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ABN 12 121 542 738
ANNUAL REPORT 2015
ChAiRmAN’s LETTER
DiRECTORs’ REPORT
AUDiTOR’s iNDEPENDENCE DECLARATiON
CONsOLiDATED sTATEmENT OF PROFiT
OR LOss AND OThER COmPREhENsiVE iNCOmE
CONsOLiDATED sTATEmENT OF FiNANCiAL POsiTiON
CONsOLiDATED sTATEmENT OF CAsh FLOWs
CONsOLiDATED sTATEmENT OF ChANGEs iN EQUiTY
NOTEs TO ThE FiNANCiAL sTATEmENTs
DiRECTORs’ DECLARATiON
iNDEPENDENT AUDiTOR’s REPORT
CORPORATE GOVERNANCE sTATEmENT
ADDiTiONAL AsX iNFORmATiON
CORPORATE DiRECTORY
1
5
22
23
24
25
26
27
68
69
71
78
80
ChaiRman’S lEttER
Dear Shareholder
It is with pleasure that I present to you GR Engineering Services Limited’s (GR Engineering or Company) Annual report for
the year ended 30 June 2015 (FY15).
Despite another difficult year for the mining and mining services industries generally, I am very pleased to report that GR
Engineering was able to generate record revenue, convert successful operational outcomes into solid profitability and
continue to reward shareholders with strong returns in FY15.
In addition to being a reflection of the successful implementation of growth strategies enunciated in previous Annual
Reports, results for FY15 were also the result of GR Engineering’s processing engineering expertise across a broad range
of commodities thereby reducing exposure to market conditions for any one mineral commodity. During the year, the
Company’s revenue was generated from projects involving tungsten, tin, iron ore, copper, mineral sands, nickel and gold.
The year also saw continued revenue contributions from the oil and gas industry through the Company’s wholly owned
subsidiary, Upstream Production Solutions (UPS).
Activity during the year was dominated by the construction of Wolf Minerals (UK) Limited’s £75 million Hemerdon Tungsten
and Tin processing plant in Devon in the United Kingdom which by 30 June 2015 was nearing completion and commissioning
was underway.
In November 2014, GR Engineering entered into a $55 million EPC contract with Keysbrook Leucoxene Pty Ltd, a subsidiary
of MZI Resources Limited for its Keysbrook Mineral Sands Project in Western Australia. By 30 June 2015, this project was
well advanced, running on time and on budget and is due for completion in December 2015.
Also in November 2014, the Company’s wholly owned subsidiary, GR Engineering Services Indonesia entered into a $US9
million engineering, procurement and construction management (EPCM) contract with Pt Batatua Raya, a subsidiary of
Finders Resources Limited. This copper project is located on Wetar Island in Indonesia and further demonstrates the
Company’s ability to utilise a wide range of contracting models to projects located in Australia and overseas.
In addition, the Company completed commissioning and operational handover of the moisture reduction plant at Rio Tinto’s
Greater Paraburdoo Operations in Western Australia. This $17 million project was also completed on time and on budget and
was important in further establishing GR Engineering’s track record in the application of its process engineering expertise to
the iron ore industry.
The year under review saw a marked increase in study activity with 31 studies completed throughout the year and 14 active
studies underway as at 30 June. This higher level of study activity is not only a valuable contributor to better manpower
utilisation but is also an important indicator of potential future construction activity.
JOE MARIO PAUL RICCIARDO
Executive Chairman
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
1
ChaiRman’S lEttER
During FY15, the Company’s wholly owned subsidiary, Upstream Production Solutions continued to deliver results in
accordance with expectations despite difficult trading conditions. While significant falls in oil and gas prices during the year
resulted in delays and deferrals to anticipated contracts, management has been successful in securing additional work
thereby preserving UPS’s trading position.
Safety incidents, including a lost time injury incurred on a site operated by UPS in June 2015 served as a salutary reminder
to all our employees and contractors of the importance of observing safe work practices and procedures. We recognise that
while operational outcomes are important, the safety and wellbeing of our people is paramount and safety considerations
are therefore key criteria in our approach to everything we do.
GR Engineering generated record consolidated group revenue of $216.9 million in FY15, an increase of $102.7 million or
89.9% over FY14 and Profit Before Tax for the year was $17.2 million, an increase of $0.4 million or 2.4% over FY14. EBITDA
increased by $3.0 million or 17.4% over FY14, from $17.2 million to $20.2 million.
As at 30 June 2015, the Company held net cash of $63.5 million, trade receivables of $26.0 million and trade payables of
$35.4 million. With no significant debt, these balances reflect a strong working capital position at financial year end.
Further enhancing the Company’s working capital position is the achievement in May 2015 of more favourable terms under
its Bank Guarantee facility with a further limit increase from $30 million to $40 million and importantly, the removal of the
requirement for cash backing as security for bank guarantees on issue.
Having regard to these factors, your directors have resolved to declare a fully franked dividend of 5.0 cents per share for the
half year ended 30 June 2015, bringing the full year payment to 9.5 cents per share. This represents an increase of 35.7%
over the 7.0 cents per share dividend paid in relation to FY14 and an increase of 90.0% over the 5.0 cents per share paid in
relation to FY13.
The Company heads into the new financial year buoyed by strong order book. On 05 May 2015 GR Engineering was
awarded the $114 million engineering, procurement and construction (EPC) contract for the design and construction of the
processing facility and paste fill plant for Sirius Resources NL’s Nova Nickel Project in Western Australia. Work on this project
commenced immediately and is scheduled for completion in November 2016. The Nova Nickel project is one of Australia’s
most significant base metal projects of recent years and we look forward to working with Sirius on its successful delivery.
Together with revenue associated with bringing to completion the projects mentioned earlier and other parcels of work on
hand, GR Engineering has good revenue visibility to the end of FY16 and into FY17. Nevertheless we remain focused on
pursuing and winning additional work to fully utilise the Company’s operational and financial capacity.
It is pleasing that despite difficulties facing our sector GR Engineering has continued to deliver solid and consistent financial
returns to shareholders in FY15 and has grounds for a positive outlook for FY16. I recognise the hard work and dedication of
our employees and contractors and the confidence placed in us by our clients in making these outcomes possible. Finally I
would also like to thank my fellow directors for their insightful guidance and counsel throughout FY15.
JOE MARIO PAUL RICCIARDO
Executive Chairman
2
Continued Revenue
EBITDA
+90%
FY15 $216.9 million
+18%
FY15 $20.3 million
Profit
Before Tax
+2%
FY15 $17.2 million
Cashflow from
Operations
+127%
FY15 $42.5 million
Dividends Paid
Net Cash
+36%
FY15 9.5 cents per share
+72%
FY15 $63.5 million
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
3
Upstream Production Solutions
is a leading provider of products and
services to the oil and gas industry
with a reputation for safe, reliable
solutions to production challenges.
4
DIRECTORS’ REPORTContinued DiRECtORS’ REPORt
Your Directors present their report together with the financial statements of GR Engineering Services Limited
(“GR Engineering” or “consolidated entity”) for the financial year 1 July 2014 to 30 June 2015 and the independent
auditor’s report thereon.
The names of the consolidated entity’s Directors in office during the financial year ended 30 June 2015 and until the
date of this report are as below. Directors were in office for this entire period unless otherwise stated.
DIRECTORS
Geoffrey (Geoff) Michael JONES
(Managing Director)
Joseph (Joe) Mario Paul RICCIARDO
(Non-Executive Chairman)
Tony Marco PATRIZI
(Executive Director)
Barry Sydney PATTERSON
(Non-Executive Director)
Terrence John STRAPP
(Non-Executive Director)
Peter John HOOD
(Non-Executive Director)
COMPANY SECRETARY
Giuseppe (Joe) TOTARO
(B.Comm, CPA, CTA)
Joe is a co-founder of GR Engineering and has been Company Secretary since 4 September 2006. He was appointed Chief
Financial Officer on 19 April 2011. Joe is a certified practicing accountant (CPA) with over 29 years’ experience in commercial
and public practice specialising in mining and mining services. He was formerly company secretary of and business
consultant to JR Engineering. Joe’s experience includes corporate advisory services having consulted on and managed
numerous corporate transactions involving private and publicly listed companies.
PRINCIPAL ACTIVITIES
During the financial period the consolidated entity’s activities have been the provision of high quality process engineering
design and construction services to the mining and mineral processing industry and the provision of operations,
maintenance and well management services to the oil and gas sector.
DIVIDENDS PAID DURING THE YEAR
• Fully franked dividend of 4.00 cents per share paid on 30 September 2014
• Fully franked dividend of 4.50 cents per share paid on 30 March 2015
• Subsequent to 30 June 2015, a fully franked dividend of 5.00 cents per share was recommended by the Directors to
be paid on 25 September 2015.
5
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015
REVIEW OF OPERATIONS
The financial year ended 30 June 2015 (FY15) was a record revenue year for GR Engineering Services Limited. This positive
outcome was made possible by the consolidated entity’s established track record of project delivery and our in-house ability
to provide whole of project solutions, from feasibility study stage through to lump sum engineering design and construction.
This holistic approach sets GR Engineering apart from many of its competitors as it provides clients with clear lines of
accountability and creates certainty on timing, performance and price.
Operationally, a feature of FY15 was the construction of Wolf Minerals (UK) Limited’s £75 million Hemerdon Tungsten and
Tin Project located in Devon, England. As at 30 June 2015, this project was nearing completion and commissioning of the
processing facility was underway. This result is a testament to the project team and to the efficiency and productivity of
the many local subcontractors who have worked on the safe and on budget execution of this project.
In Western Australia, work was successfully completed on a $16.8 million moisture reduction brownfields project at
Paraburdoo. This was an important project to GR Engineering which had been seeking opportunities to utilise its capabilities
in iron ore processing. The consolidated entity remains focused on securing additional optimisation and other value adding
opportunities in the iron ore sector over the coming years.
In November 2014, GR Engineering entered into a $55 million engineering, procurement and construction (EPC) contract
with Keysbrook Leucoxene Pty Ltd, a subsidiary of MZI Resources Limited for its Keysbrook Mineral Sands Project in
Western Australia. This project involves the construction of a wet concentrator plant located at the Keysbrook mine site
and the expansion of an existing mineral separation plant in Picton. By 30 June 2015, this project was well advanced,
running on time and on budget and is due for commissioning in the fourth quarter of 2015.
Also in November 2014, the consolidated entity was awarded a US$9 million engineering, procurement and construction
management (EPCM) contract for the design and construction of the Wetar Copper Project expansion for PT Batutua
Tembaga Raya. This project involves the design and construction management of a copper processing facility on Wetar
Island, Indonesia. GR Engineering continues to pursue near term EPCM contracting opportunities and to apply its EPC
contracting disciplines to the delivery of successful EPCM outcomes. The consolidated entity’s specialist EPCM team has
established a sound record in EPCM delivery, including the on time and on budget completion in the first half of FY15 of
the Syama Gold Project Oxide Circuit in Mali for Resolute Mining Limited.
In May 2015 GRES was awarded the $114 million EPC contract by Sirius Resources NL (Sirius) for the engineering,
procurement and construction of the processing facility associated with the Nova Nickel Project in Western Australia.
Work on this project commenced immediately upon award and is due for completion in November 2016.
Subsequent to balance date, in July 2015, GR Engineering was awarded an additional $12 million EPC contract by Sirius for
the design and construction of the Nova Nickel Project’s non-process infrastructure, bringing the total value of contracted
works associated with the Nova Nickel Project to $126 million.
Also subsequent to the balance date, GR Engineering entered into an EPC contract with Western Areas Limited associated
with the Forrestania Mill Recovery Enhancement Project in Western Australia. The Contract has been entered into on a
guaranteed maximum price basis. The total value of the work under the Contract is approximately $22 million, subject to
further commitments being made by Western Areas.
With the exception of the Western Areas contract, all contracts listed above are with first time clients thereby creating
valuable opportunities to establish new long term commercial relationships and the potential for repeat business. These
engagements also add to the suite of commodities to which GR Engineering’s process engineering skills are applied thereby
broadening its market base.
During FY15, 31 studies involving a wide range of commodities were completed and as at 30 June 2015, the consolidated
entity was engaged on a further 14 studies. This level of study activity is encouraging as it serves as an indicator of potential
future construction opportunities. In addition, a solid base load of study activity facilitates efficient manpower utilisation and
therefore greater overhead absorption.
In FY15 GR Engineering’s wholly owned subsidiary, Upstream Production Solutions (Upstream PS) continued to deliver
results in line with expectations, notwithstanding difficult trading conditions. International oil and gas prices declined
markedly during FY15 resulting in the delay and deferral of anticipated projects. Nevertheless, management was successful
in securing new engagements predominantly in Queensland, thereby enabling Upstream PS to meet budgeted revenue
expectations. Upstream PS generated $31.2 million in revenue in FY15 and EBITDA in FY15 was $1.8 million.
6
DIRECTORS’ REPORTContinued Safety incidents, including a lost time injury, served as a salutary reminder to all our employees and contractors of the
importance of observing safe work practices and procedures. We recognise that while operational outcomes are important,
the safety and wellbeing of our people is paramount and safety considerations are therefore key criteria in our approach to
everything we do.
Looking ahead, GR Engineering enters FY16 with a solid order book dominated by Australian based projects and good
revenue visibility through to FY17. As at the date of this report, contracted revenue for FY16 stood at $195 million (excluding
contributions from Upstream PS). Despite the increased levels of contracted revenue and utilisation, the consolidated entity
retains the operational and financial capacity to execute additional work and is working diligently to close out existing near
term opportunities and to pursue new business in Australia and abroad.
FINANCIAL POSITION
The consolidated entity generated revenue of $216.9 million and net operating cash flow of $42.5 million for the year ended
30 June 2015. During FY15, the consolidated entity paid dividends totalling $12.8 million and as at 30 June 2015 held cash
totalling $64.6 million, an increase of $32.4 million over the balance held as at 30 June 2014. Pursuant to an agreement
entered with the consolidated entity’s Bankers in April 2015 the requirement to secure bank guarantees with cash equating
to one quarter of the value of bank guarantees on issue was removed.
At the end of FY15, the consolidated entity held trade debtors of $26.0 million, trade creditors of $35.4 million and short
and long term debt of $1.1 million.
GROWTH STRATEGY
The consolidated entity’s growth strategy continues to be based on the following key areas:
• Pursue EPC process engineering and construction opportunities in precious and base metals in Australia and abroad;
• Seek to grow the consolidated entity’s track record of applying process engineering solutions to iron ore processing;
• Develop and further promote the consolidated entity’s EPCM capabilities;
• Provide management and financial support to Upstream PS so as to facilitate growth in the provision of operations and
maintenance services to the oil and gas industry;
• Assess and pursue acquisitions to the extent that they meet the consolidated entity’s investment criteria; and
• Pursue increased market share by promoting the consolidated entity’s ability to deliver a complete suite of in house
EPC/EPCM contracting capabilities.
This strategy has served GR Engineering well, as evidenced by the operational outcomes outlined earlier in this report,
which have contributed to record revenue in FY15. The consolidated entity’s management will continue to apply the human
and financial resources needed to maintain momentum in its continued implementation of its growth strategy.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In March 2015, Assetinsure Pty Ltd agreed to increase GR Engineering’s insurance bond facility from $20 million to
$30 million.
In May 2015 the consolidated entity entered into an agreement with National Australia Bank providing for an increase in
the consolidated entity’s Bank Guarantee Facility from $30 million to $40 million. The terms of the increased Bank Guarantee
Facility include, inter alia, the removal of the requirement for Letters of Set Off against term deposits equating to one quarter
of the value of Bank Guarantees on issue as security under the facility.
In July 2015, GR Engineering was awarded an additional $12 million EPC contract by Sirius for the design and construction
of the Nova Nickel Project’s non-process infrastructure, adding an additional $12 million to revenue under the project.
Also in July 2015, the consolidated entity entered into a $22 million EPC contract with Western Areas Limited (Western
Areas) for its Forrestania Mill Recovery Enhancement Project.
7
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 FUTURE DEVELOPMENTS
Information regarding likely developments in the operations of the consolidated entity in future financial years is referred to
in the Review of Operations and Growth Strategy in above sections of this Directors’ Report.
EVENTS AFTER BALANCE SHEET DATE
On 20 August 2015, the consolidated entity declared a fully franked dividend of 5.0 cents per share, an aggregate of
$7,536,627. The Record Date of the dividend is 11 September 2015 and the proposed payment date is 25 September 2015.
