Annual
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2023
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Head office
T +61 8 9420 0222
E corporate@emecogroup.com
emecogroup.com
Level 3, 133 Hasler Road, Osborne Park WA 6017, Australia
PO Box 1341, Osborne Park DC WA 6916, Australia
Emeco Holdings Limited and its Controlled Entities
ABN 89 112 188 815
Annual Financial Report
30 June 2023
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
1
Emeco Holdings Limited and its Controlled Entities
ABN 89 112 188 815
Annual Financial Report
30 June 2023
Contents
Chairman’s Report........................................................................................................ 33
Managing Director’s Report ......................................................................................... 5
Operating and Financial Review .................................................................................. 8
Segment Business Overview ..................................................................................... 13
Business Risks ........................................................................................................... 14
Financial Report.......................................................................................................... 18
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
1
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
2
Chairman’s Report
Dear Shareholders
I am pleased to present the Emeco Holdings Limited Annual Report for the 2023 financial year (FY23).
FY23 has been another active year for Emeco as strong conditions in commodity markets fuelled
exceptional demand and activity levels across our business. Our robust business model assisted our highly
capable management team to meet the ongoing challenges of managing cost inflation and labour shortages
in a dynamic equipment market.
On behalf of the Board, I would like to thank the entire Emeco team for their ongoing commitment to
providing the highest quality rental fleet and services to our customers across each of our businesses.
Their ability to work proactively with our customers to deliver solutions that add value to their operations
remains core to the ongoing success of our Company.
Operational & Financial Performance
Safety remains Emeco’s highest priority and our performance in good safety is something we are very
proud of. Regrettably, during the year, we reported our first Lost Time Injury (LTI) in over seven years and
this saw our Total Recordable Injury Frequency Rate (TRIFR) increase to 2.9. We are never complacent
about safety, and we learn from these experiences and have reviewed our processes and addressed the
risks which led to this event.
Our financial performance can be considered a story of two halves. Pleasingly, we delivered a strong
turnaround performance in the second half, with growth in revenue and earnings across each of our
businesses. This followed a disappointing start to the year which was negatively impacted by the
underperformance of our Pit N Portal (PNP) business, as reported in our half year results.
On a very positive note, the Group reported revenue of $874.9 million for the year, an increase of 16% on
the prior period, and Operating EBITDA of $250.4 million which was largely in line with FY22.
Credit issues reported in the first half have been addressed with the resetting of the PNP project portfolio,
increased resources and the implementation of enhanced processes surrounding customer selection and
credit management.
Sustainability
Emeco strives to create a sustainable business which continues to deliver creative solutions for our
customers, a family feel for our people, support for our local communities, and value for our investors.
The Board endorsed Emeco’s inaugural Environmental, Social and Governance (ESG) Strategy in
February 2023. An ESG Committee was established in March to discuss, shape and measure initiatives
of the Strategy and to assist with establishing systems to report on progress and compliance with Task
Force on Climate-related Financial Disclosures (TCFD).
This work included:
-
identifying the relevant data required to be collected as well as implementing processes to enhance
our compliance reporting;
the formation of a Reconciliation Action Plan (RAP) working group in June 2023 to assist with the
implementation of the Company’s inaugural RAP, which is currently being drafted with
Reconciliation Australia;
development of the Company’s climate change position, regarding Scope 1 and Scope 2 emissions;
and
investing in technology development to support our lowering of carbon emissions for our customers.
-
-
-
Balance Sheet and Capital Management
Emeco remains committed to prudent capital management and disciplined capital allocation decision
making across our sustaining, replacement, and growth investment initiatives. The strength of our balance
sheet and our continuing strong cash flow generation allows us to return funds to our shareholders whilst
providing flexibility to sustain and grow our Company.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
3
Chairman’s Report
Dear Shareholders
I am pleased to present the Emeco Holdings Limited Annual Report for the 2023 financial year (FY23).
FY23 has been another active year for Emeco as strong conditions in commodity markets fuelled
exceptional demand and activity levels across our business. Our robust business model assisted our highly
capable management team to meet the ongoing challenges of managing cost inflation and labour shortages
in a dynamic equipment market.
On behalf of the Board, I would like to thank the entire Emeco team for their ongoing commitment to
providing the highest quality rental fleet and services to our customers across each of our businesses.
Their ability to work proactively with our customers to deliver solutions that add value to their operations
remains core to the ongoing success of our Company.
Operational & Financial Performance
Safety remains Emeco’s highest priority and our performance in good safety is something we are very
proud of. Regrettably, during the year, we reported our first Lost Time Injury (LTI) in over seven years and
this saw our Total Recordable Injury Frequency Rate (TRIFR) increase to 2.9. We are never complacent
about safety, and we learn from these experiences and have reviewed our processes and addressed the
risks which led to this event.
Our financial performance can be considered a story of two halves. Pleasingly, we delivered a strong
turnaround performance in the second half, with growth in revenue and earnings across each of our
businesses. This followed a disappointing start to the year which was negatively impacted by the
underperformance of our Pit N Portal (PNP) business, as reported in our half year results.
On a very positive note, the Group reported revenue of $874.9 million for the year, an increase of 16% on
the prior period, and Operating EBITDA of $250.4 million which was largely in line with FY22.
Credit issues reported in the first half have been addressed with the resetting of the PNP project portfolio,
increased resources and the implementation of enhanced processes surrounding customer selection and
credit management.
Sustainability
Emeco strives to create a sustainable business which continues to deliver creative solutions for our
customers, a family feel for our people, support for our local communities, and value for our investors.
The Board endorsed Emeco’s inaugural Environmental, Social and Governance (ESG) Strategy in
February 2023. An ESG Committee was established in March to discuss, shape and measure initiatives
of the Strategy and to assist with establishing systems to report on progress and compliance with Task
Force on Climate-related Financial Disclosures (TCFD).
This work included:
our compliance reporting;
Reconciliation Australia;
and
-
-
-
-
the formation of a Reconciliation Action Plan (RAP) working group in June 2023 to assist with the
implementation of the Company’s inaugural RAP, which is currently being drafted with
development of the Company’s climate change position, regarding Scope 1 and Scope 2 emissions;
investing in technology development to support our lowering of carbon emissions for our customers.
Strong cash conversion, particularly in the second half, allowed the Group to continue to fund its capital
investment programme, which included $21.8 million in growth capital expenditure, the assets of which
have now been deployed into projects.
The Board remains committed to its capital management policy of returning 25-40% of Operating NPAT to
shareholders via dividend payments and/or share buy-backs. During the year, Emeco returned $20.4
million to shareholders by way of the payment of 2.5 cents per share of fully franked dividends and the
repurchase of $7.3 million in shares.
The Board has approved a final fully franked dividend of 1.25 cents per share, bringing total fully franked
dividends with respect to the FY23 financial year to 2.5 cents per share. In addition to this, the Board has
also allocated $7.3 million to repurchase additional shares on market in 1H24, bringing total shareholder
payouts with respect to FY23 to ~35% of Operating NPAT.
Emeco’s balance sheet remains strong with net leverage of 1.1x, which is largely in line with the Board’s
long-term target of 1.0x. The Group also maintains lines of undrawn funding and cash which provide the
flexibility to respond to the changing needs of the business and to pursue opportunities for growth. As at
30 June 2023, the Group held over $140.0 million in available liquidity.
In February 2023, Fitch Ratings upgraded their long-term issuer default rating to BB- from B+. In doing so,
they noted the improvement in Emeco’s revenue visibility and defensibility through diversifying our service
offering, increasing contract tenures, and improving customer and commodity diversification. This is a
positive reflection on the work that has been done by our management team, pursuant to our well-
articulated strategy.
Board & Key Management Personnel Changes
The year saw the retirement of Mr Keith Skinner from our Board. Keith made an important contribution to
the Group’s governance and processes, particularly through his roles as Chair of the Audit and Risk
Management Committee and as a member of the Remuneration & Nomination Committee. On behalf of
the Board and shareholders I thank Keith and wish him well in retirement.
In June of this year, the Company welcomed the appointment of Mr James Walker III to the Board. James
brings significant financial and commercial experience from his 30-year career in executive leadership,
asset management and investment banking. He also brings extensive strategic experience from a
successful career where he has been instrumental in delivering growth and value for shareholders and
investors.
During the year our CFO, Ms Thao Pham also announced her retirement after over a decade of service to
Emeco in various roles. Thao’s contribution over the past decade has been exceptional, having played an
instrumental role in the re-establishment of Emeco as Australia’s leading equipment rental and services
Company in Australia. On behalf of the Board, I would like to thank Thao for her dedication and contribution.
The Board was pleased to announce the appointment of Ms Theresa Mlikota as our new CFO. Theresa,
who commenced in May, is a well credentialled finance executive with deep industry knowledge and we
are excited by the leadership and contribution she is already making to the Group.
identifying the relevant data required to be collected as well as implementing processes to enhance
Thank You
The Board continues to be confident in the outlook for Emeco. The Group is in a strong financial position
and we have a clear strategy to deliver sustainable growth and create value for our shareholders.
I would like to thank my fellow Board members for their ongoing contribution and to our Managing Director
& CEO, Ian Testrow, and his senior leadership team for their ongoing commitment to deliver growth and
shareholder value.
I would also like to thank our shareholders for your continued support.
Balance Sheet and Capital Management
Emeco remains committed to prudent capital management and disciplined capital allocation decision
making across our sustaining, replacement, and growth investment initiatives. The strength of our balance
sheet and our continuing strong cash flow generation allows us to return funds to our shareholders whilst
providing flexibility to sustain and grow our Company.
Peter Richards
Chairman
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
3
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
4
Managing Director’s Report
Dear Shareholders
It has been both an exciting and challenging year for Emeco. Our results were delivered against a backdrop
of record demand for our equipment and services but tested by ongoing inflationary pressures across the
business. Our Pit N Portal (PNP) portfolio was successfully de-risked and reset, including the renegotiation
of rates and contractual terms with a key customer.
The business is resilient, and our dedicated team continues to tackle each challenge and create new
opportunities, always motivated by delivering strong returns for our shareholders.
Health & Safety
The health and safety of our people is paramount. Emeco remains committed to providing a healthy and
safe workplace with a focus on continually reducing our Total Recordable Injury Frequency Rate (TRIFR).
Unfortunately, during the year we recorded the Company’s first Lost Time Injury (LTI) in over seven years.
This incident contributed to an increase in the Group’s TRIFR to 2.9. Whilst we consider this result
unacceptable, it is a timely reminder that when it comes to safety, we can never be complacent.
Safeguarding the lives and health of our people is integral to Emeco’s operational discipline, and we
continue to embed a zero-harm objective across all our sites. We have developed a Health, Safety,
Environment and Training (HSET) Strategic Plan that is overseen by the General Manager, HSET and the
members of the HSET Leadership Team.
We are committed to re-establishing our strong track record of improving safety and will implement
improvements as part of our broader HSET strategy.
Operating and Financial Performance
During the year, the Group delivered record revenue of $874.9 million, up 16%, driven by strong rental and
workshop demand and an increase in fully maintained projects.
Our second half earnings recovered strongly, after a disappointing first half. Second half Operating EBITDA
of $136.9 million was an increase of 21% on the first half, and a 6% increase on the prior corresponding
period, reflecting earnings growth across each of our businesses. Our first half earnings were impacted by
the poor performance of our PNP business. Full year Operating EBITDA of $250.4 million was just ahead
of FY22.
Operating NPAT of $59.1 million and reported NPAT of $41.3 million, were both down on last year driven
primarily by the underperformance of the PNP business as well as higher interest costs.
Our Rental business revenue grew by 19% over the year as we deployed fleet to meet strong customer
demand and increased the number of fully maintained projects, in line with our strategy. Gross fleet
utilisation increased to 93% driven by this new work. Operating EBITDA increased by $19.5 million or 8%
on FY22. Margins declined from FY22 as a result of the increase in fully maintained projects, use of cross-
hired fleet to meet customer demand and ongoing parts and labour cost inflation. Margins stabilised during
the second half with the application of contractual and out-of-cycle pricing and fleet deployment.
Our Force business continued its strong performance, driven by a significant increase in retail customer
activity, whilst also supporting increased internal rebuild and maintenance activity, with 125 equipment
rebuilds completed during the year. Revenue from retail customers increased 73% and Operating EBITDA
increased 30% compared to FY22.
Our mid-life asset rebuild model continues to underpin our ability to replace and grow our Rental fleet to
meet customer demand in a capital and cost-efficient manner, maximising our financial returns. We have
also significantly increased the proportion of Force built components to both counter parts price inflation
and to ensure security of supply in a challenging market.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
5
Managing Director’s Report
Dear Shareholders
It has been both an exciting and challenging year for Emeco. Our results were delivered against a backdrop
of record demand for our equipment and services but tested by ongoing inflationary pressures across the
business. Our Pit N Portal (PNP) portfolio was successfully de-risked and reset, including the renegotiation
of rates and contractual terms with a key customer.
The business is resilient, and our dedicated team continues to tackle each challenge and create new
opportunities, always motivated by delivering strong returns for our shareholders.
Health & Safety
The health and safety of our people is paramount. Emeco remains committed to providing a healthy and
safe workplace with a focus on continually reducing our Total Recordable Injury Frequency Rate (TRIFR).
Unfortunately, during the year we recorded the Company’s first Lost Time Injury (LTI) in over seven years.
This incident contributed to an increase in the Group’s TRIFR to 2.9. Whilst we consider this result
unacceptable, it is a timely reminder that when it comes to safety, we can never be complacent.
Safeguarding the lives and health of our people is integral to Emeco’s operational discipline, and we
continue to embed a zero-harm objective across all our sites. We have developed a Health, Safety,
Environment and Training (HSET) Strategic Plan that is overseen by the General Manager, HSET and the
members of the HSET Leadership Team.
We are committed to re-establishing our strong track record of improving safety and will implement
improvements as part of our broader HSET strategy.
Operating and Financial Performance
During the year, the Group delivered record revenue of $874.9 million, up 16%, driven by strong rental and
workshop demand and an increase in fully maintained projects.
Our second half earnings recovered strongly, after a disappointing first half. Second half Operating EBITDA
of $136.9 million was an increase of 21% on the first half, and a 6% increase on the prior corresponding
period, reflecting earnings growth across each of our businesses. Our first half earnings were impacted by
the poor performance of our PNP business. Full year Operating EBITDA of $250.4 million was just ahead
of FY22.
Operating NPAT of $59.1 million and reported NPAT of $41.3 million, were both down on last year driven
primarily by the underperformance of the PNP business as well as higher interest costs.
Our Rental business revenue grew by 19% over the year as we deployed fleet to meet strong customer
demand and increased the number of fully maintained projects, in line with our strategy. Gross fleet
utilisation increased to 93% driven by this new work. Operating EBITDA increased by $19.5 million or 8%
on FY22. Margins declined from FY22 as a result of the increase in fully maintained projects, use of cross-
hired fleet to meet customer demand and ongoing parts and labour cost inflation. Margins stabilised during
the second half with the application of contractual and out-of-cycle pricing and fleet deployment.
Our Force business continued its strong performance, driven by a significant increase in retail customer
activity, whilst also supporting increased internal rebuild and maintenance activity, with 125 equipment
rebuilds completed during the year. Revenue from retail customers increased 73% and Operating EBITDA
increased 30% compared to FY22.
Our mid-life asset rebuild model continues to underpin our ability to replace and grow our Rental fleet to
meet customer demand in a capital and cost-efficient manner, maximising our financial returns. We have
also significantly increased the proportion of Force built components to both counter parts price inflation
and to ensure security of supply in a challenging market.
PNP delivered a strong second half turnaround performance, underpinned by the successful renegotiation
of our contract with a key customer, as well as the commencement of several new projects. First half
earnings were disappointing, reflecting the termination of several projects, as we de-risked our project
portfolio. This negatively impacted both revenue and Operating EBITDA, as we demobilised equipment
and people. A $22.9 million credit loss provision was recognised in first half Statutory EBITDA to account
for losses associated with terminated projects. The recovery from Minjar/Barto receivable during 2H23 was
sufficient to cover a credit loss associated with Aurora Metals in 2H23 and the de-risking and reset of the
project portfolio without the need for additional provisions. A comprehensive counterparty risk review has
been completed and additional credit management resources have been injected into the finance function
to improve counterparty risk exposure going forward.
We continue to be disciplined in our investment of capital, with $154.1 million in net sustaining capital spent
over the course of the year. In response to the strong customer demand in our Rental business, we also
invested $21.8 million into additional growth fleet during the year. This highly sought after equipment was
quickly placed into work and is generating strong earnings and returns in line with our expectations. The
strength of our mid-life asset model and the capital efficiency that we drive through our asset procurement
team and Force’s rebuild capability, provide us with a significant competitive advantage. This is critical to
ensuring our capital spend remains as cost efficient as possible in the current inflationary environment.
Group returns remain robust despite the challenges faced during the year. Return on capital (ROC)
employed of 13% reflects the issues at PNP, with Group ROC excluding PNP remaining strong at 18%,
comfortably above our cost of capital.
People & Diversity
Emeco operates in a highly skilled and tight labour market. Consequently, our ability to attract and retain
people is a major pillar to the ongoing growth and success of our business. Emeco continues to target
greater employee engagement and to focus on long-term retention and development strategies.
During the year our General Manager - People and Culture ran leadership development sessions for teams
and individuals across the business. We have also recently implemented strategies to reduce our reliance
on subcontractors through an enhanced employee value proposition and we expect to see the benefits of
this in FY24. Emeco also supports its workforce in their work and personal lives, through an employee
assistance programme, provided via a third party to all employees and their extended families.
Diversity is an important element of meeting the changing needs of a business that operates in a dynamic
economic and operational environment. Emeco’s workforce currently comprises 13% female and 3.2%
Indigenous employees, which is a solid foundation to work from to improve the diversity of our employee
base. The Company considers a flexible work arrangement as being important in attracting a diverse
workforce. The Group’s flexible work arrangements, saw a significant increase in part time and casual
workers in FY23.
Strategy
Our strategic goal of making Emeco a sustainable and resilient business that generates long term value for
our shareholders, guides our everyday decision making. We continue to deliver against our four pillars of:
- Being the lowest cost, highest quality provider of mining equipment;
- Widening our customer value proposition;
- Building a balanced and diversified portfolio of customers and projects throughout Australia with a
broad commodity mix; whilst
- Maintaining a strong balance sheet.
In FY23, our customer value proposition was endorsed by the mining sector with a demonstrated increase
in demand for our high-quality workshop services, the significant increase in the number of fully maintained
projects in our Rental business and the increased use of our EOS technology.
The Group’s portfolio of projects expanded during the year, with revenue evenly balanced across
commodities, customers and geographies. Further, with the reset of the PNP project portfolio, the credit
quality of our customer base has also been enhanced.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
5
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
6
The Group has maintained a strong balance sheet with good access to liquidity, providing it with flexibility
for growth or capital management initiatives. Second half cash flow was very strong and supported the
investment in fleet and growth capex, whilst also delivering cash returns to shareholders by way of
dividends.
Looking Ahead
The outlook for FY24 is positive with demand across all businesses expected to remain robust driving
earnings growth. Emeco continues to meet the challenges of a dynamic equipment rental market, whilst
delivering solid returns to shareholders. We will continue to focus on business improvements, cost
efficiencies and contract repricing initiatives to maintain the strong returns we generate on our core Rental
business.
Rental earnings growth is expected to be driven predominantly by high fleet utilisation and fleet growth.
We will continue our focus on cost improvement, targeting the replacement of cross-hired fleet with owned
equipment and converting subcontracted labour into full-time employees. A strong portfolio of contracted
retail projects will underpin growth at our Force workshops, whilst they continue to support our Rental
business through a growing internal rebuild program.
PNP earnings will increase on FY23 albeit on a lower revenue base following the de-risking and reset of
the project portfolio. We continue to review the PNP business to consider options to improve returns.
Net sustaining capex for the year ahead is expected to be approximately $160 million, largely in line with
FY23 and in line with depreciation.
Emeco has a strong track-record in achieving high returns on capital investments in our core Rental
business through our mid-life asset rebuild model. Our FY24 capex program also includes: growth capital
expenditure of approximately $7 million to rebuild five 789C trucks, to replace cross-hired fleet, with an
Internal Rate of Return (IRR) of 19%. Further, growth capital expenditure of approximately $19 million has
been committed to acquire 18 x 793D fleet cores. A staged rebuild program, linked to customer demand
will bring the total investment for this 793D fleet to $24 – 37 million. Both these investments are expected
to generate an IRR of ~20%, once equipment is rebuilt and deployed into projects.
Emeco has also committed to the upgrade of its ERP over the next 3 years, with an approved project spend
of ~$8 million for FY24. This investment in technology is critical to the sustained success and growth of
the business.
Leverage is expected to remain around the Company’s long-term target of 1.0x Operating EBITDA.
We are confident that our business model will enable us to deliver sustainable growth and deliver increased
shareholder returns in FY24.
Acknowledgements
In closing, I would like to pay tribute to the entire Emeco team across Australia. Our people are our most
valuable asset and their dedication to providing the highest quality equipment and solutions for our
customers is unrelenting. In what has been an exciting and challenging year, I am immensely proud of how
they have demonstrated their capabilities and capacity to adapt and deliver for our customers and
stakeholders.
Our customers are the reason our business exists, we thank them for their loyalty and support when they
choose our brands. We also extend our thanks to Emeco’s suppliers, financiers and community partners
who are essential to the delivery of the high-quality equipment and services that we provide for our
customers.
Finally, thank you to our shareholders for your continued support and investment in our Company.
Ian Testrow
Managing Director & Chief Executive Officer
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
7
Operating and Financial Review
The Emeco Group is a provider of open cut and underground mining equipment, maintenance and project
support solutions and services.
The Group supplies safe, reliable and maintained open cut and underground equipment rental solutions,
together with onsite infrastructure to its customers. The Group also provides repair and maintenance, and
component and machine rebuild services and supplies operator, technical and engineering solutions and
services to the mining industry.
Established in 1972, the business listed on the ASX in July 2006 and is headquartered in Perth, Western
Australia.
Emeco generates earnings from the provision of open cut and underground mining equipment,
maintenance and project support solutions and services to the mining industry. Operating costs principally
comprise parts and labour associated with maintaining drilling and earthmoving equipment. Capital
expenditure principally comprises the replacement of major components over the life cycle of Emeco’s
assets, with the balance used to acquire assets (growth and replacement), including midlife equipment
cores and the cost to rebuild those cores.
Table 1: Group financial results
A$ millions
Revenue
EBITDA2
EBIT2
NPAT
ROC%2
EBIT margin2
EBITDA margin2
Operating results1,2,3
2022
2023
754.4
874.9
250.2
250.4
120.7
104.6
68.9
59.1
16.2%
13.2%
16.0%
12.0%
33.2%
28.6%
Statutory results
2023
874.9
225.9
79.1
41.3
9.6%
9.0%
25.8%
2022
754.4
245.7
115.1
65.0
14.9%
15.3%
32.6%
Note: 1. Significant items have been excluded from the reported result to aid in 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. Refer to Table 2 for a reconciliation between operating results and
statutory results.
2. Non IFRS measures.
3. EBITDA: Earnings before interest, tax, depreciation and amortisation. Excludes tangible asset impairment, net finance
costs and net foreign exchange gain; EBIT: Earnings before interest and tax. Excludes net finance costs and net foreign
exchange gain; NPAT: Net profit after tax; ROC: Return on capital (EBIT / Average capital employed).
The Group has maintained a strong balance sheet with good access to liquidity, providing it with flexibility
for growth or capital management initiatives. Second half cash flow was very strong and supported the
investment in fleet and growth capex, whilst also delivering cash returns to shareholders by way of
dividends.
Looking Ahead
business.
The outlook for FY24 is positive with demand across all businesses expected to remain robust driving
earnings growth. Emeco continues to meet the challenges of a dynamic equipment rental market, whilst
delivering solid returns to shareholders. We will continue to focus on business improvements, cost
efficiencies and contract repricing initiatives to maintain the strong returns we generate on our core Rental
Rental earnings growth is expected to be driven predominantly by high fleet utilisation and fleet growth.
We will continue our focus on cost improvement, targeting the replacement of cross-hired fleet with owned
equipment and converting subcontracted labour into full-time employees. A strong portfolio of contracted
retail projects will underpin growth at our Force workshops, whilst they continue to support our Rental
business through a growing internal rebuild program.
PNP earnings will increase on FY23 albeit on a lower revenue base following the de-risking and reset of
the project portfolio. We continue to review the PNP business to consider options to improve returns.
Net sustaining capex for the year ahead is expected to be approximately $160 million, largely in line with
FY23 and in line with depreciation.
Emeco has a strong track-record in achieving high returns on capital investments in our core Rental
business through our mid-life asset rebuild model. Our FY24 capex program also includes: growth capital
expenditure of approximately $7 million to rebuild five 789C trucks, to replace cross-hired fleet, with an
Internal Rate of Return (IRR) of 19%. Further, growth capital expenditure of approximately $19 million has
been committed to acquire 18 x 793D fleet cores. A staged rebuild program, linked to customer demand
will bring the total investment for this 793D fleet to $24 – 37 million. Both these investments are expected
to generate an IRR of ~20%, once equipment is rebuilt and deployed into projects.
Emeco has also committed to the upgrade of its ERP over the next 3 years, with an approved project spend
of ~$8 million for FY24. This investment in technology is critical to the sustained success and growth of
the business.
Leverage is expected to remain around the Company’s long-term target of 1.0x Operating EBITDA.
We are confident that our business model will enable us to deliver sustainable growth and deliver increased
shareholder returns in FY24.
Acknowledgements
In closing, I would like to pay tribute to the entire Emeco team across Australia. Our people are our most
valuable asset and their dedication to providing the highest quality equipment and solutions for our
customers is unrelenting. In what has been an exciting and challenging year, I am immensely proud of how
they have demonstrated their capabilities and capacity to adapt and deliver for our customers and
Our customers are the reason our business exists, we thank them for their loyalty and support when they
choose our brands. We also extend our thanks to Emeco’s suppliers, financiers and community partners
who are essential to the delivery of the high-quality equipment and services that we provide for our
stakeholders.
customers.
Finally, thank you to our shareholders for your continued support and investment in our Company.
Ian Testrow
Managing Director & Chief Executive Officer
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
7
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
8
Table 2: FY23 Statutory to operating results reconciliation
A$ millions
Statutory result
Tangible asset impairment
Long-term incentive expense
Trade receivables written off
Tax effect of adjustments
Operating result
EBITDA
225.9
-
1.4
23.0
-
250.4
EBIT
79.1
1.0
1.4
23.0
-
104.6
NPAT
41.3
1.0
1.4
23.0
(7.6)
59.1
Reconciliation of differences between operating and statutory results:
1. FY23 operating results are non IFRS measures and exclude the following:
- Tangible asset impairments: Net impairments totalling $1.0 million were recognised across the business on assets held
for sale and subsequently disposed during the period (FY22: $1.1 million).
- Long-term incentive expense: During FY23, Emeco recognised $1.4 million (FY22: $2.0 million) of non-cash expenses
relating to the employee incentive plan.
- Trade receivables written off: Losses on trade receivables deemed non-recurring due to quantum and written off totalling
$23.0 million (FY22: nil).
- Tax effect of adjustments: notional tax on above adjustments at 30%.
2. Refer to the 2022 Annual Report for a reconciliation of differences between FY22 operating and statutory results.
CONTINUED SOLID RETURNS
Group revenue from operations was a record, increasing by 16% to $874.9 million in FY23 (FY22: $754.4
million).
External Rental revenue increased to $494.8 million (FY22: $415.1 million), primarily due to higher
equipment utilisation through new and expanded projects secured during the period and the increase in
fully maintained projects. Higher contract rates also drove revenue higher with the application of contracted
rise and fall mechanisms as well as out-of-cycle price increases on some contracts. Force delivered a 42%
increase in total revenue, delivering over 125 machine rebuilds (both internal and external) through its
regional network of workshops. External revenue from Force increased from $90.6 million in FY22 to
$156.5 million in FY23, with strong demand across all regions. Pit N Portal revenue decreased by 10% or
$25.1 million, to $223.6 million during the year (FY22: $248.7 million), following the completion of a number
of projects as well as the de-risking and reset of the project portfolio.
Operating EBITDA increased to $250.4 million in FY23 (up $0.2 million on FY22). A strong recovery in
second half earnings, reflecting growth across each business, drove a significant improvement in half on
half Operating EBITDA and Operating EBIT (increasing 21% and 56% respectively). First half earnings
were impacted by the poor performance from the Pit N Portal business.
Operating EBITDA margins decreased to 28.6% (FY22: 33.2%), due to the poor first half performance from
Pit N Portal. Revenue mix (an increase in Force revenue which is lower margin) and cost inflation also
impacted margins. The Group continues to pursue repricing opportunities to counter cost inflation and
business improvement opportunities to improve margins, with a key focus on reducing the use of
subcontracted labour and cross-hired fleet.
Return on capital (ROC) remains above our cost of capital but was lower at 13% (FY22: 16%), driven
primarily by the underperformance of the Pit N Portal business. ROC excluding Pit N Portal of 18% is
comfortably higher than the Company’s cost of capital.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
9
A$ millions
Statutory result
Tangible asset impairment
Long-term incentive expense
Trade receivables written off
Tax effect of adjustments
Operating result
EBITDA
225.9
-
1.4
23.0
-
250.4
EBIT
79.1
1.0
1.4
23.0
-
104.6
NPAT
41.3
1.0
1.4
23.0
(7.6)
59.1
Reconciliation of differences between operating and statutory results:
1. FY23 operating results are non IFRS measures and exclude the following:
- Tangible asset impairments: Net impairments totalling $1.0 million were recognised across the business on assets held
for sale and subsequently disposed during the period (FY22: $1.1 million).
relating to the employee incentive plan.
- Trade receivables written off: Losses on trade receivables deemed non-recurring due to quantum and written off totalling
$23.0 million (FY22: nil).
- Tax effect of adjustments: notional tax on above adjustments at 30%.
CONTINUED SOLID RETURNS
Group revenue from operations was a record, increasing by 16% to $874.9 million in FY23 (FY22: $754.4
million).
External Rental revenue increased to $494.8 million (FY22: $415.1 million), primarily due to higher
equipment utilisation through new and expanded projects secured during the period and the increase in
fully maintained projects. Higher contract rates also drove revenue higher with the application of contracted
rise and fall mechanisms as well as out-of-cycle price increases on some contracts. Force delivered a 42%
increase in total revenue, delivering over 125 machine rebuilds (both internal and external) through its
regional network of workshops. External revenue from Force increased from $90.6 million in FY22 to
$156.5 million in FY23, with strong demand across all regions. Pit N Portal revenue decreased by 10% or
$25.1 million, to $223.6 million during the year (FY22: $248.7 million), following the completion of a number
of projects as well as the de-risking and reset of the project portfolio.
Operating EBITDA increased to $250.4 million in FY23 (up $0.2 million on FY22). A strong recovery in
second half earnings, reflecting growth across each business, drove a significant improvement in half on
half Operating EBITDA and Operating EBIT (increasing 21% and 56% respectively). First half earnings
were impacted by the poor performance from the Pit N Portal business.
Operating EBITDA margins decreased to 28.6% (FY22: 33.2%), due to the poor first half performance from
Pit N Portal. Revenue mix (an increase in Force revenue which is lower margin) and cost inflation also
impacted margins. The Group continues to pursue repricing opportunities to counter cost inflation and
business improvement opportunities to improve margins, with a key focus on reducing the use of
subcontracted labour and cross-hired fleet.
Return on capital (ROC) remains above our cost of capital but was lower at 13% (FY22: 16%), driven
primarily by the underperformance of the Pit N Portal business. ROC excluding Pit N Portal of 18% is
comfortably higher than the Company’s cost of capital.
Table 2: FY23 Statutory to operating results reconciliation
Table 3: Operating cost summary (operating results)
Note: Operating results are non IFRS and have been adjusted as per reconciliation in Table 2.
A$ millions
Revenue
Operating expenses
Repairs and maintenance
External mining and maintenance services
Employee expenses1
Cartage and fuel
Net other expenses2
Operating EBITDA1,2
Depreciation and amortisation expense3
Operating EBIT3
2023
874.9
(152.7)
(223.9)
(149.8)
(21.6)
(76.5)
250.4
(145.8)
104.6
2022
754.4
(123.5)
(162.7)
(140.4)
(17.4)
(60.2)
250.2
(129.4)
120.7
- Long-term incentive expense: During FY23, Emeco recognised $1.4 million (FY22: $2.0 million) of non-cash expenses
Note: 1. Employee expenses for Operating EBITDA excludes employee share plan expenses of $1.4 million (FY22: $2.0 million).
2. Refer to the 2022 Annual Report for a reconciliation of differences between FY22 operating and statutory results.
3. Depreciation and amortisation expense for Operating EBIT excludes tangible asset impairment of $1.0 million for FY23
(FY22: $1.1 million).
2. Net other expenses for Operating EBITDA in FY23 excludes losses on trade receivables written off totalling $23.0 million.
Net other expenses for Operating EBITDA in FY22 excludes restructuring expenses of $0.8 million as well as Covid related
costs of $1.7 million.
Repairs and maintenance expense increased to $152.7 million (FY22: $123.5 million) driven by increased
levels of equipment utilisation, including return to work and mobilisation costs as well as parts and labour
cost inflation.
External mining and maintenance services expenses increased to $223.9 million (FY22: $162.7 million)
predominantly due to an increase in the volume of rebuild jobs with blue chip customers in the Force
business, as well as an increase in parts and labour costs.
Employee expenses increased to $149.8 million (FY22: $140.4 million), with higher average employee
numbers to service new projects. The Emeco workforce was supplemented with subcontracted labour,
particularly during new project start-ups.
Cartage and fuel expenses increased to $21.6 million, in line with higher utilisation and revenue growth
across all segments.
Net other expenses increased to $76.5 million (FY22: $60.2 million) primarily as a result of increased fleet
cross-hire expenses to meet customer demand for rental equipment.
Depreciation and amortisation expense increased to $145.8 million in FY23 (FY22: $129.4 million) in line
with revenue growth and increased equipment utilisation.
REINVESTMENT IN RENTAL FLEET
The Group has a good track record in achieving strong returns on its investment in its fleet through the
application of our proven mid-life asset model. In FY23, the written down value (WDV) of the equipment
fleet including capital work in progress and inventory increased by $49.0 million to $752.6 million, primarily
due to the investment in capital expenditure to sustain, replace and grow our fleet size, partially offset by
depreciation and disposals. Our investment in sustaining capital is predominantly made up of parts and
labour costs associated with rebuilds through our Force workshops.
Net sustaining capital expenditure plus component inventory increased marginally, from $150.6 million in
FY22 to $154.1 million in FY23, driven by higher utilisation levels.
Emeco also invested $21.8 million in growth capex (FY22: $17.0 million) during the year including
approximately $20.0 million in our Rental business, for the rebuild of a second-hand fleet of 18 trucks
purchased at auction in FY22. This fleet is now fully deployed and generating strong earnings and returns
(IRR 21%) for our Rental business, demonstrating the competitive advantage our mid-life asset model
delivers.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
9
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
10
Table 4: Equipment fleet
A$ millions
Equipment fleet
Assets held for sale
Equipment fleet
2023
2022
752.6
1.2
753.8
703.7
4.1
707.8
We continually review our fleet mix to ensure it meets long-term rental demand and to maximise returns
on investment. Assets which are surplus to fleet requirements or are approaching the end of their useful
lives are transferred to assets held for sale and are actively marketed through Emeco’s global network of
brokers.
FREE CASH FLOW
Table 5: Free cash flow summary
A$ millions
Operating EBITDA
Net movement in working capital
Net sustaining capital expenditure1
Acquisition of component inventory
Net finance costs
Net free cash flow (pre-growth capex and other investments)
Growth capex
Loan issued to related party
Borex acquisition
Net free cash flow
Note:
1. Capital expenditure excludes assets acquired under leasing arrangements.
2023
250.4
(18.2)
(152.5)
(1.6)
(25.8)
52.3
(21.8)
(4.9)
-
25.6
2022
250.2
(9.8)
(146.5)
(4.1)
(19.3)
70.5
(17.0)
-
(2.2)
51.3
Net free cash flow in FY23 was impacted by a working capital outflow of $18.2 million (FY22: outflow of
$9.8 million) predominantly due to the non-collection of impaired Pit N Portal receivables of $23.0 million
(FY22: nil). Higher drawn debt levels and interest rates during the period, resulted in net finance costs
being $6.5 million higher compared to FY22.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
11
We continually review our fleet mix to ensure it meets long-term rental demand and to maximise returns
on investment. Assets which are surplus to fleet requirements or are approaching the end of their useful
lives are transferred to assets held for sale and are actively marketed through Emeco’s global network of
Table 4: Equipment fleet
A$ millions
Equipment fleet
Assets held for sale
Equipment fleet
brokers.
