am pleased to present the Emeco Holdings Limited Annual Report for the 2018 financial year (FY18).
Safety and sustainability
Emeco continues to maintain its commitment to our people, the environment and the communities in which we
operate. Emeco’s most valued assets are our people and their safety is at the forefront of all decisions across
the business. Our continued improving safety performance demonstrates this commitment to our staff and
customers.
Overall, we continue to improve our safety record notwithstanding the significant increase in the number of
employees and operations through increased activity and the acquisition of Force in November 2017. We
continue to strive to create industry best safety practices and eliminate harm.
For more information on our sustainability performance and policies, please refer to Emeco’s FY18
Sustainability Report available on our website.
Return to profitability
In FY18, Emeco’s focus has been on executing our growth strategy and driving operational efficiencies, whilst
continuing to strengthen the balance sheet.
In addition to realising the full year benefits of the merger with Andy’s Earthmovers and Orionstone in FY18,
Emeco acquired Force and announced an agreement to acquire Matilda Equipment (which completed shortly
after year-end). As well as these acquisitions, Emeco’s ongoing business improvement initiatives ensured it
maintained strong discipline in operating costs and capital expenditures.
As a result, I am pleased Emeco will be reporting a return to profitability in FY18, with positive operating NPAT
for the first time since FY13.
Continued focus on cash flow and deleveraging
In FY18, Emeco generated operating cash flow of $178.2 million and ended the year with net debt / pro forma
run rate operating EBITDA of 2.0x1 (down from 3.9x2 in FY17). This places the business in a strong position
to renew the fleet as required, take advantage of growth opportunities in the market and refinance our debt on
terms that are more attractive.
I would like to take this opportunity to thank our shareholders for their overwhelming continued support of
Emeco with the acquisitions of Force and Matilda. I would also like to thank management and all our employees
for their efforts in returning the company to profitability. This continued support is critical to Emeco’s short and
long-term success.
Peter Richards
Chairman
1 FY18 net debt / annualised 4Q18 operating EBITDA plus annualised Matilda 3Q18 operating EBITDA.
2 FY17 net debt / annualised 4Q17 operating EBITDA.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
3
Managing Director’s Report
Dear Shareholder,
During FY18, Emeco continued to execute on our strategy to become the highest quality and lowest cost
provider of equipment rental solutions. I am pleased to report that our focus on serving our customers and the
hard work of our team has resulted in a return to positive operating NPAT for the first time since FY13.
Significant increase in the Australian fleet’s scale and enhanced workshop capabilities
In line with our strategy, Emeco has recently made two significant acquisitions. In November 2017, Emeco
acquired Force Equipment Pty Ltd (Force). The Force acquisition significantly increased Emeco’s scale by
providing Emeco with 179 high quality, low hour machines to complement the Emeco fleet.
With four strategically located workshops around Australia, Force’s retail maintenance business also allowed
Emeco to widen our customer offering and providing a new source of low capital intensity earnings. In addition
to this, the Force maintenance capability also provides Emeco with in-house major component rebuild
capabilities, allowing us to reduce our reliance on external service providers and mitigate Emeco’s risk of
critical component supply disruption in a tight market. Since the acquisition of Force, Emeco has been able to
utilise these workshops to realise material cost and capex savings.
On 30 April 2018, Emeco also announced an agreement to acquire Matilda Equipment Holdings Pty Ltd
(Matilda), a national equipment rental business. Matilda specialises in individual high margin rentals of high
demand, late model ancillary equipment, also providing Emeco with a channel to sustain our ongoing capex
requirements for such assets. This acquisition completed in early FY19 on 2 July 2018.
Operational initiatives
During FY18, Emeco has continued to improve our systems and processes to maintain operational excellence
and cost discipline. This has included a focus on enhanced centralised support to the regions, including
centralising planning of our component change outs, standardising processes across regions and using
technology to drive best practice asset management, particularly given the potential for cost pressures in a
tightening market.
Emeco’s group operating utilisation at the end of FY18 was 62%, representing a significant improvement
compared with 56% at the beginning of the reporting period. There remains capacity to work our fleet harder
to drive returns through the cycle. The teams continue to increase operating utilisation and rental rates at every
opportunity, and we have had new project wins and existing project scope expansions leading into FY19.
Emeco is a leading employer with ~500 employees across Australia, including ~320 skilled tradespeople and
~20 apprentices. We remain focused on developing our permanent employee workforce rather than relying on
subcontractors. Through centralisation initiatives, the objective is to increase labour productivity and
efficiencies in a tightening market in order to control costs.
We continue to focus on safety and a key focus in integrating the Force business (and also Matilda going into
FY19) is standardising and implementing best safety practices across the business. I am proud that Emeco
achieved a 45% reduction in its total recordable injury frequency rate over FY18 (down from 2.2 to 1.2).
Emeco wound down our exposure in Chile at the end of FY17 and disposed of the Canadian business in April
2018, allowing management to focus on the expanding Australian operations.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
4
Financial performance
I am pleased to report a return to profitability for the first time since FY13, with operating NPAT for the year of
$20.1 million. Emeco generated operating EBIT of $83.2 million (up 593% on FY17) and EBITDA of $153.0
million (up 83% on FY17), from operating revenue of $381.0 million (up 64% on FY17). Operating EBITDA
margin was up 440bps to 40.2%, driven by our increased scale and continued cost reduction initiatives.
This has resulted in strong operating cash flow generation in FY18, giving Emeco the flexibility to invest in our
fleet and the business to promote further growth.
The strong operating cash flow performance, together with the equity raising to fund the acquisition of Force,
has driven down Emeco’s net debt / pro forma run rate operating EBITDA to 2.0x3 at the end of FY18 (from
3.9x4 in FY17). This is in line with Emeco’s aggressive deleveraging strategy in order to position us to refinance
the notes on more favourable terms.
Outlook for FY19
The Company expects to see additional growth in revenue and earnings in FY19, driven by further increases
in utilisation and rates, additional retail maintenance services, a full year contribution from Force and the
completion of the acquisition of Matilda.
I would like to thank the Emeco team for all of their continued hard work throughout the last 12 months, and
thank our shareholders for their continued support especially through the recent capital raisings.
Ian Testrow
Managing Director & Chief Executive Officer
3 FY18 net debt / annualised 4Q18 operating EBITDA plus annualised Matilda 3Q18 operating EBITDA.
4 FY17 net debt / annualised 4Q17 operating EBITDA.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
5
Operating and Financial Review
The Emeco Group supplies safe, reliable and maintained equipment rental solutions to the earthmoving
industry. The Group also supplies external maintenance and component rebuild services for earthmoving
equipment and offers EOS, an equipment productivity and management tool, to its customers. 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 and maintenance solutions to the
earthmoving 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 asset’s life cycle while owned by Emeco.
Chart 1: Revenue by region
Chart 2: Revenue by
commodity
Chart 3: Fleet composition by
number of assets
VIC 3% Contract Mining 3%
Lithium 1% Civil 2%
Workshops
7%
QLD 32%
NSW 27%
Iron Ore 8%
Gold 20%
Thermal
Coal 35%
WR 28%
Copper 11%
Bauxite,4%
Coking Coal, 19%
Other 9%
Dump
Truck
37%
Water Cart
8%
Excavator
8%
Dozer
17%
Grader
8%
Wheel Loader
13%
Note: Above analysis relates to 12 month period ended 30 June 2018 and excludes discontinued operations.
Table 1: Group financial results
A$ millions
Revenue
EBITDA4
EBIT4
NPAT4
ROC4 %
EBIT margin
EBITDA margin
Operating results1,2,3
2017
2018
381.0
153.0
83.2
20.1
19.6%
21.8%
40.2%
233.0
83.5
12.0
(90.9)
3.3%
5.2%
35.8%
Statutory results
2018
381.0
130.7
49.7
5.3
11.7%
13.0%
34.3%
2017
196.0
51.9
(85.8)
(157.2)
(22.6)%
(43.8)%
26.5%
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 results include the Canada discontinued operations but exclude the Chile discontinued operations for FY18.
Operating results include the Canada and Chile discontinued operations in FY17.
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 (EBIT / Average capital employed).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
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Table 2: 2018 operating results to statutory results reconciliation
A$
millions Statutory
EBITDA
130.7
Tangible asset
impairments
-
EBIT
NPAT
49.7
5.3
11.2
11.2
Redundancy
and
restructuring
costs
4.0
4.0
4.0
Long-term
incentive
program
10.8
10.8
10.8
Reconciliation of differences between operating and statutory results:
1. FY18 operating results (non-IFRS) excludes the following:
Acquisition
costs
3.8
3.8
3.8
Canada
3.7
3.7
3.7
Tax
Effect Operating
-
-
(18.7)
153.0
83.2
20.1
Tangible asset impairments: During FY18 net impairments totalling $11.2 million were recognised across the business on
assets held for sale and subsequently disposed during the period.
Redundancy and restructuring costs: One off costs related to redundancy and restructuring totalled $4.0 million before
tax.
Long-term incentive program: During FY19 Emeco recognised $10.8 million of non-cash expenses relating to the employee
long-term incentive plan.
Acquisition costs: During FY18 Emeco incurred costs totalling $1.9 million in relation to the acquisition of Force Equipment
Pty Ltd and $1.9 million in relation to the acquisition of Matilda Equipment Holdings Pty Ltd and its subsidiary.
Canada The Canadian business was disposed in April 2018. The operating results of this business have been included for
the period under control of the Company.
Tax Effect The Company recognised a tax benefit of $18.7 million in relation to the recognition of a deferred tax asset during
the period that had been derecognised in prior periods.
2. Refer to the 2017 Annual Report for reconciliation of differences between FY17 operating and statutory results.
3. All reconciling items relating to FY18 operating results are discussed in further detail later in the operating and financial review.
STRONG OPERATING UTILISATION LEADING INTO FY19
Group operating utilisation increased over FY18 to end the period at 62% compared to 56% at June 2017.
The size of the fleet also significantly increased over the period. 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: 2018 Average Australia Operating Utilisation
80%
60%
40%
20%
0%
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Note:
1. Operating utilisation defined as ratio of operating hours recognised over a month, compared to 400 hours a month.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
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Group operating revenue from continuing operations increased to $381.0 million in FY18 (FY17: $233.0
million). Rental revenue increased to $324.0 million (FY17: $208.8 million) as a result of the acquisition of
Force Equipment (Force) in November 2017, increased operating utilisation of the rental fleet and
improvements in rental rates on new and renewed contracts. Maintenance services revenue increased 150.9%
to $55.2 million (FY17: $22.0 million) primarily due to the addition of the external maintenance capability
acquired in the Force acquisition.
Operating EBITDA margins increased to 40.2% (FY17: 35.8%) as a result of increased rental rates achieved
across all regions, innovative contract structures with customers and further cost reductions, in addition to the
benefit of previous cost control measures and operational efficiencies. The increase in EBITDA margin is
especially strong given the lower margin, low capital intensity workshop revenue stream acquired as part of
Force. EBIT recovery improved operating return on capital (ROC) to 19.6% in FY18 (FY17: 3.3%).
INCREASED UTILISATION AND RENTAL RATES IMPROVE OPERATING EBITDA
Table 3: Operating cost summary (operating results)
A$ millions
Revenue
Operating expenses
Repairs and maintenance
External maintenance services
Employee expenses
Cartage and fuel
Hired in equipment and labour
Net other expenses
Operating EBITDA
Depreciation expense
Amortisation
Operating EBIT
2018
381.0
(104.9)
(40.0)
(30.0)
(10.3)
(11.8)
(31.0)
153.0
(68.9)
(1.0)
83.2
2017
233.0
(60.7)
(16.2)
(21.3)
(9.5)
(20.3)
(21.4)
83.5
(70.6)
(0.8)
12.0
Operating EBITDA increased to $153.0 million (up $69.5 million or 83.2% on FY17) as a result of recent
acquisitions, increased utilisation of the fleet by customers, rental rate increases and cost management
measures implemented over FY17 and FY18. Total revenue increased to $381.0 million (up $148.0 million or
63.5% on FY17), partly due to a full year contribution of the Andy’s and Orionstone businesses and the
acquisition of Force on 30 November 2017.
Repairs and maintenance expense increased to $104.9 million (FY17: $60.7 million) driven by the larger fleet
and higher operating utilisation. As a percentage of rental revenue, repairs and maintenance expense
increased from 29.1% in FY17 to 32.4%, largely due to catch up maintenance work on the acquired Andy’s
and Orionstone fleets.
Due to increased scale as well as the addition of the Force maintenance workforce in November 2017,
employee expenses increased 40.8% in FY18 to $30.0 million (FY17: $21.3 million). Total headcount has
increased from approximately 240 in FY17 to approximately 500 in FY18.
Other expenses increased to $31.0 million (FY17: $21.4 million) predominately due to increased operating
overheads associated with growth in the company, namely insurance, property rental costs and employee
travel. Costs associated with hired in equipment and labour, predominately equipment operating leases and
subcontract labour, declined by 41.8% due to the increased ability to replace this equipment with owned
equipment and a concerted effort to replace subcontract labour with full time employees where feasible. Refer
to note 8 in the financial statements for further breakdown of other expenses (page 70).
Depreciation expense increased to $68.9 million in FY18 (FY17: $70.6 million) driven by the increased scale
of fleet from recent acquisitions and increased utilisation of equipment.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
8
AUSTRALIAN FLEET GROWTH
Table 4: Rental fleet
A$ millions
Rental fleet
Non-current assets held for sale
2018
399.5
8.0
2017
339.6
26.4
The written down value (WDV) of the rental fleet increased to $399.5 million in FY18 primarily due to the
acquisition of Force, adding an additional $59.2 million. The size of the rental fleet in Australia has increased
significantly over the past 18 months as a result of the recent acquisitions and innovative asset swaps to
exchange fleets from the international businesses for machines in Australia.
An impairment loss on plant and equipment of $11.1 million was incurred in FY18, down from $18.4 million in
FY17 (refer to note 22,) as the business continued to rationalise non-core fleet acquired through the recent
acquisitions and dispose of assets approaching the end of their useful life. The impairment of plant and
equipment relates to the assets designated as held for sale during the period (refer to note 15).
We continually review our rental fleet, matching fleet mix to rental demand to maximise returns on investment.
Idle units identified as having low rental demand, are no longer profitable or approaching end of useful life are
transferred to non-current assets held for sale and are actively marketed through Emeco’s global network of
brokers.
IMPROVED EARNINGS AND CASH CONVERSION
Table 5: Cash flow summary
A$ millions
Operating EBITDA
Non-Operating EBITDA
Working capital
Income tax cash flows
Operating free cash flow
Capital expenditure
Disposals
Net capital expenditure
Finance costs
Free cash flow
1H FY18
67.0
(1.4)
24.4
0.0
90.0
(38.3)
11.7
(26.6)
(24.4)
39.0
2H FY18
86.0
(2.6)
4.8
0.0
88.2
(42.2)
11.2
(31.0)
(22.5)
34.7
2018
153.0
(4.0)
29.2
0.0
178.2
(80.5)
22.9
(57.6)
(46.9)
73.7
2017
83.5
(13.9)
(32.7)
0.0
36.9
(31.4)
30.9
(0.5)
(38.0)
(1.6)
Note: 2018 results include Canada discontinued operation and exclude Chile discontinued operations.
Operating EBITDA increased from $83.5 million in FY17 to $153.0 million in FY18 and, in combination with
improved working capital, free cash flow increased by $75.3 million to $73.7 million.
Working capital management improved over in FY18 as the working capital inefficiencies associated with the
acquisition of the Andy’s and Orionstone businesses was rectified. 1H18 included the receipt of $12.0 million
of funds associated with the Chilean asset swap at the end of FY17. The working capital management of the
Group was not impacted by the addition of the Force workshop operations and continued to strengthen in
2H18 with reduced debtor days outstanding and beneficial supplier terms.
Net capital expenditure increased by $57.1 million due to the significant increase in the size of the fleet over
the last 12 months, increased utilisation and catch up capital component replacement required on machines
acquired from Andy’s and Orionstone in late FY17. Disposals predominately related to the sale of assets at
the end of life in addition to rationalising fleet added through recent business acquisitions that were non-core
to the Emeco rental fleet.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
9
STRENGTHENED BALANCE SHEET
Following the successful debt restructuring in FY17 and recapitalisation of the business, the Company has
continued to delever the business through increased earnings and the ability to convert these earnings into
sustained cash flows.