BOARD OF DIRECTORS
Joseph (Joe) Mario Paul RICCIARDO – Non-Executive Chairman
BAppSc (Mech Eng)
Joe co-founded GR Engineering. He is a Mechanical Engineer with over 35 years’ experience in feasibility studies, design,
construction, maintenance and operation of mineral processing facilities.
In 1986 Joe lead the founding of JR Engineering. As Managing Director, Joe successfully grew JR Engineering into a leading
engineering services provider before its sale to a major ASX listed Mining Services Group in 2001.
In 2006, Joe was instrumental in regrouping the former key executives from JR Engineering to establish GR Engineering.
Joe is a non-executive director of Mineral Resources Limited and has been on its Board since its public listing in 2006.
•
•
Interests in ordinary shares in GR Engineering – 9,798,578
Interests in other securities in GR Engineering – None
• Special Responsibilities:
– Non-Executive Chairman
• Directorships in other listed entities in the last 3 years:
– Mineral Resources Limited (ASX:MIN) 2006 – Present
Geoffrey (Geoff) Michael JONES – Managing Director
BE (Civil), FIEAust, CPEng
Geoff is a Civil Engineer with over 30 years’ experience in construction, engineering, minerals processing and project
development in Australia and overseas. Geoff previously worked for Baulderstone Hornibrook, John Holland, Minproc
Engineers and Signet Engineering before serving over six years as Group Project Engineer for Resolute Mining Limited.
Prior to joining GR Engineering Services Limited in 2011, Geoff was the General Manager of Sedgman Limited’s metals
engineering business and also responsible for the strategic development of the metals engineering division internationally.
Geoff is currently the Non-executive Chairman of Marindi Metals Limited (previously Brumby Resources Limited), a
non-executive director of Azumah Resources Limited and a non-executive director of Energy Metals Limited.
•
•
Interests in ordinary shares in GR Engineering – 1,182,531
Interests in other securities in GR Engineering: Share Appreciation Rights – 942,064
• Special Responsibilities:
– Managing Director
• Directorships in other listed entities in the last 3 years:
– Marindi Metals Limited (ASX:MZN) 2015 – Present
– Brumby Resources Limited (ASX:BMY) 2006 – 2015
– Azumah Resources Limited (ASX:AZM) 2009 – Present
– Energy Metals Limited (ASX:EME) 2008 – Present
8
DIRECTORS’ REPORTContinued Tony Marco PATRIZI – Executive Director
BE (Mech Eng)
Tony co-founded GR Engineering. Tony is a Mechanical Engineer with over 30 years’ experience in the mining and minerals
processing industries as a company director, operations manager, and project manager and maintenance engineer. Tony was
previously the operations manager of JR Engineering which had over 300 personnel and provided workshop, maintenance,
engineering and construction services to mining and mineral processing projects in Western Australia and interstate.
•
•
Interests in ordinary shares in GR Engineering – 9,795,000
Interests in other securities in GR Engineering – None
• Directorships in other listed entities – None
Barry Sydney PATTERSON – Non-Executive Director
ASMM, MIMM, FAICD
Barry is a Mining Engineer with over 50 years’ experience in the mining industry and is a co-founder of GR Engineering.
He co-founded contract mining companies Eltin, Australian Mine Management and National Mine Management. Barry was
also a co-founder of JR Engineering Services Pty Ltd.
Barry has served as a director of a number of public companies across a range of industries. He was formerly a non-
executive chairman of Sonic Healthcare Limited and Silex Systems Limited and is currently a Non-Executive Director of
Dacian Gold Limited.
•
•
Interests in ordinary shares in GR Engineering – 10,500,000
Interests in other securities in GR Engineering – None
• Special Responsibilities:
– Chairman of the Remuneration and Nominations Committee
– Member of the Audit and Risk Committee
– Non-Executive Director
• Directorships in other listed entities in the last 3 years:
– Dacian Gold Limited (ASX:DCN) 2012 – Present
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
9
Terrence (Terry) John STRAPP – Non-Executive Director
CPA, FFin., MAICD
Terry has extensive experience in banking, finance and corporate risk management and has over 30 years’ experience in the
mining and resource industry. He was formerly a non-executive director of The Mac Services Group Limited (resigned 2010).
Terry is a non-executive director of Ausdrill Limited.
•
•
Interests in ordinary shares in GR Engineering – 380,000
Interests in other securities in GR Engineering – None
• Special Responsibilities:
– Chairman of the Audit and Risk Committee
– Member of the Remuneration and Nominations Committee
• Directorships in other listed entities in the last 3 years:
– Ausdrill Limited (ASX:ASL) 2005 – Present
Peter John HOOD – Non-Executive Director
BE(Chem), MAusIMM, FlChemE, FAICD
Peter is a Chemical Engineer and has over 40 years’ experience in the resource and energy sectors.
He was formerly the chief executive officer of Coogee Chemicals and then oil and gas operator, Coogee Resources.
Prior to that he served in senior management and project development roles for WMC Ltd in nickel and gold production.
Peter has considerable board experience and is currently Chairman of Matrix Composites and Engineering Ltd,
Deputy President of the Australian Chamber of Commerce and Industry, Immediate Past President of the Chamber
of Commerce and Industry of Western Australia and former Chairman of Apollo Gas Ltd.
•
•
Interests in ordinary shares in GR Engineering – 500,000
Interests in other securities in GR Engineering – None
• Special Responsibilities:
– Member of the Audit and Risk Committee
– Member of the Remuneration and Nominations Committee
• Directorships in other listed entities in the last 3 years:
– Matrix Composites & Engineering Limited (ASX:MCE) 2011 – Present
10
DIRECTORS’ REPORTContinued MEETINGS OF DIRECTORS
The number of Meetings of the Board of Directors held during the year ended 30 June 2015 and the number attended by
each director are as follows:
FULL mEETiNGS OF diREcTORS
Eligible
Attended
Barry Patterson
Joe Ricciardo
Geoff Jones
Tony Patrizi
Terrence Strapp
Peter Hood
11
11
11
11
11
11
10
10
11
11
10
11
Meetings of the Audit and Risk Committee were held on 22 August 2014 and 20 February 2015. These meetings were
attended by the Chairman of the Audit and Risk Committee Terrence Strapp, members of the Audit and Risk Committee
Barry Patterson and Peter Hood, and Chief Financial Officer Joe Totaro. No formal meeting of the Remuneration and
Nominations Committee was held during the year ended 30 June 2015 as its members elected to address matters for
its consideration within the context of meetings of the full Board of Directors.
OPTIONS
As at the date of this report, there were no unissued ordinary shares of GR Engineering under option.
SHARE APPRECIATION RIGHTS
As at the date of this report, Share Appreciation Rights granted are as follows:
Grant date
vesting & Exercise date
Exercise price
12 November 2013
12 November 2013
12 November 2013
30 June 2016
30 June 2017
30 June 2018
Nil
Nil
Nil
Quantity
432,433
296,297
213,334
For full particulars of the Share Appreciation Rights issued to Directors as remuneration, refer to the Remuneration Report.
PERFORMANCE RIGHTS
As at the date of this report, the unissued ordinary shares of GR Engineering which are the subject of unvested Performance
Rights are as follows:
Grant date
No. Performance Rights
Exercise price
Quantity
21 September 2015
1,690,000
21 September 2015
4 October 2015
31 March 2016
13 May 2016
31 March 2017
31 March 2018
31 March 2019
25,000
127,500
50,000
127,500
127,500
127,500
4 October 2015
31 March 2016
13 May 2016
31 March 2017
31 March 2018
31 March 2019
–
–
–
–
–
–
–
The Performance Rights holders do not have any right to participate in any issues of shares or other interests in the
consolidated entity or any other entity.
No shares were issued during the financial year ended 30 June 2015 due to the vesting of Performance Rights.
11
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 INDEMNIFYING OFFICERS OR AUDITORS
During the financial year, the consolidated entity paid insurance premiums relating to contracts insuring the directors and
company secretary against liability which may arise in connection with them acting as Director or Company Secretary, to
the extent permitted under the Corporations Act. The contract of insurance prohibits disclosure of the nature of the liability
and the amount of the premium.
LEGAL PROCEEDINGS
No person has applied for leave of court to bring proceedings on behalf of the consolidated entity or intervene in any
proceedings to which the consolidated entity is a party for the purpose of taking responsibility on behalf of the consolidated
entity for all or any part of those proceedings.
NON AUDIT SERVICES
The Board of Directors is satisfied that the provision of non-audit services during the year is consistent with the general
standard of independence imposed by the Corporations Act 2001.
Non-audit services were reviewed by the Board to ensure they do not compromise the objectivity of the Auditor and to
ensure the nature of services provided is not inconsistent with the principals of auditor independence. Set out in APES
110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.
During the year ended 30 June 2015 fees amounting to $56,700 were paid to Deloitte Touche Tohmatsu for non- audit
services including taxation advice.
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration for the year ended 30 June 2015 has been reviewed and can be found at page
18 of the annual financial report.
ENVIRONMENTAL ISSUES
In conducting its business, the consolidated entity is required to obtain permits and licences from relevant state
environment protection authorities. It is of paramount importance to management and the Board of Directors that as well
as operating within its own Environmental Policies, the consolidated entity observes all relevant licences in good standing.
The consolidated entity has not been made aware of any areas of non-compliance in this regard.
The consolidated entity is not subject to the Energy Efficiency Opportunities Act 2006 as it does not meet the energy use
threshold specified in Section 10 of that legislation. The consolidated entity’s energy consumption will be monitored and
will register under the act if and when the energy use threshold is exceeded.
12
DIRECTORS’ REPORTContinued REMUNERATION REPORT – AUDITED
The remuneration report details the amount and nature of the remuneration for the consolidated entity’s key
management personnel.
Directors
• Geoff Jones
(Managing Director)
• Joe Ricciardo
(Non-Executive Chairman)
• Tony Patrizi
(Executive Director)
• Barry Patterson
(Non-Executive Director)
• Terrence Strapp
(Non-Executive Director)
• Peter Hood
(Non-Executive Director)
Executives
• David Sala Tenna
(General Manager – EPC)
• Joe Totaro
(Chief Financial Officer & Company Secretary)
• Rodney Schier
(Engineering Manager)
• Paul Newling
(General Manager – EPCM)
Unless otherwise stated the named persons held their current position for the whole financial year and since the end
of the financial year. At the consolidated entity’s 2014 Annual General Meeting, 93% of eligible shareholders voted in
favour of the remuneration report. No specific comments were made regarding the remuneration report at the meeting.
REMUNERATION POLICY
The consolidated entity’s remuneration policy has been designed to attract and retain high calibre key employees whose
personal interests are aligned with success and growth of the consolidated entity and therefore shareholders.
This will be achieved by:
• Staying abreast of labour market forces thereby ensuring remuneration offered by the consolidated entity is competitive
and remains so through a process of annual review.
• Devising performance based remuneration programmes.
• Utilising the consolidated entity’s Equity Incentive Plan and/or Employee Share Option Plan.
NON-EXECUTIVE DIRECTORS
The consolidated entity’s policy is to remunerate non-executive directors according to market rates and to reflect the time
dedicated to their position and special responsibilities involved.
GR Engineering’s Constitution provides that the Directors shall be paid out of the funds of the consolidated entity by way
of remuneration for services such sums as may from time to time be determined by the consolidated entity in General
Meeting, to be divided among the Directors in such proportions as they shall from time to time agree or in default of
agreement, equally.
Directors are encouraged to hold shares in the consolidated entity to align their personal objectives with the growth and
profitability of the consolidated entity.
EXECUTIVE DIRECTORS
Executive Directors’ pay and reward is comprised of a competitive base salary. To the extent that executive directors are
shareholders in the consolidated entity, their personal objectives are aligned with the performance of the consolidated entity.
13
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 SENIOR EXECUTIVES
Executives’ remuneration is comprised of a competitive base salary, performance bonuses and share based incentive
payments (at the discretion of the board). The Managing Director, Geoff Jones is also incentivised through the issue of
performance based Share Appreciation Rights and is eligible to participate in the GR Engineering Services Limited Equity
Incentive Plan.
All executive remuneration packages are reviewed annually to ensure they remain competitive and reflect performance.
Remuneration paid to directors and executives is valued at cost to the consolidated entity. Options, Performance Rights
and Share Appreciation Rights are valued using the Black Scholes and Monte Carlo methods.
EMPLOYMENT DETAILS OF MEMBERS OF KEY MANAGEMENT PERSONNEL
Name
Title
contract details
Joe Ricciardo
Non-Executive
Chairman
Termination: 3
months notice by
the consolidated entity
or employee
Tony Patrizi
Executive Director Termination: 3
months notice by
the consolidated entity
or employee
Barry Patterson Non-Executive
Director
Terrence Strapp Non-Executive
Peter Hood
Director
Non-Executive
Director
By rotation and
re-election
By rotation and
re-election
By rotation and
re-election
Geoff Jones
Managing Director Fixed term to 30 June
david Sala Tenna General Manager
– EPC
Joe Totaro
Company
Secretary/Chief
Financial Officer
Rodney Schier
Engineering
Manager
Paul Newling
General Manager
– EPCM
2018. Termination: 6
months notice by the
consolidated entity
and 3 months notice
by the employee
Termination: 3
months notice by
the consolidated entity
or employee
Termination: 3
months notice by
the consolidated entity
or employee
Termination: 3
months notice by
the consolidated entity
or employee
Termination:
3 months notice by
the consolidated entity
or employee
Non Salary
cash
incentives
Shares/
Units
Options/
Rights
Fixed
Salary
Total
–
–
–
–
–
–
–
–
–
–
–
–
-
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
25.1%
74.9%
100%
–
–
–
100%
100%
100%
100%
100%
100%
1.4%
98.6%
100%
The terms and conditions upon which key employees are employed are set out in contracts of employment. These contracts
provide for minimum notice periods prior to termination and, in some cases restrictive covenants upon termination.
The consolidated entity can terminate the contract at any time in the case of serious misconduct and termination payments
may be paid in lieu of notice period.
14
DIRECTORS’ REPORTContinued REMUNERATION DETAILS FOR THE YEAR ENDED 30 JUNE 2015 – BOARD OF DIRECTORS
Short Term Benefits
Post Employment
Benefits
Equity Based Payments
Super-
Sub Total
annuation Other *
Equity
Options
Total
Performance
Based
cash
Salary &
Fees
$
Non cash
Payments
**
$
$
$
EXEcUTivE diREcTORS
Tony Patrizi
2015
2014
Geoff Jones
2015
2014
287,213
13,809
301,022
27,285
287,616
14,017
301,633
17,774
457,303
30,117
487,420
18,783
457,225
24,075
481,300
17,774
NON-EXEcUTivE diREcTORS
Joe Ricciardo ***
2015
2014
59,266
70,663
7,352
8,203
66,618
78,866
Barry Patterson
2015
2014
57,000
57,000
Terrence Strapp ****
2015
2014
Peter Hood
2015
2014
62,700
57,000
57,000
57,000
TOTAL diREcTORS
–
–
–
–
–
–
57,000
57,000
62,700
57,000
57,000
57,000
5,630
6,536
5,415
5,272
5,415
5,272
5,415
5,272
2015
2014
980,482
51,278
1,031,760
67,943
986,504
46,295
1,032,799
57,900
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
$
–
–
$
%
328,307
319,407
0.0%
0.0%
130,588
38,997
675,788
366,098
96,904
962,076
25.1%
48.1%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
72,248
85,402
62,415
62,272
68,115
62,272
62,415
62,272
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
130,588
38,997
1,269,288
366,098
96,904
1,553,701
13.4%
29.8%
“Other” amounts relate to performance based bonus payments, as approved by the board
“Non-Cash payments” refer to reportable fringe benefits (fuel for personal vehicles and novated leases)
*
**
*** Reduction in benefits due to change in role to Non- Executive Chairman
**** Paid to SDG Nominees Pty Ltd, an entity controlled by Terrence Strapp
15
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 REMUNERATION DETAILS FOR THE YEAR ENDED 30 JUNE 2015 – EXECUTIVES
Short Term Benefits
Post Employment
Benefits
Equity Based Payments
cash
Salary &
Fees
$
Non cash
Payments
**
$
Super-
Sub Total
annuation Other *
Equity
Options
Total
Performance
Based
$
$
SENiOR EXEcUTivES
david Sala Tenna – General manager – EPc
2015
2014
331,193
343,224
5,211
7,551
336,404
31,463
350,775
17,774
Joe Totaro – company Secretary & chief Financial Officer
2015
2014
260,869
224,855
9,459
9,582
270,328
24,782
234,437
20,799
Rodney Schier – Engineering manager
2015
2014
261,468
261,468
5,121
8,288
266,589
24,839
269,756
24,185
Paul Newling – General manager EPcm
2015
2014
420,222
449,224
3,853
5,067
424,075
18,783
454,291
17,774
TOTAL SENiOR EXEcUTivES
2015
2014
1,273,752
23,644
1,297,396
99,867
1,278,771
30,488
1,309,259
80,532
TOTAL diREcTORS
2015
2014
2,254,234
74,922
2,329,156
167,810
2,265,275
76,783
2,342,058
138,432
$
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
6,497
6,497
6,497
6,497
$
–
–
–
–
–
–
–
–
–
–
$
%
367,867
368,549
295,110
255,236
291,428
293,941
449,355
478,562
1,403,760
1,396,288
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
1.4%
1.4%
0.5%
0.5%
137,085
38,997
2,673,048
6.6%
372,595
96,904
2,949,989
15.9%
*
**
“Other” amounts relate to performance based bonus payments, as approved by the board
“Non-Cash payments” refer to reportable fringe benefits (fuel for personal vehicles and novated leases)
16
DIRECTORS’ REPORTContinued LONG TERM INCENTIVES
Employee Share Option Plan
The consolidated entity has established an employee share option plan (ESOP). The consolidated entity may offer options
to subscribe for shares in the consolidated entity to eligible persons subject to the ESOP rules. Options offered under the
ESOP are to be offered on such terms as the board determines and the offer must set out specified information including
the number of options, the period of the offer, calculation of the exercise price and any exercise conditions.