FREE CASH FLOW
Table 5: Free cash flow summary
A$ millions
Operating EBITDA
Net movement in working capital
Net sustaining capital expenditure1
Acquisition of component inventory
Net finance costs
Growth capex
Loan issued to related party
Borex acquisition
Net free cash flow
2023
2022
752.6
1.2
753.8
703.7
4.1
707.8
2023
250.4
(18.2)
(152.5)
(1.6)
(25.8)
52.3
(21.8)
(4.9)
-
25.6
2022
250.2
(9.8)
(146.5)
(4.1)
(19.3)
70.5
(17.0)
-
(2.2)
51.3
Net free cash flow (pre-growth capex and other investments)
Note:
1. Capital expenditure excludes assets acquired under leasing arrangements.
Net free cash flow in FY23 was impacted by a working capital outflow of $18.2 million (FY22: outflow of
$9.8 million) predominantly due to the non-collection of impaired Pit N Portal receivables of $23.0 million
(FY22: nil). Higher drawn debt levels and interest rates during the period, resulted in net finance costs
being $6.5 million higher compared to FY22.
CONSERVATIVE LEVERAGE IN LINE WITH TARGET
Table 6: Net debt and gearing summary
A$ millions
Interest bearing liabilities (current and non-current)1
Secured Notes - AUD
Lease liabilities and other financing
Total debt1
Cash
Net debt1
Leverage ratio2
Interest cover ratio3
2023
2022
250.0
72.7
322.7
(46.7)
276.0
1.10x
10.3x
250.0
51.1
301.1
(60.2)
240.9
0.96x
11.7x
Note: 1. Figures based on facilities drawn. Includes debt raising costs included in interest bearing liabilities in note 24, and excludes
supply chain finance disclosed in note 23.
2. Leverage ratio - Net debt / Operating EBITDA.
3.
Interest cover ratio - Operating EBITDA / Net Interest expense.
Total debt increased to $322.7 million, up 7% from $301.1 million in the prior year. Lease liabilities and
other financing increased by $21.6 million or 42%, predominantly due to recognition of right-of-use assets
and lease liabilities as a result of extending several property leases.
Emeco’s cash balance was $46.7 million at 30 June 2023, a $13.5 million decrease compared to 30 June
2022. The decrease from the prior year is predominantly due to a working capital outflow as a result of
$23.0 million of debtor write-offs relating to Pit N Portal receivables (FY22: nil).
The Group paid dividends
in FY23
the Company’s shareholders
(FY22: $13.5 million) and completed on-market share buy-backs totalling $7.3 million (FY22: $17.2 million).
totalling $13.0 million
to
Emeco’s leverage ratio is steady at 1.10x at 30 June 2023 compared to 0.96x at 30 June 2022 and remains
in line with our long term target of 1.0x whilst funding sustaining and growth investment and capital
management.
On 22 August 2023, the board resolved to pay a fully franked final dividend for the year ended 30 June
2023 of 1.25 cents per share. This in combination with the fully franked interim dividend of 1.25 cents per
share, results in total dividends for the year of 2.5 cent per share. The final dividend will be fully franked
and will be paid on 29 September 2023. The board also resolved to undertake an on market buy-back of
$7.3 million. This in combination with the dividends declared for the year, results in a 35% payout ratio
against Operating NPAT, which is at the higher end of the Company’s preferred payout policy of 25 – 40%.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
11
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
12
Segment Business Overview
Main markets
The Company’s business operations comprised of three segments: Rental, Pit N Portal and Workshops.
Rental
Revenue growth was driven by strong rental demand in both Eastern and Western Regions, across coal,
iron ore and gold projects.
The Rental segment achieved total revenue of $499.6 million during the year, an increase of 16% on FY22,
driven by increased SMU hours (utilisation), increased contract rates and higher levels of maintained
services, resulting from new projects secured. External revenue of $494.8 million, increased by 19% on
FY22.
Gross utilisation increased to 93% in FY23 (FY22: 92%) driven by new work at Saraji, Burton, Goonyella,
Whyalla, New Wilkie, Solomon, Fimiston and South Flank projects.
Rental Operating EBITDA increased from $240.2 million to $259.7 million, an 8% increase. Margins
stabilised in 2H23 with the application of out-of-cycle pricing, scheduled rise and fall rate increases and
deployment of idle fleet. Business improvement initiatives will target contract repricing, subcontracted
labour and cross-hired fleet, to improve margins which were lower at 52% for the year.
Force Workshops
Total Force workshop activity (as measured by retail and internal revenue pre-intercompany eliminations)
increased from $173.7 million in FY22 to $246.7 million in FY23, as a result of securing component rebuild
works with blue chip retail customers and high internal demand from our Rental division. Over 125 machine
rebuilds (both internal and external) were completed during the period, with retail revenue and earnings
supported by growing demand from all regions. The Operating EBITDA contribution from external
customers increased to $11.8 million (FY22: $9.0 million).
Pit N Portal
Pit N Portal’s revenue decreased from $248.7 million in FY22 to $223.6 million in FY23, reflecting
completion of a number of projects as well as the de-risking and reset of the project portfolio. Credit losses
provisioned in the first half of $22.9 million were sufficient to account for full year cash losses associated
with underperforming credits in the second half.
A strong second half turnaround in performance, with a $10.2 million improvement in Operating EBITDA
and an increase in margin to 14%, was driven by an improvement in contract terms with a key customer
across two core projects as well as new projects secured, including Tank, Daisy Milano and Kidston.
Full year Operating EBITDA decreased from $32.7 million to $17.2 million, as a result of operational
performance and project exits in the first half.
A review of this business is underway to identify opportunities to improve returns.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
13
Segment Business Overview
Main markets
The Company’s business operations comprised of three segments: Rental, Pit N Portal and Workshops.
Rental
FY22.
Revenue growth was driven by strong rental demand in both Eastern and Western Regions, across coal,
iron ore and gold projects.
The Rental segment achieved total revenue of $499.6 million during the year, an increase of 16% on FY22,
driven by increased SMU hours (utilisation), increased contract rates and higher levels of maintained
services, resulting from new projects secured. External revenue of $494.8 million, increased by 19% on
Gross utilisation increased to 93% in FY23 (FY22: 92%) driven by new work at Saraji, Burton, Goonyella,
Whyalla, New Wilkie, Solomon, Fimiston and South Flank projects.
Rental Operating EBITDA increased from $240.2 million to $259.7 million, an 8% increase. Margins
stabilised in 2H23 with the application of out-of-cycle pricing, scheduled rise and fall rate increases and
deployment of idle fleet. Business improvement initiatives will target contract repricing, subcontracted
labour and cross-hired fleet, to improve margins which were lower at 52% for the year.
Total Force workshop activity (as measured by retail and internal revenue pre-intercompany eliminations)
increased from $173.7 million in FY22 to $246.7 million in FY23, as a result of securing component rebuild
works with blue chip retail customers and high internal demand from our Rental division. Over 125 machine
rebuilds (both internal and external) were completed during the period, with retail revenue and earnings
supported by growing demand from all regions. The Operating EBITDA contribution from external
customers increased to $11.8 million (FY22: $9.0 million).
Force Workshops
Pit N Portal
Pit N Portal’s revenue decreased from $248.7 million in FY22 to $223.6 million in FY23, reflecting
completion of a number of projects as well as the de-risking and reset of the project portfolio. Credit losses
provisioned in the first half of $22.9 million were sufficient to account for full year cash losses associated
with underperforming credits in the second half.
A strong second half turnaround in performance, with a $10.2 million improvement in Operating EBITDA
and an increase in margin to 14%, was driven by an improvement in contract terms with a key customer
across two core projects as well as new projects secured, including Tank, Daisy Milano and Kidston.
Full year Operating EBITDA decreased from $32.7 million to $17.2 million, as a result of operational
performance and project exits in the first half.
A review of this business is underway to identify opportunities to improve returns.
Business Risks
Emeco’s short to medium term operational and financial success may be impacted by a number of factors
which, whilst not considered likely to have an individually material impact, may be material to the Company’s
operational and financial success if multiple risks eventuated at the same time or for prolonged durations.
Some of these risks and mitigation strategies include, but are not limited to:
Risk
Vulnerability to
mining and
commodity cycles
Mitigation & management strategies
Emeco’s financial performance is influenced by the level of activity in the
resources and mining industry, which is impacted by a number of factors beyond
Emeco’s control. This includes:
Climate change
risk/Environmental,
Social and
Governance (ESG)
considerations
• Demand for mining production which may be influenced by factors such
as commodity prices, exchange rates and the competitiveness of
Australian mining operations.
• Government policy on infrastructure spending, royalties and taxes.
• Policies of mine owners including their decisions to undertake their
operations using their own equipment or rented equipment.
In recent years, Emeco has had a firm focus on building a sustainable business
that generates shareholder value through the cycles. To mitigate the risks posed
by the cyclical nature of the industry, Emeco has significantly reduced its cost
base and its capital intensity, particularly through its mid-life asset rebuild model.
The acquisition of Force has assisted with this as it allows Emeco to rebuild its
own components and assets cost effectively. Emeco has also focused on
increasing the level of maintained services it provides to its customers to embed
Emeco in customers’ operations and secure longer contract tenure. Emeco has
also significantly diversified its commodity exposure, including an overall reduction
in coal exposure.
Emeco is exposed directly and indirectly to climate change risks, including an
exposure to coal customers, which gives rise to several risks such as:
• Regulatory and policy risk – growing regulatory pressures and societal
demands require companies like Emeco to be more accountable for their
ESG performance. Regulatory requirements and government policies to
combat climate change and reduce greenhouse emissions are increasing.
These regulations can lead to increased costs, operational constraints,
and potential penalties for non-compliance for the mine owners and
subsequently Emeco.
• Market and financial risk - as countries and industries shift towards
cleaner energy sources, the demand for coal may decline, leading to
reduced market value and potential financial losses for companies heavily
reliant on coal. Additionally, financiers and investors are increasingly
considering climate-related risks and may choose to divest from
companies with high exposure to carbon-intensive assets. This may
impact Emeco’s ability to secure cost efficient funding to maintain and
grow its operations.
Emeco’s acquisitions of Force (2017) and Pit N Portal (2020), together with the
recent transfer of equipment from the Eastern Region to the Western Region has
resulted in a significant reduction in Emeco’s coal exposure, reducing from 65% in
FY19 to 31% in FY23.
There is a risk that Emeco may not meet community and/or other stakeholder
expectations regarding its business activities or other ESG performance,
potentially leading to loss of contracts, loss of reputation, higher compliance costs,
loss of investor confidence and an inability to secure labour.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
13
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
14
Technology
The technology landscape is evolving quickly. Emeco is exposed to the impacts of
new and competing technologies in the mining services sector.
Emeco are increasingly engaging in industry networks and maintaining
relationships with equipment and parts manufacturers and technology providers.
This keeps Emeco informed of changes that can be embedded into future
strategies. Through our Force business, Emeco are in a unique position to
leverage expertise and customer relationships to explore decarbonisation
developments. The Company’s mid-life asset model minimises exposure to
equipment becoming obsolete.
Delay or
unavailability of
parts
Emeco has a significant fleet of equipment and has substantial ongoing
requirements for consumables including parts, tyres and lubricants. If Emeco
cannot secure a reliable supply of equipment, parts and/or consumables, there is
a risk that its operational and financial performance may be adversely affected.
Inflationary cost
pressures
Through its Force workshops, the Group has been able to increase its resilience
to supply chain issues by reducing its reliance on third party suppliers. Emeco
maintains strong relationships with OEM dealers and aftermarket alternate
suppliers. Emeco uses long range forecasts to enhance the security of its supply.
Emeco has also increased its parts inventory levels in recent times to ensure its
fleet can be repaired and maintained as required.
Emeco procures goods and services from a range of suppliers, that are critical to
its business operations. These goods and services are subject to availability
shortages and price inflation, which may not be within Emeco’s control. In
particular, parts and labour. The rate of cost inflation may outpace the Company’s
ability to adjust contract pricing, which may negatively impact Emeco’s financial
performance.
Emeco has been engaging with customers on out-of-cycle rate increases and also
ensuring appropriate rate increase mechanisms are included in its revenue
contracts. There is also a tight focus on cost management and appropriate back
charging of costs to customers. Further, performing works in-house through our
Force business also assists to mitigate against cost pressures.
Skilled labour
shortages
Emeco’s growth and profitability may be limited by loss of key operating
personnel, inability to recruit and retain skilled and experienced employees or by
increases in employee costs. The industry has experienced a labour shortage
(particularly skilled labour) throughout Australia in recent times.
Serious injury or
fatality
To mitigate against this, Emeco has a ‘People and Culture’ team dedicated to
ensuring employees and potential employees become embedded in the Company
and feel part of the team. In addition, Emeco does regular benchmarking to
ensure employees are remunerated appropriately and in line with the market to
remain competitive.
There are a range of potential safety hazards to which Emeco’s employee and
contractor workforces, and visitors are exposed. Where a serious risk results in
the worst-case scenario, it can lead to serious injury or fatality to persons while
undertaking activities or attending locations in connection with the Emeco
business. Apart from the direct workers compensation expense, this may
adversely impact operational performance or the Company’s ability to continue
operations. Further, an employer who is found to be engaged in negligent conduct
that results in a workplace death, may face penalties, imprisonment, legal costs,
and reputational impacts.
Emeco endeavours to continuously improve its management and mitigation of this
risk through ongoing enhancements to safety plans, processes and resources.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
15
Technology
The technology landscape is evolving quickly. Emeco is exposed to the impacts of
new and competing technologies in the mining services sector.
Emeco are increasingly engaging in industry networks and maintaining
relationships with equipment and parts manufacturers and technology providers.
This keeps Emeco informed of changes that can be embedded into future
strategies. Through our Force business, Emeco are in a unique position to
leverage expertise and customer relationships to explore decarbonisation
developments. The Company’s mid-life asset model minimises exposure to
equipment becoming obsolete.
Delay or
Emeco has a significant fleet of equipment and has substantial ongoing
unavailability of
requirements for consumables including parts, tyres and lubricants. If Emeco
parts
cannot secure a reliable supply of equipment, parts and/or consumables, there is
a risk that its operational and financial performance may be adversely affected.
Through its Force workshops, the Group has been able to increase its resilience
to supply chain issues by reducing its reliance on third party suppliers. Emeco
maintains strong relationships with OEM dealers and aftermarket alternate
suppliers. Emeco uses long range forecasts to enhance the security of its supply.
Emeco has also increased its parts inventory levels in recent times to ensure its
fleet can be repaired and maintained as required.
Inflationary cost
Emeco procures goods and services from a range of suppliers, that are critical to
pressures
its business operations. These goods and services are subject to availability
shortages and price inflation, which may not be within Emeco’s control. In
particular, parts and labour. The rate of cost inflation may outpace the Company’s
ability to adjust contract pricing, which may negatively impact Emeco’s financial
performance.
Emeco has been engaging with customers on out-of-cycle rate increases and also
ensuring appropriate rate increase mechanisms are included in its revenue
contracts. There is also a tight focus on cost management and appropriate back
charging of costs to customers. Further, performing works in-house through our
Force business also assists to mitigate against cost pressures.
Skilled labour
shortages
Emeco’s growth and profitability may be limited by loss of key operating
personnel, inability to recruit and retain skilled and experienced employees or by
increases in employee costs. The industry has experienced a labour shortage
(particularly skilled labour) throughout Australia in recent times.
To mitigate against this, Emeco has a ‘People and Culture’ team dedicated to
ensuring employees and potential employees become embedded in the Company
and feel part of the team. In addition, Emeco does regular benchmarking to
ensure employees are remunerated appropriately and in line with the market to
remain competitive.
Serious injury or
There are a range of potential safety hazards to which Emeco’s employee and
fatality
contractor workforces, and visitors are exposed. Where a serious risk results in
the worst-case scenario, it can lead to serious injury or fatality to persons while
undertaking activities or attending locations in connection with the Emeco
business. Apart from the direct workers compensation expense, this may
adversely impact operational performance or the Company’s ability to continue
operations. Further, an employer who is found to be engaged in negligent conduct
that results in a workplace death, may face penalties, imprisonment, legal costs,
and reputational impacts.
Emeco endeavours to continuously improve its management and mitigation of this
risk through ongoing enhancements to safety plans, processes and resources.
Short term
contracts, contract
terminations and/or
timely
redeployment of
fleet
Underperformance
of contracts
Emeco’s traditional sources of revenue are often subject to short term contractual
arrangements with mechanisms for termination by the client, for reasons outside
Emeco’s control. This may adversely affect Emeco’s ability to deliver financial
performance in line with the expectations of the market.
In recent years, Emeco has focused on increasing the average tenure of its
contracts. As part of this, the Company has also focused on increasing the level of
service it provides to its customers to embed itself in customers’ operations and
secure longer contract tenure.
The acquisition of Pit N Portal in 2020 has increased the average tenor of projects
within the Emeco portfolio, given the longer-term nature of the projects within this
business. The Company maintains strong customer relationships to understand
fleet requirements in order to plan fleet allocation and minimise the time fleet is
“off hire” between projects.
Emeco’s earnings are dependent on profitable contracts and from time to time,
there may be underperforming contracts. Execution and delivery of projects
involves judgement regarding the planning, development and operation of
complex operating facilities and equipment. As a result, Emeco’s operations, cash
flows and liquidity could be affected if the resources or time needed to complete a
project are miscalculated, if it fails to meet contractual obligations, or if it
encounters delays or unspecified conditions. Financial performance of contracts
can be impacted by matters outside the Company’s control, including wet weather,
client funding, mine economics and planning and commodity price cycles.
Emeco maintains a broad portfolio of contracts and customers, with a broad
commodity and geographic spread. This assists to ensure that the financial
impact of any single underperforming contract is minimised.
Extreme weather
events
Emeco recognises the physical impacts of extreme weather events. Risks related
to the physical impacts of extreme weather events could disrupt mining operations
and impact the health and safety of our workforce.
Business disruption
due to a cyber
security incident
Lack of capital
Emeco seeks to address revenue exposure to shutdowns or contract suspensions
through the inclusion of standby rates. The Group works with its customers in
scenarios where extreme events have caused site wide issues or lack of access.
The potential of cyber security attacks, misuse and release of sensitive
information pose ongoing and real risks.
Emeco remains vigilant to cyber threats and has taken proactive steps to reduce
cyber risk. Critical IT assets have been identified, controls have been put in place
to restrict unauthorised access and threat detection technology has been
deployed to identify and isolate potential breaches. Emeco employees also
receive regular cyber risk awareness training.
Emeco is capital intensive and relies on banks and other institutions to source its
funding needs. A failure to access sufficient liquidity may limit the Company’s
ability to grow its earnings and may prevent the Company from paying its debts as
and when they fall due. Further, where the Company does not maintain access to
multiple funding sources across a range of tenors, it may be subjected to
increased establishment and interest expenses.
Emeco adopts a conservative approach to capital management and seeks to
maintain a low gearing, ensuring the balance sheet can withstand market shocks
and retain the flexibility to fund opportunities which deliver earnings growth. As
part of its pro-active capital management strategies, Emeco renewed its revolving
credit facility in December 2022 for a tenor of three years with an option to extend
for a further two years to December 2027 at Emeco’s election. Further, the
Company has secured substantial funding through the Australian loan note market
through to 2026.
Additionally, the Company is exposed to other risks such as the impact of macroeconomic factors and
competition. The Company manages these risks at both a strategic and day-to-day operational level.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
15
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
16
Table 7: Five-year financial summary
REVENUE
Total revenue from continuing operations
2023
2022
2021
2020
2019
$'000
874,917
754,368
620,528
540,429
464,486
PROFIT
Operating EBITDA2
Operating EBIT2
Operating NPAT2
Reported profit/(loss) for the year
Basic EPS3
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
Net cash movement
Free cash flow before payments for
acquisitions and other investments
DIVIDENDS
Number of ordinary shares at year end2
Total dividends declared in respect to financial
year
Ordinary dividends per share declared
KEY RATIO'S
Average fleet utilisation
Operating EBIT ROC1
Leverage ratio1
$'000
$'000
$'000
$'000
cents
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
250,379
250,173
237,687
254,366
213,966
104,558
120,732
119,110
139,410
125,352
59,118
41,331
8.0
68,867
64,953
12.1
56,791
20,695
4.0
61,037
66,129
19.8
63,126
33,961
11.2
1,088,421
1,021,513
965,544
1,088,591
768,669
498,977
454,292
434,138
731,346
570,591
589,444
567,221
531,406
357,245
198,078
322,647
301,064
299,210
620,016
467,934
206,388
221,148
205,616
181,973
169,464
(180,875)
(169,874)
(149,558)
(169,852)
(251,024)
(38,995)
(65,687)
(179,472)
149,825
(53,718)
(13,482)
(14,413)
(123,414)
161,946
(135,278)
30,462
53,522
56,058
73,051
12,312
'000
519,003
526,666
544,055
368,551
323,212
$'000
cents
12,973
13,341
6,801
2.50
2.50
1.25
%
%
x
93.0
13.2
1.10
91.8
16.2
0.96
86.7
16.8
0.94
-
-
90.5
21.0
1.66
-
-
90.1
21.0
2.02
Financial information as reported in the corresponding financial year and includes operations now discontinued.
1 Operating results are non IFRS measures. Please refer to previous annual reports for reconciliation between Reported and
Operating results.
2 Weighted average number of shares restated at 30 June 2021 due to FY21 bonus rights issue. 30 June 2019 includes the
impact of a 10:1 share consolidation that occurred on 27 November 2018.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
17
Table 7: Five-year financial summary
Total revenue from continuing operations
$'000
874,917
754,368
620,528
540,429
464,486
2023
2022
2021
2020
2019
Financial Report
250,379
250,173
237,687
254,366
213,966
104,558
120,732
119,110
139,410
125,352
59,118
41,331
8.0
68,867
64,953
12.1
56,791
20,695
4.0
61,037
66,129
19.8
63,126
33,961
11.2
1,088,421
1,021,513
965,544
1,088,591
768,669
498,977
454,292
434,138
731,346
570,591
589,444
567,221
531,406
357,245
198,078
322,647
301,064
299,210
620,016
467,934
Directors’ Report.............................................................................................................. 19
Auditors’ independence declaration .............................................................................. 44
Financial Statements .......................................................................................................45
Consolidated Statement of Profit or Loss and Other Comprehensive Income ......45
Consolidated Statement of Financial Position ......................................................47
Consolidated Statement of Changes in Equity .....................................................48
Consolidated Statement of Cash Flows................................................................49
Notes to the Consolidated Financial Statements ..................................................50
Directors’ Declaration.................................................................................................... 115
Independent Auditor’s Report....................................................................................... 116
Shareholder Information ............................................................................................... 120
Company Directory........................................................................................................ 123
Reported profit/(loss) for the year
Basic EPS3
REVENUE
PROFIT
Operating EBITDA2
Operating EBIT2
Operating NPAT2
BALANCE SHEET
Total assets
Total liabilities
Shareholders’ equity
Total debt
CASH FLOWS
$'000
$'000
$'000
$'000
cents
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
cents
%
%
x
Net cash flows from operating activities
206,388
221,148
205,616
181,973
169,464
Net cash flows from investing activities
(180,875)
(169,874)
(149,558)
(169,852)
(251,024)
Net cash flows from financing activities
(38,995)
(65,687)
(179,472)
149,825
(53,718)
(13,482)
(14,413)
(123,414)
161,946
(135,278)
30,462
53,522
56,058
73,051
12,312
Net cash movement
Free cash flow before payments for
acquisitions and other investments
DIVIDENDS
Number of ordinary shares at year end2
'000
519,003
526,666
544,055
368,551
323,212
Total dividends declared in respect to financial
year
12,973
13,341
6,801
Ordinary dividends per share declared
2.50
2.50
1.25
-
-
90.5
21.0
1.66
-
-
90.1
21.0
2.02
93.0
13.2
1.10
91.8
16.2
0.96
86.7
16.8
0.94
Financial information as reported in the corresponding financial year and includes operations now discontinued.
1 Operating results are non IFRS measures. Please refer to previous annual reports for reconciliation between Reported and
2 Weighted average number of shares restated at 30 June 2021 due to FY21 bonus rights issue. 30 June 2019 includes the
impact of a 10:1 share consolidation that occurred on 27 November 2018.
KEY RATIO'S
Average fleet utilisation
Operating EBIT ROC1
Leverage ratio1
Operating results.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
17
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
18
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2023
The board of directors (Board) 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 2023 (FY23).
Directors
The directors of the Company during FY23 were:
PETER RICHARDS B.Comm
Appointment: Independent Non-Executive Director since June 2010. Chairman since January 2016.
Board committee membership:
•
•
Chairman of the Remuneration and Nomination Committee.
Member of the Audit and Risk Management Committee.
Skills and experience: Peter has over 40 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 of Elmore Limited
(previously IndiOre Limited and NSL Consolidated Limited) from 2009 to 2021 and was Chairman from
2014 to 2017 and 2018 to 2021.
Current appointments:
•
•
Chairman of Graincorp Limited since March 2020 (Non-Executive Director since 2015).
Chairman of Spenda Limited (previously Cirralto Limited) since December 2017.
IAN TESTROW BEng (Civil), MBA
Appointment: Managing Director since 20 August 2015.
Skills and experience: Ian joined Emeco in 2005 and was appointed Chief Executive Officer and Managing
Director in August 2015. Prior to this, Ian was Emeco’s Chief Operating Officer, having previously been
responsible for Emeco’s Eastern Region Rental business (2005 to 2009) and the North and South American
operations (2009 to 2014). Prior to Emeco, Ian worked for Wesfarmers, BHP Billiton, Thiess and Dyno
Nobel.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
19
Emeco Holdings Limited and its Controlled Entities
Directors’ Report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
The board of directors (Board) 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 2023 (FY23).
PETER FRANK BSEE, MBA
Appointment: Non-Executive Director since April 2017.
Directors
The directors of the Company during FY23 were:
PETER RICHARDS B.Comm
Appointment: Independent Non-Executive Director since June 2010. Chairman since January 2016.
Board committee membership:
Chairman of the Remuneration and Nomination Committee.
Member of the Audit and Risk Management Committee.
Skills and experience: Peter has over 40 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 of Elmore Limited
(previously IndiOre Limited and NSL Consolidated Limited) from 2009 to 2021 and was Chairman from
2014 to 2017 and 2018 to 2021.
Current appointments:
Chairman of Graincorp Limited since March 2020 (Non-Executive Director since 2015).
Chairman of Spenda Limited (previously Cirralto Limited) since December 2017.
•
•
•
•
IAN TESTROW BEng (Civil), MBA
Appointment: Managing Director since 20 August 2015.
Skills and experience: Ian joined Emeco in 2005 and was appointed Chief Executive Officer and Managing
Director in August 2015. Prior to this, Ian was Emeco’s Chief Operating Officer, having previously been
responsible for Emeco’s Eastern Region Rental business (2005 to 2009) and the North and South American
operations (2009 to 2014). Prior to Emeco, Ian worked for Wesfarmers, BHP Billiton, Thiess and Dyno
Nobel.
Skills and experience: As of 31 December 2021, Peter retired as Senior Managing Director at Black
Diamond Capital Management, however continues in an advisory capacity. Prior to joining Black Diamond,
Peter was President of GSC Group, a SEC-registered investment advisor, 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. Peter has also served as chairman of the board of Kolmar Labs Group Inc., Scovill Inc. and Worldtex
Inc. and was previously a director of IAP Worldwide Services Inc., Grede Holdings LLC, Color Spot Holdings
Inc. and Viasystems Group Inc.. Peter graduated from the University of Michigan with a BSEE degree and
earned an MBA from the Harvard Business School.
Current appointments:
•
•
•
•
Director of Specialty Chemicals International Limited.
Director of Harvey Gulf International Marine LLC.
Director of North Metro Harness Initiative LLC.
Director of Bakelite UK Topco Ltd.
PETER KANE BEng (Mining)
Appointment: Independent Non-Executive Director since December 2020.
Board committee membership:
•
•
Member of the Remuneration and Nomination Committee since December 2020.
Member of the Audit and Risk Management Committee since December 2020.
Skills and experience:
Peter is a Mining Engineer with over 30 years’ experience in the mining industry throughout Australia, New
Zealand and Mongolia. Peter is currently the Project Director of Strategic Minerals where he is responsible
for development of the Woolgar gold tenements. Prior to Strategic Minerals, Peter held roles as the Chief
Operating Officer at QCoal Group, Chief Executive Officer at Cockatoo Coal, Group Managing Director at
Guildford Coal, Chief Executive Officer at Aston Resources, Chief Executive Officer at Boardwalk
Resources, Executive General Manager Projects with Whitehaven Coal and Chief Operating Officer with
Macarthur Coal. Peter also performed the role of Joint Venture Chair for multiple operations with numerous
joint venture partners. Peter’s earlier career included 10 years for Leighton in various roles including
General Manager of the Australian mining contractor business and 10 years with BHP, primarily in their
iron ore and, later, coal divisions. Peter was a Board member of Australian Coal Research Limited from
2017 to 2021 and an Independent Non-Executive Director of Multicom Resources in 2022. Peter is a
member of the Australasian Institute of Mining & Metallurgy and a graduate of the Australian Institute of
Company Directors.
Current appointments:
•
Project Director of Strategic Minerals since January 2023.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
19
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
20
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
JAMES WALKER III BScEcon
Appointment: Non-Executive Director since June 2023
Board committee membership:
•
•
Member of the Audit and Risk Management Committee.
Member of the Remuneration and Nomination Committee.
Skills and experience: James is a 30-year veteran in asset management and has held several leadership
positions throughout his career. James currently serves as a board member for Starwood REIT, Clarus
Corp. and Consumer Portfolio Services, Inc and is also a Strategic Partner of Jadian Capital, a real estate
private equity investment firm. James was most recently CEO and Partner at a middle market private equity
firm and, from 2008 through 2016, James was a Managing Partner of Fir Tree Partners, a top 50 global
alternative asset management firm. Prior to joining Fir Tree, James was a co-founder and Managing
Partner of Black Diamond Capital Management. James began his career in investment banking at Kidder,
Peabody & Co and Bear Stearns. James received a Bachelor of Economics from Boston College’s School
of Management in 1984 and is currently a member of the Board of Regents of Boston College.
Current appointments:
•
•
•
•
Lead Independent Director of Starwood REIT.
Board Member of Clarus Corp.
Board Member of Consumer Portfolio Services.
Strategic Partner of Jadian Capital.
KEITH SKINNER B.Comm, FCA, FAICD
Appointment: Independent Non-Executive Director since April 2017 until his retirement on 13 June 2023.
Board committee membership:
•
•
Chairman of the Audit and Risk Management Committee until 13 June 2023.
Member of the Remuneration and Nomination Committee until 13 June 2023.
Skills and experience: Keith was the Chief Operating Officer of Deloitte Touche Tohmatsu for 13 years
until his retirement from the firm in May 2015. Previously Keith was one of the leading Restructuring and
Insolvency practitioners in Australia, leading many corporate turnarounds. Keith was on the Board of
Deloitte Touche Tohmatsu (1995 to 1997) and on the Board of the Global Deloitte Organisation (2013 to
2015), and a member of the Deloitte Global Governance (2013 to 2015) and Deloitte Global Risk
Committees (2013 to 2015). Keith has also been the Chairman of Emue Technologies Limited (2013 to
2015). Keith was a Director of North Sydney Local Health District (2017 to 2021) and the Chair of the
Finance, Risk and Performance Committee. Keith was also the Independent Chairman of the Audit and
Risk Committee for the Australian Digital Health Agency (2016 to 2019) and was a Director of the Lysicrates
Foundation Limited (2015 to 2020).
Current appointments:
•
Director of Invocare Limited since September 2018. Chair of the Audit and Risk Committee.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
21
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
JAMES WALKER III BScEcon
Appointment: Non-Executive Director since June 2023
Board committee membership:
Member of the Audit and Risk Management Committee.
Member of the Remuneration and Nomination Committee.
•
•
•
•
•
•
•
•
Skills and experience: James is a 30-year veteran in asset management and has held several leadership
positions throughout his career. James currently serves as a board member for Starwood REIT, Clarus
Corp. and Consumer Portfolio Services, Inc and is also a Strategic Partner of Jadian Capital, a real estate
private equity investment firm. James was most recently CEO and Partner at a middle market private equity
firm and, from 2008 through 2016, James was a Managing Partner of Fir Tree Partners, a top 50 global
alternative asset management firm. Prior to joining Fir Tree, James was a co-founder and Managing
Partner of Black Diamond Capital Management. James began his career in investment banking at Kidder,
Peabody & Co and Bear Stearns. James received a Bachelor of Economics from Boston College’s School
of Management in 1984 and is currently a member of the Board of Regents of Boston College.
Current appointments:
Lead Independent Director of Starwood REIT.
Board Member of Clarus Corp.
Board Member of Consumer Portfolio Services.
Strategic Partner of Jadian Capital.
KEITH SKINNER B.Comm, FCA, FAICD
Appointment: Independent Non-Executive Director since April 2017 until his retirement on 13 June 2023.
Board committee membership:
Chairman of the Audit and Risk Management Committee until 13 June 2023.
Member of the Remuneration and Nomination Committee until 13 June 2023.
Skills and experience: Keith was the Chief Operating Officer of Deloitte Touche Tohmatsu for 13 years
until his retirement from the firm in May 2015. Previously Keith was one of the leading Restructuring and
Insolvency practitioners in Australia, leading many corporate turnarounds. Keith was on the Board of
Deloitte Touche Tohmatsu (1995 to 1997) and on the Board of the Global Deloitte Organisation (2013 to
2015), and a member of the Deloitte Global Governance (2013 to 2015) and Deloitte Global Risk
Committees (2013 to 2015). Keith has also been the Chairman of Emue Technologies Limited (2013 to
2015). Keith was a Director of North Sydney Local Health District (2017 to 2021) and the Chair of the
Finance, Risk and Performance Committee. Keith was also the Independent Chairman of the Audit and
Risk Committee for the Australian Digital Health Agency (2016 to 2019) and was a Director of the Lysicrates
Foundation Limited (2015 to 2020).
Current appointments:
•
Director of Invocare Limited since September 2018. Chair of the Audit and Risk Committee.
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Company secretary
The company secretary of the Company during FY23 was:
PENELOPE YOUNG LLB, LLM, BBus
Appointment: Company Secretary since April 2017.
Directors’ meetings
The number of board and committee meetings held and attended by each director in FY23 is outlined in
the following table below:
Table 8: Board and committee meetings held and director attendance
Board meetings
Audit & Risk
Management
Committee meetings
Remuneration &
Nomination Committee
meetings
Director
Peter Richards
Ian Testrow
Peter Frank
Peter Kane
James Walker III (1)
Keith Skinner (2)
A
9
9
8
9
1
8
B
9
9
9
9
1
8
A
4
4 *
- *
4
1
3
B
4
4
4
4
1
3
A
B
*
(1)
(2)
Number of meetings attended.
Number of meetings held during the time the director held office during the year.
Not a member of this committee in FY23.
Mr James Walker III was appointed as a director of the Company on 6 June 2023.
Mr Keith Skinner resigned as a director of the Company on 13 June 2023.
A
2
2 *
- *
2
-
2
B
2
2
2
2
-
2
Corporate governance statement
The Company’s corporate governance statement is located on the Company’s website at -
www.emecogroup.com/who-we-are/corporate-governance.
Principal activities
The principal activities of the Group during FY23 were the provision of open cut and underground mining
equipment rental and providing complementary equipment and mining services, including maintenance,
asset and component rebuilds, fleet optimisation technology, and technical and engineering services.
As set out in this report, the nature of the Group’s operations and principal activities have been consistent
throughout the financial year.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
21
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
22
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Operating and financial review
A review of Group operations, and the results of those operations for FY23, is set out in the operating and
financial review section at pages 8 to 17 and in the accompanying financial statements.
Dividends
On 22 August 2023, the board resolved to pay a final dividend for the financial year ended 30 June 2023
of 1.25 cents per share, representing a total cash payment of $6.5 million. The dividend will be fully franked
and will be paid on 29 September 2023.