Table 6: Net debt and gearing summary
A$ millions
Interest bearing liabilities (current and non-current)
2018
2017
Notes (USD denominated)1
Revolving credit facility
Lease liabilities
Other
Cash
Net proceeds on hand from equity raising
Net debt
Derivative asset / (liability)
Net debt (including hedging instruments)
Leverage ratio
Interest cover ratio
481.6
0.0
1.2
1.9
171.4
(87.5)
400.8
(2.2)
403.0
2.6
3.0
462.7
0.0
9.8
1.6
17.0
-
457.1
(4.4)
461.5
5.5
1.5
Note: Above figures based on facilities drawn – bank guarantees are excluded.
Leverage ratio - Net debt : Operating EBITDA
Interest cover ratio - Operating EBITDA : Interest expense
1. Movement is due to the decline in the AUD/USD (June17: 0.7692, June18: 0.7391)
Emeco’s adjusted net debt decreased to $400.8 million at 30 June 2018 from $457.1 million at 30 June 2017.
As at 30 June 2018, the net amount of US$355.9 million in notes are outstanding. These secured notes mature
in March 2022 and a semi-annual coupon of 9.25% is payable in January and July each year. The note terms
do not contain maintenance covenants.
The semi-annual coupon relating to US$230.0 million of the US$355.9 million of notes has been hedged to
AUD to provide cashflow certainty of interest payments. US$100 million principal of the US$355.9m notes
held has been hedged. Due to the movements in the Australian dollar between the inception of the hedge on
31 March 2017 and 30 June 2018, a net hedge liability of $2.2 million has been recognised at June 2018.
At 1 July 2017, Emeco had 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. In April 2018, as a
result of the reduced requirement for the guarantee facility following the exit of the international businesses
the $30 million facility was reduced to A$5 million to reduce the costs associated with the unutilised portion of
this facility. At 30 June 2018 the RCF was undrawn and $3.5 million of the bank guarantee facility was utilised.
Finance lease liabilities decreased from $9.8 million at 30 June 2017 to $1.2 million at 30 June 2018 as the
Company closed out multiple leases acquired from the Andy’s and Orionstone businesses and assigned
several leases through the disposal of the Canadian business.
Emeco’s cash balance was $171.4 million at 30 June 2018 which included $87.5 million in relation to the net
cash received from the capital raising associated with the acquisition of Matilda Equipment. This cash was
subsequently used to complete the acquisition of Matilda in July 2018 and has been removed from the
calculation of net debt at 30 June 2018. Refer to note 24 in the accompanying financial statements for
additional information on Emeco’s financing facilities.
Emeco’s leverage ratio has improved from 5.5x at 30 June 2017 to 2.6x at 30 June 2018 due to recognition of
a full year of earnings from Andy’s and Orionstone, increased cash reserves associated with greater
conversion of earnings to cash flow from operations and the acquisition of the Force business in November
2017.
In line with FY17 the board declared a nil interim and final dividend for FY18.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
10
Segment Business Overview
Chart 5: Revenue by segment
Workshops
$25.8m
Chart 6: Operating EBITDA2
contribution by segment
Workshops
$2.7m
Canada
$3.7m
Australian Rental
$355.2m
Australian Rental
$168.2m
Note:
1. Workshops revenue excludes $17.0 million of intersegment revenue
2. Operating EBITDA contribution shows segment contribution to Group operating EBITDA
Main markets
Comprised of the segments being Australian rental and Workshops. The Australian rental business is
diversified across bulk commodities and metals with segment performance summarised below:
Australian rental
Revenue in the Australian rental segment increased by 81.2% to $355.2 million with operating EBITDA margins
increasing from 32.9% in FY17 to 47.3% in FY18 as a result of increased rental rates, innovative contract
structures and utilisation combined with tight cost controls. The Australia rental business improved operating
utilisation 62% at the end of FY18 (FY17: 56%). The size of the Australian rental fleet has approximately tripled
over the course of the last 18 months as a result of acquisitions and strategic asset swaps to exchange
equipment from the discontinued overseas businesses for equipment located in Australia.
Workshops
The Workshops segment was established through the acquisition of Force in November 2018 and earned
revenue of $25.8 million for the seven months of ownership, excluding $17.0 million of work performed for the
Australian rental business. Due to the low capital intensity of the Workshops operations, the EBITDA margin
of this segment is significantly lower than the traditional rental business. Workshops contributed $2.7 million
to the Group’s Operating EBITDA at a margin of 10.5%. The Workshops provide the rental business with
vertical integration and cost savings by providing the capability to rebuild major components. The workshops
have also provided opportunities for Emeco to provide rental services to workshop customers that were not
traditionally customers of Emeco.
International operations
The operations of the Chilean business were discontinued in June 2017.
An agreement was entered into with Emeco’s Canadian strategic partner Heavy Metal Equipment Rental
(HMER) in FY17 to manage the remaining customer contracts in Canada. In April 2018, ownership of Emeco’s
Canadian entity was transferred to HMER. The Company has no further exposure related to the Canadian
business.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
11
Table 7: 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
Shareholders’ equity
Total debt
CASH FLOWS
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Free cash flow after repayment/(drawdown)
of net debt
Free cash flow before
repayment/(drawdown) of net debt1
DIVIDENDS
2018
2017
2016
2015
2014
323,986
208,286
139,545
206,718
205,368
1,835
2,648
5,470
2,788
8,145
55,171
22,080
22,956
31,925
27,582
380,992
233,014
167,970
241,431
241,095
153,004
83,193
20,068
83,504
(97,066)
(90,891)
54,246
(14,219)
(90,519)
43,364
(59,225)
(94,813)
67,344
(10,879)
(213,543)
11,376
(180,463)
(225,389)
(127,703)
(275,309)
0.4
(3.7)
(15.1)
(15.8)
(3.6)
716,052
520,679
427,692
708,755
748,362
562,570
552,686
421,695
487,284
424,390
(153,482)
(32,007)
5,997
221,471
323,972
484,581
474,109
377,818
423,971
343,774
125,533
14,223
70,644
(2,894)
(127,087)
486
(23,112)
(13,013)
82,072
25,032
156,730
(21,318)
(49,311)
(6,733)
(71,364)
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
cents
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
155,174
(6,609)
(1,779)
(22,640)
35,740
$'000
162,856
(334)
5,561
(18,495)
85,889
Number of ordinary shares at year end
'000
3,178,859
2,436,860
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
89.6
57.4
19.6
2.62
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
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 2018
12
Financial Report
Directors’ Report ..................................................................................................................... 14
Directors .......................................................................................................................... 14
Company secretary ........................................................................................................ 16
Directors’ meetings ....................................................................................................... 16
Corporate governance statement ................................................................................ 17
Principal activities ......................................................................................................... 17
Operating and financial review .................................................................................... 17
Dividends ........................................................................................................................ 17
Significant changes in state of affairs ......................................................................... 17
Events subsequent to report date ............................................................................... 17
Likely developments ...................................................................................................... 17
Directors’ interest .......................................................................................................... 18
Indemnification and insurance of officers and auditors ........................................... 18
Non-audit services ......................................................................................................... 19
Lead auditor’s independence declaration .................................................................. 19
Rounding off ................................................................................................................... 19
Remuneration report (audited) ..................................................................................... 20
Deloitte Touche Tohmatsu independence declaration ............................................. 33
Financial Statements .............................................................................................................. 34
Consolidated Statement of Profit or Loss and Other Comprehensive Income ...... 34
Consolidated Statement of Financial Position ........................................................... 36
Consolidated Statement of Changes in Equity .......................................................... 37
Consolidated Statement of Cash Flows ...................................................................... 38
Notes to the Consolidated Financial Statements ....................................................... 39
Directors’ Declaration........................................................................................................... 114
Independent Auditor’s Report ............................................................................................. 115
Shareholder Information ...................................................................................................... 119
Company Directory ............................................................................................................... 122
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
13
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
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 auditor’s report for
the financial year ended 30 June 2018 (FY18).
Directors
The directors of the Company during FY18 were:
PETER RICHARDS BCom
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:
Non-Executive Director of IndiOre Limited (previously known as NSL Consolidated Limited) (since
2009, Chairman 2014 to 2017)
Non-Executive Director of Graincorp Limited (since 2015)
Non-Executive Chairman of Cirralto Limited (since December 2017)
IAN TESTROW BEng (Civil), MBA
Appointment: Managing Director since 20 August 2015.
Skills and experience: Ian was appointed Chief Executive Officer in August 2015. Prior to this, Ian was
Emeco’s 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 Emeco’s 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 2018
14
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
PETER FRANK BSEE, MBA
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 Harvey Gulf
International Marine LLC, 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
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:
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)
DARREN YEATES B Eng., MBA, FAICD, Grad Dip Mgt, Grad Dip App. Fin
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
metalliferous exploration.
Current appointments:
Director of WorkPac Pty Ltd (since January 2018)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
15
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Company secretary
The company secretary of the Company during FY18 was:
PENELOPE YOUNG LLB, LLM, BBus
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. Penny holds a Bachelor of
Laws, Master of Laws and a Bachelor of Business.
Directors’ meetings
The number of board and committee meetings held and attended by each director in FY18 is outlined in the
following table below:
Table 8: Board and committee meetings held and director attendance
Director
Board meetings
Peter Richards
Ian Testrow
Peter Frank
Keith Skinner
Darren Yeates
A
14
14
14
13
14
B
14
14
14
14
14
Audit & risk
management
committee meetings
A
*
*
5
5
1
5
5
B
5
5
5
5
5
Remuneration &
nomination committee
meetings
A
B
*
*
2
2
1
2
2
2
2
2
2
2
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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
16
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Corporate governance statement
The Company’s corporate governance statement is located on the Company’s website at
https://www.emecogroup.com/investors-overview/corporate-governance.
Principal activities
The principal activity during FY18 of the Group was the provision of safe, reliable and maintained earthmoving
equipment solutions to customers in the earthmoving industry as well as the maintenance and remanufacturing
of major components of heavy earthmoving equipment.
As set out in this report, the nature of the Group’s operations and principal activities have been consistent
throughout the financial year.
Operating and financial review
A review of Group operations, and the results of those operations for FY18, is set out in the operating and
financial review section at pages 6 to 12 and in the accompanying financial statements.
Dividends
No dividends were declared or paid during FY18. No dividends have been declared or paid since the end of
FY18.
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 Group’s state of affairs
that occurred during the financial year under review.
Events subsequent to report date
On 2 July 2018, the Company acquired Matilda Equipment Holdings Pty Ltd and its subsidiary Matilda
Equipment Pty Ltd. Refer to note 36 for further details on the transaction.
No other significant events have occurred subsequent to the year ended 30 June 2018.
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 6 to 12. 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 2018
17
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Directors’ 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 9: Directors’ Interests
Director
Peter Richards
Ian Testrow
Peter Frank
Keith Skinner
Darren Yeates
Ordinary shares
Options or rights
68,179
849,590
[A]
-
-
-
-
121,696,461
[B]
-
-
-
[A] This comprises ordinary shares held directly by Mr Testrow and those which he acquired under the Company’s FY15 employee share
ownership plan but which are held for Mr Testrow in an account managed by Pacific Custodian Pty Ltd. Pacific Custodian Pty Ltd is
also trustee of the Emeco share plans.
[B] This comprises unvested performance shares issued under the Company’s FY16 and FY17 long term incentive plans after shareholder
approval. See section 6
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 strategy officer, 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 2018
18
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Non-audit services
During the year, Deloitte Touche Tohmatsu, the Group’s 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:
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.
The non-audit services provided do not undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or
auditing the auditor’s own work, acting in a management or decision making capacity for the 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 auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 33 and forms part of the directors’ 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/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. The Company is an entity to which
the class order applies.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
19
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Remuneration report (audited)
Remuneration report contents
This report covers the following matters:
1.
2.
3.
4.
5.
6.
7.
Introduction
Remuneration governance
Executive remuneration
Non-executive director remuneration
Details of remuneration
Share-based payments
KMP share and equity holdings
8.
Service contracts
1.
Introduction
This report details the Group’s remuneration objectives, practices and outcomes for key management
personnel (KMP), which includes directors and executives, for the year ended 30 June 2018. Any reference
to ‘executives’ in this report refers to KMP who are not non-executive directors.
The following persons were directors of the Company during FY18:
Non-executive directors
Peter Richards
Chair
Peter Frank
Keith Skinner
Darren Yeates
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
The following persons were also employed as executives of the Company during FY18:
Other executives
Position
Thao Pham
Justine Lea
Chief Strategy Officer
Chief Financial Officer
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
20
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
2.
Remuneration governance
The board is committed to implementing KMP remuneration structures which achieve a balance between:
rewarding executives for the achievement of the Company’s short and long term financial, strategic and
safety goals;
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:
the general remuneration strategy of the Company;
the terms of KMP remuneration and the outcomes of remuneration reviews;
employee equity plans and the allocations under those plans;
recruitment, retention, performance measurement and termination policies and procedures for all KMP;
disclosure of remuneration in the Company’s public materials including ASX filings and the annual
report; and
retirement payments.
The members of the remuneration and nomination committee in FY18 were Mr Peter Richards (Chair), Mr
Keith Skinner and Mr Darren Yeates.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
21
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
3.
Executive remuneration
3.1 Remuneration policy
The Group remuneration policy is substantially reflected in the objectives of the Company’s remuneration and
nomination committee. The committee’s objectives are summarised in the following table:
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:
fulfilling their respective roles with the Group;
achieving the Group’s strategic objectives; and
maximising Group earnings and returns to shareholders.
The remuneration structure for the Company’s executives consists of fixed and variable components. The
variable component ensures that a proportion of pay varies with Company performance.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
22
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
3.2 Fixed remuneration
Fixed remuneration comprises base salary, employer superannuation contributions and other non-cash
benefits.
Each executive’s fixed remuneration is reviewed and benchmarked annually in August. In FY18, this process
did not result in any change in any executive’s fixed remuneration.
The level of remuneration is set to enable the Company to attract and retain proven performers once they are
working within the business. An executive’s 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
The Company is committed to regularly reviewing senior management variable remuneration arrangements to
reward and retain proven performers within the Group. Variable remuneration consists of short and long term
incentives.
In FY18, the variable remuneration review took into account the Group’s significant recent transformation and
key items of focus for the FY18 financial year, including continuing to deleverage the Company. This resulted
in the design of Emeco’s new hybrid incentive plan (EHIP) for FY18 which includes both short term, cash
incentive (STI) and long term, equity security incentive (LTI) elements, award of which is determined by
reference to the Company’s performance over FY18.
Emeco believes that continuing to retain its long-term, experienced and execution-focused management team
has been instrumental in Emeco attacking its challenges over the last 12 months. As such, retaining and
rewarding senior management is considered key in continuing to drive the Company’s performance and
achievement of the Group’s business and strategic objectives and therefore value generation for shareholders.
Awards under the FY18 EHIP are for performance assessed over the FY18 financial year, however, the actual
awards are scheduled to be made at different points in time. The cash component of the FY18 EHIP is
determined, and paid, after the Company’s FY18 performance is assessed against the key performance
indicators (KPIs). See section 3.3.1.3 for more information. The equity component of the EHIP is also
determined by reference to the KPIs but is subject to an additional service condition in order to incentivise
senior managers (including executives) to continue with the Group. The ultimate deferred award of the equity
security component also involves an inherent share price KPI over the vesting period. See section 3.3.1.2 for
more information.
For each executive offered awards under the EHIP in FY18, the below table sets out the maximum
remuneration attributable to:
short term, cash incentive as a percentage of total fixed remuneration (TFR); and
long term, equity security incentive as a percentage of TFR if the executives remain employed by the
Group until the vesting date (see table 14 for details),
if maximum performance is achieved.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
23
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Table 10: Components of variable remuneration
3.3.1 EHIP
Given the currently highly dynamic status of the Company, the EHIP has been designed to ensure focus on
the Company’s current objectives, acknowledging these may change with the transformation of the Company
over a longer period, whilst retaining and rewarding the senior management team thereby enhancing alignment
between senior management remuneration and wealth creation for shareholders.
The actual amount of the awards under the EHIP are determined after the end of the financial year in light of
the Company’s financial performance against KPIs. See section 3.3.1.3 below for more information on the
KPIs. See tables 11, 13 & 14 for information on actual incentives awarded.
All executive awards require review and approval by the remuneration and nomination committee and the
board.
3.3.1.1 Cash / STI
An executive’s maximum achievable cash award is set as a percentage of TFR (see table 10 above for details).
The actual amount of the cash award under the EHIP is determined and paid after the end of the financial year
in light of the Company’s performance against the KPIs.
3.3.1.2 Equity security / LTI
The maximum achievable equity security award for each executive is also set out as a percentage of TFR in
table 10 above.
EHIP equity awards are rights to fully paid ordinary Emeco shares (Shares), subject to the service condition
being met. These awards may be in the form of performance rights or performance shares (Rights). The only
difference between performance rights and performance shares is that performance shares are backed by
Shares on issue whereas performance rights are not. Rights that do not vest will lapse.