The exercise price is to be determined by the Board in its absolute discretion and set out in the offer provided that the
exercise price is not less than the average market price on ASX on the five trading days prior to the day the Directors
resolve to grant the option(s).
Equity Incentive Plan
The GR Engineering Services Limited Equity Incentive Plan (Plan) was adopted by the Board on 28 March 2012. In
accordance with the Listing Rules of the Australian Securities Exchange (ASX), shareholder approval of the Plan was
obtained at the consolidated entity’s Annual General Meeting held on 30 November 2012. Under the ASX Listing Rules
and Corporations Act 2001 (Cth), the issue of securities under the Plan to directors will be subject to separate shareholder
approval. At the discretion of the Board, all eligible employees of the consolidated entity or eligible consultants may
participate in the Plan. Non-executive directors are not eligible to participate in the Plan.
The Plan is designed to align the interests of executives and employees with the interests of shareholders by providing
an opportunity to receive an equity interest in the consolidated entity and therefore direct participation in the benefits of
future consolidated entity performance over the medium to long term.
This is achieved by awarding both or either:
• Performance Rights (PR), with each PR being a right to acquire one fully paid ordinary share of the consolidated entity
and vesting upon the satisfaction of certain performance conditions; and
• Share Appreciation Rights (SARs), being rights to receive a future payment in shares, based on to the amount of
increase in market value of one share in the consolidated entity in a specified period between the grant of the SAR
and exercise of that SAR.
Securities issued under the Plan will be subject to vesting criteria as determined by the Board and have a term of 3 years
(or such term as otherwise agreed by the Board).
During the year ended 30 June 2015 no Performance Rights were issued and 20,000 were forfeited in accordance with
the terms and conditions of the Plan. A total of 2,295,000 Performance Rights were on issue as at 30 June 2015.
Grant date
11 Sep 2012
4 Oct 2012
13 May 2013
30 Apr 2014
30 Apr 2014
30 Apr 2014
30 Apr 2014
vesting date
Expiry date
Exercise Price
Number
Fair value
21 Sep 2015
21 Sep 2015
4 Oct 2015
4 Oct 2015
13 May 2016
13 May 2016
31 Mar 2016
31 Mar 2016
31 Mar 2017
31 Mar 2017
31 Mar 2018
31 Mar 2018
31 Mar 2019
31 Mar 2019
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1,710,000
25,000
50,000
127,500
127,500
127,500
127,500
$0.637
$0.689
$0.459
$0.571
$0.511
$0.458
$0.410
The Performance Rights issued or lapsed in the current financial year do not relate to key management personnel.
17
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 The following share-based payment compensation relates to Share Appreciation Rights issued to directors and
senior management:
Name
Geoff
Jones
Grant
date
vesting
date
date
Exercised
Number
of Shares
issued on
vesting date
Exercise
Price
$
Quantity
% of compensation
for the Year
consisting of Share
Appreciation Rights
Fair
value
$
12 Nov 2013 30 Jun 2014 30 Jun 2014
407,949
12 Nov 2013 30 Jun 2015 30 Jun 2015
324,582
12 Nov 2013 30 Jun 2016
12 Nov 2013 30 Jun 2017
12 Nov 2013 30 Jun 2018
Nil
Nil
Nil
Nil
Nil
1,600,000
$0.1774
727,273
$0.1827
432,433
$0.1761
296,297
$0.1619
213,334
$0.1508
38.0%
19.3%
RELATIONSHIP BETWEEN COMPANY PERFORMANCE AND REMUNERATION POLICY
The table below sets out summary information about the consolidated entity’s earnings and movements in shareholder
wealth for the 5 years to 30 June 2015:
Revenue ($000's)
142,512
152,838
2011
2012
Net profit before tax ($000's)
Net profit after tax ($000's)
Share price at year end ($)
dividend ($000's)
EPS (cents)
diluted EPS (cents)
29,247
21,098
1.95
19,000
16.76
16.75
19,858
13,115
0.90
12,000
8.74
8.74
2013
114,695
11,476
7,539
0.46
9,000
5.03
4.97
2014
2015
114,183
216,893
16,787
14,164
0.70
9,000
9.44
9.26
17,196
12,938
0.90
12,785
8.60
8.42
Messrs Ricciardo and Patrizi, a Non-Executive Director, two senior executives and four key employees hold significant
shareholdings in the consolidated entity. As a result the performance of the consolidated entity and the personal and
financial interest of its executive and management team are aligned.
The consolidated entity has issued Share Appreciation Rights to its Managing Director Geoff Jones which are designed
to incentivise the Managing Director and align his interests with those of all shareholders.
The ESOP and Plan have been adopted by the consolidated entity and will be implemented as the Nomination and
Remuneration Committee identify the need to remunerate either existing or future employees, key employees, executives
or executive directors on a performance basis.
18
DIRECTORS’ REPORTContinued SHAREHOLDING
The number of shares in the parent entity held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
2015
Ordinary shares
Joe Ricciardo
Tony Patrizi
Barry Patterson
Terry Strapp
Peter Hood
Geoff Jones
david Sala Tenna
Joe Totaro
Rodney Schier
Paul Newling
2014
Ordinary shares
Joe Ricciardo
Tony Patrizi
Barry Patterson
Terry Strapp
Peter Hood
Geoff Jones
david Sala Tenna
Joe Totaro
Rodney Schier
Paul Newling
Balance at
the start of
the year
Received
as part of
remuneration
Additions/
other
disposals/
other
Balance at the
end of the year
9,798,578
9,795,000
10,500,000
380,000
500,000
857,949
13,825,000
9,500,000
8,100,000
–
–
–
–
–
–
324,582
–
–
–
–
63,256,527
324,582
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,798,578
9,795,000
10,500,000
380,000
500,000
1,182,531
13,825,000
9,500,000
8,100,000
–
63,581,109
Balance at
the start of
the year
Received
as part of
remuneration
Additions/
other
disposals/
other
Balance at the
end of the year
9,798,578
9,795,000
10,500,000
300,000
500,000
400,000
13,825,000
9,500,000
8,100,000
–
–
–
–
–
–
–
–
–
80,000
–
407,949
50,000
–
–
–
–
–
–
–
–
62,718,578
407,949
130,000
–
–
–
–
–
–
–
–
–
–
–
9,798,578
9,795,000
10,500,000
380,000
500,000
857,949
13,825,000
9,500,000
8,100,000
–
63,256,527
19
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
During the year ended 30 June 2015 the consolidated entity leased office space at 71-73 Daly Street from Ashguard Pty
Ltd. Directors of the consolidated entity, namely Joe Ricciardo, Tony Patrizi, and Barry Patterson, each have a non controlling
interest in Ashguard Pty Ltd. The total amount invoiced by Ashguard Pty Ltd in the year ended 30 June 2015 amounted to
$314,263 including GST (2014: $300,847). The balance payable at 30 June 2015 is $46,054 (2014: $22,570). During the year
ended 30 June 2015 the consolidated entity procured items for Ashguard Pty Ltd. The total amount invoiced to Ashguard
Pty Ltd in the year ended 30 June 2015 was $10,998 including GST (2014: Nil). The balance outstanding at 30 June 2015
is Nil (2014: Nil).
During the year ended 30 June 2015 the consolidated entity procured items and hired equipment from PIHA Pty Ltd (a
subsidiary of Mineral Resources Limited), a company in which Joe Ricciardo is a non-executive director. The total amount
invoiced by PIHA Pty Ltd in the year ended 30 June 2015 amounted to $240,664 including GST (2014: Nil). The balance
payable at 30 June 2015 is $237,936 (2014: Nil). During the year ended 30 June 2015 the consolidated entity provided
engineering services and procurement of materials for PIHA Pty Ltd. The total amount invoiced to PIHA Pty Ltd in the
year ended 30 June 2015 was $41,083 including GST (2014: $80,300). The balance outstanding at 30 June 2015 is Nil
(2014: $48,180).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Crushing Services International Pty Ltd (a subsidiary of Mineral Resources Limited), a company in which Joe Ricciardo
is a non-executive director. The total amount invoiced to Crushing Services International Pty Ltd in the year ended 30 June
2015 was $151,580 including GST (2014: $153,274). The balance outstanding at 30 June 2015 is Nil (2014: Nil).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Azumah Resources Limited, a company in which Geoff Jones is a non-executive director. The total amount invoiced
to Azumah Resources Limited in the year ended 30 June 2015 was $204,886 including GST (2014: $26,848). The balance
outstanding at 30 June 2015 is Nil (2014: $19,750).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Optiro Pty Ltd, a company in which Joe Ricciardo and Tony Patrizi each hold non-controlling interests. The total amount
invoiced to Optiro Pty Ltd in the year ended 30 June 2015 was $9,680 including GST (2014: Nil). The balance outstanding at
30 June 2015 is $9,680 (2014: Nil).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Marindi Metals Limited (previously Brumby Resources Limited), a company in which Geoff Jones is a non-executive
chairman. The total amount invoiced to Marindi Metals Limited in the year ended 30 June 2015 was $56,562 including GST
(2014: Nil). The balance outstanding at 30 June 2015 is Nil (2014: Nil).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Dacian Gold Limited, a company in Barry Patterson is a non-executive director. The total amount invoiced to Dacian
Gold Limited in the year ended 30 June 2015 was $7,420 including GST (2014: Nil). The balance outstanding at 30 June
2015 is Nil (2014: Nil).
The terms and conditions of the transactions and the associated agreements to which they relate (where applicable) that
have been set out above are at arms length and on normal commercial terms.
This marks the end of the remuneration report.
20
DIRECTORS’ REPORTContinued CORPORATE GOVERNANCE
The Directors of the consolidated entity are committed to the highest standards of corporate governance in all elements of
the business of the consolidated entity including internal control, ethics, risk functions, policies and internal and external audit.
The consolidated entity’s Board of Directors has adopted a comprehensive corporate governance policy and manual based
on ASX guidelines. The Board continually seeks to review and develop additional structures to be implemented as the
consolidated entity’s activities develop in size, nature and scope.
Please refer to the Corporate Governance Statement contained in this report.
This directors’ report is signed in accordance with a resolution of directors made pursuant to Section 298(2) of the
Corporations Act 2001.
On behalf of the Directors
Geoff Jones
Managing Director
20 August 2015
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
21
aUDitOR’S inDEPEnDEnCE DEClaRatiOn
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Woodside Plaza
Level 14
240 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
21 August 2015
The Board of Directors
GR Engineering Services Limited
183 Great Eastern Highway
BELMONT WA 6104
Dear Board Members
GR Engineering Services 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 GR Engineering Services Limited.
As lead audit partner for the audit of the financial statements of GR Engineering Services Limited for the financial
year ended 30 June 2015, 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
Neil Smith
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
21
22
COnSOliDatED StatEmEnt OF
PROFit OR lOSS anD OthER
COmPREhEnSiVE inCOmE
FOR THE YEAR ENdEd 30 JUNE 2015
REVENUE
Other income
EXPENSES
Employee benefits expense
Superannuation expense
Depreciation and amortisation expense
Workers compensation expense
Equity based payments
Finance costs
Direct materials and subcontractor costs
Accountancy & audit fees
Marketing
Bad debts
Occupancy
Administration
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year attributable to
the owners of GR Engineering Services Limited
Other comprehensive income for the year, net of income tax
Items that may be reclassified subsequently to profit or loss:
Fair value gain/(loss) on available for sale financial assets
Exchange differences on translating foreign operations
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year attributable to
the owners of GR Engineering Services Limited
Notes
5
6
7
7
7
10
8
22
consolidated
2015
$
2014
$
216,892,554
114,182,880
1,586,113
4,410,411
(46,482,886)
(29,320,690)
(4,218,975)
(4,169,359)
(324,568)
(564,101)
(58,869)
(2,252,373)
(1,639,164)
(185,877)
(759,823)
(81,029)
(137,893,008)
(60,993,558)
(286,932)
(34,930)
(13,745)
(2,309,003)
(4,926,384)
(430,849)
(62,017)
(146,340)
(1,951,214)
(3,983,782)
17,195,907
16,786,575
(4,258,256)
(2,622,989)
12,937,651
14,163,586
346,848
1,103,967
1,450,815
(142,852)
(414,488)
(557,340)
14,388,466
13,606,246
Profit attributable to owners of the parent
12,937,651
14,163,586
Total comprehensive income attributable to the owners
of the parent
14,388,466
13,606,246
Basic earnings per share
Diluted earnings per share
The accompanying notes form part of these Financial Statements.
32
32
cents
8.60
8.42
cents
9.44
9.26
23
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 COnSOliDatED StatEmEnt
OF FinanCial POSitiOn
AS AT 30 JUNE 2015
ASSETS
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Financial assets
Intangible assets
Deferred tax
Total non-current assets
Total assets
LIABILITIES
current liabilities
Trade and other payables
Borrowings
Income tax
Provisions
Unearned revenue
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EqUITY
Issued capital
Reserves
Retained profits
Total equity
Notes
consolidated
2015
$
2014
$
9
10
11
12
10
13
14
15
8
16
17
8
18
19
17
18
20
21
22
64,582,994
32,193,955
26,038,936
34,674,786
2,821,512
2,355,304
652,458
738,393
94,095,900
69,962,438
–
3,514,591
2,347,202
3,891,099
2,040,901
601,704
552,656
3,647,664
2,256,138
8,670,587
546,612
10,727,980
102,766,487
80,690,418
35,392,357
21,609,153
397,912
2,055,333
7,962,338
5,416,190
287,966
1,889,743
4,873,459
3,818,279
51,224,130
32,478,600
706,432
2,111,213
2,817,645
247,412
1,407,585
1,654,997
54,041,775
34,133,597
48,724,712
46,556,821
28,918,256
28,785,355
2,552,945
670,930
17,253,511
17,100,536
48,724,712
46,556,821
The accompanying notes form part of these Financial Statements.
24
COnSOliDatED StatEmEnt
OF CaSh FlOWS
FOR THE YEAR ENdEd 30 JUNE 2015
cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Notes
consolidated
2015
$
2014
$
231,649,234
114,143,457
(184,485,238)
(93,543,588)
(5,802,192)
1,117,263
(3,070,409)
1,264,723
Net cash flows from operating activities
9
42,479,067
18,794,183
cash flows from investing activities
Purchase of property, plant and equipment
(1,797,266)
(43,946)
(Investment)/divestment in term deposits for project security
5,239,431
13,026,944
Net cash outflow on acquisition of business
Investment in financial assets
Net cash flows used in investing activities
cash flows from financing activities
Payment of finance lease liabilities
Dividends paid
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effects of exchange rate changes of balances of cash
held in foreign currencies
–
(5,750,000)
(1,398,649)
2,043,516
(56,804)
7,176,194
(168,525)
(12,784,676)
(12,953,201)
(358,129)
(9,000,000)
(9,358,129)
31,569,382
16,612,248
32,193,955
16,218,685
819,657
(636,978)
cash and cash equivalents at end of period
9
64,582,994
32,193,955
The accompanying notes form part of these Financial Statements.
25
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 COnSOliDatED StatEmEnt
OF ChanGES in EQUitY
FOR THE YEAR ENdEd 30 JUNE 2015
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nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
NOTE 1. GENERAL INFORMATION
The financial report covers GR Engineering Services Limited as a consolidated entity consisting of GR Engineering Services
Limited and the entities it controlled during the year. The financial report is presented in Australian dollars, which is GR
Engineering Services Limited’s functional and presentation currency.