Type
FY23 final
1H23
FY22 final
Payment date
29 September 2023
13 April 2023
30 September 2022
Period ends
30 June 2023
31 December 2022
30 June 2022
Cents per share
Value $ million
Fully franked
1.25
6.488
Yes
1.25
6.485
Yes
1.25
6.583
Yes
On market share buy-back
The Company undertook an on-market share buy-back between 24 February 2022 and 22 February 2023,
buying back 21,666,287 ordinary shares for a total amount of $18.4 million. This included 7,663,420 shares
bought back for a total amount of $6.6 million for the year ended 30 June 2023. On 22 February 2023, the
Company announced a further on-market share buy-back of up to 51,900,261 ordinary shares, which
remains open. Further details of on-market share buy-backs for the financial year are set out in note 13 to
the financial statements.
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 Groups’ state of affairs
that occurred during the financial year under review.
Events subsequent to reporting date
On 3 August 2023, the Group announced material changes to the Managing Director & CEO’s (Mr
Testrow’s) terms of employment, with effect from FY24. Further information is set out in note 34 to the
financial statements.
On 22 August 2023, the board resolved to pay a final dividend for the year ended 30 June 2023 of 1.25
cents per share, representing a total cash payment of $6.5 million. The dividend will be fully franked and
will be paid on 29 September 2023.
On 22 August 2023, the Company announced its intention to undertake an on-market share buy-back of
up to $7.3 million, under the program announced on 22 February 2023.
Other than the above, there have been no other significant events, subsequent to the year ended 30 June
2023.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
23
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Operating and financial review
Likely developments
A review of Group operations, and the results of those operations for FY23, is set out in the operating and
financial review section at pages 8 to 17 and in the accompanying financial statements.
Dividends
Likely developments in, and expected results of, the operations of the Group are referred to in the operating
and financial review section at pages 8 to 17. 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 have been omitted in accordance
with section 299A(3) of the Corporations Act 2001.
On 22 August 2023, the board resolved to pay a final dividend for the financial year ended 30 June 2023
of 1.25 cents per share, representing a total cash payment of $6.5 million. The dividend will be fully franked
and will be paid on 29 September 2023.
Directors’ interests
Type
FY23 final
1H23
FY22 final
Payment date
29 September 2023
13 April 2023
30 September 2022
Period ends
30 June 2023
31 December 2022
30 June 2022
Cents per share
Value $ million
Fully franked
1.25
6.488
Yes
1.25
6.485
Yes
1.25
6.583
Yes
On market share buy-back
The Company undertook an on-market share buy-back between 24 February 2022 and 22 February 2023,
buying back 21,666,287 ordinary shares for a total amount of $18.4 million. This included 7,663,420 shares
bought back for a total amount of $6.6 million for the year ended 30 June 2023. On 22 February 2023, the
Company announced a further on-market share buy-back of up to 51,900,261 ordinary shares, which
remains open. Further details of on-market share buy-backs for the financial year are set out in note 13 to
the financial statements.
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 Groups’ state of affairs
that occurred during the financial year under review.
Events subsequent to reporting date
On 3 August 2023, the Group announced material changes to the Managing Director & CEO’s (Mr
Testrow’s) terms of employment, with effect from FY24. Further information is set out in note 34 to the
financial statements.
On 22 August 2023, the board resolved to pay a final dividend for the year ended 30 June 2023 of 1.25
cents per share, representing a total cash payment of $6.5 million. The dividend will be fully franked and
will be paid on 29 September 2023.
On 22 August 2023, the Company announced its intention to undertake an on-market share buy-back of
up to $7.3 million, under the program announced on 22 February 2023.
Other than the above, there have been no other significant events, subsequent to the year ended 30 June
2023.
The relevant interests of each director in securities issued by the companies within the Group and other
related bodies corporate, as notified to the ASX in accordance with section 205G(1) of the Corporations
Act 2001 are set out below:
Table 9: Directors’ interests
Director [A]
Peter Richards
Ian Testrow
Peter Frank
Peter Kane
James Walker III
Keith Skinner
Ordinary shares [B]
Rights
11,044
13,581,238
-
10,288
-
22,300
-
1,789,780 [C]
-
-
-
-
[A]
[B]
[C]
This comprises the Director’s relevant interest in securities as notified to the ASX as at the date of this report or, for Mr
Skinner, on his retirement as a director on 13 June 2023.
This comprises ordinary shares in which the Director has a relevant interest.
This comprises rights issued under the Company’s incentive plans.
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 current and former 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
Emeco from doing anything which could prejudice the insurers in respect of a claim, including 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 2023
23
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
24
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Non-audit services
During the year, Deloitte Touche Tohmatsu, the Group’s auditor, has performed certain other services in
addition to their statutory duties. This is for provision of certain assurance and tax compliance services. No
other advisory or consulting services were provided by Deloitte during the year.
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 10 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 44 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 2016/19, dated 24 March 2016. The Company is an entity to which
the class order applies.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
25
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Non-audit services
During the year, Deloitte Touche Tohmatsu, the Group’s auditor, has performed certain other services in
addition to their statutory duties. This is for provision of certain assurance and tax compliance services. No
other advisory or consulting services were provided by Deloitte during the year.
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 10 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 44 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 2016/19, dated 24 March 2016. The Company is an entity to which
the class order applies.
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Remuneration report (audited)
Contents
This Remuneration Report for the year ended 30 June 2023 outlines the remuneration arrangements of the
Company and is in accordance with the requirements of the Corporations Act 2001 (Act) and its regulations.
This information has been audited as required by section 308(3C) of the Act. This report covers the following
matters:
1. Introduction
2. Remuneration governance
3. Executive remuneration arrangements
3.1. Remuneration principles and strategy
3.2. Approach to setting remuneration and details of incentive plans
4. Relationship between executive remuneration and company performance
5. Executive remuneration outcomes for FY23
6. Executive contracts
7. Non-executive director remuneration
8. Additional disclosures relating to share-based payments
9. Loans to key management personnel and their related parties
10. Other transaction balances with key management personnel and their related parties
1.
Introduction
This report details the Group’s remuneration objectives, practices and outcomes for key management
personnel (KMP), who are defined as those persons having authority and responsibility for planning,
directing and controlling the major activities of the Company, directly or indirectly, including any director
(whether executive or otherwise) of the Company. 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 FY23:
Non-executive directors
Peter Richards
Chair, Independent Non-Executive Director
Peter Frank
Non-Executive Director
Peter Kane
Independent Non-Executive Director
James Walker III
Non-Executive Director
(Commenced 6 June 2023)
Keith Skinner
Independent Non-Executive Director
(Resigned 13 June 2023)
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
25
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
26
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
The following persons were also employed as executives of the Company during FY23:
Other executives
Position
Theresa Mlikota
Chief Financial Officer
(Commenced role 8 May 2023)
Thao Pham
Chief Financial Officer
(Ceased role 7 May 2023) *
* Ms Thao Pham ceased to be a KMP on 7 May 2023.
2.
Remuneration governance
Remuneration and Nomination Committee
The Remuneration and Nomination Committee reviews and makes recommendations to the Board on
remuneration packages and policies applicable to the Managing Director & Chief Executive Officer,
executives and non-executive directors. The Remuneration and Nomination Committee’s role also includes
responsibility for general remuneration strategy, superannuation and other benefits, and employee
incentive schemes.
The members of the Remuneration and Nomination Committee in FY23 were Mr Peter Richards (Chair),
Mr Peter Kane and Mr Keith Skinner (prior to his resignation on 13 June 2023). Mr James Walker III was
appointed as a member of the Remuneration and Nomination Committee from 15 August 2023.
Further information on the Remuneration and Nomination Committee’s role and responsibilities can be
found at www.emecogroup.com/who-we-are/corporate-governance.
Use of remuneration consultants
To ensure the Remuneration and Nomination Committee is fully informed when making remuneration
decisions, it seeks external remuneration advice from time to time. Where required, remuneration
consultants are engaged by, and report directly to, the Remuneration and Nomination Committee. In
selecting remuneration consultants, the Remuneration and Nomination Committee considers potential
conflicts of interest and requires independence from the Company’s key management personnel and other
executives as part of their terms of engagement.
During the period, no remuneration recommendations (as defined by the Act) were provided by
remuneration consultants to the Company.
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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
27
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
The following persons were also employed as executives of the Company during FY23:
Other executives
Position
Theresa Mlikota
Chief Financial Officer
(Commenced role 8 May 2023)
Thao Pham
Chief Financial Officer
(Ceased role 7 May 2023) *
* Ms Thao Pham ceased to be a KMP on 7 May 2023.
2.
Remuneration governance
Remuneration and Nomination Committee
The Remuneration and Nomination Committee reviews and makes recommendations to the Board on
remuneration packages and policies applicable to the Managing Director & Chief Executive Officer,
executives and non-executive directors. The Remuneration and Nomination Committee’s role also includes
responsibility for general remuneration strategy, superannuation and other benefits, and employee
incentive schemes.
The members of the Remuneration and Nomination Committee in FY23 were Mr Peter Richards (Chair),
Mr Peter Kane and Mr Keith Skinner (prior to his resignation on 13 June 2023). Mr James Walker III was
appointed as a member of the Remuneration and Nomination Committee from 15 August 2023.
Further information on the Remuneration and Nomination Committee’s role and responsibilities can be
found at www.emecogroup.com/who-we-are/corporate-governance.
Use of remuneration consultants
To ensure the Remuneration and Nomination Committee is fully informed when making remuneration
decisions, it seeks external remuneration advice from time to time. Where required, remuneration
consultants are engaged by, and report directly to, the Remuneration and Nomination Committee. In
selecting remuneration consultants, the Remuneration and Nomination Committee considers potential
conflicts of interest and requires independence from the Company’s key management personnel and other
executives as part of their terms of engagement.
During the period, no remuneration recommendations (as defined by the Act) were provided by
remuneration consultants to the Company.
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.
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Executive remuneration arrangements
3.
3.1 Remuneration principles and strategy
Emeco’s executive remuneration strategy is designed to attract, motivate and retain talented individuals
and align the interests of executives and shareholders. The following diagram illustrates how the
Company’s remuneration strategy aligns with its strategic direction and links remuneration outcomes to
performance.
Business objective
Build a sustainable, resilient and profitable business through scale, customer and commodity diversification and creating value through
providing the lowest cost, highest quality earthmoving equipment solutions and related services that add value to our customers’
projects and embed Emeco in its customers’ operations
Remuneration strategy linkages to business objective
Remunerate fairly and
appropriately
Align executive interests with
those of shareholders
Attract, retain and develop proven
performers
Provide market-competitive
remuneration and rewards to executives
in order to secure the long-term benefits
of their time, experience and loyalty and
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.
Ensure human resources policies and
practices are consistent and
complementary to the strategic
direction of the Company.
Prohibit the hedging of unvested
equity to ensure alignment with
shareholder outcomes.
Provide total remuneration which is sufficient to
attract and retain proven and experienced
executives who are capable of:
• fulfilling their respective roles within the Group;
• achieving the Group’s strategic objectives; and
• maximising Group earnings and returns to
shareholders.
Remuneration
component
Fixed
Remuneration
Variable short-
term incentive
plan (STI)
Vehicle
Purpose
Link to performance
Comprises base
salary, employer
superannuation
contributions and
other non-cash
benefits.
Paid in cash.
To provide competitive fixed remuneration
to attract, retain and motivate executives,
set with reference to the Company’s size,
achievements, role, market and
experience.
Changes to an executive’s scope of
responsibilities are considered during the
annual remuneration review and, along with
performance, drive remuneration changes.
Rewards executives for their contribution to
achievement of key performance indicators
(KPIs) during the financial year.
The key performance measures in FY23
which determine if any short-term component
is payable are:
• Emeco health and safety (total
recordable injury frequency rate
(TRIFR)),
• operating earnings before interest, tax,
depreciation and amortisation
(Operating EBITDA); and
• executive-specific operational or financial
targets and focus areas.
Targets are discussed in section 5.
Variable long-
term incentive
plan (LTI)
Awards are made
in the form of rights
to ordinary Emeco
shares (Rights).
Rewards executives for their contribution to
progressive achievement of Company KPIs
over the three-year performance period.
Awards of Rights are dependent on
achievement of the LTI KPI.
Vesting of awards is dependent on the
Company’s performance inherent within
which is the creation of long-term growth and
value for shareholders and a more
sustainable, resilient and profitable business.
Performance Rights may be converted into
shares after vesting at the end of the three-
year performance period (subject to any
earlier vesting as set out below) directly
aligning executive interests with
shareholder value over the three-year
period.
Further, the incentive’s value is ultimately
dependent on the Company’s share price
after the three-year performance period,
driving executives to maximise shareholder
return. Targets are discussed in section 5.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
27
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
28
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
3.2
Approach to setting remuneration and details of incentive plans
In FY23, the executive remuneration framework consisted of fixed remuneration and short-term and long-
term incentives as outlined below.
Overall remuneration level and mix
How is overall
remuneration
and mix
determined?
The Company aims to reward executives with a level and mix (proportion of fixed remuneration,
short-term incentives and long-term incentives) of remuneration appropriate to their position,
responsibilities and performance within the Company and which is aligned with targeted market
comparators. This level and mix is determined on an individual basis.
The table below illustrates the overall remuneration mix available for fixed remuneration and short
and long-term incentives for the Managing Director & Chief Executive Officer and other executives
for FY23. The target mix for each individual is considered appropriate for Emeco based on the
Company’s short-term and long-term objectives and the relevant executive’s role and
responsibilities.
Table 10: Overall remuneration mix
Executive
Position
Fixed
remuneration
% of total
remuneration
Short-term
incentive %
of total
remuneration
Long-term
incentive % of
total
remuneration
Ian Testrow [A]
Managing Director &
Chief Executive Officer
33%
Theresa Mlikota [B]
Chief Financial Officer
100%
Thao Pham [C]
Chief Financial Officer
50%
27%
-
30%
40%
-
20%
[A] Pursuant to an amendment to Mr Testrow’s employment contract, as announced to the ASX on 3 August 2023, for FY24 to
FY27, Mr Testrow’s overall available annual remuneration mix will be 29% fixed remuneration with the opportunity to receive
up to 37% in short-term incentive and 34% in long-term incentive. The terms of Mr Testrow’s FY24 to FY27 incentives are
set out in the ASX announcement dated 3 August 2023 and any grant of equity incentives to Mr Testrow will be subject to
shareholder approval.
[B] Ms Mlikota commenced as CFO in May 2023 and is eligible to participate in the STI and LTI plans from FY24. As such,
during FY23, Ms Mlikota received fixed remuneration only. Ms Mlikota’s overall remuneration mix in FY24 will be 39% fixed
remuneration with the opportunity to receive up to 31% in short-term incentive and 30% in long-term incentive.
[C] Ms Pham ceased to be a KMP on 7 May 2023.
The table below sets out the maximum incentive opportunity for each executive under the FY23 STI
and FY23 LTI plans, expressed as a percentage of total fixed remuneration (TFR).
Table 11: Components of variable remuneration
Executive
Position
Maximum
STI % of
TFR
Maximum LTI
% of TFR
Maximum Total
% of TFR
Ian Testrow [A]
Managing Director &
Chief Executive Officer
80%
120%
200%
Theresa Mlikota [B]
Chief Financial Officer
-
-
-
How much
variable
remuneration
can executives
earn in FY23?
Thao Pham [C]
Chief Financial Officer
60%
[A] Pursuant to an amendment to Mr Testrow’s employment contract, as announced to the ASX on 3 August 2023, Mr Testrow
has the opportunity, for FY24 to FY27, to receive up to 130% of fixed remuneration through participation in a short-term
incentive scheme and 120% of fixed remuneration through participation in a long-term incentive scheme. The terms of Mr
Testrow’s FY24 to FY27 incentives are set out in the ASX announcement dated 3 August 2023 and any grant of equity
incentives to Mr Testrow will be subject to shareholder approval.
100%
40%
[B] Ms Mlikota commenced as CFO in May 2023 and is eligible to participate in the STI and LTI plans from FY24. Under her
employment agreement, Ms Mlikota is eligible to receive up to 80% of fixed remuneration through participation in a short-
term incentive scheme and 75% of fixed remuneration through participation in a long-term incentive scheme.
[C] Ms Pham ceased to be a KMP on 7 May 2023.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
29
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
3.2
Approach to setting remuneration and details of incentive plans
In FY23, the executive remuneration framework consisted of fixed remuneration and short-term and long-
term incentives as outlined below.
Overall remuneration level and mix
How is overall
remuneration
and mix
determined?
The Company aims to reward executives with a level and mix (proportion of fixed remuneration,
short-term incentives and long-term incentives) of remuneration appropriate to their position,
responsibilities and performance within the Company and which is aligned with targeted market
comparators. This level and mix is determined on an individual basis.
The table below illustrates the overall remuneration mix available for fixed remuneration and short
and long-term incentives for the Managing Director & Chief Executive Officer and other executives
for FY23. The target mix for each individual is considered appropriate for Emeco based on the
Company’s short-term and long-term objectives and the relevant executive’s role and
responsibilities.
Table 10: Overall remuneration mix
Fixed
Short-term
Long-term
remuneration
incentive %
incentive % of
% of total
of total
total
remuneration
remuneration
remuneration
Executive
Position
Ian Testrow [A]
Managing Director &
Chief Executive Officer
33%
Theresa Mlikota [B]
Chief Financial Officer
100%
Thao Pham [C]
Chief Financial Officer
50%
27%
-
30%
40%
-
20%
[A] Pursuant to an amendment to Mr Testrow’s employment contract, as announced to the ASX on 3 August 2023, for FY24 to
FY27, Mr Testrow’s overall available annual remuneration mix will be 29% fixed remuneration with the opportunity to receive
up to 37% in short-term incentive and 34% in long-term incentive. The terms of Mr Testrow’s FY24 to FY27 incentives are
set out in the ASX announcement dated 3 August 2023 and any grant of equity incentives to Mr Testrow will be subject to
shareholder approval.
[B] Ms Mlikota commenced as CFO in May 2023 and is eligible to participate in the STI and LTI plans from FY24. As such,
during FY23, Ms Mlikota received fixed remuneration only. Ms Mlikota’s overall remuneration mix in FY24 will be 39% fixed
remuneration with the opportunity to receive up to 31% in short-term incentive and 30% in long-term incentive.
[C] Ms Pham ceased to be a KMP on 7 May 2023.
The table below sets out the maximum incentive opportunity for each executive under the FY23 STI
and FY23 LTI plans, expressed as a percentage of total fixed remuneration (TFR).
Maximum
STI % of
TFR
80%
Maximum LTI
Maximum Total
% of TFR
% of TFR
Ian Testrow [A]
Managing Director &
Chief Executive Officer
Theresa Mlikota [B]
Chief Financial Officer
-
Thao Pham [C]
Chief Financial Officer
60%
120%
-
40%
200%
-
100%
[A] Pursuant to an amendment to Mr Testrow’s employment contract, as announced to the ASX on 3 August 2023, Mr Testrow
has the opportunity, for FY24 to FY27, to receive up to 130% of fixed remuneration through participation in a short-term
incentive scheme and 120% of fixed remuneration through participation in a long-term incentive scheme. The terms of Mr
Testrow’s FY24 to FY27 incentives are set out in the ASX announcement dated 3 August 2023 and any grant of equity
incentives to Mr Testrow will be subject to shareholder approval.
[B] Ms Mlikota commenced as CFO in May 2023 and is eligible to participate in the STI and LTI plans from FY24. Under her
employment agreement, Ms Mlikota is eligible to receive up to 80% of fixed remuneration through participation in a short-
term incentive scheme and 75% of fixed remuneration through participation in a long-term incentive scheme.
[C] Ms Pham ceased to be a KMP on 7 May 2023.
How much
variable
remuneration
earn in FY23?
can executives
Table 11: Components of variable remuneration
Executive
Position
How is variable
remuneration
delivered?
The FY23 STI is assessed over a single year and the FY23 LTI is assessed progressively
over three years.
The chart below sets out the time periods for assessing and awarding remuneration under
the FY23 STI and FY23 LTI plans:
FY23
FY24
FY25
FY26
Fixed remuneration
FY23 STI (cash)
FY23 LTI (Rights)
FY23 STI tested
FY23 STI paid (cash)
FY23 LTI tested against KPI (1/3 of maximum entitlement to
Rights each year)
FY23 LTI vests (Rights become convertible to shares)
Fixed remuneration
How is fixed
remuneration
reviewed and
approved?
Fixed remuneration is reviewed periodically. Any fixed remuneration changes for executives
takes into account changes in position, responsibilities and performance and are aligned with
targeted market comparators. Changes to an executive’s fixed remuneration is subject to
approval from the Board (and any recommendations of the Remuneration and Nomination
Committee).
Variable remuneration - FY23 Short-term incentive plan (FY23 STI)
What is the purpose
of the plan?
The FY23 STI plan is a cash incentive that rewards executives for their contribution to
achievement of certain KPIs in the financial year.
What are the KPIs
and how do they
align with business
performance?
When is
performance
measured?
The KPIs for the FY23 STI plan are based on a balance of financial and non-financial
measures which provide the platform for the long-term performance, growth, resilience and
sustainability of the Company, assessed at either a Company or individual level.
See section 5 for more information on the FY23 KPIs.
Achievement against the STI KPIs is assessed in conjunction with finalisation of the Company’s
full year results.
How are awards
determined?
Awards are determined by the Board, on recommendation of the Remuneration and
Nomination Committee, after consideration of performance against the applicable KPIs.
How is it paid?
FY23 STI awards are paid in cash.
What happens if an
executive leaves?
The FY23 STI award is only paid to executives employed by the Group after performance is
assessed against the STI KPIs.
Variable remuneration - FY23 Long-term incentive plan (FY23 LTI)
What is the purpose
of the plan?
The FY23 LTI plan is an equity incentive that rewards executives for their contribution to
achievement of certain KPIs over a three-year period.
Under this plan, one-third of a participant’s maximum entitlement is tested each year against
the KPI set for that year. The Board believes that assessing KPIs each year is appropriate
given the cyclic nature of the mining sector. Assessing achievement annually ensures that
executives are rewarded for their performance in each year of the performance period.
Awards under the FY23 LTI plan are made in the form of Rights.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
30
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
What are the KPIs
and how do they
align with business
performance?
The KPI for year 1 of the FY23 LTI is earnings per share growth, which is designed to further
align management with shareholder value through the focus on Company performance and
financial outcomes.
To ensure continued appropriate alignment of the KPI to business performance and
shareholder interests throughout the business and industry cycle, the Board will consider the
KPI for each of year 2 and year 3 of the FY23 LTI at the beginning of the relevant year.
See section 5 for more information on the FY23 KPI.
When is
performance
measured?
Achievement against the LTI KPI is measured by the Board, with the assistance of the
Remuneration and Nomination Committee, at the time of the Company’s full year results.
The FY23 LTI plan spans a three-year performance period. Performance is assessed annually
by the Board in conjunction with approval of the full year results (see “How is variable
remuneration delivered” on page 30).
How are awards
determined?
Awards are determined by the Board, on recommendation of the Remuneration and
Nomination Committee, after consideration of performance against the applicable KPI.
How is it paid?
FY23 LTI awards are paid by issuing rights (Rights) to fully paid ordinary Emeco shares
(Shares). Rights issued under the FY23 LTI plan are scheduled to vest after announcement of
Emeco’s annual results in 2025.
Under the FY23 LTI Plan, executives have the option to convert the Rights into Shares at any
time within 5 years from the vesting date, unless the executive leaves Emeco earlier (see
“What happens if an executive leaves?” below).
The maximum possible award of Rights to each executive under the FY23 LTI plan was
calculated by reference to the volume-weighted average price of Emeco shares for the 20
business days following the release of Emeco’s FY22 results, being 88.68 cents. Rights will be
issued at no cost to the executive. The ultimate value of the FY23 LTI award is determined by
the Emeco share price once the Rights have vested and are converted into Shares, providing
further alignment with the long-term interests of shareholders.
What happens if an
executive leaves?
Under the FY23 LTI plan, if Emeco has terminated the executive’s employment for misconduct
or other breach of employment contract, all the Rights issued to the executive under the FY23
LTI plan will lapse unless otherwise determined by the Board.
If the executive leaves the Emeco Group for any other reason, Rights that have been tested
and issued under the FY23 LTI plan will immediately vest and must be exercised into Shares
within 12 months from vesting.
The executive will have no entitlement to untested awards.
What happens if
there is a change in
control?
In the event of absolute change in control (i.e. the acquisition by a third party and its associates
of more than 50% of the Company’s shares) or an effective change of control (i.e. a third party
acquiring the capacity to determine the Company’s financial and operating policies):
•
rights which have been tested and issued under the FY23 LTI plan; and
• awards in respect of any component of the FY23 LTI that has not been tested,
will vest on the change date.
What other terms
apply to the Rights?
Dividends are not payable, and there are no voting entitlements, on Rights issued under the
LTI plan (whether vested or unvested). Rights cannot be disposed of, other than by conversion
of vested Rights into Shares (which, can then be transferred or sold subject to the Company’s
share trading policy).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
31
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
4. Relationship between executive remuneration and company performance
Emeco’s remuneration objectives aim to align the interests of Emeco’s executives with the interests of the
Company and its shareholders. This is achieved by ensuring that a significant proportion of an executive’s
remuneration is “at risk” and tied to the satisfaction of KPIs which relate to the Company’s performance and
long-term growth. Details of those KPIs, and the Company’s performance in respect of those measures,
are set out in section 5.
In FY23, the KPIs for variable components of executive remuneration were directed at driving and rewarding
the executive’s contribution to the Group’s financial and safety performance and personal achievements
consistent with the Company’s strategy, performance, governance, evolution and long-term value creation.
The STI KPIs (detailed in section 5) focussed on safety, earnings and executive-specific personal targets
based on their roles. The FY23 LTI KPI (applicable to the FY23 testing period under the FY21 LTI, FY22
LTI and FY23 LTI Plans) of FY23 earnings per share growth is designed to further increase alignment
between management and shareholders by recognising the importance of financial outcomes in overall
Company performance.
Throughout FY23, Emeco continued its focus on building a profitable and resilient customer-focussed
solutions business. External revenue for Emeco Group’s rental and workshops businesses grew 19% and
72% respectively during FY23. However, the consequences of the Pit N Portal project terminations and
associated one-off costs in 1H23, together with the continuing tightening of the labour market, cross-hired
fleet costs, extreme weather and ongoing inflationary pressures, impacted Emeco Group’s overall
performance in FY23. As a result, the Company’s financial performance and EPS for FY23 did not achieve
the levels required to satisfy key financial FY23 KPIs.
Emeco is committed to maintaining a strong safety culture. Regrettably, the total recordable injury frequency
rate (TRIFR) has increased from 1.9 in FY22 to 2.9 in FY23, with the Company’s first Lost Time Injury
reported in over 7 years. Due to the increase in TRIFR, the safety target for FY23 was not met.
However, satisfaction of personal goals and key initiatives identified for each executive under the individual
STI targets (set out in section 5) resulted in partial STI awards.
What are the KPIs
and how do they
The KPI for year 1 of the FY23 LTI is earnings per share growth, which is designed to further
align management with shareholder value through the focus on Company performance and
align with business
financial outcomes.
performance?
To ensure continued appropriate alignment of the KPI to business performance and
shareholder interests throughout the business and industry cycle, the Board will consider the
KPI for each of year 2 and year 3 of the FY23 LTI at the beginning of the relevant year.
See section 5 for more information on the FY23 KPI.
When is
performance
measured?
Achievement against the LTI KPI is measured by the Board, with the assistance of the
Remuneration and Nomination Committee, at the time of the Company’s full year results.
The FY23 LTI plan spans a three-year performance period. Performance is assessed annually
by the Board in conjunction with approval of the full year results (see “How is variable
remuneration delivered” on page 30).
How are awards
determined?
Awards are determined by the Board, on recommendation of the Remuneration and
Nomination Committee, after consideration of performance against the applicable KPI.
How is it paid?
FY23 LTI awards are paid by issuing rights (Rights) to fully paid ordinary Emeco shares
(Shares). Rights issued under the FY23 LTI plan are scheduled to vest after announcement of
Emeco’s annual results in 2025.
Under the FY23 LTI Plan, executives have the option to convert the Rights into Shares at any
time within 5 years from the vesting date, unless the executive leaves Emeco earlier (see
“What happens if an executive leaves?” below).
The maximum possible award of Rights to each executive under the FY23 LTI plan was
calculated by reference to the volume-weighted average price of Emeco shares for the 20
business days following the release of Emeco’s FY22 results, being 88.68 cents. Rights will be
issued at no cost to the executive. The ultimate value of the FY23 LTI award is determined by
the Emeco share price once the Rights have vested and are converted into Shares, providing
further alignment with the long-term interests of shareholders.
What happens if an
executive leaves?
Under the FY23 LTI plan, if Emeco has terminated the executive’s employment for misconduct
or other breach of employment contract, all the Rights issued to the executive under the FY23
LTI plan will lapse unless otherwise determined by the Board.
If the executive leaves the Emeco Group for any other reason, Rights that have been tested
and issued under the FY23 LTI plan will immediately vest and must be exercised into Shares
within 12 months from vesting.
The executive will have no entitlement to untested awards.
What happens if
there is a change in
In the event of absolute change in control (i.e. the acquisition by a third party and its associates
of more than 50% of the Company’s shares) or an effective change of control (i.e. a third party
control?
acquiring the capacity to determine the Company’s financial and operating policies):
•
rights which have been tested and issued under the FY23 LTI plan; and
• awards in respect of any component of the FY23 LTI that has not been tested,
will vest on the change date.
What other terms
apply to the Rights?
Dividends are not payable, and there are no voting entitlements, on Rights issued under the
LTI plan (whether vested or unvested). Rights cannot be disposed of, other than by conversion
of vested Rights into Shares (which, can then be transferred or sold subject to the Company’s
share trading policy).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
31
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
32
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Company performance
Details of the Group’s performance (as measured by a range of financial and other indicators, including
disclosure required by the Act) and movements in shareholder wealth are set out in the following table:
Operating EBITDA ($m) [1]
Operating EBIT ($m) [1]
Operating NPAT ($m) [1][2]
Net leverage
Return on capital [1]
Total dividends determined ($m) [3]
Total shares bought back ($m) [4]
FY23
FY22
FY21
FY20
FY19
250.4
250.2
237.7
254.4
214.0
104.6
120.7
119.1
139.4
125.4
59.1
68.9
56.8
61.0[4]
63.1
1.10x
0.96x
0.94x
1.66x
2.02x
13%
13.0
7.3
16%
13.3
18.4
17%
21%
21%
6.8
3.8
-
-
-
-
Closing share price as at 30 June
$0.66
$0.65
$1.05
$0.99
$0.38
TRIFR
2.9
1.9
2.1
2.9
1.2
[1]
[2]
[3]
[4]
Non IFRS measures. Refer to Table 2 of the Operating and Financial Review for further detail regarding operating
adjustments.
FY20 Operating NPAT tax effected for comparative purposes.
FY21 figure includes dividends determined in respect of the FY21 year and paid in FY22. FY22 figure includes dividends
determined and paid in respect of 1H22 and determined in respect of the FY22 full year and paid in FY23. The FY23 figure
includes dividends determined and paid in respect of 1H23 and determined but not yet paid in respect of the FY23 full year.
Total shares bought back reflects the monetary value of shares to be bought back (or, in respect of FY23 is anticipated to be
bought back) in respect of the financial year under announced on-market share buy-back schemes.
5. Executive remuneration outcomes for FY23
5.1 Fixed remuneration outcomes
Following the recommendation of the Remuneration and Nomination Committee, and to ensure that the
Company continues to remunerate executives fairly and appropriately and provide market-competitive
remuneration, existing executives received a 4.5% increase in their total fixed remuneration in FY23, (which
included the compulsory 0.5% increase in the superannuation guarantee) as part of their annual review.
5.2 Variable remuneration outcomes
In FY23, executives had both common and individual KPIs in order to align the performance of each
executive with the overall success of the Company. Set out below is information regarding satisfaction of
the applicable KPIs for the FY23 STI and LTI plans.
5.2.1 FY23 STI plan
Table 12 below sets out the KPIs for the FY23 STI and the respective weightings. In the Board’s view, these
KPIs align the reward of executives with the interests of shareholders. The FY23 STI provided for pro-rata
entitlements where achievement was between the thresholds and targets.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
33
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Company performance
Table 12: FY23 STI KPI weightings, payment schedule and achievement
Details of the Group’s performance (as measured by a range of financial and other indicators, including
disclosure required by the Act) and movements in shareholder wealth are set out in the following table:
KPI
Weight Payment schedule
Rationale
Achievement
Safety
20%
0% if the Group TRIFR[1] as at 30 June
2023 is equal to or higher than Group
TRIFR as at 30 June 2022.
100% if the Group TRIFR[1] as at
30 June 2023 is 10% lower than the
Group TRIFR as at 30 June 2022.
Pro-rata payments between these
levels.
No entitlement if there is a serious,
permanently disabling injury or a fatality.
Below
threshold
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 goal.
Operating
EBITDA [2]
60%
0% if actual FY23 Group Operating
EBITDA ≤ 85% of budget FY23 Group
Operating EBITDA.
Reflects the Company’s
financial performance and
ability to pay STI awards.
Below
threshold
100% if actual FY23 Group Operating
EBITDA ≥ 105% of budget FY23 Group
Operating EBITDA.
Pro-rata payments between these
levels.
Personal
KPIs
20%
Satisfaction of key initiatives set by the
Board for each executive.
Reflects key focus areas for
each executive.
Between
threshold and
target
[1]
[2]
TRIFR = Number of recordable injuries x 1,000,000 hours
Total hours worked
Non IFRS measures. Refer to Table 2 of the Operating and Financial Review for further detail regarding operating
adjustments.
5.2.2 FY23 LTI plan
The Board sets the KPI for the FY23 LTI annually for each financial year during the performance period.
This allows the Board to ensure that the KPI remains appropriate and targets those areas most applicable
to business performance.
The FY23 KPI is based on earnings per share (EPS) growth during FY23, reflecting the importance of
financial outcomes in overall company performance at this stage in the Company’s evolution. The same
FY23 EPS growth KPI applied for the FY23 testing periods under each of the open LTI plans, being year 1
of the FY23 LTI, year 2 of the FY22 LTI and year 3 of the FY21 LTI.
In light of the Company’s overall performance, the EPS growth outcome did not meet the level required to
satisfy the EPS growth KPI.
5.2.1 FY23 STI plan
5.2.3 Incentive outcomes
As set out above, the FY23 STI KPIs focused on safety, earnings and executive-specific personal targets.
As the safety and earnings KPIs were below the required threshold, no award was made for these items.
However, good performance against personal STI targets resulted in partial STI awards.
Following the partial achievement of these personal KPIs, Mr Ian Testrow received an STI award for FY23
equal to 18% of the maximum STI award, with the remaining 82% forfeited.
Ms Thao Pham, received an STI award attributable to her achievements in FY23 while a KMP equal to 13%
of the maximum STI award, with the remaining 87% forfeited.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
33
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
34
Operating EBITDA ($m) [1]
Operating EBIT ($m) [1]
Operating NPAT ($m) [1][2]
Net leverage
Return on capital [1]
Total dividends determined ($m) [3]
Total shares bought back ($m) [4]
FY23
FY22
FY21
FY20
FY19
250.4
250.2
237.7
254.4
214.0
104.6
120.7
119.1
139.4
125.4
59.1
68.9
56.8
61.0[4]
63.1
1.10x
0.96x
0.94x
1.66x
2.02x
13%
13.0
7.3
16%
13.3
18.4
17%
21%
21%
6.8
3.8
-
-
-
-
2.9
1.9
2.1
2.9
1.2
Closing share price as at 30 June
$0.66
$0.65
$1.05
$0.99
$0.38
TRIFR
[1]
[2]
[3]
adjustments.
Non IFRS measures. Refer to Table 2 of the Operating and Financial Review for further detail regarding operating
FY20 Operating NPAT tax effected for comparative purposes.
FY21 figure includes dividends determined in respect of the FY21 year and paid in FY22. FY22 figure includes dividends
determined and paid in respect of 1H22 and determined in respect of the FY22 full year and paid in FY23. The FY23 figure
includes dividends determined and paid in respect of 1H23 and determined but not yet paid in respect of the FY23 full year.
[4]
Total shares bought back reflects the monetary value of shares to be bought back (or, in respect of FY23 is anticipated to be
bought back) in respect of the financial year under announced on-market share buy-back schemes.
5. Executive remuneration outcomes for FY23
5.1 Fixed remuneration outcomes
Following the recommendation of the Remuneration and Nomination Committee, and to ensure that the
Company continues to remunerate executives fairly and appropriately and provide market-competitive
remuneration, existing executives received a 4.5% increase in their total fixed remuneration in FY23, (which
included the compulsory 0.5% increase in the superannuation guarantee) as part of their annual review.