Award
Rights are awarded after the Company’s FY18 performance is assessed against the KPIs. The award of
Rights under the FY18 EHIP is at no cost to the employee and is calculated by reference to the July 2017
VWAP of Emeco shares.
Service condition
Subject to continued employment with the Group, EHIP Rights will vest in FY20 on the vesting date (see table
14 below). Retaining senior management is particularly important to the Company given the Group’s
significant growth and focus on deleveraging in order to position the Group well for refinancing the Group’s
notes due in 2022.
3.3.1.3 Key performance indicators
Along with financial performance indicators tailored to the Group’s key items of focus for the financial year, the
KPIs are chosen to include important non-financial metrics and goals which are aligned with the long term
performance and sustainability of the Company. In FY18, a safety KPI was once again included given the
importance of safety to the Group’s workforce, customers and stakeholders. A deleveraging KPI was also
included to further focus executive efforts on strengthening the Group’s balance sheet and the long term
sustainability and success of the Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
24
Ian TestrowManaging Director & Chief Executive Officer80%120%200%Thao PhamChief Strategy Officer60%40%100%Justine LeaChief Financial Officer60%40%100%Maximum total variableremuneration ExecutivePosition Maximum STI / cash Maximum LTI / equity
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
The FY18 EHIP provided for pro-rata entitlements where performance in respect of the KPIs was between the
thresholds and targets (see table 11). In FY18, the executives had identical KPIs and no personal KPIs so as
to focus executive efforts on the overall performance and strategic objectives of the Group in addition to
promoting collaboration and support between executives, senior managers and the Group as a whole.
Table 11 below sets out the KPIs for the FY18 EHIP and the weightings attributable to each of them. In the
board’s view, these KPIs align the reward of executives with the interests of shareholders.
Table 11: FY18 EHIP KPI weightings and entitlements
[A]
TRIFR = Number of recordable injuries x 1,000,000 hours
Total hours worked
3.4 Prohibition of hedging securities
Emeco’s share trading policy prohibits executives, directors, officers and employees of the Group 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
Emeco’s remuneration objectives are focused on driving and rewarding leadership performance and
behaviours consistent with the Company’s overall performance and strategic objectives, including increasing
shareholder wealth. By setting KPIs which are focused on the overall performance of the Company and
deleveraging to ensure a sustainable business throughout the mining cycles, the interests of Emeco’s
executives are aligned with the interests of the Company and its shareholders. Further, the Company
considers that KPIs which are consistent across the executive team, promote a strong culture of performance,
collaboration, support and continuity which is vital to driving Emeco’s financial performance and its business
and strategic objectives.
FY17 and FY18 have been periods of transformation for Emeco. Going into FY17, Emeco had significant
challenges reflected in its share price. However, through cost discipline, focus on the Group’s customers and
the Group’s recapitalisation and acquisitions of Andy’s Earthmovers (Asia Pacific) Pty Ltd (Andy’s) and
Orionstone Holdings Pty Ltd (Orionstone), Emeco’s financial performance and leverage ratios improved. This
resulted in 100% of the executives’ target short term incentive being awarded in FY17.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
25
KPIWeightingEntitlementRationaleAchievement Health & Safety20%0% if the TRIFR [A] as at 30 June 2018 is higher than the TRIFR as at 30 June 2017.20% if the TRIFR as at 30 June 2018 is 20% lower than the TRIFR as at 30 June 2017.Pro-rata payments between these levels.Notwithstanding the above, no entitlement if there is a serious, permanently disabling injury or a fatality.The board regularly reviews the Company’s safety performance in detail and is striving to achieve a 'zero-harm' workplace at Emeco. TRIFR measures progress towards this aspiration. 100%Financial60%0% if actual FY18 operating EBITDA is equal to or less than 85% of budget FY18 operating EBITDA.100% if actual FY18 operating EBITDA is equal to or greater than 115% of budget FY18 operating EBITDA.Pro-rata payments between these levels.Reflects the financial performance and the ability of the Company to pay STI awards.100%Strategic Goals20%0% if leverage for FY18 is equal to or more than 4Q17.20% if leverage for FY18 is equal to or less than 3xPro-rata payments between these levels.Reflects the Company's focus on deleveraging and ensuring a sustainable business throughout the mining sector cycles. 100%
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Throughout FY18, the Company remained focused on cash generation through increasing rental rates and
utilisation, reducing costs, and managing capital expenditure and working capital in order to deleverage and
further strengthen its balance sheet. Operating EBITDA is a good indicator of the Company’s cash generating
ability. The acquisition of Force Equipment Pty Ltd (Force Equipment) in November 2017 has also increased
the Group’s ability to generate revenue and manage capital expenditure through the addition of fleet,
workshops and component rebuild capability and, overall, has enhanced the Group’s financial flexibility and
ability to reduce debt.
Retaining senior management over the period and throughout the Force Equipment, Andy’s and Orionstone
integrations has been fundamental to Emeco’s significant improvements in performance and in placing the
Group in a leading market position from which to benefit from the current stronger market conditions. As a
result of Emeco’s improved performance over FY18, the KPIs were 100% achieved and, accordingly,
executives will be rewarded with maximum short term and long term awards under EHIP.
Rights awarded under the EHIP are dependent on continued employment with the Group over the vesting
period. As such, the value of rights is ultimately dependent on the share price at the end of the vesting period
and therefore incorporate an inherent share price KPI over the vesting period. No incentives under the
Company’s previous long term incentive plans vested in FY18. See section 6 for more detail.
A summary of the KPIs for the FY18 EHIP plans are set out in the following table:
KPI
Financial
Cash
Equity
Operating EBITDA; Leverage Share price
Non-financial
Safety
Continued employment
The awards to executives in FY17 and FY18 reflect the significant improvement in Company performance over
this period. The extent to which Emeco has set financial KPIs which are genuinely challenging, and which
mean that variable remuneration is genuinely at risk, is highlighted by the fact that in FY16 executives only
received 25% of their target short term incentive as the operating EBITDA target was not met. In FY15, no
executive subject to the financial hurdle received a STI payment. In FY14, no STIs in respect of financial KPIs
were awarded however STIs were awarded for safety, personal goals and the sale of idle assets KPIs being
met. Details of the FY18 KPIs are set out above in section 3.3.1.3.
Details of the Group’s performance and benefits for shareholder wealth are set out in the following table:
FY18
FY17
FY16
FY15
FY14
Profit/(loss) from continuing operations ($m)
Profit/(loss) from discontinuing operations ($m)
5.3
6.1
(24.3)
(56.9)
(156.2)
(225.3)
(123.1)
(224.2)
Statutory EBITDA ($m)
130.7
69.6
47.6
Statutory profit/(loss) ($m)
11.4
(180.5)
(225.3)
(127.7)
(275.3)
Total dividends declared ($m)
-
-
-
-
-
Statutory return on capital employed
11.7%
(50.2%)
(61.6%)
(20.7%)
(30.7%)
Closing share price as at 30 June
$0.38
$0.11
$0.03
$0.08
$0.20
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
26
(4.6)
32.8
(51.1)
27.2
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Macroeconomic uncertainty, a downturn in the resources sector globally, difficult trading conditions in Emeco’s
markets and a resultant decline in the Company’s earnings saw the Company’s share price decline and close
at 20 cents, 8 cents, 3 cents on 30 June 2014, 30 June 2015 and 30 June 2016 respectively. FY17 saw
improving market conditions, an increase in the Company’s earnings and completion of the Group’s
recapitalisation and the acquisitions of Andy’s and Orionstone (Transaction). Accordingly, the Company’s
share price increased, closing at 10.5 cents on 30 June 2017. In FY18, market conditions and the Company’s
performance continued to improve and, towards the end of the first half, the Company acquired Force
Equipment, thereby expanding the Group’s fleet and, importantly, acquiring the strategically important
component rebuild capability providing vertical integration. At market close at the end of FY18, the Company’s
share price reached 37.5 cents. Notwithstanding this, no long term securities have vested in the last five years.
The change to vesting conditions for the Company’s long term equity incentive plans in recent years has
provided senior managers with a more meaningful incentive to remain with the Group over the longer term.
The Company regards retaining senior managers as a vital factor in the performance of the Group in the
immediate and longer term. The Company’s innovative technological platforms, in addition to the enhanced
fleet and capability, facilitated by the acquisitions of Andy’s, Orionstone, Force Equipment and Matilda
Equipment Holdings Pty Ltd, positions the Group well to add further value for Emeco customers and increase
Company earnings. The value of equity awards upon vesting is wholly dependent on the Company’s share
price, which aligns executives’ interests with that of shareholders.
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 usually reviewed and benchmarked annually in August. However, given
changes to the board composition in April 2017 in connection with the Group’s recapitalisation and the
acquisitions of Andy’s and Orionstone, the review did not take place in FY18.
An annual cap of $1,200,000 is currently prescribed in the Company’s constitution as the total aggregate
remuneration available to non-executive directors.
The allocation of fees to non-executive directors within this cap has been determined after consideration of a
number of factors including the time commitment of directors, the size and scale of the Company’s operations,
the skill sets of board members, the quantum of fees paid to non-executive directors of comparable companies
and participation in board committee work.
The chair of the board 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 increases 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 FY18, all Australian non-executive
directors sit on more than one committee. However, non-executive directors only get paid for sitting on one
committee.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
27
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
5.
Details of remuneration
5.1 Remuneration received in relation to FY18
Details of the elements comprising the remuneration of the Group’s KMP in FY18 are set out in table 12 below.
The table does not include the following components of remuneration because they were either not provided
to KMP during FY18 or were not available to KMP by reason of their executive role:
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.
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 12.
Table 12: FY18 KMP remuneration (Company and consolidated)
[1] This figure includes cash awards under the FY18 EHIP approved by the board after review of performance against the KPIs (refer to
table 13).
[2] This figure includes long term, equity based incentives awarded by the Company in FY15, FY16 and FY17.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
28
Salary and feesShort term bonus payments [1]Non- monetarySuperan-nuation benefitsOther long term benefitsTermination benefitsLong term equity incentives [2]Total% of remuneration performance related$$$$$$$$Non-executive directorsPeter Richards 153,325 --13,955---167,280-Peter Frank 82,578--7,844---90,422-Keith Skinner 90,835--8,629---99,464-Darren Yeates 88,771--8,433---97,204-TOTAL NON-EXECUTIVE DIRECTORS415,509--38,861---454,370-Executive directorsIan Testrow961,834704,00030,87340,523-3,154,2744,891,50479%Other executivesThao Pham366,191210,240-27,33811,425-714,5531,329,74770%Justine Lea335,616197,100-26,48940,523-227,338827,06651%TOTAL ALL EXECUTIVES1,663,6411,111,340-84,70092,471-4,096,1657,048,317TOTAL2,079,1501,111,340-123,56192,471-4,096,1657,502,687Share based paymentsShort-term employee benefitsPost-employment benefits
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Comparative information relating to remuneration of the Group’s KMP for the prior financial year is set out
below:
[1] This figure includes: (i) STI awards under the FY17 plan which were finally determined on 24 August 2017 after completion of
performance reviews and (ii) Transaction related bonuses and payments (see notes E and F below).
[2] This figure includes equity based incentives offered under the Company’s long-term equity based incentive plans in FY15, FY16 and
FY17.
[A] Mr John Cahill and Ms Erica Smyth ceased as non-executive directors on 1 April 2017.
[B] Mr Peter Frank, Mr Keith Skinner and Mr Darren Yeates commenced as non-executive directors on 1 April 2017.
[C] 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.
[D] 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.
[E] 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 Testrow’s partial MIP sacrifice during the Transaction; and (ii) Transaction bonus of $650,000 (in accordance with
Mr Testrow’s 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).
[F] 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).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
29
Salary and feesShort term bonus payments [1]Non- monetarySuperan-nuation benefitsOther long term benefitsTermination benefitsLong term equity incentives [2]Total% of remuneration performance related$$$$$$$$Non-executive directorsPeter Richards 151,219 --14,366---165,585-John Cahill [A]68,126--6,472---74,598-Peter Frank [B]20,644--1,961---22,605-Keith Skinner [B]22,709--2,157---24,866-Erica Smyth [A]68,126--6,472---74,598-Darren Yeates [B]22,193--2,108---24,301-TOTAL NON-EXECUTIVE DIRECTORS353,017--33,536---386,553-Executive directorsIan Testrow [C]801,0023,060,000[E]60,27532,30260,173-969,3334,983,08581%Gregory Hawkins [D]51,834--5,839--(134,442)(76,768)n/aOther executivesThao Pham335,398600,400[F]-26,775--232,4621,195,03570%Justine Lea318,365428,500[F]-29,08622,551-69,905868,40757%TOTAL ALL EXECUTIVES1,506,5994,088,90060,27594,00282,724-1,137,2586,969,758TOTAL1,859,6164,088,90060,275127,53882,724-1,137,2587,356,311Short-term employee benefitsPost-employment benefitsShare based payments
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
5.2 FY18 EHIP STI cash grants
The terms of the FY18 EHIP plan are discussed at pages 24 to 26.
Details of the vesting profile of the short term, cash grants awarded to executives in respect of FY18 are set
out below:
Table 13: FY18 executive STI vesting information
[1] The minimum short term, cash grant value for each executive is zero.
The awards to executives in FY18 reflect the significant amount of work undertaken to achieve the Company’s
objectives.
6.
Share-based payments
The terms of the FY18 EHIP, including applicable performance and service conditions, are discussed at page
24 to 26.
Historically most of the Company’s 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 after FY12 given the
downturn in the mining sector and this seemingly affected the value of these plans as a retention tool.
Recognising the crucial role senior management have in the recovery of a business, in FY16 the Company
moved to a retention based long term incentive plan, under which the awards vest at the end of a three-year
period to incentivise continued service.
In FY17, as part of the Transaction, the Company’s shareholders approved the establishment of the
management incentive plan (MIP) and the MIP awards to Mr Testrow. Awards to executives under the MIP
formed an important aspect of the Transaction and incentivised management to remain with the Group post-
Transaction and beyond in order to achieve timely integration of the businesses and achievement of the
Group’s long term objectives, thereby aligning the interests of executives with the long term interests of
shareholders.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
30
Executive Maximum total STI / cashincentive [1] % awarded% forfeitedIan Testrow$704,000100%0%Thao Pham$210,240100%0%Justine Lea$197,100100%0%
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
Grants and vesting of equity awards made to executives in connection with the FY18 EHIP and the Company’s
long term incentive plans in FY15, FY16 and FY17 are set out in the following table:
Table 14: Summary of executive KMP allocated, vested or lapsed equity
[A] Mr Ian Testrow’s grant of awards under the: (i) FY15 and FY16 long term incentive plans were approved by shareholders on 14
December 2016; (ii) FY17 MIP was approved by shareholders on 13 March 2017, subject to completion of the Transaction; and (iii)
FY18 EHIP is subject to shareholder approval at the 2018 annual general meeting.
[1] A performance share represents one fully paid ordinary Emeco share on issue. A performance right is a right to receive one fully paid
ordinary Emeco share. The vesting of performance shares and performance rights is subject satisfaction of vesting conditions.
[2] Vesting is subject to satisfaction of vesting conditions. The minimum total value of the grants for future financial years is zero if the
service condition is not satisfied. An estimate of the maximum possible total value in future financial years is the fair value at grant
date multiplied by the number of equity instruments awarded. See section 3.3.1.2 for details of the performance and service conditions
applicable to awards under the FY18 EHIP. The performance shares granted under the Company’s FY15 long term plan lapsed due
to the TSR performance condition not being met. Full details of the vesting conditions for all prior year equity grants to executives are
included in the remuneration report for the relevant year.
[3] The fair value of the performance shares granted in FY15 and FY16 was determined using a Monte Carlo share price simulation
model. The fair value of awards granted under the MIP in FY17 and FY18 EHIP was determined using the 30 day volume weighted
average price on the grant date. For all securities, the fair value 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 12) is the portion of the fair value of the securities
recognised in FY18. The fair value of all securities is not related to or indicative of the benefit (if any) that an executive may ultimately
realise if the equity instruments vest.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
31
ExecutiveGrant dateEquity instrument [1]Number granted % vested in FY18% forfeited in FY18Vesting date [2]Fair value per share/right at grant date [3]Ian Testrow [A]14/12/2016Performance shares1,550,000-100%28/09/2017$0.1214/12/2016Performance shares13,021,703--17/09/2018$0.0331/03/2017Performance shares108,674,758--1/04/2020$0.08TBATBA[8,250,000]--31/03/2020TBAThao Pham24/11/2014Performance shares640,000-100%28/09/2017$0.1205/02/2016Performance shares3,330,756--17/09/2018$0.0331/03/2017Performance rights24,368,606--1/04/2020$0.0820/08/2018Performance rights1,095,000--30/06/2020$0.36Justine Lea24/11/2014Performance shares244,000-100%1/09/2017$0.1231/03/2017Performance rights8,122,868--1/04/2020$0.0820/08/2018Performance rights1,026,563--30/06/2020$0.36
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2018
7.
