Annual Report
2024
1
Contents
Emeco Holdings Limited and its Controlled Entities
ABN 89 112 188 815
Annual Report
2024
PAGE
Financial Highlights
2
Chairman’s Report
7
Managing Director’s Report
11
Operating & Financial Review
15
Sustainability
21
Business Risks
31
Directors’ Report
37
Remuneration Report
47
Auditor’s Independence Declaration
67
Financial Statements
68
Shareholder Information
128
Company Directory
131
2
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
FINANCIAL YEAR 2024 HIGHLIGHTS
Year at a Glance
(1)
Operating financial metrics are non-IFRS measures. Refer to Table 2: FY24 Statutory to operating results reconciliation,
in the Operating & Financial Review section of this annual report.
(2)
Net debt / Operating EBITDA (excludes supply chain funding).
(3)
Operating free cash flow before growth capex.
(4)
Basic EPS based on Statutory Net Profit After Tax.
(5)
Return on capital (ROC) calculated as LTM Operating EBIT over average capital employed.
to 1.0x
1.0x
2024
1.1x
2023
Net leverage
Net leverage (2)
(2)
6%
$823M
2024
$875M
2023
Revenue
Revenue
12%
$281M
2024
$250M
2023
Operating EBITDA
Operating EBITDA (1)
(1)
66%
$87M
2024
$52M
2023
Free cash flow
Free cash flow (3)
(3)
20%
$125M
2024
$105M
2023
Operating EBIT
Operating EBIT (1)
(1)
28%
10.20cps
2024
7.99cps
2023
Earnings per share
Earnings per share (4)
(4)
17%
$69M
2024
$59M
2023
Operating NPAT
Operating NPAT (1)
(1)
to 15%
15%
2024
13%
2023
ROC
ROC (5)
(5)
3
FINANCIAL YEAR 2024 HIGHLIGHTS
Business at a Glance
Australia’s largest provider
of open cut rental equipment
and value-added services
RENTAL
WORKSHOPS
750
FLEET SIZE
100
FLEET SIZE
7
WORKSHOPS
Australia’s largest
underground hard-rock rental
business
Mining equipment maintenance
and rebuild service provider –
component and asset rebuild
and fabrication
DIVERSIFIED REVENUE BASE
REVENUE BY COMMODITY
Gold
Met Coal
Iron Ore
Nickel
Thermal Coal
Other
REVENUE BY CUSTOMER
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Customer 6
Customer 7
Customer 8
Customer 9
Customer 10
Other Customers
1000
EMPLOYEES
4
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
FINANCIAL YEAR 2024 HIGHLIGHTS
Emeco Investment Highlights
Emeco offers an attractive diversified investment exposure to the
Australian mining industry
Australia’s largest
mining equipment
rental provider with
national footprint
Diversified by customer,
project and commodity
Focused on delivering
strong returns
and free cash flow
generation
Strong balance sheet
and low leverage
Scale and asset
management expertise
provide cost and
quality advantage
Positive equipment
industry demand outlook
$
5
FINANCIAL YEAR 2024 HIGHLIGHTS
Our Strategy
Emeco’s three strategic pillars ensure a sustainable and resilient
business and the creation of long-term value for shareholders
Enhance Emeco’s core capabilities in equipment rental
through technology
Develop Emeco’s skilled workforce, rebuild capability
and strategic workshop network
Leverage Emeco’s position as the largest provider of
rental equipment to the mining sector
Be Australia’s
lowest cost,
highest quality,
technology-driven,
mining equipment
rental provider
01
02
03
Target a balanced portfolio by customer, project,
commodity and region
Maintain flexibility to service a broad range of customers
via highly diversified fleet portfolio
Achieve ESG objectives and support the energy transition
Maintain a
balanced and
diversified
portfolio
Target net debt / EBITDA at or below 1.0x to support
resilience through mining cycles
Disciplined capital allocation to generate free cash flow
and target 20% ROC
Retain flexibility to reinvest in the business and return
capital to shareholders
Exercise
disciplined
capital
management
6
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
7
Dear Shareholders
On behalf of the Board of Emeco Holdings Limited, I am pleased to present the Company’s
Annual Report for the 2024 financial year (FY24). I am greatly honoured to be writing
the FY24 Chairman’s Letter as Interim Chair following the retirement of Peter Richards
as a Director of Emeco in May this year. I would like to take this opportunity to thank Peter
for his tenure and input to the Board of Emeco.
Emeco has delivered a strong financial performance off the back of a positive year of
progress which included the exit from underground contract mining and the strategic
repositioning to a more simplified Company business model, focused on increasing
returns and delivering free cash flow for shareholders.
The Company’s broad exposure to both bulk commodities and metals saw continued
strength in demand for our rental fleet. We continued to proactively manage cost and
skilled labour challenges in a competitive mining equipment rental market, keeping Emeco
well positioned to meet client needs.
Chairman’s
Report
Safety
Our safety performance improved significantly, with
no Lost Time Injuries reported during the period and
the Total Recordable Injury Frequency Rate (TRIFR)
decreasing from 3.2 to 2.8. We remain committed to
continuously improving our safety standards and over
the year implemented further improvements to address
risks identified, demonstrating our ongoing vigilance
and prioritisation of good safety practices across the
business.
Our people drive our business success, and their safety
continues to be Emeco’s highest priority with a focus
on promoting diligence in the application of our safety
standards by all Emeco management and employees.
Operational & Financial Performance
The Group consolidated the performance improvements
delivered in the second half of FY23 and delivered
further growth in earnings in FY24. Pleasingly, Emeco
delivered Operating EBITDA growth of 12% to $280.5
million, Operating EBIT growth of 20% to $125.3 million
and Operating Net Profit after Tax growth of 17% to
$69.4 million.
Reported revenue of $822.7 million for the year was
down 6% on the prior period, primarily due to reduced
revenue from the underground business. Surface rental
and workshop external revenue, grew by 10% and 6%
respectively. Margins increased on the back of stronger
cost and contract management, as well as revenue
mix, with growth in high margin revenue from surface
rental and a reduction in low margin revenue from
underground.
8
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
CHAIRMAN’S REPORT
Balance Sheet and Capital Management
Emeco has a clear and prudent capital management
framework balancing the allocation of capital to
sustaining and growing the business, delivering cash
returns to shareholders, and maintaining balance sheet
strength. During the year, the Company delivered strong
free cash flow and contained net leverage to around
the Company’s long term target level. Return on Capital
(ROC) increased from 13% to 15%.
Strong earnings growth and cash conversion allowed
the Company to continue to fund its capital investment
programme, which included $154.6 million in sustaining
capital expenditure and $47.0 million in growth capital
expenditure. This will deliver increased earnings and
ROC in FY25, following the full deployment of the growth
fleet late in FY24.
The Company ended the year with net debt at $280.5M,
equating to leverage of 1.0x in line with the Board’s long-
term target. The Company remains focused on the
delivery of free cash flow and organic earnings growth.
Consequently, the Company expects to moderate its
growth capex programme in FY25, with the intent of
maintaining leverage levels around the long-term
target and removing the Company’s use of supply chain
finance.
The Group’s capital management framework was
reviewed during the year, with the board resolving to
make no changes to the existing policy:
• Shareholder payout ratio targeting 25 – 40% of
Operating NPAT and
• Target Leverage to be around 1.0x
The Group’s position with respect to capital
management is to maximise future optionality for
shareholders. Consequently, the Board has elected to
suspend the Group’s capital management programme
for FY25 in favour of reducing debt. As a result, no
interim or final dividend for FY24 has been approved.
The Company paid a 1.25 cents per share fully franked
dividend during the reporting period and performed
share buy- backs totalling $0.4 million as part of the
FY23 capital management programme.
Strategy
The Pit N Portal business was successfully restructured
into Emeco Underground following the sale of the
contracting operations to Macmahon Underground
Pty Limited (“Macmahon” or “MAH”), streamlining
the Company’s business model to three core groups:
Emeco Surface Rental, Emeco Underground Rental,
and Force Workshops. The underground rental business
will be focused on Emeco’s core capabilities of asset
management and equipment rental to drive growth in
the underground sector.
Management’s focus on free cash flow generation and a
targeted 20% return on capital, is supported by specific
business improvement initiatives, which are expected to
be delivered over the next two years.
Sustainability
Emeco continued to make progress in Environmental,
Social and Governance (ESG) initiatives during FY24
following the Board’s approval of the Company’s
inaugural ESG Strategy in FY23.
Environmental initiatives included commencing work
to develop the Company’s current position regarding
Scope 1 and Scope 2 emissions, with Scope 3 to follow.
The Company’s inaugural Position Statement on
Climate Change has been developed and is published
in this annual report. Work continued with respect
to a carbon neutrality road map. As a large mining
fleet owner and operator, we are also committed to
technology development to support our fleet being as
carbon efficient as possible to assist in the delivery of
reduced Scope 1 emissions for our customers.
Social initiatives included continued significant
investment in training programmes for employees
focused on health, safety, wellbeing and upskilling.
Our Reflect Reconciliation Action Plan was endorsed
by Reconciliation Australia, and we will continue to
advance our reconciliation process.
As we have outlined previously, 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.
9
Board & Key Management Personnel Changes
I mentioned earlier that Peter Richards stepped down
from the Board during the year, having served eight
years as Chairman and nearly 14 years as a Director.
Peter’s significant business experience and long career
has been a major source of expertise and advice for
Emeco, and his tenure as Chairman has seen numerous
positive changes eventuate for Emeco. All of us at
Emeco wish Peter well and thank him for his meaningful
contribution to the Company. During his long tenure
the Company navigated significant challenges and
continued to evolve and grow.
As the Board’s longest serving Non-Executive Director,
I will continue to act in an interim capacity as Chairman
of the Board, while the Board considers appropriate
independent candidates for the role. As you can
appreciate this is an important role and the Board will
undertake a considered process.
In October 2023, Ms Sarah Adam-Gedge was
appointed to the Board as an Independent Non-
Executive Director and Chair of the Audit and Risk
Management Committee. Sarah is a Chartered
Accountant and experienced Non-Executive Director
who currently serves on the boards of several ASX-
listed companies. She complements the Board with her
broad financial, commercial, leadership and governance
experience gained through her executive career and her
board roles across a number of industries.
Thank You
Looking to FY25, we believe the refocus on organic
earnings growth through Emeco’s core rental and
workshop businesses, along with the recalibration of
our capital allocation towards balance sheet strength
improves the Company’s positioning to deliver better
returns to shareholders over the long-term.
The Board continues to be confident in the longer-term
outlook for Emeco. The Company has a clear strategy
to deliver sustainable growth and to create value for
our shareholders.
I mentioned earlier it is our people that ultimately
drive our success. On behalf of the Board, I would like
to thank the entire Emeco team for contributing to
another positive year for the Company. I would also
like to acknowledge the contribution from our Pit N
Portal colleagues who transferred to Macmahon in the
second half of the financial year following the sale of the
underground contracting operations.
I would also like to thank our Managing Director & CEO,
Ian Testrow, and his senior leadership team for their
contribution to a successful FY24, and their ongoing
commitment to deliver growth and shareholder value. I
look forward to them continuing to deliver in FY25.
Finally, I would like to thank my fellow Board members
for their support and ongoing contribution, and most
importantly, our shareholders for your continued
support of the Company.
Peter Frank
Interim Chair
CHAIRMAN’S REPORT
10
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
11
Dear Shareholders
Emeco delivered a strong result in FY24, consolidating and building upon the good
recovery in performance achieved in prior periods. We saw increased volatility across
commodity prices, however activity in the mining sector remained robust, driving
continued high demand for our rental fleet and services.
Operationally, the business successfully navigated persistent cost inflationary pressures
and a competitive labour market.
Following the successful de-risking and reset of the underground business, we continued
the strategic repositioning through the sale of its contracting operations. Our objective is
to reset the whole business to focus on what it does best and to deliver stronger returns
through a simplified business model concentrating on the provision of equipment rental
and workshop services.
The Emeco business is well positioned to support clients as they seek to efficiently manage
their capital investments in this climate.
Managing
Director’s Report
Health & Safety
The Total Recordable Injury Frequency Rate (TRIFR)
for the year was an improvement from 3.2 in FY23 to
2.8 in FY24. This result is pleasing, particularly in the
context of major structural changes in our workforce
during the year which included the transfer of over 200
underground employees as part of the sale of Pit N
Portal to Macmahon and a significant change-out of
subcontracted labour across the rental business. When
it comes to safety, we can never be complacent. Our
resolve to focus on further actions we can take to drive
future improvements in our safety, remains unchanged.
We continue to implement our Health, Safety,
Environment and Training (HSET) Strategic Plan. This
past year has seen a significant focus on identifying,
understanding, and controlling our critical risks. Our new
critical risk process aligns to global standards for critical
risk and control, and we have recently implemented
critical control verification software to support this
new process. Our investment in training workers
remains a high priority and this is also supported by
the development of new internal equipment specific
training packages. Further to this, we have recently
implemented targeted maintenance inductions for
all maintenance workers to ensure they have been
provided with the necessary information to perform
work safely in accordance with industry and Company
standards.
We are committed to maintaining a strong track
record of improving safety and will continue to monitor
and make improvements as part of our broader
HSET strategy.
Financial Performance
The Group delivered revenue of $822.7 million, and
Operating EBITDA of $280.5 million in FY24. Operating
EBITDA and Operating EBIT were up 12% and 20%
respectively, a very positive result reflecting the
strength of Emeco’s core Rental and Force businesses,
underpinned by demand for bulk commodities.
Revenue was down 6%, primarily due to the sale of
the underground contracting mining portfolio to
Macmahon, which saw a lower revenue contribution in
the second half.
Operating NPAT for the year was $69.4 million,
up 17% on the prior year, Statutory NPAT was
$52.7 million including $16.7 million in after-tax
significant items primarily related to the non-cash
impairment of underground assets.
Depreciation expense increased, reflecting growth in
our fleet in FY23 and FY24. Finance costs were well
contained, in spite of growth capex and higher base
rates.
The Group reported solid operational and financial
performance from each business segment. Group
margins improved with a decrease in low margin
underground revenue; application of rise and fall
provisions across a number of contracts; and cost
savings achieved through procurement and labour
sourcing initiatives. Operating EBIT margins increased
from 12% to 15% and Operating EBITDA margins
increased from 29% to 34%.
12
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
MANAGING DIRECTOR’S REPORT
The Group generated operating free cash flow (before
growth capex) of $86.9 million, which was slightly above
expectations for the year. Return on capital (ROC)
increased from 13% to 15%, which was moderated by
the investment in growth capex in the second half.
The benefit of the FY24 growth capex programme, in
combination with incremental cost savings achieved
across parts and labour spend is expected to deliver
improved earnings and ROC in FY25.
Operations Review
Rental
Strong customer demand saw Rental revenue grow
by 10% over the year to $544.7 million, with gross fleet
utilisation averaging 91% during FY24. Key asset classes
performed well with the rental fleet appropriately
configured towards larger projects and large format
trucks. Delivery of the Group’s major growth capex
rebuild programme in FY24 through our Force
workshops, will be a key driver of revenue and earnings
growth in FY25. I am extremely proud of the entire
team who collectively delivered against this important
initiative, with the deployment of 23 newly rebuilt trucks
(18 x 793D trucks and five x 789C trucks) to large scale
projects during the year.
Operating EBITDA and Operating EBIT both grew
largely in line with revenue at 11% and 13% respectively
to deliver Operating EBITDA of $288.2 million and
Operating EBIT of $156.4 million.
The Rental business continues to navigate the
challenges of a high-cost parts and labour environment
by remaining cost competitive. This has been achieved
through the ability to pass on some costs to clients
through rise and fall provisions, but also through the
deployment of higher margin fleet over the course of
the year. A strong focus on converting subcontracted
labour to full time labour, will continue to drive our
cost competitiveness, along with securing more cost-
efficient supplies through dedicated procurement
resourcing.
Force
Force continued its strong performance, delivering the
significantly increased internal rebuild programme,
whilst continuing to deliver for external customers. The
business grew internal revenue by 29% to $116.2 million,
whilst external revenue grew by 6% to $166.2 million.
Workshop and rebuild service demand remains strong.
Our strategically positioned network of workshops
across key mining regions around Australia, put us
in a strong position to service ongoing demand from
bulk commodities and the gold sector, in particular.
Operating EBITDA increased by 34% to $15.8 million
over the year, with operating EBIT increasing by 29%
to $9.4 million.
Underground
The underground business was restructured during
the year with the sale of its contracting operations to
Macmahon. The underground mining fleet was retained,
and the business will operate as Emeco Underground,
focused on our core capabilities of asset management
and equipment rental. Underground delivered a solid
turnaround in earnings in FY24 reporting a 23%
increase in Operating EBITDA to $21.1 million. Operating
EBIT was $5.5 million in FY24 after reporting a $0.3
million loss in FY23.
The transaction represents a simplification of Emeco’s
business model and provides an opportunity to
streamline overheads and integrate underground
workshops into Emeco’s Force business. As a part of
the transaction, Emeco and Macmahon have entered
into a 5-year strategic rental agreement under which
Emeco will become Macmahon’s preferred equipment
rental provider for both surface and underground
mining. Macmahon represents a strong source of
equipment rental demand, given its focus on a capital-
light business model.
The transaction was completed in February 2024 after
the underground business delivered a strong first half
performance relative to the prior year, following the
successful de-risking and reset of its contract portfolio
last year.
Technology
As we look ahead, we remain committed to our vision
of a technologically empowered business that is agile,
data-driven, resilient, and forward-thinking. Our
ongoing projects and initiatives are a testament to this
commitment.
We have continued to push the boundaries of technology
adoption within our business, towards our goal of being
at the forefront of innovation and delivering world class
performance in all areas of our business and operations.
We continue to prioritise investments across IT, Business
Systems & Intelligence, Digital Transformation, and
Operational Technology (OT), and have established
an innovation framework across the organisation
to foster idea generation through to implementation
and sustainment.
This focus allows us to have a resilient, modern and
digital enterprise, with the capability and processes
that allow our people and assets to deliver at their best
for our customers every day. Our FY25 priorities for IT
and Digital Transformation are centred around driving
business value, speed, and operational efficiency. Our
Emeco Operating System (EOS) OT Platform helps
customers manage their fleet onsite and improve
performance, safety, and reduce carbon emissions.
We continue to advance our OT fleet health solution,
intersect our condition monitoring capability with
machine learning algorithms to provide real-time data
analysis and predictive maintenance, protect our assets
and significantly improve machine performance and
safety, to deliver a superior outcome for our customers.
In FY24, we achieved a major milestone on our ERP
implementation project – Project Elevate - with the
delivery of the design phase. In FY25, we will progress
to the build phase. The Company’s investment in
Microsoft D365 as its new ERP, is expected to total up to
$20 million, with $3.1 million spent in FY24.
Sustainability, People and Diversity
Throughout FY24, Emeco maintained a strong
commitment to people and systems, and to the
environment and communities in which we conduct
business. Our Sustainability Report includes some of the
actions taken and metrics monitored by Emeco in our
goal to achieve longevity for our business and develop
our social licence to operate.
During FY24, we developed our first Climate Change
Position Statement which is included in our Sustainability
Report. We also commenced measuring our carbon
13
MANAGING DIRECTOR’S REPORT
footprint via Scope 1 and Scope 2 greenhouse gas (GHG)
emissions from our operations, and our preliminary
emissions estimates will be refined and added to as
we collect more data and develop our calculation
methodology.
Emeco operates within a highly skilled and competitive
labour market, making our ability to attract and retain
talent a critical factor in our ongoing growth and
success. We are dedicated to enhancing employee
engagement and focusing on long-term retention
and development strategies. Throughout the year, our
General Manager of People and Culture conducted
leadership development sessions for teams and
individuals across the organisation. Additionally, we
have implemented strategies to reduce our reliance on
subcontracted labour by strengthening our employee
value proposition, anticipating continued benefits
into FY25. We also support our workforce through
a comprehensive employee assistance programme,
available to all employees and their extended families,
facilitated via a third party.
Culture and values have been included in our Safety
Interactions tool, which will add another level of
engagement with our employees and enable us to
identify areas for growth and improvement.
Apprenticeship development, as well as upskilling of new
and existing employees, remain an important focus for
Emeco. At the end of FY24, we have approximately 90
apprentices progressing through their training.
Diversity and inclusion continue to be an important
element of meeting the changing needs of a business
that operates in a dynamic economic and operational
environment. Understanding the vital importance of
diversity in responding to the everchanging operational
landscape, we are proud that our workforce comprises
approximately 13.4% women and 2.6% of First Nations
heritage. The Company considers a flexible work
arrangement as being important in attracting a diverse
workforce. The Group’s flexible work arrangements, saw
an increase in part time and casual workers in FY24.
Strategy and Outlook
Emeco’s strategic goal is to build a sustainable and
resilient business that generates long term value for
our shareholders whilst delivering superior services
to our customers. In FY24 we refocused on our core
competency of equipment rental and maintenance, to
continue providing a clear cost and quality advantage
to customers. With the exit from contract mining,
the business is now re-calibrated around our core
competency and competitive strengths and is better
positioned to deliver improved returns on invested
capital.
Other key strategic priorities for the business during the
year included:
• Delivering returns on our growth capex programmes,
with a targeted Return on Capital of around 20% over
the next two years
• Delivering cost efficiencies and working closely with
clients around contract repricing to drive shared
efficiencies, margins and returns
• Delivery of strong free cash flow from the existing
business and FY24 growth capex programme
• Business improvement initiatives around the use of
subcontracted labour, optimised fleet configuration,
addressing underperforming projects, procurement
opportunities and risk management through improved
credit control and customer selection
• Investment in technology and corporate systems to
improve business process efficiency and costs
The outlook for FY25 remains positive. Activity in
the mining sector is expected to remain buoyant,
particularly in bulk materials which should continue
to drive demand for large mining equipment. The
metals sector is characterised by the use of smaller
sized equipment, which is a more competitive market
space for Emeco, but in which we still have a significant
competitive advantage through our mid-life asset
rebuild capability.
Leverage is expected to reduce back below the
Company’s long-term target of around 1.0x Operating
EBITDA with the decision to allocate capital towards
reducing refinancing requirements.
We are confident that our business is well positioned
to enable us to deliver sustainable growth and deliver
increased shareholder returns in FY25.
Acknowledgements
Firstly, I would like to thank the Emeco Board in
supporting me and my hard-working management
team as we deliver on our business strategy. Most
importantly, I would like to thank the entire Emeco
team across all of our operations for their efforts and
contributions in making FY24 another successful year for
the Company.
Again, I am immensely proud of how we have capably
adapted and responded to challenges and opportunities
to deliver for our customers and stakeholders.
I would like to thank our customers for their loyalty
and support in choosing to partner with Emeco, which
I extend to our suppliers, financiers and community
partners who have also supported our business.
Finally, I would like to thank our shareholders and
acknowledge your continued support and investment
in our Company and our people.
Ian Testrow
Managing Director & Chief Executive Officer
14
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
15
Operating
& Financial
Review
16
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
OPERATING & FINANCIAL REVIEW
Table 1: Group financial results
Operating results (1),(2),(3)
Statutory results
A$ millions
2024
2023
2024
2023
Revenue
822.7
874.9
822.7
874.9
EBITDA
280.5
250.4
273.0
225.9
EBIT
125.3
104.6
101.4
79.1
NPAT
69.4
59.1
52.7
41.3
ROC%
14.9%
13.2%
11.5%
9.6%
EBIT margin%
15.2%
12.0%
12.3%
9.0%
EBITDA margin%
34.1%
28.6%
33.2%
25.8%
(1)
Significant one-off and/or non-cash 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 gains/losses; EBIT: Earnings before interest and tax.
Excludes net finance costs and net foreign exchange gains/losses; NPAT: Net profit after tax; ROC: Return on capital
(EBIT / Average capital employed).
The Emeco Group supplies safe, reliable and maintained surface and underground mining 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 surface 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 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.
17
OPERATING & FINANCIAL REVIEW
Table 2: FY24 Statutory to operating results reconciliation
A$ millions
EBITDA
EBIT
NPAT
Statutory result
273.0
101.4
52.7
Tangible asset impairment
-
16.4
16.4
Long-term incentive expense
3.5
3.5
3.5
Restructuring costs
2.9
2.9
2.9
ERP implementation costs
3.1
3.1
3.1
Gain on lease modifications
(0.2)
(0.2)
(0.2)
Gain on sale of PNP assets/contracts
(1.8)
(1.8)
(1.8)
Tax effect of adjustments
-
-
(7.2)
Operating result
280.5
125.3
69.4
Reconciliation of differences between operating and statutory results:
1.
FY24 operating results are non - IFRS measures and exclude the following:
-
Tangible asset impairments: Net impairments totalling $16.4 million were recognised across the business on assets
held for sale (FY23: $1.0 million).
-
Long-term incentive expense: During FY24, Emeco recognised $3.5 million (FY23: $3.4 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 nil (FY23: $23.0 million).
-
Gain on lease modifications: Relates to AASB 16 treatment of corporate office lease.
-
Gain on sale of PNP assets/contracts: Relates to the non-recurring gain on PNP asset and contract sale
to Macmahon.
-
Restructuring costs: Related to the termination costs for non-transferring PNP employees following sale
of PNP assets and contracts to Macmahon.
-
Tax effect of adjustments: Notional tax on above adjustments at 30%.
2.
Refer to the 2023 Annual Report for a reconciliation of differences between FY23 operating and statutory results.
Strong returns
Group revenue from operations in FY24 was $822.7 million (FY23: $874.9 million). This was down 6% due to the
sale of the underground contract mining portfolio during the period.
External Surface Rental revenue increased to $544.7 million (FY23: $494.8 million), primarily due to strong
utilisation levels and the addition of growth fleet to new projects secured during the period. Higher contract
rates also drove revenue higher with the application of contracted rise and fall mechanisms. Force delivered a
14% increase in total revenue, delivering 128 machine rebuilds (both internal and external) through its regional
network of workshops. External revenue from Force increased from $156.5 million in FY23 to $166.2 million
in FY24, with strong demand across all regions. Underground revenue decreased by 50% to $111.8 million
(FY23: $223.6 million), following the sale of the Pit N Portal contract mining portfolio to Macmahon which was
completed in February 2024.