5.2 Variable remuneration outcomes
In FY23, executives had both common and individual KPIs in order to align the performance of each
executive with the overall success of the Company. Set out below is information regarding satisfaction of
the applicable KPIs for the FY23 STI and LTI plans.
Table 12 below sets out the KPIs for the FY23 STI and the respective weightings. In the Board’s view, these
KPIs align the reward of executives with the interests of shareholders. The FY23 STI provided for pro-rata
entitlements where achievement was between the thresholds and targets.
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
As noted above, the FY23 LTI is assessed progressively over a three-year period with one-third of the
maximum incentive being tested each year. Accordingly, a maximum of two-thirds of each executive’s FY23
award is available to be earned after FY23, with one-third deferred to after FY24 and one-third deferred to
after FY25.
As no award was made under the FY23 LTI for the FY23 testing period, the maximum that may be received
under the FY23 LTI Plan following deferred testing in FY24 and FY25 is equal to 67% or two-thirds of the
maximum FY23 LTI entitlement (see table 11 above for maximum entitlement).
After assessment of the FY23 EPS growth KPI with no award being made for the FY23 testing period under
the FY21 LTI plan, FY22 LTI plan and FY23 LTI plan, the cumulative LTI outcomes are summarised in the
graphic below. Any deferred components will be tested against their applicable KPIs in subsequent years.
Cumulative LTI Outcomes
FY23 LTI
33%
67%
FY22 LTI
18%
49%
33%
FY21 LTI
50%
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Earned
Forfeited
Deferred
[1] Expressed as a percentage of maximum LTI available over the 3-year period.
[2] As detailed above, the KPI for the FY23 testing period under the FY21 LTI plan, FY22 LTI plan and FY23 LTI plan is the same
and the outcomes are therefore the same. Outcomes for prior testing periods under the FY21 LTI plan and the FY22 LTI plan
are detailed in the FY21 and FY22 annual reports.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
35
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
As noted above, the FY23 LTI is assessed progressively over a three-year period with one-third of the
maximum incentive being tested each year. Accordingly, a maximum of two-thirds of each executive’s FY23
award is available to be earned after FY23, with one-third deferred to after FY24 and one-third deferred to
after FY25.
As no award was made under the FY23 LTI for the FY23 testing period, the maximum that may be received
under the FY23 LTI Plan following deferred testing in FY24 and FY25 is equal to 67% or two-thirds of the
maximum FY23 LTI entitlement (see table 11 above for maximum entitlement).
After assessment of the FY23 EPS growth KPI with no award being made for the FY23 testing period under
the FY21 LTI plan, FY22 LTI plan and FY23 LTI plan, the cumulative LTI outcomes are summarised in the
graphic below. Any deferred components will be tested against their applicable KPIs in subsequent years.
Cumulative LTI Outcomes
FY23 LTI
33%
67%
FY22 LTI
18%
49%
33%
FY21 LTI
50%
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Earned
Forfeited
Deferred
[1] Expressed as a percentage of maximum LTI available over the 3-year period.
[2] As detailed above, the KPI for the FY23 testing period under the FY21 LTI plan, FY22 LTI plan and FY23 LTI plan is the same
and the outcomes are therefore the same. Outcomes for prior testing periods under the FY21 LTI plan and the FY22 LTI plan
are detailed in the FY21 and FY22 annual reports.
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Statutory Executive KMP remuneration
The following table sets out total remuneration for executive KMP in FY23 and FY22, calculated in
accordance with statutory accounting requirements.
Table 13 – Statutory executive KMP remuneration
KMP
Short-term employee benefits
Post-employment benefits
Share-based
payments
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Executive director
Ian Testrow [7] [8]
Other executives
Thao Pham [5]
Theresa Mlikota [6]
TOTAL KMP
remuneration
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
1,361,700 152,981 217,176
-
1,045,140 460,326
27,500 32,336
27,692 19,026
534,521
46,078
622,759 198,720
-
-
-
-
1,992,195 199,059 217,176
-
1,667,899 659,046
95,974
-
-
-
24,327 15,764
27,692 25,622
3,702
-
-
-
55,529 48,100
55,384 44,648
-
-
-
-
-
-
-
-
1,111,502 2,903,195
1,922,686 3,474,870
44%
69%
334,925
955,615
526,143 1,400,936
99,676
-
-
-
40%
52%
-
-
1,446,427 3,958,486
2,448,829 4,875,806
42%
64%
[1] These figures include annual leave accrual adjustments.
[2] The FY23 figure includes cash awards under the FY23 STI as approved by the Board after review of performance against
applicable key performance indicators (see table 12).
[3] Long service leave accruals are revalued where an employee’s remuneration increases. Figures also includes certain on-costs
which may be re-calculated from time to time.
[4] The FY23 figures include Rights granted (for accounting purposes) by the Company in FY19, FY20, FY21 and FY22, however
no Rights under the FY23 LTI plan were issued in FY23.
[5] Ms Pham ceased to be a KMP on 7 May 2023. The table includes that portion of Ms Pham’s remuneration that relates to the
period that she was a KMP only.
[6] Ms Mlikota commenced her role on 8 May 2023.
[7] Mr Testrow’s salary & fees include an interest expense reimbursement of $314,846 (inclusive of FBT) on a personal loan provided
by the Company to Mr Testrow (refer to note 33 of the financial statements for further information). The interest expense
reimbursed was $166,868, with an estimated FBT liability of $147,978, totalling $314,846.
[8] The non-monetary benefit for Mr Testrow reflects the zero-interest component of the loan provided by a subsidiary of the
Company, of $115,103 plus estimated FBT of $102,073 totalling $217,176. Refer to note 33 of the financial statements for further
information.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
35
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
36
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
6.
Executive contracts
FY23 remuneration arrangements for executives are formalised in employment agreements which provide
for an indefinite term. The executives’ termination provisions under those employment agreements during
FY23 are as follows:
Executive
Resignation
Termination
for cause
Termination
payment [1]
Managing Director & CEO notice
period (by company or executive) [2]
12 months’ notice
No notice
CFO notice period
(by company or executive)
6 months’ notice
No notice
Nil
Nil
[1] Other than salary in lieu of notice and accrued statutory leave entitlements.
[2] As announced to the ASX on 3 August 2023, Mr Testrow’s employment agreement was varied with effect from FY24 such that
various aspects of the termination provisions for FY24 to FY27 will be different from that stated above. As set out in the ASX
announcement dated 3 August 2023 and subject to obtaining all necessary shareholder approvals, pursuant to the contract
variation, if Mr Testrow were to die or suffer a total and permanent disability or if there were to be an absolute change of control
of the Company during this period, Mr Testrow may be eligible to receive unpaid fixed remuneration up to 30 June 2027 and
Mr Testrow’s untested incentives relating to FY24 to FY27 may be awarded and vest.
7.
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 objectivity and avoid any
perceived bias in their decision-making.
Non-executive director fees are usually reviewed and benchmarked annually in August against fees paid
to non-executive directors of comparable companies with similar market capitalisation and industry as the
Company. The Board may consider advice from external consultants when undertaking the annual review
process.
The ASX listing rules specify that the non-executive directors fee pool shall be determined from time to time
by a general meeting. The Company’s constitution has provided for an aggregate fee pool of $1,200,000
per year since its listing on the ASX.
The Board will not seek any increase for the non-executive directors’ pool at the 2023 AGM.
Structure
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.
Following the recommendation of the Remuneration and Nomination Committee, the non-executive director
fees were increased by 4% in FY23.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
37
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
6.
Executive contracts
The table below summarises the non-executive directors fee policy for FY23 (inclusive of superannuation):
FY23 remuneration arrangements for executives are formalised in employment agreements which provide
for an indefinite term. The executives’ termination provisions under those employment agreements during
FY23 are as follows:
Executive
Resignation
Termination
for cause
Termination
payment [1]
Managing Director & CEO notice
period (by company or executive) [2]
12 months’ notice
No notice
CFO notice period
(by company or executive)
6 months’ notice
No notice
Nil
Nil
[1] Other than salary in lieu of notice and accrued statutory leave entitlements.
[2] As announced to the ASX on 3 August 2023, Mr Testrow’s employment agreement was varied with effect from FY24 such that
various aspects of the termination provisions for FY24 to FY27 will be different from that stated above. As set out in the ASX
announcement dated 3 August 2023 and subject to obtaining all necessary shareholder approvals, pursuant to the contract
variation, if Mr Testrow were to die or suffer a total and permanent disability or if there were to be an absolute change of control
of the Company during this period, Mr Testrow may be eligible to receive unpaid fixed remuneration up to 30 June 2027 and
Mr Testrow’s untested incentives relating to FY24 to FY27 may be awarded and vest.
7.
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 objectivity and avoid any
perceived bias in their decision-making.
Non-executive director fees are usually reviewed and benchmarked annually in August against fees paid
to non-executive directors of comparable companies with similar market capitalisation and industry as the
Company. The Board may consider advice from external consultants when undertaking the annual review
The ASX listing rules specify that the non-executive directors fee pool shall be determined from time to time
by a general meeting. The Company’s constitution has provided for an aggregate fee pool of $1,200,000
per year since its listing on the ASX.
The Board will not seek any increase for the non-executive directors’ pool at the 2023 AGM.
process.
Structure
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.
Following the recommendation of the Remuneration and Nomination Committee, the non-executive director
fees were increased by 4% in FY23.
Board fees
Chairman
Directors
FY23*
FY22
$172,796
$166,149
$109,200
$105,000
Committee fees
FY23*
FY22
Committee Chair
$14,560
$13,999
Committee Member
$10,920
$10,500
*Change in annual fee from FY22 amounts effective from 3 October 2022.
Due to the small number of Australian based non-executive directors in FY23, all Australian non-executive
directors sat on more than one committee. However, non-executive directors were only paid for sitting on
one committee in FY23.
Non-executive directors do not receive retirement benefits, nor do they participate in any incentive
programs.
The remuneration of non-executive directors for FY23 and FY22 is detailed in table 14 below.
Table 14 – Statutory non-executive director remuneration
Non-executive directors
Peter Richards
Peter Frank
Peter Kane
FY23
FY22
FY23
FY22
FY23
FY22
Keith Skinner [1]
FY23
FY22
James Walker III [2] FY23
FY22
TOTAL
FY23
FY22
Short-term
employee benefits
Salary and fees
167,507
163,772
100,486
105,000
107,708
105,000
107,525
108,182
5,853
-
489,079
481,954
Post-employment
benefits
Superannuation
benefits
17,419
16,378
10,410
10,500
11,168
10,500
11,145
10,818
615
-
50,757
48,196
[1] Mr Skinner retired as a director on 13 June 2023.
[2] Mr Walker commenced as a director of 6 June 2023.
Long-term
benefits
Long-term equity
incentives
-
-
-
-
-
-
-
-
-
-
-
-
Total
184,926
180,150
110,896
115,500
118,876
115,500
118,670
119,000
6,468
-
539,836
530,150
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
37
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
38
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
8.
Additional disclosures relating to share-based payments
Grants and vesting of equity settled awards made during FY23 to executives in connection with the
Company’s open long-term incentive plans are set out in the table below.
All grants are rights (or an entitlement to receive rights) to receive one fully paid ordinary Emeco share. The
vesting of rights is subject to satisfaction of vesting conditions. Once vested, a participant has a period
within which to exercise the right (at zero cost) and receive shares.
Table 15 – Summary of executive KMP allocated, vested or lapsed equity
Executive [7]
Grant date
[1]
Number
granted [2]
Ian Testrow [A]
2019 MIP (Year 3)
15/11/2018
1,000,000
(Year 4)
15/11/2018
1,000,000
2020 LTI (Year 1)
12/11/2020
157,836
LTI (Year 2)
18/11/2021
176,404
LTI (Year 3)
17/11/2022
102,129
2021 LTI (Year 1)
18/11/2021
377,020
LTI (Year 2)
17/11/2022
218,275
LTI (Year 3)
-
-
2022 LTI (Year 1)
17/11/2022
194,485
LTI (Year 2)
2023 LTI (Year 1)
-
-
-
-
Thao Pham[B]
2019 MIP
26/07/2018
553,557
2020 LTI (Year 1)
14/11/2019
(Year 2)
(Year 3)
14/11/2019
14/11/2019
2021 LTI (Year 1)
26/07/2021
(Year 2)
(Year 3)
26/07/2021
26/07/2021
29,918 [C]
29,917 [C]
29,917 [C]
63,941 [C]
63,940 [C]
63,940 [C]
2022 LTI (Year 1)
12/08/2021
100,000 [C]
(Year 2)
(Year 3)
12/08/2021
100,000 [C]
12/08/2021
100,000 [C]
2023 LTI (Year 1)
10/03/2023
135,516 [C]
(Year 2)
(Year 3)
10/03/2023
135,516 [C]
10/03/2023
135,516 [C]
% vested to
the date of
this report
% forfeited
to the date
of this
report [3]
Vesting
date [4] [5]
Fair value
per
share/right
at grant date
[6]
100%
-
100% [D]
100% [D]
100% [D]
-
-
-
-
-
-
[E]
85% [D]
95% [D]
55% [D]
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15%
5%
45%
5%
45%
100%
45%
100%
-
18/08/2022
Aug-2023
18/08/2022
18/08/2022
17/11/2022
Aug-2023
Aug-2023
-
$3.30
$3.30
$0.94
$1.07
$0.66
$1.06
$0.68
-
Aug-2024
$0.70
-
-
30/06/2023
18/08/2022
18/08/2022
18/08/2022
Aug-2023
Aug-2023
Aug-2023
Aug-2024
Aug-2024
Aug-2024
-
-
$3.60
$1.91
$1.91
$1.91
$0.93
$0.93
$0.93
$1.04
$1.01
$0.99
$0.72
$0.69
$0.67
100%
Aug-2025
-
-
Aug-2025
Aug-2025
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
39
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
[A] Mr Testrow’s grant of awards under the: (i) FY19 MIP were approved by shareholders on 15 November 2018; (ii) FY20 LTI (Year 1)
was approved by shareholders on 12 November 2020; (iii) FY20 LTI (Year 2) and FY21 LTI (Year 1) was approved by shareholders
on 18 November 2021 and (iv) FY20 LTI (Year 3), FY21 LTI (Year 2) and FY22 LTI (Year 1) was approved by shareholders on
17 November 2022. No grant will be made in respect of FY21 LTI (Year 3), FY22 LTI (Year 2) and FY23 LTI (Year 1). Refer to
the applicable notice of meeting for further details regarding these grants. Mr Testrow may, subject to shareholder approval, also
be granted up to 353,607 Rights in respect of Year 3 of the FY22 LTI and up to 479,192 Rights in respect of each of Year 2 and
Year 3 of the FY23 LTI.
[B] Ms Pham ceased to be a KMP on 7 May 2023.
[C] This figure represents maximum entitlement under the FY20, FY21, FY22 and FY23 LTI plans across each year in the three-year
performance period and does not reflect the number of Rights that may be issued in each year across the performance period
after testing of the relevant KPIs. Refer to table 16 for more information regarding Rights held by KMPs.
[D] Rights under the FY20 LTI vested on 18 August 2022, becoming vested performance rights capable of being exercised into
ordinary shares in accordance with their terms. Further details regarding the FY20 LTI plan is set out in the FY20 remuneration
report.
[E] Following satisfaction of the applicable service condition, Ms Pham received 553,557 shares following the vesting of the FY19
MIP performance rights on 30 June 2023. Further details regarding the FY19 MIP are set out in the FY19 remuneration report.
[1] Grant date in this table relates to the grant of the long-term incentive for accounting purposes only and, in respect of the FY20,
FY21 FY22 and FY23 incentive plans, differs from the date Rights may be issued over the course of the life of the plan.
[2] All figures are post-consolidation (where applicable). Figures for Mr Testrow are stated following assessment of the relevant KPI
by the Board and shareholder approval. Figures for other executives represent the maximum entitlement under the FY20, FY21,
FY22 and FY23 LTI plans and are stated prior to assessment of the relevant KPI.
[3] Includes amounts for FY21 LTI (Year 3), FY22 LTI (Year 2) and FY23 LTI (Year 1) following the assessment of the FY23 KPI by
the Board after the end of the FY23 financial year.
[4] Vesting of Rights are subject to satisfaction of vesting and performance conditions and, in some circumstances, may be earlier
than the date stated above (see section 3.2, ‘What happens if an executive leaves?’ in respect of the FY23 LTI plan). A participant
has a period of time in which to exercise any vested rights into shares. 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 5 for details of the year 1 KPI
applicable to awards under the FY23 LTI. Full details of the vesting conditions for all prior year equity settled grants to executives
are included in the remuneration report for the relevant year.
[5] Where exact vesting dates are not noted, the vesting date will follow release of the Company’s full year results.
[6] For the long-term incentive awards, the fair value of awards granted in the year is the fair value of those rights calculated at grant
date using a Black-Scholes option-pricing model. 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 13) is the portion of the fair
value of the securities recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the
relevant period. 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.
[7] Ms Mlikota commenced her role in May 2023 and is eligible to participate in the STI and LTI plans from FY24.
8.
Additional disclosures relating to share-based payments
Grants and vesting of equity settled awards made during FY23 to executives in connection with the
Company’s open long-term incentive plans are set out in the table below.
All grants are rights (or an entitlement to receive rights) to receive one fully paid ordinary Emeco share. The
vesting of rights is subject to satisfaction of vesting conditions. Once vested, a participant has a period
within which to exercise the right (at zero cost) and receive shares.
Table 15 – Summary of executive KMP allocated, vested or lapsed equity
Executive [7]
Grant date
[1]
Number
granted [2]
% vested to
the date of
this report
% forfeited
to the date
of this
report [3]
Vesting
date [4] [5]
Fair value
per
share/right
at grant date
[6]
Ian Testrow [A]
2019 MIP (Year 3)
15/11/2018
1,000,000
100%
2022 LTI (Year 1)
17/11/2022
194,485
Aug-2024
$0.70
(Year 4)
15/11/2018
1,000,000
2020 LTI (Year 1)
12/11/2020
157,836
LTI (Year 2)
18/11/2021
176,404
LTI (Year 3)
17/11/2022
102,129
2021 LTI (Year 1)
18/11/2021
377,020
LTI (Year 2)
17/11/2022
218,275
LTI (Year 3)
LTI (Year 2)
2023 LTI (Year 1)
Thao Pham[B]
-
-
-
-
-
-
2021 LTI (Year 1)
26/07/2021
2019 MIP
26/07/2018
553,557
2020 LTI (Year 1)
14/11/2019
(Year 2)
(Year 3)
(Year 2)
(Year 3)
(Year 2)
(Year 3)
(Year 2)
(Year 3)
14/11/2019
14/11/2019
26/07/2021
26/07/2021
29,918 [C]
29,917 [C]
29,917 [C]
63,941 [C]
63,940 [C]
63,940 [C]
12/08/2021
100,000 [C]
12/08/2021
100,000 [C]
10/03/2023
135,516 [C]
10/03/2023
135,516 [C]
2022 LTI (Year 1)
12/08/2021
100,000 [C]
100% [D]
100% [D]
100% [D]
[E]
85% [D]
95% [D]
55% [D]
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15%
5%
45%
5%
45%
100%
45%
100%
18/08/2022
Aug-2023
18/08/2022
18/08/2022
17/11/2022
Aug-2023
Aug-2023
-
-
-
30/06/2023
18/08/2022
18/08/2022
18/08/2022
Aug-2023
Aug-2023
Aug-2023
Aug-2024
Aug-2024
Aug-2024
Aug-2025
Aug-2025
$3.30
$3.30
$0.94
$1.07
$0.66
$1.06
$0.68
-
-
-
$3.60
$1.91
$1.91
$1.91
$0.93
$0.93
$0.93
$1.04
$1.01
$0.99
$0.72
$0.69
$0.67
2023 LTI (Year 1)
10/03/2023
135,516 [C]
100%
Aug-2025
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
39
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
40
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Table 16: KMP Rights
Details of Rights held by KMP, including their personally related entities, for FY23 are as follows:
KMP
Rights [1]
Holding at
1 July 2022
Rights issued
in FY23 [2]
Rights vested
in FY23
Holding at
30 June 2023
Potential
future Rights
[3]
Executive director
Ian Testrow
Other executives
Thao Pham
Theresa Mlikota [4]
Rights /
performance shares
Rights /
performance rights
Rights /
performance rights
Rights /
performance rights
2,000,000
-
1,000,000
1,000,000
-
711,260
514,889
436,369
789,780
1,311,991
668,154
106,622
-
-
[A]
-
N/A[B]
N/A[B]
-
-
[1] A ‘performance share’ is a right to one fully paid ordinary Emeco share currently 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 to satisfaction
of vesting conditions.
[2] Rights issued to executives in FY23 as awards under the FY20, FY21 and FY22 incentive plans.
[3] Maximum remaining possible entitlement to Rights under the FY22 and FY23 LTI plans across the three-year performance period.
[4] Ms Mlikota commenced as CFO in May 2023 and is eligible to participate in the STI and LTI plans from FY24.
[A] Following satisfaction of the applicable service condition, Ms Pham received 553,557 shares on the vesting of the FY19 MIP
performance rights on 30 June 2023.
[B] Ms Pham ceased to be a KMP on 7 May 2023.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
41
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Table 16: KMP Rights
Table 17: KMP Shareholding
Details of Rights held by KMP, including their personally related entities, for FY23 are as follows:
Details of Shares held by KMP, including their personally related entities, for FY23 are as follows:
KMP
Rights [1]
Holding at
1 July 2022
Rights issued
in FY23 [2]
Rights vested
Holding at
in FY23
30 June 2023
Potential
future Rights
[3]
Holding at
1 July 2022
Shares received
as a result of
rights vesting in
FY23
Shares otherwise
issued in FY23
Net other
changes
Holding at
30 June 2023
Executive director
Other executives
performance shares
Rights /
performance rights
performance rights
performance rights
Ian Testrow
Rights /
2,000,000
-
1,000,000
1,000,000
711,260
514,889
436,369
789,780
1,311,991
Thao Pham
Rights /
668,154
106,622
N/A[B]
N/A[B]
Theresa Mlikota [4]
Rights /
-
-
-
[A]
-
[1] A ‘performance share’ is a right to one fully paid ordinary Emeco share currently 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 to satisfaction
of vesting conditions.
[2] Rights issued to executives in FY23 as awards under the FY20, FY21 and FY22 incentive plans.
[3] Maximum remaining possible entitlement to Rights under the FY22 and FY23 LTI plans across the three-year performance period.
[4] Ms Mlikota commenced as CFO in May 2023 and is eligible to participate in the STI and LTI plans from FY24.
[A] Following satisfaction of the applicable service condition, Ms Pham received 553,557 shares on the vesting of the FY19 MIP
performance rights on 30 June 2023.
[B] Ms Pham ceased to be a KMP on 7 May 2023.
-
-
Non-executive directors
Peter Richards
Peter Frank
Peter Kane
Keith Skinner
James Walker III
Executives
Ian Testrow
Thao Pham
Theresa Mlikota [C]
11,044
-
10,288
22,300
-
-
-
-
-
-
12,144,869
1,436,369
2,569,851
-
[A]
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,044
-
10,288
N/A[B]
-
13,581,238
N/A[D]
-
[A] Following satisfaction of the applicable service condition, Ms Pham received 553,557 shares on the vesting of the FY19 MIP performance rights on
30 June 2023.
[B] Mr Skinner retired as a director on 13 June 2023.
[C] Ms Mlikota commenced her role in May 2023 and does not hold Shares or Rights in the Company.
[D] Ms Pham ceased to be a KMP on 7 May 2023.
9.
Loans to key management personnel and their related parties
As approved by shareholders at the 2022 AGM, a zero-interest loan for a principal amount of $4,948,640.55
was provided by a subsidiary of the Company to Mr Ian Testrow. The principal amount was advanced to
Mr Testrow in February 2023 and is repayable on the earlier of 30 June 2027, within 6 months in the event
of Mr Testrow’s death or total and permanent disability; or, prior to the amendment of the loan described
below, within 3 months of Mr Testrow ceasing to be employed by the Emeco Group.
This loan aimed to incentivise Mr Testrow to retain his equity investment in the Company at current levels
and to avoid any need for Mr Testrow to sell shares in the Company. The proceeds of the loan were used
to discharge a third-party interest-bearing loan taken out by Mr Testrow to assist in funding personal tax
liabilities arising from shares in the Company received by Mr Testrow under the management incentive plan
(as approved by shareholders in 2017 at the time of the Company’s recapitalisation).
As announced on the ASX on 3 August 2023 and to further incentivise Mr Testrow to remain with the
Company for at least the next four years, the terms of the loan to Mr Testrow have been varied with effect
from FY24 to provide that if Mr Testrow were to resign and his employment end before 30 June 2027:
•
•
the loan will attract an interest rate of 12% per annum from the date the loan was drawn until the date
the loan is repaid in full (loan previously interest free in all circumstances); and
the loan becomes due on the date Mr Testrow’s employment ends (previously three months after Mr
Testrow’s employment ends).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
41
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
42
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Prior to the loan to Mr Testrow being advanced in February 2023, the Company agreed to reimburse
amounts paid by Mr Testrow in respect of interest that he was incurring on the previous third party loan of
approximately $20,000 a month. Mr Testrow received reimbursement of $166,868 under this arrangement
during FY23.
Further details regarding this loan and amounts paid during the year are set out in Table 13 above and in
note 33 of the notes to the financial statements.
10. Other transactions and balances with key management personnel and their related
parties
Except for the loan and reimbursement arrangement with Mr Testrow described above, there are no other
transactions and balances with key management personnel and their related parties.
Signed in accordance with a resolution of the directors.
Ian Testrow
Managing Director & Chief Executive Officer
Dated at Perth, 22nd day of August 2023
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
43
Emeco Holdings Limited and its Controlled Entities
Directors’ report
For the year ended 30 June 2023
Prior to the loan to Mr Testrow being advanced in February 2023, the Company agreed to reimburse
amounts paid by Mr Testrow in respect of interest that he was incurring on the previous third party loan of
approximately $20,000 a month. Mr Testrow received reimbursement of $166,868 under this arrangement
during FY23.
Further details regarding this loan and amounts paid during the year are set out in Table 13 above and in
note 33 of the notes to the financial statements.
10. Other transactions and balances with key management personnel and their related
parties
Except for the loan and reimbursement arrangement with Mr Testrow described above, there are no other
transactions and balances with key management personnel and their related parties.
Signed in accordance with a resolution of the directors.
Ian Testrow
Managing Director & Chief Executive Officer
Dated at Perth, 22nd day of August 2023
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
Level 3, 133 Hasler Road
Osborne Park WA 6017
22 August 2023
Dear Board Members
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo EEmmeeccoo HHoollddiinnggss LLiimmiitteedd
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 report of Emeco Holdings Limited for the financial year ended 30 June 2023,
I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DDEELLOOIITTTTEE TTOOUUCCHHEE TTOOHHMMAATTSSUU
AA TT RRiicchhaarrddss
Partner
Chartered Accountants
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
43
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
44
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 2023
Note
2023
$'000
Restated
2022
$'000
Revenue
Other income
Repairs and maintenance
Employee expenses
External mining and maintenance services
Cartage and fuel
Depreciation and amortisation expense
Impairment of tangible assets
Other expenses
Trade receivables written off
Finance income
Finance costs
Net foreign exchange loss
Profit before tax expense
Tax expense
Net profit after tax
Other comprehensive income/(loss)
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences (net of tax)
Total other comprehensive income/(loss) for the year
7
8
9
9
9
9
18
9
9
9
11
874,917
4,087
(152,704)
(151,200)
(223,938)
(21,606)
(145,821)
(981)
(80,594)
(23,013)
670
(27,928)
(52)
51,837
(10,506)
41,331
754,368
680
(123,508)
(142,405)
(162,686)
(17,414)
(129,441)
(1,125)
(63,329)
-
164
(24,185)
(436)
90,683
(25,730)
64,953
169
169
(446)
(446)
Total comprehensive income for the year
41,500
64,507
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
45
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 2023
Note
2023
$'000
Restated
2022
$'000
Revenue
Other income
Repairs and maintenance
Employee expenses
External mining and maintenance services
Cartage and fuel
Depreciation and amortisation expense
Impairment of tangible assets
Other expenses
Trade receivables written off
Finance income
Finance costs
Net foreign exchange loss
Profit before tax expense
Tax expense
Net profit after tax
Other comprehensive income/(loss)
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences (net of tax)
Total other comprehensive income/(loss) for the year
7
8
9
9
9
9
9
9
9
18
11
874,917
4,087
(152,704)
(151,200)
(223,938)
(21,606)
(145,821)
(981)
(80,594)
(23,013)
670
(27,928)
(52)
51,837
(10,506)
41,331
754,368
680
(123,508)
(142,405)
(162,686)
(17,414)
(129,441)
(1,125)
(63,329)
-
164
(24,185)
(436)
90,683
(25,730)
64,953
169
169
(446)
(446)
Total comprehensive income for the year
41,500
64,507
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Profit or Loss and Other Comprehensive Income
(continued)
For the year ended 30 June 2023
Profit attributable to:
Owners of the Company
Profit for the year
Total comprehensive income attributable to:
Owners of the Company
Total comprehensive profit for the year
Earnings per share:
Basic earnings per share
Diluted earnings per share
2023
$'000
Restated
2022
$'000
41,331
41,331
64,953
64,953
41,500
41,500
64,507
64,507
Note
35
35
2023
Cents
2022
Cents
7.99
7.85
12.13
11.94
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
45
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
46
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Financial Position
as at 30 June 2023
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories and work in progress
Assets held for sale
Other current assets
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity attributable to equity holders of the Company
Note
2023
$'000
Restated
2022
$'000
17
18
19
14
16
20
21
22
33
23
24
26
24
26
12
13
46,673
157,765
23,435
1,165
16,890
245,928
9,657
752,632
75,527
4,677
842,493
60,158
142,948
23,511
4,094
20,843
251,554
10,971
703,664
55,324
-
769,959
1,088,421
1,021,513
147,143
23,746
15,645
186,534
298,901
696
12,846
312,443
135,879
14,969
14,546
165,394
286,095
681
2,122
288,898
498,977
454,292
589,444
567,221
1,149,254
(6,474)
(553,336)
589,444
1,155,856
7,585
(596,220)
567,221
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
47
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories and work in progress
Assets held for sale
Other current assets
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
17
18
19
14
16
20
21
22
33
23
24
26
24
26
12
13
46,673
157,765
23,435
1,165
16,890
245,928
9,657
752,632
75,527
4,677
842,493
147,143
23,746
15,645
186,534
298,901
696
12,846
312,443
60,158
142,948
23,511
4,094
20,843
251,554
10,971
703,664
55,324
-
769,959
135,879
14,969
14,546
165,394
286,095
681
2,122
288,898
1,088,421
1,021,513
498,977
454,292
589,444
567,221
1,149,254
(6,474)
(553,336)
589,444
1,155,856
7,585
(596,220)
567,221
Accumulated losses
Total equity attributable to equity holders of the Company
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Financial Position
as at 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Changes in Equity
For the year ended 30 June 2023
Note
2023
$'000
Restated
2022
$'000
Share
based
Foreign
currency
Share
capital
$'000
payment
translation
Treasury
Accumulated
reserve
$'000
reserve
$'000
shares
$'000
losses
$'000
Balance at 1 July 2022 as reported
1,155,856
28,475
14,579
(35,469)
Transfer of FCTR to accumulated losses
-
-
(14,579)
-
Balance at 1 July 2022 as restated
1,155,856
28,475
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Foreign currency translation differences
Total comprehensive income for the year
-
-
-
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
On market share buy-backs
(6,602)
Dividends paid
Shares vested during the period
Shares purchased by the trust
Share-based payment transactions
-
-
-
-
Total contributions by and distributions to owners
(6,602)
Balance at 30 June 2023
1,149,254
-
-
-
-
-
(5,805)
-
1,417
(4,388)
24,087
-
-
(169)
(169)
-
-
-
-
-
-
(35,469)
-
-
-
-
-
5,805
(728)
-
5,077
(169)
(30,392)
Total
equity
$'000
567,221
-
567,221
(596,220)
14,579
(581,641)
41,331
41,331
-
41,331
(169)
41,162
-
(13,026)
-
-
-
(13,026)
(553,336)
(6,602)
(13,026)
-
(728)
1,417
(18,939)
589,444
Share
based
Foreign
currency
Share
capital
$'000
payment
translation
Treasury
Accumulated
reserve
$'000
reserve
$'000
shares
$'000
losses
$'000
Total
equity
$'000
Balance at 1 July 2021
1,171,457
30,901
15,025
(38,294)
(647,688)
531,401
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Foreign currency translation differences
Total comprehensive income/(loss) for the year
-
-
-
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
On market share buy-backs
(15,601)
Dividends paid
Shares vested during the period
Shares purchased by the trust
Share-based payment transactions
-
-
-
-
Total contributions by and distributions to owners
(15,601)
Balance at 30 June 2022
1,155,856
-
-
-
-
-
(4,425)
-
1,999
(2,426)
28,475
-
(446)
(446)
-
-
-
-
-
-
-
-
-
-
-
4,425
(1,600)
-
2,825
14,579
(35,469)
64,953
64,953
-
64,953
(446)
64,507
-
(13,485)
-
-
-
(13,485)
(596,220)
(15,601)
(13,485)
-
(1,600)
1,999
(28,687)
567,221
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
47
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
48
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2023
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Finance income received
Finance costs paid
Note
2023
$'000
Restated
2022
$'000
915,963
807,815
(683,760)
(567,371)
232,203
240,444
572
164
(26,387)
(19,460)
Net cash generated by operating activities
30
206,388
221,148
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment
Payment for property, plant and equipment
Loan issued to related party
Payment for acquired entities
Net cash used in investing activities
3,485
2,791
(179,411)
(170,417)
33
(4,949)
-
-
(2,248)
(180,875)
(169,874)
Cash flows from financing activities
Dividends paid to Company’s shareholders
Payments for shares bought back
Purchase of own shares
Proceeds from borrowings
Repayment of borrowings
Premium paid on US notes repurchased
Payment for debt financing costs
Payments for hedge derivatives closed
Repayment of lease liabilities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effects of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the financial period
(13,026)
(6,602)
(728)
(13,485)
(15,601)
(1,600)
56,806
280,000
(52,781)
(276,828)
-
-
-
(22,664)
(38,995)
(13,482)
60,158
(3)
46,673
(11,191)
(5,566)
(5,314)
(16,102)
(65,687)
(14,413)
74,725
(154)
60,158
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
49
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2023
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Finance income received
Finance costs paid
Note
2023
$'000
Restated
2022
$'000
915,963
807,815
(683,760)
(567,371)
232,203
240,444
572
164
(26,387)
(19,460)
Net cash generated by operating activities
30
206,388
221,148
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment
Payment for property, plant and equipment
Loan issued to related party
Payment for acquired entities
Net cash used in investing activities
33
(4,949)
-
3,485
2,791
(179,411)
(170,417)
-
(2,248)
(180,875)
(169,874)
Cash flows from financing activities
Dividends paid to Company’s shareholders
Payments for shares bought back
Purchase of own shares
Proceeds from borrowings
Repayment of borrowings
Premium paid on US notes repurchased
Payment for debt financing costs
Payments for hedge derivatives closed
Repayment of lease liabilities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Effects of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the financial period
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
(13,026)
(6,602)
(728)
(13,485)
(15,601)
(1,600)
56,806
280,000
(52,781)
(276,828)
-
-
-
(22,664)
(38,995)
(13,482)
60,158
(3)
46,673
(11,191)
(5,566)
(5,314)
(16,102)
(65,687)
(14,413)
74,725
(154)
60,158
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
1 Reporting entity
Emeco Holdings Limited (the ‘Company’) is domiciled in Australia. The address of the Company’s
registered office is Level 3, 133 Hasler Road, Osborne Park WA 6017. The consolidated financial
statements of the Company as at and for the year ended 30 June 2023 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 and mining services to
its customers 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 2022.
The consolidated financial statements were authorised for issue by the board of directors on 22
August 2023.
(b) Comparative financial information – restatement and reclassification
The presentation of certain items in the financial statements have been amended during the period
to simplify the presentation and aid understanding. Where applicable, comparative amounts have
been reclassified to ensure comparability.
On the face of the Consolidated Statement of Profit or Loss, the Group has reclassified certain
“hired in equipment and services” costs totalling $12,842,000 from “external mining and
maintenance services” to “other expenses“, to more accurately reflect the nature of expenses
incurred (refer to note 9 for further information). There was no impact on total expenses as a result
of this reclassification.
On the face of the Statement of Financial Position, the Group has reclassified “leased plant &
equipment” with a net book value of $14,701,000, from “Property, plant and equipment” to “Right-
of-use asset" to more accurately reflect the nature of asset held. Refer to note 21 and note 22 for
further information. There was no impact on total assets, profit or loss or cash flow as a result of
this reclassification.