KMP share and equity holdings
Details of shares and equity held by KMP, including their personally related entities, for FY18 are as follows:
Table 15: KMP holdings
8.
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 months’ notice or on the payment to the executive of
up to six months’ salary in lieu of notice. No termination payments other than salary in lieu of notice and
accrued statutory leave entitlements are payable under these contracts.
Signed in accordance with a resolution of the directors.
Ian Testrow
Managing Director
Dated at Perth, 20th day of August 2018
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
32
Equity instrumentHolding at1 July 2017Rights granted in FY18Rights vested in FY18Shares granted in FY18Net changes otherHolding at30 June 2018Non-executive directorsPeter RichardsShares52,264--- 15,915 68,179ExecutivesIan TestrowPerformance shares123,246,461 ---(1,550,000)121,696,461Shares757,831 --- 91,759 849,590Thao PhamPerformance shares3,970,756 ---(640,000)3,330,756Performance rights24,368,606----24,368,606Shares78,238----78,238Justine LeaPerformance shares244,000 ---(244,000)-Performance rights8,122,868----8,122,868Shares 4,000 --- 1,218 5,218
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Deloitte Touche Tohmatsu
Tower 2, Brookfield Place,
123 St Georges Tce,
Perth WA 6000, Australia
DX 206
Tel: +61 (0) 8 9365 7000
Fax: +61 (0) 8 9365 7001
www.deloitte.com.au
The Board of Directors
Emeco Holdings Limited
3/71 Walters Drive
Perth WA 6017
20 August 2018
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 2018, 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
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 2018
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 39 to 113.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
34
20182017Note$'000$'000Continuing operationsRevenue from rental income323,986 174,313 Revenue from the sale of machines and parts1,835 1,630 Revenue from maintenance services55,171 20,099 380,992 196,042 Repairs and maintenance(104,888) (55,575) Employee expenses8(35,416) (20,240) External maintenance services(39,996) (14,398) Cartage and fuel(10,309) (8,303) Hired in equipment and labour(11,824) (16,114) Depreciation expense8(68,844) (54,747) Gross profit109,715 26,665 Other income72,251 247 Other expenses8(46,314) (29,781) Impairment of tangible assets8(11,150) (8,206) Amortisation expense21(1,017) (826) Business acquisition and restructuring transaction expenses8b(3,836) (87,997) Finance income8492 14,095 Finance costs8(50,911) (46,665) Net foreign exchange loss8(12,617) (10,028) Loss before tax expense(13,387) (142,496) Tax benefit/(expense)1018,707 (14,671) Profit/(loss) from continuing operations5,320 (157,167) Discontinued operationsProfit/(loss) from discontinued operations (net of tax)146,056 (23,296) Profit/(loss) from discontinued operations6,056 (23,296) Profit/(loss) for the year11,376 (180,463) Other comprehensive income/(loss)Items that are or may be reclassified to profit and loss:Foreign currency translation differences for foreign operations (net of tax)(4,639) 14,397 Changes in fair value of cash flow hedges (net of tax)1,535 (15,400) Total other comprehensive income/(loss) for the year(3,104) (1,003) Total comprehensive income/(loss) for the year8,272 (181,466)
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
(continued)
For the year ended 30 June 2018
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 39 to 113.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
35
20182017Note$'000$'000Profit/(loss) attributable to:Owners of the Company3511,376 (180,463) Profit/(loss) for the year11,376 (180,463) Total comprehensive profit/(loss) attributable to:Owners of the Company358,272 (181,466) Total comprehensive profit/(loss) for the year8,272 (181,466) 20182017NotecentscentsProfit/(loss) per share:Basic profit/(loss) per share350.43 (18.66) Diluted profit/(loss) per share350.40 (18.66) Profit/(loss) per share from continuing operationsBasic profit/(loss) per share350.20 (16.15) Diluted profit/(loss) per share350.19 (16.15)
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Financial Position
as at 30 June 2018
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 39 to 113.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
36
20182017Note$'000$'000Current AssetsCash and cash equivalents17171,431 16,978 Trade and other receivables1890,367 113,535 Inventories204,895 3,114 Prepayments2,722 2,956 Assets held for sale158,007 26,421 Total current assets277,422 163,004 Non-current AssetsTrade and other receivables18- 237 Derivative financial instruments195,709 4,015 Intangible assets211,994 2,887 Property, plant and equipment22407,951 349,737 Deferred tax assets1222,177 - Investments799 799 Total non-current assets438,630 357,675 Total assets716,052 520,679 Current LiabilitiesTrade and other payables2380,194 82,545 Liabilities directly associated with assets classified as held for sale15- 449 Derivative financial instruments197,866 8,366 Interest bearing liabilities243,012 6,894 Provisions266,769 6,383 Total current liabilities97,841 104,637 Non-current LiabilitiesInterest bearing liabilities24464,343 447,145 Provisions26386 904 Total non-current liabilities 464,729 448,049 Total liabilities 562,570 552,686 Net (liabilities)/assets 153,482 (32,007) EquityShare capital13915,224 749,117 Reserves6,326 (537)Retained losses(768,068)(780,587)Total equity attributable to equity holders of the Company153,482 (32,007)
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
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 39 to 113.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
37
ShareForeignbased currencyReserveSharepaymentHedgingtranslationfor ownAccumulated Totalcapitalreservereservereserveshareslossesequity$'000$'000$'000$'000$'000$'000$'000Balance at 1 July 2016593,616 16,744 345 16,050 (20,634) (600,124) 5,997 Total comprehensive income for the periodProfit or (loss)- - - - - (180,463) (180,463) Other comprehensive incomeForeign currency translation differences- - 12,581 1,816 - - 14,397 Changes in fair value of cashflow hedge, net of tax- - (15,400) - - - (15,400) Total comprehensive income/(loss) for the period- - (2,819) 1,816 - (180,463) (181,466) Transactions with owners, recorded directly in equityContributions by and distributions to ownersShares issued during the period, net of issue costs155,501 - - - - - 155,501 Own shares acquired by employee share plan trust- - - - (18,440) - (18,440) Share-based payment transactions- 6,401 - - - - 6,401 Total contributions by and distributions to owners155,501 6,401 - - (18,440) - 143,462 Balance at 30 June 2017749,117 23,145 (2,474) 17,866 (39,074) (780,587) (32,007) ShareForeignbased currencyReserveSharepaymentHedgingtranslationfor ownAccumulated Totalcapitalreservereservereserveshareslossesequity$'000$'000$'000$'000$'000$'000$'000Balance at 1 July 2017749,117 23,145 (2,474) 17,866 (39,074) (780,587) (32,007) Total comprehensive income for the periodProfit or (loss)- - - - - 11,376 11,376 Other comprehensive incomeForeign currency translation differences- - (3,705) (934) - - (4,639) Changes in fair value of cashflow hedge, net of tax- - 1,535 - - - 1,535 Reclassfication of FCTR reserve on disposal of subsidiary- - - (1,143) - 1,143 - Total comprehensive income/(loss) for the period- - (2,170) (2,077) - 12,519 8,272 Transactions with owners, recorded directly in equityContributions by and distributions to ownersShares issued during the period, net of issue costs166,107 - - - - - 166,107 Shares distributed from trust- (6,048) - - 6,048 - - Own shares acquired by employee share plan trust- - - - - - - Share-based payment transactions- 11,110 - - - - 11,110 Total contributions by and distributions to owners166,107 5,062 - - 6,048 - 177,217 Balance at 30 June 2018915,224 28,207 (4,644) 15,789 (33,026) (768,068) 153,482
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements
set out on pages 39 to 113.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
38
20182017Note $'000 $'000 Cash flows from operating activitiesCash receipts from customers413,101 142,128 Cash paid to suppliers and employees(234,892) (131,468) Cash generated from operations178,209 10,660 Finance income received383 37 Finance expense paid(46,865) (38,009) Cash receipts from derivatives sold- 15,354 Net cash inflow/(outflow) from operating activities of discontinued operations14(6,194) 25,554 Net cash from operating activities30125,533 13,596 Cash flows from investing activitiesProceeds on disposal of non-current assets22,726 4,552 Payment for property, plant and equipment(80,500) (30,715) Cash acquired from acquired business363,395 942 Payment for acquired entities36(72,643) - Acquisition costs8b(3,836) (14,445) Net cash inflow from investing activities of discontinued operations143,771 26,296 Net cash (used in) investing activities(127,087) (13,370) Cash flows from financing activitiesNet proceeds from issue of shares164,410 20,000 Payment for debt establishment costs(1,078) (20,598) Payment of finance lease liabilities(5,792) (3,013) Net cash outflow from financing activities of discontinued operations14(810) (3,145) Net cash generated by/(used in) financing activities156,730 (6,756) Net increase/(decrease) in cash and cash equivalents155,176 (6,530) Cash and cash equivalents at beginning of the period16,978 24,854 Effects of exchange rate fluctuations on cash held(723) (1,346) Cash and cash equivalents at the end of the financial period171,431 16,978
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
1 Reporting entity
Emeco Holdings Limited (the ‘Company’) is domiciled in Australia. The address of the Company’s
registered office is Level 3, 71 Walters Drive, Osborne Park WA 6017. The consolidated financial
statements of the Company as at and for the year ended 30 June 2018 comprise the Company and its
subsidiaries (together referred to as the ‘Group’). The Group is a for profit entity and primarily involved in
the provision of safe, reliable and maintained earthmoving equipment solutions to customers in the
earthmoving industry as well as the maintenance and remanufacturing of major components of heavy
earthmoving equipment.
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 Group has adopted all of the new and revised
Standards and Interpretations issued by the AASB that are relevant to its operations and effective
for an accounting period that begins on or after 1 July 2017.
The consolidated financial statements were authorised for issue by the board of directors on 20
August 2018.
(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:
derivative financial instruments are measured at fair value;
assets held for sale at fair value less costs of disposal; and
financial instruments at fair value through profit or loss are measured at fair value.
The methods used to measure fair values are discussed further in note 5.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s
functional currency.
The company is a company of the kind referred to in ASIC Corporations (Rounding in Financial
/Directors’ 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 2018
39
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
2 Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
Recognition of tax losses
In accordance with the Company’s accounting policies for deferred taxes (refer note 3(o)), a deferred
tax asset is recognised for unused tax losses only if it is probable that future taxable profits will be
available to utilise these losses. This includes estimates and judgements about future profitability,
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. Due to the recent history of losses and cyclical nature of the industry, the company has only
brought to account $67,932,000 of previously unrecognised Australian tax losses as a deferred tax
asset of $20,380,000 onto the balance sheet at this time. Australian tax losses of $121,973,000
(gross) remain unrecognised and available to the Group.
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 asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs of disposal and value in use, in accordance with the Company’s 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 Company’s 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 Company’s 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 2018
40
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
3 Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by Group entities.
(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 2018
41
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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.
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 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 2018
42
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 ‘highly effective’ in offsetting the changes
in the fair value or cash flows of the respective hedged items attributable to hedged risk and whether
the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a
forecast transaction, the transaction should be highly probable to occur and should present an
exposure to variations in cash flows that could ultimately affect reported profit or loss.
Fair value hedges
The risk being hedged in a fair value hedge is a change in the fair value of an asset or liability or
unrecognised firm commitment that may affect the income statement. Changes in fair value might
arise through changes in interest rates or foreign exchange rates. The Group’s fair value hedges
principally consist of interest rate swaps that are used to protect against changes in the fair value of
fixed rate long term financial instruments due to movements in market interest rates. The application
of fair value hedge accounting results in the fair value adjustment on the hedged item attributable to
the hedged risk being recognised in the income statement at the same time the hedging instrument
impacts the income statement. If a hedging relationship is terminated, the fair value adjustment to
the hedged item continues to be recognised as part of the carrying amount of the item or group of
items and is amortised to the income statement as a part of the effective yield over the period to
maturity. Where the hedged item is derecognised from the Group’s balance sheet, the fair value
adjustment is included in the income statement as a part of the gain or loss on disposal.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows
attributable to a particular risk associated with the recognised asset or liability or a highly probable
forecast transaction that could affect profit or loss, the effective portion of changes in the fair value
of the derivative is recognised in other comprehensive income and presented in the hedging reserve
in equity. Any ineffective portion of changes in the fair value of the derivative is recognised
immediately in profit or loss.
When the hedged item is a non-financial asset, the amount accumulated in equity is retained in other
comprehensive income and reclassified to profit or loss in the same period or periods during which
the non-financial item affects profit or loss. In other cases the amount accumulated in equity is
reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the
hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated
or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If
the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in
profit or loss.
Other non-trading derivatives
When a derivative financial instrument is not designated in a hedge relationship that qualifies for
hedge accounting, all changes in its fair value are recognised immediately in profit or loss.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
43
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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.
(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;
any other costs directly attributable to bringing the assets to a working condition for their
intended use;
when the Group has an obligation to remove the assets or restore the site, an estimate of the
costs of dismantling and removing the items and restoring the site on which they are located;
and
capitalised borrowing costs.
Cost includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign
currency purchases of property, plant and equipment. Purchased software that is integral to the
functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference
between the net proceeds from disposal and the carrying amount of the item) is recognised in profit
or loss.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
44
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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.
The estimated useful lives are as follows:
Buildings and leasehold improvements
Plant and equipment
Office equipment
Motor vehicles
Sundry plant
15 years
3 – 15 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 Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities of the acquiree.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
45
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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:
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.
(g) Work in progress
Progressive capital work to inventory and fixed assets are carried in work in progress accounts within
their respective statement of financial position classifications with fixed assets being disclosed as a
‘capital work in progress’. Upon work completion the balance is capitalised.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
46
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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:
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;
observable data indicating that there is measurable decrease in expected cash flows from a
the disappearance of an active market for a security; or
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 asset’s carrying amount and the
present value of the estimated future cash flows discounted at the asset’s original effective interest
rate. Losses are recognised in profit or loss and reflected in an allowance account. 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 asset’s 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 Group’s corporate assets do not generate separate cash inflows and are utilised by more than
one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested
for impairment as part of the testing of the CGU to which the corporate asset is allocated.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
47
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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
Group’s 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 Group’s net obligation in respect of long term employee benefits is the amount of future benefit
that employees have earned in return for their service in the current and prior periods. That benefit
is discounted to determine its present value. 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 2018
48
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 Retention Incentive (RI) plan and the hybrid incentive plan (EHIP) 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 Company’s 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. 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.
(b) A short term incentive (STI) plan allows the senior management 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 executive’s performance. The
performance conditions related to KPIs include operating EBITDA, leverage, safety and
personal goals. These benefits are accounted for in accordance with AASB 2 and AASB 119.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
49
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
3 Significant accounting policies (continued)
(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.
(iii) Maintenance services
Revenue from services rendered is recognised in profit or loss in proportion to the stage of
completion of the transaction at the reporting date.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
50
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
3 Significant accounting policies (continued)
(m) Leases
Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership
are classified as finance leases. On initial recognition the leased asset is measured at an amount
equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent
to initial recognition, the asset is accounted for in accordance with the accounting policy applicable
to that asset.
Other leases are operating leases and are not recognised in the Group’s statement of financial
position.
Lease payments
Payments made under operating leases are recognised in profit or loss on a straight line basis over
the term of the lease. Lease incentives received are recognised as an integral part of the total lease
expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense
and the reduction of the outstanding liability. The finance expense is allocated to each period during
the lease term so as to produce a constant periodic rate of interest on the remaining balance of the
liability.
(n) Finance income and finance costs
The Group’s finance income and finance costs include:
interest income;
interest expense;
dividend income;
discount on repurchased debt;
withholding tax;
amortisation of borrowing costs capitalised using the effective interest method.
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;
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 Group’s right to receive payment is established.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
51
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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:
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 2018
52
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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:
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 AASB 112
Income Taxes and AASB 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 2018
53
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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
2018. Those which may be relevant to the Group are set out below.
(i) AASB 16 Leases (2016)
AASB 16 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.
AASB 16 applies to annual reporting periods beginning on or after 1 January 2019 and replaces
AASB 117 Leases and the related interpretations.
As lessor accounting will remain largely unaffected on application of AASB 16, any impact on the
Group’s financial statements will arise from operating commitments relating to leases on properties
and vehicles. At reporting date, the Group has commitments of $23,810,000 relating to non-
cancellable operating leases. The application of AASB 16 is expected to change the expense profile
relating to operating leases with the following effect on the financial statements:
Replacement of operating expense by amortisation and interest expense in the statement of
Increase in both total assets and total liabilities;
profit or loss and other comprehensive income; and
Reclassification of cash flows relating to lease repayments from operating to financing activities.