Operating EBITDA increased by $30.1 million or 12% to $280.5 million in FY24. This reflected a strong
performance across the business, with the surface rental and workshops businesses delivering solid earnings
growth and the underground business demonstrating a turnaround performance following a restructure of its
activities.
Operating EBITDA margins increased to 34.1% (FY23: 28.6%), driven by a better revenue mix with growth in
higher margin surface rental revenue and less low margin underground contracting revenue, and improved
cost control. The Group continues to pursue repricing opportunities to counter cost inflation and business
improvement opportunities to improve margins, with a key focus on reducing the use of subcontracted labour
and improved parts procurement.
Return on Capital (ROC) also improved, increasing to 15% (FY23: 13%), with a strong focus on project returns in
our capital deployment decision making.
18
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Table 3: Operating cost summary (operating results)
Note: Operating results are non-IFRS and have been adjusted as per reconciliation in Table 2.
A$ millions
2024
2023
Revenue
822.7
874.9
Operating expenses
Repairs and maintenance
(140.1)
(152.7)
External mining and maintenance services
(188.5)
(223.9)
Employee expenses
(104.4)
(149.8)
Cartage and fuel
(27.7)
(21.6)
Net other expenses
(81.5)
(76.5)
Operating EBITDA
280.5
250.4
Depreciation and amortisation expense
(155.2)
(145.8)
Operating EBIT
125.3
104.6
Repairs and maintenance expense decreased to $140.1 million (FY23: $152.7 million), largely in line with the
reduction in underground contracting revenue.
External mining and maintenance services expenses decreased to $188.5 million (FY23: $223.9 million)
predominantly due to the reduction in underground contracting revenue.
Employee expenses decreased to $104.4 million (FY23: $149.8 million), following the significant reduction in
low-margin underground contracting revenue associated with the provision of labour, a key driver of the margin
improvement for the Group.
Cartage and fuel expenses increased to $27.7 million (FY23: $21.6 million) due to the higher number of
equipment movements during the period.
Net other expenses increased to $81.5 million (FY23: $76.5 million) primarily as a result of increased fleet cross-
hire expenses.
Depreciation and amortisation expense increased to $155.2 million in FY24 (FY23: $145.8 million) in line with
rental fleet growth and utilisation.
OPERATING & FINANCIAL REVIEW
Investment in Rental Fleet
The Group has a demonstrated track record in achieving strong returns on its investment in fleet through the
application of our proven mid-life asset model. In FY24, the Written Down Value (WDV) of property, plant and
equipment including capital works in progress and component inventory increased by $31.0 million to
$783.7 million, driven primarily by the Group’s $47.0 million growth capital expenditure programme, which
included the rebuild of 18 x 793D and 5 x 789C second-hand trucks, now fully deployed into projects. In addition
to this, the Company acquired ~$16.5 million in fleet from HSE, funded partially using $12.7M in lease finance.
This growth investment in high-demand, larger sized fleet is expected to drive earnings growth and returns in
FY25 (targeting Internal Rate of Return over 20%).
Net sustaining capital expenditure of $154.6 million (net of disposals), was in line with depreciation for the
period, and the prior period expenditure (FY23: $154.1 million).
19
Table 4: Equipment fleet
Table 5: Free cash flow summary
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. The
increase in assets held for sale of $14.5 million includes assets surplus to the surface rental business as well as
the underground rental business, following the sale of underground contract mining projects to Macmahon.
A$ millions
2024
2023
Equipment fleet
720.2
682.4
Assets held for sale
15.7
1.2
Equipment fleet
735.9
683.6
Free Cash Flow
A$ millions
2024
2023
Operating EBITDA
280.5
250.4
Net movement in working capital
(14.2)
(18.2)
Net sustaining capital expenditure (1) (2)
(146.8)
(152.5)
Acquisition of component inventory (2)
(7.8)
(1.6)
Net finance costs
(24.8)
(25.8)
Net free cash flow (pre-growth capex and other investments)
86.9
52.3
Growth capital expenditure (1)
(47.0)
(21.8)
Loan issued to related party
-
(4.9)
Net free cash flow
39.9
25.6
(1)
Capital expenditure excludes assets acquired under leasing arrangements.
(2)
Net sustaining capital expenditure referred to elsewhere in this annual report includes acquisition of component inventory.
Free cash flow generation improved significantly during the year, primarily driven by higher earnings and strong
cash conversion. Net free cash flow in FY24 was impacted by a working capital outflow of $14.2 million (FY23:
outflow of $18.2 million) predominantly due to the establishment of new projects in surface rental. Growth
capital expenditure of $47.0 million, which is expected to drive further earnings growth in our rental business,
was funded from free cash generated during the year. Finance costs of $24.8 million were well contained (FY23:
$25.8 million), despite higher prevailing interest rates during the period.
OPERATING & FINANCIAL REVIEW
20
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Total debt increased to $358.8 million, up 11% from $322.7 million in the prior year. Lease liabilities and other
financing increased by $6.1 million, predominantly due to the use of lease finance to fund additional fleet
purchases.
Emeco’s leverage ratio improved from 1.10x in FY23 to 1.00x in FY24, in line with our long-term target, whilst
funding sustaining and growth investment and capital management.
The cash balance was $78.3 million at 30 June 2024, a $31.6 million increase compared to 30 June 2023.
The increase from the prior year is largely due to strong cash conversion of higher earnings and better working
capital management.
Total dividends of $6.5 million were paid to the Company’s shareholders in FY24 (FY23: $13.0 million), along
with the completion of an on-market share buy-back totalling $2.1 million (FY23: $7.3 million). This included
$1.7 million in share purchases for the employee LTI plan.
On 21 August 2024, the board resolved for the continued suspension of the Group’s capital management
programme for FY25, in favour of lowering net debt levels.
OPERATING & FINANCIAL REVIEW
Conservative Leverage in line with Target
Table 6: Net debt and gearing summary
A$ millions
2024
2023
Interest bearing liabilities (current and non-current)1
Secured notes – AUD
250.0
250.0
Revolving credit facility
30.0
-
Lease liabilities and other financing
78.8
72.7
Total debt (1)
358.8
322.7
Cash
(78.3)
(46.7)
Net debt (1)
280.5
276.0
Leverage ratio (2)
1.00x
1.10x
Interest cover ratio (3)
12.0x
10.3x
(1)
Figures based on facilities drawn. Includes debt raising costs classified as interest bearing liabilities in note 19, and
excludes supply chain finance disclosed in note 13.
(2)
Leverage ratio - Net debt / Operating EBITDA.
(3)
Interest cover ratio - Operating EBITDA / Net interest expense.
21
Sustainability
Report
22
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Table 1: Operational footprint
1.
Emeco’s commitment to sustainability
This is the Sustainability Report for Emeco Holdings Limited and its related bodies corporate (Emeco or the
Company) covering the financial year ending 30 June 2024 (FY24).
Throughout FY24, Emeco maintained a strong commitment to our people and systems, and to the environment
and communities in which we conduct business. This report presents some of the actions taken and metrics
monitored by Emeco, reflective of our aspirations to achieve longevity for our business and develop our social
licence to operate.
1.1
Report boundary
References to Emeco in this report cover all Emeco’s operations, except where explicitly stated otherwise.
Table 1 provides an overview of our operational footprint during FY24.
States
Workshops
Warehouses and
Distribution Centres
Field Service Coverage
Western Australia
Queensland
New South Wales
South Australia
Perth (2)
Kalgoorlie
Port Hedland
Newman
Mackay (2)
Perth
Mackay
WA
QLD
1.2
Our stakeholders
Table 2 sets out Emeco’s key stakeholder groups and how Emeco engages with those stakeholders, relevant
topics, and concerns. These topics are addressed throughout this report.
Stakeholder
Group
Methods of engagement
Topics and concerns
Investors and
proxy advisors
Investor relations meetings and calls,
investor conferences, semi-annual
financial performance reporting,
annual general meeting, email
communications
• Company performance
• Strategy and outlook
• Financial and non-financial risk mitigation
• Capital management
• Corporate governance
• ESG objectives – including climate change
• Executive remuneration
Customers
Meetings, emails, phone calls,
management meetings, monthly site
meetings, tender processes, site visits
Our engagement with customers is
through a multi-level relationship
approach, from the Managing
Director/CEO to operational site-
based staff
• Safety
• Contract terms and conditions
• Customer requirements
• Customer future needs
• Emeco performance
• ESG objectives – including climate change
Employees
In person, survey, email
communications, Emeco’s intranet,
inductions, in-house training,
staff and safety meetings, HR
communications
• Job security, remuneration and benefits
• Safety, health and risk management
• Training and development
• Work prioritisation
• Company performance, outlook and strategy
• Performance reviews
SUSTAINABILITY REPORT
Table 2: Stakeholder engagement
23
SUSTAINABILITY REPORT
Stakeholder
Group
Methods of engagement
Topics and concerns
Suppliers
Supply related enquiries, tender and/
or quote responses
Emeco continues to enhance our
relationship with key suppliers
• Supply chain opportunities and/or issues
• Security of supply
• Pricing and discounts
• Contractual terms and conditions
• Modern slavery
Financiers and
rating agencies
Financier meetings and calls,
semi-annual financial performance
reporting, email communications
• Company performance
• Strategy and outlook
• Financial and non-financial risk mitigation
• Capital management
• Corporate governance
• ESG objectives – including climate change
2.
Material sustainability risks
Emeco identifies and manages material exposures to risks having the potential to affect the sustainability of our
business, including economic, environmental, reputational, legal, social, and health and safety risks.
2.1
Economic
Emeco’s material economic and business risks are outlined in the Business Risks statement within this annual
report.
2.2
Environmental
Emeco conducts its operational activities in a manner which endeavours to minimise environmental impacts.
The Company has in place policies and procedures on waste management to ensure compliance with
environmental protection legislation. Environmental risk inspections are undertaken across our operations.
Environmental hazards, including pollutants, hazardous chemicals, noise, and respiratory irritants, are
monitored through health surveillance procedures. A copy of Emeco’s Environmental Management Policy is
available on the Company’s website.
We have adopted a “measure to manage” philosophy to improve our understanding of our risks and we are
taking steps to engage with our industry partners (suppliers, customers, etc.) on Emeco’s environmental
impacts and considerations.
During FY24 we developed our first Climate Change Position Statement, included at the end of Section 4. We
also commenced measuring our carbon footprint i.e. greenhouse gas (GHG) emissions from our operations.
Section 4 shares some of our preliminary emissions estimates, which will be refined and added to as we collect
more data and develop our calculation methodology. This work is also in preparation for climate change
reporting possibly becoming legislated under the proposed regime known as the Treasury Laws Amendment
(Financial Market Infrastructure and Other Measures) Bill 2024 (Cth), which would adopt the Australian
Sustainability Reporting Standards (ASRS).
2.3
Social
Emeco is committed to providing a safe and inclusive workplace that attracts, retains, and develops people. We
invest in training and resources for employees on health, safety, wellbeing and upskilling.
Emeco identifies health and safety threats to the workforce and community as a material social risk, which we
actively seek to minimise.
Significant risks in Emeco’s operations that could result in serious injury or fatality have been identified and
categorised into a number of focus areas that are managed by Emeco’s Core Risk Control Protocols. These
protocols are supported by Emeco’s Lifesaving Rules.
Further details on Emeco’s people and safety are included in Section 3.
24
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
SUSTAINABILITY REPORT
2.4
Supply chain
In FY24, Emeco embarked on a journey to reshape our supply chain and procurement function to a more
centralised structure. Our objective is to gain efficiencies through standardising practices across all business
units, clearly categorising the goods and services we purchase, and rationalising our supplier base. Emeco is
committed to increasing our maturity in how we manage key supply arrangements.
We have identified our major suppliers within our supply chain and are working to define and strengthen
relationships with our preferred suppliers. Additionally, we are working to reduce reliance on reactive purchasing
from a large number of suppliers, instead focusing on purchasing from a smaller, more proactively managed
pool. We believe that improved governance and efficiency of our procure-to-pay process can be achieved by
consolidating our supplier base and putting a greater portion of our spend under negotiated supply contracts.
To meaningfully grow our engagement with First Nations people and develop our social licence to operate,
we are informing ourselves as to existing and potential suppliers that are First Nations owned or operated, or
that source for First Nations businesses. We have identified and included such suppliers among our preferred
suppliers for labour hire, industrial hardware, and stationery, and continue to seek further opportunities.
2.5
Modern slavery
Emeco is committed to continuously improving our human rights and modern slavery governance framework,
in order to create meaningful value and be a partner of choice in our industry. We assess and seek to mitigate
risks of modern slavery in our operations and supply chain. Periodic analysis of our supplier pool and spend
profile has consistently indicated that the risk of modern slavery for Emeco is relatively low. This analysis will
continue at regular intervals, to assist us to identify, monitor, and develop mitigating actions in relation to, any
spend categories, suppliers or supplier groups associated with heightened modern slavery risk factors.
Each year, in accordance with reporting requirements under the Modern Slavery Act 2018 (Cth), Emeco
publishes a modern slavery statement summarising the Group’s actions in this area. Prior years’ statements are
available on the Company’s website. Our FY24 modern slavery statement will be published during FY25.
2.6
Technology
We continue to prioritise investments across Information Technology (IT), Business Systems & Intelligence,
Digital Transformation, and Operational Technology (OT). This focus is necessary for us to shape a resilient,
modern and digital enterprise, with capabilities and processes for our people and assets to deliver their best
for our customers every day. Our FY25 priorities for IT and Digital Transformation are centred around driving
business value and operational efficiency. Our projects to modernise our Enterprise Resource Planning (ERP)
system and our Field Service business are a key component of this strategy.
We continue to advance our OT fleet health solution and condition monitoring capability with machine learning
algorithms to enable real-time data analysis and predictive maintenance, allowing us to protect our assets,
improve machine performance and safety, and deliver a superior outcome for our customers. We also offer our
Emeco Operating System (EOS) OT Platform to customers as a tool to manage their fleet, raising opportunities
to improve performance and safety, and reduce inefficient fuel burn and associated emissions. As of June
2024, we have EOS installed on nearly 300 machines, of which around 100 installations were completed during
2H24; and around 100 more installations are planned for FY25.
3.
People
3.1
Health and safety
Ensuring the safety of our workers is our highest priority. We are committed to creating a safe and healthy
work environment by implementing comprehensive safety and health processes, providing regular training, and
fostering a culture of awareness and responsibility. Every worker has the right to work in a safe and supportive
setting. We strive to uphold the highest standards of safety to protect our most valuable asset – our people.
Our priorities align with the key objectives of our HSE strategy which aims to adopt the principles which embed
safety in the workplace. We believe a safe workplace is the foundation of a strong organisation. To this end, we
have established health and safety protocols that are regularly reviewed and updated in keeping with industry
standards and regulations.
Emeco has developed a Health, Safety, Environment and Training (HSET) Strategic Plan (HSET Plan) that is
overseen by Emeco’s General Manager HSET and representatives of the HSET Leadership Team, who are
responsible for the execution of the Plan. The Plan brings focus to our safety culture, improving the physical
safety of our workplaces and systems of work. Emeco has completed a review of the Company’s Critical Risks
and associated documentation including Critical Risk Protocols and Critical Control Verification Tools.
Emeco has a significant focus on eliminating risks which could lead to a fatality or serious incident, with a
laser focus on disciplined safety fundamentals which include the ongoing implementation of Critical Control
Verification Processes across the Group. The rollout phase of the Critical Risk Verification Programme has
continued across Emeco’s rental and workshops divisions.
25
SUSTAINABILITY REPORT
3.2
Risk management
We safeguard our people, reputation, assets, and the environment by understanding and managing risk, as well
as ensuring that we identify opportunities to best serve the long-term interest of all our stakeholders.
Risk management at Emeco, including specific elements of financial risk management, is overseen by the
Board through the Audit and Risk Management Committee, which is chaired by an independent non-executive
director.
The Committee operates in accordance with an approved Charter and assists the Board with overseeing and
monitoring the Company’s risk management system.
The Committee is tasked with periodically reviewing, and suggesting any necessary amendments to, the
Company’s risk management framework, risk register and risk appetite positions.
To provide a safe place of work, significant effort goes into ensuring workplace hazards are recognised and the
risks posed by these hazards are managed. We focus effort on the most significant hazards and the activities,
systems and hardware that are used to control people’s exposure to these hazards. This effort is guided by
a safe system of work that encompasses the policies, standards, processes, and procedures that provide
direction and guidance to our people on how work is to be done with a particular focus on the critical controls.
3.3
Safety performance
The ultimate success in achieving a zero-harm workplace depends on the engagement of Emeco’s people. We
continue investing in training and development of our personnel, to enhance our capabilities as an organisation
including with respect to safety performance.
In FY24:
• The Total Recordable Injury Frequency Rate (TRIFR) was 2.8, down from 3.21 in FY23.
• The Lost Time injury frequency rate (LTIFR) was 0.0 as of June 2024.
• There were no fatalities recorded across the Group’s operations.
Table 3: Safety performance frequency rate measures
Table 4: Five years of average annual LTIFR & TRIFR performance
TRIFR
LTIFR
RWIFR2
MTIFR3
FY24
2.8
0.0
0.3
2.3
FY23
3.2
0.3
0.3
2.3
FY24
FY23
FY22
FY21
FY20
LTIFR
0.0
0.3
0.0
0.0
0.0
TRIFR
2.8
3.2 (1)
1.9
2.1
2.9
(1)
FY23 TRIFR has been restated from 2.9 to 3.2 due to a correction.
(2)
Restricted Work Injury Frequency Rate.
(3)
Medically Treated Injury Frequency Rate.
3.4
Training management
Training is the cornerstone of our health and safety strategy. We provide ongoing education and training
programmes to ensure that all workers are well-versed in safety practices and procedures. This includes initial
training for new workers and also continuous learning opportunities.
Enhancing the rigour and capacity of our training programmes is crucial for improving health and safety
performance by ensuring that employees are well-equipped with the necessary knowledge and skills to
identify and mitigate risks effectively. Detailed reviews have been undertaken of each work area’s training
needs, to ensure the training reflects the requirements of our workforce and our business. We continue to
review, standardise and deliver training programmes associated with the identification and control of hazards,
including Job Safety Analysis and Hazard Identification and Risk Management.
To ensure workers arrive on site job ready, face to face or classroom Maintenance Inductions are held each
week. This induction includes general maintenance information, verification of competency on specific
equipment and training in Emeco’s safety systems.
26
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
SUSTAINABILITY REPORT
Emeco’s HSET Plan brings focus to our safety culture, and in FY24 drove the development and implementation
of the following:
• Updated operational training requirements across all business units, and equipment specific operator training
manuals.
• Statutory Supervisor Training.
• Theory assessments for Safe Work Method Statements.
• Internal Safety Management Systems Audits at multiple sites.
• Compliance Planners, centralised and tailored to individual business units, for scheduling and tracking
activities required to ensure compliance with HSET laws and regulations.
• New internal document management system, with enhanced features for document sharing and version
control.
• Updated Psychosocial Harms Policy and associated Management Plan.
• Monthly Health Toolbox Topics introduced at pre-start meetings.
• Critical Risk Verification Programme rolled out at multiple sites.
3.5
People and culture
People are key to Emeco’s success. With changing market forces and the demand for skilled labour increasing,
Emeco continues to invest in developing the skills of employees to not only aid our business, but to also benefit
employees. Emeco believes that this approach will reaffirm and maintain its position as an employer of choice.
Our apprenticeships programme, and upskilling of employees in general, remain an important focus for Emeco.
We work towards having up to two waves of apprentice intakes each year. During FY24, around 34 apprentices
commenced their training with us, and around 19 apprentices completed their training. At the end of FY24, we
have approximately 90 apprentices progressing through their training.
In FY24, we developed our inaugural Reconciliation Action Plan and registered this with Reconciliation Australia
as a “Reflect” RAP. This initial RAP set out our priority actions for the 18-month period from August 2023
to February 2025. We are undertaking the planned activities, and we will formulate our next RAP based on
progress made and feedback received with respect to the initial RAP.
Our People & Culture team drive our Community Grants programme where employees can refer community
groups for consideration to receive grants to help fund the groups’ activities. The programme launched in
FY21 and has been making modest contributions to community causes which our employees identify as being
meaningful to them. The grants totalled approximately $120,000 in FY24, up from approximately $62,000 in
FY23. Our criteria for giving have, so far, focused on projects presented as promoting youth and junior sports
and physical activity, or caring for mental wellbeing of our workers and families.
Myosh, a health and safety management platform used by Emeco, enables the capture of a variety of
workplace interactions. During FY24 we developed a “People and Workplace Culture Discussion” module
and added this as a type of interaction we wanted to record and learn from. The new module consists of a
set of questions to serve as a prompt and a guide for managers when checking in with team members, with
the objective to encourage our teams to consider workplace culture as an integral contributor and driver of
health and safety. The guide is centred around our core values of accountability for and pride in our work,
communication, growth, family and teamwork.
Our General Manager of People & Culture visits our operational sites regularly, to run leadership development
sessions for teams and individuals across the business, as well as reinforcing the strategy, vision and values
Emeco is striving to achieve. During FY24, 13 such visits were made, including to Queensland, South Australia,
and the Kalgoorlie and Port Hedland areas of Western Australia, with 34 leadership development sessions
conducted.
3.6
Workforce profile
Emeco’s workforce reduced during FY24 mainly due to divestment of the PNP underground mining services
business, which resulted in the transfer of around 220 employees from Emeco to Macmahon. Our total
workforce numbers moved from 1193 at 30 June 2023 to 942 at 30 June 2024, down 21% (Table 5).
In FY24 our focus was on the retention and growth of our permanent, skilled workforce. We recognise that
workforce stability and quality are essential to fostering a positive workplace culture, which is crucial for
delivering exceptional service to our customers and creating value for our investors and the communities
we operate in. Our ongoing efforts are directed towards reducing dependency on subcontracted labour by
attracting, retaining and developing a quality permanent workforce.
Detailed below are numbers of employees at FY24 year end.
27
SUSTAINABILITY REPORT
Table 5: Workforce by contract type
Full time
Part time
Casual
Total
FY24
832
15
95
942
FY23
1133
14
46
1193
Table 6: Workforce by job classification, gender and age
Job classification
Total
Gender
Age (years)
Female
Male
< 30
31-40
41-50
51+
CEO
1
0
1
0
0
0
1
Key Management Personnel
1
1
0
0
0
0
1
General Managers and Senior Managers
22
4
18
0
5
11
6
Other Managers
50
4
46
1
17
19
13
Professionals
113
32
81
16
43
28
26
Sales
8
1
7
0
2
2
4
Clerical & Administrative
84
74
10
31
26
16
11
Technicians and Trades
528
6
522
151
187
120
70
Apprentices and Trainees
90
2
88
82
6
2
0
Machinery Operators & Drivers
23
2
21
4
6
6
7
Labourers
22
0
22
6
6
7
3
Total
942
126
816
291
298
211
142
Diversity
At Emeco, we value and embrace diversity and inclusion as fundamental pillars of our organisational culture.
We believe that a diverse workforce, inclusive of various backgrounds, perspectives, and experiences, fosters
innovation, enhances decision making, and drives business success.
Our commitment to creating an inclusive environment ensures that every team member feels respected, valued
and empowered to contribute to their fullest potential.
Each year Emeco’s Board sets measurable objectives to achieve workplace diversity. These are aimed at
building a diverse workforce and promoting diversity and inclusion in the workplace.
At Board level, gender diversity remains a priority when considering changes to the Board’s composition, with
Emeco aiming to meet gender diversity objectives set out in the ASX Corporate Governance Principles and
Recommendations. During FY24, the Board appointed a female non-executive director, Ms Sarah Adam-
Gedge, with effect from 1 October 2023.
Overall, women represent 13.4% of our total workforce (Table 6), and 44.9% of non-technical roles, at the end of
FY24. Women made up 13.5% of new starters across all roles, and 48.9% of new starters in non-trade/technical
roles, during FY24. Female representation at senior management levels is 20.8%.
Where an employee self-identifies as having family heritage from Australia’s First Nations people, we record
this information. Based on available information, around 2.6% of our workforce identify as First Nations.
Workplace Gender Equality Agency report
In accordance with the requirements of the Workplace Gender Equality Act 2012 (Cth), Emeco’s Workplace
Gender Equality Agency report is submitted by the required dates. The public reports are available in the
sustainability section of Emeco’s website. Emeco’s FY24 report was submitted in line with WGEA reporting
requirements.
28
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Table 8: Main sites using purchased electricity
WA – Southwest
WA – Northwest
QLD
NSW
Perth workshops,
warehouse, and
head office (x5)
Kalgoorlie workshops
and warehouse (x3)
Port Hedland and
Newman workshops (x2)
Mackay workshops and
warehouse, and Brisbane
office (x5)
Rutherford and
Gunnedah premises (x2)
SUSTAINABILITY REPORT
During FY24, we gathered energy consumption data and calculated our Scope 1 and Scope 2 emissions for
FY23 and FY24. FY23 is our base year. Emeco is below the threshold for mandatory reporting under the
National Greenhouse and Energy Reporting (NGER) Scheme, as evidenced by our modest levels of Scope 1 and
Scope 2 emissions outlined in Tables 7 and 9. Higher levels of emissions have been identified across our value
chain, and we are developing methodologies with our customers and suppliers to refine our estimates of Scope
3 emissions.
4.1
Scope 1 emissions
We assessed the main contributor of our Scope 1 emissions to be diesel fuel we purchase and use in light
vehicles and equipment operated by the Company. This excludes fuel used in mining equipment which we rent
to customers – as we do not operate, nor supply fuel for, the rental equipment.
Table 7 sets out our estimate of GHG emissions from diesel fuel purchased for Emeco-operated light vehicles
and equipment during FY24 and FY234. As our light vehicles and equipment reach effective life and are retired,
we plan to incorporate into our fleet, vehicle models that are marketed as being more fuel efficient than
conventional or older diesel models. We will monitor our fuel usage and compare this with the advertised fuel
efficiency, to guide future decisions around model selection.
4.2
Scope 2 emissions
Our Scope 2 emissions arise from the generation of network electricity which we purchase and use at sites we
control. All such sites are leased, not owned, by the Group. We do not control sites of our customers and of other
third parties, where our equipment supplied for rental, and our workforce, are deployed at times.
During FY24, we had control of, and paid for electricity supplied to, 17 operational sites located across four
electricity networks, as outlined in Table 8.
4.