In the Consolidated Statement of Changes in Equity, the Group has transferred the opening
balance of foreign currency translation reserves of $14,579,000 to accumulated losses, relating to
foreign operations discontinued in prior periods with no likelihood of commencing in the future.
The Company has amended the presentation in the Statement of Cash Flows for the cash receipts
from customers and cash paid to suppliers and employees to be presented gross of GST. This
was done as it is considered to present more useful information and aid in understanding.
Comparatives have been reclassified accordingly as outlined in the table below:
Cash receipts from customers
Cash paid to suppliers and employees
Reported
30 June 2022
$’000
732,378
(491,934)
Comparative
period adjustment
$’000
75,437
(75,437)
Restated
30 June 2022
$’000
807,815
(567,371)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
49
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
50
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
2 Basis of preparation (continued)
(c) 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:
• assets held for sale at fair value less costs of disposal; and
•
The methods used to measure fair values are discussed further in note 5.
financial instruments at fair value through profit or loss are measured at fair value.
(d) 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 2016/191, dated 24 March 2016, and in accordance with that
Corporations Instrument, amounts in the Directors’ Report and the financial statements are
rounded off to the nearest thousand dollars unless otherwise stated. Certain columns and rows
may not add due to the use of rounded numbers.
(e) 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.
The estimates and judgements that have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial year are discussed below:
Impairment of assets
The Group performs annual impairment testing as at 30 June for any intangible assets with
indefinite useful lives. More frequent reviews are performed of both intangible and tangible assets
or asset groups where there are potential indicators of impairment. The identification of impairment
indicators involves management judgement. When an indicator of impairment is identified, a formal
impairment assessment is performed. Impairment testing involves comparing an asset's
recoverable amount to its carrying amount (refer to note 21 for further information).
The Group performed annual impairment testing at 30 June 2023, and considered the following
factors as indicators that its cash generating units (CGU’s) may be impaired:
• The carrying amount of the net assets of the Group were more than its market capitalisation
at 30 June 2023;
• The Pit N Portal CGU incurred an EBIT loss during the period; and
• Market interest rates have increased during the current and preceding periods, resulting in
higher discount rates used to calculate the CGU’s recoverable amount.
An impairment assessment was performed for the Group's key cash generating units (CGUs),
being Rental, Workshops and Pit N Portal, with no impairment identified.
The Group has prepared value-in-use models for the purpose of impairment testing as at 30 June
2023, using a five-year discounted cash flow model for Pit N Portal and ten-year discounted cash
flow model for Rental and Workshops. Cash flows beyond the forecast period are extrapolated
using a terminal value growth rate. Key areas of judgement relate to the forecast utilisation rates,
pricing for the fleet, repairs and maintenance expenditure, other operating costs, capital
expenditure and discount rates.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
51
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
2 Basis of preparation (continued)
(c) Basis of measurement
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
2 Basis of preparation (continued)
(e) Use of estimates and judgements (continued)
•
•
•
•
Impairment of assets (continued)
In performing its detailed impairment assessment, the Group has considered:
•
long-term commodity prices and therefore the demand for earthmoving equipment and
associated services;
independent fair market value of its property, plant and equipment;
supply chain risks and therefore the impact on the ability of the Group to deliver its products
and services;
the likelihood of any continued disruption to the operations of the Group’s customers, as a
result of labour shortages; and
the impact of decarbonisation and ESG related impacts on operations and asset life.
The consolidated financial statements have been prepared on the historical cost basis except for
the following material items in the statement of financial position:
• 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.
(d) 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 2016/191, dated 24 March 2016, and in accordance with that
Corporations Instrument, amounts in the Directors’ Report and the financial statements are
rounded off to the nearest thousand dollars unless otherwise stated. Certain columns and rows
may not add due to the use of rounded numbers.
(e) 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.
The estimates and judgements that have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial year are discussed below:
Impairment of assets
The Group performs annual impairment testing as at 30 June for any intangible assets with
indefinite useful lives. More frequent reviews are performed of both intangible and tangible assets
or asset groups where there are potential indicators of impairment. The identification of impairment
indicators involves management judgement. When an indicator of impairment is identified, a formal
impairment assessment is performed. Impairment testing involves comparing an asset's
recoverable amount to its carrying amount (refer to note 21 for further information).
The Group performed annual impairment testing at 30 June 2023, and considered the following
factors as indicators that its cash generating units (CGU’s) may be impaired:
• The carrying amount of the net assets of the Group were more than its market capitalisation
at 30 June 2023;
• The Pit N Portal CGU incurred an EBIT loss during the period; and
• Market interest rates have increased during the current and preceding periods, resulting in
higher discount rates used to calculate the CGU’s recoverable amount.
An impairment assessment was performed for the Group's key cash generating units (CGUs),
being Rental, Workshops and Pit N Portal, with no impairment identified.
The Group has prepared value-in-use models for the purpose of impairment testing as at 30 June
2023, using a five-year discounted cash flow model for Pit N Portal and ten-year discounted cash
flow model for Rental and Workshops. Cash flows beyond the forecast period are extrapolated
using a terminal value growth rate. Key areas of judgement relate to the forecast utilisation rates,
pricing for the fleet, repairs and maintenance expenditure, other operating costs, capital
expenditure and discount rates.
The post-tax discount rate used in the calculations is 9.8% (2022: 8.7%). The rate reflects the
underlying cost of capital adjusted for market and asset specific risks. For the future cash flows of
the CGU’s, 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 depend on the level of tendering activity and the Group’s conversion rate and for
subsequent years were based on Rental’s ten-year, and Pit N Portal’s five-year outlook taking into
account all available information at this current time and are subject to change over time.
The forecast cash flow estimates used in assessments for all CGU’s were based on Board
approved budgets for the year ending 30 June 2024. A revenue compound annual growth rate
(CAGR) of 2.2% for Rental and Workshops and 9.7% for Pit N Portal was used over the remaining
forecast years. The terminal value growth rate represents the long-term forecast consumer price
index (CPI) of 2.0% (2022: 2.0%) for all CGUs. The recoverable amounts of all of the Group's
CGUs continued to exceed their carrying amounts at 30 June 2023, with no reasonably possible
changes to key assumptions giving rise to a risk of impairment in the Rental and Workshop CGUs.
The recoverability of the Pit N Portal CGU is sensitive to reasonably possible changes in key
assumptions. Specifically, the recoverability of the CGU is dependent on returning to historic levels
of EBITDA achieved in the years ended 30 June 2021 and 30 June 2022 on a sustained basis and
in the terminal year.
In addition to determining the recoverable value through the value-in-use models, the Group
obtained an external valuation (on a fair value basis) of the plant and equipment held by the Group
which supported the carrying value of that plant and equipment as at 30 June 2023.
Assets held for sale
In accordance with the Company’s accounting policies for assets held for sale (refer note 3(j)),
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 which are dependent on the
supply of and demand for the specific categories of equipment being held for sale. 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 14.
Recoverability of receivables
The Group applies judgement in determining recoverability of receivables as described in note 6.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
51
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
52
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
2 Basis of preparation (continued)
(e) Use of estimates and judgements (continued)
Recoverability carried forward tax losses
The Group prepares long-term earnings forecasts to assess the recoverability of its carried forward
tax losses. The assumptions used in the long-term earnings forecasts are described in the
impairment of assets section above.
Assumed interest rate on zero-interest loan provided to related party
The non-monetary benefit of the zero-interest loan provided to the Managing Director and Chief
Executive Officer was determined by reference to the Australian Taxation Office benchmark
interest rate for the FBT year ending 31 March 2024. Refer to note 33 for further information.
3 Significant accounting policies
The accounting policies adopted in the preparation of the consolidated financial statements are
consistent with those followed in the preparation of the Group’s annual consolidated financial statements
for the year ended 30 June 2022 except for the adoption of new standards effective as of 1 July 2022.
The Group has not early adopted any other standard, interpretation or amendment that has been issued
but is not yet effective.
(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)
i.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group
entities at exchange rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are 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 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 2023
53
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
2 Basis of preparation (continued)
(e) Use of estimates and judgements (continued)
Recoverability carried forward tax losses
The Group prepares long-term earnings forecasts to assess the recoverability of its carried forward
tax losses. The assumptions used in the long-term earnings forecasts are described in the
impairment of assets section above.
Assumed interest rate on zero-interest loan provided to related party
The non-monetary benefit of the zero-interest loan provided to the Managing Director and Chief
Executive Officer was determined by reference to the Australian Taxation Office benchmark
interest rate for the FBT year ending 31 March 2024. Refer to note 33 for further information.
3 Significant accounting policies
The accounting policies adopted in the preparation of the consolidated financial statements are
consistent with those followed in the preparation of the Group’s annual consolidated financial statements
for the year ended 30 June 2022 except for the adoption of new standards effective as of 1 July 2022.
The Group has not early adopted any other standard, interpretation or amendment that has been issued
but is not yet effective.
(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)
i.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group
entities at exchange rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are 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 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 and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(c) AASB 16 Leases
The Group as lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The
Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a
lease term of 12 months or less) and leases of low value assets (such as tablets and personal
computers, small items of office furniture and telephones). For these leases, the Group
recognises the lease payments as an operating expense on a straight-line basis over the term
of the lease unless another systematic basis is more representative of the time pattern in which
economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
•
Fixed lease payments (including in-substance fixed payments), less any lease incentives
receivable;
Variable lease payments that depend on an index or rate, initially measured using the index
or rate at the commencement date;
The amount expected to be payable by the lessee under residual value guarantees;
The exercise price of purchase options, if the lessee is reasonably certain to exercise the
options; and
Payments of penalties for terminating the lease, if the lease term reflects the exercise of
an option to terminate the lease.
•
•
•
•
The lease liability is subsequently measured by increasing the carrying amount to reflect interest
on the lease liability (using the effective interest method) and by reducing the carrying amount to
reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related
right-of-use asset) whenever:
•
The lease term has changed or there is a significant event or change in circumstances
resulting in a change in the assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised
discount rate.
The lease payments change due to changes in an index or rate or a change in expected
payment under a guaranteed residual value, in which case the lease liability is remeasured
by discounting the revised lease payments using an unchanged discount rate (unless the
lease payments change is due to a change in a floating interest rate, in which case a revised
discount rate is used).
A lease contract is modified and the lease modification is not accounted for as a separate
lease, in which case the lease liability is remeasured based on the lease term of the modified
lease by discounting the revised lease payments using a revised discount rate at the effective
date of the modification.
•
•
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
54
The right-of-use assets comprise the initial measurement of the corresponding lease liability,
lease payments made at or before the commencement day, less any lease incentives received
and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset,
restore the site on which it is located or restore the underlying asset to the condition required by
the terms and conditions of the lease, a provision is recognised and measured under AASB 137.
To the extent that the costs relate to a right-of-use asset, the costs are included in the related
right-of-use asset, unless those costs are incurred to produce inventories.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(c) AASB 16 Leases (continued)
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-
use asset reflects that the Group expects to exercise a purchase option, the related right-of-use
asset is depreciated over the useful life of the underlying asset. The depreciation starts at the
commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial
position.
The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts
for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy (as
outlined in the financial report for the annual reporting period).
Variable rents that do not depend on an index or rate are not included in the measurement of the
lease liability and the right-of-use asset. The related payments are recognised as an expense in
the period in which the event or condition that triggers those payments occurs and are included in
the line “Other expenses” in profit or loss.
(d) Financial instruments
AASB 9 Financial Instruments sets out requirements for recognising and measuring financial
assets, financial liabilities and some contracts to buy or sell non-financial items.
i. Classification
The Group classifies its financial assets and liabilities in the following measurement categories:
• Those to be measured subsequently at fair value (either through other comprehensive income,
or through profit or loss), and
• Those to be measured at amortised cost.
The classification depends on the Group’s business model for managing financial assets and
liabilities, and the contractual terms of the cash flows. Derivatives are presented as current assets
or liabilities to the extent of the cashflows occurring within 12 months after the end of the reporting
period. For assets and liabilities measured at fair value, gains and losses will either be recorded in
profit or loss or other comprehensive income. For investments in debt instruments, this will depend
on the business model in which the investment is held. For investments in equity instruments that
are not held for trading, this will depend on whether the Group has made an irrevocable election at
the time of initial recognition to account for the equity investment at fair value through other
comprehensive income. The Group reclassifies debt investments when and only when its business
model for managing those assets changes.
ii. Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly attributable
to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value
through profit or loss are expensed in profit or loss. Measurement of cash and cash equivalents
and trade and other receivables remains at amortised cost consistent with the comparative period.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
55
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(c) AASB 16 Leases (continued)
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the
underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-
use asset reflects that the Group expects to exercise a purchase option, the related right-of-use
asset is depreciated over the useful life of the underlying asset. The depreciation starts at the
commencement date of the lease.
The right-of-use assets are presented as a separate line in the consolidated statement of financial
position.
The Group applies AASB 136 to determine whether a right-of-use asset is impaired and accounts
for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy (as
outlined in the financial report for the annual reporting period).
Variable rents that do not depend on an index or rate are not included in the measurement of the
lease liability and the right-of-use asset. The related payments are recognised as an expense in
the period in which the event or condition that triggers those payments occurs and are included in
the line “Other expenses” in profit or loss.
(d) Financial instruments
AASB 9 Financial Instruments sets out requirements for recognising and measuring financial
assets, financial liabilities and some contracts to buy or sell non-financial items.
i. Classification
The Group classifies its financial assets and liabilities in the following measurement categories:
• Those to be measured subsequently at fair value (either through other comprehensive income,
or through profit or loss), and
• Those to be measured at amortised cost.
The classification depends on the Group’s business model for managing financial assets and
liabilities, and the contractual terms of the cash flows. Derivatives are presented as current assets
or liabilities to the extent of the cashflows occurring within 12 months after the end of the reporting
period. For assets and liabilities measured at fair value, gains and losses will either be recorded in
profit or loss or other comprehensive income. For investments in debt instruments, this will depend
on the business model in which the investment is held. For investments in equity instruments that
are not held for trading, this will depend on whether the Group has made an irrevocable election at
the time of initial recognition to account for the equity investment at fair value through other
comprehensive income. The Group reclassifies debt investments when and only when its business
model for managing those assets changes.
ii. Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly attributable
to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value
through profit or loss are expensed in profit or loss. Measurement of cash and cash equivalents
and trade and other receivables remains at amortised cost consistent with the comparative period.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(d) Financial instruments (continued)
ii. Measurement (continued)
Non-derivative financial liabilities
Interest bearing liabilities
All loans and borrowings are initially recognised at fair value, being the amount received less
attributable transaction costs. After initial recognition, interest bearing liabilities are stated at
amortised cost with any difference between cost and redemption value being recognised in the
statement of profit or loss over the period of the borrowings on an effective interest basis.
Trade and other payables
Liabilities are recognised for amounts to be paid for goods or services received. Trade payables
are settled on terms aligned with the normal commercial terms in operations.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in other
comprehensive income, there is no subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment. Dividends from such investments
continue to be recognised in profit or loss as other income when the Group’s right to receive
payments is established. Impairment losses (and reversal of impairment losses) on equity
investments measured at Fair Value through Other Comprehensive Income (FVOCI) are not
reported separately from other changes in fair value. Changes in the fair value of financial assets
at fair value through profit or loss are recognised in other expenses in the statement of profit or loss
as applicable.
iii.
Impairment
The Group assesses on a forward-looking basis the expected credit losses associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends
on whether there has been a significant increase in credit risk. For trade receivables, contract
assets and lease receivables, the Group applies the simplified approach permitted by AASB 9,
which requires expected lifetime losses to be recognised from initial recognition of the receivables.
iv. 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 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 in the period in which they are paid from retained earnings.
Share buy-backs
Share buy-backs are recognised in the period in which they are paid against share capital.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
56
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(e) 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 equipment 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.
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, with the exception of contract costs (refer to note 3(o) for further information).
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 profit or loss and other 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
57
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
3 Significant accounting policies (continued)
(e) Property, plant and equipment
i. Recognition and measurement
accumulated impairment losses.
Items of property, plant and equipment are measured at cost, less accumulated depreciation and
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 equipment 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.
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, with the exception of contract costs (refer to note 3(o) for further information).
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 profit or loss and other 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.
(e) Property, plant and equipment (continued)
iii. Depreciation (continued)
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
Intangible assets
(f)
i. Research and development
Expenditure on research activities is recognised in profit or 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 or 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 tangible and intangible
assets, liabilities and contingent liabilities of the acquiree.
Subsequent measurement
Goodwill is measured at cost, less accumulated impairment losses.
iii. Other intangible assets
Software that is acquired and internally developed by the Group and has finite useful lives are
measured at cost less accumulated amortisation and any accumulated impairment losses.
Intangibles that are acquired by the Group as part of a business combination and have finite useful
lives are measured at fair value less accumulated amortisation and any accumulated impairment
losses.
iv. Amortisation
Intangible assets with a finite useful life 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
• Customer contracts
1 – 4 years
1 – 3 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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58
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(g)
Inventories
Inventories consist of equipment and parts and 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.
(h) Work in progress
Progressive work to inventory and fixed assets are carried in work in progress accounts within
inventory and property, plant and equipment being (disclosed as a ‘capital work in progress’)
respectively. Upon work completion the balance is reclassified from capital work in progress to
the relevant category of asset within property, plant and equipment.
Impairment
(i)
i. Non-derivative financial assets
The expected credit loss model under AASB 9 is used to measure the fair value of financial assets
not classified as at fair value through profit or loss. To assist in this process, the Group segregates
trade receivables into various customer segments where they may have similar loss patterns.
The loss allowance is calculated by taking the following factors into consideration:
Grouping of receivables
The Group has classified its receivables into three main segments of Rental, Workshops and Pit
N Portal in line with the main segments and work undertaken. The debtors in each segment are
then further classified as follows:
• Rental – blue chip customers, insured customers, underinsured customers and uninsured
customers.
• Workshop – blue chip customers, insured customers, underinsured customers, uninsured
customers, and small retail customers.
• Pit N Portal – blue chip customers, insured customers, underinsured customers, uninsured
customers, and small retail customers.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
59
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(g)
Inventories
value.
Inventories consist of equipment and parts and are measured at the lower of cost and net realisable
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.
(h) Work in progress
Progressive work to inventory and fixed assets are carried in work in progress accounts within
inventory and property, plant and equipment being (disclosed as a ‘capital work in progress’)
respectively. Upon work completion the balance is reclassified from capital work in progress to
the relevant category of asset within property, plant and equipment.
(i)
Impairment
i. Non-derivative financial assets
The expected credit loss model under AASB 9 is used to measure the fair value of financial assets
not classified as at fair value through profit or loss. To assist in this process, the Group segregates
trade receivables into various customer segments where they may have similar loss patterns.
The loss allowance is calculated by taking the following factors into consideration:
Grouping of receivables
The Group has classified its receivables into three main segments of Rental, Workshops and Pit
N Portal in line with the main segments and work undertaken. The debtors in each segment are
• Rental – blue chip customers, insured customers, underinsured customers and uninsured
then further classified as follows:
customers.
• Workshop – blue chip customers, insured customers, underinsured customers, uninsured
• Pit N Portal – blue chip customers, insured customers, underinsured customers, uninsured
customers, and small retail customers.
customers, and small retail customers.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
Impairment (continued)
(i)
i. Non-derivative financial assets (continued)
These categories are defined as:
• Blue chip customers – those that are typically defined as having a market capitalisation of
greater than $1 billion. The classification of Blue Chip is determined under the credit risk of the
Groups’ Insurance Policy.
Insured customers – those that are trading within terms with their trade receivable exposure
under the insured limit.
•
• Underinsured customers - those that have not been granted sufficient credit limits by the
insurer to cover sales within credit terms.
• Uninsured customers – are all other customers that are not recognised in the above
categories.
Historical loss rates and forward looking information
The Group uses a combination of historical losses recognised for receivables in the above
categories and takes a view on the future economic conditions that are representative of those
expected to exist. Specifically, the Group has considered the macroeconomic impacts of the
likelihood of any potential and significant decreases to commodity prices on its customers’
operations and therefore their potential capacity to repay amounts owing to the Group.
For an investment in an equity security, objective evidence of impairment includes a significant or
prolonged decline in its fair value below its cost.
Bad debt policy
An allowance for expected credit losses is made when the Group receives notification a customer
is placed into administration or liquidation, or information becomes available to the Group
indicating collection may be in doubt. The realisation of a bad debt subsequently comes into effect
when all avenues of collection have been exhausted without success, and a commercial decision
is made that it is uneconomical to pursue debt recovery.
Definition of default
The Group considers the following as constituting an event of default for internal credit risk
management purposes as historical experience indicates that financial assets that meet either of
the following criteria are generally not recoverable:
• when the customer breaches their agreed credit limit; or
•
information obtained from external sources indicates that the debtor is unlikely to pay its
creditors, including the Group, in full.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
60
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(i) Non-derivative financial assets (continued)
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.
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.
(j)
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 for 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
61
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(i) Non-derivative financial assets (continued)
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.
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.
(j)
Assets held for sale
continuing use.
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
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 for 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.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(k) 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.
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
Under the Emeco long-term incentive plans (LTI) and the legacy management incentive plan
(MIP), certain executives have been granted rights (Rights) to receive fully paid ordinary shares
(Shares) in the Company, the award and vesting of which is subject to varying performance and
or service conditions. There is no entitlement to dividends (or shadow dividends) on Rights.
Under the LTI plans, Rights are issued based on the performance of the executive and the
Company over a three-year period, with one-third of the maximum LTI entitlement being tested
each year. Issued Rights vest at the end of the three-year performance period. If Emeco terminates
the executive’s employment for misconduct or other breach of the executive’s employment
contract, the Board may lapse some or all of the Rights issued to the executive. Rights issued
under the LTI will otherwise vest. The fair value of Rights issued are measured using the Black
Scholes pricing model. The grant date in respect of the LTI Plans, for all eligible employees
excluding the Managing Director (“MD”), was the day the plan was approved by the Board. Any
issue of awards to the MD under the LTI plans are subject to shareholder approval. The fair value
of rights granted are expensed over the three-year period from grant date to vesting date based
on the maximum LTI available in each year. At the completion of the annual testing, when the final
number of rights are approved with respect to the specific financial year, the expense is adjusted
in the year of approval to align with the actual Rights approved which may be less than the
maximum Rights available for that financial year. With respect to the MD and upon approval by
the shareholders the fair value of the rights will be remeasured at the date of the shareholder
meeting (being grant date) at which point they will be treated consistently to the other employees.
If the reward to the MD by shareholders is not approved, the previously recognised expense will
be reversed.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
61
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
62
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(k) Employee benefits (continued)
v. Share-based payment transactions (continued)
On 3 August 2023, the Group announced material changes to the terms of employment of the MD,
whereby LTI plans in respect of FY24 to FY27 (inclusive) will have a one-year performance period.
All equity awards granted will vest on the earlier of release of the Group’s FY27 full-year results
and the end of the MD’s employment. All awards will be in equity. Where Shareholder approval for
an award is not obtained, the award will be paid in cash.
Under the MIP, Rights granted to participants are subject to service conditions. These have various
vesting dates ranging up to 5 years. The fair values of these Rights are based on Volume Weighted
Average Price (“VWAP”) and are expensed evenly over the period from grant date to vesting date.
In the event of death, total and permanent disability, retrenchment or retirement of the participant,
Rights granted under the MIP may vest on an accelerated basis. Rights granted under the MIP will
lapse if the executive ceases employment for any other reason.
(l)
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.
(m) 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.
(n) Revenue
Revenue is disclosed based on the type of good or service provided. This is detailed below:
i. Rental revenue
Revenue from the rental of both open cut and underground equipment is recognised in profit or
loss over time based on the number of hours the machines operate each month. The rental of each
machine is considered to be a separate performance obligation with the transaction price generally
set at a rate per hour. Customers are billed monthly.
ii. Goods sold
Revenue from the sale of goods in the ordinary course of business is measured at the fair value
of the consideration received or receivable, net of returns and allowances, trade discounts and
volume rebates. Sales are recognised when control of the products has transferred, being when
the products are delivered and accepted by the customers’. The Group’s obligation to repair or
replace faulty products under the standard warranty terms is recognised as a provision.
iii. Maintenance services
Maintenance services relates to the provision of both major component and full equipment rebuilds
for both internal and external customers and the provision of mobile workshops and infrastructure
to support both Emeco and external customers’ equipment fleets. Revenue from services rendered
is recognised in profit or loss over time in proportion to the stage of completion of the transaction
at the reporting date, and customers are billed monthly. The Group’s obligation to repair or make-
good faulty works under the standard warranty terms is recognised as a provision.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
63
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(k) Employee benefits (continued)
v. Share-based payment transactions (continued)
On 3 August 2023, the Group announced material changes to the terms of employment of the MD,
whereby LTI plans in respect of FY24 to FY27 (inclusive) will have a one-year performance period.
All equity awards granted will vest on the earlier of release of the Group’s FY27 full-year results
and the end of the MD’s employment. All awards will be in equity. Where Shareholder approval for
an award is not obtained, the award will be paid in cash.
Under the MIP, Rights granted to participants are subject to service conditions. These have various
vesting dates ranging up to 5 years. The fair values of these Rights are based on Volume Weighted
Average Price (“VWAP”) and are expensed evenly over the period from grant date to vesting date.
In the event of death, total and permanent disability, retrenchment or retirement of the participant,
Rights granted under the MIP may vest on an accelerated basis. Rights granted under the MIP will
lapse if the executive ceases employment for any other reason.
(l)
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.
(m) 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.
Revenue is disclosed based on the type of good or service provided. This is detailed below:
Revenue from the rental of both open cut and underground equipment is recognised in profit or
loss over time based on the number of hours the machines operate each month. The rental of each
machine is considered to be a separate performance obligation with the transaction price generally
set at a rate per hour. Customers are billed monthly.
(n) Revenue
i. Rental revenue
ii. Goods sold
Revenue from the sale of goods in the ordinary course of business is measured at the fair value
of the consideration received or receivable, net of returns and allowances, trade discounts and
volume rebates. Sales are recognised when control of the products has transferred, being when
the products are delivered and accepted by the customers’. The Group’s obligation to repair or
replace faulty products under the standard warranty terms is recognised as a provision.
iii. Maintenance services
Maintenance services relates to the provision of both major component and full equipment rebuilds
for both internal and external customers and the provision of mobile workshops and infrastructure
to support both Emeco and external customers’ equipment fleets. Revenue from services rendered
is recognised in profit or loss over time in proportion to the stage of completion of the transaction
at the reporting date, and customers are billed monthly. The Group’s obligation to repair or make-
good faulty works under the standard warranty terms is recognised as a provision.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(n) Revenue (continued)
iv. Mining services
Mining services relate to the provision of equipment, equipment operator, technology and
engineering solutions and the provision and maintenance of onsite infrastructure (electrical,
ventilation, pumping, lighting services and special purpose vehicles). Mining services revenue is
recognised over time on the basis of the work completed and billed to the customer as the
customer receives the benefit. Customer contracts are generally based on schedule of rates or a
cost-plus basis.
Certain contracts with customers include a variable element which is subject to the group meeting
either certain cost targets or material movement Key Performance Indicators (“KPIs”). Variable
consideration is recognised when it is highly probable that a significant reversal of revenue will not
occur in a subsequent period.
(o) Contract costs
Costs incurred to prepare assets for work on a specific contract (or specific anticipated contract)
that can be separately identified, such as freight of earthmoving equipment to customer sites and
modifying assets to meet customer specifications, are recognised as a contract cost asset and
amortised to direct costs over the term of the contract.
The Group accepts that an anticipated contract is a contract where it is more likely than not that
the contract will be obtained.
In determining the contract asset value, the following is taken into account:
• costs of obtaining a contract: the incremental costs of obtaining a contract with a customer are
recognised as an asset if the entity expects to recover those costs; and
• costs of fulfilling a contract: costs that are required to be incurred in order to fulfil contract
obligations that are not already costs accounted for under other accounting standards i.e.
inventory or property, plant and equipment.
Costs that relate directly to a contract (or a specific anticipated contract) include any of the
following:
•
•
•
•
•
direct labour;
direct materials;
allocations of costs that relate directly to the contract or to contract activities;
costs that are explicitly chargeable to the customer under the contract; and
other costs that are incurred only because an entity entered into the contract.
Amortisation and impairment
An asset recognised is amortised to direct costs on a systematic basis that is consistent with the
transfer to the customer of the goods or services to which the asset relates.
An impairment loss is recognised in direct costs in the profit or loss, to the extent that the carrying
amount of the contract asset exceeds the remaining amount of consideration that the entity
expects to receive in exchange for the goods or services to which the asset relates; less the costs
that relate directly to providing those goods or services and that have not been recognised as
expenses.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
63
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
64
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
(p) 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 the loan receivable from related party (refer to note 33 for further information)
• amortisation of borrowing costs capitalised using the effective interest method; and
•
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;
fees on supply chain financing facilities.
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.
(q)
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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
65
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
3 Significant accounting policies (continued)
3 Significant accounting policies (continued)
•
•
•
•
•
•
•
(p) Finance income and finance costs
The Group’s finance income and finance costs include:
interest income;
interest expense;
• dividend income;
• discount on repurchased debt;
the net gain or loss on financial assets at fair value through profit or loss;
the foreign currency gain or loss on financial assets and liabilities;
• withholding tax;
• amortisation of the loan receivable from related party (refer to note 33 for further information)
• amortisation of borrowing costs capitalised using the effective interest method; and
•
fees on supply chain financing facilities.
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.
(q)
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
purposes.
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
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.
(q)
Income tax (continued)
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 and increased to
the extent unrecognised tax losses are now considered probable.
(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 of the tax consolidated group
is Emeco Holdings Limited.
(iv) Tax consolidation
Amounts payable or receivable under the tax-funding arrangement between the Company
and the entities in the tax consolidated group are determined using a ‘separate taxpayer within
group’ approach to determine the tax contribution amounts payable or receivable by each
member of the tax-consolidated group. This approach results in the tax effect of transactions
being recognised in the legal entity where that transaction occurred and does not tax effect
transactions that have no tax consequences to the Group. The same basis is used for tax
allocation within the tax-consolidated group.
The Company has not adopted the AASB 112 amendments related to the Organisation for
Economic Co-operation and Development Pillar two tax reforms and has not performed an
assessment of its potential exposure to the profit or loss and tax liability, which will be performed
for the half-year ending 31 December 2023.
(r) 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.
4 New standards and interpretations
The new Australian Accounting Standards and Interpretations which are mandatory and have been
adopted by the Group are set out below:
(i) AASB 2020-3 Amendments to Australian Accounting Standards – Annual improvements
2018-2020 and other amendments
The annual improvements amend the following standards:
• AASB 1 First-time Adoption of International Financial Reporting Standards permits a subsidiary that
applies paragraph D16(a) of AASB 1 to measure cumulative translation differences using the
amounts reported by its parent, based on the parent’s date of transition to IFRS Accounting
Standards.
• AASB 9 Financial Instruments clarifies that in applying the ‘10 per cent’ test to assess whether to
derecognise a financial liability, an entity includes only fees paid or received between the entity (the
borrower) and the lender, including fees paid or received by either the entity or the lender on the
other’s behalf.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
65
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
66
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
4 New standards and interpretations (continued)
Property, Plant and Equipment - Proceeds before Intended Use
The amendments to AASB 116 Property, Plant and Equipment prohibit deducting from the cost of an
item of property, plant and equipment any proceeds from selling items produced while bringing that
asset to the location and condition necessary for it to be capable of operating in the manner intended
by management. Instead, the proceeds from selling such items, and the cost of producing those items,
is recognised in profit or loss. The amendments also clarify the meaning of ‘testing whether an asset is
functioning properly’. AASB 116 now specifies this as assessing whether the technical and physical
performance of the asset is such that it is capable of being used in the production or supply of goods or
services, for rental to others or for administrative purposes. The amendments have been applied
retrospectively, but only to items of property, plant and equipment that are brought to the location and
condition necessary for them to be capable of operating in the manner intended by management or on
or after the beginning of the earliest period presented in the financial statements in which the entity first
applies the amendments.
Onerous Contracts - Cost of Fulfilling a Contract
The amendments to AASB 137 Provisions, Contingent Liabilities and Contingent Assets specify that the
‘cost of fulfilling’ an onerous contract comprises the ‘costs that relate directly to the contract’. Costs that
relate directly to a contract can either be incremental costs of fulfilling that contract (e.g. direct labour
and materials) and an allocation of other costs that relate directly to fulfilling contracts (e.g. the allocation
of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
(ii) AASB 2021-7 Amendments to Australian Accounting Standards – effective date of
amendments to AASB 10 and AASB 128 and editorial corrections
The editorial corrections in AASB 2021-7 are effective for either annual periods beginning on or after 1
January 2023 (those in respect of AASB 17 Insurance Contracts) or 1 January 2022.
The application of all amendments mentioned above did not have a material impact on the Group's
consolidated financial statements, as the amendments either do not affect the Group’s existing
accounting policies, or does not apply to situations, transactions and events that the Group undertakes.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
67
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
4 New standards and interpretations (continued)
5 Determination of fair values
Property, Plant and Equipment - Proceeds before Intended Use
The amendments to AASB 116 Property, Plant and Equipment prohibit deducting from the cost of an
item of property, plant and equipment any proceeds from selling items produced while bringing that
asset to the location and condition necessary for it to be capable of operating in the manner intended
by management. Instead, the proceeds from selling such items, and the cost of producing those items,
is recognised in profit or loss. The amendments also clarify the meaning of ‘testing whether an asset is
functioning properly’. AASB 116 now specifies this as assessing whether the technical and physical
performance of the asset is such that it is capable of being used in the production or supply of goods or
services, for rental to others or for administrative purposes. The amendments have been applied
retrospectively, but only to items of property, plant and equipment that are brought to the location and
condition necessary for them to be capable of operating in the manner intended by management or on
or after the beginning of the earliest period presented in the financial statements in which the entity first
applies the amendments.
Onerous Contracts - Cost of Fulfilling a Contract
The amendments to AASB 137 Provisions, Contingent Liabilities and Contingent Assets specify that the
‘cost of fulfilling’ an onerous contract comprises the ‘costs that relate directly to the contract’. Costs that
relate directly to a contract can either be incremental costs of fulfilling that contract (e.g. direct labour
and materials) and an allocation of other costs that relate directly to fulfilling contracts (e.g. the allocation
of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
(ii) AASB 2021-7 Amendments to Australian Accounting Standards – effective date of
amendments to AASB 10 and AASB 128 and editorial corrections
The editorial corrections in AASB 2021-7 are effective for either annual periods beginning on or after 1
January 2023 (those in respect of AASB 17 Insurance Contracts) or 1 January 2022.
The application of all amendments mentioned above did not have a material impact on the Group's
consolidated financial statements, as the amendments either do not affect the Group’s existing
accounting policies, or does not apply to situations, transactions and events that the Group undertakes.
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, 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) Other financial assets
Other financial assets are recognised at amortised cost and subsequently measured using the
effective interest rate method and are subject to impairment. Gains and losses are recognised in
profit or loss when the asset is derecognised, modified or impaired. The Group’s other financial
assets at amortised cost include a loan to related party. Refer to note 33 for further information.
(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 leases, the market rate of interest is determined by reference
to similar lease agreements.
(e) Share-based payment transactions
The fair value of the Rights awarded under the LTI plan and MIP are measured using the volume
weighted average price of Shares as at the grant date. The volume weighted average price inputs
include the weighted average of the closing share price and volume traded over a specified period
of time.
(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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
67
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
68
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments
Overview
The Group has exposure to the following risks from their use of financial instruments:
•
•
• market risk.
credit risk;
liquidity risk; and
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.
The consolidated entity holds the following financial instruments:
Carried at amortised cost
Cash and bank balances (note 17) (a)
Trade and other receivables (note 18) (a)
Trade and other payables (note 23) (a)
Interest bearing liabilities (note 24)
Other financial assets (note 33) (a)
(a) The carrying value of each of these items approximates fair value.
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 controlled 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
69
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments
Overview
•
•
credit risk;
liquidity risk; and
• market risk.
capital.
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
The consolidated entity holds the following financial instruments:
Carried at amortised cost
Cash and bank balances (note 17) (a)
Trade and other receivables (note 18) (a)
Trade and other payables (note 23) (a)
Interest bearing liabilities (note 24)
Other financial assets (note 33) (a)
(a) The carrying value of each of these items approximates fair value.
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 controlled 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 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
Credit risk
receivables from customers.