The Group continues to assess the potential impact when reviewing new contracts that will fall 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. In reviewing the types of contracts held with customers, management does not believe the
changes to the standard will have a material impact on the financial performance and financial
position of the Group. The Group’s rental customer contracts constitute leases and will continue to
be accounted for in line with lessor accounting. Management are in the process of assessing the
impact of this standard on the maintenance services revenue stream, however it’s expected that
there will not be a material change in how this is accounted for.
(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:
simplifying the general classifications of financial assets into those carried at amortised cost and
those carried at fair value;
permitting entities to irrevocably elect on initial recognition to present gains and losses on an
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 entity’s own credit risk in OCI, except when
it would create an ‘accounting mismatch’;
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.
In assessing the anticipated impact of AASB 9, management has reviewed historical losses on
financial assets carried at amortised cost. Based on this analysis, management does not expect the
change in the standard to have a material impact on the financial position of the Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
54
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
5 Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities. Fair values have been determined for measurement
and/or disclosure purposes based on the following methods. When applicable, further information about
the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
(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 arm’s 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, retention incentive plan and hybrid 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 2018
55
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 Company’s 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
56
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments
Overview
The Group has exposure to the following risks from their use of financial instruments:
credit risk;
liquidity risk; and
market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management of
capital.
Risk management framework
The board of directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The board of directors has established the audit and risk management committee
(Committee), which is responsible for developing and monitoring the Group’s risk management policies.
The Committee reports regularly to the board of directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group,
to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management
policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s
activities. The Group, through its training, management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand their roles and
obligations.
The Committee oversees how management monitors compliance with the Group’s risk management policies
and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced
by the Group. The Committee is assisted in its oversight role by the internal audit function.
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 Group’s
receivables from customers.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The
Group’s maximum exposure to credit risk at the reporting date was:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
57
20182017Note$'000$'000Trade receivables18 85,772 87,821 Other receivables (including VAT/GST)18 4,947 26,151 Cash and cash equivalents17 171,431 16,978 262,150 130,950 ConsolidatedCarrying amount
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments (continued)
Credit risk (continued)
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the demographics of the Group’s customer base, including the
default risk of the industry and country in which customers operate, as these factors may have an influence
on credit risk. The Group sets individual counter party limits and where possible insures its rental income
within Australia and generally operates on a ‘cash for keys’ policy for the sale of equipment and parts.
Both insured and uninsured debtors are subject to the Group’s credit policy. The Group’s credit policy
requires each new customer to be analysed individually for creditworthiness before the Group’s standard
payment and delivery terms and conditions are offered. The Group’s review includes external ratings, when
available, and in some cases bank references. Purchase limits are established for each customer according
to the external rating and are approved by the appropriate management level dependent on the size of the
limit. In the instance that a customer fails to meet the Group’s creditworthiness and the Group is unable to
secure credit insurance, future transactions with the customer will only be 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 (2017: $700,000,000). The Australian business held insurance for the entire financial year
ended 30 June 2018.
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 2018 the Group’s doubtful debts provision for continuing and discontinued operations was
$352,000 (2017: $200,000). As at 30 June 2018 the Group recognised bad debt write offs for continuing
and discontinued operations for a total amount of $339,000 (2017: $24,000).
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 customers’ credit
ratings.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
58
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments (continued)
Credit risk (continued)
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic
region was:
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by type of
customer was:
The aging of the Group’s trade receivables at the reporting date was:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
59
ImpairmentImpairmentGrossprovisionGrossprovision2018201820172017$'000$'000$'000$'000Australia85,772 (352) 78,794 (200) North America- - 526 - South America- - 8,501 - 85,772 (352) 87,821 (200) ConsolidatedConsolidated20182017$'000$'000Insured34,282 27,529 Blue chip (including subsidiaries)43,190 36,595 Other security- - Uninsured8,300 23,697 85,772 87,821 ConsolidatedCarrying amountGrossImpairmentGrossImpairment2018201820172017$'000$'000$'000$'000Not past due75,150 - 45,420 - Past due 0-30 days8,328 - 17,890 - Past due 31-60 days1,466 - 13,112 - Past due 61 days828 (352) 11,399 (200) 85,772 (352) 87,821 (200) ConsolidatedConsolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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:
Cash
The Group held cash and cash equivalents of $171,431,000 at 30 June 2018 (2017: $16,978,000), 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 2018 the Group held
$116,000 of bank guarantees (2017: $116,000) and $Nil of prepayments (2017: $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 2018 $3,531,000 guarantees were outstanding (2017:
$4,172,000).
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 Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group’s reputation.
The Group monitors working capital limits and employs maintenance planning and life cycle costing models
to price its rental contracts. These processes assist it in monitoring cash flow requirements and optimising
cash return in its operations. Typically the Group ensures that it has sufficient cash on demand to meet
expected operational expenses for a period of 60 days, including the servicing of financial obligations; this
excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as
natural disasters.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
60
20182017$'000$'000Balance at 1 July200 1,090 Bad debt written off(339) (24) Change in provision for doubtful debts491 (866) Balance at 30 June352 200 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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$40,000,000 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$5,000,000. The bank guarantee facility was reduced from A$30,000,000 during the period to reduce the
holding costs of the unrequired portion of this facility. 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 $3,531,000 of the bank guarantee facility.
The Group has a facility agreement comprising a credit card facility with a limit of A$150,000 and is secured
via a cash cover account.
The Group has finance lease facilities totalling A$1,155,000 (2017: A$9,801,000) which have various
maturities up to November 2020.
The Group has financed its insurance payments with A$1,857,000 remaining at year end which matures
in January 2019.
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 2018
61
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments (continued)
Liquidity risk (continued)
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or
at significantly different amounts.
The gross inflows/(outflows) disclosed in the previous tables 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 2018
62
Contract-Carryingual cash6 mths orMore thanConsolidatedamountflowsless6-12 mths1-2 years2-5 years5 years30 June 2018$'000$'000$'000$'000$'000$'000$'000Non-derivative financialliabilitiesSecured notes issue465,050667,17422,27322,273 44,545 578,083 - Finance lease liabilities1,1551,1831,00334 - - - Insurance financing1,8571,8811,646235 - - - Trade and other payables31,88231,88231,882- - - - Liabilities directly associated with assets classified as held for sale- - - - - - - 499,944702,12056,80422,542 44,545 578,083 - Derivative financialasset/(liability)Cross currency interest rate swaps used for hedgingasset/(liability)(2,157)2,329(730)(483)(1,295)4,837 - (2,157)2,329(730)(483)(1,295)4,837 - Contract-Carryingual cash6 mths orMore thanConsolidatedamountflowsless6-12 mths1-2 years2-5 years5 years30 June 2017$'000$'000$'000$'000$'000$'000$'000Non-derivative financialliabilitiesSecured notes issue443,284676,73414,26721,401 42,802 598,264 - Finance lease liabilities9,80110,4582,4262,609 3,207 2,216 - Insurance financing1,5841,5841,584- - - - Trade and other payables24,49124,49124,491- - - - Liabilities directly associated with assets classified as held for sale449 449 449 - - - - 479,609713,71643,21724,010 46,009 600,480 - Derivative financialasset/(liability)Cross currency interest rate swaps used for hedgingasset/(liability)(4,351)(12,275)(8,363)(832)(2,323)(757) - (4,351)(12,275)(8,363)(832)(2,323)(757)-
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and
equity prices will affect the Group’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return.
The Group enters into derivatives, and also incurs financial liabilities, in order to manage market risks. All
such transactions are carried out within the guidelines set by the Group’s hedging policy. Generally the
Group seeks to apply hedge accounting in order to manage volatility in profit or loss.
Currency risk
The functional currency of the Group is the Australian dollar (AUD). The Group holds borrowings in United
States Dollars (USD) for which currency risk exists.
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.
The Group’s investments in its subsidiaries and their earnings for the year are not hedged as these
currency positions are considered long term in nature.
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 2018 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 2018, the Group was unhedged US$125,927,000 face value of the annual
coupon and US$255,927,000 face value of the net principal outstanding.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
63
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments (continued)
Market risk (continued)
Exposure to currency risk
The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
(1) Net USD exposure of US$355,927,000 (2017: US$355,927,000) in an AUD denominated entity.
Balance is net of notes held by the Group.
The following significant exchange rates applied during the year:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
64
USDCADUSDCAD$'000$'000$'000$'000Cash4,220 - 3,727 15 Secured notes issued (1)(355,927) - (355,927) - Gross balance sheet exposure(351,707) - (352,200) 15 Cross currency interest rate swap to hedge the secured notes issued100,000 - 100,000 - 100,000 - 100,000 - Net exposure (251,707) - (252,200) 15 30 June 201830 June 20172018201720182017CAD0.98421.01020.97710.9990USD0.77530.75540.73910.7692EURO0.64990.74480.63440.6730CLP484.42502.65478.90510.14GBP0.57610.59110.56340.5913Average rateReporting date spot rate
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 2018
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 2017, as indicated below:
Interest rate risk
In accordance with the board’s 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 2018
65
EquityProfit or lossEquityProfit or loss$'000$'000$'000$'00030 June 2018USD (10 percent movement)(5,957) 21,672 6,430 (26,488) 30 June 2017USD (10 percent movement)(10,747) 20,430 5,426 (24,970) ConsolidatedStrengtheningWeakening
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments (continued)
Market risk (continued)
Profile
At the end of the reporting date the interest rate profile of the Group’s interest bearing financial instruments
as reported to the management of the Group was:
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 Company’s outstanding debt and the foreign currency
remeasurement risk arising on the principal balance every six months on the Company’s outstanding debt.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
66
20182017Note$'000$'000Variable rate instruments:Cash at bank17 171,431 16,978 171,431 16,978 Fixed rate instruments:Effective interest rate swaps to hedge interest rate risk(2,157) 4,015 Interest bearing liabilities (notes)24 (481,569) (462,724) Interest bearing finance leases24 (1,155) (9,801) Insurance financing24 (1,857) (1,584) (486,738) (470,094) Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 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 2017.
Detailed below is the profit and loss impact of cash flow hedges during the year.
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 other than the transfer of the hedge reserve
to profit and loss as the hedge matures.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
67
100bp100bp100bp100bpincreasedecreaseincreasedecreaseBBSWBBSWLiborLiborCash flow hedges$'000$'000$'000$'00030 June 2018Fixed rate foreign currency instruments6,417 (6,662) (6,469) 6,722 Cash flow sensitivity (net)6,417 (6,662) (6,469) 6,722 30 June 2017Fixed rate foreign currency instruments8,564 (8,970) (8,630) 9,044 Cash flow sensitivity (net)8,564 (8,970) (8,630) 9,044 EquityEquity Profit or loss20182017Financial instrument$'000$'000Cross currency interest rate swap- Swap- 1,349 - Hedged item (debt)- - Net profit and loss impact before tax- 1,349
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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:
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:
(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 2018
68
Derivatives0.1%-2.3%0.1%-2.3%Loans and borrowings0.1%-3.5%0.1%-3.5%Leases4.5%-8.1%4.5%-8.1%USD notes - secured9.3%-9.3%9.3%-9.9%20182017CarryingFairCarryingFairamountvalueamountvalueNote$'000$'000$'000$'000Assets carried at fair valueInterest rate swaps used for hedging195,709 5,709 4,0154,0155,709 5,709 4,0154,015Assets carried at amortised costReceivables1890,36790,367113,535113,535Cash and cash equivalents17171,431171,43116,97816,978261,798261,798130,513130,513Liabilities carried at fair valueInterest rate swaps used for hedging197,866 7,866 (8,366) (8,366) 7,866 7,866 (8,366) (8,366) Liabilities carried at amortised costSecured bank loans24707 - 630 - Secured notes issue (1)24(465,050) (481,569) (443,284) (462,724) Insurance financing24(1,857) (1,857) (1,584) (1,584) Finance lease liabilities24(1,155) (1,183) (9,801) (10,458) Trade and other payables23(80,194) (80,194) (82,545) (82,545) (547,549) (564,803) (536,584) (557,311) 30 June30 June20182017
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
6 Financial instruments (continued)
Market risk (continued)
Fair value hierarchy
The Group’s financial instruments carried at fair value would be categorised at level 2 in the fair value
hierarchy as their value is based on inputs other than the quoted prices that are observable for these
assets/(liabilities), either directly or indirectly with the exception of certain investments in shares that are
categorised at level 1.
Capital management
Underpinning Emeco’s strategic framework is consistent value creation for shareholders. Central to this
is the continual evaluation of the Company’s capital structure to ensure it is optimised to deliver value to
shareholders. The board’s policy is to maintain diversified, long term sources of funding to maintain
investor, creditor and market confidence and to support the future growth of the business.
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 Company’s primary return metric is return on capital (ROC), which the Group defines as earnings
before interest and tax (EBIT) divided by invested capital defined as the average over the period of equity,
plus interest bearing liabilities, less cash and cash equivalents. The Group’s ROC for the year was 11.7%
(2017: (22.6%)). This includes non-recurring items of $33,500,000 (2017: $97,800,000) after tax. Had the
non-recurring items not been included in the Group EBIT return on capital for the year would have been
19.6% (2017: 3.2%).
The Group’s return on invested capital at the end of the reporting period was as follows:
7 Other income
(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
2018 was $22,726,000 (2017: $93,518,000 which included $64,430,000 of non-cash assets sales).
Included in sundry income are fees charged on overdue accounts, bad debts recovered, and receipts
from trade receivables not recognised at the point of acquisition of the Orionstone and Andy’s
Earthmovers businesses.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
69
20182017$'000$'000EBIT (continuing and discontinued operations)49,649 (85,800) Average invested capital424,766 379,396 EBIT return on capital at 30 June11.7%(22.6%)Consolidated20182017$'000$'000Net profit/(loss) on sale of non current assets (1)755 214 Sundry income (2)1,496 33 2,251 247 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
8 Loss before income tax expense for continuing operations
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
70
20182017Note$'000$'000Profit before income tax expense has been arrived at aftercharging/(crediting) the following items:Impairment of tangible assets:- inventory2014 157 - property, plant and equipment11,136 9,280 - reversal of impairment on property, plant and equipment - (1,231) 11,150 8,206 Employee expenses:- salaries and wages, superannuation, employee share plan35,416 20,240 Other expenses:- bad debts339 24 - doubtful debts/(reversal)36 163 - insurance2,489 1,394 - motor vehicles2,747 1,554 - rental expense4,132 2,778 - safety expenses832 564 - travel and subsistence expense3,687 2,775 - telecommunications1,313 1,015 - workshop consumables, tooling and labour1,517 1,378 - restructuring3,976 1,101 - corporate development expenses122 687 - consulting fees6,420 3,332 - employee share plan expenses10,816 6,045 - other expenses7,888 6,971 46,314 29,781 Depreciation of:- buildings221 368 - plant and equipment - owned65,743 66,666 - plant and equipment - leased1,613 1,744 - office equipment225 226 - motor vehicles556 674 - leasehold improvements210 245 - sundry plant334 684 less discontinuing operations depreciation expense14(58) (15,860) 68,844 54,747 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
8 Loss before income tax expense for continuing operations (continued)
(1)
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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
71
20182017$'000$'000Finance costs:- interest expense44,977 42,399 - witholding tax expense- 767 - amortisation of debt establishment costs using effective interest rate4,117 1,877 - other facility costs1,817 1,622 Net finance costs50,911 46,665 Finance income:- interest income(492) (37) - hedge gains (1)- (14,058) Net finance income(492) (14,095) Foreign exchange (gain)/loss:Net realised foreign exchange (gain)/loss(1,110) 68,936 Net unrealised foreign exchange (gain)/loss13,727 (58,907) Net foreign exchange (gain)/loss12,617 10,029 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
8b Business acquisition and restructuring transaction expenses
In March 2017, the Company completed a transaction that involved the following:
acquisition of Andy’s Earthmovers (Asia Pacific) Pty Ltd (Andy’s) and Orionstone Holdings Pty Ltd
(Orionstone). Refer to note 36 for further details;
cancellation of the existing Emeco 144A notes, Andy’s 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 note 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.
Together referred to as (The Transaction)
In November 2017, the Company acquired Force Equipment Pty Ltd (Force), refer to note 36 for further
details. Subsequent to the end of the reporting period, the Company acquired Matilda Equipment Holdings
Pty Ltd and its subsidiary Matilda Equipment Pty Ltd (Matilda). Refer to note 36 for further details.