Greenhouse gas (GHG) emissions – preliminary estimates
With respect to GHG emissions, Emeco has adopted definitions set out in the National Greenhouse and Energy
Reporting Scheme and summarised below:
Scope 1 emissions are emissions released into the atmosphere as a direct result of the activities at an
organisation’s facilities.
Scope 2 emissions for a facility represent emissions that are released outside the facility boundary to produce
electricity that is imported into the facility and used.
Scope 3 emissions are indirect emissions other than Scope 2 emissions. These occur outside the boundary of
an organisation as a result of the organisation’s actions.
(4)
Fuel quantities are estimated from purchase records. Fuel to emissions conversion is made with reference
to the National Greenhouse Accounts (NGA) Factors 2023 published by the Commonwealth Department
of Climate Change, Energy, the Environment and Water:
https://www.dcceew.gov.au/climate-change/publications/national-greenhouse-accounts-factors-2023
(NGA Factors 2023).
Table 7: Diesel purchased
FY24
FY23
FY24 v FY23
Diesel purchased (kilolitres or kL)
1,169
1,096
7% increase
Scope 1 emissions (tonnes of GHG emissions, reported as
tonnes of CO2 equivalent or tCO2e)
3,178
2,978
7% increase
29
SUSTAINABILITY REPORT
Set out in Table 9 are approximate quantities of electricity purchased during FY24 and FY23, and the
associated GHG emissions, for the 17 sites listed above5.
Table 9: Electricity purchased
Portion by area
FY24
FY23
FY24 v FY23
Electricity purchased
(megawatt hours or MWh)
100%
4,204
4,034
4% increase
WA – Southwest
46%
1,955
1,771
WA – Northwest
16%
680
745
QLD
22%
913
826
NSW6
16%
656
692
Scope 2 emissions (tCO2e)
2,570
2,474
4% increase
Of the 17 sites included in this estimate, 11 sites each had over 100 MWh of electricity usage during FY24; and
7 sites had over 300 MWh each. We are working with solar technology providers, and owners of some of our
larger sites, to assess the feasibility of introducing solar generation to those sites, with a view to reducing our
reliance of network electricity.
Besides the operational sites included in the estimate in Table 9, we pay for electricity at a number of other
locations, predominantly residential properties provided for staff accommodation. We estimate the 17 sites
reported on above, account for over 90% or more of the total electricity we purchased in FY24.
4.3
Scope 3 emissions
We are at an early point of our journey to map our Scope 3, indirect emissions. We consider one large source of
such emissions is diesel fuel usage in heavy mining equipment which we supply for hire. Our customers (or their
customers) operate, and supply fuel for, this rental equipment, thus putting the associated emissions outside
the boundary of our organisation.
We have made preliminary estimates using SMUs (service meter units) or operating hours logged by our surface
mining fleet (i.e. excluding underground equipment), and medium load fuel consumption statistics provided in
a recent edition of the Caterpillar Performance Handbook. This estimate is in the vicinity of 500,000+ tCO2e of
indirect emissions7 from mapping nearly 90% of SMUs for our surface mining fleet during FY24 and FY23.
As we develop our EOS technology, we expect to enhance our ability to measure actual fuel use by our
machines being deployed at our customers’ projects. This knowledge will augment the OEM published generic
information, to enable us to refine our emissions calculations.
Another source of our Scope 3 emissions which is potentially significant, is emissions from production of iron
and steel which is in machinery parts we purchase for our own fleet and our customers’ machines. We will work
with manufacturers and industry partners to explore a robust methodology
for estimating this form of indirect emissions.
(5)
Electricity quantities are estimated from purchase records and vendor provided meter readings. Electricity to emissions
conversion is made with reference to the NGA Factors 2023.
(6)
Quantity reported for NSW includes approximately 80% which is passed through to a sublessee of our Rutherford site.
(7)
Applying both Scope 1 and Scope 3 emission factors from the NGA Factors 2023.
30
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Climate Change Position Statement
We recognise that climate change is one of the most significant challenges facing the world today. We accept the
science as reported by the Intergovernmental Panel on Climate Change. We acknowledge the world must continue
to increase efforts to reduce greenhouse gas (GHG) emissions in order to meet the aims of the Paris Agreement to
hold the global average temperature increase to well below 2°C above pre-industrial levels, and pursue efforts to
limit the temperature increase to 1.5°C.
The Australian mining industry has a role to play in driving the transition to a lower carbon economy. Emeco has
operations in all key mining regions of Australia, with customers including mining companies and contractors
across gold, iron ore, metallurgical coal, nickel, thermal coal and copper. As a responsible business in the mining
sector, we place value on identifying, assessing and reporting on our actions to address climate change.
We will continue to:
• Integrate the evaluation of climate-related risks and opportunities into our business strategies and planning
processes.
• Provide reasonable financial, human and material resources to meet the challenges and opportunities of the
transition to a lower carbon future.
• Seek improvements in energy efficiency and waste reduction across our business to ameliorate the emissions
intensity of our operations.
We will endeavour to achieve these outcomes by leveraging our innovative culture and are committed
to assessing our options to increase the use of renewable energy and energy technologies with lower
emissions.
• Assess our direct and indirect GHG emissions. Our current focus is on our Scope 1 and Scope 2 emissions
inventory.
Understanding our GHG emissions profile will allow us to set short and medium term targets, in tandem
with defining longer term goals. We also acknowledge the value of collaborating with our customers
and suppliers to reduce GHG emissions throughout our value chain. We are committed to better
understanding our Scope 3 emissions, which will enable us to frame appropriate targets for our full value
chain in the future.
• Repair and rebuild machines for optimum reliability.
A circular economy plays an important role in reducing GHG emissions associated with the mining industry.
We promote reduce, reuse and recycle practices throughout our business areas and activities, as reflected in
our business model of supplying hire, maintenance and rebuild of midlife equipment.
• Adopt a phased approach to reporting against frameworks such as those established by the Task Force on
Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB), and
enhance our disclosure and transparency regarding our climate-related risks and opportunities.
• Assess, and prepare to adapt to, potential physical climate-related impacts, by undertaking risk assessments
across our value chain, and working with our customers to understand potential physical risks at their
operating sites which may impact the resilience of our business.
• Conduct our business activities in a socially responsible manner for the benefit of our employees, customers,
suppliers and the broader community.
• Inform ourselves as to existing and emerging policies and practices of our peers and industry partners which
encourage decarbonisation and support an equitable transition.
This position statement will be reviewed periodically to ensure it remains relevant to the needs of Emeco and its
stakeholders and is guided by the dynamic global response to the Paris Agreement.
SUSTAINABILITY REPORT
4.4 Climate Change Position Statement
31
Business
Risks
32
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Risk
Risk profile (italicised) and mitigation strategies
People and Culture
HSE and Training
Serious injury or
fatality.
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 promotes a culture of ‘safety first’ and takes a robust approach to mapping
and auditing controls across key processes, and developing and delivering training
to ensure workers are appropriately skilled and aligned to the Company’s focus
on safety. Senior leadership meet regularly to review and address safety related
incidents and patterns of compliance to training.
Labour Shortage
Inability to recruit/
retain sufficiently
qualified/skilled
people in a highly
competitive labour
market.
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 in order that
we remain competitive.
Emeco is also engaged in offshore sourcing of labour to increase skilled labour
supply into the Australian market.
Compliance
Legal and
Regulatory
Breach of key
regulatory
requirements due
to inadequate
continuous
monitoring of laws
or failure of a key
control, possibly
resulting in fines,
legal proceedings
or loss of social
licence to operate.
Pertinent to Emeco’s operations are laws and regulations governing employment
and labour relations, taxation, competition and consumer practices, intellectual
property, data privacy, environmental protection, financial regulation, etc.
We focus on maintaining compliance with laws and regulations applicable to the
regions we operate within, and ensuring adequate controls are in place to manage
the risk of legal proceedings.
Emeco employs a range of initiatives to meet or exceed regulatory compliance
including employment of specialists to support operational staff in areas such as
legal, human resources, health and safety; use of engineering solutions to improve
operations and safety; and regular training and competency testing of employees.
Emeco continues to develop and invest in its approach to risk management and
ESG strategies to foster a proactive and preventive compliance culture.
Internal audit plans include reviews of policies and procedures to ensure ongoing
regulatory compliance.
Operational Technology
Technology
The technology landscape is evolving quickly. Emeco is exposed to the impacts of
new and competing technologies in the mining services sector.
Emeco is increasingly engaging in industry networks and developing relationships
with equipment and parts manufacturers and technology providers. This keeps
Emeco informed of changes that can be embedded into future strategies. In
addition to monitoring alternative drivetrain technologies, Emeco is focused on
immediate advances that increase the structural life of its equipment, improve
emissions profiles, and reduce failures that hinder material reuse. By integrating
these advancements, Emeco enhances the durability and sustainability of its
fleet, ensures compliance with evolving environmental standards and maintains a
competitive edge in the market.
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.
BUSINESS RISKS
Emeco’s short to medium term operational and financial success may be impacted by a number of risk factors
which may be material to the Company if multiple risks eventuated at the same time or for a prolonged
duration. Some of the more material risks and mitigation strategies include, but are not limited to:
33
BUSINESS RISKS
Risk
Risk profile (italicised) and mitigation strategies
Information Technology
ERP Replacement
Emeco has completed the design phase for its ERP replacement project and
will soon commence the build phase. Key risks for the remainder of the project
include schedule delays (which may arise for multiple reasons such as design
misalignment, milestone elongation, resource under sizing, etc.), cost overrun,
critical resource departures, and change resistance. To control and mitigate risks
for the project, we are taking actions including the below:
• Peer review of design by Microsoft and independent System Integrator.
• Audit of project governance, to ensure the project team is set up for success and
audit recommendations are implemented.
• External review by reputable third parties of delivery strategy, schedule and
resource profile.
• Regular project engagement surveys and continuous improvement of team
collaboration, cohesiveness and retention.
• Appointment of dedicated change manager, with additional change analyst
resources planned, to prepare the organisation for change and acceptance.
• Critical resource review, cross discipline training, refinement of documentation
and retention strategies.
Cybersecurity
Business
disruption due to
a cybersecurity
incident.
The potential of cybersecurity attacks, misuse and release of sensitive information
pose ongoing risks to the operational and financial results of the Company.
Emeco remains vigilant to cyber threats and has taken a number of actions
to improve cybersecurity posture and maturity across the business, and
reduce cybersecurity risk. These include undertaking an external cybersecurity
audit across the business, and developing and executing against a prioritised
remediation plan. Emeco has also engaged an external cybersecurity services
provider that is providing ongoing cybersecurity advisory services to improve
policies, practices, technical architecture reviews, and to implement security
information and event management monitoring and response. Emeco employees
also receive annual cyber risk awareness training.
Financial
Cash and Liquidity
Lack of capital.
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 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 proactive 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 Medium Term Note (AMTN) market through to 2026.
Customer Credit
Risk
Customer credit risk remains an inherent part of Emeco’s business. Over the
years the Group’s customer profile has expanded with revenue growth. However,
balancing growth in the portfolio against potentially increased exposure to lower
quality credits, requires increased management of individual customer accounts.
Changes in commodity prices and customer specific issues affecting cash flows
available to settle accounts are factored into the level of credit extended to any
customer. However, these are subject to change in a dynamic environment.
Management assesses customer credits based on recently revised policies and
procedures. Credit insurance (or alternative security such as a bank guarantee or
security deposit) and payment terms are considered as part of this process.
The Group’s debtor portfolio is currently >90% covered under trade insurance cover.
34
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
BUSINESS RISKS
Risk
Risk profile (italicised) and mitigation strategies
Portfolio Optimisation
Business
Acquisitions and
Integration
If financial, operational, market, legal and regulatory, human resource etc. risks
materialise during a business acquisition or integration, they can significantly impact
the success of the transaction. These risks can result in loss of capital, decreased
productivity, reduced profitability, legal action, reputational damage, and loss of
talent and institutional knowledge.
Rigorous and prompt actions to identify, assess, and prioritise risks associated
with any contemplated acquisition and integration, allows the Company to develop
strategies to mitigate the risks and ensure the success of the transaction.
M&A remains a key strategy to enhance the business operating model. Emeco
actively monitors and considers opportunities to enhance market presence and
deliver acceptable returns for shareholders. Emeco’s M&A and business development
efforts focus on diversifying its revenue streams across different services,
commodities, and geographic areas. This diversification strategy helps spread risk
and strengthen the Company’s overall resilience.
Macroeconomic
and Geopolitical
Risk
Exposure to
geopolitical and
macroeconomic
uncertainty
including,
changes to
royalty and
taxation policy,
inflationary
pressures,
international
trade
agreements,
fluctuations in
interest rates and
foreign currency.
This exposure may lead to increased uncertainty and volatility in financial markets,
making it more difficult to access capital, the tightening of labour markets, rising
operating costs and reduced margins.
Emeco’s primary customer base is the resources sector of Australia. Its financial
performance is closely tied to the performance of customers within those markets
that are cyclical and affected by various factors beyond Emeco’s control including:
commodity price performance, investment in mining projects, regulation affecting the
mining sector, the availability and cost of labour, equipment and parts.
Emeco’s M&A and business development priorities seek to diversify Emeco’s revenue
base from a service offering, commodity and geographic perspective. Emeco’s
diversified portfolio of customers provides a more balanced exposure to fluctuations
in commodity prices and regional events (e.g. wet weather), thus minimising single
event exposure risks. Emeco’s rental projects have gradually steered towards
maintained hire models to increase contract tenure and diversify our service offering.
The Company maintains strong financial disciplines with respect to investment
decisions, operational spending and financial reporting and forecasting to measure
and maintain resilience in its financial position. Emeco also engages professional
advisors to keep it appraised of changes in regulatory requirements, macroeconomic
conditions and geopolitical risks.
Inflationary Cost
Pressures
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.
To offset inflationary pressures, Emeco engages with customers regarding out-of-
cycle rate increases, and also ensures appropriate mechanisms are included in its
revenue contracts for periodic review of pricing i.e. rise and fall adjustment. There is
also a tight focus on cost management and appropriate back charging of costs to
customers, including cost of outsourced labour. Further,performing works in-house
through our Force business also assists to mitigate against cost pressures.
Vulnerability
to Mining and
Commodity
Cycles
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. These include:
• Demand for mineral production which may be influenced by factors such as global
growth, commodity prices, exchange rates and the competitiveness of Australian
mining operations.
• Government policy on rebates, spending, royalties and taxes.
• Policies of mine owners including their decisions to undertake operations using their
own equipment or rented equipment.
In recent years, Emeco has focused on building a sustainable business that generates
shareholder value through economic and commodity 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
equipment components and assets, cost effectively.
35
BUSINESS RISKS
Risk
Risk profile (italicised) and mitigation strategies
Portfolio Optimisation
Competition Risk
Failure to remain
competitive with
Emeco’s peers
in the market
due to a lack
of continuous
innovation and/
or competitive
pricing, possibly
resulting in
loss of revenue
impacting the
long-term
profitability of
the Company.
The mining services industry in which Emeco operates, consists of numerous peers
and competitors all seeking to improve business performance. The coming years
will see a shift in the way organisations operate, with use of renewable energy,
automation and AI expected to increase. Emeco will need to ensure it remains in step
with the ever-changing industry. Further, Emeco remains at risk of not being able to
maintain sufficient pricing flexibility to offset inflationary costs, resulting in margin
deterioration.
Emeco seeks to maintain competitive cost advantages through its unique asset
management and mid-life rebuild model, coupled with disciplined cost control
measures to ensure operational efficiency.
Emeco differentiates itself through continuous innovation and technology integration,
such as the EOS platform, which is expanding to provide an equipment health module
that will enhance internal operations and add value to customers by improving
productivity and efficiency.
Emeco has a network of workshops to support operations and customers across major
mining markets within Australia, ensuring efficient access and high service standards.
Strong customer and supplier partnerships and collaboration opportunities remain
critical to us being a preferred supplier. These are actively nurtured by all levels of
management.
Emeco fosters a “can do” approach through strong leadership, maintaining a
reputation as an employer of choice with competitive remuneration, flexible work
arrangements, and an inclusive culture.
Fleet configuration is continuously reviewed to focus on competitive strengths
and identify underperforming categories, allowing Emeco to adapt and prioritise
equipment classes that offer the best long-term returns for shareholders.
Sustainability / Social Licence to Operate
Sustainability /
Social Licence
Climate
change risk /
Environmental,
Social and
Governance
(ESG)
considerations.
Emeco is exposed directly and indirectly to climate change risks, including exposure
to coal customers, which gives rise to 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.
• 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. 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 revenue derived from thermal coal projects represents 14% of total revenue
in FY24. Diversification strategies through underground rental and Force workshops
have resulted in lower thermal coal exposure.
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 has undertaken transitionary work to evaluate the scale of its Scope 1 and
Scope 2 carbon emissions, which are not considered material. The Company has an
established pathway to comply with anticipated legislation on ESG related reporting
(including with respect to climate change). In time this will also include measuring and
establishing targets for reducing Scope 3 emissions.
Operations
Short Term
Contracts,
Contract
Terminations
Emeco’s traditional sources of revenue are often subject to short term contractual
arrangements with mechanisms for termination by the customer, 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,
including by increasing the level of service provided to customers in order to embed
itself in customers’ operations and secure longer contract tenure.
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.
36
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
BUSINESS RISKS
Additionally, the Company is exposed to other risks that it manages at both a strategic and day-to-day
operational level.
Risk
Risk profile (italicised) and mitigation strategies
Operations
Under-
performance of
Contracts
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, customer 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.
Emeco seeks to address revenue exposure to shutdowns or contract suspensions
through the inclusion of minimum hours charges and/or standby rates. Emeco works
with its customers in scenarios where extreme events have caused site wide issues
or lack of access.
Supply Chain
Risk
Delay or
unavailability of
parts, labour and
other goods and
services.
Emeco relies heavily on imported parts, which in turn depend on overseas
manufacturing and logistics and availability of suitable vessels for transport. There
is risk that Emeco cannot secure parts for both component rebuilds and ongoing
maintenance to meet increasing customer demand for fleet. There is further risk that
supply chain costs will continue to increase over time.
Emeco is currently undertaking Project Delta, a strategic sourcing initiative aimed at
identifying and securing cost reduction opportunities. A key benefit of the project is
rationalising Emeco’s supplier base, allowing for proactive relationship management.
This will help secure savings and foster relationships with suppliers incentivised to
deliver further, non-contracted or price related value adds. Relationship management
is critical to ensuring open lines of communication and collaboration to understand
lead times and upcoming challenges. Emeco is building connections with key suppliers
to ensure we receive prompt updates on their supply chains.
Emeco has expanded inventory held to support both equipment in the field and
component rebuilds. This is providing additional security to respond quickly to
customer requirements.
Fleet Risk
Emeco’s heavy fleet bias towards one major equipment manufacturer exposes us to
a concentration risk pertaining to technology / obsolescence.
As societal expectations increase with respect to ESG strategies, Emeco must
consider future technologies to decarbonise our fleet and our customers’ operations.
Emeco’s mid-life asset model proves both cost and capital efficient but continues
to require investment in carbon intensive technology which at some point will be
obsolete.
The mid-life rebuild business model has positive attributes from a carbon
perspective, given the reuse of carbon intensive steel and remanufacture and reuse
of major components.
The mid-life model offers commercial benefits and acts as a proactive strategy to
mitigate risks related to fleet obsolescence and technological evolution in the mining
sector. The model leverages Force workshops to rebuild targeted assets, allowing
Emeco to return equipment to operation at a substantial cost advantage compared
to competitors without in-house rebuild capabilities. Emeco aims to maintain a fleet
of assets with 5-10 years remaining economic life, as opposed to the typical 20-year
lifespan of new equipment.
The push to decarbonise fleets is reshaping equipment replacement strategies across
the industry. Rather than immediately replacing fleets, there is a shift towards extending
the asset lives to allow time for the development of alternative fuels. This strategy
enables Emeco to increase the volume of mid-life equipment rebuilds.
Emeco adopts a meticulous approach to commercial reviews for major equipment
spending, ensuring adequate returns on investment. This robust life-cycle
management includes regular evaluation of equipment performance and
technological relevance, and identifies optimal points throughout an asset’s life
where upgrades, disposal or replacement can be considered, reducing the risk
of obsolescence and allowing for responsive actions before planned end-of-life
milestones.
37
Directors’
Report
38
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
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.
PETER FRANK BSEE, MBA
Appointment:
Non-Executive Director since April 2017 and
Interim Chair from 31 May 2024.
Board committee membership:
• Member of the Remuneration and Nomination
Committee from 31 May 2024.
Skills and experience:
Peter retired as Senior Managing Director at Black
Diamond Capital Management in December 2021
after 13 years of service, 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:
• Chair of the Remuneration and Nomination
Committee since October 2023.
• Member from December 2020 to
October 2023.
• Member of the Audit and Risk Management
Committee since December 2020.
Skills and experience:
Peter is a Mining Engineer with over 35 years’
experience in the mining industry throughout
Australia, New Zealand and Mongolia. Recently,
Peter was the Project Director of Strategic Minerals
where he was responsible for the 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 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.
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 2024 (FY24).
The directors of the Company during FY24 were:
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
39
JAMES WALKER III BScEcon
Appointment:
Non-Executive Director since June 2023.
Board committee membership:
• Member of the Audit and Risk Management
Committee from June 2023 to October 2023.
• Member of the Remuneration and
Nomination Committee from June 2023
to October 2023.
Skills and experience:
Mr Walker is a 30-year veteran in asset management
and has held several leadership positions throughout
his career. He has recently re-joined Black Diamond
Capital Management, a company that he co-
founded in 1996, serving as the President and Senior
Managing Director. Mr Walker also currently serves
as a board member for Starwood REIT and Consumer
Portfolio Services, Inc and is also a Strategic Partner
of Jadian Capital, a real estate private equity
investment firm. From 2008 through 2017, Mr Walker
was Managing Partner of Fir Tree Partners, a top
50 global alternative asset management firm, and
was a member of the firm’s Real Estate Investment
Committee and Chairman of the firm’s Risk
Committee. Mr Walker began his career in investment
banking at Kidder, Peabody & Co and Bear Stearns.
Mr Walker received a Bachelor of Economics from
Boston College’s School of Management in 1984 and
was recently a member of the Board of Regents of
Boston College.
Current appointments:
• President and Senior Managing Director of Black
Diamond Capital Management.
• Lead Independent Director of Starwood REIT.
• Board Member of Consumer Portfolio Services.
• Strategic Partner of Jadian Capital.
SARAH ADAM-GEDGE BBus (Accounting),
CAANZ, GAICD
Appointment:
Independent Non-Executive Director
since October 2023.
Board committee membership:
• Chair of the Audit and Risk Management
Committee since October 2023.
• Member of the Remuneration and Nomination
Committee from October 2023 to June 2024.
Skills and experience:
Ms Adam-Gedge is a Chartered Accountant and
graduate member of the Australian Institute of
Company Directors who brings broad financial,
commercial, technology and digital, leadership and
governance experience to Emeco gained through her
executive career and her current Board roles.
Ms Adam-Gedge began her executive career at
Arthur Andersen as an audit specialist before joining
PwC and broadening into consulting including
business process re-engineering, supply chain
efficiency and financial performance optimisation.
Her career includes over a decade in regional CEO
roles in leading technology and consulting businesses
including IBM, Avanade Australia, Publicis Sapient
Australia and Wipro Limited Australia and
New Zealand.
Current appointments:
• Deputy Chair & Non-Executive Director and Chair of
the Audit & Risk Committee of Austal Limited since
August 2017.
• Non-executive Director of Codan Limited since
January 2023.
• Non-executive Director and Chair of the Audit & Risk
Committee of Bravura Solutions Ltd since
August 2023.
• Non-executive Director of Cricket Australia since
March 2023.
• Non-member Director of CPA Australia since
September 2023.
40
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
PETER RICHARDS B.Comm
Appointment:
Independent Non-Executive Director
from June 2010 and Chairman from January 2016
until his retirement on 31 May 2024.
Board committee membership:
• Member of the Remuneration and Nomination
Committee 1 October 2023 until 31 May 2024
(previously Chair).
• Member of the Audit and Risk Management
Committee until 31 May 2024.
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.
PENELOPE YOUNG LLB, LLM, BBus
Appointment:
Company Secretary since April 2017.
Ms Penelope Young has been General Counsel & Company Secretary of the Company since 2017.
Penny joined Emeco as Senior Legal Counsel in May 2015.
Penny is a qualified lawyer with extensive experience most particularly in corporate and commercial law.
Prior to joining Emeco, Penny spent the majority of her career working in private practice.
Penny holds a Master of Laws, Bachelor of Laws and a Bachelor of Business.
Company secretary
The Company Secretary of the Company during FY24 was:
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
41
Board and committee meetings held and director attendance
(1)
Indicates the number of meetings the Director attended during FY24.
(2)
Indicates the number of meetings held during FY24 while the Director was a member of the Board or the relevant
Committee.
[A]
Mr Testrow attended all Audit & Risk Management Committee and Renumeration & Nomination Committee meetings by
invitation.
[B]
Ms Adam-Gedge was appointed as a director on 1 October 2023.
[C]
Mr Richards retired as a director on 31 May 2024.
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 FY24 were the provision of surface and underground mining
equipment rental and 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, other than as a result of the sale by Pit N Portal Mining Services Pty Ltd of its mining
services contracts during the year, the nature of the Group’s operations and principal activities have been
largely consistent throughout the financial year.
Operating and financial review
A review of Group operations, and the results of those operations for FY24, is set out in the operating and
financial review section and in the accompanying financial statements.
Capital management
Following a review of the Group’ capital management framework, the Board resolved to maintain the
Company’s existing capital management policy. The capital management policy allocates 25-40% of operating
net profit after tax to capital management initiatives each year. The Board will assess the relative benefits of
dividends and share buybacks at the time the payments are approved in order to maximise shareholder value.
Directors’ meetings
The number of board and committee meetings held and attended by each director in FY24 is outlined in the
table below:
Board
Board
sub-committee
(ad hoc)
Audit & Risk
Management
Committee
Remuneration
& Nomination
Committee
Director
Attended (1) Eligible (2) Attended (1) Eligible (2) Attended (1) Eligible (2) Attended (1) Eligible (2)
Ian Testrow [A]
5
5
1
1
4
0
2
0
Peter Frank
5
5
0
1
0
0
0
0
Peter Kane
5
5
1
1
4
4
2
2
Sarah
Adam-Gedge [B]
4
4
1
1
3
3
1
1
James Walker III
4
5
0
1
1
1
1
1
Peter Richards [C]
4
4
1
1
3
3
2
2
42
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
Dividends
No dividends were declared during the period following the Board’s decision to suspend the Group’s capital
management programme in favour of net debt reduction.