The Group has exposure to the following risks from their use of financial instruments:
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 and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Credit risk (continued)
Trade receivables
Accrued revenue
Other receivables
Cash and cash equivalents
Other financial assets
Note
18
18
18
17
33
Consolidated
Carrying amount
2022
$'000
2023
$'000
112,262
33,862
11,058
46,673
4,677
208,532
110,055
25,667
7,415
60,158
-
203,295
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 counterparty limits and where possible insures
its income within Australia and generally operates on a ‘cash for keys’ policy for the sale of equipment
and parts. The Group has also increased its internal review and authorisation procedures that are applied
to new clients and in the ongoing strengthening of appropriate credit limits for existing customers.
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
will be requested.
Where commercially available, the Group aims to insure the majority of 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 $1,000,000,000
(2022: $750,000,000). The Group held insurance for the entire financial year ended 30 June 2023.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
69
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
70
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Credit risk (continued)
The ageing of the Group’s trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61 days
Consolidated
Consolidated
Gross
2023
$'000
Impairment
2023
$'000
Gross
2022
$'000
Impairment
2022
$'000
96,511
8,006
259
7,4861
112,262
-
-
-
(190)
(190)
89,160
17,235
3,412
248
110,055
-
-
-
(189)
(189)
(1) Of this balance, $7,000,000 was received subsequent to 30 June 2023.
Using the expected credit loss model (ECL), the Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of trade and other receivables. To effectively apply
the ECL, the Group has categorised its trade receivables as follows:
- Blue chip customers: defined as having a market capitalisation of greater than $1,000,000,000;
-
Insured customers: those that are trading within terms and their trade receivable exposure is under
the insured limit;
- Underinsured: those that have not been granted sufficient credit limits by the insurer to cover sales
within credit terms;
- Uninsured customers: all other customers that are not recognised in the above category.
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by type of
customer was:
Blue chip (including subsidiaries)
Insured
Underinsured
Uninsured
Consolidated
Carrying amount
2023
$'000
47,324
47,164
6,647
11,127
112,262
2022
$'000
34,513
36,781
6,966
31,795
110,055
The Group considers blue chip and insured customers as no risk. The Group only assesses uninsured
customers and underinsured customers that have breached their current credit limit in the ECL
calculation.
The Group uses a combination of historical losses recognised for receivables in the above classifications
and takes a view on the economic conditions that are representative of those expected to exist during
the life of the receivable. This is based on the historical loss rates, ageing of debtors and economic
factors that include commodity prices.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
71
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Credit risk (continued)
The ageing of the Group’s trade receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61 days
Consolidated
Consolidated
Impairment
Impairment
Gross
2023
$'000
96,511
8,006
259
7,4861
112,262
2023
$'000
-
-
-
(190)
(190)
Gross
2022
$'000
89,160
17,235
3,412
248
110,055
2022
$'000
-
-
-
(189)
(189)
(1) Of this balance, $7,000,000 was received subsequent to 30 June 2023.
Using the expected credit loss model (ECL), the Group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of trade and other receivables. To effectively apply
the ECL, the Group has categorised its trade receivables as follows:
- Blue chip customers: defined as having a market capitalisation of greater than $1,000,000,000;
-
Insured customers: those that are trading within terms and their trade receivable exposure is under
- Underinsured: those that have not been granted sufficient credit limits by the insurer to cover sales
the insured limit;
within credit terms;
- Uninsured customers: all other customers that are not recognised in the above category.
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by type of
customer was:
Consolidated
Carrying amount
2023
$'000
2022
$'000
47,324
47,164
6,647
11,127
34,513
36,781
6,966
31,795
112,262
110,055
Blue chip (including subsidiaries)
Insured
Underinsured
Uninsured
The Group considers blue chip and insured customers as no risk. The Group only assesses uninsured
customers and underinsured customers that have breached their current credit limit in the ECL
calculation.
The Group uses a combination of historical losses recognised for receivables in the above classifications
and takes a view on the economic conditions that are representative of those expected to exist during
the life of the receivable. This is based on the historical loss rates, ageing of debtors and economic
factors that include commodity prices.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Credit risk (continued)
Economic data
It is anticipated that a movement in key economic data i.e. commodity prices, impacts the expected credit
loss as it may drive the way the Groups’ customers run their operations or achieve profitability and cash
flows to pay their receivables. As part of this assessment, the Group has considered the potential impact
of commodity demand and prices.
The Group determined potential scenarios primarily driven by changes in commodity prices, which have
been weighted by probability to determine the expected credit loss provision.
Loss history
Given the significant change in operations and customer mix due to the acquisition of Orionstone and
Andy’s in March 2017, Force in November 2018, Matilda in July 2018, and Pit N Portal in February 2020,
the Group has determined it is not appropriate to include a rental customer history earlier than FY19.
Therefore, only loss history from FY19 is used for this assessment.
Based on the factors outlined above, the Group has calculated an expected credit loss of $190,000 based
on historical loss trends and economic factors (2022: $189,000). During the period, allowances for
specific customers were identified as doubtful and subsequently written off by the Group totalling
$23,013,000 (2022: nil).
The movement in the credit loss allowance in respect of trade receivables during the year was as follows:
Opening loss allowance as at 1 July
Net remeasurement of loss allowance
Loss allowance on receivables arising during the period
Loss allowance on receivables recovered/written off during the period
Loss allowance as at 30 June
Consolidated
Impairment
2023
$'000
Impairment
2022
$'000
189
1
23,013
(23,013)
190
205
(16)
-
-
189
The Group believes that the unimpaired amounts that are past due by more than 30 days are still
collectible, based on industry standards, historic payment behaviour and extensive analysis of the
underlying customers’ credit ratings.
Credit-impaired financial assets
The Group will assess if a financial asset is impaired when amounts are past due by more than 120 days.
An allowance for impairment will be recognised unless the Group has reasonable and supportable
information that an impairment is not required to be recognised.
Cash
The Group held cash and cash equivalents of $46,673,000 at 30 June 2023 (2022: $60,158,000), 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 2023 the Group held
nil bank guarantees (2022: nil) and $400,000 of advance payments from customers (2022: nil).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
71
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
72
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Credit risk (continued)
Guarantees
Financial guarantees are generally only provided to wholly owned subsidiaries or when entering into a
premise rental agreement or asset lease liability. Details of outstanding guarantees are provided in note
29. At 30 June 2023, $3,509,000 guarantees were outstanding (2022: $3,121,000).
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 returns 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.
Notes
The Group has issued secured fixed interest notes to the value of $250,000,000 which mature on 10 July
2026. The nominal fixed interest rate is 6.25%. Refer to note 24 for further details.
Revolving Credit Facility
The Group has a Revolving Credit Facility (RCF) facility of $100,000,000, which matures in December
2025, which has two sub facilities consisting of a Loan Note Agreement Facility (LNA) of $95,000,000
(30 June 2022: $96,800,000) and a Bank Guarantee Facility of $5,000,000 (30 June 2022: $3,200,000).
In December 2022, the Group successfully refinanced the facility with existing lenders in the syndicate,
with the tenor of the facility being three years, with an option to extend for a further two years to December
2027 at the Group’s election. The bank guarantee facility attracts a fee of up to 1.57% on the unutilised
portion of the facility, and a fee of 3.5% on the outstanding balance of guarantees on issue. The nominal
interest rate on the LNA is equal to the aggregate of the bank bill swap rate (BBSY) plus a margin of
between 2.75% and 3.75% dependent on the portion of the facility utilised and credit agency ratings
(2.75% if less than 25% drawn and credit agency ratings of Ba2/BB or higher; 3.75% if greater than or
equal to 25% drawn and credit agency ratings lower than B1/B+).
The facilities require the Group to maintain a collateral coverage ratio greater than 2.0x and a fixed
charge coverage ratio greater than 1.5x. At 30 June 2023, the Group had no drawn amount of the LNA
and had utilised $3,509,000 of the bank guarantee facility.
The Group has a facility agreement comprising a credit card facility with a limit of $150,000 and is secured
via a cash cover account.
To manage the cash flow conversion cycle on goods and services procured by the Group, and to ensure
that suppliers receive payment in a timely manner, the Group offers some suppliers supply chain
financing. The Group’s supply chain financing facilities totalled $25,500,000 as at 30 June 2023 (2022:
$25,500,000). Refer to note 23 for further information.
The Group has lease facilities totalling $70,721,000 (2022: $54,648,000) which have various maturities
up to June 2033.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
73
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Liquidity risk (continued)
The following gross outflows represent the contractual, undiscounted cash flow maturities of the Group’s
financial liabilities (including estimated interest payments).
Consolidated
30 June 2023
Non-derivative financial
liabilities
Secured notes issue
Lease liabilities
Trade and other payables(1)
Financial liabilities
Consolidated
30 June 2022
Non-derivative financial
liabilities
Secured notes issue
Lease liabilities
Trade and other payables(1)
Contractual
Carrying
amount
$'000
cash
flows
$'000
6 mths or
less
6-12 mths
1-2 years
2-5 years
More than
5 years
$'000
$'000
$'000
$'000
$'000
250,000
70,721
139,581
4,259
464,561
304,689
78,820
139,581
4,818
527,908
7,813
10,474
139,581
758
158,626
7,813
13,956
-
735
22,504
15,625
14,867
-
1,400
31,892
273,438
23,577
-
15,946
-
1,925
-
-
298,940
15,946
Carrying
amount
$’000
Contractual
cash
flows
$’000
6 mths or
less
$’000
6-12 mths
$’000
1-2 years
$’000
2-5 years
$’000
More than
5 years
$’000
250,000
54,648
125,607
430,255
320,314
60,414
125,607
506,335
7,813
8,157
125,607
141,577
7,813
7,316
-
15,129
15,625
18,041
-
33,666
289,063
18,632
-
307,695
-
8,268
-
8,268
(1) Trade and other payables excludes deferred revenue and interest accruals. Estimated interest payments
are included within “secured notes issue”. Refer to note 24 for further information.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Credit risk (continued)
Guarantees
Liquidity risk
Financial guarantees are generally only provided to wholly owned subsidiaries or when entering into a
premise rental agreement or asset lease liability. Details of outstanding guarantees are provided in note
29. At 30 June 2023, $3,509,000 guarantees were outstanding (2022: $3,121,000).
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 returns 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.
Notes
The Group has issued secured fixed interest notes to the value of $250,000,000 which mature on 10 July
2026. The nominal fixed interest rate is 6.25%. Refer to note 24 for further details.
Revolving Credit Facility
The Group has a Revolving Credit Facility (RCF) facility of $100,000,000, which matures in December
2025, which has two sub facilities consisting of a Loan Note Agreement Facility (LNA) of $95,000,000
(30 June 2022: $96,800,000) and a Bank Guarantee Facility of $5,000,000 (30 June 2022: $3,200,000).
In December 2022, the Group successfully refinanced the facility with existing lenders in the syndicate,
with the tenor of the facility being three years, with an option to extend for a further two years to December
2027 at the Group’s election. The bank guarantee facility attracts a fee of up to 1.57% on the unutilised
portion of the facility, and a fee of 3.5% on the outstanding balance of guarantees on issue. The nominal
interest rate on the LNA is equal to the aggregate of the bank bill swap rate (BBSY) plus a margin of
between 2.75% and 3.75% dependent on the portion of the facility utilised and credit agency ratings
(2.75% if less than 25% drawn and credit agency ratings of Ba2/BB or higher; 3.75% if greater than or
equal to 25% drawn and credit agency ratings lower than B1/B+).
The facilities require the Group to maintain a collateral coverage ratio greater than 2.0x and a fixed
charge coverage ratio greater than 1.5x. At 30 June 2023, the Group had no drawn amount of the LNA
and had utilised $3,509,000 of the bank guarantee facility.
The Group has a facility agreement comprising a credit card facility with a limit of $150,000 and is secured
via a cash cover account.
To manage the cash flow conversion cycle on goods and services procured by the Group, and to ensure
that suppliers receive payment in a timely manner, the Group offers some suppliers supply chain
financing. The Group’s supply chain financing facilities totalled $25,500,000 as at 30 June 2023 (2022:
$25,500,000). Refer to note 23 for further information.
The Group has lease facilities totalling $70,721,000 (2022: $54,648,000) which have various maturities
up to June 2033.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
73
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
74
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
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.
Currency risk
The functional currency of the Company is the Australian dollar (AUD).
The Group is not exposed to any material currency risk.
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 fixed interest notes.
Profile
At the end of the reporting period, the interest rate profile of the Group’s interest bearing financial
instruments as reported to the management of the Group was:
Variable rate instruments:
Cash at bank
Fixed rate instruments:
Interest bearing liabilities (AUD notes)
Interest bearing finance leases
Consolidated
Note
2023
$'000
2022
$'000
17
24
24
46,673
46,673
60,158
60,158
(250,000)
(70,721)
(320,721)
(250,000)
(54,648)
(304,648)
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the
Statement of Financial Position, are as follows:
2023
2022
Carrying
amount
$’000
Note
Fair
value
$’000
Carrying
amount
$’000
Fair
value
$’000
Assets carried at amortised cost
Receivables
Cash and cash equivalents
Other financial assets
Liabilities carried at amortised cost
Secured notes issue
Lease liabilities
Loan note agreement
Trade and other payables
18
17
33
24
24
23
157,765
157,765
46,673
4,677
46,673
4,677
142,948
60,158
-
142,948
60,158
-
209,115
209,115
203,106
203,106
(250,000)
(250,000)
(250,000)
(250,000)
(70,721)
(78,821)
(54,648)
(60,413)
32
(147,143)
(467,832)
32
158
(147,143)
(135,879)
(475,932)
(440,369)
158
(135,879)
(446,134)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
75
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
6 Financial instruments (continued)
Market risk (continued)
To comply with the provisions of AASB 13 Fair Value Measurement, the Group incorporates credit
valuation adjustments to appropriately reflect both its own non-performance risk and the respective
counterparty’s non-performance risk in the fair value measurements.
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 average invested capital, which is defined as the average over
the period of equity, plus interest bearing liabilities, less cash and intangibles. The Group’s ROC for the
year was 9.6% (2022: 14.9%).
The Group’s return on invested capital at the end of the reporting period was as follows:
EBIT
Average invested capital (1)
Consolidated
2023
$'000
79,147
826,459
2022
$'000
115,140
771,360
EBIT return on capital at 30 June
9.6%
14.9%
(1) Average invested capital is average over the period of equity, plus interest bearing liabilities, less
cash and intangibles.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
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.
Currency risk
The functional currency of the Company is the Australian dollar (AUD).
The Group is not exposed to any material currency 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 fixed interest notes.
Interest rate risk
Profile
At the end of the reporting period, the interest rate profile of the Group’s interest bearing financial
instruments as reported to the management of the Group was:
Variable rate instruments:
Cash at bank
Fixed rate instruments:
Interest bearing liabilities (AUD notes)
Interest bearing finance leases
Consolidated
Note
2023
$'000
2022
$'000
17
24
24
46,673
46,673
60,158
60,158
(250,000)
(70,721)
(320,721)
(250,000)
(54,648)
(304,648)
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the
Statement of Financial Position, are as follows:
2023
2022
Carrying
amount
Note
$’000
Fair
value
$’000
Carrying
amount
$’000
Fair
value
$’000
Assets carried at amortised cost
Receivables
Cash and cash equivalents
Other financial assets
Liabilities carried at amortised cost
Secured notes issue
Lease liabilities
Loan note agreement
Trade and other payables
18
17
33
24
24
23
157,765
157,765
46,673
4,677
46,673
4,677
142,948
60,158
-
142,948
60,158
-
209,115
209,115
203,106
203,106
(250,000)
(250,000)
(250,000)
(250,000)
(70,721)
(78,821)
(54,648)
(60,413)
32
(147,143)
(467,832)
32
158
(147,143)
(135,879)
(475,932)
(440,369)
158
(135,879)
(446,134)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
75
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
76
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
7 Revenue
The Group disaggregates revenue from its contracts with customers through three strategic business
units, being Rental, Workshops and Pit N Portal. This appropriately depicts how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors. The Group’s fleet is
commodity agnostic i.e. the fleet can be used across a range of different commodities without significant
modification, and decision making relating to the sale of goods and services is driven by the economic
factors affecting each business unit. For further information regarding revenue earned by business unit,
refer to note 15.
8 Other income
Net profit on sale of non-current assets (1)
Sundry income (2)
Consolidated
2023
$'000
2022
$'000
1,428
2,659
4,087
60
620
680
(1) 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
2023 was $3,485,000 (2022: $2,791,000).
(2) Included in sundry income are other out-of-cycle fees received from customers, which are measured
based on the consideration to which the Group expects to be entitled in a contract with a customer
and excludes amounts collected on behalf of third parties. The Group recognises income when it
transfers control of a product to a customer.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
77
The Group disaggregates revenue from its contracts with customers through three strategic business
units, being Rental, Workshops and Pit N Portal. This appropriately depicts how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors. The Group’s fleet is
commodity agnostic i.e. the fleet can be used across a range of different commodities without significant
modification, and decision making relating to the sale of goods and services is driven by the economic
factors affecting each business unit. For further information regarding revenue earned by business unit,
refer to note 15.
8 Other income
Net profit on sale of non-current assets (1)
Sundry income (2)
Consolidated
2023
$'000
2022
$'000
1,428
2,659
4,087
60
620
680
(1) 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
2023 was $3,485,000 (2022: $2,791,000).
(2) Included in sundry income are other out-of-cycle fees received from customers, which are measured
based on the consideration to which the Group expects to be entitled in a contract with a customer
and excludes amounts collected on behalf of third parties. The Group recognises income when it
transfers control of a product to a customer.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
7 Revenue
9 Profit before income tax expense
Consolidated
Note
2023
$'000
Restated
2022
$'000
Profit before income tax expense has been arrived at
after charging/(crediting) the following items:
Impairment of tangible assets:
-
-
inventory
property, plant and equipment
19
Employee expenses:
-
-
salaries, wages and superannuation
employee share plan expenses
Other expenses:
- motor vehicles
- safety, staff training and amenities
- travel and subsistence expense
- workshop consumables, tooling and labour
- doubtful debts/(reversal) excluding write-offs
-
-
-
-
- COVID-19 expenses
- Hired-in equipment and services
-
insurance
property and office expenses
telecommunications and IT
corporate, accounting and legal
other expenses
Depreciation of:
-
buildings
- plant and equipment
office equipment
-
- motor vehicles
-
-
leasehold improvements
sundry plant
depreciation of right-of-use assets
-
Total depreciation
Amortisation of intangible assets:
- contract intangibles
- software
Total depreciation and amortisation expense
21
22
20
(2)
983
981
149,783
1,417
151,200
3,506
5,234
12,613
6,487
-
5,103
10,616
4,401
4,253
-
22,423
5,958
80,594
46
121,864
1,080
1,756
218
1,553
126,517
17,855
144,372
790
659
1,449
145,821
89
1,036
1,125
140,406
1,999
142,405
2,928
5,756
8,356
3,942
(2)
5,146
9,068
3,448
3,976
1,686
14,135
4,890
63,329
66
111,319
553
1,446
140
1,304
114,828
13,042
127,870
661
910
1,571
129,441
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
77
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
78
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
9 Profit before income tax expense (continued)
Finance costs:
-
-
-
Total finance costs
interest expense
amortisation of debt establishment costs using effective interest rate
other facility costs
Finance income:
interest income
-
Total finance income
Foreign exchange loss/(gain):
-
-
Net foreign exchange loss/(gain)
net realised foreign exchange loss/(gain)
net unrealised foreign exchange loss/(gain)
Consolidated
2023
$'000
2022
$'000
25,016
1,366
1,546
27,928
21,600
1,113
1,472
24,185
(670)
(670)
(164)
(164)
1
51
52
192
244
436
(1) Refer to note 25 for further details on the long-term debt refinancing transactions associated with these
finance costs.
10 Auditor’s remuneration
Audit services
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
-
audit and review of financial reports
Assurance, agreed upon procedures & other services
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
other assurance services
-
taxation services
-
Overseas Deloitte Firms:
-
-
other assurance services
taxation services
Consolidated
2023
$
2022
$
777,362
517,292
203,700
-
51,410
12,945
34,104
9,758
1,024,924
16,029
9,610
607,286
The Company has engaged with Deloitte for the provision of audit as well as other specific
assurance. No other advisory or consulting services were provided by Deloitte during the year.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
79
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
9 Profit before income tax expense (continued)
11 Taxes
a. Recognition in the income statement
Deferred tax expense
Origination and reversal of temporary differences and
tax losses in the current year
Tax expense
Consolidated
2023
$’000
2022
$’000
10,506
10,506
25,730
25,730
Note
12
b. Current and deferred tax expense/(benefit) recognised directly in equity
Foreign exchange
12
218
410
Consolidated
2023
$’000
2022
$’000
(1) Refer to note 25 for further details on the long-term debt refinancing transactions associated with these
finance costs.
c. Numerical reconciliation between tax expense and pre-tax net profit
Prima facie tax expense calculated
at 30% on profit before tax
Increase/(decrease) in income tax expense due to:
Derecognition of foreign tax losses
Other non-deductible expenses
Prior year error - debt deductions
Additional tax losses arising from amended interest deductions
Under/(over) provided in prior years
Tax expense
Consolidated
2023
$’000
2022
$’000
15,551
27,205
35
58
(2,299)
(3,635)
796
10,506
50
67
-
-
(1,592)
25,730
amortisation of debt establishment costs using effective interest rate
-
-
-
Finance costs:
interest expense
other facility costs
Total finance costs
Finance income:
-
interest income
Total finance income
Foreign exchange loss/(gain):
-
-
net realised foreign exchange loss/(gain)
net unrealised foreign exchange loss/(gain)
Net foreign exchange loss/(gain)
10 Auditor’s remuneration
Audit services
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
-
audit and review of financial reports
Assurance, agreed upon procedures & other services
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
-
-
-
-
other assurance services
taxation services
Overseas Deloitte Firms:
other assurance services
taxation services
Consolidated
2023
$'000
2022
$'000
25,016
1,366
1,546
27,928
21,600
1,113
1,472
24,185
(670)
(670)
(164)
(164)
1
51
52
192
244
436
Consolidated
2023
$
2022
$
777,362
517,292
203,700
-
51,410
12,945
34,104
9,758
16,029
9,610
1,024,924
607,286
The Company has engaged with Deloitte for the provision of audit as well as other specific
assurance. No other advisory or consulting services were provided by Deloitte during the year.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
79
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
80
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
12 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
Property, plant and equipment
Intangibles
Receivables
Right-of-use contracts
Other financial assets
Inventories
Payables
Interest bearing loans & borrowings
Unearned revenue
Business costs
Provisions
Borrowing costs
Employee share costs
Tax losses carried forward
Tax assets/(liabilities)
Set off of tax
Net tax (liabilities)/assets
Assets
Liabilities
Net
2023
$'000
-
-
-
17,387
-
-
741
-
-
516
11,688
-
-
93,541
123,873
(123,873)
-
2022
$'000
-
-
-
13,021
-
-
1,050
-
-
847
4,582
4,739
-
91,100
115,339
(115,339)
-
2023
$'000
(132,739)
(470)
(614)
-
(178)
(2,256)
-
(209)
(25)
-
-
-
(228)
-
(136,719)
123,873
(12,846)
2022
$'000
(114,501)
(470)
(289)
-
(168)
(1,574)
-
-
(25)
-
-
-
(434)
-
(117,461)
115,339
(2,122)
2023
$'000
(132,739)
(470)
(614)
17,387
(178)
(2,256)
741
(209)
(25)
516
11,688
-
(228)
93,541
(12,846)
-
(12,846)
2022
$'000
(114,501)
(470)
(289)
13,021
(168)
(1,574)
1,050
-
(25)
847
4,582
4,739
(434)
91,100
(2,122)
-
(2,122)
Movement in deferred tax balances
Property, plant and equipment
Intangibles assets
Receivables
Right-of-use contracts
Other financial assets
Inventories
Payables
Interest bearing loans & borrowings
Unearned revenue
Business costs
Provisions
Borrowing costs
Employee share costs
Tax losses carried forward
Balance
1 July 22
$'000
(114,501)
(470)
(289)
13,021
(168)
(1,574)
1,050
-
(25)
847
4,582
4,739
(434)
91,100
(2,122)
Consolidated
Balances
acquired
$'000
Recognised
in profit or
loss
$'000
Recognised
directly
in equity
$'000
Recognised
in other
comprehensive
income
$'000
(8,936)
-
-
8,936
-
-
-
-
-
-
-
-
-
-
-
(9,302)
-
(325)
(4,570)
(10)
(682)
(91)
(209)
-
(331)
7,106
(4,739)
206
2,441
(10,506)
-
-
-
-
-
-
(218)
-
-
-
-
-
-
-
(218)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance
30 Jun 23
$'000
(132,739)
(470)
(614)
17,387
(178)
(2,256)
741
(209)
(25)
516
11,688
-
(228)
93,541
(12,846)
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
81
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
12 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
12 Deferred tax assets and liabilities (continued)
Movement in deferred tax balances
Balance
1 July 21
$'000
Balances
acquired
$'000
Consolidated
Recognised
in profit or
loss
$'000
Recognised
directly
in equity
$'000
Recognised
in other
comprehensive
income
$'000
Property, plant and
equipment
Intangibles assets
Receivables
Derivative - hedge
receivable
Right-of-use contracts
Other financial assets
Inventories
Payables
Interest bearing loans
and borrowings
Unearned revenue
Business costs
Provisions
Borrowing costs
Employee share costs
Tax losses carried
forward
(92,626)
(6,309)
(15,566)
(4)
(575)
3,717
12,807
(116)
(230)
1,470
1,732
(25)
1,534
3,646
6
(1,245)
94,393
24,484
(466)
-
1,732
6,309
-
-
-
(1,732)
-
-
-
-
-
-
-
286
(5,449)
(6,095)
(52)
(1,344)
(10)
-
-
(687)
936
4,733
811
(3,293)
-
-
-
-
-
-
-
(410)
-
-
-
-
-
-
-
(466)
(25,730)
(410)
Balance
30 Jun 22
$'000
(114,501)
(470)
(289)
-
13,021
(168)
(1,574)
1,050
-
(25)
847
4,582
4,739
(434)
91,100
(2,122)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Unrecognised deferred tax assets
The following deferred tax assets have not been
brought to account as assets:
Tax losses
Consolidated
2023
$’000
2022
$’000
82,425
82,390
Unutilised tax losses are in Chile, Indonesia, the United Kingdom, United States and Europe and are
not expected to be utilised by the Group.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
81
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
82
Consolidated
Property, plant and equipment
Intangibles
Receivables
Right-of-use contracts
Other financial assets
Inventories
Payables
Interest bearing loans & borrowings
Unearned revenue
Business costs
Provisions
Borrowing costs
Employee share costs
Tax losses carried forward
Tax assets/(liabilities)
Set off of tax
Net tax (liabilities)/assets
Assets
Liabilities
Net
2023
$'000
2022
$'000
2023
$'000
2022
$'000
2023
$'000
2022
$'000
(132,739)
(114,501)
(132,739)
(114,501)
17,387
13,021
741
1,050
516
11,688
847
4,582
4,739
93,541
123,873
91,100
115,339
(123,873)
(115,339)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(470)
(614)
(178)
(2,256)
(209)
(25)
-
-
-
-
-
-
(470)
(289)
(168)
(1,574)
(25)
-
-
-
-
-
-
-
(470)
(614)
17,387
(178)
(2,256)
741
(209)
(25)
516
11,688
(228)
93,541
(12,846)
-
-
(228)
(434)
(136,719)
123,873
(12,846)
(117,461)
115,339
(2,122)
(12,846)
(470)
(289)
13,021
(168)
(1,574)
1,050
-
(25)
847
4,582
4,739
(434)
91,100
(2,122)
-
(2,122)
Consolidated
Balances
acquired
$'000
Recognised
in profit or
loss
$'000
Recognised
directly
in equity
$'000
Recognised
in other
comprehensive
income
$'000
Property, plant and equipment
(8,936)
(9,302)
Movement in deferred tax balances
Intangibles assets
Receivables
Right-of-use contracts
Other financial assets
Inventories
Payables
Unearned revenue
Business costs
Provisions
Borrowing costs
Employee share costs
Tax losses carried forward
Interest bearing loans & borrowings
Balance
1 July 22
$'000
(114,501)
(470)
(289)
13,021
(168)
(1,574)
1,050
-
(25)
847
4,582
4,739
(434)
91,100
(2,122)
8,936
-
-
-
-
-
-
-
-
-
-
-
-
-
(325)
(4,570)
(10)
(682)
(91)
(209)
-
-
(331)
7,106
(4,739)
206
2,441
(218)
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,506)
(218)
Balance
30 Jun 23
$'000
(132,739)
(470)
(614)
17,387
(178)
(2,256)
741
(209)
(25)
516
11,688
-
(228)
93,541
(12,846)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
13 Capital and reserves
Share capital
519,002,615 (2022: 526,666,035) ordinary shares, fully paid
Acquisition reserve
Consolidated
2023
$’000
2022
$’000
1,225,141
(75,887)
1,149,254
1,231,743
(75,887)
1,155,856
Terms and conditions
Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are
entitled to one vote per share at shareholders' meetings. Shares have no par value.
In the event of winding up of the Company, the ordinary shareholder ranks after all other creditors are
fully entitled to any proceeds of liquidation.
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
($)
$'000
1 July 2022
526,666,035
1,231,743
On market share buy-back (1)
On market share buy-back (1)
7 September 2022
4 November 2022
(3,627,412)
(4,036,008)
0.93
0.80
(3,373)
(3,229)
Balance
Less: treasury shares
Issued capital
30 June 2023
519,002,615
3,408,327
515,594,288
1,225,141
(1) During the year ending 30 June 2023, Emeco purchased 7,663,420 shares through an on-market
share buy-back at an average share price of $0.86 totaling $6,602,000 (30 June 2022: 17,389,099
shares were purchased at an average share price of $0.90 totaling $15,601,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
83
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
13 Capital and reserves
13 Capital and reserves (continued)
Treasury shares
The treasury shares comprise of shares purchased on-market to satisfy the vesting of shares and rights
under the employee share plans. Rights that are forfeited under the Company’s employee share plans
due to employees not meeting the service vesting requirement will remain in the reserve. As at 30 June
2023 the Company held 3,408,327 treasury shares (2022: 4,561,797), in satisfaction of the employee
share plans.
Foreign currency translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
Share-based payment reserve
The share-based payment reserve comprises the expenses incurred from the issue of the Company’s
securities under its employee share/option plans (refer note 3(k)v.).
In the event of winding up of the Company, the ordinary shareholder ranks after all other creditors are
Dividends
For the period ended 30 June 2022, the board resolved to pay a final dividend of 1.25 cents per share
totalling $6,541,000, which was fully franked and paid on 30 September 2022. On 22 February 2023, a
fully franked interim dividend of 1.25 cents per share totalling $6,485,000 was declared and paid on 13
April 2023.
On 22 August 2023, the board resolved to pay a final dividend for the year ended 30 June 2023 of 1.25
cents per share, representing a total cash payment of $6.5 million. The dividend will be fully franked and
will be paid on 29 September 2023.
519,002,615 (2022: 526,666,035) ordinary shares, fully paid
1,225,141
1,231,743
Consolidated
2023
$’000
2022
$’000
(75,887)
(75,887)
1,149,254
1,155,856
Share capital
Acquisition reserve
Terms and conditions
Ordinary shares
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are
entitled to one vote per share at shareholders' meetings. Shares have no par value.
fully entitled to any proceeds of liquidation.
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
($)
$'000
1 July 2022
526,666,035
1,231,743
On market share buy-back (1)
On market share buy-back (1)
7 September 2022
4 November 2022
(3,627,412)
(4,036,008)
0.93
0.80
(3,373)
(3,229)
Balance
Less: treasury shares
Issued capital
30 June 2023
1,225,141
519,002,615
3,408,327
515,594,288
(1) During the year ending 30 June 2023, Emeco purchased 7,663,420 shares through an on-market
share buy-back at an average share price of $0.86 totaling $6,602,000 (30 June 2022: 17,389,099
shares were purchased at an average share price of $0.90 totaling $15,601,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
83
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
84
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
13 Capital and reserves (continued)
Franking account
Dividend franking account
30% franking credits available to shareholders of Emeco
Holdings Limited for subsequent financial years
The Company
2023
$’000
Restated
2022
$’000
72,268
77,870
The above available amounts are based on the balance of the dividend franking account at year end
adjusted for:
(a)
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;
franking credits that the entity may be prevented from distributing in subsequent years; and
franking credits acquired through business combinations.
(b)
(c)
(d)
(e)
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 $2,780,000 (2022: $2,821,000). In
accordance with the tax consolidation legislation, the Company as the head entity in the Australian tax
consolidated group has also assumed the benefit of $72,268,000 (2022: $77,870,000) franking credits.
14 Disposal groups and assets held for sale
During the year $3,062,000 (FY22: $5,576,000) of assets were transferred from property, plant and
equipment into assets held for sale. Assets previously classified during the period as held for sale were
further impaired by $983,000 (FY22: $1,036,000) to their fair value less cost to sell based on market
prices of similar equipment.
As at 30 June 2023, assets held for sale comprised of $1,165,000 (2022: $4,094,000). Level 3 fair value
hierarchy has been used in determining the fair value with reference to an independent valuation utilising
observable market valuations. The Group is actively marketing these assets and they are expected to
be disposed of within 12 months.
Assets classified as held for sale
Property, plant and equipment
Net assets classified as held for sale
2023
$’000
2022
$’000
1,165
1,165
4,094
4,094
Liabilities directly associated with assets classified as held for sale relate to assets designated as held
for sale that have outstanding lease repayments remaining. All remaining payments are due within six
months.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
85
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
13 Capital and reserves (continued)
Franking account
The Company
2023
$’000
Restated
2022
$’000
72,268
77,870
Dividend franking account
30% franking credits available to shareholders of Emeco
Holdings Limited for subsequent financial years
adjusted for:
receivables;
end;
The above available amounts are based on the balance of the dividend franking account at year end
(a)
franking credits that will arise from the payment of current tax liabilities and recovery of current tax
(b)
franking debits that will arise from the payment of dividends recognised as a liability at the year
(c)
franking credits that will arise from the receipt of dividends recognised as receivables by the tax
consolidated group at the year end;
(d)
(e)
franking credits that the entity may be prevented from distributing in subsequent years; and
franking credits acquired through business combinations.
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 $2,780,000 (2022: $2,821,000). In
accordance with the tax consolidation legislation, the Company as the head entity in the Australian tax
consolidated group has also assumed the benefit of $72,268,000 (2022: $77,870,000) franking credits.
14 Disposal groups and assets held for sale
During the year $3,062,000 (FY22: $5,576,000) of assets were transferred from property, plant and
equipment into assets held for sale. Assets previously classified during the period as held for sale were
further impaired by $983,000 (FY22: $1,036,000) to their fair value less cost to sell based on market
prices of similar equipment.
As at 30 June 2023, assets held for sale comprised of $1,165,000 (2022: $4,094,000). Level 3 fair value
hierarchy has been used in determining the fair value with reference to an independent valuation utilising
observable market valuations. The Group is actively marketing these assets and they are expected to
be disposed of within 12 months.
Assets classified as held for sale
Property, plant and equipment
Net assets classified as held for sale
2023
$’000
2022
$’000
1,165
1,165
4,094
4,094
Liabilities directly associated with assets classified as held for sale relate to assets designated as held
for sale that have outstanding lease repayments remaining. All remaining payments are due within six
months.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
15 Segment reporting
The Group has three (2022: 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:
Rental
Workshops
Pit N Portal
Provides a wide range of earthmoving equipment solutions to customers in
Australia. Additional technology platforms have been developed to enable
customers to improve earthmoving efficiencies of their rental machines.
Provides maintenance and component rebuild services to customers in
Australia.
Provides a range of mining services solutions and associated services to
customers in Australia.
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.