The below table details the items recognised through the consolidated statement of profit or loss and
other comprehensive income:
(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 $1,912,000 in costs relating to the acquisition of Force and $1,924,000 in relation
to Matilda, which subsequently settled in July 2018. In 2017 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 Andy’s 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 Andy’s ($66,558,000) and
Orionstone ($137,359,000) in addition to the Group’s US$282,720,000 / A$365,779,000 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 which were issued at fair value resulting in a gain of
$20,359,000.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
72
20182017$'000$'000Business acquisition and restructuring transaction expenses- cost of shares issued to Black Diamond Capital Management LLC (1)- 10,253 - acquisition expenses (2)3,836 14,445 - write off facility costs (2)- 5,778 - impairment of goodwill (3)- 77,880 - discount on refinanced debt (4)- (20,359) Net financial costs3,836 87,997 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
9 Auditor’s remuneration
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
73
20182017$$Audit services Auditors of the Company Deloitte Touche Tohmatsu Australia: - audit and review of financial reports451,000 540,965 Overseas Deloitte Firms: - other assurance services15,915 11,000 466,915 551,965 Other services Auditors of the Company Deloitte Touche Tohmatsu Australia: - taxation services170,884 146,160 - independent services538,664 388,890 Overseas Deloitte Firms: - taxation services15,259 35,033 - account preparation- 3,741 724,807 573,824 1,191,722 1,125,789 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
10 Taxes
a. Recognition in the income statement
b. Current and deferred tax expense/(benefit) recognised directly in equity
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
74
20182017Note$'000$'000Deferred tax expense/(benefit):Origination and reversal of temporary differences of current year(18,707) 14,672 12(18,707) 14,672 Tax expense/(benefit)(18,707) 14,672 Tax expense/(benefit) from continuing operations(18,707) 14,672 Tax expense/(benefit) from discontinued operations14- 5,150 Total tax expense/(benefit)(18,707) 19,822 Consolidated20182017$'000$'000Share issue costs(1,758) - Cashflow hedges658 (1,056) Foreign currency translation reserve(1,588) (119) (2,688) (1,175) Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
10 Taxes (continued)
c. Numerical reconciliation between tax expense and pre-tax net profit/(loss)
11 Current tax assets and liabilities
The current tax asset for the Group of $Nil (2017: $Nil) represents income taxes recoverable in respect of
prior periods and that arise from payment of taxes in excess of the amount due to the relevant tax authority.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
75
20182017$'000$'000Prima facie tax benefit calculatedat 30% on net profit(2,200) (48,192) Increase/(decrease) in income tax expense due to:Effect on tax rate in foreign jurisdictions(35) 468 Non-deductible interest- 499 Non-deductible foreign taxes- 232 Australian tax losses not previously recognised(17,788) 28,256 Foreign tax losses not previously recognised, now recouped(1,743) 12,835 Non-deductible acquisition costs1,151 7,409 Other non-deductible expenses10 99 Goodwill impairment- 23,364 Non-assessable debt forgiveness gain- (5,148) Under/(over) provided in prior years1,898 - Tax expense/(benefit)(18,707) 19,822 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
12 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Movement in deferred tax balances
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
76
201820172018201720182017Consolidated$'000$'000$'000$'000$'000$'000Property, plant and equipment- - (8,540) (9,097) (8,540) (9,097) Receivables3,336 3,363 - (1,130) 3,336 2,233 Other financial assets- - (324) - (324) - Inventories- - (2,090) (67) (2,090) (67) Payables723 1,971 - - 723 1,971 Derivatives - hedge payable- - - - - - Derivatives - hedge receivable647 1,305 - - 647 1,305 Interest bearing loans and borrowings4,782 - - (891) 4,782 (891) Employee benefits482 1,418 - - 482 1,418 Unearned revenue- - - - - - Equity - capital raising costs1,704 - - - 1,704 - Provisions1,550 311 - - 1,550 311 Employee share costs- - (473) (3,718) (473) (3,718) Tax losses carried forward20,380 6,535 - - 20,380 6,535 Tax assets/(liabilities)33,604 14,903 (11,427) (14,903) 22,177 - Set off of tax(11,427) (14,903) 11,427 14,903 - - Net tax assets/(liabilities)22,177 - - - 22,177 - AssetsLiabilitiesNetRecognisedIncluded inBalancesRecognisedRecognisedin otherdiscontinuedBalanceacquiredin profitdirectly comprehensiveoperationsBalance1 July 1730 Nov 17or lossin equityincome(note 14)30 June 18$'000$'000$'000$'000$'000$'000$'000Property, plant and equipment(9,097) (94) 651 - - - (8,540) Other financial assets- - (324) - - - (324) Receivables2,233 35 1,067 - - - 3,335 Inventories(67) (11) (2,012) - - - (2,090) Payables1,971 20 (1,267) - - - 724 Derivatives - hedge payable- - - - - - - Derivatives - hedge receivable1,305 - - (658) - - 647 Interest bearing loans and borrowings(891) - 4,085 1,588 - - 4,782 Employee benefits1,418 831 (1,767) - - - 482 Equity - capital raising costs- - (54) 1,758 - - 1,704 Unearned revenue- - - - - - - Provisions311 - 1,239 - - - 1,550 Employee share costs(3,718) - 3,245 - - - (473) Tax losses carried forward6,535 - 13,845 - - - 20,380 - 781 18,707 2,688 - - 22,177 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
12 Deferred tax assets and liabilities (continued)
Movement in deferred tax balances
Unrecognised deferred tax assets
Unutilised tax losses are in Australia, Chile, Indonesia, the United Kingdom, United States and Europe.
$36,592,000 of the unrecognised deferred tax asset is related to the losses in the Australian tax jurisdiction,
which do not expire. The remaining losses are not expected to be utilised by the Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
77
RecognisedIncluded inBalancesRecognisedRecognisedin otherdiscontinuedBalanceacquiredin profitdirectly comprehensiveoperationsBalance1 July 1631 March 17or lossin equityincome(note 14)30 June 17$'000$'000$'000$'000$'000$'000$'000Property, plant and equipment(23,555) (6,050) 7,175 - - 13,333 (9,097) Receivables(5,192) 3,530 3,975 - - (80) 2,233 Inventories(849) (19) 374 - - 427 (67) Payables1,546 107 359 - - (41) 1,971 Derivatives - hedge payable- - - - - - - Derivatives - hedge receivable(5,382) - 87 6,600 - - 1,305 Interest bearing loans and borrowings25,323 1,197 (21,986) (5,425) - - (891) Employee benefits980 - 472 - - (34) 1,418 Equity - capital raising costs363 - (363) - - - - Unearned revenue- - (575) - - 575 - Provisions487 375 (551) - - - 311 Employee share costs- - (3,718) - - - (3,718) Tax losses carried forward25,786 - 79 - - (19,330) 6,535 19,507 (860) (14,672) 1,175 - (5,150) - Consolidated20182017$'000$'000The following deferred tax assets have not beenbrought to account as assets:Tax losses118,838 132,532 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
13 Capital and reserves
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
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
78
20182017$'000$'000Share capital3,178,858,997 (2017: 2,436,860,480 ) ordinary shares, fully paid 991,111 825,004 Acquisition reserve(75,887) (75,887) 915,224 749,117 ConsolidatedDetailsDateSharesIssue price$'000Balance1 July 20172,436,860,480 825,004 Issue of shares for rights issue8 November 2017320,100,520 $0.21067,221 Issue of shares for rights issue24 November 201760,661,191 $0.21012,739 Less: share issue costs, net of deferred tax(1,983) Issue of shares for rights issue 8 May 2018309,604,949 $0.25077,401 Issue of shares for rights issue24 May 201851,631,857 $0.25012,908 Less: share issue costs, net of deferred tax(2,179) Balance30 June 20183,178,858,997 991,111 Less: treasury shares135,081,471 Issued capital3,043,777,526
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
13 Capital and reserves (continued)
Reserve for own shares (1)
The reserve for own shares comprises of shares purchased on market to satisfy the vesting of shares
and rights under the LTIP. Shares that are forfeited under the Company’s MIP due to employees not
meeting the service vesting requirement will remain in the reserve. As at 30 June 2018 the Company held
135,081,471 treasury shares (2017: 210,690,767) 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 Company’s
securities under its employee share/option plans (refer note 3(j)(v)).
Dividends (1)
No dividends were paid or declared during the year (2017: $Nil) or prior to the release of this report.
Franking account
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 (2017: $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 $65,146,000 (2017: $46,215,000) franking credits.
________________________
(1) Refer to Consolidated Statement of Changes in Equity.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
79
20182017 $'000 $'000 Dividend franking account30% franking credits available to shareholders ofEmeco Holdings Limited for subsequent financial years65,146 46,215 The Company
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
14 Discontinued operations
In April 2018, Emeco entered into an agreement to transfer ownership of Emeco Canada Limited to its
local partner, HMER to enable the Company to exit the Canadian business. The FY17 comparative
information has been restated.
In June 2017 the board resolved to exit the Chilean business after a strategic review of the operations.
The business is currently in the process of being wound down and is not expected to materially contribute
to the future earnings of the Group.
The profit from discontinued operations of $6,056,000 (2017: loss of $23,296,000) is attributable entirely
to the owners of the Company.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
80
CanadaChileTotalCanadaChileTotal$'000$'000$'000$'000$'000$'000Profits/(losses) of discontinued operationsRevenue- 4,243 4,243 9,000 27,971 36,971 Other income2,946 - 2,946 1,631 333 1,964 Direct costs/reversal of accrued costs1,090 (4,010) (2,920) 1,310 (13,686) (12,376) Profit on sale of assets- 1 1 290 86 376 Impairment of tangible assets (or reversal of) - Inventories- - - (229) (6,617) (6,846) - Property, plant and equipment2,350 - 2,350 (1,717) (8,614) (10,331) Other expenses(341) (80) (421) (1,030) (7,057) (8,087) Employee expenses (or reversal of)50 - 50 (449) (621) (1,070) Depreciation(58) - (58) (5,973) (9,887) (15,860) Finance income9 - 9 17 280 297 Finance costs(119) (25) (144) (1,828) (1,354) (3,182) Income tax expense- - - (2) (5,150) (5,152) Profit/(loss) for the year5,927 129 6,056 1,020 (24,316) (23,296) 2017201820182017$'000$'000Cash flows from/(used in) discontinued operationNet cash used in operating activities(6,194) 25,554 Net cash from investing activities3,771 26,296 Net cash from financing activities(810) (3,145) Net cash from/(used in) discontinued operation(3,233) 48,705
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
15 Disposal groups and non-current assets held for sale
During the year $14,925,000 of non-current assets were transferred from property, plant and equipment
into non-current assets held for sale. Assets previously classified and classified during the period as held
for sale were further impaired by $11,136,000 to their fair value less cost to sell based on market prices of
similar equipment.
As at 30 June 2018, the non-current assets held for sale comprised assets of $8,007,000 (2017:
$26,421,000). These relate to plant and equipment in Australia and one piece of equipment in Chile. Level
2 fair value hierarchy has been used in determining the fair value with reference to an independent
valuation utilising observable market valuations. The Group is actively marketing these assets and they
are expected to be disposed of within 12 months.
Liabilities directly associated with assets classified as held for sale relate to assets designated as held for
sale that have outstanding finance lease repayments remaining. All remaining payments are due within
six months.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
81
20182017$'000$'000Assets classified as held for saleProperty, plant and equipment - continuing operations7,936 25,834 Property, plant and equipment - discontinuing operations71 587 8,007 26,421 Liabilities directly associated with assets classified as held for saleContinuing operations- (449)- (449) Net assets classified as held for sale8,007 25,972
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
16 Segment reporting
The Group has four (2017: three) reportable segments, as described below, which are the Group’s
strategic business units. The strategic business units offer different products and services, and are
managed separately because they require different operational strategies for each geographic region. For
each of the strategic business units, the managing director and board of directors review internal
management reports on a monthly basis. The following summary describes the operations in each of the
Group’s reportable segments:
Australian
Rental
Australian
Workshops
Provides a wide range of earthmoving equipment to customers in Australia.
Provides maintenance services to customers in Australia.
Canada
(discontinued)
Provides a wide range of maintenance services to customers who are predominately
within Canada. This segment was discontinued in April 2018.
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 Group’s 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 arm’s
length basis.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
82
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
16 Segment reporting (continued)
Information about reportable segments 2018
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
83
AustralianAustralianTotalRentalWorkshops$'000$'000$'000$'000$'000Year ended 30 June 2018Segment revenue355,231 42,773 - 4,243 402,247 Elimination of intersegment revenue- (17,012) - - (17,012) Revenue from external customers355,231 25,761 - 4,243 385,235 Other income1,981 48 2,956 - 4,986 Impairment of tangible assets(11,150) - 2,350 - (8,800) Segment earnings before interest, tax, depreciation and amortisation149,061 2,656 6,105 154 157,976 Impairment of goodwill- - - - - Depreciation and amortisation(68,515) (329) (58) - (68,902) Segment result (EBIT)80,546 2,327 6,047 154 89,074 Corporate overheads(33,234) EBIT55,840 Finance income/(expense) (net)(50,554) Foreign exchange movements(12,617) Net loss before tax(7,331) Tax benefit/(expense)18,707 Net profit/(loss) after tax11,376 Total assets for reportable segments603,145 29,634 - 501 633,280 Unallocated assets82,772 Total group assets 716,052 Net capital expenditure57,612 162 - - 57,774 Total liabilities for reportable segments64,290 12,314 - 662 77,266 Unallocated liabilities485,304 Total group liabilities 562,570 Canada(discont'd)Chile (discont'd)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
16 Segment reporting (continued)
Information about reportable segments 2017
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
84
AustralianAustralianTotalRentalWorkshops$'000$'000$'000$'000$'000Year ended 30 June 2017Segment revenue196,043 - 9,000 27,971 233,014 Elimination of intersegment revenue- - - - - Revenue from external customers196,043 - 9,000 27,971 233,014 Other Income581 - 1,632 347 2,560 Impairment of tangible assets(8,206) - (1,946) (15,231) (25,383) Segment earnings before interest, tax, depreciation and amortisation50,299 - 8,924 (8,205) 51,018 Impairment of goodwill(77,880) - - - (77,880) Depreciation and amortisation(55,573) - (5,974) (9,887) (71,434) Segment result (EBIT)(83,154) - 2,950 (18,092) (98,296) Corporate overheads(16,861) EBIT(115,157) Finance income/(expense) (net)(35,403) Foreign exchange movements(10,079) Net loss before tax(160,639) Tax benefit/(expense)(19,822) Net profit/(loss) after tax(180,463) Total assets for reportable segments 499,614 - 4,038 12,854 516,506 Unallocated assets4,173 Total group assets 520,679 Net capital expenditure(27,962) - 10,852 15,551 (1,559) Total liabilities for reportable segments 60,591 - 6,081 16,405 83,077 Unallocated liabilities 469,609 Total group liabilities 552,686 Canada (discont'd)Chile (discont'd)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
17 Cash and cash equivalents
18 Trade and other receivables
The Group’s exposure to credit risks, currency risks and impairment losses associated with trade and
other receivables are disclosed in note 6.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
85
20182017$'000$'000Cash at bank171,431 16,978 Consolidated20182017$'000$'000CurrentTrade receivables85,772 87,821 Less: Impairment of receivables(352) (200) 85,420 87,621 VAT/GST receivable2,484 3,805 Other receivables2,463 22,109 90,367 113,535 Non-currentOther receivables- 237 - 237 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
19 Derivatives
20 Inventories
(1) During the year ended 30 June 2018 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 $14,000 (2017: $157,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
86
20182017$'000$'000Non-current assetsCross currency interest rate swaps5,709 4,015 5,709 4,015 Current liabilitiesCross currency interest rate swaps(7,866) (8,366) (7,866) (8,366) Consolidated20182017$'000$'000Work in progress - at cost3,930 2,199 Consumables, spare parts - at cost350 222 Total at cost4,280 2,421 Equipment and parts - at NRV (1)615 693 Total inventory4,895 3,114 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
21 Intangible assets
Amortisation and impairment of intangible assets
The amortisation charge and impairment of intangible assets are recognised in the following line item in
the income statement:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
87
20182017$'000$'000Goodwilll- 77,880 Less: Impairment- (77,880) - - Other intangibles - at cost5,130 5,006 Less: Accumulated amortisation(3,136) (2,119) 1,994 2,887 Total intangible assets1,994 2,887 Consolidated20182017$'000$'000Amortisation expense1,017 826 Goodwill impairment- 77,880 Total expense for the year for continuing operations1,017 78,706 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
22 Property, plant and equipment
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
88
Land & buildingsLeasehold improvementsPlant & equipmentLeased plant & equipmentOffice equipmentMotor vehiclesSundry plantTotalCost base at 30 June 20181,767 4,673 745,571 5,711 3,089 7,618 8,169 776,598 Accumulated depreciation at 30 June 2018(1,088) (4,127) (346,077) (2,042) (2,741) (6,041) (6,531) (368,647) 679 546 399,494 3,669 348 1,577 1,638 407,951 Cost base at 30 June 20171,712 4,601 637,588 6,812 2,964 7,462 6,946 668,085 Accumulated depreciation at 30 June 2017(866) (3,916) (297,975) (1,251) (2,516) (5,601) (6,223) (318,348) 846 685 339,613 5,561 448 1,861 723 349,737 Consolidated$'000Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:Land & buildingsLeasehold improvementsPlant & equipmentLeased plant & equipmentOffice equipmentMotor vehiclesSundry plantTotalCarrying amount at the beginning of the year846 685 339,613 5,561 448 1,861 723 349,737 Additions55 58 57,773 16 87 17 819 58,825 Additions from acquisition (Force)- 55 61,891 - 38 316 528 62,828 Depreciation(221) (210) (65,685) (1,613) (225) (556) (334) (68,844) Disposals- (42) - - - (25) (50) (117) Transfer asset class- - (612) 660 - - (48) - Impairment- - - - - (36) - (36) Movement from/(to) assets held for sale- - (14,925) - - - - (14,925) Disposed through sale of Emeco Canada- - - (955) - - - (955) movement PSO stock- - 3,788 - - - - 3,788 Movement capital WIP- - 17,651 - - - 17,651 Carrying amount at the end of the year680 546 399,494 3,669 348 1,577 1,638 407,952 Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:Land & buildingsLeasehold improvementsPlant & equipmentLeased plant & equipmentOffice equipmentMotor vehiclesSundry plantTotalCarrying amount at the beginning of the year2,142 934 264,637 9,198 402 1,127 1,742 280,182 Additions- 19 88,426 264 275 46 46 89,076 Additions from acquisition (Orionstone)- - 85,344 - - 1,686 144 87,174 Additions from acquisition (Andy's)450 - 62,277 6,345 - - 10 69,082 Depreciation(368) (245) (66,540) (1,871) (226) (674) (684) (70,608) Disposals(1,321) (21) - (727) (5) (307) (506) (2,887) Movement from/(to) assets held for sale- - (96,217) (7,573) - - - (103,790) Net movement in rental inventory- - (1,531) - - - - (1,531) Net movement in capital work in progress- - 6,169 - - - - 6,169 Effects of movement in foreign exchange(57) (2) (2,952) (75) 2 (17) (29) (3,130) Carrying amount at the end of the year846 685 339,613 5,561 448 1,861 723 349,737 $'000Consolidated2018$'000Consolidated2017
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
22 Property, plant and equipment (continued)
Depreciation
The Group has changed how it manages depreciation from an individual asset to individual
componentisation of asset level. The reassessments on componentisation that reflects estimated useful
life and residual value have decreased depreciation by $16,772,000 in the current year.