Type
FY24 final
1H24
FY23 final
Payment date
-
-
29 September 2023
Period ends
-
-
30 June 2023
Cents per share
-
-
1.25
Value $ million
-
-
6.488
Fully franked
-
-
Yes
On market share buy-back
On 23 August 2023, the Company announced an on-market buyback of $7.3 million. During the course of FY24,
the Company purchased a total of 627,858 ordinary shares for a total amount of approximately $414,000.
On 20 February 2024, the Company announced its decision to suspend the capital management programme,
to redirect operating free cash flow towards reducing financing requirements and to consider further the
Company’s capital management strategy. Further details of on-market share buy-backs for the financial year
are set out in note 20 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
The Board resolved to continue the suspension of the Group’s capital management programme for FY25,
in favour of net debt reduction.
Likely developments
Likely developments in, and expected results of, the operations of the Group are referred to in the operating
and financial review section. 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 299(3) of the
Corporations Act 2001.
Operations, financial position, business strategies and future prospects
Information on the Group’s operations, financial position, business strategies and prospects for future financial
years of the Group are referred to in the Managing Director’s Report and Operating & Financial Review sections
of this annual report. Information on the Group’s business strategies, and prospects for future financial years,
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.
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
43
Directors’ interests
The relevant interests of each current 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:
Directors’ interests
Director [A]
Ordinary shares [B]
Rights [C]
Ian Testrow
15,176,533
194,485
Peter Frank
-
-
Peter Kane
10,288
-
James Walker III
-
-
Sarah Adam-Gedge
-
-
[A]
This comprises the Director’s relevant interest in securities as notified to the ASX as at the date of this report.
[B]
This comprises ordinary shares in which the Director has a relevant interest.
[C]
This comprises rights issued under the Company’s employee incentive plans.
Refer to notes 10 and 24 in the Financial Statements for related party disclosures.
Indemnification and insurance of officers and auditors
The Company has entered into a deed of access, indemnity and insurance with each of the current and former
directors, the current and former chief financial officer and the company secretary of the Group. 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 Group. 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 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 (Deloitte).
Non-audit services
During the year, Deloitte, 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 comply with the Company’s
non-assurance services policy and 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 and its network firms, for audit and non-audit
services provided during the year are found in note 26 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 included in this annual report 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.
44
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
44
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Letter from the chair of the remuneration and nomination committee
Dear Shareholders,
On behalf of the Emeco Board, I am pleased to present the Remuneration Report for the 2024 financial year
(FY24). This report details the governance, framework and outcomes of the Company’s remuneration practices
for the Directors and Senior Executives who were key management personnel (KMP) for the Company during
the year.
The Board believes the remuneration framework, which it continues to develop and refine, provides a structure
to retain and attract the right people whilst generating sustainable shareholder returns and adhering to
prudent risk management. Our key principles of offering market competitive, performance-based remuneration
which aligns with shareholder interests are the key drivers of the remuneration outcomes for FY24.
Business performance linked to remuneration outcomes
Emeco has delivered a solid financial performance off the back of a positive year of progress which included
the exit from the underground contract mining business and the strategic repositioning to underground rental,
delivering on the growth capital expenditure programme, completing the design phase of the ERP replacement
programme, improvements to credit processes and an improvement in safety performance.
The Group consolidated the performance improvements delivered in the second half of FY23 and delivered
further growth in earnings in FY24.
• Operating EBITDA and EBIT growth of 12% and 20%, respectively
• Operating Free Cash Flow growth of 66%, cash conversion of 93%
• ROC increased from 13% to 15%
• EPS growth of 28%
• Share price growth of 9%, resulting in a Total Shareholder Return of 11%
Stakeholder engagement
We value feedback from our shareholders and actively engage with a range of stakeholders to improve the
Company’s reward structure to align with the strategy and outcomes for shareholders.
At the 2023 AGM, Emeco received a strike against its remuneration report. Our subsequent discussions with
various stakeholders confirmed that the primary concern related to the level of disclosure provided on the
rationale for the structure of the remuneration and measures used. Concerns were also flagged with the use of
a single metric and the performance period for the long term incentive (LTI) plans. Additional disclosures were
requested on the non-financial metrics and achievement parameters.
The Board have given consideration during the year to reflect on the feedback received ahead of the
preparation of the 2024 remuneration report. The review process has considered the need to balance the
interests of our shareholders, while maintaining competitive remuneration practices. Due consideration was
also given to the structure of the Company’s shareholder base and the contract, tenure and experience of the
CEO & MD, Ian Testrow.
2024 Remuneration Outcomes
To address feedback received, further details on the non-financial measures used in the calculation and award
of STIs are disclosed and the Board notes a change to both LTI plans in FY25 to include an additional KPI of TSR
growth.
Short-Term Incentive (STI)
The executive management team has successfully delivered a strong set of financial results as outlined above,
improving on the performance of FY23, resulting in the vesting of 78.7% of short-term incentives linked to
earnings (60% of STI) as set out at section 7.3.1 of the Remuneration Report.
Emeco Holdings Limited and its Controlled Entities
Directors’ Report For the year ended 30 June 2024
45
The plan also includes safety measures which account for 20% of the STI. The Group reported a TRIFR of 2.8,
a significant improvement on the prior period and, which resulted in 100% of award for this measure. This past
year has seen a significant focus on identifying, understanding, and controlling our critical risks. Our new critical
risk process aligns to global standards for critical risk and control, and we have recently implemented critical
control verification software to support this new process.
The STI plan also includes personal targets which account for 20% of the STI measures. These have been
reviewed and assessed by the Remuneration and Nomination Committee and Board, with between
92.5-100% of these being awarded to KMP and appropriately recognised in the FY24 remuneration outcomes.
Importantly, they are focused on initiatives which are expected to drive future profitability including:
- delivery of the design phase of the Company’s new ERP
- delivery of the group’s growth capex rebuild programme
- delivery of the Group’s procurement savings initiative; and
- reduction in the Group’s reliance on subcontracted labour
Long-Term Incentive (LTI)
Management have delivered 28% EPS growth off the back of improved operational performance and better
cost and contract management, resulting in the award of 100% of long-term incentives applicable to the
performance period. This aligns with outcomes for shareholders with share price growth over the same period
of 9% and TSR of 11%.
It should be noted that the FY25 LTI measures will be amended to include TSR growth which was 11% for FY24.
Should these measures have been in effect for FY24, the LTI performance would remain at 100%.
Looking forward
The Remuneration and Nomination Committee is satisfied that the framework provides a balanced approach
to remuneration that seeks to appropriately reward financial and non-financial performance with shareholder
value creation. In addition, the FY24 remuneration outcomes reflect and support the Company’s strategic and
financial performance, giving us confidence that we are adopting effective remuneration frameworks.
The addition of a TSR growth measure in the FY25 LTI plan alongside the EPS growth measure will address
feedback from stakeholders, and will bring increased alignment across business performance, the shareholder
experience and remuneration outcomes.
Peter Kane
Committee Chair
46
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
47
PAGE
Introduction
48
Response to “first strike”
48
Remuneration governance
49
Summary of Company performance
49
and FY24 incentive outcomes
Executive remuneration arrangements
51
Relationship between executive remuneration
56
and company performance
Executive remuneration for FY24
57
Executive contracts
62
Non-executive director remuneration
62
Additional disclosures relating to
63
share-based payments
Loans to key management personnel
66
and their related parties
Other transactions and balances with
66
key management personnel and their
related parties
Remuneration
Report
(audited)
48
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
1.
Introduction
This remuneration report for the year ended 30 June 2024 details the Group’s remuneration objectives,
practices and outcomes for the Company’s key management personnel (KMP) 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.
KMP 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. The Company’s KMPs for FY24 are listed in the below tables. 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 FY24:
Non-executive directors
Peter Frank
Non-Executive Director, Interim Chair
(Interim Chair from 31 May 2024)
Peter Kane
Independent Non-Executive Director
James Walker III
Non-Executive Director
Sarah Adam-Gedge
Independent Non-Executive Director
(Commenced 1 October 2023)
Peter Richards
Chair, Independent Non-Executive Director
(Retired 31 May 2024)
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
Other executives
Position
Theresa Mlikota
Chief Financial Officer
The following persons were also employed as executives of the Company during FY24:
2.
Response to “first-strike”
At the 2023 Annual General Meeting (2023 AGM) held on 29 November 2023, more than 25% of shareholders
voted against the adoption of the remuneration report, resulting in the Company incurring a ‘first strike’
pursuant to section 250R of the Act.
At that same meeting, the various resolutions relating to the employment and incentive arrangements
agreed with the Company’s Managing Director & Chief Executive Officer, Mr Ian Testrow, were approved by
shareholders.
Subsequent to the 2023 AGM, the Board has considered the concerns raised predominantly through the proxy
advisor reports and has sought to engage with various stakeholders, to address these concerns.
In response, the Board determined the following:
• the Company would provide additional detail within this annual report regarding KPIs for both the STI and LTI
plans, including the performance assessed against those KPIs.
• the number of KPI measures attaching to each of the Company’s LTI plans would increase from one to two for
the FY25 testing period and will now also include TSR growth, in addition to the EPS growth measure.
In response to matters raised by proxy advisors with respect to components of the Managing Director & Chief
Executive Officer’s employment contract and remuneration, the Board seeks to highlight the approvals by
shareholders at the 2023 AGM.
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
49
3.
Remuneration governance
Remuneration and Nomination Committee
The Remuneration and Nomination Committee (RNC) 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 RNC’s role also includes responsibility for general remuneration strategy,
superannuation and other benefits, and employee incentive schemes.
The members of the RNC at the start of FY24 were Mr Peter Richards, Mr Peter Kane and Mr James Walker.
However, due to changes in board composition and availability, at the end of the FY24 year, the members were
Mr Peter Kane and Mr Peter Frank.
The RNC was chaired by an independent non-executive director at all times during FY24. Mr Peter Richards
was chair at the start of FY24 and Mr Peter Kane assumed the chair position on 1 October 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 RNC 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 RNC. In selecting remuneration consultants, the RNC 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.
4.
Summary of Company performance and FY24 incentive outcomes
The Company delivered a strong FY24 result, consolidating and building upon the good recovery in
performance achieved in prior periods.
Highlights
Financial
• Strong revenue growth delivered through Surface Rental and Force businesses. Underground revenue
reduced following sale of underground contract mining projects to Macmahon Holdings Ltd (MAH) to deliver
business simplification and de-risking
• Strong margin and earnings growth across all business segments – driven by robust demand and focus on
cost and contract management and efficient capital usage
• YOY - 12% Operating EBITDA growth, 20% Operating EBIT growth and 17% Operating NPAT growth
• Strong free cash flow generation, cash flow conversion of 93%
• Leverage (1) improved to 1.00x, NTA $1.21/share
• FCF yield of 24% at 30 June 2024
Operations
• Solid safety performance against backdrop of major organisational change
• Successful delivery of major growth capex programme which will drive earnings growth in FY25 with new
equipment now deployed to projects
• Business improvement programme expected to deliver increased returns over next two years
• Fleet gross utilisation average 91% for surface rental
(1)
Leverage = Net Debt / Operating EBITDA.
50
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
Performance measure
STI
LTI
Alignment to strategy
Safety
20%
Ensuring the safety of Emeco’s people is central to
everything Emeco does. Aiming for a zero-harm
workplace, safety processes, policies and procedures
are continually updated.
Operating EBITDA
60%
Operating EBITDA is a key measure of Emeco’s
profitability and ability to provide returns to
shareholders.
Earnings per share (EPS)
100%
EPS is a key metric in aligning management with
shareholder value creation.
Personal objectives (1)
20%
Personal objectives enable a focus on specific factors
aligned with the Company’s strategic and operational
objectives and reflect key focus areas for each
executive.
(1)
Personal KPIs are detailed in section 7.3.1 below.
FY24 STI Outcomes
Based on performance for FY24, incentive outcomes for KMP ranged from 85.7% to 87.2% for Group and
personal performance against the safety, financial and personal KPIs. Details regarding the STI outcomes are
set out in sections 7.3.1 and 7.3.3 below.
FY24 LTI Outcomes
The EPS increase over FY24 was 28%, resulting in a full award for the FY24 performance period for each of the
LTI plans currently on foot. Details regarding the LTI plans and outcomes are detailed in sections 7.3.2 and 7.3.3.
Strategy
• Business model now simplified to focus on core rental and workshop business with exit from underground
contracting
• Clear focus on operational and financial targets – ROC target of 20% over the next two years and strong free
cash flow generation. Strong improvement in ROC to 15% from 13%. ROC expected to improve following full
deployment of growth fleet in back end of 2H24, with earnings kick in FY25
• Margins improved on the back of stronger cost and contract management, as well as revenue mix
People, safety and sustainability
• Safety performance improved with TRIFR reducing from 3.2 to 2.8
• Endorsement of the Company’s inaugural “Reflect” reconciliation action plan
• Development of the Group’s Position Statement on Climate Change
Technology
• Design of new ERP system complete, build phase now commencing
• Enhancing internal resources to bolster the internal technology environment and produce offering to
customers
These results demonstrate the Company’s sustainable and resilient operations and strength of the executive
team in driving the Company forward and delivering strong, sustainable returns.
Linking FY24 incentive outcomes to Company performance
The Company’s remuneration structure includes a significant component of executive remuneration tied to
financial performance outcomes. Key performance indicators (KPIs) used in the short and long terms plans are
approved with the assistance of the RNC and aligned with the strategy outlined below.
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
51
Business objectives
Build a sustainable, resilient and profitable business through scale, customer and commodity diversification and creating
value through providing the lowest cost, highest quality mining equipment solutions that add value to our customers’
projects and embed Emeco into its customers’ operations.
Demonstrate disciplined capital management through maintaining a strong balance sheet, return on capital and free cash
flow generation for long term value creation for our shareholders.
Remuneration strategy linkages to business objective
Remunerate fairly and
appropriately
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.
Align executive interests with those
of shareholders
Provide a significant proportion of
‘at risk’ remuneration to ensure that
executive reward is directly linked to
the creation of shareholder value.
Ensure human resources policies
and practices are consistent and
complementary to the strategic
direction of the Company.
Prohibit the hedging of unvested
equity to ensure alignment with
shareholder outcomes.
Attract, retain and develop proven performers
Personalise remuneration arrangements and
provide total remuneration which is sufficient
to attract and retain proven and experienced
executives who are capable of:
• providing experienced and quality leadership;
• excel in fulfilling their respective roles within
the Group;
• achieving the Group’s strategic objectives; and
• maximising Group earnings and returns to
shareholders.
Remuneration
component
Vehicle
Purpose
Link to performance
Fixed
Remuneration
Comprises base
salary, employer
superannuation
contributions and other
non-cash benefits.
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.
Variable short-
term incentive
plan (STI)
Paid in cash and, under
the CEO STI plan, a
portion may be paid
in equity (subject to
shareholder approval).
Rewards executives for their
contribution to achievement of key
performance indicators (KPIs)
during the financial year.
The key performance measures in
FY24 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 7.
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 relevant performance period.
Awards of Rights are dependent on
achievement of the LTI KPI.
Performance Rights may be converted
into shares after vesting at the end
of the applicable performance period
(subject to any earlier vesting as set
out below) aligning executive interests
with shareholder value over the
performance period.
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.
Further, the incentive’s value
is ultimately dependent on the
Company’s share price after
the performance period, driving
executives to maximise shareholder
return. LTI plans and targets are
discussed in section 7.
5.
Executive remuneration arrangements
5.1
Remuneration principles and strategy
Emeco’s executive remuneration strategy is designed to attract, motivate and retain talented individuals, align
executive reward to the Company’s business objectives, and to create long term shareholder value.
The following diagram illustrates how the Company’s remuneration strategy aligns with its strategic direction
and links remuneration outcomes to performance.
52
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
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.
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 Chief Financial Officer for FY24. The target mix for each
individual is benchmarked and considered appropriate for Emeco based on the
Company’s short-term and long-term objectives and the relevant executive’s role and
responsibilities.
Overall remuneration mix
Executive
Position
Fixed
remuneration
% of total
remuneration
Short-term
incentive
% of total
remuneration
Long-term
incentive
% of total
remuneration
Ian Testrow
Managing Director
& Chief Executive
Officer
29%
37%
34%
Theresa Mlikota Chief Financial
Officer
39%
31%
30%
How much variable
remuneration can
executives earn in
FY24?
The table below sets out the maximum incentive opportunity for each executive under
the FY24 STI and LTI plans, expressed as a percentage of total fixed remuneration
(TFR).
Components of variable remuneration
Executive
Position
Maximum
STI %
of TFR
Maximum
LTI %
of TFR
Maximum
Total %
of TFR
Ian Testrow
Managing Director
& Chief Executive
Officer
130%
120%
250%
Theresa Mlikota Chief Financial
Officer
80%
75%
155%
5.2
Approach to setting remuneration
The executive remuneration framework consists of both fixed and variable elements, with the variable elements
dependent upon meeting financial and non-financial performance measures. This structure is designed
to ensure that executives are appropriately rewarded for their time and energy based on their position,
experience, responsibilities and performance within the Company whilst also aligning with the interests of
shareholders.
Total remuneration is comprised of three main components: total fixed remuneration (TFR), STI and LTI. As a
part of determining the level of total remuneration for the Company’s executives, benchmarking against other
companies within the industry is undertaken.
The RNC and Board may also then consider factors which can influence the setting of remuneration including
experience, competition for talent and suitability for driving the Company’s strategic objectives.
In the below section, key questions regarding the setting of remuneration and incentive plan arrangements are
answered.
Outcomes and awards are detailed in section 7.
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
53
FY24 Incentive Plans
Executive
Position
STI plan
LTI plan
Ian Testrow
Managing Director & Chief
Executive Officer
FY24 CEO STI plan
(CEO STI)
FY24 CEO LTI plan
(CEO LTI)
Theresa Mlikota
Chief Financial Officer
FY24
Management
STI plan (MSTI)
FY24
Management
LTI plan (MLTI)
Fixed remuneration
How is fixed
remuneration
reviewed and
approved?
Fixed remuneration is reviewed periodically. Fixed remuneration changes for
executives take into account changes in position, responsibilities and performance and
are benchmarked with targeted market comparators. Changes to an executive’s fixed
remuneration are subject to RNC and Board approval.
Overall remuneration level and mix
What are the
executive STI and
LTI plans in FY24?
The table below sets out the STI and LTI Plans in which each executive can participate
in FY24:
Variable remuneration - FY24 Short-term incentive plans (FY24 STI)
What are the KPIs
and how do they
align with business
performance?
The KPIs for the FY24 STI plans are a balance of financial and non-financial measures
which provide the platform for the long-term performance, growth, resilience and
sustainability of the Company. They are assessed at either a Company or individual
level. The applicable FY24 STI KPIs are set out in the following table.
FY24 STI KPIs
Executive
Safety (20%)
Financial (60%)
Personal (20%)
Ian Testrow
FY24 TRIFR
performance
relative to FY23
Operating
EBITDA relative
to FY24 budget
Improving Pit N Portal
performance and reducing credit,
operational and commercial risk
Delivery of growth capex
programme to meet capital
business case justification
Completion of design element
of ERP replacement project
in accordance with approved
timetable and costs
Achieving key EOS development
markers
Theresa Mlikota
FY24 TRIFR
performance
relative to FY23
Operating
EBITDA relative
to FY24 budget
Achievement of supply chain and
procurement strategy changes
and delivery of cost savings
inclusive of targeted annualised
savings
Completion of design element
of ERP replacement project
in accordance with approved
timetable and costs
Completion of credit review and
implementation of improved
credit and governance processes
See section 7.3.1 for more information on the FY24 STI KPIs.
54
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
Variable remuneration - FY24 Short-term incentive plans (FY24 STI)
When is
performance
measured?
Achievement against the STI KPIs is assessed in conjunction with finalisation of the
Company’s full year results.
How are awards
determined?
Awards are approved by the Board, on recommendation of the RNC, and will be
granted after consideration of performance against the applicable KPIs.
How are STIs paid?
Awards under the FY24 MSTI plan are paid in cash during FY25.
Under the FY24 CEO STI plan, 80% of the total STI award will be paid in cash however
a portion of the STI may be payable in equity (using a share price of $0.65) unless
Mr Testrow elects to take the whole of any STI award as cash. Any STI equity award
is subject to approval by shareholders and will be subject to a vesting period. Any STI
equity award not approved by shareholders, will be paid in cash.
What happens
if an executive
leaves?
Under the FY24 STI plans, cash awards are only paid if the executive is employed by
the Group after performance is assessed against the relevant STI KPIs. If there is an
equity award under the CEO STI plan, that equity would vest on the earlier of the date
Mr Testrow’s employment ends and the release of the FY27 full year results.
Variable remuneration - FY24 Long-term incentive plans (FY24 LTI)
What is the
Management
LTI plan?
The FY24 MLTI plan is an equity incentive that rewards executives (excluding the
Managing Director & Chief Executive Officer) for their contribution to achievement of
certain KPIs over a three-year period.
Under the MLTI, one-third of a executive’s maximum entitlement is tested each year
against the KPIs 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 FY24 MLTI plan are made in the form of performance rights
(Rights), being rights to fully paid ordinary Emeco shares (Shares).
The FY24 MLTI plan is on substantially the same terms as the FY22 and FY23 LTI
plans.
What is the
CEO LTI plan?
The CEO LTI plan is an equity incentive that rewards the Managing Director & Chief
Executive Officer for his contribution to the achievement of certain KPIs over a one-
year period. Awards under the CEO LTI plan are subject to a vesting period.
Under this plan, Mr Testrow’s maximum entitlement is tested against the KPIs set for
that year.
All equity awards granted under the CEO LTI plan will vest on release of the
Company’s FY27 full year results unless Mr Testrow’s employment ends earlier or
there is a Change of Control as defined below (see “What happens under the CEO LTI
plan if the executive leaves or there is a Change of Control?”).
Awards under the CEO LTI plan are made in the form of Rights.
What are the KPIs
and how do they
align with business
performance?
The FY24 KPI for each LTI plan is earnings per share growth, which is designed to 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 RNC and Board
considers the KPIs for the performance period at the beginning of the relevant year.
As noted earlier, after consideration of the Company’s strategy, objectives and a
range of other factors including shareholder experience and investor and stakeholder
feedback, in FY25, the KPIs for the LTI plans will increase from one to two and will
include TSR growth in combination with the existing EPS growth measure. Having
these two LTI measures provides a strong alignment with the Company’s strategy to
drive sustainable earnings growth and long term shareholder value.
See section 7.3.3 for more information on the FY24 KPI.
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
55
Variable remuneration - FY24 Long-term incentive plans (FY24 LTI)
When is
performance
measured?
The FY24 MLTI plan spans a three-year performance period. The CEO LTI plan has
a one-year performance period but is not scheduled to vest until release of the
Company’s FY27 full year results.
Performance under each plan and achievement against the LTI KPI is assessed
annually by the Board in conjunction with approval of the full year results (see “How is
variable remuneration delivered”).
How are awards
determined?
Awards are approved by the Board, on recommendation of the RNC, after
consideration of performance against the applicable KPI.
How is it paid?
LTI awards are paid by issuing Rights. Rights issued under the FY24 MLTI plan are
scheduled to vest after announcement of Emeco’s FY26 full year results. Rights issued
under the CEO LTI plan are scheduled to vest after announcement of Emeco’s FY27
full year results.
Under each of the FY24 LTI Plans, the executive has 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?” above).
Under the FY24 MLTI plan, the maximum possible award of Rights to the executive
was calculated by reference to the volume-weighted average price of Emeco shares
for the 20 business days following the release of Emeco’s FY23 results, being
62.84 cents. The maximum possible award of Rights under the CEO LTI plan
was calculated using a share price of 65 cents pursuant to the approval of the
shareholders at the Company’s 2023 AGM.
Rights will be issued at no cost to the executive. The ultimate value of the 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
under the FY24
MLTI if an executive
leaves or there is a
Change of Control?
Under the FY24 MLTI plan, if Emeco terminates the executive’s employment for
misconduct or other breach of employment contract, all the Rights issued to the
executive under that 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 FY24 MLTI plan will immediately vest and must be
exercised into Shares within 12 months from vesting.
The executive will have no entitlement to untested awards.
In the event of absolute change in control (i.e. a third party and its associates holds
greater than 50% of the Company’s ordinary shares) or an effective change of control
(i.e. occurrence of an event which results in a third party and its associates having
the capacity to determine the outcome of decisions on the Company’s financial and
operating policies) (Change of Control):
• rights which have been tested and issued under the FY24 MLTI plan; and
• awards in respect of any component of the FY24 MLTI that have not been tested,
will vest on the event date.
What happens
under the CEO LTI
plan if the executive
leaves or there is a
Change of Control?
If:
• Mr Testrow resigns and his employment ends before 30 June 2027;
• the Company terminates his employment; or
• the directors determine that there has been serious misconduct or a material
breach of policy (as defined in the employment agreement),
Mr Testrow would receive Rights awarded prior to the date his employment ends.
However, any equity incentives in respect of part years worked or not yet worked
would be forfeited.
Under the CEO LTI plan, if Mr Testrow’s employment ends due to the total or
permanent disability or death of Mr Testrow or there is a Change of Control (as
described in the section above), Mr Testrow would receive the maximum equity
incentives available under the FY24-26 CEO LTI plans which have not yet been tested
or awarded (in addition to equity incentives tested and awarded) and all Rights which
have been awarded under the CEO LTI or STI plans would vest. (1)
Under the CEO LTI plan, if the employment of the Managing Director & Chief Executive
Officer were to end prior to 30 June 2027, the executive will have up to 2 years to
exercise any vested Rights.
What other terms
apply to the Rights?
Dividends are not payable, and there are no voting entitlements, on Rights issued
under the LTI plans (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).
(1)
At the 2023 AGM, the shareholders approved the CEO LTI plan for FY24-FY26 pursuant to ASX Listing Rule 10.14.
Shareholder approval for the FY27 CEO LTI plan has not yet been sought.