The financial report consists of the Financial Statements, Notes to the Financial Statements and the Directors’ Declaration.
GR Engineering Services Limited is a listed public company limited by shares, incorporated and domiciled in Australia. The
registered office of GR Engineering Services Limited is located at 179 Great Eastern Highway, Belmont, Western Australia.
The principal place of business is located at 179 Great Eastern Highway, Belmont, Western Australia.
A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’
report, which is not part of the financial report.
The financial report was authorised for issue, in accordance with a resolution of directors, on 20 August 2015. The directors
have the power to amend and reissue the financial report.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
Adoption of new and revised Accounting Standards
The consolidated entity has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board that are relevant to their operations and are effective for the current financial reporting period,
beginning 1 July 2014.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant
to the consolidated entity included:
• AASB 1031 ‘Materiality’ (December 2013)
• AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities
(Amendments to AASB 132)’
• AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets’
• AASB 2013-4 ‘Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of
Hedge Accounting’
• AASB 2013-5 ‘Amendments to Australian Accounting Standards – Investment Entities’
• AASB 2013-9 ‘Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial
Instruments – Part B’
• AASB 2014-1 ‘Amendments to Australian Accounting Standards’ [Part A – Annual Improvements 2010-2012 and
2011-2013 Cycles]
• AASB 2014-1 ‘Amendments to Australian Accounting Standards’ [Part C – Materiality]
•
Interpretation 21 ‘Levies’
The adoption of these standards and interpretations did not have a material impact on the consolidated entity.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
27
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
New Accounting Standards and Interpretations not yet mandatory or early adopted
The following Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet
effective and have not been adopted by the consolidated entity for the year ended 30 June 2015.
Standard/interpretation
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied
in the financial
year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
30 June 2019
AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5
‘Amendments to Australian Accounting Standards arising from AASB 15’
1 January 2017
30 June 2018
AASB 2014-3 ‘Amendments to Australian Accounting Standards –
Accounting for Acquisitions of Interests in Joint Operations’
AASB 2014-4 ‘Amendments to Australian Accounting Standards –
Clarification of Acceptable Methods of Depreciation and Amortisation’
AASB 2014-9 ‘Amendments to Australian Accounting Standards –
Equity Method in Separate Financial Statements’
AASB 2014-10 ‘Amendments to Australian Accounting Standards –
Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture’
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual
Improvements to Australian Accounting Standards 2012-2014 Cycle’
1 January 2016
30 June 2017
AASB 2015-2 ‘Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 101’
1 January 2016
30 June 2017
AASB 2015-3 ‘Amendments to Australian Accounting Standards arising
from the Withdrawal of AASB 1031 Materiality’
1 July 2015
30 June 2016
AASB 2015-4 ‘Amendments to Australian Accounting Standards – Financial
Reporting Requirements for Australian Groups with a Foreign Parent’
1 July 2015
30 June 2016
AASB 2015-5 ‘Amendments to Australian Accounting Standards –
Investment Entities: Applying the Consolidation Exception’
1 July 2015
30 June 2016
The impact of these recently issued or amended standards and interpretations have not been determined as yet by the
consolidated entity.
Statement of compliance
These financial statements are general purpose financial statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.
The financial statements comprise the consolidated financial statements of the consolidated entity. For the purposes of
preparing the consolidated financial statements, the consolidated entity is a for-profit entity. Accounting Standards include
Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements
and notes of the company and the consolidated entity comply with International Financial Reporting Standards (‘IFRS’).
28
Basis of preparation
Historical cost convention
The consolidated financial statements have been prepared on the basis of historical cost, except for certain non-current
assets and financial instruments that are measured at revalued amounts or fair values, as explained in the accounting
policies below. Historical cost is generally based on the fair values of the consideration given in exchange for assets.
All amounts are presented in Australian dollars, unless otherwise noted.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an asset or a liability, the consolidated entity takes into account
the characteristics of the asset or liability if market participants would take those characteristics into account when pricing
the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated
financial statements is determined on such a basis, except for share-based payment transactions that are within the scope
of AASB 2, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to
fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 3.
Accounting for construction contracts
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference
to the stage of completion of the contract activity at the reporting date, measured based on the proportion of contract
costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be
representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the
extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated
reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable.
Contract costs are recognised as expenses in the period in which they are incurred. Where construction contracts are still
in the completion stage, they are included as work in progress.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
29
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Principles of consolidation
The consolidated financial statements incorporate the financial statements of the consolidated entity and entities (including
structured entities) controlled by the consolidated entity and its subsidiaries. Control is achieved when the consolidated entity:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The consolidated entity reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
When the consolidated entity has less than a majority of the voting rights of an investee, it has power over the investee
when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally.
The consolidated entity considers all relevant facts and circumstances in assessing whether or not the consolidated entity’s
voting rights in an investee are sufficient to give it power, including:
• the size of the consolidated entity’s holding of voting rights relative to the size and dispersion of holdings of the other
vote holders;
• potential voting rights held by the consolidated entity, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the consolidated entity has, or does not have, the current
ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders’ meetings.
Consolidation of a subsidiary begins when the consolidated entity obtains control over the subsidiary and ceases when the
consolidated entity loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date
the consolidated entity gains control until the date when the consolidated entity ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the consolidated entity and
to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the consolidated
entity and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into
line with the Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members
of the Group are eliminated in full on consolidation.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Managing Director of the consolidated entity.
30
Foreign currency translation
The financial report is presented in Australian dollars, which is GR Engineering Services 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 financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the exchange
rates prevailing at the dates of the transactions. All resulting foreign exchange differences are recognised in other
comprehensive income through the foreign currency reserve in equity.
The functional currency of GR Engineering Services (UK) Limited is Great British pounds. The functional currency of
Upstream Production Solutions Malaysia Sdn. Bhd. is Malaysian Ringgit. The functional currency of other foreign subsidiaries
of the consolidated entity is United States dollars.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when
the fair value was determined.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the consolidated entity and
the revenue can be reliably measured.
Sales revenue
Revenue from the sale of goods is recognised when the consolidated entity has transferred to the buyer the significant risks
and rewards of ownership of the goods.
Rendering of services
Revenue from a contract to provide services is recognised by reference to the stage of completion.
Where the contract outcome cannot be measured reliably, revenue is recognised only to the extent of the expenses
recognised that are recoverable.
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the
financial asset.
31
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Income tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement
of profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. The consolidated entity’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred income tax is provided for on all temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for the financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
•
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:
• except where the deferred income tax asset relating to the deductible temporary differences arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
•
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests
in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can
be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of profit or
loss and other comprehensive income.
Unearned income
Unearned income classified as a current liability consists of customer advances for construction work in progress. The
consolidated entity recognises a liability upon receipt of customer advances and then subsequently recognised as revenue
when earned.
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 which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an
allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written
off when identified.
32
Inventories
Inventories are valued at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of
the acquisition and subsequent reclassification to other categories is restricted. The fair values of quoted investments
are based on current bid prices. For unlisted investments, the consolidated entity establishes fair value by using valuation
techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, and option pricing models.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are carried at amortised cost using the effective interest rate method. Gains and losses are recognised
in profit or loss when the asset is derecognised or impaired.
Available for sale financial assets
Listed shares and listed redeemable notes held by the consolidated entity that are traded in an active market are classified
as available for sale and are stated at fair value.
Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the
investments revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest
method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss. Where the
investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the
investments revaluation reserve is reclassified to profit or loss.
Dividends on available for sale equity instruments are recognised in profit or loss when the consolidated entity’s right to
receive the dividends is established.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a financial
asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or
obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions
due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter
bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable data
indicating that there is a measurable decrease in estimated future cash flows.
When an available for sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in
other comprehensive income are reclassified to profit or loss in the period.
The amount of the impairment allowance for loans and receivables carried at amortised cost is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate. If there is a reversal of impairment, the reversal cannot exceed the amortised cost that would have been recognised
had the impairment not been made and is reversed to profit or loss.
33
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
• Property, plant and equipment – over 2.5 to 20 years
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-
generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated
recoverable amount, the assets or cash-generating units are written down to their recoverable amount.
The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset.
Impairment losses are recognised in the profit or loss in the cost of sales line item.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued used of the asset.
Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the item) is included in the statement of profit or loss in the period the item is derecognised.
Leases
Finance leases, which transfer to the consolidated entity substantially all the risks and benefits incidental to ownership of
the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present
value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same bases as the lease income.
Operating lease payments are recognised as an expense in the statement of profit or loss on a straight-line basis over the
lease term.
Impairment of non-financial assets
At each reporting date, the consolidated entity assesses whether there is any indication that an asset may be impaired.
Where an indicator of impairment exists, the consolidated entity makes a formal estimate of recoverable amount. Where
the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to
its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset,
unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate
cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable
amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
34
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue
costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method.
Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through the
amortisation process.
Provisions
Provisions are recognised when the consolidated entity has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation.
Where the consolidated entity expects some or all of a provision to be reimbursed the reimbursement is recognised as a
separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in
the statement of profit or loss net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Employee benefits
Wages and salaries, annual leave and sick leave
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave
in the period the related service is rendered.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future
cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Share based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date.
The fair value determined at the grant date of the share based payments is expensed on a straight-line basis over the
vesting period, based on the consolidated entity’s estimate of equity instruments that will eventually vest. At the end of
each reporting period, the consolidated entity revises its estimate of the number of equity instruments expected to vest.
The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
Share based payment transactions with parties other than employees are measured at the fair value of the goods or services
received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
35
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares
for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, for example as the result of a share buy back, those instruments are
deducted from equity and the associated shares are cancelled. No gain or loss is recognised in profit or loss and the
consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of GR Engineering Services Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
De-recognition of financial instruments
The de-recognition of a financial instrument takes place when the consolidated entity no longer controls the contractual
rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows
attributable to the instrument are passed through to an independent third party.
Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase
of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost
of acquisition of the asset or as part of the expense item as applicable.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the statement of financial position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
36
Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred
by the consolidated entity, liabilities incurred by the consolidated entity to the former owners of the acquire and the
equity instruments issued by the consolidated entity in exchange for control of the acquiree. Acquisition-related costs
are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value,
except that:
• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and
measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively;
•
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share- based payment
arrangements of the consolidated entity entered into to replace share-based payment arrangements of the acquire are
measured in accordance with AASB 2 ‘Share-based Payment’ at the acquisition date; and
• assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for
Sale and Discontinued Operations’ are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non- controlling interests
in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the
acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non- controlling interests in the acquiree and the fair value of the acquirer’s previously held
interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Intangible assets
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at
their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses. Amortisation is recognised on a straight- line basis over their estimated
useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on a prospective basis.
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
37
nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates
in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year
are discussed below.
Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference
to the stage of completion of the contract activity at the reporting date, measured based on the proportion of contract
costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be
representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the
extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated
reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable.
Contract costs are recognised as expenses in the period in which they are incurred. Where construction contracts are still
in the completion stage, they are included as work in progress.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an
expense immediately.
Because the consolidated entity predominantly undertakes projects on an Engineering, Procurement & Construction (“EPC”)
turnkey design and construction contract basis, all the risk associated with cost, time, plant performance and plant warranty
(defects period) rests with the consolidated entity. As such the consolidated entity is responsible for the total “make-good”
of any defects of underperformance.
The consolidated entity includes a project completion and close out provision (liability) in design and construction project
cost forecast reports, nominally being 3% of the project costs. This percentage has been assessed based on management’s
best estimate.
NOTE 4. OPERATING SEGMENTS
Operating segments have been identified on the basis of internal reports of the consolidated entity that are regularly
reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their
performance. The chief operating decision maker has been identified as the Managing Director. On a regular basis, the
board receives financial information on a company basis similar to the financial statements presented in the financial report,
to manage and allocate their resources.
The Managing Director has chosen to classify the operations of the consolidated entity by reference to presence in an
industry. The segments identified on this basis are “mineral processing” and “oil and gas”.
Segment revenues and results
The following table shows the revenue and results of the consolidated entity summarised under these segments.
Segment revenue
Mineral processing
Oil and gas
Total revenue
Segment profit before tax
Mineral processing
Oil and gas
Total profit before tax
2015
$
2014
$
185,668,102
109,945,226
31,224,452
4,237,654
216,892,554
114,182,880
18,815,506
14,353,376
(1,619,599)
2,433,199
17,195,907
16,786,575
Segment revenue reported above represents revenue generated from external customers. There were no inter-segment
sales in the current year (2014: Nil).
38
Segment assets and liabilities
Segment assets
Mineral processing
Oil and gas
Total assets
depreciation and amortisation
Mineral processing
Oil and gas
Total depreciation and amortisation
Segment liabilities
Mineral processing
Oil and gas
Total liabilities
Geographical information
2015
$
2014
$
88,416,047
67,084,984
14,350,441
13,605,434
102,766,487
80,690,418
701,436
1,009,408
3,467,923
4,169,359
629,756
1,639,164
48,870,511
29,541,239
5,171,264
4,592,358
54,041,775
34,133,597
The following table shows the revenue from external customers of the consolidated entity summarised by location.
Revenue
Australia
Overseas
Total revenue
Non-current assets
102,836,821
46,871,453
114,055,733
67,311,427
216,892,554
114,182,880
All non-current assets of the consolidated entity are held in Australia.
Information about major customers
During the financial year two customers individually provided more than 10% of total revenue each for the consolidated entity.
39
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 5. REVENUE
Rendering of services – construction contracts
185,668,102
109,945,226
Rendering of services – operations and maintenance contracts
31,224,452
4,237,654
Total revenue
216,892,554
114,182,880
consolidated
2015
$
2014
$
NOTE 6. OTHER INCOME
Net foreign exchange gain/(loss)
Net gain/(loss) on disposal of property, plant and equipment
Subsidies and grants
Interest revenue
Gain on bargain purchase of business
Other revenue
Other income
NOTE 7. EXPENSES
436,480
13,284
10,056
1,117,263
–
9,030
143,706
(21,183)
495
1,264,723
3,035,549
(12,879)
1,586,113
4,410,411
Profit before income tax includes the following specific expenses:
Finance costs
Interest and leasing charges on finance leases
58,869
81,029
Employee benefits
Employee benefits expense excluding superannuation
Defined contribution superannuation expense
Total employee benefits
46,482,886
29,320,690
4,218,975
2,252,373
50,701,861
31,573,064
40
NOTE 8.
INCOME TAX EXPENSE
Major components of income tax expense for the years ended 30 June 2015 and 2014 are:
income tax recognised in the
consolidated statement of profit or loss
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous years
consolidated
2015
$
2014
$
6,894,707
(778,276)
5,215,891
(2,503,708)
Deferred income tax
Relating to origination and reversal of temporary differences
Adjustments in respect of previous deferred income tax
(1,818,250)
(39,925)
(767,821)
678,627
Income tax expense reported in statement of profit or loss
4,258,256
2,622,989
income tax recognised in statement of changes in equity
Deferred income tax
Revaluation of shares
Income tax expense reported in equity
A reconciliation of income tax expense applicable to accounting
profit before income tax at the statutory income tax rate to income
tax expense at the consolidated entity’s effective income tax rate
for the years ended 30 June 2015 and 2014 is as follows:
(148,649)
(148,649)
61,222
61,222
Accounting profit before income tax
At the statutory income tax rate of 30% (2014: 30%)
17,195,907
16,786,575
5,158,772
5,035,973
Add:
Non-deductible expenses
Foreign tax on projects
194,444
–
(610,670)
22,767
Adjustments in respect of previous current income tax
(818,201)
(1,890,726)
Derecognition of prior year overseas losses
Impact to tax expense arising from foreign tax rate differential
At effective income tax rate of 24.8% (2014: 15.6%)
–
(276,759)
4,258,256
65,645
–
2,622,989
Income tax expense reported in statement of profit or loss
4,258,256
2,622,989
41
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 8.