Major customers
For the year ended 30 June 2023, the Group had three (2022: one) major customers comprising 10% or
more of total Group revenue across the segments as indicated below:
Segment
Rental
Workshops
Pit N Portal (1)
2023
$’000
2022
$’000
87,981
104,443
108,722
301,146
-
-
84,400
86,400
(1) The major customer for Pit N Portal for the year ended 30 June 2023 was different to the major
customer reported for the year ended 30 June 2022.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
85
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
86
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
15 Segment reporting (continued)
Information about reportable segments
Rental
$'000
Continuing
Workshops
$'000
Pit n Portal
$'000
Total
$'000
Year ended 30 June 2023
Segment revenue
Intersegment revenue
Revenue from external customers
Other income
Trade receivables written off
Segment earnings before interest, tax, depreciation & amortisation
Impairment of tangible assets
Depreciation and amortisation
Segment result (EBIT)
Corporate overheads
499,636
(4,819)
494,817
2,504
-
259,744
(981)
(120,489)
138,274
246,658
(90,196)
156,462
-
-
11,776
-
(4,520)
7,256
223,638
-
223,638
1,235
(23,013)
(5,796)
-
(17,483)
(23,279)
969,932
(95,015)
874,917
3,739
(23,013)
265,724
(981)
(142,492)
122,251
(43,104)
79,147
(27,258)
(52)
51,837
(10,506)
41,331
1,033,047
55,374
1,088,421
175,926
198,475
300,502
498,977
808,687
55,968
168,392
162,871
107,617
2,432
53,010
10,623
37,848
EBIT
Net finance (expense)/income
Foreign exchange movements
Net profit before tax
Tax expense
Net profit after tax
Total assets for reportable segments
Unallocated assets
Total Group assets
Capital expenditure net of disposals
Total liabilities for reportable segments
Unallocated liabilities
Total Group liabilities
M
Rental
$'000
Continuing
Workshops
$'000
Pit n Portal
$'000
Total
$'000
Year ended 30 June 2022
Segment revenue
Intersegment revenue
Revenue from external customers
Other income
Segment earnings before interest, tax, depreciation & amortisation
Impairment of tangible assets
Depreciation and amortisation
Segment result (EBIT)
Corporate overheads
429,099
(13,978)
415,121
590
240,236
(1,125)
(108,063)
131,048
173,654
(83,063)
90,591
28
9,041
-
(3,468)
5,573
248,656
-
248,656
62
32,700
-
(15,701)
16,999
EBIT
Net finance (expense)/income
Foreign exchange movements
Net profit before tax
Tax expense
Net profit after tax
Total assets for reportable segments
Unallocated assets
Total Group assets
Capital expenditure net of disposals
Total liabilities for reportable segments
Unallocated liabilities
Total Group liabilities
734,074
39,729
196,371
139,254
79,354
1,649
38,496
26,723
52,849
851,409
(97,041)
754,368
680
281,977
(1,125)
(127,232)
153,620
(38,480)
115,140
(24,021)
(436)
90,683
(25,730)
64,953
970,174
51,339
1,021,513
167,626
170,699
283,593
454,292
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
87
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
16 Other current assets
Prepayments
Contract assets
17 Cash and cash equivalents
Cash at bank
Total assets for reportable segments
808,687
55,968
168,392
1,033,047
18 Trade and other receivables
Current
Trade receivables
Accrued revenue
Less: Expected credit losses
VAT/GST receivable
Other receivables
Deferred employee benefits expense (1)
Consolidated
2023
$’000
4,703
12,187
16,890
2023
$’000
3,550
17,293
20,843
Consolidated
2023
$’000
2022
$’000
46,673
60,158
Consolidated
2023
$’000
2022
$’000
112,262
33,862
(190)
145,934
511
11,058
262
157,765
110,055
25,667
(189)
135,533
-
7,415
-
142,948
(1) Deferred employee benefits expense relates to expected employee benefits to be recognised in the
consolidated statement of profit or loss and other comprehensive income on a loan to a related party
over the next 12 months. Refer to note 33 for further information.
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 and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
15 Segment reporting (continued)
Information about reportable segments
Segment earnings before interest, tax, depreciation & amortisation
Year ended 30 June 2023
Segment revenue
Intersegment revenue
Revenue from external customers
Other income
Trade receivables written off
Impairment of tangible assets
Depreciation and amortisation
Segment result (EBIT)
Corporate overheads
EBIT
Net finance (expense)/income
Foreign exchange movements
Net profit before tax
Tax expense
Net profit after tax
Unallocated assets
Total Group assets
Capital expenditure net of disposals
Total liabilities for reportable segments
Unallocated liabilities
Total Group liabilities
M
Year ended 30 June 2022
Segment revenue
Intersegment revenue
Revenue from external customers
Other income
Impairment of tangible assets
Depreciation and amortisation
Segment result (EBIT)
Corporate overheads
EBIT
Net finance (expense)/income
Foreign exchange movements
Net profit before tax
Tax expense
Net profit after tax
Unallocated assets
Total Group assets
Capital expenditure net of disposals
Total liabilities for reportable segments
Unallocated liabilities
Total Group liabilities
Segment earnings before interest, tax, depreciation & amortisation
Rental
$'000
Continuing
Workshops
$'000
Pit n Portal
$'000
Total
$'000
499,636
(4,819)
494,817
2,504
-
259,744
(981)
(120,489)
138,274
246,658
(90,196)
156,462
-
-
-
11,776
(4,520)
7,256
223,638
-
223,638
1,235
(23,013)
(5,796)
-
(17,483)
(23,279)
162,871
107,617
2,432
53,010
10,623
37,848
Rental
$'000
Continuing
Workshops
$'000
Pit n Portal
$'000
Total
$'000
429,099
(13,978)
415,121
590
240,236
(1,125)
(108,063)
131,048
173,654
(83,063)
90,591
28
9,041
-
(3,468)
5,573
248,656
-
248,656
62
32,700
-
(15,701)
16,999
969,932
(95,015)
874,917
3,739
(23,013)
265,724
(981)
(142,492)
122,251
(43,104)
79,147
(27,258)
(52)
51,837
(10,506)
41,331
55,374
1,088,421
175,926
198,475
300,502
498,977
851,409
(97,041)
754,368
680
281,977
(1,125)
(127,232)
153,620
(38,480)
115,140
(24,021)
(436)
90,683
(25,730)
64,953
970,174
51,339
1,021,513
167,626
170,699
283,593
454,292
Total assets for reportable segments
734,074
39,729
196,371
139,254
79,354
1,649
38,496
26,723
52,849
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
87
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
88
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
18 Trade and other receivables (continued)
The movement in the allowance for expected credit losses (“ECL”) in respect of trade receivables and
accrued revenue during the period was as follows:
Opening loss allowance
Collective ECL recognised during the period(1)
Loss allowance on trade receivables arising during the period(2)
Loss allowance on trade receivables written off during the year(3)
Closing loss allowance
Consolidated
2023
$’000
2022
$’000
189
1
23,013
(23,013)
190
205
(16)
-
-
189
(1) The collective ECL is calculated using a combination of historical losses and economic conditions
that are representative of those expected to exist during the life of the receivable. This is based on
historical loss rates, ageing of debtors and economic factors that include commodity prices. The
Group considers blue chip and insured customers as no risk, and only assesses uninsured and
underinsured customers that have breached their trading terms in the ECL calculation. The Group
also reviews specific customer receivables deemed a higher recoverability risk (see below). Refer to
note 6 for further information.
(2) Loss allowance arising during the period is the GST exclusive amount, which is now fully written off
(refer to note 3 below). The amount including GST is $25,314,000.
(3) Losses on trade receivables written off during the year relate to Pit N Portal customers. A loss
allowance of $22,965,000 was made at 31 December 2022 against amounts owing in relation to
Minjar/Barto. Subsequent to 31 December 2022, a total of $10,909,000 was received from
Minjar/Barto with the balance of $12,056,000 written off. Additional amounts written off during the
year included $9,638,000 for Aurora Metals following its placement into receivership and $1,273,000
for KMG following termination of this contract.
19 Inventories
Work in progress – at cost (1)
Consumables, equipment & spare parts – at cost
Total at cost
Equipment and parts – at NRV
Total inventory
Consolidated
2023
$’000
2022
$’000
2,072
18,001
20,073
3,362
23,435
7,723
12,805
20,528
2,983
23,511
(1) During the year ended 30 June 2023, a reversal to impairment of inventories was recognised in
the consolidated statement of profit or loss and other comprehensive income of $2,000 (2022:
write-down of $89,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
89
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
18 Trade and other receivables (continued)
20 Intangible assets
The movement in the allowance for expected credit losses (“ECL”) in respect of trade receivables and
accrued revenue during the period was as follows:
Goodwill
Contract intangible
Less: Accumulated amortisation
Software – at cost
Less: Accumulated amortisation
Consolidated
2023
$’000
2022
$’000
8,005
8,005
3,737
(2,500)
1,237
8,184
(7,769)
415
3,737
(1,710)
2,027
8,049
(7,110)
939
Total intangible assets
9,657
10,971
Contract intangible and goodwill
Goodwill of $8,005,000 was recognised on the acquisition of Matilda Equipment Holdings Pty Ltd
(Matilda) in FY19 and represents the residual value of the purchase price of the company over the fair
value of the identifiable assets and liabilities acquired. The goodwill is recognised in the Australian
Rental operating segment.
On the acquisition of Pit N Portal on 28 February 2020, a customer intangible was recognised. This
represented the residual value of the purchase price of the company over the fair value of the identifiable
assets and liabilities acquired. The customer intangible is being amortised over the determined life of
the intangible. Also included in this balance are contract intangibles acquired relating to the acquisition
of Borex Pty Ltd in FY22.
Software
Software has been acquired and developed internally by the business for asset management, monitoring
and planning purposes. Software is amortised over 1 to 4 years.
Amortisation and impairment of intangible assets
The amortisation charge and impairment of intangible assets are recognised in the following line item in
the income statement:
Amortisation expense
Total expense for the year
Consolidated
2023
$’000
2022
$’000
1,449
1,449
1,571
1,571
Consolidated
2023
$’000
2022
$’000
189
1
23,013
(23,013)
190
205
(16)
-
-
189
Opening loss allowance
Collective ECL recognised during the period(1)
Loss allowance on trade receivables arising during the period(2)
Loss allowance on trade receivables written off during the year(3)
Closing loss allowance
(1) The collective ECL is calculated using a combination of historical losses and economic conditions
that are representative of those expected to exist during the life of the receivable. This is based on
historical loss rates, ageing of debtors and economic factors that include commodity prices. The
Group considers blue chip and insured customers as no risk, and only assesses uninsured and
underinsured customers that have breached their trading terms in the ECL calculation. The Group
also reviews specific customer receivables deemed a higher recoverability risk (see below). Refer to
note 6 for further information.
(2) Loss allowance arising during the period is the GST exclusive amount, which is now fully written off
(refer to note 3 below). The amount including GST is $25,314,000.
(3) Losses on trade receivables written off during the year relate to Pit N Portal customers. A loss
allowance of $22,965,000 was made at 31 December 2022 against amounts owing in relation to
Minjar/Barto. Subsequent to 31 December 2022, a total of $10,909,000 was received from
Minjar/Barto with the balance of $12,056,000 written off. Additional amounts written off during the
year included $9,638,000 for Aurora Metals following its placement into receivership and $1,273,000
for KMG following termination of this contract.
19 Inventories
Work in progress – at cost (1)
Consumables, equipment & spare parts – at cost
Total at cost
Equipment and parts – at NRV
Total inventory
Consolidated
2023
$’000
2022
$’000
2,072
18,001
20,073
3,362
23,435
7,723
12,805
20,528
2,983
23,511
(1) During the year ended 30 June 2023, a reversal to impairment of inventories was recognised in
the consolidated statement of profit or loss and other comprehensive income of $2,000 (2022:
write-down of $89,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
89
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
90
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
21 Property, plant and equipment
Land &
buildings
Leasehold
improvements
Plant &
equipment
Consolidated
$’000
Office
equipment
Motor
vehicles
Sundry
plant
Total
At cost at 30 June 2023
2,915
7,645
1,543,524
6,200
13,891
15,484
1,589,659
Accumulated depreciation and
impairment at 30 June 2023
(1,444)
1,471
(5,037)
2,608
(805,703)
737,821
(4,965)
1,235
(8,310)
5,581
(11,568)
3,916
(837,027)
752,632
At cost at 30 June 2022
2,727
5,730
1,376,662
5,260
14,280
14,585
1,419,244
Accumulated depreciation and
impairment at 30 June 2022
Reconciliations of the carrying
amounts for each class of
property, plant and equipment
are set out below:
Carrying amount at the
beginning of the year
Additions
Depreciation
Disposals
Movement (to)/from assets held
for sale
Movement in major equipment
components
Movement capital WIP
Carrying amount at the end of
the year
Reconciliations of the carrying
amounts for each class of
property, plant and equipment
are set out below:
Carrying amount at the
beginning of the year
Additions
Depreciation
Disposals
Movement (to)/from assets held
for sale
Movement in major equipment
components
Movement capital WIP
Carrying amount at the end of
the year
(1,398)
1,329
(4,819)
911
(688,561)
688,101
(3,888)
1,372
(6,863)
7,417
(10,051)
4,534
(715,580)
703,664
Land &
buildings
Leasehold
improvements
Plant &
equipment
Consolidated
2023
$’000
Office
equipment
Motor
vehicles
Sundry
plant
Total
1,329
188
(46)
-
-
-
-
911
1,915
(218)
-
-
-
-
688,101
191,233
(121,864)
(1,145)
(2,794)
1,648
(17,358)
1,372
947
(1,080)
(4)
-
-
-
7,417
74
(1,756)
-
(154)
-
-
4,534
1,049
(1,553)
-
703,664
195,406
(126,517)
(1,149)
(114)
(3,062)
-
-
1,648
(17,358)
1,471
2,608
737,821
1,235
5,581
3,916
752,632
Land &
buildings
Leasehold
improvements
Plant &
equipment(1)
Consolidated
2022
$’000
Office
equipment
Motor
vehicles
Sundry
plant
Total(1)
859
536
(66)
-
-
-
-
932
119
(140)
-
-
-
-
644,088
142,238
(111,319)
-
(5,537)
2,866
15,765
1,113
822
(553)
-
3,841
5,051
(1,446)
-
(10)
(29)
-
-
-
-
3,214
2,624
(1,304)
-
-
-
-
654,047
151,390
(114,828)
-
(5,576)
2,866
15,765
1,329
911
688,101
1,372
7,417
4,534
703,664
(1) Prior year property plant & equipment has been restated to reclassify leased plant & equipment in
right-of-use assets (in accordance with AASB 16). Refer to note 22 for further details.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
91
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
21 Property, plant and equipment
21 Property, plant and equipment (continued)
Land &
Leasehold
Plant &
buildings
improvements
equipment
equipment
Motor
vehicles
Sundry
plant
Total
Consolidated
$’000
Office
Depreciation
The Group manages depreciation at an individual componentisation of asset level. Depreciation is
calculated based on a standard machine hour usage basis.
Security
The Group’s assets are subject to a fixed and floating charge under the terms of the notes issued. Refer
to 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 2023, detailed impairment testing was undertaken for the Australian Rental CGU and
the Pit N Portal CGU and testing carried out for the Workshops CGU, with no impairment being identified.
Additionally, carrying value of property, plant and equipment was supported by an independent fair
market valuation. Refer to note 2(e) “Estimates and judgements” for detailed consideration of this matter.
During the period, assets classified as held for sale were impaired by $983,000 (FY22: $1,036,000) to
their fair value less cost to sell based on market prices of similar equipment.
At cost at 30 June 2023
2,915
7,645
1,543,524
6,200
13,891
15,484
1,589,659
(1,444)
1,471
(5,037)
2,608
(805,703)
737,821
(4,965)
1,235
(8,310)
5,581
(11,568)
3,916
(837,027)
752,632
At cost at 30 June 2022
2,727
5,730
1,376,662
5,260
14,280
14,585
1,419,244
(1,398)
1,329
(4,819)
911
(688,561)
688,101
(3,888)
1,372
(6,863)
7,417
(10,051)
4,534
(715,580)
703,664
Accumulated depreciation and
impairment at 30 June 2023
Accumulated depreciation and
impairment at 30 June 2022
Reconciliations of the carrying
amounts for each class of
property, plant and equipment
are set out below:
Carrying amount at the
beginning of the year
Additions
Depreciation
Disposals
for sale
Movement (to)/from assets held
Movement in major equipment
components
Movement capital WIP
Carrying amount at the end of
the year
Reconciliations of the carrying
amounts for each class of
property, plant and equipment
are set out below:
Carrying amount at the
beginning of the year
Additions
Depreciation
Disposals
for sale
Movement (to)/from assets held
Movement in major equipment
components
Movement capital WIP
Carrying amount at the end of
the year
1,471
2,608
737,821
1,235
5,581
3,916
752,632
Land &
Leasehold
Plant &
buildings
improvements
equipment
equipment
Motor
vehicles
Sundry
plant
Total
1,329
188
(46)
911
1,915
(218)
Consolidated
2023
$’000
Office
1,372
947
(1,080)
(4)
Consolidated
2022
$’000
Office
equipment
1,113
822
(553)
-
-
-
-
-
-
688,101
191,233
(121,864)
(1,145)
(2,794)
1,648
(17,358)
644,088
142,238
(111,319)
-
(5,537)
2,866
15,765
-
-
-
-
-
-
-
-
7,417
74
(1,756)
-
(154)
-
-
3,841
5,051
(1,446)
-
-
-
4,534
1,049
(1,553)
(114)
(3,062)
703,664
195,406
(126,517)
(1,149)
1,648
(17,358)
-
-
-
-
-
-
-
Land &
Leasehold
buildings
improvements
Plant &
equipment(1)
Motor
vehicles
Sundry
plant
Total(1)
859
536
(66)
932
119
(140)
(10)
(29)
3,214
2,624
(1,304)
654,047
151,390
(114,828)
-
(5,576)
2,866
15,765
1,329
911
688,101
1,372
7,417
4,534
703,664
(1) Prior year property plant & equipment has been restated to reclassify leased plant & equipment in
right-of-use assets (in accordance with AASB 16). Refer to note 22 for further details.
-
-
-
-
-
-
-
-
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
91
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
92
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
22 Right-of-use assets
Consolidated
$’000
As at 30 June 2023
Buildings
vehicles Equipment
Motor
Opening balance 1 July 2022
Additions
Additions to leased equipment
reclassified
Termination of lease
Remeasurements
Total cost
36,039
18,782
10,364
8,096
19,136
5,133
-
-
-
(8,493)
(1,240)
(2,119)
3,459
-
-
49,787
17,220
22,150
26,193
Leased
equipment
reclassified
from PPE to
ROU
asset(1)
23,153
-
4,447
(1,407)
-
Total
88,692
32,011
4,447
(13,259)
3,459
115,350
Accumulated depreciation
(13,897)
(6,575)
(8,970)
(10,381)
(39,823)
Net carrying amount
35,890
10,645
13,180
15,812
75,527
As at 30 June 2022
Buildings
vehicles Equipment
Motor
Leased
equipment
reclassified
from PPE to
ROU
asset(1)
Consolidated
$’000
Opening balance 1 July 2021
Additions
Termination of lease
Remeasurements
Total cost
27,280
9,004
(195)
(50)
6,273
4,393
(302)
-
13,657
5,479
21,836
1,317
-
-
-
-
Total
69,046
20,193
(497)
(50)
36,039
10,364
19,136
23,153
88,692
Accumulated depreciation
(14,799)
(3,945)
(5,901)
(8,723)
(33,368)
Net carrying amount
21,240
6,419
13,235
14,430
55,324
(1) Prior year property plant & equipment has been restated to reclassify leased plant & equipment in
right-of-use assets (in accordance with AASB 16).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
93
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
22 Right-of-use assets
22 Right-of-use assets (continued)
As at 30 June 2023
Buildings
vehicles Equipment
Total
Consolidated
$’000
Motor
36,039
18,782
10,364
8,096
19,136
5,133
(8,493)
(1,240)
(2,119)
-
3,459
-
-
-
-
Leased
equipment
reclassified
from PPE to
ROU
asset(1)
23,153
-
4,447
(1,407)
-
49,787
17,220
22,150
26,193
88,692
32,011
4,447
(13,259)
3,459
115,350
Opening balance 1 July 2022
Additions
reclassified
Additions to leased equipment
Termination of lease
Remeasurements
Total cost
Accumulated depreciation
(13,897)
(6,575)
(8,970)
(10,381)
(39,823)
Net carrying amount
35,890
10,645
13,180
15,812
75,527
Consolidated
$’000
Leased
equipment
reclassified
from PPE to
ROU
asset(1)
As at 30 June 2022
Buildings
vehicles Equipment
Total
Opening balance 1 July 2021
Additions
Termination of lease
Remeasurements
Total cost
Motor
6,273
4,393
(302)
-
27,280
9,004
(195)
(50)
13,657
5,479
21,836
1,317
-
-
-
-
69,046
20,193
(497)
(50)
36,039
10,364
19,136
23,153
88,692
Accumulated depreciation
(14,799)
(3,945)
(5,901)
(8,723)
(33,368)
Net carrying amount
21,240
6,419
13,235
14,430
55,324
(1) Prior year property plant & equipment has been restated to reclassify leased plant & equipment in
right-of-use assets (in accordance with AASB 16).
The Group’s right-of-use assets relate to property, motor vehicles and heavy earth moving equipment.
The average lease term is 4.42 years (2022: 4.65 years).
The corresponding lease liability analysis is presented in note 24.
Amount recognised in profit or loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to leases of low value assets
23 Trade and other payables
Current
Trade payables
Interest accrual
Deferred revenue
Other payables and accruals
Consolidated
2023
$’000
2022
$’000
17,855
3,274
1,403
88
22,620
13,042
2,374
2,420
132
17,968
Consolidated
2023
$’000
2022
$’000
80,723
7,561
-
58,859
147,143
75,357
7,471
6,700
46,351
135,879
The Group’s exposure to currency and liquidity risk associated with trade and other payables is
disclosed in note 6.
Trade and other payables are stated at cost and represent liabilities for goods and services provided to
the Group prior to the end of the financial year, which are unpaid at the reporting date.
To manage the cash flow conversion cycle on some goods and services procured by the Group, and to
ensure that suppliers receive payment in a timely manner, the Group offers some suppliers supply chain
financing. At 30 June 2023, the balance of the supply chain finance programmes was $25,517,000
(2022: $24,736,000). The supply chain financing programmes attract fees in the range of 1.15% - 2.04%
of the transaction value, and are repaid on 60-day terms. The Group evaluates supplier arrangements
against a number of indicators to assess if the payable continues to have the same characteristics of a
trade payable or should be classified as borrowings. These indicators include whether the payment
terms exceed customary payment terms in the industry, the extent to which the rights and obligations (if
any) under the contractual relationships attached to the original liability have been modified, and whether
there are any additional credit enhancements arising from the supply chain financing arrangements. At
30 June 2023, the Group has concluded the payables subject to supply chain financing arrangements
did not meet all of the characteristics to be classified as borrowings and accordingly the balances remain
in trade and other payables.
The Company has also entered into a deed of cross guarantee with certain subsidiaries as described in
note 37. Under the terms of the deed, the Company has guaranteed the repayment of all current and
future creditors in the event any of the entities party to the deed are wound up. Details of the
consolidated financial position of the Company and subsidiaries party to the deed are set out in note 37.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
93
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
94
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
24 Interest bearing liabilities
Current
Amortised cost
Lease liabilities
Other financing
Financial liability (1)
Non-current
Amortised cost
AUD notes – secured
Debt raising costs (2)
Lease liabilities
Financial liability (1)
Consolidated
2023
$’000
2022
$’000
21,431
1,098
1,217
23,746
250,000
(3,431)
49,290
3,042
298,901
14,005
964
-
14,969
250,000
(4,548)
40,643
-
286,095
(1) A current financial liability of $1,217,000 (2022: nil) and non-current financial liability of $3,042,000
(2022: nil) was recognised, relating to the sale and leaseback of equipment.
(2) Carried at amortised cost. The movement from prior year is due to amortisation recorded in the
Statement of Profit or Loss and Other Comprehensive Income for the year.
Revolving Credit Facility
The Group has a Revolving Credit Facility (RCF) of $100,000,000 which matures in December 2025
and has two sub facilities consisting of a Loan Note Agreement Facility (LNA) of $95,000,000 (2022:
$96,800,000) and a Bank Guarantee Facility of $5,000,000 (2022: $3,200,000). In December 2022, the
Group successfully refinanced the facility with existing lenders in the syndicate, with the tenor of the
facility being three years, with an option to extend for a further two years to December 2027 at the
Group’s election. The bank guarantee facility attracts a fee of up to 1.57% on the unutilised portion of
the facility, and a fee of 3.5% on the outstanding balance of guarantees on issue. The nominal interest
rate on the LNA is equal to the aggregate of the bank bill swap rate (BBSY) plus a margin of between
2.75% and 3.75% dependent on the portion of the facility utilised and credit agency ratings (2.75% if
less than 25% drawn and credit agency ratings of Ba2/BB or higher; 3.75% if greater than or equal to
25% drawn and credit agency ratings lower than B1/B+).
The facilities require the Group to maintain a collateral coverage ratio greater than 2.0x and a fixed
charge coverage ratio greater than 1.5x. The collateral coverage ratio is based on an independent
valuation of the rental fleet in ratio to the drawn LNA. At 30 June 2023, the LNA was undrawn (2022:
nil).
Secured notes issue
On 2 July 2021, the Company successfully completed the issuance of $250,000,000 notes in the AMTN
market (AUD Notes). The notes have a fixed coupon of 6.25%, payable semi-annually, and have a
maturity date of 10 July 2026. The funds received from this debt raising were used to repay the
outstanding US$180,007,000 March 2024 notes, call premium and to close out all hedging associated
with those notes on 2 July 2021, resulting in cash out flows of $11,191,000 for early repayment of the
Note, debt financing payments of $5,566,000 and a mark-to-market payment on hedge close-out of
$5,314,000. These cash out flows were recorded in financing activities for the year ended 30 June 2022,
with the profit or loss impact predominantly recorded in the Statement of Profit or Loss and Other
Comprehensive Income for the year ended 30 June 2021.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
95
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
24 Interest bearing liabilities
Current
Amortised cost
Lease liabilities
Other financing
Financial liability (1)
Non-current
Amortised cost
AUD notes – secured
Debt raising costs (2)
Lease liabilities
Financial liability (1)
Consolidated
2023
$’000
2022
$’000
21,431
1,098
1,217
23,746
14,005
964
-
14,969
250,000
250,000
(3,431)
49,290
3,042
(4,548)
40,643
-
298,901
286,095
(1) A current financial liability of $1,217,000 (2022: nil) and non-current financial liability of $3,042,000
(2022: nil) was recognised, relating to the sale and leaseback of equipment.
(2) Carried at amortised cost. The movement from prior year is due to amortisation recorded in the
Statement of Profit or Loss and Other Comprehensive Income for the year.
Revolving Credit Facility
The Group has a Revolving Credit Facility (RCF) of $100,000,000 which matures in December 2025
and has two sub facilities consisting of a Loan Note Agreement Facility (LNA) of $95,000,000 (2022:
$96,800,000) and a Bank Guarantee Facility of $5,000,000 (2022: $3,200,000). In December 2022, the
Group successfully refinanced the facility with existing lenders in the syndicate, with the tenor of the
facility being three years, with an option to extend for a further two years to December 2027 at the
Group’s election. The bank guarantee facility attracts a fee of up to 1.57% on the unutilised portion of
the facility, and a fee of 3.5% on the outstanding balance of guarantees on issue. The nominal interest
rate on the LNA is equal to the aggregate of the bank bill swap rate (BBSY) plus a margin of between
2.75% and 3.75% dependent on the portion of the facility utilised and credit agency ratings (2.75% if
less than 25% drawn and credit agency ratings of Ba2/BB or higher; 3.75% if greater than or equal to
25% drawn and credit agency ratings lower than B1/B+).
The facilities require the Group to maintain a collateral coverage ratio greater than 2.0x and a fixed
charge coverage ratio greater than 1.5x. The collateral coverage ratio is based on an independent
valuation of the rental fleet in ratio to the drawn LNA. At 30 June 2023, the LNA was undrawn (2022:
nil).
Secured notes issue
On 2 July 2021, the Company successfully completed the issuance of $250,000,000 notes in the AMTN
market (AUD Notes). The notes have a fixed coupon of 6.25%, payable semi-annually, and have a
maturity date of 10 July 2026. The funds received from this debt raising were used to repay the
outstanding US$180,007,000 March 2024 notes, call premium and to close out all hedging associated
with those notes on 2 July 2021, resulting in cash out flows of $11,191,000 for early repayment of the
Note, debt financing payments of $5,566,000 and a mark-to-market payment on hedge close-out of
$5,314,000. These cash out flows were recorded in financing activities for the year ended 30 June 2022,
with the profit or loss impact predominantly recorded in the Statement of Profit or Loss and Other
Comprehensive Income for the year ended 30 June 2021.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
24 Interest bearing liabilities (continued)
Secured notes issue (continued)
The AUD Notes include restrictions on issuing additional debt if leverage (net debt divided by operating
EBITDA) is greater than 1.75x and shareholder distributions if leverage is greater than 2.0x. The notes
include a call premium of 3.125% that is payable if redeemed prior to 10 July 2024 and 1.5625% is
payable on the notes if the notes are redeemed prior to 10 July 2025. No call premium is payable after
this date. There are no restrictions on capital expenditure in the AUD notes. The effective interest rate
of these notes is 6.76%, which is inclusive of the capitalised borrowing costs and annual coupon.
Working capital facilities
The Group has a credit card facility with a limit of $150,000 (2022: $150,000). The facility is secured via
a cash cover account.
Lease liabilities
At 30 June 2023, the Group held lease facilities totalling $70,721,000 (2022: $54,648,000) which have
various maturities up to June 2033. Lease terms are negotiated on an individual basis and include a
wide range of different terms and conditions. The lease agreements do not impose any covenants.
Lease liabilities of the Group are payable as follows:
Opening balance as at 1 July
New leases
Interest expense
Principal repayments
Remeasurements
Balance at 30 June
Current
Non-current
Consolidated
2023
$’000
2022
$’000
54,648
32,011
3,274
(22,672)
3,460
70,721
21,431
49,290
70,721
48,300
21,028
2,374
(17,201)
147
54,648
14,005
40,643
54,648
The Group’s lease liabilities are secured by the leased assets of $75,527,000 (2022: $55,324,000). In
the event of default, the leased assets revert to the lessor.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
95
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
96
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
24 Interest bearing liabilities (continued)
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:
AUD notes
Lease liabilities
Debt raising costs
Financial liabilities
Other financing
USD notes
AUD notes
Lease liabilities
Debt raising costs
Other financing
1 July
2022
$'000
250,000
54,648
(4,548)
-
965
301,065
1 July
2021
$'000
250,508
-
48,300
(94)
497
299,211
-
(22,662)
-
(781)
(4,360)
(27,803)
*
Financing
cash
flows
$'000
(258,019)
-
(17,201)
(5,566)
(3,436)
(284,222)
*
Financing
cash
flows
$'000
Finance
expense*
$'000
Net debt
acquired
$'000
Realised
FX
$'000
Hedging
transactions
$'000
30 June
2023
$'000
-
3,275
1,117
234
100
4,726
-
35,460
-
4,806
4,393
44,659
-
-
-
-
-
-
-
-
-
-
-
-
250,000
70,721
(3,431)
4,259
1,098
322,647
inclusive of amortisation expense
Finance
expense*
$'000
Net debt
acquired
$'000
Realised
FX
$'000
Hedging
transactions
$'000
30 June
2022
$'000
-
-
2,374
1,112
45
3,531
-
250,000
21,175
-
3,859
275,034
118
-
-
-
-
118
7,393
-
-
-
-
7,393
-
250,000
54,648
(4,548)
965
301,065
inclusive of amortisation expense
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
97
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:
AUD notes
Lease liabilities
Debt raising costs
Financial liabilities
Other financing
USD notes
AUD notes
Lease liabilities
Debt raising costs
Other financing
Finance
expense*
$'000
Net debt
acquired
$'000
Realised
FX
$'000
Hedging
transactions
$'000
30 June
2023
$'000
Financing
cash
flows
$'000
(22,662)
1 July
2022
$'000
250,000
54,648
(4,548)
-
965
(781)
(4,360)
301,065
(27,803)
1 July
2021
$'000
Financing
cash
flows
$'000
250,508
(258,019)
-
(94)
497
48,300
(17,201)
(5,566)
(3,436)
299,211
(284,222)
-
-
-
-
3,275
1,117
234
100
4,726
-
-
2,374
1,112
45
3,531
*
inclusive of amortisation expense
Finance
expense*
$'000
Net debt
acquired
$'000
Realised
FX
$'000
Hedging
transactions
$'000
30 June
2022
$'000
118
7,393
35,460
4,806
4,393
44,659
-
-
-
-
250,000
21,175
3,859
275,034
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250,000
70,721
(3,431)
4,259
1,098
322,647
-
250,000
54,648
(4,548)
965
*
inclusive of amortisation expense
118
7,393
301,065
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
24 Interest bearing liabilities (continued)
25 Financing arrangements
The Group has the ability to access the following lines of credit:
2023
AUD notes (1)
Loan note agreement (2)
Bank guarantee facility (2)
Lease liabilities
2022
AUD notes (1)
Loan note agreement (2)
Bank guarantee facility (2)
Lease liabilities
Consolidated
$’000
Facility
utilised at
reporting
date
Facility not
utilised at
reporting
date
250,000
-
3,509
70,721
324,230
-
95,000
1,491
-
96,491
Consolidated
$’000
Facility
utilised at
reporting
date
Facility not
utilised at
reporting
date
250,000
-
3,121
54,648
307,769
-
96,800
79
-
96,879
Available
facility
250,000
95,000
5,000
70,721
420,721
Available
facility
250,000
96,800
3,200
54,648
404,648
(1) The facility of $250,000,000 was fully drawn at 30 June 2023. Refer to note 24 for further details.
(2) The Revolving Credit Facility has a limit of $100,000,000. The Revolving Credit Facility consists of
the Loan Note Agreement of $95,000,000 and bank guarantee of $5,000,000. The Loan Note
Agreement was undrawn at 30 June 2023. Bank guarantees of $3,509,000 were issued at 30 June
2023.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
97
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
98
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
26 Provisions
Current
Employee benefits:
annual leave
-
long service leave
-
Non-current
Employee benefits – long service leave
Movement in provisions
Balance at 1 July
Arising during the year
Utilised
Balance at 30 June
Consolidated
2023
$’000
2022
$’000
12,813
2,832
15,645
696
696
12,900
1,646
14,546
681
681
Consolidated
2023
$’000
2022
$’000
15,228
17,550
(16,437)
16,341
12,526
15,000
(12,299)
15,227
Defined contribution superannuation funds
The Group makes contributions to defined contribution superannuation funds. The expense recognised
for the year was $19,904,000 (2022: $18,128,000).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
99
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
26 Provisions
27 Share-based payments
Current
Employee benefits:
annual leave
long service leave
-
-
Non-current
Employee benefits – long service leave
Movement in provisions
Balance at 1 July
Arising during the year
Utilised
Balance at 30 June
Consolidated
2023
$’000
2022
$’000
12,813
2,832
15,645
696
696
12,900
1,646
14,546
681
681
Consolidated
2023
$’000
2022
$’000
15,228
17,550
(16,437)
16,341
12,526
15,000
(12,299)
15,227
Defined contribution superannuation funds
The Group makes contributions to defined contribution superannuation funds. The expense recognised
for the year was $19,904,000 (2022: $18,128,000).
During the year the Company issued Rights to key management personnel and senior employees of the
Group under its employee incentive plans (refer note 3(k)v.).
Vested plans
Grant date/employee entitled
MIP
Rights/performance share rights 2019
Rights/performance share rights 2019
LTIP
Rights/performance share rights 2020
Rights/performance share rights 2021
Rights/performance share rights 2022
Unvested plans
Grant date/employee entitled
MIP
Rights/performance share rights 2019
LTIP
Rights/performance share rights 2020
LTIP
Rights/performance share rights 2021
LTIP
Rights/performance share rights 2022
LTIP
Rights/performance share rights 2023
Number of
instruments
Vesting
conditions
Contractual life
of rights/
performance
share rights
1,000,000 4 years service
553,557 5 years service
512,161 3 years service
40,198 2 years service
42,946 1 year service
2,148,862
4 years
5 years
3 years
2 years
1 year
Number of
instruments
Vesting
conditions
Contractual life
of rights/
performance
share rights
1,000,000 5 years service
5 years
140,744 3 years service
3 years
1,662,411 3 years service
3 years
1,736,520 3 years service
3 years
4,385,502 3 years service
8,925,177
3 years
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
99
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
100
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
27 Share-based payments (continued)
The movements of Rights on issue during the year were as follows:
Outstanding at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 30 June
Number of
rights/
performance
share rights
2023
8,604,782
4,440,329
(2,148,862)
(1,971,072)
8,925,177
Number of
rights/
performance
share rights
2022
8,623,741
3,466,013
(1,429,242)
(2,055,730)
8,604,782
The fair value of Rights granted during the year are measured using the Black Scholes model resulting
in a fair value of $0.65 (FY22: $0.94). The Black Scholes model requires inputs including the risk-free
rate, volatility and dividend yield. For Rights granted during the year, the risk-free rate was determined
by reference to the Reserve Bank of Australia’s 3-year government bond rate. Volatility was derived
from historical share price movements over a period similar to the life of the Rights granted, and dividend
yield is reflective of the Company’s share price at year end and historical dividends paid. Please refer
to note 3(k)v. for further information.