56
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
6. 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 7.
In FY24, the KPIs for variable components of executive remuneration were again 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 7) focused on safety, earnings and executive-specific personal targets based
on their roles. The FY24 LTI KPI (applicable to the FY24 performance period under the FY22 and FY23 LTI Plans,
the FY24 MLTI plan and the FY24 CEO LTI plan) of 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 FY24, Emeco continued its focus on building a profitable and resilient customer-focused rental
solutions business. Management’s focus was targeted towards simplifying the business model by exiting the
underground contracting business and to then focus on delivering higher returns and cash flow from the core
business of rental and workshops. The Company delivered strong operating EBITDA growth, resulting in partial
satisfaction of the financial STI KPI and full satisfaction of the EPS growth LTI KPI.
Emeco is committed to maintaining a strong safety culture. Pleasingly, the total recordable injury frequency rate
(TRIFR) has decreased from 3.2 in FY23 to 2.8 in FY24. Consequently, the safety target for FY24 was exceeded.
It is noted that the FY23 TRIFR has been restated due to a correction.
Further detail regarding satisfaction of incentive plan KPIs including personal goals and key initiatives for each
executive under the individual STI targets are set out in section 7.
FY24
FY23
FY22
FY21
FY20
Operating EBITDA ($m) (1)
280.5
250.4
250.2
237.7
254.4
Operating EBIT ($m) (1)
125.3
104.6
120.7
119.1
139.4
Operating NPAT ($m) (1)
69.4
59.1
68.9
56.8
61.0 [2]
Net leverage (3)
1.00x
1.10x
0.96x
0.94x
1.66x
Return on capital (1)
15%
13%
16%
17%
21%
Total dividends determined ($m) (5)
-
13.0
13.3
6.8
-
Total shares bought back ($m) (6)
0.4
7.3
18.4
3.8
-
Closing share price as at 30 June
$0.71
$0.65
$0.65
$1.05
$0.99
TRIFR (5)
2.8
3.25
1.9
2.1
2.9
(1)
Non-IFRS measures. Refer to Table 2 of the Operating and Financial Review for further detail regarding operating
adjustments.
(2)
FY20 Operating NPAT tax effected for comparative purposes.
(3)
Net Leverage – Net Debt / Operating EBITDA.
(4)
Return on Capital – Operating EBIT / Average Capital Employed.
(5)
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 in respect of the FY23 full year and
paid in FY24.
(6)
Total shares bought back reflects the monetary value of shares to be bought back in respect of the financial year under
announced on-market share buy-back schemes.
(7)
FY23 safety data has been restated from 2.9 to 3.2 due to a correction.
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:
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
57
7. Executive remuneration for FY24
7.1
Changes to Managing Director & CEO terms of employment commencing FY24
As announced to the ASX on 3 August 2023, Mr Testrow’s employment agreement was varied with effect from
1 July 2023. A description of the material changes relating to fixed and variable remuneration is provided below.(1)
Topic
Description of term
Variation Period From 1 July 2023 to 30 June 2027 (ie FY24 to end FY27).
Total fixed
remuneration
(TFR)
Increased to $1.25m per annum (inclusive of superannuation) from $1.062m per annum.
This is a permanent change to Mr Testrow’s terms of employment.
During the Variation Period, Mr Testrow’s TFR will be reviewed annually for inflation.
Incentive
250% of TFR through participation in a short-term and long-term incentive scheme. This is
a permanent change to Mr Testrow’s terms of employment.
CEO STI Plan
130% of TFR for the Variation Period. A portion of the CEO STI (up to ~38% of the maximum
award, calculated based on a $0.65 share price) may be payable in equity (subject to
shareholder approval) unless Mr Testrow elects to take the whole of any STI award as cash.
All CEO STI equity awards will vest on the earlier of release of the Company’s FY27 full year
results, the end of Mr Testrow’s employment or a Change of Control.
Any CEO STI equity awards which are not approved by shareholders will be paid in cash.
CEO LTI plan
CEO LTI plan has a one-year performance period. However, under the terms of the CEO LTI
plan, all equity awards granted will vest on the earlier of release of the Company’s FY27 full
year results, the end of Mr Testrow’s employment or a Change of Control.
The CEO Plan was approved by shareholders at the 2023 AGM for three years and,
accordingly, all awards under the CEO LTI plans from FY24-FY26 will be issued in equity. (2)
End of
employment
If Mr Testrow’s employment ends before 30 June 2027 other than due to total or
permanent disability or death, Mr Testrow would receive any Rights awarded under either
the CEO STI or LTI plans at the time his employment ends. Any equity incentives in respect
of part years worked or not yet worked will be forfeited.
If Mr Testrow’s employment ends due to total or permanent disability or death the following
benefits will be immediately paid or vested (as applicable):
• unpaid fixed remuneration up to 30 June 2027; (3) and
• maximum equity incentives available under the CEO LTI Plan approved by shareholders,
which have not yet been tested or awarded (in addition to equity incentives tested and
awarded).[4]
During the Variation Period, Mr Testrow’s employment can only be terminated in specified
circumstances, such as serious misconduct, material breach of policy, bankruptcy, serious
or persistent breach of employment agreement, on conviction of an indictable offence
(excluding road traffic offences absent a custodial penalty) and other similarly serious
circumstances.
Change of
Control
If there is a Change of Control of the Company, the following will be immediately paid or
vested to Mr Testrow (as applicable):
• an amount equivalent to remuneration up to 30 June 2027; (3) and
• maximum equity incentives available under the CEO LTI Plan approved by shareholders
which have not yet been tested or awarded (in addition to equity incentives tested and
awarded prior to the Change of Control). (4)
Upon payment of the above amounts, the variation provides that the conditions of
Mr Testrow’s employment will largely revert to that of pre-variation (excluding permanent
changes noted above).
(1)
For a complete description of the material changes to Mr Testrow’s employment arrangements, refer to the ASX
announcement on 3 August 2023.
(2)
As at the date of this report, approval has not been sought for the FY27 CEO LTI plan.
(3)
Approved by shareholders at the Company’s 2023 AGM.
(4)
Shareholders approved the CEO LTI plan for three years commencing FY24 at the Company’s 2023 AGM. As at the
date of this report, approval has not been sought for the FY27 CEO LTI plan.
58
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
Note: Personal KPIs are outlined in detail on the following page.
7.2
Fixed remuneration outcomes
As noted above in section 7.1, after a periodic review of Mr Testrow’s performance and remuneration
arrangements, and to incentivise and align Mr Testrow’s ongoing commitment to the Company, various changes
to Mr Testrow’s employment arrangements were implemented with effect from 1 July 2023. This included a
fixed remuneration increase.
Following the recommendation of the RNC in August 2023, and to ensure that the Company continues to
remunerate executives fairly and appropriately, executives excluding Mr Testrow, received a 0.5% increase in
their total fixed remuneration to compensate for the legislated increase in employer superannuation guarantee
contributions in FY24.
Mr Testrow’s fixed remuneration has been benchmarked against targeted market comparators and the Board
remain comfortable with where it has been set.
Other than as described in the preceding paragraphs, no other executive received an increase in their total
fixed remuneration in FY24.
7.3
Variable remuneration outcomes
In FY24, 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 FY24 STI and LTI plans.
7.3.1 FY24 STI plans
The table below sets out the KPIs for the FY24 CEO STI plan and the FY24 MSTI plan and the respective
weightings. In the Board’s view, these KPIs align the reward of executives with the interests of shareholders.
The FY24 STI plans provided for pro-rata entitlements where achievement was between the thresholds and
targets.
KPI
Weight
Payment schedule
Rationale
Achievement
Safety
20%
0% if the Group TRIFR (1)
as at 30 June 2024 is equal to
or higher than Group TRIFR as
at 30 June 2023. 100% if the
Group TRIFR[1] as at 30 June
2024 is 10% lower than the
Group TRIFR as at 30 June
2023. Pro-rata payments
between these levels.
No entitlement if there is a
serious, permanently disabling
injury or a fatality.
The Board regularly reviews the
Company’s safety performance
in detail and is striving to
achieve a ‘zero-harm’ workplace
at Emeco. TRIFR measures
performance against this goal.
20%
Operating
EBITDA (2)
60%
0% if actual FY24 Group
Operating EBITDA ≤ 85% of
budget FY24 Group Operating
EBITDA. 100% if actual FY24
Group Operating EBITDA
≥ 105% of budget FY24 Group
Operating EBITDA. Pro-rata
payments between these levels.
Reflects the Company’s financial
performance and ability to pay
STI awards.
47.2%
Personal KPIs
20%
Satisfaction of key initiatives set
by the Board for each executive.
Reflects key focus areas for each
executive which are central to
the Company’s performance,
strategy and operations.
18.5-20%
FY24 STI KPI weightings, payment schedule and achievement
(1)
TRIFR = Number of recordable injuries x 1,000,000 hours
Total hours worked
(2)
Non IFRS measures. Refer to Table 2 of the Operating and Financial Review for further detail regarding operating
adjustments.
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
59
KPI
Weight
Achievement
CEO STI KPIs
Improving Pit N Portal performance and reducing credit,
operational and commercial risk
5%
5%
Delivery of growth capex programme to meet capital
business case justification
5%
5%
Completion of design element of ERP replacement
project in accordance with approved timetable and cost
5%
5%
Achievement of key EOS development markers
5%
3.5%
CFO MSTI KPIs
Achievement of supply chain and procurement strategy
changes inclusive of targeted annualised savings
7.5%
7.5%
Completion of design element of ERP replacement
project in accordance with approved timetable and cost
7.5%
7.5%
Completion of credit review and implementation of
improved credit and governance processes
5%
5%
7.3.2 FY24 LTI plans
The Board approves the KPI for the current LTI plans at the start of the performance period. This allows
the Board to ensure that the KPI remains appropriate and targets those areas most applicable to business
performance.
As it did in the previous year, in FY24 the board set the FY24 KPI based on earnings per share (EPS) growth
during the financial year, reflecting the importance of financial outcomes in overall company performance at
this stage in the Company’s evolution. The same EPS growth KPI applied for the FY24 performance periods
under each of the open LTI plans, being the FY24 CEO LTI, year 1 of the FY24 MLTI, year 2 of the FY23 LTI and
year 3 of the FY22 LTI.
The FY24 LTI KPI was set such that 0% would be payable if FY24 EPS growth is equal to or less than 0%; and
100% would be payable if FY24 EPS growth is equal to or greater than 8%. There would also be pro rata
payments between these levels.
In light of the Company’s overall performance, the EPS growth outcome exceeded the level required to
satisfy the EPS growth KPI with EPS growth at 28%. Accordingly, a 100% award will be made for the FY24
performance period under each of the open LTI plans, being the FY24 CEO LTI, year 1 of the FY24 MLTI, year 2
of the FY23 LTI and year 3 of the FY22 LTI.
For the FY25 performance period, the KPIs for the open LTI plans will be EPS growth and TSR growth, bringing
increased alignment between the shareholder experience and remuneration outcomes.
7.3.3 Incentive outcomes
STI
As set out above, the FY24 STI KPIs focused on safety, earnings and executive-specific personal targets.
Pleasingly, the Company’s earnings improved significantly and the TRIFR improved from 3.2 in FY23 to 2.8 in
FY24. This, combined with high performance against personal STI targets resulted in partial STI awards.
The following table outlines the proportion of maximum incentive opportunity that was earned (i.e awarded
following testing) or forfeited (i.e not awarded following testing) in relation to the FY24
STI plans.
Executive
Maximum STI
(% of TFR)
STI awarded
(% of Maximum STI)
STI forfeited
(% of Maximum STI)
Ian Testrow
130%
85.7%
14.3%
Theresa Mlikota
80%
87.2%
12.8%
Personal FY24 STI KPI weightings and achievement
60
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
Executive
Maximum LTI
(% of TFR)
LTI awarded (1)
(% of Maximum LTI)
LTI forfeited
(% of Maximum LTI)
Ian Testrow
120%
100%
0%
Executive
Maximum
LTI
(% of TFR)
LTI tested and
awarded in FY24
(% of Maximum LTI
available over
3 year period)
LTI tested and forfeited
in FY24
(% of Maximum LTI
available over
3 year period)
LTI to be tested
across FY25 & FY26
(% of Maximum LTI
available over
3 year period)
Theresa Mlikota
75%
33%
0%
67%
LTI
As noted above, the EPS growth KPI applicable to all of the LTI plans on foot was met. Accordingly, each
executive will be awarded their maximum equity entitlement under each plan they participate in.
FY24 CEO LTI outcomes
Awards under prior year LTI plans
FY24 MLTI outcomes
(1)
Awards under the FY24 CEO LTI plan were approved by shareholders at the 2023 AGM. Awards under the CEO LTI plan
will vest on release of Emeco’s FY27 full year results unless Mr Testrow’s employment ends earlier or there is a Change of
Control.
As noted in section 7.3.2 above, the EPS growth KPI also applied to the FY24 performance period under the
FY22 LTI plan and FY23 LTI plans. As such, for executives participating in the FY22 and FY23 plans, there has
been a maximum award under those plans for the FY24 performance period.
Graphic notes:
(1)
Expressed as a percentage of maximum LTI available over the 3-year period.
(2)
Mr Testrow is a participant of the FY22 and FY23 LTI plans. Ms Mlikota is not a participant of these earlier plans.
(3)
As detailed above, the KPI for the FY24 performance period is the same under all plans and the outcomes are therefore
the same. Outcomes for prior performance periods under the FY22 and FY23 LTI plans are detailed in the FY22 and
FY23 annual reports.
The FY21 LTI plan vested after release of the Company’s FY23 full year results. Overall performance under that
plan resulted in awards of approximately 50% of maximum entitlement.
As noted above, due to the EPS KPI being met in respect of the FY24 performance period, there has been 100%
award to executives under prior year plans in which they participate. Under these plans, assessment against
KPIs is progressive over a three-year period with one-third of the maximum incentive being tested each year.
Accordingly, a maximum of one-third of an executive’s FY22 and FY23 award was available to be earned in
FY24.
The FY22 LTI plan has now been fully tested across the three years and an overall award of approximately 52%
of a participating executive’s maximum entitlement has been made across the plan. The FY23 LTI has been
tested across two years of the performance period (testing two thirds of the maximum potential entitlement),
with one year (or one-third of the maximum potential entitlement) remaining to be tested in FY25.
The number of Rights which have or, subject to shareholder approval, will be awarded to KMP’s under these
plans is set out in section 10 below.
Any deferred components will be tested against their applicable KPIs in subsequent years.
0%
FY23 LTI
33%
33%
52%
33%
48%
FY22 LTI
10%
20%
30%
20%
50%
60%
70%
80%
90%
100%
Earned
Forfeited
Deferred
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
61
Statutory Executive KMP remuneration
The following table sets out total remuneration for executive KMP in FY24 and FY23, calculated in accordance
with statutory accounting requirements.
KMP
Short-term employee benefits
Post-employment benefits
Share-based
payments
Executive director
Ian Testrow (5) (6) FY24
1,429,982 1,394,250
597,641
27,500
81,026
-
2,245,113
5,775,512
63%
FY23
1,361,700
152,981
217,176
27,500
32,336
-
1,111,502
2,903,195
44%
Other executives
Theresa Mlikota FY24
650,351
477,287
-
27,500
13,950
-
316,515
1,485,603
53%
FY23
95,974
-
-
3,702
-
-
-
99,676
-
Thao Pham (7)
FY24
-
-
-
-
-
-
-
-
-
FY23
534,521
46,078
-
24,327
15,764
-
334,925
955,615
40%
TOTAL KMP
remuneration
FY24 2,080,333 1,871,537 597,641
55,000 94,976
-
2,561,628
7,261,115
61%
FY23
1,992,195
199,059
217,176
55,529
48,100
-
1,446,427 3,958,486
42%
(1)
These figures include annual leave accrual adjustments.
(2)
The FY24 figure includes awards under the FY24 STI as approved by the Board in August 2024. These awards will be
received in FY25.
(3)
Long service leave accruals are revalued where an employee’s remuneration increases. Figures also include certain on-
costs which may be re-calculated from time to time.
(4)
The FY24 figures include Rights granted (for accounting purposes) by the Company in FY19 to FY24, however no Rights
under the FY24 LTI plan were issued in FY24.
(5)
Mr Testrow’s salary & fees for FY23 include an interest expense reimbursement of $314,846 (inclusive of FBT) on a
personal loan provided by a subsidiary of the Company to Mr Testrow (refer to note 10 of the financial statements for
further information). The interest expense reimbursed was $166,868, with an estimated FBT liability of $147,978.
(6)
The non-monetary benefit for Mr Testrow reflects the zero-interest component of the loan provided by a subsidiary of
the Company of $316,748 (FY23: $115,103) plus estimated FBT of $280,893 (FY23: 102,073) totalling $597,641 (FY23:
$217,176). Refer to note 10 of the financial statements for further information.
(7)
Ms Pham ceased to be a KMP on 7 May 2023.
Salary & fees (1)
Superannuation
Long-term equity incentives (4)
Total statutory remuneration
% of remuneration
performance related
Short-term bonus payments (2)
Non-monetary
Other long-term benefits (3)
Termination benefits
Statutory executive KMP remuneration
62
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
8.
Executive contracts
FY24 remuneration arrangements for executives are formalised in their employment agreements. The
employment agreements are for an indefinite term unless terminated by either the Company or the executive.
The termination provisions under the executives’ employment agreements during FY24 are as follows:
Executive
Resignation
Termination
for cause
Termination
payment (1)
Managing Director & CEO notice period
(by company or executive)
12 months’ notice
No notice (2)
See section 7.1 (3)
CFO notice period
(by company or executive)
6 months’ notice
No notice
Nil
(1)
Other than salary in lieu of notice and accrued statutory leave entitlements.
(2)
Until the end of the Variation Period (30 June 2027), Mr Testrow’s employment can only be terminated in specified
circumstances, such as serious misconduct, material breach of policy, bankruptcy, serious or persistent breach of
employment agreement, on conviction of an indictable offence (excluding road traffic offences absent a custodial
penalty) and other similarly serious circumstances.
(3)
At the 2023 AGM, shareholders approved the termination payments that would be payable to Mr Testrow should his
employment end prior to the end of the Variation Period (30 June 2027).
9.
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 annually in August. 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 fee pool at the 2024 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 as chair or in board committee work.
During FY24, in accordance with the recommendation of the Remuneration and Nomination Committee:
• the non-executive director fees were increased by 3% effective 1 October 2023.
• the legislated increase in superannuation guarantee contributions of 0.5% was applied on top of
remuneration for non-executive directors effective from 1 July 2023.
• directors were paid a fee for each committee they were a member from 1 August 2023.
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
63
The table below summarises the non-executive directors fee policy for FY24 (inclusive of superannuation):
Non-executive directors do not receive retirement or termination benefits, nor do they participate in any short
or long term incentive programme.
The remuneration of non-executive directors for FY24 and FY23 is detailed in the table below.
Board fees
30 June 2024
30 June 2023
Chair
$178,869
$172,796
Directors
$113,038
$109,200
Committee fees
30 June 2024
30 June 2023
Committee Chair
$15,071
$14,560
Committee Member
$11,303
$10,920
Statutory non-executive director remuneration
Non-executive
directors
Short-term
employee benefits
Post-employment
benefits
Long-term
benefits
Total
Salary and fees
Superannuation
benefits
Long-term
equity
incentives
Peter Frank
FY24
105,314
11,575
-
116,889
FY23
100,486
10,410
-
110,896
Peter Kane
FY24
122,737
13,491
-
136,228
FY23
107,708
11,168
-
118,876
James Walker III
FY24
104,096
11,440
-
115,536
FY23
5,853
615
-
6,468
Sarah
Adam-Gedge (1)
FY24
91,196
10,032
-
101,228
FY23
-
-
-
-
Peter Richards (2)
FY24
169,512
18,630
-
188,143
FY23
167,507
17,419
-
184,926
Keith Skinner (3)
FY24
-
-
-
-
FY23
107,525
11,145
-
118,670
TOTAL
FY24
592,855
65,168
-
658,023
FY23
489,079
50,757
-
539,836
(1)
Ms Adam-Gedge commenced as a director on 1 October 2023.
(2)
Mr Richards retired as a director on 31 May 2024.
(3)
Mr Skinner retired as a director on 13 June 2023.
10. Additional disclosures relating to share-based payments
Grants and vesting of equity-settled awards made during FY24 to executives in connection with the Company’s
open long-term incentive plans are set out in the next table.
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.
64
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
Summary of executive KMP allocated, vested or lapsed equity
Executive
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 4)
15/11/2018
1,000,000
100%
-
24/08/2023
$3.30
2021 LTI (Year 1)
18/11/2021
377,020
100% [D]
-
25/08/2023
$1.06
LTI (Year 2)
17/11/2022
218,275
100% [D]
-
25/08/2023
$0.68
LTI (Year 3) [E]
-
-
-
100%
-
-
2022 LTI (Year 1)
17/11/2022
194,485
-
-
22/08/2024
$0.70
LTI (Year 2) [E]
-
-
-
100%
-
-
LTI (Year 3) [B]
-
-
-
-
Aug-2024
-
2023 LTI (Year 1) [E]
-
-
-
100%
-
-
LTI (Year 2) [B]
-
-
-
-
Aug 2025
-
LTI (Year 3)
-
-
-
-
Aug 2025
-
2024 CEO LTI
29/11/2023
2,307,693
-
0%
Aug-2027
$0.71
Theresa Mlikota [F]
2024 MLTI (Year 1)
19/12/2023
271,881 [c]
-
0%
Aug-2026
$0.64
2024 MLTI (Year 2)
19/12/2023
271,881 [c]
-
-
Aug-2026
$0.64
2024 MLTI (Year 3)
19/12/2023
271,881 [c]
-
-
Aug-2026
$0.64
[A]
Mr Testrow’s grant of awards under: (i) FY19 MIP were approved by shareholders on 15 November 2018; (ii) FY21 LTI
(Year 1) was approved by shareholders on 18 November 2021; (iii) FY21 LTI (Year 2) and FY22 LTI (Year 1) was approved
by shareholders on 17 November 2022; (iv) no grant was made in respect of FY21 LTI (Year 3), FY22 LTI (Year 2) and
FY23 LTI (Year 1).
[B]
Mr Testrow may, subject to shareholder approval, be granted 353,607 Rights in respect of Year 3 of the FY22 LTI and
479,192 Rights in respect of Year 2 FY23 LTI.
[C]
This figure represents maximum entitlement under the FY24 LTI plan 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 below for more information regarding Rights held by KMPs.
[D]
Rights under the FY21 LTI plan vested on 24 August 2023, becoming vested performance rights. These vested
performance rights were exercised into ordinary shares in accordance with their terms on 25 August 2023. Further
details regarding the FY21 LTI plan is set out in the FY21 remuneration report.
[E]
There was no award for the 2023 performance period under the FY21, FY22 or FY23 LTI plan due to failure to satisfy the
KPI.
[F]
Ms Mlikota commenced her role in May 2023 and is eligible to participate in the STI and LTI plans from FY24.
(1)
Grant date in this table relates to the grant of the long-term incentive for accounting purposes only and, in respect of the
FY21 FY22, FY23 and FY24 MLTI incentive plans, differs from the date Rights may be issued over the course of the life of
the plan.
(2)
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 relevant plans and are stated prior to
assessment of the relevant KPI.
(3)
Includes amounts for FY22 LTI (Year 3) and FY23 LTI (Year 2) and FY24 CEO LTI and FY24 MLTI (year 1) following the
assessment of the FY24 KPI by the Board after the end of the FY24 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 5, ‘What happens if an executive leaves?’ in respect of the FY24 LTI
plan). A participant has a period of time after the vesting date 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 7 for details of the KPI applicable to awards under the FY24 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 Statutory executive
KMP remuneration table 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.
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
65
KMP Rights
Details of Rights held by KMP, including their personally related entities, for FY24 are as follows:
KMP
Rights (1)
Holding at
1 July 2023
Rights
issued in
FY24 (2)
Rights
vested in
FY24 (3)
Holding at
30 June
2024
Potential
future
Rights (4)
Executive director
Ian Testrow
Rights /
performance shares
1,000,000
-
1,000,000
-
-
Rights /
performance shares
789,780
-
595,295 [A]
194,485
3,619,684
Other executives
Theresa Mlikota (5)
Rights /
performance shares
-
-
-
-
815,643
KMP
Holding at
1 July 2023
Shares received
as a result of
rights vesting in
FY24
Shares
otherwise
issued in
FY24
Net other
changes
Holding at
30 June 2024
Non-executive directors
Peter Richards [A]
11,044
-
-
-
11,044
Peter Frank
-
-
-
-
-
Peter Kane
10,288
-
-
-
10,288
James Walker III
-
-
-
-
-
Sarah Adam-Gedge
-
-
-
-
-
Executives
Ian Testrow
13,581,238
1,595,295
-
-
15,176,533
Theresa Mlikota
-
-
-
-
-
(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. On satisfaction of those conditions, ordinary shares will be received by the holder of the
performance share on the vesting date. A performance right will, on vesting, become exercisable into ordinary shares at
the election of the holder within the exercise period.
(2)
There was no LTI award for the FY23 performance period due to failure to satisfy the LTI KPI.
(3)
Rights vested in FY24 includes awards under the FY19 MIP and the FY21 LTI incentive plans.
(4)
Maximum remaining possible entitlement to Rights under the FY22, FY23 and FY24 LTI plans.
(5)
Ms Mlikota commenced as CFO in May 2023 and is eligible to participate in the MLTI plan from FY24.
[A]
595,295 performance rights issued under the FY21 LTI plan vested after release of the Company’s FY23 full year results
and were exercised into ordinary shares on 25 August 2023.
KMP Shareholding
Details of shares held by KMP, including their personally related entities, for FY24 are as follows:
[A]
Mr Richards retired as a director on 31 May 2024.
66
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Remuneration Report For the year ended 30 June 2024
11. 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 was designed to incentivise Mr Testrow to retain his equity investment in the Company at current
levels. 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).
Further details regarding this loan and amounts paid during the year are set out in Statutory executive KMP
remuneration table above and in note 10 of the notes to the financial statements.
12. 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
Dated at Perth, 21st day of August 2024
67
Emeco Holdings Limited and its Controlled Entities
Auditor’s Independence Declaration For the year ended 30 June 2024
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
21 August 2024
Dear Board Members
Auditor’s Independence Declaration to Emeco Holdings Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Emeco Holdings Limited.