INCOME TAX EXPENSE (continued)
deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred income tax assets
Accrued employee entitlements
Accrued superannuation
Accrued audit fees
Leasing
Section 40/880 deduction
Provision for long service leave
Provision for warranty
Unrealised foreign exchange (gain)/loss
Lease termination
Payables – Upstream Production Solutions subsidiary
Accrued employee entitlements – Upstream Production Solutions subsidiary
Shares in listed entity
Deferred income tax liabilities
Prepayments
Accrued interest
Other accrued income
Unrealised foreign exchange gain
Assets capitalised for tax
Net trade debtors – Upstream Production Solutions subsidiary
Prepayments – Upstream Production Solutions subsidiary
Customer contracts – Upstream Production Solutions subsidiary
Plant and equipment – Upstream Production Solutions subsidiary
consolidated
2015
$
2014
$
63,505
14,073
17,026
(6,027)
2,277
93,181
1,534,549
–
61,452
94,806
674,208
(87,427)
40,993
16,079
19,500
(43,585)
133,001
64,654
804,968
10,125
9,965
94,806
547,490
61,222
2,461,623
1,759,218
(2,434)
(17,173)
(2,498)
(779)
(1,554)
–
(222)
(165,797)
(15,028)
(205,485)
(3,577)
(20,426)
(8)
–
(720)
(72,906)
(634)
(1,094,298)
(20,037)
(1,212,606)
Net deferred tax asset
2,256,138
546,612
current tax assets and liabilities
Current tax liabilities
Income tax payable
2,055,333
1,889,743
42
NOTE 9. CURRENT ASSETS – CASH AND CASH EqUIVALENTS
Cash on hand
Cash at bank
Cash on deposit
The fair value of cash and cash equivalents is $64,582,994
(2014: $32,193,955).
Cash at bank and in hand earns interest at floating rates based
on daily bank rates.
Short-term deposits are made for varying periods of between
one day and three months depending on the immediate cash
requirements of the consolidated entity, and earn interest at the
respective short-term deposit rates.
In previous periods the consolidated entity has held term deposits
to secure bank guarantees for current projects. The agreement
with National Australia Bank does not require this balance to be
held in term deposit any longer. The balance as at 30 June 2015
is Nil (2014: $5,239,431). This balance was included in trade and
other receivables in previous periods.
A summary of all cash including term deposits is as follows:
Cash at bank and on hand
Cash on deposit (Current asset)
Term deposits held for project security (Current asset)
Term deposits held for project security (Non-current asset)
Reconciliation of cash
For the purposes of the Statement of Cash Flows, cash and cash
equivalents comprise the following at 30 June:
Cash at bank and on hand
Cash on deposit
consolidated
2015
$
120,814
2014
$
42,129
40,489,539
12,651,826
23,972,641
19,500,000
64,582,994
32,193,955
40,610,353
12,693,955
23,972,641
19,500,000
–
–
1,348,332
3,891,099
64,582,994
37,433,386
40,610,353
12,693,955
23,972,641
19,500,000
64,582,994
32,193,955
43
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 9. CURRENT ASSETS – CASH AND CASH EqUIVALENTS (continued)
Reconciliation from the net profit after tax
to the net cash flow from operations
Net profit after tax
Non-cash items
Depreciation and amortisation
Profit/loss on sale of asset
Share based employee payments
Net foreign exchange (gain)/loss
Gain on bargain purchase of business
Acquisition of shares as consideration for services
Changes in assets and liabilities
consolidated
2015
$
2014
$
12,937,651
14,163,586
4,169,359
1,639,164
(13,284)
564,101
284,308
–
–
21,183
759,823
222,490
(3,035,549)
(748,974)
(Increase)/decrease in trade and other receivables
7,373,451
(3,087,761)
(Increase)/decrease in inventories
(Increase)/decrease in deferred tax asset
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
(Decrease)/increase in tax liabilities
Increase in unearned income
(466,000)
(1,709,527)
4,545
(89,195)
13,777,824
15,494,222
3,797,890
165,591
855,255
(358,226)
1,597,703
(7,046,380)
Net cash from operating activities
42,479,067
18,794,183
NON-CASH TRANSACTIONS
During the year ended 30 June 2015 and year ending 30 June 2014, the following non-cash investing and financing activities
occurred, which are not reflected in the consolidated statement of cash flows:
• during the year ended 30 June 2015 the consolidated entity acquired equipment under finance lease of $812,348
(2014: $nil)
44
NOTE 10. TRADE AND OTHER RECEIVABLES
current assets – trade and other receivables
Trade receivables
Less: Allowance for impairment of receivables
Term deposits held for project security*
Other receivables
Accrued revenue
Non-current assets – trade and other receivables
Term deposits held for project security*
* In previous periods the consolidated entity has held term deposits to
secure bank guarantees for current projects. In May 2015 the consolidated
entity entered into a revised agreement with National Australia Bank, which
removed the requirement for these term deposits to be held. These balances
were classified as other receivables, they are now classified as cash. The
balance of these other receivables in current assets at 30 June 2015 is Nil
(2014: $1,348,332), the balance in non-current assets at 30 June 2015 is Nil
(2014: $3,891,099).
A summary of term deposits held for project security is as follows:
Term deposits held for project security (Current asset)
Term deposits held for project security (Non-current asset)
Impairment of receivables
Movements in the allowance for impairment of receivables are as follows:
Opening balance
Receivables written off during the year as uncollectable
Closing balance
Bad debts written off during the year as uncollectable amount to
$13,745 (2014: $146,340).
Past due but not impaired
Customers with balances past due but without allowance for impairment
of receivables amount to $2,593,631 as at 30 June 2015 ($1,290,828 as at
30 June 2014).
consolidated
2015
$
2014
$
25,909,381
33,250,872
–
–
25,909,381
33,250,872
–
1,348,332
81,784
47,771
25,266
50,316
26,038,936
34,674,786
–
3,891,099
–
–
–
–
–
–
1,348,332
3,891,099
5,239,431
–
–
–
45
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 10. TRADE AND OTHER RECEIVABLES (continued)
The ageing of the past due but not impaired receivables are as follows:
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
In determining the recoverability of a trade receivable, the consolidated
entity considers any change in the credit quality of the trade receivable from
the date credit was initially granted up to the end of the reporting period.
The concentration of credit risk is limited due to the fact that the customer
base is large and unrelated.
NOTE 11. CURRENT ASSETS – INVENTORIES
Consumables – at cost
Work in progress
consolidated
2015
$
2,576,343
17,288
–
2014
$
836,366
454,462
–
2,593,631
1,290,828
643,800
2,177,712
2,821,512
643,800
1,711,504
2,355,304
NOTE 12. NOTE 12. CURRENT ASSETS – OTHER
Prepayments
652,458
738,393
NOTE 13. NON-CURRENT ASSETS – PROPERTY, PLANT AND EqUIPMENT
Plant and equipment – at cost
Less: Accumulated depreciation
Plant and equipment under lease
Less: Accumulated depreciation
6,876,508
(3,776,287)
3,100,221
2,096,878
(1,682,508)
414,370
4,263,196
(2,902,953)
1,360,243
2,171,734
(1,491,076)
680,658
3,514,591
2,040,901
46
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Plant &
Equipment
Under Lease
$
Plant &
Equipment
$
Total
$
1,089,297
1,582,655
2,671,952
–
–
(73,413)
2,351
(337,577)
680,658
812,348
–
–
86,696
400,000
(5,400)
(2,351)
86,696
400,000
(78,813)
–
(701,357)
(1,038,935)
1,360,243
1,780,891
(45,197)
–
2,040,901
2,593,239
(45,197)
–
(267,666)
(806,685)
(1,074,351)
1,225,340
2,289,252
3,514,591
Balance at 1 July 2013
Additions
Transferred on acquisition of business
Disposals, Write off of assets
Transfers in/(out)
Depreciation expense
Balance at 30 June 2014
Additions
Disposals, Write off of assets
Transfers in/(out)
Depreciation expense
Balance at 30 June 2015
NOTE 14. FINANCIAL ASSETS
Available for sale financial assets held at fair value
Shares in listed entities
consolidated
2015
$
2014
$
2,347,202
601,704
Shares held in the listed entity Doray Minerals Limited are measured at fair value at the end of the reporting period. The
number of shares held at 30 June 2015 is 2,436,048 (30 June 2014: Nil). All ordinary shares held in Mutiny Gold Limited
were transferred into ordinary shares in Doray Minerals Limited on 22 January 2015. The number of shares held in Mutiny
Gold Limited at 30 June 2015 is Nil (30 June 2014: 23,142,464).
Shares held in the listed entity Kibaran Resources Limited are measured at fair value at the end of the reporting period.
The number of shares held at 30 June 2015 is 1,470,588 (30 June 2014: Nil).
Shares held in the listed entity Cassini Resources Limited are measured at fair value at the end of the reporting period.
The number of shares held at 30 June 2015 is 14,925,380 (30 June 2014: Nil).
NOTE 15. INTANGIBLE ASSETS
Customer contracts acquired on purchase of business
Less: Accumulated amortisation
Total intangible assets
consolidated
2015
$
4,247,863
(3,695,207)
2014
$
4,247,863
(600,199)
552,656
3,647,664
The acquisition of the business of Upstream Production Solutions included seven projects in place at the acquisition date
23 April 2014. The fair value of each contract is amortised over the life of that contract. The lives of the seven contracts range
between 2 and 4 years.
47
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 16. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
GST payable
Other payables
consolidated
2015
$
22,435,808
9,494,986
517,076
2,944,487
2014
$
8,930,874
7,861,469
2,912,194
1,904,616
35,392,357
21,609,153
Refer to Note 24 for further information on financial instruments.
Trade payables are non-interest bearing and are normally settled on 30 day terms.
The net of GST payable and GST receivable is remitted to the appropriate tax body on a monthly basis.
NOTE 17. BORROWINGS
current liabilities – borrowings
Lease liability
Non-current liabilities – borrowings
Lease liability
Refer to Note 24 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
397,912
287,966
706,432
247,412
Lease liability
Assets pledged as security
1,104,344
535,378
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the statement of financial
position, revert to the lessor in the event of default.
48
NOTE 18. PROVISIONS
current liabilities – provisions
Annual leave
Warranties
Project returns
movement in provisions
Provision for annual leave
Balance at beginning of year
Additional provisions recognised
Amounts used
Balance at end of year
Provision for warranty and defects liability
Balance at beginning of year
Additional provisions/(reduction in provisions) recognised
Amounts used
Balance at end of year
Provision for project returns
Balance at beginning of year
Additional provisions/(reduction in provisions) recognised
Amounts used
Balance at end of year
Non-current liabilities – provisions
Long service leave
movement in provisions
Provision for long service leave
Balance at beginning of year
Additional provisions recognised
Amounts used
Balance at end of year
consolidated
2015
$
2014
$
2,847,178
5,115,160
–
2,190,232
2,683,227
–
7,962,338
4,873,459
2,190,232
2,816,751
1,156,934
2,359,555
(2,159,805)
(1,326,257)
2,847,178
2,190,232
2,683,227
2,431,933
–
1,942,275
952,652
(211,700)
5,115,160
2,683,227
–
–
–
–
96,034
–
(96,034)
–
2,111,213
1,407,585
1,407,585
757,204
(53,575)
661,861
788,472
(42,748)
2,111,213
1,407,585
49
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 19. CURRENT LIABILITIES – UNEARNED REVENUE
Unearned revenue
contracts in progress
Progress billings
Construction costs to date plus recognised profits
NOTE 20. EqUITY – ISSUED CAPITAL
consolidated
2015
$
2014
$
5,416,190
3,818,279
216,482,839
144,540,271
211,066,649
140,721,992
5,416,190
3,818,279
consolidated
consolidated
2015
Shares
2014
Shares
2015
$
2014
$
Ordinary shares – fully paid
Opening balance
150,407,949
150,000,000
28,785,355
28,501,548
Additional shares issued
324,582
407,949
132,901
283,807
Ordinary shares – fully paid
150,732,531
150,407,949
28,918,256
28,785,355
Ordinary shares
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
Changes to the Corporation Law abolished the authorised capital and par value concept in relation to share capital from
1 July 1998. Therefore, the consolidated entity does not have a limited amount of authorised capital and issued shares
do not have a par value.
Share appreciation rights
As at 30 June 2015, the consolidated entity had issued a total of 942,064 share appreciation rights to Geoff Jones,
Managing Director, as part of the consolidated entity’s equity incentive plan (as at 30 June 2014: 1,669,337).
Number of shares under
share appreciation rights
432,433
296,297
213,334
Grant date
vesting date
Exercise price
12/11/13
12/11/13
12/11/13
30/06/16
30/06/17
30/06/18
$0.50
$0.50
$0.50
Performance
condition share
price targets
$0.86
$1.04
$1.24
50
Performance rights
As at 30 June 2015, the consolidated entity had issued a total of 2,295,000 performance rights (as at 30 June 2014: 2,315,000):
Number of performance rights
Grant date
Expiry date
Exercise price
1,710,000
25,000
50,000
127,500
127,500
127,500
127,500
NOTE 21. EqUITY – RESERVES
Foreign currency reserve
Performance rights reserve
Share options reserve
Share appreciation rights reserve
Investment revaluation reserve
Foreign currency reserve
Balance at beginning of year
Additional amounts recognised
Balance at end of year
11/09/12
4/10/12
13/05/13
30/04/14
30/04/14
30/04/14
30/04/14
21/09/15
4/10/15
13/05/16
31/03/16
31/03/17
31/03/18
31/03/19
consolidated
2015
$
699,712
984,762
584,497
79,978
203,996
2,552,945
(404,255)
1,103,967
699,712
Nil
Nil
Nil
Nil
Nil
Nil
Nil
2014
$
(404,255)
590,246
545,500
82,291
(142,852)
670,930
10,233
(414,488)
(404,255)
The above foreign currency reserve represents foreign exchange
differences resulting from translation of foreign currency amounts
held in subsidiaries of the consolidated entity.
Performance rights reserve
Balance at beginning of year
Additional amounts recognised
Balance at end of year
The above performance rights reserve relates to performance rights
granted and vested by the consolidated entity to its employees
under its equity incentive plan.
590,246
394,516
984,762
293,425
296,821
590,246
51
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 21. EqUITY – RESERVES (continued)
Share options reserve
Balance at beginning of year
Additional amounts recognised
Balance at end of year
The above share options reserve relates to share options granted
and vested by the consolidated entity to its employees under its
employee share option plan.
Share appreciation rights reserve
Balance at beginning of year
Additional amounts recognised
Amount exercised
Balance at end of year
The above share appreciation rights reserve relates to share
appreciation rights granted and vested by the consolidated entity
to its employees under its equity incentive plan.
Investment revaluation reserve
Balance at beginning of year
Additional amounts recognised
Less tax effect of additional amount recognised
Balance at end of year
The above investment revaluation reserve relates to the revaluation
of shares held in listed entities to fair value at the end of the
reporting period. The fair value is determined using the quoted
share price at 30 June 2015.
NOTE 22. EqUITY – RETAINED PROFITS
Retained profits at the beginning of the financial year
Profit after income tax expense for the year
Payment of dividends
Retained profits at the end of the financial year
consolidated
2015
$
545,500
38,997
584,497
2014
$
448,596
96,904
545,500
82,291
130,588
(132,901)
79,978
–
366,098
(283,807)
82,291
(142,852)
370,529
(23,681)
203,996
–
(204,074)
61,222
(142,852)
17,100,536
11,936,950
12,937,651
14,163,586
(12,784,676)
(9,000,000)
17,253,511
17,100,536
52
NOTE 23. EqUITY – DIVIDENDS
Dividends
Year ended 30 June 2014
Dividend paid 1 October 2013 (fully franked at 30% tax rate):
3 cents per ordinary share
Dividend paid 28 March 2014 (franked to 40%):
3 cents per ordinary share
Year ended 30 June 2015
Dividend paid 30 September 2014 (fully franked at 30% tax rate):
4 cents per ordinary share
Dividend paid 30 March 2015 (fully franked at 30% tax rate):
4.5 cents per ordinary share
On 20 August 2015, the consolidated entity declared a fully
franked dividend of 5.0 cents per share, an aggregate of $7,536,627.
The Record Date of the dividend is 11 September 2015 and the
proposed payment date is 25 September 2015.
consolidated
2015
$
2014
$
4,500,000
4,500,000
6,016,318
6,768,358
12,784,676
9,000,000
Franking credits
Franking credits available for subsequent financial years based on
a tax rate of 30%
1,219,526
1,696,720
NOTE 24. FINANCIAL INSTRUMENTS
Financial risk management objectives
The consolidated entity is exposed to risks in relation to its financial instruments. These risks include market risk (consisting
of foreign currency risk and interest rate risk), credit risk, liquidity risk and equity risk.
A summary of the consolidated entity’s financial instruments are as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Available for sale securities
Total financial assets
Financial liabilities
Trade and other payables
Finance lease liabilities
Total financial liabilities
64,582,994
32,193,955
26,038,936
38,565,885
2,347,202
601,704
92,969,132
71,361,544
35,392,357
21,609,153
1,104,344
535,378
36,496,701
22,144,531
53
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 24. FINANCIAL INSTRUMENTS (continued)
Capital management
The consolidated entity manages its capital to ensure the ability to continue as a going concern while maximising the return
to stakeholders. The capital structure of the consolidated entity consists of equity in the form of issued capital, reserves and
retained earnings. There is no requirement for borrowings at this stage, as there are sufficient reserves of cash balances.