Security
The Group’s assets are subject to a fixed and floating charge under the terms of the new notes issued.
Refer note 24 for further details.
Impairment tests for cash generating units
The Group conducts impairment testing annually at 30 June each year and when impairment indicators
exist. At 30 June 2018, it was determined that no significant impairment indicators existed that warranted
further impairment testing.
At 30 June 2017 it was determined that impairment indicators existed and further impairment testing was
conducted with the recoverable amount of its cash generating units (CGU) calculated using a value in use
and fair value less costs to sell methodologies. CGU’s 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 was 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%. 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 were based on Emeco’s 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% was used over the five years of the forecast.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
89
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
23 Trade and other payables
The Group’s exposure to currency and liquidity risk associated with trade and other payables is disclosed
in note 6.
The Company has also entered into a deed of cross guarantee with certain subsidiaries as described in
note 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 2018
90
20182017$'000$'000CurrentTrade payablesTrade payables31,882 24,491 Other payables and accruals48,312 58,054 80,194 82,545 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
24 Interest bearing liabilities
(1) 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 has an A$40,000,000 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$5,000,000. The bank guarantee facility was reduced from A$30,000,000 during the period to reduce
the holding costs of the unrequired portion of this facility. 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 $3,531,000 of the bank guarantee facility.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
91
20182017$'000$'000CurrentAmortised costOther financing1,857 1,584 Lease liabilities - secured1,155 5,310 3,012 6,894 Non-currentAmortised costUSD notes - secured481,569 462,724 Debt raising costs (1)(16,519) (19,440) Debt raising costs (revolving credit facility)(707) (630) Lease liabilities - secured- 4,491 464,343 447,145 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
24 Interest bearing liabilities (continued)
Secured notes issue
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. 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$100,000,000 net capex for the 12-month period commencing 31 March 2017 and for each subsequent
12-month period. Any unused limit can be carried forward for the subsequent 12-month period. An
agreement was reached on 15 February 2018 to change the limitation on capital expenditure. Prior to this
the notes had 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 subsequent 12 month period. Any unused limit could be
carried forward for the subsequent 12 month period. The Group designated derivatives (cross currency
interest rate swaps) as hedge instruments against this underlying debt.
USD
$’000
FY18
AUD
$’000
FY17
USD
$’000
AUD
$’000
USD notes
Hedged (asset)/liability
Net exposure
US$355,927
-
US$355,927
$481,569
$2,157
$483,726
US$355,927
-
US$355,927
$462,724
$4,351
$467,075
Working capital facilities
The Group has a credit card facility with a limit of A$110,000. The facility is secured via a cash cover
account.
Finance leases
At 30 June 2018, the Group held finance lease facilities totalling A$1,155,000 (2017: A$9,801,000) 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$1,857,000 which matures in January
2019.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
92
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
24 Interest bearing liabilities (continued)
Finance lease liabilities
Finance lease liabilities of the Group are payable as follows:
The Group leases plant and equipment under finance leases. The Group’s lease liabilities are secured by
the leased assets of $3,669,000 (2017: $5,561,000). In the event of default, the leased assets revert to
the lessor.
Reconciliation of liabilities arising from financing activities
Liabilities arising from financing activities are those for which cash flows were or will be classified in the
Group’s consolidated statement of cash flows. The following table details cash and non-cash movements
in the Group’s liabilities arising from financing activities:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
93
PresentPresentFuturevalue ofFuturevalue ofminimumminimumminimumminimumleaseleaseleaseleasepaymentsInterestpaymentspaymentsInterestpayments201820182018201720172017Consolidated$'000$'000$'000$'000$'000$'000Less than one year1,183(28)1,1555,769(459)5,310Between one and five years---4,689(198)4,491More than five years------1,183(28)1,15510,458(657)9,8011 JulyFinancingDisposalFinancialNew debtUnrealised30 June2017cash flowsof subsidiaryexpense*acquiredFX2018$'000$'000$'000$'000$'000$'000$'000Lease liabilities9,801(5,018)(3,903)275--1,155USD notes462,724----18,845481,569Debt raising costs(19,440)(592)-3,513--(16,519)Debt raising costs (revolving credit facility)(630)(487)-410--(707)Other financing1,584(1,584)--1,857-1,857454,039(7,681)(3,903)4,1981,85718,845467,355*inclusive of amortisation expense
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
25 Financing arrangements
The Group has the ability to access the following lines of credit:
(1) The facility of US$360,818,000/A$481,569,000 was fully drawn at 30 June 2018. The Group holds
US$4,890,000/A$6,616,000 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 bank guarantee facility was reduced from A$30,000,000 during the period to reduce the holding
costs of the unrequired portion of this facility.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
94
2018Available facilityFacility utilised at reporting dateFacility not utilisted at reporting dateRevolving credit facility 35,000 - 35,000 Bank guarantee facility (2)5,000 3,531 1,469 USD notes (1)481,569 481,569 - Finance leases1,155 1,155 - Insurance financing1,857 1,857 - Working capital110 110 - 524,691 488,222 36,469 2017Available facilityFacility utilised at reporting dateFacility not utilisted at reporting dateRevolving credit facility 35,000 - 35,000 Bank guarantee facility (2)30,000 2,729 27,271 USD notes (1)462,724 462,724 - Finance leases9,801 9,801 - Insurance financing1,584 1,584 - Working capital866 866 - 539,975 477,704 62,271 Consolidated$'000Consolidated$'000
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
26 Provisions
Defined contribution superannuation funds
The Group makes contributions to defined contribution superannuation funds. The expense recognised
for the year was $4,689,000 (2017: $2,128,000).
27 Share based payments
During the year the Company issued performance shares and performance rights to key management
personnel and senior employees of the Group under its RI (refer note 3(j)(v)).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
95
20182017$'000$'000CurrentEmployee benefits:- annual leave4,900 3,381 - long service leave1,545 903 Provision for restructuring324 2,099 6,769 6,383 Non-currentEmployee benefits - long service leave386 494 Provision for restructuring- 410 386 904 ConsolidatedEmployee benefitsProvision for restructuringTotalBalance at 1 July 20174,778 2,509 7,287 Provisions acquired through Force2,761 - 2,761 Reductions arising from payments(708) (2,185) (2,893) Balance at 30 June 20186,831 324 7,155 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
27 Share based payments (continued)
Long term incentive plan
Grant date / employees
entitled
Matured in FY17:
Performance shares/rights 2014
Matured in FY18:
Performance shares/rights 2015
Number of
instruments
Vesting conditions
24,491,074 3 years service TSR ranking to a
Contractual life
of performance
shares/rights
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%.
19,681,416 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 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
Number of
instruments
Vesting
conditions
Contractual life
of performance
shares/rights
Performance shares/rights 2017
303,603,596 3 years service
3 years
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
96
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
27 Share based payments (continued)
The movement of performance shares and performance rights on issue during the year were as follows:
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 RI’s granted, measured using a value weighted average price (2017:
RI’s granted, measured using a value weighted average price). Expected volatility is estimated by
considering the Company’s historical daily and monthly share price movement and an analysis of
comparable companies. Volatility has not been included in the 2017 and 2018 valuation due to the
incentives not containing market vesting conditions. Market conditions are detailed in note 3(j)(v).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
97
Number ofNumber ofperformanceperformanceshares/rightsshares/rights20182017Outstanding at 1 July211,504,857 49,289,980 Forfeited during the period(7,371,827) (19,544,793) Exercised during the period- (121,843,024) Granted during the period- 303,602,694 Outstanding at 30 June204,133,030 211,504,857 Exercisable at 30 June- -
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
27 Share based payments (continued)
For the Group’s CEO and key management personnel the following applies:
Dividends:
dividends (or shadow dividends) will not be paid on unvested LTI or RI securities;
dividends (or shadow dividends) will accrue on unvested LTI securities and will only be paid at the
time of vesting on those LTI securities that vest, provided all vesting conditions are met; and
Absolute change in control:
the proportion of vesting LTI 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.
Employee expenses
(1) 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
98
in AUD20182017Performance shares/rights10,816,362 6,401,305 Total expense recognised as employee costs (1)10,816,362 6,401,305 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
28 Commitments
(a) Operating lease commitments
The Group leases the majority of their operating premises. The terms of the lease are negotiated in
conjunction with the Group’s internal and external advisors and are dependent upon market forces.
During the year ended 30 June 2018 an amount of $14,145,000 was recognised as an expense in
profit or loss in respect of operating leases (2017: $17,954,000).
(b) Capital commitments
The Group has entered into commitments for purchases of fixed assets, primarily rental fleet assets,
with a value of $12,050,000 (2017: $Nil) which are expected to settle at various dates over the next
twelve months.
29 Contingent liabilities
Guarantees
The Group has provided bank guarantees in the amount of $3,531,000 (2017: $4,172,000) in relation to
obligations under operating leases and rental premises.
Indonesia
Since the Group announced it would exit its Indonesian operations, the Indonesian tax office commenced
routine VAT and Corporate income tax audits. As a consequence the Indonesian tax office have issued
an assessment which the Group have disputed. Under local laws an assessment does not become final
until all appeal avenues have been exhausted.
The process to liquidate the Indonesian entity has commenced and the Group continues to manage its
on-going tax and legal obligations in Indonesia. The Group does not believe any potential exposure exists
in relation to the Indonesian entity.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
99
20182017$'000$'000Future non-cancellable operating leases not provided forin the finanical statements and payable:Less than one year11,707 14,145 Between one and five years12,103 10,589 More than five years- - 23,810 24,734 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
30 Notes to the statement of cash flows
(i) Reconciliation of cash
For the purposes of the statements of cash flow, cash includes cash on hand and at bank and short
term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as
shown in the statements of cash flows is reconciled to the related items in the statements of financial
position as follows:-
(ii) Reconciliation of net profit to net cash provided by operating activities
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
100
20182017Note$'000$'000Cash assets17171,431 16,978 Consolidated20182017Note$'000$'000Net profit/(loss) - continuing operations5,320 (157,168) Add/(less) items classified as investing/financing activities: Net profit on sale of non-current assets7(755) (504) Acquisition costs363,836 14,445 Add/(less) non-cash items: Amortisation211,017 826 Depreciation868,844 54,747 Amortisation of borrowing costs using effective interest rate84,117 5,078 Write off previous deferred borrowing costs8- 5,778 (Gain)/loss on hedge6- 1,349 Discount on refinanced debt8- (20,359) Shares issued to BDCM8- 10,253 Withholding tax expense8- 767 Foreign exchange (gain)/loss812,617 10,029 Impairment losses on tangible assets811,150 8,206 Bad debts8339 24 Provision for doubtful debts/(reversal)836 (591) Impairment of goodwill- 77,880 Other non-cash items and reclassifications4,265 (9,169) Equity settled share based payments810,816 6,164 (Increase)/decrease in deferred tax asset(21,396) 14,671 Net cash flow from operating activities of discontinued operations(6,194) 25,554 Net cash from operating activities before change in assets/(liabilities) adjusted for assets and (liabilities) acquired94,012 47,980 (Increase)/decrease in trade and other receivables35,893 (49,228) (Increase)/decrease in inventories(1,781) (2,712) Increase/(decrease) in payables(3,821) 17,047 Increase/(decrease) in provisions1,230 509 Net cash from/(used in) operating activities125,533 13,596 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
31 Controlled entities
(a) Particulars in relation to controlled entities
Parent entity
Emeco Holdings Limited
Controlled entities
Pacific Custodians Pty Ltd as trustee for Emeco
Country
of
incorporation
Ownership interest
2017
2018
%
%
Employee Share Ownership Plan Trust
Emeco Pty Limited
Emeco International Pty Limited
EHL Corporate Pty Ltd
Emeco Parts Pty Ltd
Emeco Finance Pty Ltd
Andy’s Earthmovers (Asia Pacific) Pty Ltd
Orionstone Holdings Pty Ltd
Orionstone Pty Ltd
Ironstone Group Pty Ltd
Orion (WA) Pty Ltd
RPO Australia Pty Ltd
Force Equipment Pty Ltd
Emeco Equipment (USA) LLC
Emeco Canada Ltd
Emeco (UK) Limited
Emeco International Europe BV
Emeco Europe BV
Emeco BV
PT Prima Traktor IndoNusa
Emeco Holdings South America SpA
Enduro SpA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Canada
United Kingdom
Netherlands
Netherlands
Netherlands
Indonesia
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
100
100
100
100
100
100
(b) Acquisition of entities in the current year
The following entity was acquired in the current year:
Force Equipment Pty Ltd
Refer to note 36 for details on the acquisition of this entity.
(c) Acquisition of entities in the prior year
The following entities were acquired in the prior year:
Andy’s Earthmovers (Asia Pacific) Pty Ltd
Orionstone Holdings Pty Ltd
Orionstone Pty Ltd
Orion (WA) Pty Ltd
RPO Australia Pty Ltd
Ironstone Group Pty Ltd
(d) Disposals of entities in the current year
The following entity was disposed of in the current year:
Emeco Canada Ltd
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
101
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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
Darren Yeates
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
Other executives
Position
Thao Pham
Justine Lea
Chief Strategy Officer
Chief Financial Officer
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
102
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
32 Key management personnel disclosure (continued)
Key management personnel compensation
The key management personnel compensation is as follows:
Remuneration of key management personnel by the Group
The compensation disclosed above represents an allocation of the key management personnel’s
compensation from the Group in relation to their services rendered to the Company.
Individual directors and executives compensation disclosures
Information regarding 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 directors’ report on pages 20 to 32.
Apart from the details disclosed in this note, no director has entered into a material contract with the
Company or the Group since the end of the previous financial year and there were no material contracts
involving directors’ interests existing at year end.
Equity Instruments
Shares and rights over equity instruments granted as compensation under 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 Company’s 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.
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.