As lead audit partner for the audit of the financial report of Emeco Holdings Limited for the financial year ended 30 June
2024, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
68
Financial
Statements
PAGE
Consolidated Statement of Profit or Loss
71
and Other Comprehensive Income
Consolidated Statement of Financial Position
72
Consolidated Statement of Changes in Equity
73
Consolidated Statement of Cash Flows
74
Notes to the Consolidated Financial Statements
75
Directors’ Declaration
123
Independent Auditor’s Report
124
69
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
70
The financial statements cover Emeco Holdings Limited
(“the Company” or “the Parent”) as a consolidated entity
(referred to hereafter as “the Group”) consisting of Emeco
Holdings Limited and the entities it controlled at the end
of, or during, the year. The financial statements are
presented in Australian dollars, which is the functional
and presentation currency of the Company.
Emeco Holdings Limited is a public company limited by
shares, incorporated, and domiciled in Australia.
The Group is a for-profit entity.
A description of the nature of the Group’s operations and
its principal activities are included in the Directors’ Report,
which is not part of the financial statements.
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 2023.
The consolidated financial statements were authorised
for issue by the board of directors on 21 August 2024.
An accounting policy, critical accounting estimate,
assumption, or judgement specific to a note is disclosed
within the note itself.
71
71
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
For the year ended 30 June 2024
2024
2023
Note
$'000
$'000
Revenue
1
822,728
874,917
Other income
3
3,689
4,087
Repairs and maintenance
(140,058)
(152,704)
Employee expenses
4
(107,958)
(151,200)
External mining and maintenance services
(188,533)
(223,938)
Cartage and fuel
(27,690)
(21,606)
Depreciation and amortisation expense
4
(155,192)
(145,821)
Impairment of tangible assets
4
(16,345)
(981)
Other expenses
4
(89,215)
(80,594)
Trade receivables written-off
9
-
(23,013)
Finance income
4
1,795
670
Finance costs
4
(27,393)
(27,928)
Net foreign exchange loss
4
(223)
(52)
Profit before tax expense
75,605
51,837
Tax expense
5
(22,945)
(10,506)
Profit after tax
52,660
41,331
Other comprehensive income/(loss)
Items that are or may be reclassified to profit and loss:
Foreign currency translation differences (net of tax)
211
169
Total other comprehensive income for the year
211
169
Total comprehensive income for the year
52,871
41,500
Profit attributable to:
Owners of the Company
52,660
41,331
Profit for the year
52,660
41,331
Total comprehensive profit attributable to:
Owners of the Company
52,871
41,500
Total comprehensive income for the year
52,871
41,500
2024
2023
Note
cents
cents
Profit per share:
Basic earnings per share
6
10.20
7.99
Diluted earnings per share
6
10.04
7.85
72
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Financial Position As at 30 June 2024
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
2024
Restated
2023
Note
$'000
$'000
Current assets
Cash and cash equivalents
8
78,265
46,673
Trade and other receivables
9
139,231
157,765
Inventories and work in progress
11
41,635
46,584
Assets held for sale
12
15,738
1,165
Other current assets
9
19,132
16,890
Total current assets
294,001
269,077
Non-current assets
Intangible assets
17
8,754
9,657
Property, plant and equipment
15
783,680
752,632
Right-of-use assets
16
83,661
75,527
Other financial assets
10
4,662
4,677
Total non-current assets
880,757
842,493
Total assets
1,174,758
1,111,570
Current liabilities
Trade and other payables
13
130,485
170,292
Interest bearing liabilities
19
53,551
23,746
Provisions
14
11,780
15,645
Total current liabilities
195,816
209,683
Non-current liabilities
Interest bearing liabilities
19
305,185
298,901
Provisions
14
725
696
Deferred tax liabilities
5
35,791
12,846
Total non-current liabilities
341,701
312,443
Total liabilities
537,517
522,126
Net assets
637,241
589,444
Equity
Share capital
20
1,148,838
1,149,254
Reserves
20
(4,433)
(6,474)
Accumulated losses
(507,164)
(553,336)
Total equity attributable to equity holders of the Company
637,241
589,444
73
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Changes in Equity For the year ended 30 June 2024
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Share
Foreign
based
currency
Share
payment
translation
Treasury Accumulated
Total
capital
reserve
reserve
shares
losses
equity
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2023
1,149,254
24,087
(169) (30,392)
(553,336) 589,444
Total comprehensive income for the year
Profit for the year
-
-
-
-
52,660
52,660
Other comprehensive income
Foreign currency translation differences
-
-
211
-
-
211
Total comprehensive income for the year
-
-
211
-
52,660
52,871
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
On market share buy-back
(416)
-
-
-
-
(416)
Dividends paid
-
-
-
-
(6,488)
(6,488)
Shares vested during the year
-
(4,127)
-
4,127
-
-
Shares purchased by trust
-
-
-
(1,700)
-
(1,700)
Share-based payment transactions
-
3,530
-
-
-
3,530
Total contributions by and distributions to
owners
(416)
(597)
-
2,427
(6,488)
(5,074)
Balance at 30 June 2024
1,148,838
23,490
42 (27,965)
(507,164)
637,241
Share
Foreign
based
currency
Share
payment
translation
Treasury Accumulated
Total
capital
reserve
reserve
shares
losses
equity
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2022
1,155,856
28,475
-
(35,469)
(581,641)
567,221
Total comprehensive income for the year
Profit for the year
-
-
-
-
41,331
41,331
Other comprehensive income
Foreign currency translation differences
-
-
(169)
-
-
(169)
Total comprehensive income for the year
-
-
(169)
-
41,331
41,162
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
On-market share buy-back
(6,602)
-
-
-
-
(6,602)
Dividends paid
-
-
-
-
(13,026)
(13,026)
Shares vested during the year
-
(5,805)
-
5,805
-
-
Shares purchased by trust
-
-
-
(728)
-
(728)
Share-based payment transactions
-
1,417
-
-
-
1,417
Total contributions by and distributions to
owners
(6,602)
(4,388)
-
5,077
(13,026)
(18,939)
Balance at 30 June 2023
1,149,254
24,087
(169) (30,392)
(553,336) 589,444
74
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Consolidated Statement of Cash Flows For the year ended 30 June 2024
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
2024
2023
Note
$'000
$'000
Cash flows from operating activities
Cash receipts from customers
897,909
915,963
Cash paid to suppliers and employees
(635,986)
(683,760)
Cash generated from operations
261,923
232,203
Finance income received
1,548
572
Finance costs paid
(26,301)
(26,387)
Net cash generated by operating activities
7
237,170
206,388
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
13,514
3,485
Payment for property, plant and equipment
(214,947)
(179,411)
Loan issued to related party
10
-
(4,949)
Net cash used in investing activities
(201,433)
(180,875)
Cash flows from financing activities
Dividends paid to Company’s shareholders
(6,488)
(13,026)
Payments for shares bought back including brokerage
(416)
(6,602)
Purchase of own shares
(1,700)
(728)
Proceeds from borrowings
95,000
56,806
Repayment of borrowings
(66,217)
(52,781)
Repayment of lease liabilities and other financing
(24,311)
(22,664)
Net cash used in financing activities
(4,132)
(38,995)
Net increase/(decrease) in cash and cash equivalents
31,605
(13,482)
Cash and cash equivalents at beginning of the year
46,673
60,158
Effects of exchange rate fluctuations on cash held
(13)
(3)
Cash and cash equivalents at the end of the financial year
78,265
46,673
75
Notes to the
Consolidated
Financial
Statements
Page
A
Results
76
1
Operating Segments
77
2
Revenue
79
3
Other Income
79
4
Expenses
80
5
Tax
82
6
Earnings per share
86
B
Cash Flow Information
87
7
Reconciliation of Profit After
Income Tax to Net Cash from
Operating Activities
87
C
Working Capital
88
8
Cash and Cash Equivalents
88
9
Trade and Other Receivables
88
10
Other Financial Assets
90
11
Inventories
91
12
Assets Held for Sale
92
13
Trade and Other Payables
94
14
Provisions
95
D
Fixed Assets
96
15
Property, Plant and Equipment 96
16
Right-of-use Assets
98
17
Intangible Assets and Goodwill 99
E
Risk
100
18
Financial Risk Management
100
Page
F
Debt And Equity
106
19
Interest Bearing Liabilities
106
20
Equity - Issued Capital and
Reserves
109
G
Unrecognised Items
111
21
Commitments
111
22
Contingent Liabilities
111
H
Other Information
/ Group Structure
112
23
Controlled Entities
112
24
Compensation of Key
Personnel
113
25
Share-based Payments
114
26
Remuneration of Auditors
116
27
Deed of Cross Guarantee
116
28
Parent Entity Disclosure
119
29
Other Significant Accounting
Polices
120
30
Subsequent Events
121
Consolidated Entity
Disclosure Statement
122
Directors’ Declaration
123
Independent Auditor’s
Report
124
76
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
The Group has three (2023: three) reportable segments, as described below, which are the Group’s strategic
business units. The strategic business units offer different products and services and were 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:
Emeco Rental
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.
Force Workshops
Provides maintenance, equipment and component rebuild services to customers in Australia.
Emeco Underground
Provides a range of underground equipment rental services solutions and associated services to customers in
Australia. This segment changed its name to Emeco Underground, formerly Pit n Portal (PnP), which previously
included revenue from mining services. Refer to note 12 for further information.
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 2024, the Group had three (2023: three) major customers comprising 10% or more
of total Group revenue across the segments as indicated below:
A Results
2024
2023
$’000
$’000
Emeco Rental
187,961
87,981
Force Workshops
88,557
104,443
Emeco Underground
-
108,722
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
77
1.
Operating Segments
Information about reportable segments
Emeco
Rental
Force
Workshops
Emeco
Underground
Total
$’000
$’000
$’000
$’000
Year ended 30 June 2024
Segment revenue
544,749
282,412
111,768
938,929
Intersegment revenue
-
(116,201)
-
(116,201)
Revenue from external customers
544,749
166,211
111,768
822,728
Other income
920
31
2,120
3,071
Restructuring costs
-
-
(2,410)
(2,410)
Segment earnings before interest,
tax, depreciation and amortisation
288,223
15,773
18,704
322,700
Impairment of tangible assets
(669)
-
(15,676)
(16,345)
Depreciation and amortisation
(131,798)
(6,394)
(15,587)
(153,779)
Segment result (EBIT)
155,756
9,379
(12,559)
152,576
Corporate overheads
(51,150)
EBIT
101,426
Net finance expense
(25,598)
Net foreign exchange loss
(223)
Net profit before tax
75,605
Tax expense
(22,945)
Net profit after tax
52,660
Total assets for reportable segments
928,360
53,046
114,276
1,095,682
Unallocated assets
79,076
Total Group assets
1,174,758
Net capital expenditure
188,761
3,698
8,974
201,433
Total liabilities for reportable segments
101,127
51,939
15,302
168,368
Unallocated liabilities
369,149
Total Group liabilities
537,517
78
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
Emeco
Rental
Force
Workshops
Emeco
Underground
Total
$'000
$'000
$'000
$'000
Restated
Year ended 30 June 2023
Segment revenue
499,636
246,658
223,638
969,932
Intersegment revenue
(4,819)
(90,196)
-
(95,015)
Revenue from external customers
494,817
156,462
223,638
874,917
Other income
2,504
-
1,235
3,739
Trade receivables written-off
-
-
(23,013)
(23,013)
Segment earnings before interest,
tax, depreciation and amortisation
259,744
11,776
(5,796)
265,724
Impairment of tangible assets
(981)
-
-
(981)
Depreciation and amortisation
(120,489)
(4,520)
(17,483)
(142,492)
Segment result (EBIT)
138,274
7,256
(23,279)
122,251
Corporate overheads
(43,104)
EBIT
79,147
Net finance expense
(27,258)
Net foreign exchange loss
(52)
Net profit before tax
51,837
Tax expense
(10,506)
Net profit after tax
41,331
Total assets for reportable segments
831,836
55,968
168,392
1,056,196
Unallocated assets
55,374
Total Group assets
1,111,570
Net capital expenditure
162,871
2,432
10,623
175,926
Total liabilities for reportable segments
130,766
53,010
37,848
221,624
Unallocated liabilities
300,502
Total Group liabilities
522,126
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
79
(1)
Included in net profit on sale of Rental 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 was $13,514,000 (2023:
$3,485,000).
(2)
Included in net profit on sale of PnP non-current assets is the sale of infrastructure assets and light vehicles to
Macmahon as part of the sale of PnP mining services contracts. The gross proceeds from the sale of these assets was
$6,736,000 (2023: nil).
3
Other Income
The Group disaggregates revenue from its contracts with customers through three strategic business units,
Emeco Rental, Force Workshops and Emeco Underground. 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, 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
reportable segments, refer to note 1.
Revenue is disclosed based on the type of good or service provided.
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.
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 a schedule of rates or a cost-plus basis.
Maintenance services
Maintenance services relate to the provision of both major component and full equipment rebuilds for both
internal and external customers and the provision of mobile workshop services and infrastructure to support
both Emeco and external customers’ equipment. 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.
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.
2
Revenue
2024
2023
$'000
$'000
Net profit on sale of Rental non-current assets (1)
1,034
1,428
Profit on sale of PnP non-current assets (2)
1,344
-
Sundry income
1,311
2,659
3,689
4,087
80
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
4
Expenses
Profit before tax expense includes the following specific expenses:
2024
2023
Note
$'000
$'000
Profit before income tax expense has been arrived
at after charging/(crediting) the following items:
Impairment of tangible assets:
- PnP inventory
2,125
(2)
- PnP property, plant and equipment
13,601
-
- Rental property, plant and equipment
619
983
16,345
981
Employee expenses:
- salaries, wages and superannuation
104,428
149,783
- employee share plan expenses
3,530
1,417
107,958
151,200
Other expenses:
- motor vehicles
3,368
3,506
- safety, staff training and amenities
5,445
5,234
- travel and subsistence expense
13,140
12,613
- workshop consumables, tooling and labour
6,228
6,487
- insurance
4,102
5,103
- property and office expenses
6,935
10,616
- telecommunications and IT
4,307
4,401
- restructuring and redundancies
2,410
-
- corporate, accounting and legal
5,513
4,253
- hired-in equipment and services
29,784
22,423
- other expenses
7,983
5,958
89,215
80,594
Depreciation of property, plant and equipment:
- buildings
54
46
- plant and equipment
132,612
121,864
- office equipment
677
1,080
- motor vehicles
1,697
1,756
- leasehold improvements
318
218
- sundry plant
1,655
1,553
15
137,013
126,517
Depreciation of right-of-use asset
16
17,563
17,855
Total depreciation
154,576
144,372
Amortisation of intangible assets:
- contract intangible
568
790
- software
48
659
17
616
1,449
Total depreciation and amortisation
155,192
145,821
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
81
(1)
Refer to note 19 for further details associated with these finance costs.
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.
Finance income and finance costs
The Group’s finance income and finance costs include:
• interest income;
• interest expense;
• 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 10 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.
2024
2023
$'000
$'000
Finance costs:
- interest expense
25,245
25,016
- amortisation of debt establishment costs using effective interest rate
1,091
1,366
- other facility costs
1,057
1,546
Finance costs(1)
27,393
27,928
Finance income:
- interest income
(1,795)
(670)
Finance income
(1,795)
(670)
Foreign exchange loss/(gain):
- net realised foreign exchange loss
146
1
- net unrealised foreign exchange loss
77
51
Net foreign exchange loss
223
52
82
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
5
Tax
a) Income tax expense
2024
2023
$'000
$'000
Deferred tax expense
Origination and reversal of temporary differences and tax losses
in the current year
22,945
10,506
Tax expense
22,945
10,506
b) Current and deferred tax expense / (benefit) recognised
directly in equity
2024
2023
$'000
$'000
Foreign exchange expense/(benefit)
(28)
218
(28)
218
c) Numerical reconciliation of income tax expense and tax at the
statutory rate
2024
2023
$'000
$'000
Tax at the statutory rate of 30%
22,682
15,551
Increase/(decrease) in income tax expense due to:
Derecognition of foreign tax losses
73
35
Other non-deductible expenses
150
58
Prior year error - debt deductions
-
(2,299)
Additional tax losses arising from amended interest deductions
-
(3,635)
Under provided in prior years
40
796
Tax expense
22,945
10,506
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
83
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2024
2023
2024
2023
2024
2023
$'000
$'000
$'000
$'000
$'000
$'000
Property, plant and equipment
-
-
(125,429)
(132,739)
(125,429)
(132,739)
Intangibles
-
-
(255)
(470)
(255)
(470)
Receivables
-
-
(790)
(614)
(790)
(614)
Right-of-use contracts
1,091
17,387
-
-
1,091
17,387
Other financial assets
-
-
(739)
(178)
(739)
(178)
Inventories
-
-
(2,139)
(2,256)
(2,139)
(2,256)
Payables
1,099
741
-
-
1,099
741
Interest bearing loans and
borrowings
-
-
-
(209)
-
(209)
Unearned revenue
-
-
869
(25)
869
(25)
Business costs
186
516
-
-
186
516
Provisions
3,751
11,688
-
-
3,751
11,688
Borrowing costs
-
-
-
-
-
-
Employee share costs
-
-
321
(228)
321
(228)
Tax losses carried forward
86,244
93,541
-
-
86,244
93,541
Tax assets/(liabilities)
92,371
123,873
(128,162)
(136,719)
(35,791)
(12,846)
Set off of tax
(92,371)
(123,873)
92,371
123,873
-
-
Net tax assets/(liabilities)
-
-
(35,791)
(12,846)
(35,791)
(12,846)
Movement in deferred tax balances
Recognised
Recognised
Balance
in profit
directly
Balance
1 July 2023
Reclass [1]
or loss
in equity
30 June 2024
$'000
$'000
$'000
$'000
$'000
Property, plant and equipment
(132,739)
17,915
(10,605)
-
(125,429)
Intangible assets
(470)
-
215
-
(255)
Receivables
(614)
-
(176)
-
(790)
Right-of-use contracts
17,387
(17,915)
1,619
-
1,091
Other financial assets
(178)
-
(561)
-
(739)
Inventories
(2,256)
-
117
-
(2,139)
Payables
741
-
328
30
1,099
Interest bearing loans and
borrowings
(209)
-
209
-
-
Unearned revenue
(25)
-
894
-
869
Business costs
516
-
(330)
-
186
Provisions
11,688
-
(7,937)
-
3,751
Employee share costs
(228)
-
549
-
321
Tax losses carried forward
93,541
-
(7,297)
-
86,244
(12,846)
-
(22,975)
30
(35,791)
(1)
Reclassification of deferred tax balances related to reclassification of equipment between property, plant and equipment
and right-of-use assets.
84
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
Unutilised tax losses are in Chile, Indonesia, the United Kingdom, United States and Europe and are not
expected to be utilised by the Group.
Recognised
Recognised
Balance
in profit
directly
Balance
1 July 2022
Reclass [1]
or loss
in equity
30 June 2023
$'000
$'000
$'000
$'000
$'000
Property, plant and
equipment
(114,501)
(8,936)
(9,302)
-
(132,739)
Intangible assets
(470)
-
-
-
(470)
Receivables
(289)
-
(325)
-
(614)
Right-of-use contracts
13,021
8,936
(4,570)
-
17,387
Other financial assets
(168)
-
(10)
-
(178)
Inventories
(1,574)
-
(682)
-
(2,256)
Payables
1,050
-
(91)
(218)
741
Interest bearing loans and
borrowings
-
-
(209)
-
(209)
Unearned revenue
(25)
-
-
-
(25)
Business costs
847
-
(331)
-
516
Provisions
4,582
-
7,106
-
11,688
Borrowing costs
4,739
-
(4,739)
-
-
Employee share costs
(434)
-
206
-
(228)
Tax losses carried forward
91,100
-
2,441
-
93,541
(2,122)
-
(10,506)
(218)
(12,846)
2024
2023
$'000
$'000
The following deferred tax assets have not been
brought to account as assets:
Tax losses
82,498
82,425
Unrecognised deferred tax assets
(1)
Reclassification of deferred tax balances related to reclassification of equipment between property, plant and equipment
and right-of-use assets.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
85
Use of estimates and judgements
Recognition of tax losses
In accordance with the Company’s accounting policies for deferred taxes, a deferred tax asset is recognised
for unused tax losses only if it is probable that future taxable profits will be available to utilise these losses.
This includes estimates and judgements about future profitability, capital structure and tax rates. Changes
in these estimates and assumptions could impact on the amount and probability of unused tax losses and
accordingly the recoverability of deferred tax assets. Operating profits have continued to be generated in the
current period, with tax losses of $26,664,000 being utilised in the current year, taking the recognised losses to
$86,244,000 as at 30 June 2024 (2023: $93,541,000). The Company expects to fully utilise these Australian
tax losses as the Group is expected to continue to trade profitably.
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 way the Group expects,
at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they
reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets
and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to
the extent that it is probable that future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised 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 adopted the AASB 112 amendments related to the Organisation for Economic Co-operation
and Development Pillar two tax reforms and has performed an assessment of its potential exposure to the
profit and tax liability.
86
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
6
Earnings Per Share
Basic earnings per share
The calculation of basic earnings per share for the year ended 30 June 2024 was based on the profit
attributable to ordinary shareholders of $52,660,000 (2023: $41,331,000) and a weighted average number
of ordinary shares outstanding less any treasury shares for the year ended 30 June 2024 of 516,388,000
(2023: 517,322,000).
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 a company’s liquidation, ordinary shareholders rank behind all other creditors and are only
entitled to any remaining proceeds after all secured, unsecured, and preferential creditors have been paid.
2024
2023
$'000
$'000
Profit for the year
52,660
41,331
Weighted average number of ordinary shares
2024
2023
'000
'000
Issued ordinary shares at 1 July
515,594
522,104
Effect of vested employee share plans
1,123
1,033
Effect of on-market share buy-back during the year
(329)
(5,815)
Weighted average number of ordinary shares (basic) at 30 June
516,388
517,322
cents
cents
Profit per share:
Basic earnings per share
10.20
7.99
Profit attributed to ordinary shares (basic)
Diluted earnings per share
The calculation of diluted earnings per share for the year ended 30 June 2024 was based on the profit
attributable to ordinary shareholders of $52,660,000 (2023: $41,331,000) and a weighted average number
of ordinary shares outstanding less any treasury shares during the financial year ended 30 June 2024 of
524,283,000 (2023: 526,247,000).
Profit attributed to ordinary shareholders (diluted)
2024
2023
$'000
$'000
Profit attributed to ordinary shareholders (basic)
52,660
41,331
Weighted average number of ordinary shares (diluted)
2024
2023
'000
'000
Issued ordinary shares at 1 July
515,594
522,104
Effect of vested employee share plans
1,123
1,033
Effect of unvested employee share plans
7,895
8,925
Effect of on-market share buy-back during the year
(329)
(5,815)
Weighted average number of ordinary shares (diluted) at 30 June
524,283
526,247
cents
cents
Profit per share:
Diluted earnings per share
10.04
7.85
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
87
7 Reconciliation of Profit After Income Tax to Net Cash from Operating Activities
For the purposes of the statement of cash flows, 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
statement of cash flows is reconciled to the related items in the statement of financial position
as follows:
B Cash Flow Information
2024
2023
Note
$'000
$'000
Net profit after tax
52,660
41,331
Add/(less) items classified as investing/financing
activities:
Profit on sale of non-current assets
3
(2,378)
(1,428)
Add/(less) non-cash items:
Depreciation and amortisation
4
155,192
145,821
Amortisation of borrowing costs using effective interest rate
4
1,091
1,366
Net foreign exchange loss
4
223
52
Impairment losses on tangible assets
4
16,345
981
Trade receivables written-off
9
-
23,013
Equity settled share-based payments
4
3,530
1,417
Income tax expense
5
22,945
10,506
Net cash from operating activities before change in assets/
(liabilities)
249,608
223,059
Change in operating assets and liabilities, net of effects from
purchase of controlled entity:
Decrease/(increase) in trade and other receivables
3,831
(22,501)
(Increase) in inventories
(112)
(965)
(Decrease)/increase in trade and other payables
(12,318)
5,680
(Decrease)/increase in provisions
(3,839)
1,115
Net cash from operating activities
237,170
206,388
88
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
8
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and subject to an insignificant risk of changes in value.
9
Trade and Other Receivables and Other Current Assets
(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 10 for further information.
C Working Capital
2024
2023
$'000
$'000
Cash at bank
78,265
46,673
2024
2023
$'000
$'000
Current
Trade and other receivables
Trade receivables
111,860
112,262
Accrued revenue
18,184
33,862
Less: Allowance for expected credit losses
(308)
(190)
129,736
145,934
VAT/GST receivable
-
511
Other receivables
9,179
11,058
Deferred employee benefits expense(1)
316
262
139,231
157,765
Other current assets
Prepayments
5,085
4,703
Contract assets
14,047
12,187
19,132
16,890
89
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
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.
The movement in the allowance for expected credit losses (“ECL”) in respect of trade receivables and accrued
revenue during the period was as follows:
(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.
2024
2023
$'000
$'000
Opening loss allowance
190
189
Collective expected credit losses recognised during the year (1)
-
1
Loss allowance on trade receivables arising during the year
118
23,013
Loss allowance on trade receivables written off during the year
-
(23,013)
Closing loss allowance
308
190
The Group’s exposure to credit risks, currency risks and impairment losses associated with trade and other
receivables are disclosed in note 18.
Contract costs
Costs incurred to prepare assets for work on a specific contract (or specific anticipated contract) that can be
separately identified, such as mobilisation 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’s policy is 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.
90
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
10 Other Financial Assets
Loan issued to related party
At the Company’s 2022 AGM held on 17 November 2022, the provision of a zero-interest loan by a subsidiary
of the Company to Mr 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 Testrow for interest expense incurred during 2023 on a personal
loan drawn with a third party Australian financial institution. The FBT liability associated with the interest
expense reimbursement provided to Mr Testrow is $147,978, resulting in a total cost of interest reimbursement
of $314,846.
A non-monetary employee benefits expense of $316,748 (2023: $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 Testrow. The estimated FBT liability associated with the zero-interest component of the
unsecured loan provided to Mr Testrow is $280,893 (2023: $102,073), resulting in a total zero-interest loan
benefit of $597,641 (2023: $217,176). The non-monetary benefit and FBT liability for 2023 and 2024 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 Testrow for the year ended 30 June 2024, inclusive of FBT was $597,641 (2023: $532,022).