Market risk
Foreign currency risk
The consolidated entity and the parent entity undertakes certain transactions denominated in foreign currency and are
exposed to foreign currency risk through foreign exchange rate fluctuations.
The carrying amounts in Australian dollars (AUD) of the consolidated entity’s foreign currency denominated monetary assets
and monetary liabilities at the end of the reporting period are as follows.
United States Dollars
Great British Pounds
Indonesian Rupiah
Malaysian Ringgit
Assets
Liabilities
2015
AUd $
4,074,106
2014
AUd $
153,001
2015
AUd $
(476,221)
18,570,958
3,447,343
(9,946,829)
5,588
61,209
–
–
(4,612)
(24)
22,711,861
3,600,344
(10,427,686)
2014
AUd $
–
–
–
–
–
Foreign exchange risk arises from future commercial transactions denominated in a currency that is not the entity’s
functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The consolidated entity holds cash balances in United States dollars, these balances are translated into Australian dollars at
the prevailing exchange rate at 30 June 2015 of AUD $1 = USD $0.77 (2014: AUD $1 = USD $0.94).
The consolidated entity holds cash balances in Great British pounds, these balances are translated into Australian dollars at
the prevailing exchange rate at 30 June 2015 of AUD $1 = GBP £0.49 (2014: AUD $1 = GBP £0.55).
The consolidated entity holds cash balances in Indonesian rupiah, these balances are translated into Australian dollars at the
prevailing exchange rate at 30 June 2015 of AUD $1 = IDR 10,207.20 (2014: AUD $1 = IDR 11,293.70).
The consolidated entity holds cash balances in Malaysian ringgit, these balances are translated into Australian dollars at the
prevailing exchange rate at 30 June 2015 of AUD $1 = MYR 2.8905 (2014: AUD $1 = MYR 3.024
54
The following table details the consolidated entity’s sensitivity to a 10% increase and decrease in the value of the Australian
dollar against the currencies in which monetary assets are held:
Effect of 10% increase in exchange rate
Effect of 10% decrease in exchange rate
Effect on profit
before tax
Effect on equity
Effect on profit
before tax
Effect on equity
$
$
$
$
(327,078)
(784,012)
(89)
(5,562)
(327,078)
(784,012)
(89)
(5,562)
399,768
958,237
108
6,798
399,768
958,237
108
6,798
(1,116,740)
(1,116,740)
1,364,912
1,364,912
(13,839)
(313,393)
–
–
(13,839)
(313,393)
–
–
16,967
383,040
–
–
16,967
383,040
–
–
(327,232)
(327,232)
400,007
400,007
2015
United States Dollars
Great British Pounds
Indonesian Rupiah
Malaysian Ringgit
2014
United States Dollars
Great British Pounds
Indonesian Rupiah
Malaysian Ringgit
Interest rate risk
The board has considered the consolidated entity’s exposure to interest rate risk by analysing the effect on profit and equity
of an interest rate increase or decrease of one percentage point in the following table:
consolidated – 2015
Interest revenue
Interest expense
consolidated – 2014
Interest revenue
Interest expense
Effect of 1% increase in exchange rate
Effect of 1% decrease in exchange rate
Effect on profit
before tax
Effect on equity
Effect on profit
before tax
Effect on equity
$
$
$
$
334,487
(1,317)
333,170
334,487
(1,317)
333,170
(334,487)
1,314
(333,173)
(334,487)
1,314
(333,173)
396,849
396,849
(396,849)
(396,849)
–
–
–
–
396,849
396,849
(396,849)
(396,849)
55
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 24. FINANCIAL INSTRUMENTS (continued)
Equity price risk
The consolidated entity is exposed to equity price risks arising from equity investments.
The sensitivity analysis below has been determined based on the exposure of the consolidated entity to a 5% increase
or decrease in equity prices at the end of the reporting period.
• profit for the year ended 30 June 2015 would have been unaffected as the equity investments are classified as available-
for-sale and no investments were disposed of or impaired; and
• other comprehensive income for the year ended 30 June 2015 would increase by $117,360 (2014: $30,085) as a result of
an increase of 5% in equity prices, and decrease by $117,360 (2014: $30,085) as a result of a decrease of 5% in equity
prices.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the
consolidated entity. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties as a means
of mitigating the risk of financial loss from defaults. The consolidated entity uses independent rating agencies, publicly
available financial information and other trading records to rate its major customers. Legally binding contracts are entered
into to determine payment terms in relation to major projects.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies.
The consolidated entity does not have significant credit risk exposure to any single counterparty or group of counterparties.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate
liquidity risk management framework for the management of the consolidated entity’s short-, medium- and long-term
funding and liquidity management requirements. The consolidated entity manages liquidity risk by maintaining adequate
reserves and banking facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity
profiles of financial assets and liabilities.
Liquidity and interest rate risk tables
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed
as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement
of financial position.
Remaining contractual maturities
Weighted
average
interest rate
%
Less than
6 months
$
6 to 12
months
$
Over 12
months
$
Total
$
–
35,392,357
–
–
35,392,357
6.42%
226,250
35,618,607
171,662
171,662
706,432
706,432
1,104,344
36,496,701
–
21,609,153
–
–
21,609,153
9.23%
134,646
21,743,799
153,320
153,320
247,412
247,412
535,378
22,144,531
Non-derivatives
consolidated – 2015
Non-interest bearing
Trade payables
Interest-bearing – fixed rate
Lease liability
Total non-derivatives
consolidated – 2014
Non-interest bearing
Trade payables
Interest-bearing – fixed rate
Lease liability
Total non-derivatives
56
Fair value of financial instruments
The fair values of financial assets and liabilities, together with their carrying amounts in the statement of financial position,
for the consolidated entity are as follows:
consolidated
Assets
Cash at bank
Cash on deposit
Trade receivables
2015
2014
carrying amount
$
Fair value
$
carrying amount
$
Fair value
$
40,610,353
40,610,353
12,693,955
12,693,955
23,972,641
23,972,641
19,500,000
19,500,000
26,038,936
26,038,936
38,565,885
38,565,885
Available for sale securities
2,347,202
2,347,202
601,704
601,704
92,969,132
92,969,132
71,361,544
71,361,544
Liabilities
Trade payables
Lease liability
35,392,357
35,392,357
21,609,153
21,609,153
1,104,344
1,104,344
535,378
535,378
36,496,701
36,496,701
22,144,531
22,144,531
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which
the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement
in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
57
nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 24. FINANCIAL INSTRUMENTS (continued)
Fair value of financial instruments (continued)
The financial assets and liabilities of the consolidated entity are classified into these categories below:
Level 1
$
Level 2
$
Level 3
$
Total
$
Fair value hierarchy – 2015
Financial assets
Trade receivables
Available for sale securities
Financial liabilities
Trade payables
Lease liability
Fair value hierarchy – 2014
Financial assets
Trade receivables
Available for sale securities
Financial liabilities
Trade payables
Lease liability
–
26,038,936
2,347,202
2,347,202
–
26,038,936
–
–
–
35,392,357
1,104,344
36,496,701
–
38,565,885
601,704
601,704
–
38,565,885
–
–
–
21,609,153
535,378
22,144,531
–
–
–
–
–
–
–
–
–
–
–
–
26,038,936
2,347,202
28,386,138
35,392,357
1,104,344
36,496,701
38,565,885
601,704
39,167,589
21,609,153
535,378
22,144,531
The fair values of the financial assets and financial liabilities included in the level 2 and level 3 categories above have been
determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most
significant inputs being the discount rate that reflects the credit risk of counterparties.
The consolidated entity holds available for sale equity securities of $2,347,202 (30 June 2014: $601,704) which are classified
as fair value hierarchy level 1, in which fair values are based on quoted prices in active markets. There have been no transfers
of fair value hierarchy levels during the period.
During the period, net gains of $346,848 (30 June 2014: net loss $142,852) have been included in other comprehensive
income and are reported in the investment revaluation reserve.
58
NOTE 25. KEY MANAGEMENT PERSONNEL DISCLOSURES
Directors
The following persons were directors of GR Engineering Services Limited during the financial year:
Executive directors
Joe Ricciardo
Tony Patrizi
Geoff Jones
Non-Executive Chairman
Executive Director
Managing Director
Non-executive directors
Barry Patterson
Terry Strapp
Peter Hood
Non-Executive Director
Non-Executive Director
Non-Executive Director
Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major activities
of the consolidated entity, directly or indirectly, during the financial year:
Executives
David Sala Tenna
Paul Newling
Joe Totaro
Rodney Schier
General Manager EPC Division
General Manager EPCM Division
Chief Financial Officer and Company Secretary
Engineering Manager
Remuneration of key management personnel
Information on remuneration of key management personnel is set out in the Remuneration Report in the Directors Report.
The aggregate compensation made to key management personnel of the consolidated entity is set out below:
Short term benefits
Post employment benefits
Share based payments
Other
consolidated
2015
$
2014
$
2,329,156
2,342,058
167,810
176,082
–
138,432
469,499
–
2,673,048
2,949,989
59
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
cONTiNUEd
NOTE 26. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu,
the auditor of the company, and its network firms:
Audit services – Deloitte Touche Tohmatsu
Audit or review of the financial statements
Other services – Deloitte Touche Tohmatsu
Tax compliance
Other services
consolidated
2015
$
2014
$
112,627
126,123
30,450
26,250
169,327
26,171
5,000
157,294
NOTE 27. CONTINGENT LIABILITIES
The consolidated entity has bank guarantees in place as at 30 June 2015 of $29,737,896 (2014: $19,522,985).
The consolidated entity has a bank guarantee facility with the National Australia Bank to provide bank guarantees to
support project performance in favour of certain clients of the consolidated entity. The facility has an approved limit of
$40,000,000. The facility is secured by a fixed and floating charge over all the assets of the consolidated entity. The amount
of bank guarantees issued under this facility at 30 June 2015 is $28,800,581 (2014: $18,856,451). The consolidated entity
has a bank guarantee facility with National Australia Bank to provide guarantees for the security of rental properties to the
value of $937,315 (2014: $666,534). The amount of bank guarantees issued under this facility at 30 June 2015 is $937,315
(2014: $666,534).
The consolidated entity has a $30,000,000 insurance bond facility with Assetinsure Pty Ltd (2014: $20,000,000). This
facility has been utilised to provide retention and off site materials bonds in connection with certain projects. The amount
of insurance bonds issued under this facility at 30 June 2015 is $14,912,256 (2014: $13,597,040).
GR Engineering Services Limited, the parent company, has provided guarantees and indemnities in relation to certain
contracts entered into by its subsidiaries. Liability under these guarantees and indemnities is limited to the relevant
subsidiaries’ contracted limits of liability under the contracts.
60
NOTE 28. COMMITMENTS
The consolidated entity has leased certain of its office equipment under finance leases. The average lease term is 3 years
(2014: 3 years). The consolidated entity has options to purchase the equipment for a nominal amount at the end of the lease
terms. The consolidated entity’s obligations under finance leases are secured by the lessors’ title to the leased assets.
Finance Leases
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Minimum lease payments
Less: future finance charges
Present value of minimum lease payments
The consolidated entity has operating leases that relate to leases
of office buildings with lease terms of between 1 and 5 years. All
operating lease contracts contain clauses for market rental reviews.
Non-cancellable Operating Lease commitments
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Total lease payments
consolidated
2015
$
435,514
737,675
–
2014
$
425,877
574,515
–
1,173,189
1,000,392
(68,846)
1,104,344
(92,036)
908,356
1,913,651
2,222,302
–
1,612,634
1,843,515
–
4,135,953
3,456,149
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
61
nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 29. RELATED PARTY TRANSACTIONS
During the year ended 30 June 2015 the consolidated entity leased office space at 71-73 Daly Street from Ashguard Pty
Ltd. Directors of the consolidated entity, namely Joe Ricciardo, Tony Patrizi, and Barry Patterson, each have a non controlling
interest in Ashguard Pty Ltd. The total amount invoiced by Ashguard Pty Ltd in the year ended 30 June 2015 amounted to
$314,263 including GST (2014: $300,847). The balance payable at 30 June 2015 is $46,054 (2014: $22,570). During the year
ended 30 June 2015 the consolidated entity procured items for Ashguard Pty Ltd. The total amount invoiced to Ashguard
Pty Ltd in the year ended 30 June 2015 was $10,998 including GST (2014: Nil). The balance outstanding at 30 June 2015 is
Nil (2014: Nil).
During the year ended 30 June 2015 the consolidated entity procured items and hired equipment from PIHA Pty Ltd (a
subsidiary of Mineral Resources Limited), a company in which Joe Ricciardo is a non-executive director. The total amount
invoiced by PIHA Pty Ltd in the year ended 30 June 2015 amounted to $240,664 including GST (2014: Nil). The balance
payable at 30 June 2015 is $237,936 (2014: Nil). During the year ended 30 June 2015 the consolidated entity provided
engineering services and procurement of materials for PIHA Pty Ltd. The total amount invoiced to PIHA Pty Ltd in the
year ended 30 June 2015 was $41,083 including GST (2014: $80,300). The balance outstanding at 30 June 2015 is Nil
(2014: $48,180).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Crushing Services International Pty Ltd (a subsidiary of Mineral Resources Limited), a company in which Joe Ricciardo
is a non-executive director. The total amount invoiced to Crushing Services International Pty Ltd in the year ended 30 June
2015 was $151,580 including GST (2014: $153,274). The balance outstanding at 30 June 2015 is Nil (2014: Nil).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Azumah Resources Limited, a company in which Geoff Jones is a non-executive director. The total amount invoiced
to Azumah Resources Limited in the year ended 30 June 2015 was $204,886 including GST (2014: $26,848). The balance
outstanding at 30 June 2015 is Nil (2014: $19,750).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Optiro Pty Ltd, a company in which Joe Ricciardo and Tony Patrizi each hold non-controlling interests. The total amount
invoiced to Optiro Pty Ltd in the year ended 30 June 2015 was $9,680 including GST (2014: Nil). The balance outstanding
at 30 June 2015 is $9,680 (2014: Nil).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Marindi Metals Limited (previously Brumby Resources Limited), a company in which Geoff Jones is a non-executive
chairman. The total amount invoiced to Marindi Metals Limited in the year ended 30 June 2015 was $56,562 including
GST (2014: Nil). The balance outstanding at 30 June 2015 is Nil (2014: Nil).
During the year ended 30 June 2015 the consolidated entity provided engineering services and procurement of materials
for Dacian Gold Limited, a company in Barry Patterson is a non-executive director. The total amount invoiced to Dacian
Gold Limited in the year ended 30 June 2015 was $7,420 including GST (2014: Nil). The balance outstanding at 30 June
2015 is Nil (2014: Nil).
The terms of these arrangements are at arms length and at normal commercial terms.
Other than transactions with parties related to key management personnel mentioned above and in the remuneration
report, there have been no other transactions with parties related to the consolidated entity in the financial year ending
30 June 2015.
62
NOTE 30. PARENT ENTITY INFORMATION
The accounting policies of the parent entity, which have been applied in determining the financial information shown below,
are the same as those applied in the consolidated financial statements.
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Statement of profit or loss and other comprehensive income
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Performance rights reserve
Share options reserve
Share appreciation rights reserve
Investment revaluation reserve
Retained profits
Total equity
Parent
2015
$
2014
$
11,374,906
10,903,101
11,374,906
10,903,101
73,873,257
50,098,295
79,002,083
57,325,565
35,404,692
12,273,240
35,539,586
13,364,248
28,918,256
28,785,355
984,762
584,497
79,978
203,996
590,246
545,500
82,291
(142,853)
12,691,008
14,100,778
43,462,497
43,961,317
The contingent liabilities and commitments of the parent entity are the same as those of the consolidated entity, as set out
in Notes 27 and 28.
NOTE 31. EVENTS AFTER THE REPORTING PERIOD
Dividend declaration
On 20 August 2015, the consolidated entity declared a fully franked dividend of 5.0 cents per share, an aggregate of
$7,536,627. The Record Date of the dividend is 11 September 2015 and the proposed payment date is 25 September 2015.
No other matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect
the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future
financial years.