There were no transactions between the Group and these related entities during the period (FY17 nil).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
103
In AUD20182017Short term employee benefits3,190,490 6,008,791 Other long term benefits- - Post-employment benefits216,032 210,262 Termination benefits- - Equity compensation benefits4,096,165 1,137,258 7,502,687 7,356,311 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 arm’s length rate.
Ultimate parent entity
Emeco Holdings Limited is the ultimate parent entity of the Group.
34 Subsequent events
On 2 July 2018, the Company acquired Matilda Equipment Holdings Pty Ltd and its subsidiary Matilda
Equipment Pty Ltd. Refer to note 36 for further details on the transaction.
No other significant events have occurred subsequent to the year ended 30 June 2018.
35 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 30 June 2018 was based on the profit/(loss) attributable to
ordinary shareholders of $11,376,000 (2017: ($180,463,000)) and a weighted average number of ordinary
shares outstanding less any treasury shares for the year ended 30 June 2018 of 2,617,203,727 (2017:
967,114,525).
Profit attributed to ordinary shareholders
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
104
20182017ContinuingDiscontinuedContinuingDiscontinuedoperationsoperationsTotaloperationsoperationsTotal$'000$'000$'000$'000$'000$'000Profit/(loss) for the year5,320 6,056 11,376 (157,167) (23,296) (180,463) Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
35 Earnings per share (continued)
Weighted average number of ordinary shares
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2018 was based on the profit/(loss) attributable
to ordinary shareholders of $11,376,000 (2017: ($180,463,000)) and a weighted average number of
ordinary shares outstanding less any treasury shares during the financial year ended 30 June 2018 of
2,821,336,757 (2017: 1,043,671,000).
Profit attributed to ordinary shareholders (diluted)
Weighted average number of ordinary shares (diluted)
Comparative information
The average market value of the Company’s shares for the purpose of calculating the dilutive effect of
ordinary share was based on quoted market prices for the period during which the shares were
outstanding.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
105
20182017'000'000Issued ordinary shares at 1 July2,226,170 557,569 Effect of shares issued during the period336,349 457,628 Effect of vested employee share plans54,685 3,460 Effect of purchased treasury shares - (51,542) Weighted average number of ordinary shares at 30 June2,617,204 967,115 Consolidated20182017ContinuingDiscontinuedContinuingDiscontinuedoperationsoperationsTotaloperationsoperationsTotal$'000$'000$'000$'000$'000$'000Profit/(loss) attributed to ordinary shareholders (basic)5,320 6,056 11,376 (157,167) (23,296) (180,463) Consolidated20182017'000'000Issued ordinary shares at 1 July2,226,170 557,569 Effect of shares issued during the period336,349 457,628 Effect of vested employee share plans54,685 3,460 Effect of unvested employee share plans204,133 76,556 Effect of purchased treasury shares - (51,542) Weighted average number of ordinary shares (diluted) at 30 June2,821,337 1,043,671 Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
36 Business combinations
Force Equipment Pty Ltd
On 30 November 2017, Emeco Holdings Limited acquired 100% of the shares in Force Equipment Pty Ltd
(Force) for total consideration of $72,643,000 settled by an upfront cash payment of $69,940,000, and an
additional cash payment of $2,703,000 in relation to a working capital adjustment paid in February 2018.
The values identified in relation to the acquisition are provisional as at reporting date 30 June 2018. Details
of the acquisition are as follows:
Impact of acquisitions on the results of the Group
The Group has fully integrated the acquisition of the business from the acquisition date and is therefore
unable to accurately quantify the additional revenue and earnings contributed to the Group by the acquired
business.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
106
Force Equipment Pty Ltd$'000Cash assets3,395 Trade and other receivables15,168 Inventories3,538 Prepayments506 Plant and equipment62,828 Tax assets781 Trade and other payables(10,812) Provisions(2,761) Net assets /(liabilities) acquired72,643 Acquisition date fair value of consideration transferred72,643 Representing:Cash69,940 Cash consideration paid in respect of working capital adjustment2,703 Total72,643 Acquisition costs expensed to profit or loss1,912 Cash used to acquire the business, net of cash aquired:Acquisition date fair value of consideration transferred72,643 Less: cash and cash equivalents(3,395) Net cash paid69,248
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
36 Business combinations (continued)
Matilda Equipment Pty Ltd
Subsequent to the end of the reporting period, on 2 July 2018, Emeco Holdings Limited acquired 100%
of the shares in Matilda Equipment Holdings Pty Ltd (Matilda) and its subsidiary Matilda Equipment Pty
Ltd for total consideration of $94,295,000 settled by an upfront cash payment of $93,312,000 and an
additional estimated cash payment of $983,000 in relation to a working capital adjustment to be paid in
September 2018.
The values identified in relation to the acquisition are provisional as at reporting date 30 June 2018. A
valuation of intangible assets has yet to be finalised and may change the value recognised in relation to
Goodwill and Intangibles. Details of the acquisition are as follows:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
107
Matilda Equipment Pty Ltd$'000Cash assets549 Trade and other receivables6,861 Inventories580 Prepayments177 Plant and equipment80,154 Goodwill/intangibles9,477 Tax assets- Trade and other payables(3,344) Provisions(159) Net assets /(liabilities) acquired94,295 Acquisition date fair value of consideration transferred94,295 Representing:Cash93,312 Cash consideration expected to be paid in respect of working capital adjustment983 Total94,295 Acquisition costs expensed to profit or loss1,924 Cash used to acquire the business, net of cash aquired:Acquisition date fair value of consideration transferred94,295 Less: cash and cash equivalents(549) Net Cash paid93,746
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
36 Business combinations (continued)
Andy’s Earthmovers (Asia Pacific) Pty Ltd
On 31 March 2017, Emeco Holdings Limited acquired 100% of the shares in Andy’s Earthmovers (Asia
Pacific) Pty Ltd (Andy’s) 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 Andy’s ($4,947,000) and Orionstone
($72,933,000) and was allocated to the Australia cash generating unit (CGU). Goodwill arose in the
acquisition of Andy’s and Orionstone due to an increase in the Company’s 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 $77,880,000 was recognised in the consolidated statement of profit or loss and
other comprehensive income during the period.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
108
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
36 Business combinations (continued)
The values identified in relation to the acquisition are final as at reporting date 30 June 2018. Details of
the acquisition are as follows:
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
109
Andy'sOrionstone Earthmovers Holdings(Asia Pacific) Pty Ltd Pty LtdTotal$'000$'000$'000Cash assets159 783 942 Trade and other receivables15,439 11,740 27,179 Inventories156 350 506 Prepayments12 54 66 Plant and equipment64,557 91,699 156,256 Tax assets/(liabilites)2,202 (3,063) (861) Investments799 - 799 Trade and other payables(9,049) (14,403) (23,452) Provisions(905) (343) (1,248) Interest bearing liabilities(69,529) (141,957) (211,486) Net assets /(liaibilities) acquired3,841 (55,140) (51,299) Goodwill4,947 72,933 77,880 Acquisition date fair value of consideration transferred8,788 17,793 26,581 Representing:Emeco Holdings Limited shares8,788 17,793 26,581 Acquisition costs expensed to profit or loss4,776 9,669 14,445 Cash used to acquire the business, net of cash aquired:Acquisition date fair value of consideration transferred8,788 17,793 26,581 Less: cash and cash equivalents(159) (783) (942) Less: Emeco Holdings Limited shares(8,788) (17,793) (26,581) Net Cash received159 783 942
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
37 Parent entity disclosure
As at and throughout the financial year ending 30 June 2018 the parent entity (the ‘Company’) of the
Group was Emeco Holdings Limited.
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 2018
110
20182017$'000$'000Result of the parent entityProfit/(loss) for the period(17,033) (63,730) Other comprehensive income- - Total comprehensive income for the period(17,033) (63,730) Financial position of parent entity at year endCurrent assets20 20 Non-current assets412,012 322,589 Total assets412,032 322,609 Current liabilities- - Non-current liabilities- - Total liabilities- - Total equity of the parent entity comprising of:Share capital915,224 749,117 Share based payment reserve28,207 23,145 Reserve for own shares(33,026) (39,074) Retained earnings(498,373) (410,579) Total equity412,032 322,609 Company
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 directors’ reports.
It is a condition of the class order that the Company and each of the subsidiaries enter into a deed of cross
guarantee. The effect of the deed is that the Company guarantees to each creditor payment in full of any
debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act
2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event
that after six months any creditor has not been paid in full. The subsidiaries have also given similar
guarantees in the event that the Company is wound up.
The subsidiaries subject to the deed are:
Emeco Pty Ltd
Emeco International Pty Limited
Andy’s Earthmovers (Asia Pacific) Pty Ltd
Orionstone Holdings Pty Ltd
Orionstone Pty Ltd
Force Equipment Pty Ltd
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
111
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
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 2018 is set out
as follows:
Statement of profit or loss and other comprehensive income and retained earnings
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
112
20182017$'000$'000Revenue380,992 196,043 Cost of sales(271,277) (124,126) Gross profit109,715 71,917 Operating expense(63,707) (77,002) Other income2,251 581 Impairment of goodwill- 77,880 Finance income492 34,454 Finance costs(50,900) (62,902) Impairment of assets(11,150) (157) Impairment of investment- (31,690) Profit before tax(13,299) 13,080 Tax expense18,707 (14,671) Net profit after tax5,408 (1,591) Other comprehensive income(3,104) (1,003) Total comprehensive income for the period(3,104) (1,003) Retained earnings at beginning of year(571,126) (569,535) Retained earnings at end of year(565,718) (571,126) Attributable to:Equity holders of the Company(565,718) (571,126) Profit/(loss) for the period5,408 (1,591) Consolidated
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2018
38 Deed of cross guarantee (continued)
Statement of financial position
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
113
20182017$'000$'000Current assetsCash and cash equivalents171,173 12,332 Trade and other receivables93,063 107,022 Derivatives- - Inventories4,895 3,515 Assets held for sale7,937 25,833 Total current assets277,068 148,702 Non-current assetsTrade and other receivables17,808 119,524 Derivatives5,709 4,015 Intangible assets1,994 2,888 Investments186,661 157,173 Property, plant and equipment407,951 348,783 Deferred tax assets22,177 12,218 Total non-current assets642,300 644,601 Total assets919,368 793,303 Current liabilitiesTrade and other payables81,048 62,359 Derivatives7,866 9,149 Interest bearing liabilities3,012 3,714 Provisions6,881 5,136 Total current liabilities98,807 80,358 Non-current liabilitiesInterest bearing liabilities464,343 456,122 Deferred tax liabilities- 11,311 Provisions386 - Total non-current liabilities464,729 467,433 Total liabilities563,536 547,791 Net assets355,832 245,512 EquityIssued capital915,224 749,117 Share based payment reserve28,207 22,935 Reserves(21,881)44,586 Retained earnings/(losses)(565,718)(571,126)Total equity attributable to equity holders of the parent355,832 245,512 Consolidated
Emeco Holdings Limited and its Controlled Entities
Directors’ Declaration
1.
In the opinion of the directors of Emeco Holdings Limited (the ‘Company’):
(a)
the consolidated financial statements and notes as set out on pages 34 - 113, and
remuneration report in the directors’ report, set out on pages 20 to 32 are in accordance with
the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2018 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.
2.
3.
4.
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 2018.
The directors draw attention to note 2(a) to the consolidated financial statements, which includes a
statement of compliance with international financial reporting standards.
Dated at Perth, 20th day of August 2018
Signed in accordance with a resolution of the directors:
Ian Testrow
Managing Director
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
114
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Deloitte Touche Tohmatsu
Tower 2, Brookfield Place,
123 St Georges Tce,
Perth WA 6000, Australia
DX 206
Tel: +61 (0) 8 9365 7000
Fax: +61 (0) 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 2018,
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 2018 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
Key Audit Matter
How the scope of our audit responded to the Key
Audit Matter
Acquisition Accounting
On 30 November 2017 Emeco Holdings
Limited acquired Force Equipment 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 and
determining the allocation of purchase
consideration to goodwill.
Recoverability of deferred tax assets
The Group has recognised $22.4 million of
deferred tax assets as at 30 June 2018 as
per note 12.
Australian Accounting Standards require
deferred tax assets to be recognised only to
the extent that it is probable that sufficient
future taxable profits will be generated in
order for the benefits of the deferred tax
assets to be realised.
We focussed on this matter due to the
significant judgement required to assess the
probability that future taxable profits will be
available against which unused tax losses
can be utilised profits.
Our procedures included, but were not limited to:
•
•
•
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 Force
Equipment’s working capital balances and the fair
value adjustments.
We also assessed the appropriateness of the
disclosures in note 36 to the financial statements.
We assessed the Group’s ability to utilise the deferred
tax assets recognised as at 30 June 2018, based on
the extent to which they can be recovered by future
taxable profits, through:
•
•
•
•
•
•
Understanding the process that management
undertakes to develop the model for future
taxable profit;
Comparing profit forecasts to Board approved
business plans;
Assessing historical forecasting accuracy by
comparing actual performance to budgets;
Testing on a sample basis management’s model
for future taxable profit for mathematical
accuracy;
In conjunction with our tax experts evaluating
whether the unused tax losses are available to the
Group and whether the profit forecasts had been
appropriately adjusted for the differences between
accounting profits and taxable profits; and
recalculating deferred tax asset balances which
comprise a combination of timing differences
between tax and accounting values, and tax
losses.
We also assessed the appropriateness of the
disclosures in note 12 to the financial statements.
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:
•
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,
• 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.
•
•
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.
•
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.
• 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 20 to 32 of the Directors’ Report for
the year ended 30 June 2018.
In our opinion, the Remuneration Report of Emeco Holdings Limited, for the year ended 30 June
2018, 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, 20 August 2018
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
Financial calendar
The annual general meeting of Emeco Holdings Limited will be held at Baker McKenzie, Tower One -
International Towers Sydney, 100 Barangaroo Avenue, Barangaroo NSW on Thursday, 15 November 2018
commencing at 1.00pm (Sydney 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*
15 November 2018
31 December 2018
February 2019
30 June 2019
Details regarding substantial holders of the Company’s ordinary shares as at 1 August 2018, as disclosed in
the substantial holding notices given to the Company, 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
661,286,351
23.47
Paradice Investment Management Pty Ltd
267,847,315
8.565
First Samuel Limited
Black Crane Asia Opportunities Fund
166,939,396
110,839,604
5.25
4.55
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
119
Emeco Holdings Limited and its Controlled Entities
Shareholder information
Distribution of shareholders
As at 1 August 2018, there were 5,818 holders of the Company’s ordinary shares. The distribution as at
1 August 2018 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
572
2,170
929
1,405
742
5,818
Securities
3,092,294,538
75,070,762
7,167,685
4,001,850
324,162
3,178,858,997
% Issued capital
97.28
2.36
0.23
0.13
0.01
100.00
The number of security investors holding less than a marketable parcel of 1,449 securities ($0.345 on
1 August 2018) is 920 and they hold 540,229 securities.
20 largest shareholders
The names of the 20 largest holders of the Company’s ordinary shares as at 1 August 2018 are:
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Name
J P MORGAN NOMINEES AUSTRALIA LIMITED
BDCM OPPORTUNITY FUND IV LP
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
PACIFIC CUSTODIANS PTY LIMITED
BDCM OPPORTUNITY FUND III LP
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED
CS FOURTH NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED - A/C 2
UBS NOMINEES PTY LTD
CS THIRD NOMINEES PTY LIMITED
BLACK DIAMOND CREDIT STRATEGIES MASTER
FUND LTD
NATIONAL NOMINEES LIMITED
ELPHINSTONE HOLDINGS PTY LTD
BOND STREET CUSTODIANS LTD
BNP PARIBAS NOMINEES PTY LTD
DENNIS BUSINESS ASSETS PTY LTD
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
Equity securities % Issued capital
730,371,270
597,003,547
423,036,155
378,523,607
201,547,184
135,081,471
117,051,449
62,596,318
54,272,441
42,248,708
41,772,732
22,318,100
17,993,424
16,069,080
11,640,603
10,787,284
8,948,783
5,902,755
5,373,041
5,160,417
22.98
18.78
13.31
11.91
6.34
4.25
3.68
1.97
1.71
1.33
1.31
0.70
0.57
0.51
0.37
0.34
0.28
0.19
0.17
0.16
120
Emeco Holdings Limited and its Controlled Entities
Shareholder information
Voting rights of ordinary shares
Voting rights of shareholders are governed by the Company’s constitution. The constitution provides that on a
show of hands every member present in person or by proxy has one vote and on a poll every member present
in person or by proxy has one vote for each fully paid ordinary share held by the member.
Closing share price ($)
Unquoted equity securities
As at 1 August 2018, there are 73,646,355 performance rights on issue to eight participants pursuant to the
Company’s employee incentive plans.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2018
121
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
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