The current portion of the loan of $316,748 (2023: $262,000) is recorded in other receivables (refer to note
9), reflecting the expected employee benefits expense to be recognised over the next 12 months for the zero-
interest loan provided to Mr Testrow, while the remaining loan receivable of $4,662,000 (2023: $4,677,000) is
recorded as an “other financial asset” in the Statement of Financial Position.
On 3 August 2023, the Group announced material changes to Mr Testrow’s terms of employment, resulting
in the loan attracting an interest rate of 12% per annum, only in the event that Mr 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 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 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.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
91
11 Inventories
(1)
During the year ended 30 June 2024, $2,125,000 impairment of inventories on sale of PnP was recognised in the
consolidated statement of profit or loss and other comprehensive income (2023: $2,000).
(2)
Refer to note 29 for details on prior year restatement.
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.
2024
Restated (2)
2023
$'000
$'000
Work in progress - at cost (1)
23,797
25,221
Consumables, equipment & spare parts - at cost
12,590
18,001
Total at cost
36,387
43,222
Equipment and parts - at net realisable value
5,248
3,362
Total inventory
41,635
46,584
92
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
During the year $34,209,000 (2023: $1,869,000) of assets were transferred from property, plant and
equipment into assets held for sale. Assets classified during the period as held for sale were impaired by
$14,220,000 (2023: $983,000) to their fair value less cost to sell based on market prices of similar equipment.
As at 30 June 2024, assets held for sale comprised of $15,738,000 (2023: $1,165,000). Level 3 fair value
hierarchy has been used in determining the fair value with reference to an independent valuation utilising
observable market valuations less estimated costs to sell. The Group is actively marketing these assets and they
are expected to be disposed of within 12 months.
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.
12 Assets Held for Sale
On 19 December 2023, the Group executed an agreement to sell Pit N Portal’s contracting business, effective
1 January 2024, which included certain mining contracts, assets, inventory and the transfer of employee
liabilities. Emeco retains the majority of the underground mining fleet in order to continue to provide
rental services. This transaction was completed on 2 February 2024, and assets considered surplus to the
requirements of the ongoing business were impaired during the reporting period, resulting in total impairments
of $15,676,000 (property, plant and equipment and inventory) recognised in the Emeco Underground segment.
Property, plant and equipment including light vehicles with a book value of $5,392,000 was sold for proceeds of
$6,736,000, resulting in a gain on sale of $1,344,000. Contracts with a nil book value were sold for proceeds of
$500,000 resulting in a gain of $500,000. Inventory with a book value of $4,790,000 was sold at book value
and employee liabilities of $3,199,000 were transferred to Macmahon.
In exchange for Pit N Portal’s contracting business, Emeco received surface and underground mining equipment
valued at $10,175,000.
2024
2023
$'000
$'000
Assets classified as held for sale
Property, plant and equipment - Emeco Rental
7,217
1,165
Property, plant and equipment - Pit N Portal
8,521
-
Net assets classified as held for sale
15,738
1,165
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
93
Impairment tests for cash generating units
The Group performed annual impairment testing at 30 June 2024, 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
2024; 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 Emeco
Rental, Force Workshops and Emeco Underground, with no impairment identified.
The Group has prepared value-in-use models for the purpose of impairment testing as at 30 June 2024, using
a five-year discounted cash flow model for Emeco Underground and ten-year discounted cash flow model for
Emeco Rental and Force 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.
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 equipment utilisation of Emeco Underground rental;
• the likelihood of any continued disruption to the operations of the Group’s customers, as a result of commodity
price volatility and labour shortages; and
• the impact of decarbonisation and ESG related impacts on operations and asset life.
The post-tax discount rate used in the calculations is 10.2% (2023: 9.8%). 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 Emeco Rental’s ten-year, and
Emeco Underground’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 2025. A revenue compound annual growth rate (CAGR) of 2.2% for Emeco Rental and
Force Workshops and 9.7% for Emeco Underground was used over the remaining forecast years. The terminal
value growth rate represents the long-term forecast consumer price index (CPI) of 2.5% (2023: 2.0%) for all
CGUs. The recoverable amounts of all of the Group’s CGUs continued to exceed their carrying amounts at 30
June 2024, with no reasonably possible changes to key assumptions giving rise to a risk of impairment in the
Emeco Rental and Force Workshop CGUs.
The recoverability of the Emeco Underground CGU is sensitive to reasonably possible changes in key
assumptions. Specifically, the recoverability of the CGU is dependent on maintaining equipment utilisation at
levels applied in the revised forecast and EBITDA within the underground rental business on a sustained basis
to achieve a revenue CAGR of at least 7.7% over the forecast period.
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 2024.
During the period, assets classified as held for sale were impaired by $14,220,000 (FY22: $983,000) to their
fair value less cost to sell based on market prices of similar equipment.
94
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
The Group’s exposure to currency and liquidity risk associated with trade and other payables is disclosed in note
18.
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 2024, the balance of the supply chain finance programmes was $33,592,000 (2023: $25,517,000).
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 2024, 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
payables.
The Company has also entered into a deed of cross guarantee with certain subsidiaries as described in note 27.
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 27.
13 Trade and Other Payables
2024
Restated (1)
2023
$'000
$'000
Current
Trade payables
39,316
80,723
Interest accrual
7,477
7,561
Other payables and accruals
83,692
82,008
130,485
170,292
(1)
Refer to note 29 for details on prior year restatement.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
95
14 Provisions
Defined contribution superannuation funds
The Group makes contributions to defined contribution superannuation funds. The expense recognised for the
year was $17,828,000 (2023:$19,904,000).
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave, long service leave and
accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in current
liabilities in respect of employees’ services up to the reporting date and are measured at the amounts expected
to be paid when the liabilities are settled. Non-accumulating sick leave is expensed to profit or loss when
incurred.
Long service leave
The liability for long service leave is recognised in current and non-current liabilities, depending on the
unconditional right to defer settlement of the liability for at least 12 months after the reporting date. The liability
is measured as the present value of expected future payments to be made in respect of services provided by
employees up to the reporting date using the projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields on high quality corporate bonds at the reporting date with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
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.
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.
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.
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.
2024
2023
$’000
$’000
Current
Employee benefits:
- annual leave
8,931
12,813
- long service leave
2,849
2,832
11,780
15,645
Non-current
Employee benefits - long service leave
725
696
725
696
Movement in provisions
2024
2023
$’000
$’000
Balance at 1 July
16,341
15,228
Arising during the year
10,181
17,550
Transfer of liabilities on PnP sale
(3,199)
-
Utilised
(10,818)
(16,437)
Balance at 30 June
12,505
16,341
96
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
15 Property, Plant and Equipment
D Fixed Assets
Set out below are the carrying amounts of property, plant and equipment recognised and movements
for the period:
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
$'000
Land &
buildings
Leasehold
improvements
Plant &
equipment
CWIP (1)
Office
equipment
Motor
vehicles
Sundry
plant
Total
At-cost at
30 June 2024
3,000
7,845
1,611,449
56,179
2,270
10,153
18,584
1,709,480
Accumulated
depreciation and
impairments at
30 June 2024
(1,499)
(5,355)
(896,898)
-
(1,321)
(7,798) (12,929)
(925,800)
1,501
2,490
714,551
56,179
949
2,355
5,655
783,680
At-cost at
30 June 2023
2,915
7,645
1,484,149
59,375
6,200
13,891
15,484
1,589,659
Accumulated
depreciation and
impairments at
30 June 2023
(1,444)
(5,037)
(805,703)
-
(4,965)
(8,310)
(11,568)
(837,027)
1,471
2,608
678,446
59,375
1,235
5,581
3,916
752,632
2024
$'000
Land &
buildings
Leasehold
improvements
Plant &
equipment
CWIP (1)
Office
equipment
Motor
vehicles
Sundry
plant
Total
Carrying amount
at the beginning
of the year
1,471
2,608
678,446
59,375
1,235
5,581
3,916
752,632
Additions
84
200
8,961
201,469
665
174
3,394
214,947
Transfer from
CWIP to plant
& equipment
-
-
204,665
(204,665)
-
-
-
-
Depreciation
(54)
(318)
(132,612)
-
(677)
(1,697)
(1,655)
(137,013)
Disposals
-
-
(12,677)
-
-
-
-
(12,677)
Movement from/
(to) assets held
for sale
-
-
(32,232)
-
(274)
(1,703)
-
(34,209)
Carrying amount
at the end of the
year
1,501
2,490
714,551
56,179
949
2,355
5,655
783,680
(1)
CWIP-Capital work in progress
(1)
CWIP-Capital work in progress
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
97
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.
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.
Contract costs are 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.
Depreciation on buildings, leasehold improvements, furniture, fixtures and fittings, office equipment, motor vehicles
and sundry plant is calculated on a straight-line basis. Depreciation on plant and equipment is calculated on a
units of production method and charged on machine hours worked over their estimated useful life.
The Group manages depreciation at an individual componentisation of asset level. Depreciation is calculated
based on a standard machine hour usage basis. The estimated useful lives are as follows:
Buildings and leasehold improvements
15 years
Plant and equipment
3 – 15 years
Office equipment
3 – 10 years
Motor vehicles
5 years
Sundry plant
7 - 10 years
The Group’s assets are subject to a fixed and floating charge under the terms of the Company’s financing
arrangements. Refer to note 19 for further details
(1)
CWIP-Capital work in progress
2023
$'000
Land &
buildings
Leasehold
improvements
Plant &
equipment
CWIP (1)
Office
equipment
Motor
vehicles
Sundry
plant
Total
Carrying amount at the
beginning of the year
1,329
911
619,729
68,372
1,372
7,417
4,534 703,664
Additions
188
1,915
6,783 168,455
947
74
1,049
179,411
Transfer from CWIP to
plant & equipment
-
-
177,443 (177,443)
-
-
-
-
Depreciation
(46)
(218)
(121,864)
-
(1,080)
(1,756) (1,553) (126,517)
Disposals
-
-
(2,044)
(9)
(4)
-
-
(2,057)
Movement from/(to)
assets held for sale
-
-
(1,601)
-
-
(154)
(114)
(1,869)
Carrying amount at
the end of the year
1,471
2,608
678,446
59,375
1,235
5,581
3,916 752,632
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
98
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
16 Right-of-use Assets
As at 30 June 2024
Buildings
$’000
Motor vehicle
$’000
Equipment
$’000
Total
$’000
Opening balance as at 1 July 2023
49,787
17,220
48,343
115,350
Opening balance adjustment
(2,262)
-
-
(2,262)
Additions
5,433
4,561
26,301
36,295
Lease modification
(4,681)
(5,046)
(2,913)
(12,640)
Total cost
48,277
16,735
71,731
136,743
Accumulated depreciation
Accumulated depreciation
(17,790)
(7,964)
(27,328)
(53,082)
Total accumulated depreciation
(17,790)
(7,964)
(27,328)
(53,082)
Net carrying amount
30,487
8,771
44,403
83,661
As at 30 June 2023
Buildings
$'000
Motor vehicle
$'000
Equipment
$'000
Total
$'000
Opening balance as at 1 July 2022
36,039
10,364
42,289
88,692
Additions
18,782
8,096
9,580
36,458
Termination of lease
(8,493)
(1,240)
(3,526)
(13,259)
Lease modification
3,459
-
-
3,459
Total cost
49,787
17,220
48,343
115,350
Accumulated depreciation
Accumulated depreciation
(13,897)
(6,575)
(19,351)
(39,823)
Total accumulated depreciation
(13,897)
(6,575)
(19,351)
(39,823)
Net carrying amount
35,890
10,645
28,992
75,527
Set out below are the carrying amounts of right of use assets recognised and movements for the year:
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
99
The Group’s right-of-use assets relate to property, motor vehicles and heavy earth moving equipment.
The remaining average lease term is 4.25 years (2023: 4.42 years).
The corresponding lease liability analysis is presented in note 19.
2024
2023
$'000
$'000
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
17,563
17,855
Interest expense on lease liabilities
4,337
3,274
Expense relating to short term leases
2,081
1,403
Expense relating to leases of low value assets
254
88
24,235
22,620
Goodwill and customer contracts
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 allocated to the Emeco Rental operating segment.
Goodwill is measured at cost, less accumulated impairment losses.
On the acquisition of Borex Pty Ltd in FY22, 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.
Software
Software that is acquired and internally developed by the Group and has finite useful lives is measured at cost
less accumulated amortisation and any accumulated impairment losses.
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:
17 Intangible Assets and Goodwill
2024
2023
$'000
$'000
Goodwill
8,005
8,005
8,005
8,005
Contract intangible
3,737
3,737
Less: Accumulated amortisation
(3,068)
(2,500)
669
1,237
Software - at cost
7,897
8,184
Less: Accumulated amortisation
(7,817)
(7,769)
80
415
Total intangible assets
8,754
9,657
2024
2023
$'000
$'000
Amortisation expense
- Contract Intangible
568
790
- Software
48
659
Total expense for the year
616
1,449
100
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
18 Financial Risk Management
Overview
The Group has exposure to the following risks from use of financial instruments:
•
credit risk;
•
liquidity risk; and
•
market risk.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,
policies and processes for measuring and managing risk, and the Group’s management of capital.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The board of directors has established the audit and risk management committee
(Committee), which is responsible for developing and monitoring the Group’s risk management policies. The
Committee reports regularly to the board of directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to
set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies
and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.
The Group, through its training, management standards and procedures, aims to develop a disciplined and
constructive 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.
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:
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.
Carrying amount
2024
2023
Note
$'000
$'000
Cash and cash equivalents
8
78,265
46,673
Trade receivables
9
111,860
112,262
Accrued revenue
9
18,184
33,862
Other receivables
9
9,179
11,058
Other financial assets
10
4,662
4,677
222,150
208,532
The carrying value of each of these items approximates fair value.
E Risk
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
101
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 including blue-chip
customers or subsidiaries of blue-chip companies. Blue-chip customers are determined as those customers
who have a market capitalisation of greater than $1,000,000,000 (2023: $1,000,000,000). The Group held
insurance for the entire financial year ended 30 June 2024.
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. The Group
aims to insure this category;
• 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:
Gross
Impairment
Gross
Impairment
2024
2024
2023
2023
$'000
$'000
$'000
$'000
Not past due
93,114
-
96,511
-
Past due 0-30 days
14,086
-
8,006
-
Past due 31-60 days
2,468
-
259
-
Past due 61 days
2,192
(308)
7,486
(190)
111,860
(308)
112,262
(190)
Carrying amount
2024
2023
$'000
$'000
Blue-chip (including subsidiaries)
61,056
47,324
Insured
43,205
47,164
Underinsured
2,131
6,647
Uninsured
5,468
11,127
111,860
112,262
102
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
The Group considers blue-chip and insured customers as no risk. The Group only assesses uninsured customers
and underinsured customers in an 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.
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
Ther Group utilises loss history from FY20 for this assessment.
Based on the factors outlined above, the Group has calculated an expected credit loss of $308,000 based
on historical loss trends and economic factors (2023: $190,000). During the period, no allowances for
specific customers were identified as doubtful and subsequently nothing was written off by the Group (2023:
$23,013,000).
The movement in the credit loss allowance in respect of trade receivables during the year was as follows:
The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectible,
based on historic payment behaviour and extensive analysis of the underlying customers’ credit ratings.
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 $78,265,000 at 30 June 2024 (2023: $46,673,000), 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 2024 the Group held nil bank
guarantees (2023: nil) and nil of advance payments from customers (2023: nil).
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 22. At 30 June
2024, $3,183,000 guarantees were outstanding (2023: $3,509,000).
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.
Impairment
Impairment
2024
2023
$'000
$'000
Opening loss allowance as at 1 July
190
190
Loss allowance on trade receivables arising during the year
118
23,013
Loss allowance on trade receivables recovered/written-off
during the year
-
(23,013)
Loss allowance as at 30 June
308
190
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
103
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 19 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
2023: $95,000,000) and a Bank Guarantee Facility of $5,000,000 (30 June 2023: $5,000,000). 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 2024, the Group had $30,000,000 drawn of the LNA and had
utilised $3,183,000 of the bank guarantee facility.
The Group has a facility agreement comprising a credit card facility with a limit of $200,000 which 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 $33,592,000 as at 30 June 2024 (2023: $25,517,000).
The Group has lease facilities totalling $76,349,000 (2023: $70,721,000) which have various maturities up to
June 2033.
The following gross outflows represent the contractual, undiscounted cash flow maturities of the Group’s
financial liabilities (including estimated interest payments):
Carrying
Contractual
6 mths or
More than
amount
cash flows
less
6-12 mths
1-2 years
2-5 years
5 years
30 June 2024
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivative
financial liabilities
Secured notes issue
250,000
289,064
7,813
7,813
15,625
257,813
-
Lease liabilities
76,349
86,816
13,644
10,305
18,693
32,993
11,182
Trade and other
payables(1)
123,008
123,008
123,008
-
-
-
-
Financial liabilities
3,042
3,324
712
688
1,306
618
-
452,399
502,212
145,177
18,806
35,624
291,424
11,182
104
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
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
was:
(1)
Trade and other payables excludes deferred revenue and interest accruals. Estimated interest payments are included
within “secured notes issue”. Refer to note 19 for further information.
Carrying
Contractual
6 mths or
More than
Restated
amount
cash flows
less
6-12 mths
1-2 years
2-5 years
5 years
30 June 2023
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivative
financial liabilities
Secured notes issue
250,000
304,689
7,813
7,813
15,625
273,438
-
Lease liabilities
70,721
78,821
10,474
13,956
14,867
23,577
15,946
Trade and other
payables(1)
162,731
162,731
162,731
-
-
-
-
Financial liabilities
4,259
4,818
758
735
1,400
1,925
-
487,711
551,059
181,776
22,504
31,892
298,940
15,946
2024
2023
Note
$'000
$'000
Variable rate instruments:
Cash at bank
8
78,265
46,673
78,265
46,673
Fixed rate instruments:
Interest bearing liabilities (AUD notes)
19
(250,000)
(250,000)
Interest bearing liabilities (Loan Note Agreement)
19
(30,000)
-
Interest bearing finance leases
19
(76,349)
(70,721)
(356,349)
(320,721)
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
105
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 conditions, 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 year of
equity, plus interest bearing liabilities, less cash and intangibles. The Group’s ROC for the year was 11.5% (2023:
9.6%).
The Group’s return on invested capital at the end of the reporting period was as follows:
(1)
Average invested capital is average over the period of equity, plus interest bearing liabilities, less cash and intangibles.
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:
Restated
2024
2023
Carrying
Fair
Carrying
Fair
amount
value
amount
value
Note
$'000
$'000
$'000
$'000
Assets carried at amortised cost
Cash and cash equivalents
8
78,265
78,265
46,673
46,673
Trade and other receivables
9
139,231
139,231
157,765
157,765
Other financial assets
10
4,662
4,662
4,677
4,677
222,158
222,158
209,115
209,115
Liabilities carried at amortised cost
Secured notes issue
19
(250,000)
(250,000)
(250,000)
(250,000)
Loan Note Agreement
19
(30,000)
(30,000)
32
32
Lease liabilities
19
(76,349)
(86,816)
(70,721)
(78,821)
Trade and other payables
13
(130,485)
(130,485)
(170,292)
(170,292)
(486,834)
(497,301)
(490,981)
(499,081)
2024
2023
$'000
$'000
EBIT
101,426
79,147
Average invested capital (1)
882,361
826,459
EBIT return on capital at 30 June
11.5%
9.6%
106
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
19 Interest Bearing Liabilities
(1)
A current financial liability of $1,217,000 (2023: $1,217,000) and non-current financial liability of $1,825,000 (2023:
$3,042,000) 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.
Secured notes issue
On 2 July 2021, the Company successfully completed the issuance of $250,000,000 in 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 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 1.5625% which 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 $200,000 (2023: $150,000). The facility is secured via a cash
cover account.
2024
2023
$'000
$'000
Current
Amortised cost
Lease liabilities
20,649
21,431
Loan Note Agreement
30,000
-
Other financing
1,685
1,098
Financial liability (1)
1,217
1,217
53,551
23,746
Non-current
Amortised cost
AUD notes - secured
250,000
250,000
Debt raising costs (2)
(2,340)
(3,431)
Lease liabilities
55,700
49,290
Financial liability (1)
1,825
3,042
305,185
298,901
F Debt and Equity
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
107
The Group’s lease liabilities are secured by the leased assets of $83,661,000 (2023: $75,527,000).
In the event of default, the leased assets revert to the lessor.
Reconciliation of liabilities arising from financing activities
Liabilities arising from financing activities are those for which cash flows were or will be classified
in the Group’s consolidated statement of cash flows. The following table details cash and non-cash
movements in the Group’s liabilities arising from financing activities:
Lease liabilities
At 30 June 2024, the Group held lease facilities totalling $76,349,000 (2023: $70,721,000) 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:
*inclusive of amortisation expense
Lease Liabilities
2024
2023
$'000
$'000
Opening balance as at 1 July
70,721
54,648
Opening balance adjustment
(2,625)
-
New leases
35,665
32,011
Interest expense
4,595
3,274
Principal repayments
(25,054)
(22,672)
Lease modification
(6,953)
3,460
Balance at 30 June
76,349
70,721
Current
20,649
21,431
Non-current
55,700
49,290
76,349
70,721
1 July
Financing
Financial
Net debt acquired/
30 June
2023
cash flows
expense*
(retired)
2024
$'000
$'000
$'000
$'000
$'000
AUD notes
250,000
-
-
-
250,000
Loan Note Agreement
-
30,000
-
-
30,000
Lease liabilities
70,721
(25,054)
4,595
26,086
76,349
Debt raising costs
(3,431)
-
1,091
-
(2,340)
Financial liabilities
4,259
(1,217)
-
-
3,042
Other financing
1,098
(3,455)
84
3,958
1,685
322,647
274
5,770
30,044
358,736
108
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
(1)
The facility of $250,000,000 was fully drawn at 30 June 2024. Refer to note 19 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.
Financing arrangements
The Group has the ability to access the following lines of credit:
2024
Available facility
$'000
Facility utilised at
reporting date
$'000
Facility not utilised
at reporting date
$'000
AUD notes (1)
250,000
250,000
-
Loan Note Agreement (2)
95,000
30,000
65,000
Bank guarantee facility (2)
5,000
3,183
1,817
Lease liabilities
76,349
76,349
-
426,349
359,532
66,817
2023
Available facility
$'000
Facility utilised at
reporting date
$'000
Facility not utilised
at reporting date
$'000
AUD notes (1)
250,000
250,000
-
Loan Note Agreement (2)
95,000
-
95,000
Bank guarantee facility (2)
5,000
3,509
1,491
Lease liabilities
70,721
70,721
-
420,721
324,230
96,491
1 July
Financing
Financial
Net debt acquired/
30 June
2022
cash flows
expense*
(retired)
2023
$'000
$'000
$'000
$'000
$'000
AUD notes
250,000
-
-
-
250,000
Lease liabilities
54,648
(22,662)
3,275
35,460
70,721
Debt raising costs
(4,548)
-
1,117
-
(3,431)
Financial liabilities
-
(781)
234
4,806
4,259
Other financing
965
(4,360)
100
4,393
1,098
301,065
(27,803)
4,726
44,659
322,647
*inclusive of amortisation expense
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
109
(1)
During the year ending 30 June 2024, Emeco purchased 627,858 shares through an on-market share buy-back at an
average share price of $0.66 totalling $415,000 (30 June 2023: 7,663,420 shares were purchased at an average share
price of $0.86 totalling $6,602,000).
Movements in ordinary share capital
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 a company’s liquidation, ordinary shareholders rank behind all other creditors and are only
entitled to any remaining proceeds after all secured, unsecured, and preferential creditors have been paid.
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 2024 the
Company held 4,031,493 treasury shares (2023: 3,408,327), 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.
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.
20 Equity - Issued Capital and Reserves
2024
2023
$'000
$'000
Share capital
518,374,757 (2023: 519,002,615) ordinary shares, fully paid
1,224,725
1,225,141
acquisition reserve
(75,886)
(75,887)
1,148,839
1,149,254
Details
Date
Shares
Issue price ($)
$'000
Balance
1 July 2023
519,002,615
1,225,141
On market share buy-back (1)
21 December 2023
(212,329)
0.65
(138)
On market share buy-back (1)
22 December 2023
(415,529)
0.67
(278)
Balance
30 June 2024
518,374,757
1,224,725
Less: treasury shares
(4,031,493)
Issued capital
514,343,264
110
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
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 & Chief Executive Officer (“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.
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.
Dividends
For the year ended 30 June 2024, no dividend was declared.
On 22 August 2023, the Board resolved to pay a final fully franked dividend for the year ended 30 June
2023 of 1.25 cents per share, representing a total cash payment of $6,488,000. The dividend was paid on
29 September 2023.
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;
b)
franking debits that will arise from the payment of dividends recognised as a liability at the year end;
c)
franking credits that will arise from the receipt of dividends recognised as receivables by the tax
consolidated group at the year end;
d)
franking credits that the entity may be prevented from distributing in subsequent years; and
e)
franking credits acquired through business combinations.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare
dividends. 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 $69,488,000 (2023: $77,268,000) franking credits.
The Company
2024
2023
$'000
$'000
Dividend franking account
30% franking credits available to shareholders of Emeco Holdings
Limited for subsequent financial years
69,488
72,268
Franking Account
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
111
G Unrecognised Items
21 Commitments
22 Contingent Liabilities
b)
Capital commitments
The Group has nil commitments arising subsequent to 30 June 2024 for purchases of fixed assets
(2023: $18,700,000).
a) Short-term and low value leases
Guarantees
The Group has provided bank guarantees in the amount of $3,183,000 (2023: $3,509,000) in relation to
obligations under operating leases and rental premises.
Short-term and low value lease expenditure for FY24 and FY23 is disclosed in note 16.