63
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 32. EARNINGS PER SHARE
Profit after income tax attributable to the owners
of GR Engineering Services Limited
Weighted average number of ordinary shares used in
calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Weighted average number of employee performance rights
and share appreciation rights issued
Weighted average number of ordinary shares used in
calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
NOTE 33. SHARE-BASED PAYMENTS
consolidated
2015
$
2014
$
12,937,651
14,163,586
Number
Number
150,408,838
150,001,118
3,237,064
2,879,512
153,645,902
152,880,630
cents
8.60
8.42
cents
9.44
9.26
An Equity Incentive Plan was adopted by the consolidated entity on 28 March 2012. At the discretion of the Board, all eligible
employees of the consolidated entity or eligible consultants may participate in the Plan. Non-executive directors are not
eligible to participate in the Plan.
The Plan is designed to align the interests of executives and employees with the interests of shareholders by providing an
opportunity to receive an equity interest in the consolidated entity and therefore direct participation in the benefits of future
consolidated entity performance over the medium to long term.
The consolidated entity issued a total of 2,215,000 performance rights on 11 September 2012 to a total of 86 employees
and long term contractors under an Equity Incentive Plan. Each right entitles the employee to acquire one fully paid share
in the consolidated entity for Nil consideration, subject to the employees meeting a service term of three years from the
date of grant.
A further 50,000 rights were issued to two employees on 4 October 2012. A third tranche of 50,000 rights were issued to
an employee on 13 May 2013, these tranches of rights have a three year service term from the date of issue. On 30 April
2014 four further tranches of 127,500 rights each were issued to two employees. These tranches each have varying service
terms of 2, 3, 4 and 5 years from the date of issue.
A total of 530,000 performance rights have lapsed due to resignations and redundancies of entitled employees since the
date of issue of the first tranche of rights. Of this total, 20,000 have lapsed in the financial year ending 30 June 2015
(2014: 270,000).
64
A summary of performance rights on issue at 30 June 2015 follows:
Number
issued
Number
lapsed
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
2,215,000
50,000
50,000
127,500
127,500
127,500
127,500
(505,000)
(25,000)
–
–
–
–
–
Grant date
11/09/2012
04/10/2012
13/05/2013
30/04/2014
30/04/2014
30/04/2014
30/04/2014
Exercise price
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Vesting date
21/09/2015
04/10/2015
13/05/2016
31/03/2016
31/03/2017
31/03/2018
31/03/2019
Expiry date
21/09/2015
04/10/2015
13/05/2016
31/03/2016
31/03/2017
31/03/2018
31/03/2019
Vesting period
(years)
Vesting
conditions
Fair value
3
Nil
3
Nil
3
Nil
2
Nil
3
Nil
4
Nil
5
Nil
$0.637
$0.689
$0.459
$0.571
$0.511
$0.458
$0.410
The fair value of performance rights granted during the year was calculated using a Black-Scholes pricing model applying
inputs as follows:
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Grant date
share price
Exercise price
Expected
volatility
Term (years)
Dividend yield
Risk free
interest rate
$0.86
–
50%
3
10%
$0.86
–
50%
3
10%
$0.58
$0.705
$0.705
$0.705
$0.705
–
50%
3
10%
–
60%
2
11%
–
60%
3
11%
–
60%
4
11%
–
60%
5
11%
2.55%
2.49%
2.57%
2.73%
2.95%
3.33%
3.33%
65
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 nOtES tO thE FinanCial StatEmEntS
FOR THE YEAR ENdEd 30 JUNE 2015
cONTiNUEd
NOTE 33. SHARE-BASED PAYMENTS (continued)
Movement in performance rights
consolidated
Balance at beginning of year
Granted during the year
Forfeited during the year
Balance at end of year
2015
2014
Number of
performance
rights
2,315,000
–
(20,000)
2,295,000
Weighted
average
exercise price
Number of
performance
rights
Weighted
average
exercise price
–
–
–
–
2,075,000
510,000
(270,000)
2,315,000
–
–
–
–
The weighted average fair value of performance rights granted at 30 June 2015 is $0.60. The weighted average exercise
price of these performance rights at 30 June 2015 is Nil. The weighted average remaining contractual life of performance
rights outstanding at 30 June 2015 is 254 days.
On 12 November 2013, the consolidated entity issued a total of 3,269,337 share appreciation rights to Geoff Jones,
Managing Director, as part of the consolidated entity’s equity incentive plan. Of this total, 727,273 vested during the
financial year ending 30 June 2015 (2014: 1,600,000). The share appreciation rights are subject to vesting conditions,
namely the participant being employed by the consolidated entity as Managing Director and the share price being equal
to or greater than the exercise price at the vesting date.
Number of share
appreciation rights
Grant date
vesting date
Exercise price
Performance
condition share
price targets
Fair value at
grant date
1,600,000
12 Nov 2013
30 Jun 2014
727,273
432,433
296,297
213,334
12 Nov 2013
30 Jun 2015
12 Nov 2013
30 Jun 2016
12 Nov 2013
30 Jun 2017
12 Nov 2013
30 Jun 2018
$0.50
$0.50
$0.50
$0.50
$0.50
$0.60
$0.72
$0.86
$1.04
$1.24
$0.18
$0.18
$0.18
$0.16
$0.15
The fair value of share appreciation rights granted during the year was calculated using a Monte Carlo pricing model applying
inputs as follows:
Grant date share price ($)
Exercise price ($)
Expected volatility (%)
Vesting period (years)
Dividend yield (%)
Risk free interest rate (%)
class A
class B
class c
class d
class E
0.67
0.50
60
0
11
2.80
0.67
0.50
60
1
11
2.80
0.67
0.50
60
2
11
3.06
0.67
0.50
60
3
11
3.06
0.67
0.50
60
4
11
3.48
66
Movement in share appreciation rights
consolidated
2015
2014
Number of share
appreciation
rights
Weighted
average
exercise price
Number of share
appreciation
rights
Weighted
average
exercise price
Balance at beginning of year
1,669,337
Granted during the year
–
Vested and exercised during
the year
Balance at end of year
(727,273)
942,064
–
–
–
–
–
3,269,337
(1,600,000)
1,669,337
–
–
–
–
On the date of exercise of 727,273 of the above share appreciation rights, 30 June 2015, the closing share price was
$0.90 per share.
The weighted average fair value of share appreciation rights granted at 30 June 2015 is $0.17. The weighted average
exercise price of these share appreciation rights at 30 June 2015 is $0.50. The weighted average remaining contractual
life of share appreciation rights outstanding at 30 June 2015 is 646 days.
NOTE 34. SUBSIDIARIES
The consolidated financial statements incorporate the following subsidiaries at the end of the reporting period.
country of
incorporation
2015
%
2014
%
Equity holding
Name of subsidiary
GR Engineering Services (Indonesia) Pty Limited
GR Engineering Services (Argentina) Pty Limited
PT GR Engineering Services Indonesia *
GR Engineering Services (Africa)
Australia
Australia
Indonesia
Mauritius
GR Engineering Services (UK) Limited
United Kingdom
GR Engineering Services (Ghana) Limited **
GR Engineering Services (Côte D’Ivoire) **
GR Engineering Services (Mali) **
GR Engineering Services (Tengrela) ***
Upstream Production Solutions Pty Ltd ****
Ghana
Côte D’Ivoire
Mali
Côte D’Ivoire
Australia
Upstream Production Solutions (Malaysia) Sdn. Bhd. *****
Malaysia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
*
**
PT GR Engineering Services Indonesia is 90% owned by GR Engineering Services Limited and 10% owned by
GR Engineering Services (Indonesia) Pty Limited.
GR Engineering Services (Ghana) Limited, GR Engineering Services (Côte D’Ivoire) and GR Engineering Services
(Mali) are 100% owned by GR Engineering Services (Africa).
*** GR Engineering Services (Tengrela) is dormant.
****
Incorporation date 8 November 2013.
***** Incorporation date 14 April 2014.
67
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015
DiRECtORS’ DEClaRatiOn
The directors declare that:
a. in the directors’ opinion, 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. in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting
Standards, as stated in Note 2 to the financial statements;
c. in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of the consolidated entity; and
d. the directors have been given the declarations required by Section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to Section 295(5) of the Corporations Act 2001.
On behalf of the Directors
Geoff Jones
Managing Director
20 August 2015
68
inDEPEnDEnt aUDitOR’S REPORt
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Woodside Plaza
Level 14
240 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report
to the members of
GR Engineering Services Limited
Report on the Financial Report
We have audited the accompanying financial report of GR Engineering Services Limited, which comprises
the statement of financial position as at 30 June 2015, the statement of profit or loss and other comprehensive
income, the statement of cash flows and the statement of changes in equity for the year ended on that date,
notes comprising a summary of significant accounting policies and other explanatory information, and the
directors’ declaration of the consolidated entity, comprising the company and the entities it controlled at the
year’s end or from time to time during the financial year as set out on pages 22 to 68.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 2,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the consolidated financial statements comply with International Financial Reporting
Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable
assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control, relevant to the company’s preparation of the financial
report that gives a true and fair view, 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 company’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation
of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
69
69
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015
inDEPEnDEnt aUDitOR’S REPORt
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of GR Engineering Services Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of GR Engineering Services Limited is in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting Standards as
disclosed in Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 19 of the directors’ report for the year
ended 30 June 2015. 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.
Opinion
In our opinion the Remuneration Report of GR Engineering Services Limited for the year ended 30 June
2015, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Neil Smith
Partner
Chartered Accountants
Perth, 21 August 2015
70
70
Continued
CORPORatE GOVERnanCE
StatEmEnt
APPROACH TO CORPORATE GOVERNANCE
GR Engineering Services Ltd ABN 12 121 542 738 (company) has established a corporate governance framework, the
key features of which are set out in this statement. In establishing its corporate governance framework, the Company
has referred to the recommendations set out in the ASX Corporate Governance Council’s Corporate Governance Principles
and Recommendations 3rd Edition (Principles & Recommendations).
The Company has followed each recommendation where the Board has considered the recommendation to be an
appropriate benchmark for its corporate governance practices. Where the Company’s corporate governance practices follow
a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In
compliance with the “if not, why not” reporting regime, where, after due consideration, the Company’s corporate governance
practices do not follow a recommendation, the Board has explained it reasons for not following the recommendation and
disclosed what, if any, alternative practices the Company has adopted instead of those in the recommendation.
The following governance-related documents can be found on the Company’s website at www.gres.com.au, under the
section marked “Corporate Governance”:
Charters
Board
Audit and Risk Committee
Nomination and Remuneration Committee
Policies and Procedures
Process for Performance Evaluations
Policy and Procedure for the Selection and (Re)Appointment of Directors
Induction Program
Diversity Policy (summary)
Code of Conduct (summary)
Policy on Continuous Disclosure (summary)
Compliance Procedures (summary)
Shareholder Communication and Investor Relations Policy
Securities Trading Policy
The Company reports below on whether it has followed each of the recommendations during the 2014/2015 financial year
(Reporting Period). The information in this statement is current at 20 August 2015. This statement was approved by a
resolution of the Board on 20 August 2015.
Cross-references to the Company’s Annual Financial Report in this statement are references to the Company’s Annual
Financial Report for the year ended 30 June 2015, which is disclosed on the Company’s website www.gres.com.au, under
the section marked “News”.
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Recommendation 1.1
The Company has established the respective roles and responsibilities of its Board and management, and those matters
expressly reserved to the Board and those delegated to management and has documented this in its Board Charter.
Recommendation 1.2
The Company undertakes appropriate checks before appointing a person or putting forward to shareholders a candidate
for election as a director and provides shareholders with all material information in its possession relevant to a decision
on whether or not to elect or re-elect a director.
The checks which are undertaken, and the information provided to shareholders are set out in the Company’s Policy and
Procedure for the Selection and (Re) Appointment of Directors.
Recommendation 1.3
The Company has a written agreement with each director and senior executive setting out the terms of their appointment.
The material terms of any employment, service or consultancy agreement the Company, or any of its child entities, has
entered into with its Managing Director, any of its directors, and any other person or entity who is related party of the
Managing Director or any of its directors has been disclosed in accordance with ASX Listing Rule 3.16.4 (taking into
consideration the exclusions from disclosure outlined in that rule).
71
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 CORPORatE GOVERnanCE StatEmEnt
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT (continued)
Recommendation 1.4
The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper
functioning of the Board as outlined in the Company’s Board Charter.
Recommendation 1.5
The Company has a Diversity Policy, which includes requirements for the Nomination and Remuneration Committee to
set measurable objectives for achieving gender diversity and to assess annually both the objectives and the Company’s
progress in achieving them. A summary of the Company’s Diversity Policy is disclosed on the Company’s website.
The following measurable objective for achieving gender diversity has been set by the Nomination and Remuneration
Committee in accordance with the Diversity Policy:
“Subject to the identification of suitable qualified candidates, to increase the percentage of professional and senior
executive positions occupied by women to 15% by 30 June 2017.”
The Board continues to work towards meeting this objective and continues to foster a workplace environment and
recruitment policies designed to achieve greater female participation in the Company’s workforce.
The respective proportions of men and women on the Board, in senior executive positions and across the whole
organisation are set out in the following table. “Senior executive” for these purposes means a person who is a Key
Management Employee, a General Manager or a member of Senior Management as defined by the Workplace Gender
Equality Agency:
Whole organisation
Senior executive positions
Board
Recommendation 1.6
Proportion of women
39 out of 247
(16%)
(16% as at 30 June 2014)
9 out of 91
(10%)
(7% as at 30 June 2014)
0 out of 6
(0%)
(0% as at 30 June 2014)
The Chair is responsible for evaluation of the Board and, when deemed appropriate, Board committees and individual
directors. The Chair is also responsible for evaluating the Managing Director.
The Chair evaluates the performance of the Managing Director and other Board members through a series of discussions
held throughout the year. These discussions include an assessment of the Company’s state of affairs, the risks facing the
Company and its economic objectives. The Chair evaluates the extent to which each director has contributed to the efficient
utilisation of resources, the identification of risk and the achievement of economic objectives. During these discussions
the Chair also elicits confidential feedback from each Director on their view of the interpersonal dynamics between Board
members and the quality of the Board’s decision making.
During the Reporting Period the Chair evaluated the performance of all Directors, including the Managing Director, in
accordance with the above process.
Recommendation 1.7
The Managing Director is responsible for evaluating the performance of senior executives in accordance with the process
disclosed in the Company’s Process for Performance Evaluations.
During the Reporting Period the Managing Director conducted performance evaluations of Senior Executives. Where these
evaluations resulted in the identification of areas where the Senior Executive’s technical or interpersonal skills could be
strengthened, appropriate training or remedial action was formulated and agreed.
72
Continued PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE
Recommendation 2.1
The Board has established a Nomination and Remuneration Committee comprising Barry Patterson (Chair), Joseph Ricciardo,
Terrence Strapp and Peter Hood. All members of the Nomination and Remuneration Committee are non-executive directors
and all members are independent directors except Mr Ricciardo. Accordingly, the Nomination and Remuneration Committee
is structured in accordance with Recommendation 2.1.
The Board has adopted a Nomination and Remuneration Committee Charter which describes the role, composition,
functions and responsibilities of the Nomination and Remuneration Committee and is disclosed on the Company’s website.
The Nominations and Remuneration Committee held no separate meeting during the year electing instead to address
matters for its consideration within the context of meetings of the full Board of Directors.
Recommendation 2.2
The mix of skills and diversity that the Board currently has is a Board comprised of 5 qualified engineers and 1 qualified
accountant. The matrix of skills held by the Board is weighted towards those skills which are required to identify, assess,
quantify and manage those risks which are most relevant to and prevalent in the Company’s business and the industry in
which it operates.
Five of the Company’s six directors hold, or have held, positions on the boards of other publicly listed companies and all
have extensive experience in the management of organisations across a range of industries.
When necessary, the Board engages the services of external experts and consultants to augment its capacity to consider
and assess matters which fall outside the domain of its collective expertise.
Recommendation 2.3
The Board considers the independence of directors having regard to the relationships listed in Box 2.3 of the Principles
& Recommendations. The independent directors of the Company are Messrs Patterson (deemed independent), Strapp
and Hood.
Mr Patterson is a substantial shareholder of the Company. Notwithstanding that he is a substantial shareholder the Board
considers Mr Patterson to be an independent director because he is not a member of management and is otherwise free
of any interest, position, association or relationship (including those listed in Box 2.3 of the Principles & Recommendations)
that might influence in a material respect, his capacity to bring an independent judgement to bear on issues before the
Board and to act in the best interests of the Company and its members generally. Further, Mr Patterson’s interests as a
substantial shareholder are considered by the Board to be in line with the interests of all other shareholders.
The length of service of each director is set out in the Directors’ Report of the Company’s Annual Financial Report.
Recommendation 2.4
The Board does not have a majority of directors who are independent.