The weighted average share price for Rights exercised during the year was $0.77 (FY22: $1.09).
The following applies to Rights:
-
-
there is no entitlement to dividends or shadow dividends on unvested rights; and
in the event of absolute change in control (i.e. the acquisition by a third party and its associates
>50% of Emeco shares), rights awarded will vest.
Employee expenses
in AUD
Performance shares/rights
Total expense recognised as employee costs (1)
Consolidated
2023
1,416,873
1,416,873
2022
1,999,257
1,999,257
(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 2023
101
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
27 Share-based payments (continued)
28 Commitments
The movements of Rights on issue during the year were as follows:
(a) Short-term and low value leases
Future non-cancellable short-term and low value
leases not provided for in the financial statements
and payable:
Less than one year
Between one and five years
More than five years
Consolidated
2023
$’000
2022
$’000
842
-
-
842
3,363
198
-
3,561
Short-term and low value lease expenditure for FY23 and FY22 is disclosed in note 22.
(b) Capital commitments
The Group has commitments arising subsequent to 30 June 2023 of approximately $18,700,000
for purchases of fixed assets (2022: nil).
The weighted average share price for Rights exercised during the year was $0.77 (FY22: $1.09).
29 Contingent liabilities
Guarantees
The Group has provided bank guarantees in the amount of $3,509,000 (2022: $3,121,000) in relation to
obligations under operating leases and rental premises.
Number of
Number of
rights/
rights/
performance
share rights
performance
share rights
2023
8,604,782
4,440,329
(2,148,862)
(1,971,072)
8,925,177
2022
8,623,741
3,466,013
(1,429,242)
(2,055,730)
8,604,782
Outstanding at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 30 June
The fair value of Rights granted during the year are measured using the Black Scholes model resulting
in a fair value of $0.65 (FY22: $0.94). The Black Scholes model requires inputs including the risk-free
rate, volatility and dividend yield. For Rights granted during the year, the risk-free rate was determined
by reference to the Reserve Bank of Australia’s 3-year government bond rate. Volatility was derived
from historical share price movements over a period similar to the life of the Rights granted, and dividend
yield is reflective of the Company’s share price at year end and historical dividends paid. Please refer
to note 3(k)v. for further information.
The following applies to Rights:
-
-
there is no entitlement to dividends or shadow dividends on unvested rights; and
in the event of absolute change in control (i.e. the acquisition by a third party and its associates
>50% of Emeco shares), rights awarded will vest.
Employee expenses
in AUD
Performance shares/rights
Total expense recognised as employee costs (1)
Consolidated
2023
1,416,873
1,416,873
2022
1,999,257
1,999,257
(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 2023
101
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
102
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
30 Notes to the statement of cash flows
(i) Reconciliation of cash
For the purposes of the statement of cash flow, cash includes cash on hand and at bank and
short-term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial
year as shown in the statements of cash flows is reconciled to the related items in the statements
of financial position as follows:
Cash and cash equivalents
Consolidated
2023
$’000
2022
$’000
46,673
60,158
Note
17
(ii) Reconciliation of net profit to net cash generated by operating activities
Net profit from continuing operations
Less items classified as investing/financing activities:
Net profit on sale of non-current assets
Add/(less) non-cash items:
Depreciation and amortisation
Amortisation of borrowing costs using effective interest rate
Foreign exchange loss
Impairment losses on tangible assets
Trade receivables written off
Provision for doubtful debts reversal
Equity settled share-based payments
Income tax expense
Net cash from operating activities before change in assets/(liabilities)
adjusted for assets and (liabilities) acquired
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in inventories
Increase in payables
Increase in provisions
Net cash from operating activities
Note
Consolidated
2023
$’000
2022
$’000
41,331
64,953
8
9
9
9
9
18
9
9
11
(1,428)
(60)
145,821
129,441
1,366
52
981
23,013
-
1,417
10,506
1,113
436
1,125
-
(2)
1,999
25,730
223,059
224,735
(22,501)
(33,406)
(965)
5,680
1,115
(6,110)
33,229
2,700
206,388
221,148
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
103
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
30 Notes to the statement of cash flows
(i) Reconciliation of cash
For the purposes of the statement of cash flow, cash includes cash on hand and at bank and
short-term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial
year as shown in the statements of cash flows is reconciled to the related items in the statements
of financial position as follows:
Cash and cash equivalents
(ii) Reconciliation of net profit to net cash generated by operating activities
Note
17
Note
8
9
9
9
9
9
9
11
Consolidated
2023
$’000
2022
$’000
46,673
60,158
Consolidated
2023
$’000
2022
$’000
41,331
64,953
145,821
129,441
1,366
52
981
-
1,417
10,506
1,113
436
1,125
-
(2)
1,999
25,730
223,059
224,735
(22,501)
(33,406)
(965)
5,680
1,115
(6,110)
33,229
2,700
206,388
221,148
18
23,013
Less items classified as investing/financing activities:
Net profit on sale of non-current assets
(1,428)
(60)
Amortisation of borrowing costs using effective interest rate
Net profit from continuing operations
Add/(less) non-cash items:
Depreciation and amortisation
Foreign exchange loss
Impairment losses on tangible assets
Trade receivables written off
Provision for doubtful debts reversal
Equity settled share-based payments
Income tax expense
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in inventories
Increase in payables
Increase in provisions
Net cash from operating activities
Net cash from operating activities before change in assets/(liabilities)
adjusted for assets and (liabilities) acquired
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
31 Controlled entities
(a) Particulars in relation to controlled entities
Country
of
incorporation
Ownership interest
2023
%
2022
%
Parent entity
Emeco Holdings Limited
Controlled entities
Pacific Custodians Pty Ltd as trustee for Emeco
Employee Share Ownership Plan Trust
Emeco Pty Limited
Emeco International Pty Limited
EHL Corporate Pty Ltd
Emeco Parts Pty Ltd
Emeco Finance Pty Ltd
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
Matilda Equipment Holdings Pty Ltd
Matilda Equipment Pty Ltd
Pit N Portal Mining Services Pty Ltd
Pit N Portal Equipment Hire Pty Ltd
Emeco Equipment (USA) LLC
Emeco (UK) Limited
Emeco International Europe BV
Emeco Holdings South America SpA
Enduro SpA
Emeco Europe BV
Emeco BV
PT Prima Traktor IndoNusa
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
United Kingdom
Netherlands
Chile
Chile
Netherlands
Netherlands
Indonesia
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
100
100
100
100
100
100
100
100
(b) Acquisition of entities
There were no entities acquired in the current or prior year.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
103
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
104
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
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
Resigned as a director of the Company on 13 June 2023
Peter Kane
James Walker
Appointed as a director of the Company on 6 June 2023
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
Other executives
Position
Thao Pham
Ceased as Chief Financial Officer on 7 May 2023
Theresa Mlikota
Appointed as Chief Financial Officer on 8 May 2023
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
105
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
32 Key management personnel disclosure
32 Key management personnel disclosure (continued)
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.
Key management personnel compensation
The key management personnel compensation is as follows:
Non-executive directors
Peter Richards
Chair
Peter Frank
Peter Kane
Executive directors
Keith Skinner
Resigned as a director of the Company on 13 June 2023
James Walker
Appointed as a director of the Company on 6 June 2023
Ian Testrow
Managing Director & Chief Executive Officer
Other executives
Position
Thao Pham
Ceased as Chief Financial Officer on 7 May 2023
Theresa Mlikota
Appointed as Chief Financial Officer on 8 May 2023
in AUD
Short-term employee benefits
Other long-term benefits
Other non-monetary benefits
Post-employment benefits
Equity compensation benefits
Consolidated
2023
2,680,334
48,100
217,176
106,285
1,446,427
4,498,322
2022
2,808,899
44,648
-
103,580
2,448,829
5,405,956
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 26 to 43.
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
Rights over equity instruments granted as compensation under management incentive plan
(MIP)
The Company has a management incentive plan in which rights to shares have been granted to certain
employees of the Company. Rights awarded under the MIP will vest at the end of the applicable vesting
period, subject to the employee remaining employed by the Company. Rights that do not vest will lapse.
Rights over equity instruments granted as compensation under long-term incentive plan (LTI)
The Company has a retention incentive plan that rewards executives for their contribution to the
achievement of certain KPIs over a three-year period. KPIs are reviewed annually, but achievement is
assessed over a three-year period with one-third of the maximum entitlement being tested each year.
Assessing achievements annually also ensures that executives are rewarded for their performance in
each year over the three-year period. By assessing outcomes in this manner, consistent high
performance over each year within the three-year performance period is required in order to achieve
maximum award. Awards under the LTI plan are made in the form of Rights.
Other key management personnel transactions
Key management persons, or their related parties, hold positions in other entities that may result in them
having control or significant influence over the financial or operating policies of those entities. There
were no transactions, other than as disclosed in note 33, between the Group and these related entities
during the year (FY22: nil).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
105
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
106
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
33 Other related party transactions
Loan issued to related party
At the Company’s AGM on 17 November 2022, the provision of a zero-interest loan by a subsidiary of
the Company to Mr Ian Testrow (Managing Director and Chief Executive Officer) was approved by
Shareholders. The principal amount of the loan of $4,948,640.55 was drawn on 17 February 2023.
An amount of $166,868 was reimbursed to Mr Ian Testrow for interest expense incurred on a personal
loan drawn with a third party Australian financial institution. The estimated FBT liability associated with
the interest expense reimbursement provided to Mr Ian Testrow is $147,978, resulting in a total cost of
interest reimbursement of $314,846.
A non-monetary deferred employee benefits expense of $115,103 has been recognised in the Statement
of Profit or Loss or Other Comprehensive Income, reflecting the zero-interest component of the loan
provided to Mr Ian Testrow. The estimated FBT liability associated with the zero-interest component of
the unsecured loan provided to Mr Ian Testrow is $102,073, resulting in a total zero-interest loan benefit
of $217,176. The non-monetary benefit and FBT liability has been determined using an assumed interest
rate of 7.77%, based on the Australian Taxation Office benchmark interest rate for the FBT year ending
31 March 2024.
The total cost of the interest expense reimbursement and zero-interest component of the unsecured
loan provided to Mr Ian Testrow for the year ended 30 June 2023, inclusive of estimated FBT is $532,022
(2022: nil).
A deferred employee benefits expense of $262,000 is recorded in other receivables (refer to note 18),
reflecting the expected employee benefits expense to be recognised over the next 12 months for the
zero-interest loan provided to Mr Ian Testrow, while the remaining loan receivable of $4,677,000 is
recorded as an “other financial asset” on the Statement of Financial Position.
On 3 August 2023, the Group announced material changes to Mr Ian Testrow’s terms of employment,
resulting in the loan attracting an interest rate of 12% per annum, only in the event Mr Ian Testrow
resigns and his employment ends before 30 June 2027 (calculated from the date the loan was drawn
until repayment date). The loan is also repayable on the date Mr Ian Testrow’s employment ends
(previously three months after employment ends).
The loan was drawn to fund tax liabilities arising from the vesting of Management Incentive Plan
(“MIP17”) Shares granted in March 2017. The intention of the zero-interest loan is to incentivise Mr Ian
Testrow to retain his equity investment in the Company.
Subsidiaries
Loans are made between wholly owned subsidiaries of the Group for corporate purposes. 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.
Ultimate parent entity
Emeco Holdings Limited is the ultimate parent entity of the Group.
34 Subsequent events
On 22 August 2023, the board resolved to pay a final dividend for the year ended 30 June 2023 of 1.25
cents per share, representing a total cash payment of $6.5 million. The dividend will be fully franked and
will be paid on 29 September 2023.
On 22 August 2023, the Company announced its intention to undertake an on-market share buy-back
of up to $7.3 million. The Company reserves the right to vary, suspend or terminate the buy-back at any
time.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
107
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
34 Subsequent events (continued)
On 3 August 2023, the Group announced material changes to the Managing Director & CEO’s (Mr
Testrow) terms of employment, specific to the period 1 July 2023 to 30 June 2027. The change to these
terms of employment include:
•
•
•
•
•
•
Increasing total fixed remuneration (“TFR”) from $1,062,000 per annum to $1,250,000 per annum
(this is a permanent change to Mr Testrow’s terms of employment).
Participation in a short-term and long-term incentive scheme of 250% of TFR (this is a permanent
change to Mr Testrow’s terms of employment).
Increased participation in the short-term incentive (“STI”) plan from 80% to 130% of TFR for the
variation period. A portion of the STI may be payable in equity (subject to approval of Shareholders)
unless Mr Testrow elects to take the whole of any STI award as cash. All STI equity awards will vest
on 30 June 2027, and any STI equity awards which are not approved by Shareholders will be paid
in cash.
Long-term incentive (“LTI”) plans in respect of FY24 to FY27 (inclusive) will have a one-year
performance period. All equity awards granted will vest on the earlier of release of the Group’s FY27
results and the end of Mr Testrow’s employment. All awards will be in equity, and where shareholder
approval for an award is not obtained, the award will be paid in cash.
If Mr Testrow resigns and his employment ends before 30 June 2027, the loan issued to Mr Testrow
(refer to note 33 for further information) will attract an interest rate of 12% per annum (calculated
from the date the loan was drawn until repayment date). The loan was previously interest-free in all
circumstances. The loan is also repayable on the date Mr Testrow’s employment ends (previously
three months after employment ends). Mr Testrow receives equity incentives tested and awarded
prior to the date his employment ends, however forfeits equity incentives in respect of years’ partly
or not yet worked. Post-employment restraints apply until 30 June 2027.
In a change of control event, or if Mr Testrow’s employment ends due to total or permanent disability
or death, Mr Testrow will receive unpaid fixed remuneration up to 30 June 2027 and the maximum
equity incentives available under the LTI plans which have not yet been tested or awarded (in
addition to equity incentives tested and awarded).
Other than the above, there have been no significant events subsequent to the year ended 30 June
2023.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
33 Other related party transactions
Loan issued to related party
At the Company’s AGM on 17 November 2022, the provision of a zero-interest loan by a subsidiary of
the Company to Mr Ian Testrow (Managing Director and Chief Executive Officer) was approved by
Shareholders. The principal amount of the loan of $4,948,640.55 was drawn on 17 February 2023.
An amount of $166,868 was reimbursed to Mr Ian Testrow for interest expense incurred on a personal
loan drawn with a third party Australian financial institution. The estimated FBT liability associated with
the interest expense reimbursement provided to Mr Ian Testrow is $147,978, resulting in a total cost of
interest reimbursement of $314,846.
A non-monetary deferred employee benefits expense of $115,103 has been recognised in the Statement
of Profit or Loss or Other Comprehensive Income, reflecting the zero-interest component of the loan
provided to Mr Ian Testrow. The estimated FBT liability associated with the zero-interest component of
the unsecured loan provided to Mr Ian Testrow is $102,073, resulting in a total zero-interest loan benefit
of $217,176. The non-monetary benefit and FBT liability has been determined using an assumed interest
rate of 7.77%, based on the Australian Taxation Office benchmark interest rate for the FBT year ending
31 March 2024.
(2022: nil).
The total cost of the interest expense reimbursement and zero-interest component of the unsecured
loan provided to Mr Ian Testrow for the year ended 30 June 2023, inclusive of estimated FBT is $532,022
A deferred employee benefits expense of $262,000 is recorded in other receivables (refer to note 18),
reflecting the expected employee benefits expense to be recognised over the next 12 months for the
zero-interest loan provided to Mr Ian Testrow, while the remaining loan receivable of $4,677,000 is
recorded as an “other financial asset” on the Statement of Financial Position.
On 3 August 2023, the Group announced material changes to Mr Ian Testrow’s terms of employment,
resulting in the loan attracting an interest rate of 12% per annum, only in the event Mr Ian Testrow
resigns and his employment ends before 30 June 2027 (calculated from the date the loan was drawn
until repayment date). The loan is also repayable on the date Mr Ian Testrow’s employment ends
(previously three months after employment ends).
The loan was drawn to fund tax liabilities arising from the vesting of Management Incentive Plan
(“MIP17”) Shares granted in March 2017. The intention of the zero-interest loan is to incentivise Mr Ian
Testrow to retain his equity investment in the Company.
Subsidiaries
Loans are made between wholly owned subsidiaries of the Group for corporate purposes. 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.
Ultimate parent entity
Emeco Holdings Limited is the ultimate parent entity of the Group.
34 Subsequent events
On 22 August 2023, the board resolved to pay a final dividend for the year ended 30 June 2023 of 1.25
cents per share, representing a total cash payment of $6.5 million. The dividend will be fully franked and
will be paid on 29 September 2023.
On 22 August 2023, the Company announced its intention to undertake an on-market share buy-back
of up to $7.3 million. The Company reserves the right to vary, suspend or terminate the buy-back at any
time.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
107
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
108
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
35 Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the year ended 30 June 2023 was based on the profit
attributable to ordinary shareholders of $41,331,000 (2022: $64,953,000) and a weighted average
number of ordinary shares outstanding less any treasury shares for the year ended 30 June 2023 of
517,322,000 (2022: 535,493,000).
Profit attributed to ordinary shareholders (basic)
Profit for the year
Weighted average number of ordinary shares (basic)
Issued ordinary shares at 1 July
Effect of vested employee share plans
Effect of on-market share buy-back during the period
Weighted average number of ordinary shares at 30 June
Consolidated
2023
$‘000
2022
$‘000
41,331
64,953
Consolidated
2023
‘000
522,104
1,033
(5,815)
517,322
2022
‘000
539,823
955
(5,285)
535,493
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
109
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
35 Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the year ended 30 June 2023 was based on the profit
attributable to ordinary shareholders of $41,331,000 (2022: $64,953,000) and a weighted average
number of ordinary shares outstanding less any treasury shares for the year ended 30 June 2023 of
517,322,000 (2022: 535,493,000).
Profit attributed to ordinary shareholders (basic)
Profit for the year
Weighted average number of ordinary shares (basic)
Issued ordinary shares at 1 July
Effect of vested employee share plans
Effect of on-market share buy-back during the period
Weighted average number of ordinary shares at 30 June
517,322
535,493
Consolidated
2023
$‘000
2022
$‘000
41,331
64,953
Consolidated
2023
‘000
2022
‘000
522,104
539,823
1,033
(5,815)
955
(5,285)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
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 2023 was based on the profit attributable to
ordinary shareholders of $41,331,000 (2022: $64,953,000) and a weighted average number of ordinary
shares outstanding less any treasury shares during the financial year ended 30 June 2023 of
526,247,000 (2022: 544,098,000).
Profit attributed to ordinary shareholders (diluted)
Profit for the year
Weighted average number of ordinary shares (diluted)
Issued ordinary shares at 1 July
Effect of vested employee share plans
Effect of unvested employee share plans
Effect of on-market share buy-back during the period
Weighted average number of ordinary shares (diluted) at 30 June
Consolidated
2023
$‘000
2022
$‘000
41,331
64,953
Consolidated
2023
‘000
522,104
1,033
8,925
(5,815)
526,247
2022
‘000
539,823
955
8,605
(5,285)
544,098
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
109
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
110
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
36 Parent entity disclosure
As at and throughout the financial year ending 30 June 2023 the parent entity (the ‘Company’) of the
Group was Emeco Holdings Limited.
Results of the parent entity
Profit for the year (1)
Other comprehensive income
Total comprehensive income for the period
Financial position of parent entity at year end
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Share-based payment reserve
Profit reserve
Reserve of own shares
Retained losses
Total equity
Company
2023
$‘000
2022
$‘000
18,666
-
18,666
325
-
325
73
413,360
413,433
275
413,433
413,708
-
-
-
-
-
-
1,149,254
24,087
3,865
(30,394)
(733,379)
413,433
1,155,856
28,476
16,890
(35,469)
(752,045)
413,708
(1) Profit includes dividends received from wholly owned subsidiaries which are eliminated on group
consolidation.
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a deed of cross guarantee with the effect that the Company
guarantees debts in respect of its subsidiaries.
Further details of the deed of cross guarantee and the subsidiaries subject to the deed, are disclosed in
note 37.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
111
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
36 Parent entity disclosure
37 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
▪ Matilda Equipment Pty Ltd
▪ Matilda Equipment Holdings Pty Ltd
▪ Pit N Portal Mining Services Pty Ltd
▪ Pit N Portal Equipment Hire Pty Ltd
As at and throughout the financial year ending 30 June 2023 the parent entity (the ‘Company’) of the
Group was Emeco Holdings Limited.
Results of the parent entity
Profit for the year (1)
Other comprehensive income
Total comprehensive income for the period
Financial position of parent entity at year end
Total equity of the parent entity comprising of:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Share capital
Share-based payment reserve
Profit reserve
Reserve of own shares
Retained losses
Total equity
consolidation.
Company
2023
$‘000
2022
$‘000
18,666
18,666
-
-
-
-
73
413,360
413,433
275
413,433
413,708
325
-
325
-
-
-
1,149,254
1,155,856
24,087
3,865
(30,394)
(733,379)
413,433
28,476
16,890
(35,469)
(752,045)
413,708
(1) Profit includes dividends received from wholly owned subsidiaries which are eliminated on group
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a deed of cross guarantee with the effect that the Company
guarantees debts in respect of its subsidiaries.
Further details of the deed of cross guarantee and the subsidiaries subject to the deed, are disclosed in
note 37.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
111
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
112
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
37 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 2023 is set out
as follows:
Statement of profit or loss and other comprehensive income and retained earnings
Revenue
Cost of sales
Gross profit
Operating expense
Other income
Finance income
Finance costs
Unrealised FX
Impairment of assets
Impairment of intercompany loans
Profit before tax
Tax expense
Net profit after tax
Other comprehensive (loss)/income
Total comprehensive (loss)/income for the period
Retained losses at beginning of year
Retained losses at end of year
Attributed to:
Equity holders of the Company
Profit for the period
Consolidated
2023
$‘000
874,917
(574,463)
300,454
(222,857)
2,659
670
(27,928)
(62)
(939)
(20,388)
31,609
(10,506)
21,103
2022
$‘000
754,368
(450,498)
303,870
(188,056)
620
164
(24,185)
(439)
(1,037)
-
90,937
(25,730)
65,207
(169)
(169)
(446)
(446)
(570,894)
(549,960)
(635,655)
(570,894)
(529,960)
21,103
(570,894)
65,207
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
113
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
37 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 2023 is set out
as follows:
Statement of profit or loss and other comprehensive income and retained earnings
Revenue
Cost of sales
Gross profit
Operating expense
Other income
Finance income
Finance costs
Unrealised FX
Impairment of assets
Profit before tax
Tax expense
Net profit after tax
Impairment of intercompany loans
Other comprehensive (loss)/income
Total comprehensive (loss)/income for the period
Retained losses at beginning of year
Retained losses at end of year
Attributed to:
Equity holders of the Company
Profit for the period
Consolidated
2023
$‘000
2022
$‘000
874,917
754,368
(574,463)
(450,498)
300,454
303,870
(222,857)
(188,056)
2,659
670
(27,928)
(62)
(939)
(20,388)
31,609
(10,506)
21,103
(169)
(169)
620
164
(24,185)
(439)
(1,037)
-
90,937
(25,730)
65,207
(446)
(446)
(570,894)
(549,960)
(635,655)
(570,894)
(529,960)
(570,894)
21,103
65,207
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements
For the year ended 30 June 2023
37 Deed of cross guarantee (continued)
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Inventories
Assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Intangible assets
Property, plant and equipment
Right-of-use asset
Other financial assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Consolidated
2023
$‘000
2022
$‘000
46,673
157,765
16,890
23,435
1,165
60,158
142,948
20,843
23,511
4,094
245,928
251,554
-
9,657
752,632
75,527
4,677
842,493
19,506
10,971
703,664
55,324
-
789,465
1,088,421
1,041,019
147,143
23,746
15,645
186,534
298,901
696
12,846
312,443
135,879
14,969
14,546
165,394
286,095
681
2,122
288,898
498,977
454,292
589,444
586,727
1,149,254
1,155,856
(9,849)
(549,961)
1,765
(570,894)
Total equity attributable to equity holders of the parent
589,444
586,727
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
113
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
114
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 45 to 114, and
remuneration report in the directors’ report, set out on pages 26 to 43 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 2023 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
37 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
2023.
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, 22 August 2023
Signed in accordance with a resolution of the directors:
Ian Testrow
Managing Director
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
115
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 45 to 114, and
remuneration report in the directors’ report, set out on pages 26 to 43 are in accordance with
the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2023 and
of its performance for the financial year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations
2001;
2.
There are reasonable grounds to believe that the Company and the group entities identified in note
37 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.
3.
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
2023.
4.
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, 22 August 2023
Signed in accordance with a resolution of the directors:
Ian Testrow
Managing Director
(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.
Opinion
Independent Auditor’s Report to the mmeemmbbeerrss ooff
EEmmeeccoo HHoollddiinnggss LLiimmiitteedd
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
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
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 2023, the consolidated statement of profit or loss and
other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows
for the year then ended, and notes to the financial statements, including material accounting policy information and other
explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year
then ended; and
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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors
of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report 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.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
115
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
116
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr
RReeccoovveerraabbiilliittyy ooff nnoonn--ccuurrrreenntt aasssseettss
As disclosed in notes 20 and 21, the carrying value of
goodwill as at 30 June 2022 was $8.0 million (June
2022: $8.0 million), and the carrying value of property,
plant and equipment was $752.6 million (June 2022:
$703.7 million).
Management undertakes impairment testing to assess
the recoverability of non-current assets including,
goodwill, intangible assets and property, plant &
equipment annually, or whenever a trigger is identified.
Our focus was as a result of the market capitalisation of
the Group falling below the carrying value of net assets
during the year in addition to the loss recorded by the
Pit N Portal cash generating unit (‘CGU’).
The assessment of the recoverable value requires
judgement in respect of assumptions and estimates in
preparing a value in use model (‘VIU’). Significant
judgements include but are not limited to:
•
•
•
•
forecast revenue, operating costs and the
resulting forecast EBITDA;
sustaining capital forecasts;
terminal growth rate; and
discount rate.
In addition, and in relation to Pit n Portal the key
judgement underpinning the assessment of the
recoverability of the carrying value of that CGU related
to the ability of the Company to return that CGU to a
sustainable level of EBITDA in line with historic periods
(excluding the current year).
RReeccoovveerraabbiilliittyy ooff ttrraaddee rreecceeiivvaabblleess aanndd aaccccrruueedd
rreevveennuuee
In conjunction with our valuation specialists, our procedures
included, but were not limited to assessing:
•
•
•
•
•
•
•
impairment risk indicators using internal and external
information;
management’s historical budgeting accuracy for each
individual cash generating unit (CGU);
budgets and forecasts for reasonableness compared to
historical actual performance;
the mathematical accuracy of management’s value-in-use
models;
the appropriateness of the discount rate applied;
the risk of impairment by performing independent
breakeven analysis on management’s value-in-use models
for a range of changes in the key assumptions based on
parameters determined in conjunction with our valuation
specialists; and
assessing whether a reasonably possible change in key
assumptions would result in an impairment.
In addition, we specifically assessed the Company’s ability to
return the Pit N Portal CGU to historic levels of EBITDA through
review of historic performance, the make up of current
contracts and the tender pipeline for additional contracts.
We also assessed the adequacy of the disclosures in note 2(e),
to the financial statements.
As disclosed in notes 6 and 18, the Company has
written off $23.0 million of trade receivables during the
period (June 2022: nil) with an allowance for expected
credit losses at 30 June 2023 of $190k (June 2022:
$189k).
Management determine an expected credit loss based
on the policy disclosed in notes 3(d)(iii), 3(i)i and the
assumptions disclosed in note 6 including any specific
allowances and/or write offs required.
Our focus was on whether it was appropriate to write
off the amounts during the period and the
recoverability of trade receivables and accrued revenue
remaining at 30 June 2023 including the sufficiency of
the allowance for expected credit losses.
Our procedures included, but were not limited to:
•
•
•
•
•
obtaining and assessing the trade receivables and accrued
revenue reconciliations and supporting listings;
inquiring with management in relation to aged debtors or
accrued balances and any known delays or concerns
relating to recoverability of amounts from customers;
performing subsequent receipts testing on a sample of
trade receivables;
corroborating the status of recoverability by reviewing
supporting agreements with customers;
obtaining and assessing management’s Expected Credit
Loss allowance calculation and assessing the calculation in
line with the requirements of AASB 9 Financial
Instruments, including sample testing the ageing of
117
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr
receivables and the amount of insurance in place for
certain customers;
•
challenging management’s position as to the
recoverability and sufficiency of the allowance for
expected credit losses by
•
•
assessing a sample of current credit ratings of
customers; and
assessing past payment history for selected
receivables.
We also assessed the adequacy of the disclosures in note 6 and
18 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2023, but does not include the financial report and 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 fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
118
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’s 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, actions taken to eliminate threats or safeguards applied.
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.
RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 26 to 43 of the Directors’ Report for the year ended 30 June
2023.
In our opinion, the Remuneration Report of Emeco Holdings Limited, for the year ended 30 June 2023, complies with section
300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based
on our audit conducted in accordance with Australian Auditing Standards.
DDEELLOOIITTTTEE TTOOUUCCHHEE TTOOHHMMAATTSSUU
AA TT RRiicchhaarrddss
Partner
Chartered Accountants
PPeerrtthh,, 2222 AAuugguusstt 22002233
119
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
Financial calendar
The annual general meeting of Emeco Holdings Limited will be held on Thursday, 30 November 2023.
Event
Annual general meeting
Half year
Half year profit announcement
Year end
*Timing of events is subject to change and board discretion.
Date*
30 November 2023
31 December 2023
February 2024
30 June 2024
Shareholder statistics
Substantial shareholders
Details regarding substantial holders of the Company’s ordinary shares as at 1 August 2023, 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 Credit Strategies Master Fund Ltd
BDCM Opportunity Fund IV LP
BDCM Opportunity Fund III LP
BDCM Strategic Capital Fund I, L.P.
187,360,221
36.10
Paradice Investment Management Pty Ltd
52,602,397
9.669
Distribution of ordinary shareholders
As at 1 August 2023, there were 6,055 holders of the Company’s ordinary shares. The distribution as at
1 August 2023 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
151
960
620
1,727
2,597
6,055
Securities % Ordinary shares
92.35
5.65
0.92
0.88
0.20
100.00
479,333,372
29,322,084
4,782,047
4,552,175
1,012,937
519,002,615
There were 2,056 shareholders holding less than a marketable parcel of 715 securities (share price of $0.70
on 1 August 2023).
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
120
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
20 largest shareholders
The names of the 20 largest holders of the Company’s ordinary shares as at 1 August 2023 are:
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
Pacific Custodians Pty Limited
Washington H Soul Pattinson and Company Limited
First Samuel Ltd
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Mr Peter David Wilkinson & Mrs Jennifer Louise Wilkinson
Buttonwood Nominees Pty Ltd
Sandhurst Trustees Ltd
Pacific Custodians Pty Limited
Precision Opportunities Fund Ltd
UBS Nominees Pty Ltd
Steven Edwin Versteegen
ZThree Pty Ltd
BNP Paribas Noms Pty Ltd
Elphinstone Holdings Pty Ltd
NCH Pty Ltd
Equity
securities
163,716,976
116,415,297
58,406,301
17,127,108
16,823,620
12,526,359
9,983,981
9,697,032
6,313,605
5,600,000
4,023,676
3,953,378
3,408,327
3,000,000
2,776,901
2,415,459
2,400,000
1,634,065
1,563,357
1,377,999
% Issued capital
31.54
22.43
11.25
3.30
3.24
2.41
1.92
1.87
1.22
1.08
0.78
0.76
0.66
0.58
0.54
0.47
0.46
0.31
0.30
0.27
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.
Under the terms of the performance rights issued in respect of the Company’s employee incentive plans,
holders of performance rights have no voting entitlements.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
121
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
20 largest shareholders
Unquoted equity securities
The names of the 20 largest holders of the Company’s ordinary shares as at 1 August 2023 are:
Rank
Name
Equity
securities
% Issued capital
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
Pacific Custodians Pty Limited
Washington H Soul Pattinson and Company Limited
First Samuel Ltd
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Mr Peter David Wilkinson & Mrs Jennifer Louise Wilkinson
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Buttonwood Nominees Pty Ltd
Sandhurst Trustees Ltd
Pacific Custodians Pty Limited
Precision Opportunities Fund Ltd
UBS Nominees Pty Ltd
Steven Edwin Versteegen
ZThree Pty Ltd
BNP Paribas Noms Pty Ltd
Elphinstone Holdings Pty Ltd
NCH Pty Ltd
Voting rights of ordinary shares
163,716,976
116,415,297
58,406,301
17,127,108
16,823,620
12,526,359
9,983,981
9,697,032
6,313,605
5,600,000
4,023,676
3,953,378
3,408,327
3,000,000
2,776,901
2,415,459
2,400,000
1,634,065
1,563,357
1,377,999
31.54
22.43
11.25
3.30
3.24
2.41
1.92
1.87
1.22
1.08
0.78
0.76
0.66
0.58
0.54
0.47
0.46
0.31
0.30
0.27
As at 1 August 2023, there are 1,512,752 performance rights on issue to 16 participants pursuant to the
Company’s employee incentive plans. The distribution as at 1 August 2023 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
Participants Performance rights
2
11
3
0
0
16
1,010,999
481,795
19,958
0
0
1,512,752
% Performance
rights
66.83%
31.85%
1.32%
0.00%
0.00%
100.00%
On-market security purchases
During FY23, Pacific Custodians Pty Limited in its capacity as trustee of the Emeco Employee Share
Ownership Plans Trust purchased 995,393 ordinary shares on-market, at an average price of $0.73 per
share, to be used to satisfy upcoming entitlements of participants under the Company’s employee incentives
scheme to receive ordinary fully-paid shares.
On-market share buy-back
The Company undertook an on-market share buy-back between 24 February 2022 and 22 February 2023,
buying back 21,666,287 ordinary shares for a total amount of $18,357,000. This included 7,663,420 shares
bought back for a total amount of $6,602,000 for the year ended 30 June 2023.
On 22 February 2023, the Company announced a further on-market share buy-back of up to 51,900,261
ordinary shares, which remains open.
On 22 August 2023, the Company announced its intention to undertake an on-market share buy-back of up
to $7.3 million, under the program announced on 22 February 2023.
Voting rights of shareholders are governed by the Company’s constitution. The constitution provides that on
a show of hands every member present in person or by proxy has one vote and on a poll every member
present in person or by proxy has one vote for each fully paid ordinary share held by the member.
Debt securities
Under the terms of the performance rights issued in respect of the Company’s employee incentive plans,
holders of performance rights have no voting entitlements.
A register of the noteholders of the 6.25% A$ notes, which have a maturity date of 10 July 2026, is kept at
the office of EQT Australia Pty Ltd at Level 4, 7 Macquarie Place, Sydney NSW 2000. EQT Australia Pty Ltd
can be contacted by telephone on 1300 133 472.
Securities subject to voluntary escrow
As at 1 August 2023, there were no securities subject to voluntary escrow.
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
122
Emeco Holdings Limited and its Controlled Entities
Company Directory
DIRECTORS
Peter Richards
Ian Testrow
Peter Frank
Peter Kane
James Walker III
SECRETARY
Penelope Young
REGISTERED OFFICE
Level 3, 133 Hasler Road
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
Level 7-9 Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
SECURITIES EXCHANGE LISTING
Emeco Holdings Limited ordinary shares are listed on the Australian Securities Exchange Ltd.
ASX code: EHL
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
123
Emeco Holdings Limited and its Controlled Entities
Company Directory
Emeco Holdings Limited and its Controlled Entities
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DIRECTORS
Peter Richards
Ian Testrow
Peter Frank
Peter Kane
James Walker III
SECRETARY
Penelope Young
REGISTERED OFFICE
Level 3, 133 Hasler Road
Osborne Park WA 6017
Phone: +61 8 9420 0222
Fax:
+61 8 9420 0205
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
Level 7-9 Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
SECURITIES EXCHANGE LISTING
Emeco Holdings Limited ordinary shares are listed on the Australian Securities Exchange Ltd.
ASX code: EHL
EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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EMECO HOLDINGS LIMITED ANNUAL REPORT 2023
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Annual
Report
2023
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Head office
T +61 8 9420 0222
E corporate@emecogroup.com
Level 3, 133 Hasler Road, Osborne Park WA 6017, Australia
PO Box 1341, Osborne Park DC WA 6916, Australia
emecogroup.com