2024
2023
$'000
$'000
Future non-cancellable short-term and low-value leases not
provided for in the finanical statements and payable:
Less than one year
1,058
842
1,058
842
112
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
H Other Information / Group Structure
23 Controlled Entities
Country
Ownership interest
of
2024
2023
incorporation
%
%
Parent entity
Emeco Holdings Limited
Controlled entities
Pacific Custodians Pty Ltd as trustee for Emeco
Employee Share Ownership Plan Trust
Australia
100
100
Emeco Pty Limited
Australia
100
100
Emeco International Pty Limited
Australia
100
100
EHL Corporate Pty Ltd
Australia
100
100
Emeco Parts Pty Ltd
Australia
100
100
Emeco Finance Pty Ltd
Australia
100
100
Andy’s Earthmovers (Asia Pacific) Pty Ltd
Australia
100
100
Orionstone Holdings Pty Ltd
Australia
100
100
Orionstone Pty Ltd
Australia
100
100
Ironstone Group Pty Ltd
Australia
100
100
Orion (WA) Pty Ltd
Australia
100
100
RPO Australia Pty Ltd
Australia
100
100
Force Equipment Pty Ltd
Australia
100
100
Matilda Equipment Holdings Pty Ltd
Australia
100
100
Matilda Equipment Pty Ltd
Australia
100
100
Pit N Portal Mining Services Pty Ltd
Australia
100
100
Emeco Underground Pty Ltd
Australia
100
100
Emeco Equipment (USA) LLC
USA
100
100
Emeco (UK) Limited
United Kingdom
100
100
Emeco International Europe BV
Netherlands
100
100
Emeco Holdings South America SpA
Chile
100
100
Enduro SpA
Chile
100
100
Emeco Europe BV
Netherlands
100
100
Emeco BV
Netherlands
100
100
PT Prima Traktor IndoNusa
Indonesia
100
100
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
113
24 Compensation of Key Personnel
Key management personnel compensation
The key management personnel compensation is as follows:
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 Frank
Peter Kane
Sarah Adam-Gedge
Appointed as a director of the Company on 1 October 2023
Peter Richards
Resigned as Chair and Director of the Company on 31 May 2024
James Walker
Executive directors
Ian Testrow
Managing Director & Chief Executive Officer
Other executives
Position
Theresa Mlikota
Chief Financial Officer
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.
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.
In AUD
2024
2023
Short term employee benefits
4,544,725
2,680,334
Other long term benefits
94,976
48,100
Other non-monetary benefits
597,641
217,176
Post-employment benefits
120,168
106,285
Equity compensation benefits
2,561,628
1,446,427
7,919,138
4,498,322
114
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
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 minimum 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 10, between the Group and these related entities during the year
(FY23: nil)
25 Share-Based Payments
During the year the Company issued Rights to key management personnel and senior employees of the Group
under its employee incentive plans.
Vested Plans
Grant date/employees entitled
Number of
instruments
Vesting
Conditions
Contractual life of rights/
performance share rights
MIP
Rights/performance share rights 2019
1,000,000
5 years’ service
5 years
LTIP
Rights/performance share rights 2020
70,308
3 years’ service
3 years
Rights/performance share rights 2021
824,535
2 years’ service
2 years
Rights/performance share rights 2022
84,430
1 year service
1 year
1,979,273
Unvested Plans
Grant date/employees entitled
Number of
instruments
Vesting
Conditions
Contractual life of rights/
performance share rights
LTIP
Rights/performance share rights 2020
70,436
3 years’ service
3 years
LTIP
Rights/performance share rights 2021
172,920
3 years’ service
3 years
LTIP
Rights/performance share rights 2022
800,062
3 years’ service
3 years
LTIP
Rights/performance share rights 2023
1,773,990
3 years’ service
3 years
LTIP
Rights/performance share rights 2024
5,077,647
3 years’ service
3 years
7,895,055
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
115
The fair value of Rights granted during the year is measured using the Black Scholes model resulting in a fair
value of $0.67 (FY23: $0.65). 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.
The weighted average share price for Rights exercised during the year was $0.66 (FY23: $0.77).
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.
The movements of Rights on issue during the year were as follows:
(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.
Number of rights/
performance share rights
2024
Number of rights/
performance share rights
2023
Outstanding at 1 July
8,925,177
8,604,782
Granted during the year
5,694,589
4,440,329
Exercised during the year
(1,979,273)
(2,148,862)
Forfeited during the year
(4,745,438)
(1,971,072)
Outstanding at 30 June
7,895,055
8,925,177
Employee expenses
In AUD
2024
2023
Performance shares/rights
3,530,469
1,416,873
Total expense recognised as employee costs (1)
3,530,469
1,416,873
116
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
26 Remuneration of Auditors
27 Deed of Cross Guarantee
The Company has engaged with Deloitte Touche Tohmatsu Australia and overseas for the provision of audit as
well as other specific assurance. No other advisory or consulting services were provided by Deloitte during the
year.
The auditor of Emeco Holdings Limited is Deloitte Touche Tohmatsu Australia.
Amounts paid or payable for services provided by Deloitte Touche Tohmatsu are as follows:
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.
In AUD
2024
2023
Audit services
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
- audit and review of financial reports
738,175
777,362
738,175
777,362
Other assurance and agreed upon procedures
Auditors of the Company
Deloitte Touche Tohmatsu Australia:
- other assurance services
57,820
203,700
Overseas Deloitte Firms:
- other assurance services
33,071
34,104
- taxation services
19,055
9,758
109,946
247,562
848,121
1,024,924
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
Subsidiaries removed from the deed during the year:
• Matilda Equipment Pty Ltd
• Matilda Equipment Holdings Pty Ltd
• Pit N Portal Mining Services Pty Ltd
• Emeco Underground Pty Ltd
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
117
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 2024 is set out as follows:
2024
2023
$'000
$'000
Revenue
692,126
874,917
Cost of sales
(472,540)
(574,463)
Gross profit
219,586
300,454
Operating expense
(118,828)
(222,857)
Other income
478
2,659
Finance income
1,291
670
Finance costs
(27,062)
(27,928)
Unrealised FX
(224)
(62)
Impairment of assets
(669)
(939)
Impairment of investments
(20,597)
(20,388)
Profit before tax
53,975
31,609
Tax expense
(16,372)
(10,506)
Net profit after tax
37,603
21,103
Other comprehensive income
211
(169)
Total comprehensive income for the year
211
(169)
Retained losses at beginning of year
(549,960)
(570,894)
Opening balance adjustment
25,532
Retained losses at end of year
(486,614)
(549,960)
Attributable to:
Equity holders of the Company
(486,614)
(549,960)
Profit for the year
37,603
21,103
118
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
2024
Restated
2023
$'000
$'000
Current assets
Cash and cash equivalents
67,358
46,673
Trade and other receivables
116,129
157,765
Prepayments
18,453
16,890
Inventories
39,049
46,584
Assets held for sale
7,217
1,165
Total current assets
248,206
269,077
Non-current assets
Intangible assets
8,652
9,657
Property, plant and equipment
735,689
752,632
Right-of-use asset
63,477
75,527
Other financial assets
4,662
4,677
Total non-current assets
812,480
842,493
Total assets
1,060,686
1,111,570
Current liabilities
Trade and other payables
119,171
170,292
Interest bearing liabilities
51,996
23,746
Provisions
11,170
15,645
Total current liabilities
182,337
209,683
Non-current liabilities
Interest bearing liabilities
304,311
298,901
Provisions
725
696
Deferred tax liabilities
37,165
12,846
Total non-current liabilities
342,201
312,443
Total liabilities
524,538
522,126
Net assets
536,148
589,444
Equity
Issued capital
1,148,839
1,149,254
Reserves
(126,077)
(9,850)
Retained losses
(486,614)
(549,960)
Total equity attributable to equity holders of the parent
536,148
589,444
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
119
28 Parent Entity Disclosure
As at and throughout the financial year ending 30 June 2024 the parent entity (the ‘Company’) of the Group
was Emeco Holdings Limited.
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a deed of cross guarantee with the effect that the Company guarantees
debts in respect of its subsidiaries.
Further details of the deed of cross guarantee and the subsidiaries subject to the deed, are disclosed in note 27.
(1)
Profit includes dividends received from wholly owned subsidiaries which are eliminated on group consolidation.
Company
2024
2023
$'000
$'000
Result of the parent entity
Profit/(loss) for the year (1)
20,500
18,666
Other comprehensive income
-
-
Total comprehensive income/(loss) for the period
20,500
18,666
Financial position of parent entity at year end
Current assets
73
73
Non-current assets
428,790
413,360
Total assets
428,863
413,433
Current liabilities
-
-
Non-current liabilities
-
-
Total liabilities
-
-
Total equity of the parent entity comprising of:
Share capital
1,148,839
1,149,254
Share based payment reserve
23,491
24,087
Profit reserve
17,877
3,865
Reserve for own shares
(27,965)
(30,394)
Retained losses
(733,379)
(733,379)
Total equity
428,863
413,433
120
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
The principal accounting policies adopted in the preparation of the financial statements are set out below.
The accounting policies are consistent with those disclosed in the prior period financial statements, except for
the impact of new and amended standards and interpretations, effective 1 July 2023. The adoption of these
standards and interpretations did not result in any significant changes to the Group’s accounting policies.
The Group has not elected to early adopt any new or amended standards or interpretations that are issued but
not yet effective.
Accounting Standards and Interpretations not effective for the Group at 30 June 2024 or early adopted
A number of new standards, amendments of standards and interpretations are effective for annual periods
beginning from 1 July 2023 and earlier application is permitted, however, the Group has not early adopted
these standards in preparing these consolidated financial statements. The Group has reviewed these standards
and interpretations and has determined that none of these new or amended standards and interpretations will
significantly affect the Group’s accounting policies, financial position, or performance.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the
Corporations Act 2001 as appropriate for for-profit orientated entities. These financial statements also comply
with International Financial Reporting Standards issued by the International Accounting Standards Board
(IASB). The consolidated financial statements provide comparative information in respect of the previous
period. For consistency with the current year’s presentation, where required, comparative information has been
reclassified. The financial statements have been prepared under the historical cost basis, except for contingent
consideration and certain other financial assets and financial liabilities, which are measured at fair value.
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 Financial Position for the Group and for the Deed of Cross
Guarantee group, both “inventories and work in progress” and “trade and other payables” have been restated
by $23,149,000, to accurately reflect the nature of balances at the end of the prior year (refer to notes 11
and 13 for further information). At 30 June 2023, the Company incorrectly recorded an elimination journal to
offset $23,149,000 of work in progress against other payables and accruals. As the 30 June 2023 balances
were understated, they have now been corrected and restated in the current year. There was no impact on net
assets, profit or loss or cash flow as a result of this restatement. Comparatives have been restated accordingly
as outlined in the table below:
29 Other Significant Accounting Policies
Reported
30 June 2023
$’000
Comparative
period
adjustment
$’000
Restated
30 June 2023
$’000
Inventories and work in progress
23,435
23,149
46,584
Trade and other payables
147,143
23,149
170,292
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying the Group’s accounting policies. The
areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are
significant to the financial statements, are included in the respective notes to the financial statements: Note 2 –
revenue recognition: estimate of variable consideration, Note 5 - recognition of deferred tax assets: availability
of future taxable profit against which deductible temporary differences and tax losses carried forward can be
utilised.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 28.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Emeco Holdings
Limited as of 30 June 2024 and the results of all subsidiaries for the year then ended. Emeco Holdings Limited
and its subsidiaries together are referred to in these financial statements as the ‘Group’.
Emeco Holdings Limited and its Controlled Entities
Notes to the Consolidated Financial Statements For the year ended 30 June 2024
121
Subsidiaries
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. Entities are deconsolidated from the date that
control ceases.
Transactions eliminated on consolidation
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Emeco Holdings Limited’s functional and
presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing
at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such
transactions, and from the translation at the reporting date exchange rates of monetary assets, and liabilities
denominated in foreign currencies, are recognised in the profit or loss.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when it is either expected to be realised or intended to be sold or consumed
in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within
12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are
classified as non-current.
A liability is classified as current when: it is either expected to be settled in normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there
is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current. 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.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the
asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable
or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other
receivables or other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the tax authority, are presented as operating
cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
Rounding of amounts
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts
in this report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in
certain cases, the nearest dollar.
30 Subsequent Events
The Board resolved to continue the suspension of the Group’s capital management programme for FY25,
in favour of net debt reduction. There have been no other significant events subsequent to the year ended
30 June 2024.
122
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Consolidated Entity Disclosure Statement As at 30 June 2024
(a)
Participant in Emeco Holdings Limited which is consolidated in the consolidated financial statements.
(b)
Pacific Custodian Pty Ltd as Trustee for Emeco Employee Share Ownership Plan Trust which are both not consolidated in
the consolidated financial statements.
(c)
This entity is part of a tax-consolidated group under Australian taxation law, for which Emeco Holdings Limited is the
head entity.
Body Corporate
Tax Residency
Country of
incorporation
Entity type
Ownership
2024 %
Australian
/ Foreign
Foreign
Jurisdiction
Parent entity
Emeco Holdings Limited
Australia
Body corporate
Australia(c)
N/A
Controlled entities
Pacific Custodians Pty Ltd as
trustee for Emeco Employee
Share Ownership Plan Trust (b)
Australia
Trust
100
Australia(c)
N/A
Emeco Pty Limited (a)
Australia
Body corporate
100
Australia(c)
N/A
Emeco International Pty Limited (a)
Australia
Body corporate
100
Australia(c)
N/A
EHL Corporate Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Emeco Parts Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Emeco Finance Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Andy’s Earthmovers
(Asia Pacific) Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Orionstone Holdings Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Orionstone Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Ironstone Group Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Orion (WA) Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
RPO Australia Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Force Equipment Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Matilda Equipment Holdings
Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Matilda Equipment Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Pit N Portal Mining Services
Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Emeco Underground Pty Ltd (a)
Australia
Body corporate
100
Australia(c)
N/A
Emeco Equipment (USA) LLC (a)
USA
Body corporate
100
Foreign
USA
Emeco (UK) Limited (a)
United
Kingdom
Body corporate
100
Foreign
United Kingdom
Emeco International Europe BV (a)
Netherlands
Body corporate
100
Foreign
Netherlands
Emeco Holdings South America
SpA (a)
Chile
Body corporate
100
Foreign
Chile
Enduro SpA (a)
Chile
Body corporate
100
Foreign
Chile
Emeco Europe BV (a)
Netherlands
Body corporate
100
Foreign
Netherlands
Emeco BV (a)
Netherlands
Body corporate
100
Foreign
Netherlands
PT Prima Traktor IndoNusa (a)
Indonesia
Body corporate
100
Foreign
Indonesia
This Consolidated Entity Disclosure Statement has been prepared in accordance with the Corporations Act 2001 and
includes required information for each entity that was part of the consolidated entity as at the end of the financial
year. Section 295 (3A) of the Corporations Act 2001 defines tax residency as having the meaning in the Income Tax
Assessment Act 1997. The determination of tax residency involves judgement as there are currently several different
interpretations that could be adopted, and which could give rise to a different conclusion on residency.
123
Emeco Holdings Limited and its Controlled Entities
Directors’ Declaration
In the opinion of the directors of Emeco Holdings Limited (the ‘Company’):
(a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable;
(b) the consolidated financial statements and notes thereto are in accordance with the requirements of
the Corporations Act 2001 (Corporations Act), including the requirements that:
(i) they comply with the Australian Accounting Standards, the Corporations Regulations
2001 and other mandatory professional reporting requirements;
(ii) they give a true and fair view of the financial position and performance of the Company
and its controlled entities for the full year ended 30 June 2024; and
(iii) note 29 to the financial statements confirms that the financial statements also
comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board;
(c) 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
2024.
(d) the consolidated entity disclosure statement on page 122 is true and correct; and
(e) there are reasonable grounds to believe that the Company and each of its subsidiaries that are party
to the Deed of Cross Guarantee dated 5 May 2008 (as varied from time to time) (Cross-Guarantee)
will be able to meet any obligations or liabilities to which they are, or may become, subject because of
the Cross-Guarantee.
Dated at Perth, 21 August 2024
Signed in accordance with a resolution of the directors:
Ian Testrow
Managing Director
124
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Independent Auditor’s Report
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Deloitte Touche Tohmatsu
Tower 2, Brookfield Place,
123 St Georges Tce,
Perth WA 6000, Australia
DX 206
Tel: +61 (0) 8 9365 7000
Fax: +61 (0) 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report to the members of Emeco
Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Emeco Holdings Limited (the “Company”) and its subsidiaries (the “Group”)
which comprises the consolidated statement of financial position as at 30 June 2024, 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, the directors’ declaration and the
consolidated entity disclosure statement.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
x
Giving a true and fair view of the Group’s financial position as at 30 June 2024 and of its financial performance
for the year then ended; and
x
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 and its Controlled Entities
Independent Auditor’s Report
125
Key Audit Matter
How the scope of our audit responded to the Key
Audit Matter
Recoverability of non-current assets of the Underground
Rental cash generation unit (‘CGU’)
As disclosed in note 12, the Group executed an agreement to
sell Pit N Portal’s contracting business with the Group
retaining the majority of the underground mining fleet
effectively transitioning the Pit N Portal business to an
underground rental business.
As a result of this transaction certain other assets were
transferred to held for sale as disclosed in note 12 and an
impairment of $15.7 million was recognised in relation to
those assets following an assessment of the fair value less
costs to sell.
Our focus was on the assessment of the impairment charge
recorded in the year and the recoverability of the remaining
Underground Rental (formerly Pit N Portal) CGU as disclosed
in note 12.
The assessment of the recoverable value requires judgement
in respect of assumptions and estimates in preparing a value
in use model (‘VIU’). The significant judgements included but
were not limited to:
x
forecast revenue including forecast utilisation
rates, operating costs and the resulting forecast
EBITDA;
x
sustaining capital forecasts;
x
terminal growth rate; and
x
discount rate.
Our procedures included, but were not limited to:
In relation to the impairment charge recorded:
•
assessing the fair value less costs to sell of the assets
transferred to assets held for sale during the year
through:
•
considering external and internal
valuations;
•
assessing the qualifications and
experience of management’s external
valuation expert; and
•
obtaining evidence of realised sale prices
for assets sold in the year.
In relation to the Underground Rental CGU:
•
assessing management’s historical budgeting
accuracy for the Underground Rental CGU;
•
assessing budgets and forecasts for reasonableness
compared to historical actual performance;
•
in conjunction with our valuation specialists:
•
testing the mathematical accuracy of
management’s value-in-use model;
•
evaluating the appropriateness of the
discount rate applied;
•
assessing the risk of impairment by performing
independent breakeven analysis on management’s
value-in-use model for a range of changes in the key
assumptions based on parameters; and
•
assessing whether a reasonably possible change in
key assumptions would result in an impairment.
We also assessed the adequacy of the disclosures in note
12 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group’s annual report for the year ended 30 June 2024, 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.
126
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Independent Auditor’s Report
126
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible:
x
For the preparation of the financial report in accordance with the Corporations Act 2001, including giving a
true and fair view of the financial position and performance of the Group in accordance with Australian
Accounting Standards; and
x
For such internal control as the directors determine is necessary to enable the preparation of the financial
report in accordance with the Corporations Act 2001, including giving a true and fair view of the financial
position and performance of the Group, 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 skepticism throughout the audit. We are also:
x
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.
x
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.
x
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
x
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.
x
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.
x
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.
Emeco Holdings Limited and its Controlled Entities
Independent Auditor’s Report
127
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.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 48 to 66 of the Directors’ Report for the year ended
30 June 2024.
In our opinion, the Remuneration Report of Emeco Holdings Limited, for the year ended 30 June 2024, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
Perth, 21 August 2024
128
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
Financial Calendar
The annual general meeting of Emeco Holdings Limited will be held on Wednesday, 20 November 2024.
Event
Date*
Annual general meeting
20 November 2024
Half year
31 December 2024
Half year profit announcement
February 2025
Year end
30 June 2025
*Timing of events is subject to change and Board discretion.
Shareholder statistics
Substantial shareholders
Details regarding the substantial holders of the Company’s ordinary shares as at 2 August 2024 and their
relevant interest, as disclosed in the substantial holding notices given to the Company, are as follows:
Distribution of ordinary shareholders
As at 2 August 2024, there were 5,646 holders of the Company’s ordinary shares. The distribution as at
2 August 2024 was as follows:
* calculated based on ordinary shares on issue of 544,055,134 as at the date of the substantial shareholder notice on
9 February 2021.
Name
Ordinary shares
% Issued capital
Black Diamond Capital Management LLC
Black Diamond Credit Strategies Master Fund Ltd
BDCM Opportunity Fund IV LP
199,634,797
38.51
BDCM Opportunity Fund III LP
BDCM Strategic Capital Fund I, L.P.
Paradice Investment Management Pty Ltd
52,602,397
9.669*
Range
Investors
Ordinary shares
% Issued capital
100,001 and Over
155
480,652,853
92.72
10,001 to 100,000
918
28,274,100
5.45
5,001 to 10,000
561
4,305,298
0.83
1,001 to 5,000
1,599
4,224,438
0.82
1 to 1,000
2,413
918,068
0.18
Total
5,646
518,374,757
100.00
There were 1,823 shareholders holding less than a marketable parcel of 607 ordinary shares (share price of
$0.825 on 2 August 2024).
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
129
20 Largest Shareholders
The names of the 20 largest holders of the Company’s ordinary shares as at 2 August 2024 are:
Rank
Name
Ordinary shares
% Issued capital
1
J P Morgan Nominees Australia Pty Limited
165,328,127
31.89
2
Citicorp Nominees Pty Limited
123,000,167
23.73
3
HSBC Custody Nominees (Australia) Limited
43,699,796
8.43
4
BNP Paribas Nominees Pty Ltd
26,992,265
5.21
5
Pacific Custodians Pty Limited
13,988,997
2.70
6
Washington H Soul Pattinson and Company Limited
13,750,000
2.65
7
First Samuel Ltd
8,192,884
1.58
8
HSBC Custody Nominees (Australia) Limited
7,629,372
1.47
9
Mr Peter David Wilkinson & Mrs Jennifer Louise Wilkinson
7,366,000
1.42
10
Precision Opportunities Fund Ltd
6,000,000
1.16
11
Sandhurst Trustees Ltd
4,129,955
0.80
12
Pacific Custodians Pty Limited
4,007,287
0.77
13
Buttonwood Nominees Pty Ltd
3,299,473
0.64
14
ZThree Pty Ltd
2,500,000
0.48
15
Steven Edwin Versteegen
2,415,459
0.47
16
NCH Pty Ltd
1,677,585
0.32
17
Elphinstone Holdings Pty Ltd
1,563,357
0.30
18
Jode Super Pty Ltd
1,442,623
0.28
19
HSBC Custody Nominees (Australia) Limited – A/C 2
1,304,500
0.25
20
G Harvey Nominees Pty Limited
1,149,100
0.22
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 current employee long term
incentive plans, holders of performance rights have no voting entitlements.
130
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
Emeco Holdings Limited and its Controlled Entities
Shareholder Information
Unquoted equity securities
As at 2 August 2024, there were 509,273 performance rights on issue to 10 participants pursuant to the
Company’s employee incentive plans. The distribution as at 2 August 2024 was as follows:
Range
Participants
Performance rights
% Performance rights
100,001 and Over
1
194,485
38.19%
10,001 to 100,000
8
305,104
59.91%
5,001 to 10,000
1
9,684
1.90%
1,001 to 5,000
-
-
-
1 to 1,000
-
-
-
Total
10
509,273
100.00%
On-market security purchases
During FY24, Pacific Custodians Pty Limited in its capacity as trustee of the Emeco Employee Share Ownership
Plans Trust purchased 1,367,535 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 during FY24, buying back 627,858 ordinary shares for
a total amount of $414,000. On 20 February 2024, the Company announced its decision to suspend the capital
management programme in favour of net debt reduction, consequently there is no current on-market buy-back.
Debt securities
A register of the noteholders of the 6.25% A$ 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 2 August 2024, there were no securities subject to voluntary escrow.
131
Emeco Holdings Limited and its Controlled Entities
Company Directory
DIRECTORS
Peter Frank
Ian Testrow
Peter Kane
James Walker III
Sarah Adam-Gedge
SECRETARY
Penelope Young
REGISTERED OFFICE
Level 3, 133 Hasler Road
Osborne Park WA 6017
Phone: +61 8 9420 0222
Website: www.emecogroup.com
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
132
EMECO HOLDINGS LIMITED ANNUAL REPORT 2024
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.
(3)
Refer to note 29 for details on prior year restatement.
Five-Year Financial Summary
Restated (3)
2024
2023
2022
2021
2020
REVENUE
Total revenue from continuing
operations
$’000
822,728
874,917
754,368
620,528
540,429
PROFIT
Operating EBITDA (1)
$’000
280,483
250,379
250,173
237,687
254,366
Operating EBIT (1)
$’000
125,292
104,558
120,732
119,110
139,410
Operating NPAT (1)
$’000
69,367
59,118
68,867
56,791
61,037
Reported profit/(loss) for the year
$’000
52,660
41,331
64,953
20,695
66,129
Basic EPS (2)
cents
10.2
8.0
12.1
4.0
19.8
BALANCE SHEET
Total assets
$’000
1,174,758
1,111,570
1,021,513
965,544
1,088,591
Total liabilities
$’000
537,517
522,126
454,292
434,138
731,346
Shareholders’ equity
$’000
637,241
589,444
567,221
531,406
357,245
Total debt
$’000
358,736
322,647
301,064
299,210
620,016
CASH FLOWS
Net cash flows from operating activities
$’000
237,170
206,388
221,148
205,616
181,973
Net cash flows from investing activities
$’000 (201,433)
(180,875)
(169,874)
(149,558)
(169,852)
Net cash flows from financing activities
$’000
(4,132)
(38,995)
(65,687)
(179,472)
149,825
Net cash movement
$’000
31,605
(13,482)
(14,413)
(123,414)
161,946
Free cash flow before payments for
acquisitions and other investments
$’000
35,737
30,462
53,522
56,058
73,051
DIVIDENDS
Number of ordinary shares at year end (2)
‘000
518,375
519,003
526,666
544,055
368,551
Total dividends declared in respect to
financial year
$’000
-
12,973
13,341
6,801
-
Ordinary dividends per share declared
cents
-
2.50
2.50
1.25
-
Special dividends per share declared
cents
-
-
-
-
-
KEY RATIOS
Average fleet utilisation
%
91.0
93.0
91.8
86.7
90.5
Operating EBIT ROC (1)
%
14.9
13.2
16.2
16.8
21.0
Leverage ratio
x
1.00
1.10
0.96
0.94
1.66
133
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