The Board is comprised of 6 directors three of whom are or are deemed to be independent. The three non- independent
directors are Joe Ricciardo, Tony Patrizi and Geoff Jones. Joe Ricciardo and Tony Patrizi are founding shareholders of the
Company and Geoff Jones has been employed by the Company since 2011, initially as Chief Operating officer and since 01
July 2013, as Managing Director. Messrs Ricciardo, Patrizi and Jones have thorough knowledge of the Company’s business
and extensive experience in managing the risks it faces. Their continued presence on the Board is therefore highly valued.
The Board is of a size commensurate with the size and nature of the Company. Should the number of Board members
increase, it is the intention of the Company to appoint an additional independent director thereby creating a majority of
independent directors.
Recommendation 2.5
The non-independent, non-executive Chair of the Board is Joseph Ricciardo. Mr Ricciardo is not also the Managing
Director. However, Mr Ricciardo is not independent as he is a substantial shareholder of the Company. Mr Ricciardo is a
founding shareholder of the Company and was its Managing Director until 30 June 2013. He has extensive knowledge of
the Company’s business and experience in managing the risks it faces. Mr Ricciardo ensures that meetings of the Board
are conducted to an agenda that is comprehensive and relevant, and also makes a contribution to the depth of the Board’s
deliberations and quality of its decisions. For these reasons the Board considers Mr Ricciardo to be the most appropriate
Chair of the Board, notwithstanding that he is not an independent director.
73
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 CORPORatE GOVERnanCE StatEmEnt
PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE (continued)
Recommendation 2.6
The Company has an induction program for new directors and senior executives. The goal of the program is to assist new
directors to participate fully and actively in Board decision-making at the earliest opportunity and to assist senior executives
to participate fully and actively in management decision-making at the earliest opportunity. The Company’s Induction Program
is disclosed on the Company’s website.
The Nomination and Remuneration Committee regularly reviews whether the directors as a group have the skills,
knowledge and familiarity with the Company and its operating environment required to fulfil their role on the Board and the
Board committees effectively using a Board skills matrix. Where any gaps are identified, the Nomination and Remuneration
Committee considers what training or development should be undertaken to fill those gaps. In particular, the Nomination
and Remuneration Committee ensures that any director who does not have specialist accounting skills or knowledge
has a sufficient understanding of accounting matters to fulfil his or her responsibilities in relation to the Company’s
financial statements. Directors also receive ongoing briefings from the Company Secretary and Chief Financial Officer
on developments in accounting standards.
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
Recommendation 3.1
The Company has established a Code of Conduct for its directors, senior executives and employees, which is disclosed
on the Company’s website.
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING
Recommendation 4.1
The Board has established an Audit and Risk Committee. The members of the Audit and Risk Committee are Messrs
Strapp (Chairman), Patterson and Hood. All members of the Audit and Risk Committee are independent non-executive
directors and the Audit and Risk Committee is chaired by Mr Strapp who is not also Chairman of the Board. Accordingly,
the Audit and Risk Committee is structured in compliance with Recommendation 4.1.
Terrence Strapp (CPA, FFin, MAICD) is a Certified Practicing Accountant and has extensive experience in banking, finance
and corporate risk management. Mr Strapp has extensive experience in the preparation and interpretation of financial
statements and information.
Peter Hood (BE (Chem), MAustIMM, FChemE, FAICD) is a Chemical Engineer and was formerly the Chief Executive
Officer of Coogee Chemicals and Coogee Resources. He is currently the Chairman of the Australian Chamber of
Commerce and Industry and Immediate Past President of the Chamber of Commerce and Industry Western Australia.
Peter is currently Chairman of Matrix Composites and Engineering Limited. His broad based commercial experience
includes the interpretation of financial statements and information.
Barry Patterson (ASMM, MIMM, FAICD) is a mining engineer with over 50 years’ experience in mining and mining services.
He was formerly non-executive Chairman of Sonic Healthcare Limited and Silex Systems Limited and is a non-executive
director of Dacian Gold Limited. His broad based commercial experience includes the interpretation of financial statements
and information.
The Company has also established a Procedure for the Selection, Appointment and Rotation of its External Auditor. The
Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when
any vacancy arises. Candidates for the position of external auditor must demonstrate complete independence from the
Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant
to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by
the Board.
Details of the number of times the Audit and Risk Committee met during the Reporting Period, and individual director
attendances at those meetings are disclosed in a table in the Directors’ Report of the Company’s Annual Financial Report.
The Board has adopted an Audit and Risk Committee Charter which describes the Audit and Risk Committee’s role,
composition, functions and responsibilities, which is disclosed on the Company’s website.
74
Continued Recommendation 4.2
Before the Board approved the Company financial statements for the half year ended 31 December 2014 and the full-year
ended 30 June 2015, it received from the Managing Director and the Chief Financial Officer a declaration that, in their
opinion, the financial records of the Company for the relevant financial period have been properly maintained and that the
financial statements for the relevant financial period comply with the appropriate accounting standards and give a true and
fair view of the financial position and performance of the Company and the consolidated entity and that the opinion has
been formed on the basis of a sound system of risk management and internal control which is operating effectively.
Recommendation 4.3
Under Section 250RA of the Corporations Act, the Company’s auditor is required to attend the Company’s annual general
meeting at which the audit report is considered, and to be represented by a person who is a suitably qualified member of
the audit team that conducted the audit and is in a position to answer questions about the audit. Each year, the Company
writes to the Company’s auditor to inform them of the date of the Company’s annual general meeting.
In accordance with Section 250S of the Corporations Act, at the Company’s annual general meeting where the Company’s
auditor or their representative is at the meeting, the Chair allows a reasonable opportunity for the members as a whole at
the meeting to ask the auditor (or its representative) questions relevant to the conduct of the audit; the preparation and
content of the auditor’s report; the accounting policies adopted by the Company in relation to the preparation of the financial
statements; and the independence of the auditor in relation to the conduct of the audit. The Chair also allows a reasonable
opportunity for the auditor (or their representative) to answer written questions submitted to the auditor under Section
250PA of the Corporations Act.
A representative of the Company’s auditor, Deloitte Touche Tohmatsu attended the Company’s annual general meeting held
on 12 November 2014.
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
Recommendation 5.1
The Company has established written policies and procedures for complying with its continuous disclosure obligations
under the ASX Listing Rules. A summary of the Company’s Policy on Continuous Disclosure and Compliance Procedures
are disclosed on the Company’s website at www.gres.com.au.
PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY HOLDERS
Recommendation 6.1
The Company provides information about itself and its governance to investors via its website at www.gres.com.au as set
out in its Shareholder Communication and Investor Relations Policy.
Recommendation 6.2
The Company has designed and implemented an investor relations program to facilitate effective two-way communication
with investors. The program is set out in the Company’s Shareholder Communication and Investor Relations Policy.
Recommendation 6.3
The Company has in place a Shareholder Communication and Investor Relations Policy which outlines the policies and
processes that it has in place to facilitate and encourage participation at meetings of shareholders.
Recommendation 6.4
Shareholders are given the option to receive communications from, and send communications to, the Company and its
share registry electronically. This is facilitated through the Company’s website which provides access to the Company’s
and its share registry’s full range of contact details, including email address.
75
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 CORPORatE GOVERnanCE StatEmEnt
PRINCIPLE 7 – RECOGNISE AND MANAGE RISK
Recommendation 7.1
As noted above, the Board has established a combined Audit and Risk Committee. The Audit and Risk Committee is
structured in accordance with Recommendation 7.1. Please refer to the disclosure above in relation to Recommendation
4.1 in relation to the Audit and Risk Committee.
Recommendation 7.2
The Audit and Risk Committee reviews the Company’s risk management framework annually to satisfy itself that it continues
to be sound, to determine whether there have been any changes in the material business risks the Company faces and to
ensure that the Company is operating within the risk appetite set by the Board. The Audit and Risk Committee carried out
a review during the Reporting Period. The Audit and Risk Committee noted the increased risk to the Company due to the
increased potential of breaches of cyber security and has recommended that counter measures be taken to mitigate that risk.
Recommendation 7.3
The Company does not have an internal audit function. To evaluate and continually improve the effectiveness of the
Company’s risk management and internal control processes, the Board relies on ongoing reporting and discussion of the
management of material business risks as outlined in the Company’s Risk Management Policy.
Recommendation 7.4
The Company provides engineering and construction services to the mining industry and operations and maintenance
services to the oil and gas industry, including producers of coal seam gas. These activities expose the Company, directly
and indirectly to environmental, social and economic sustainability risks, which may materially impact the Company’s ability
to create or preserve value for shareholders over the short, medium or long term.
In relation to the provision of goods and services, these risks are mitigated by virtue of the Company entering a project’s
life cycle at a stage where all environmental, social and economic requirements of the relevant jurisdiction have been met
by the client. The Company does not provide goods and services in circumstances where this is not the case and to that
extent, the Company is in a position to continue its business activities in an environmentally, socially and economically
sustainable manner.
In relation to the Company’s suppliers, the Company takes due care to ensure that the goods and services required for the
conduct of its business are sourced from entities which act fairly and responsibly within the environments, societies and
economies in which they operate thereby mitigating sustainability risks in relation to these factors.
The Company aims to operate in a socially sustainable way by engaging with the local communities and wherever possible
providing employment and training opportunities to members of the local community. In doing so, the Company operates
within the framework of local norms and customs and endeavours to ensure that its clients do likewise. The Company
will not participate in any activity where it is likely to receive either directly or indirectly, economic benefit through the
exploitation of others.
76
Continued PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY
Recommendation 8.1
As noted above in relation to Recommendation 2.1, the Board has established a Nomination and Remuneration Committee.
The Nomination and Remuneration Committee is structured in compliance with Recommendation 8.1. Please refer to the
disclosure above in relation to Recommendation 2.1 in relation to the Nomination and Remuneration Committee.
Recommendation 8.2
Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report”
which forms of part of the Directors’ Report in the Company’s Annual Financial Report. This disclosure includes a summary
of the Company’s policies regarding the deferral of performance-based remuneration and the reduction, cancellation or
clawback of the performance-based remuneration in the event of serious misconduct or a material misstatement in the
Company’s financial statements.
Under the terms of the GR Engineering Services Limited Equity Incentive Plan (Plan), if in the opinion of the Board a
participant acts fraudulently or dishonestly or wilfully breaches his or her duties to the Company, the Board may in its
absolute discretion determine that all unvested or unexercised performance rights or share appreciation rights held by
the participant will lapse.
In addition to the provisions under the Plan, the Board has adopted a clawback policy in relation to any cash bonuses or
shares issued pursuant to the Plan. Under this policy the Board reserves the right to take action to reduce, recoup or
otherwise adjust the employees performance based remuneration in circumstances where in the opinion of the Board,
an employee has acted fraudulently or dishonestly or has wilfully breached his or her duties to the Company.
Recommendation 8.3
The Company’s Remuneration Committee Charter includes a statement of the Company’s policy on prohibiting participants
in the Plan entering into transactions (whether through the use of derivatives or otherwise) which limit the economic risk
of participating in the Plan.
GR ENGiNEERiNG SERvicES LimiTEd
ANNUAL REPORT 2015
77
aDDitiOnal aSX inFORmatiOn
The shareholder information set out below was applicable as at 28 September 2015:
• the twenty largest shareholders held 84.93% of the Ordinary Shares; and
• there were 1,197 ordinary shareholders.
distribution of securities
Analysis of number of equity security holders by size of holding:
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 1,000,000
1,000,001 – 100,000,000
Total
Total
198
376
214
366
32
17
1,203
Units
147,358
1,138,455
1,783,150
12,348,990
10,073,479
126,934,654
152,426,086
% of shares issued
0.10
0.75
1.17
8.10
6.61
83.26
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares is 42.
Equity security holders
Top 20 Shareholders as at 28 September 2015:
Name
1.
Citicorp Nominees Pty Ltd
2. Mr David Joseph Sala Tenna + Ms Jane Frances Sala Tenna
3.
4.
5.
6.
7.
Joley Pty Ltd
Polly Pty Ltd
Quintal Pty Ltd
Paksian Pty Ltd
Kingarth Pty Ltd
8. Mr Giuseppe Totaro
9. Ms Barbara Ann Woodhouse
10. Ms Beverley June Schier
11. Ledgking Pty Ltd
12. Mr Stephen Paul Kendrick
13.
JP Morgan Nominees Australia Limited
14. National Nominees Limited
15. HSBC Custody Nominees (Australia) Limited – Commonwealth Super Corp
16. HSBC Custody Nominees (Australia) Limited
17. Kendrick Investments Pty Ltd
18. Mr Cono Antonino Angelo Ricciardo
19. Mr Cono Antonino Angelo Ricciardo + Mr Brett Alan Turner
20. Kingarth Pty Ltd
Number of
shares held
% of shares
issued
16,309,415
13,825,000
12,000,000
10,500,000
10,500,000
9,798,578
9,025,000
9,000,000
8,150,000
8,100,000
6,000,000
3,491,000
3,374,502
2,207,166
1,728,537
1,541,455
1,384,000
980,000
772,109
770,000
10.70
9.07
7.87
6.89
6.89
6.43
5.92
5.90
5.35
5.31
3.94
2.29
2.21
1.45
1.13
1.01
0.91
0.64
0.51
0.51
129,180,012
84.93
78
Substantial shareholders
Name
1.
Citicorp Nominees Pty Ltd
2. Mr David Joseph Sala Tenna + Ms Jane Frances Sala Tenna
3.
4.
5.
6.
7.
Joley Pty Ltd
Polly Pty Ltd
Quintal Pty Ltd
Paksian Pty Ltd
Kingarth Pty Ltd
8. Mr Giuseppe Totaro
9. Ms Barbara Ann Woodhouse
10. Ms Beverley June Schier
voting rights
Number of
shares held
% of shares
issued
16,309,415
13,825,000
12,000,000
10,500,000
10,500,000
9,798,578
9,025,000
9,000,000
8,150,000
8,100,000
10.70
9.07
7.87
6.89
6.89
6.43
5.92
5.90
5.35
5.31
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Options over ordinary shares
There are no voting rights attached to Options over the consolidated entity’s shares.
Performance rights
There are no voting rights attached to Performance Rights over the consolidated entity’s shares.
Share appreciation rights
There are no voting rights attached to Share Appreciation Rights over the consolidated entity’s shares.
Options on issue
There are Nil options on issue at 30 June 2015.
Performance rights
The following performance rights are on issue:
Number
50,000
127,500
127,500
127,500
127,500
Grant date
13 May 2013
30 Apr 2014
30 Apr 2014
30 Apr 2014
30 Apr 2014
Share appreciation rights
The following share appreciation rights are on issue:
Number
432,433
296,297
213,334
Grant date
12 Nov 2013
12 Nov 2013
12 Nov 2013
Expiry date
13 May 2016
31 Mar 2016
31 Mar 2017
31 Mar 2018
31 Mar 2019
Expiry date
30 Jun 2016
30 Jun 2017
30 Jun 2018
Exercise price
–
–
–
–
–
Exercise price
–
–
–
79
GR EnGinEERinG SERvicES LimitEd AnnUAL REPORt 2015 CORPORatE DiRECtORY
GR ENGINEERING SERVICES LIMITED
PRINCIPAL PLACE OF BUSINESS
ACN 121 542 738
ABN 12 121 542 738
DIRECTORS
Joe Ricciardo
Geoff Jones
Tony Patrizi
Barry Patterson
Peter Hood
Terrence Strapp
(Non-Executive Chairman)
(Managing Director)
(Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
COMPANY SECRETARY &
CHIEF FINANCIAL OFFICER
Giuseppe (Joe) Totaro
REGISTERED OFFICE
179 Great Eastern Highway
BELMONT WA 6104
179 Great Eastern Highway
BELMONT WA 6104
Telephone:
Facsimile:
Email:
Website:
(61 8) 6272 6000
(61 8) 6272 6001
gres@gres.com.au
www.gres.com.au
ASX CODE
GNG
AUDITOR
deloitte Touche Tohmatsu
Level 14, 240 St Georges Terrace
PERTH WA 6000
SOLICITORS TO THE COMPANY
Gilbert + Tobin
1202 Hay Street
WEST PERTH WA 6005
SHARE REGISTRY
computershare investor Services Pty Limited
Level 11, 172 St Georges Terrace
PERTH WA 6000
ON-MARKET BUYBACK
The consolidated entity has no current on-market buy
back scheme.
RESTRICTED SECURITIES
There are no securities subject to any voluntary escrow
or any transfer restrictions.
80
Safety is a key element of
GR Engineering’s operating
ethos – our people are
our greatest asset.
gres.com.au
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