ABN 78 008 947 813
2007 Annual General Meeting
Meeting Documents
Notice of Annual General Meeting & Explanatory Memorandum
Proxy Form for Annual General Meeting
Corporate Representative Certificate for Annual General Meeting
To be held on Friday, 19 October 2007 at the Celtic Club,
48 Ord Street, West Perth, Western Australia commencing
at 11.00am WST
T
R
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L
A
U
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N
A
7
0
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2
“Australia’s global
drilling products
and services company”
C O N T E N T S
07
IMDEX AT A GLANCE 3
IMDEX 2007 SNAPSHOT 4
GLOBAL REACH 6
CHAIRMAN’S REPORT 8
MANAGING DIRECTOR’S REPORT 10
BOARD OF DIRECTORS 16
FINANCIAL REPORT 2007 19
IMDEX is listed on the Australian Stock Exchange
under the ASX code IMD.
IMDEX AT A GLANCE
Imdex is a Perth based, ASX listed company supplying drilling products
and services to the mining, oil and gas, water well and civil industries globally.
Imdex has two global operational divisions:
• Drilling fl uids and chemicals
• Drilling products (down hole instrumentation) and services
Imdex is a market leader in many disciplines
Imdex is establishing a comprehensive global distribution and supply network
IMDEX 2007 HIG HLIG HTS ...D el i ver i ng on it’s str ategy
Fina nc ial Perfo rma nc e
UP
79%
OPERATING
REVENUE
UP
153%
EBITA
(normal
operations)
UP
69%
UP
60%
UP
44%
2.5
CENTS
NET PROFIT
AFTER TAX
OPERATIING
CASH FLOW
EARNINGS
PER SHARE
(8.7 cents)
FULLY
FRANKED
DIVIDEND PER
SHARE
Divisi on al H ig hli ghts
FLUIDS AND CHEMICALS
Comprises: Australian Mud Company and Samchem
Segment revenue of $62.4m (up 50% on prior period)
Segment EBITA up 82% on prior period
PRODUCTS AND SERVICES
Comprises: Surtron, Refl ex, Chardec and Flexit
Segment revenue of $56.1m (up 124% on prior period)
Segment EBITA up 235% on prior period
A N N U A L R E P O R T 2 0 0 7 IMDEX
3
I M D E X 2 0 0 7 S N A P S H O T
Total Revenue
Change in percentage
Operating Profi t before Interest, Tax, Depreciation
& Amortisation (normal operations only)
Depreciation
Earnings before Interest, Tax & Amortisation (EBITA)
(normal operations only)
EBITA margin
Amortisation
Earnings before Interest & Tax (EBIT)
(normal operations only)
Net interest expense
Income tax expense
Net Profi t after Tax (normal operations only)
Change in percentage
Change in percentage
Change in percentage
Non-operational items
Sino value uplift
RTE/Imdex Joint Venture Recovery / (Impairment)
Tax effect of non-operational items
Net Profi t for the Year from Continuing Operations
Profi t from discontinuing operations
Net Profi t for the Year
Total Group EBIT
Basic earnings per share (cents)
Net Cash provided by Operating Activities
Net Assets
Change in percentage
Change in percentage
Change in percentage
Change in percentage
Change in percentage
Change in percentage
FY07
$’000
119.3
79%
29.1
(4.4)
24.7
21%
152%
(3.4)
21.3
117%
(2.0)
(6.6)
12.7
82%
-
1.1
(0.3)
13.5
69%
-
13.5
69%
22.4
87%
8.78
45%
16.1
60%
69.4
112%
FY06
$’000
FY05
$’000
66.8
43%
12.2
(2.4)
9.8
15%
77%
-
9.8
78%
(0.2)
(2.6)
7.0
114%
4.5
(2.3)
(1.2)
8.0
143%
-
8.0
90%
12.0
118%
6.07
66%
10.1
216%
32.7
72%
46.8
6.9
(1.4)
5.5
12%
-
5.5
(0.5)
(1.7)
3.3
-
-
-
3.3
0.9
4.2
5.5
3.66
3.2
19.0
4
Total Revenue and EBITA
Three Year Trend
100
)
s
n
o
i
l
l
i
m
(
30
25
20
15
10
5
)
s
n
o
i
l
l
i
m
(
A
T
B
E
I
e
u
n
e
v
e
R
50
)
s
n
o
i
l
l
i
m
(
s
t
e
s
s
A
t
e
N
80
70
60
50
40
30
20
10
-
FY 05
FY06
FY07
Total Revenue
EBITA
)
s
n
o
i
l
l
i
m
(
e
u
n
e
v
e
R
140
120
100
80
60
40
20
-
Divisional Revenue
Three Year Trend
$6.8
$23.2
$16.9
FY05
$41.7
$25.0
FY06
$62.4
$56.1
FY07
Net Asset growth refl ects our strength
Products and Services
Fluids and Chemicals
Minerals Processing
FY05
FY06
FY07
e
r
a
h
S
r
e
p
s
t
n
e
C
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
-
Continued earnings growth has led to an uplift in
the fully franked dividend payment program
FY05
FY06
FY07
Dividends Per Share
Earnings Per Share
A N N U A L R E P O R T 2 0 0 7 IMDEX
5
G L O B A L R E A C H – REGIONAL EXPERT ISE
COUNTRIES WE OPERATE IN
AUSTRALIA
BOTSWANA
CANADA
CHILE
CHINA
CONGO
GERMANY
GHANA
INDONESIA
KAZAKHSTAN
KENYA
LAOS
MALAYSIA
MALI
MAURITANIA
MEXICO
MONGOLIA
SWITZERLAND
NEW ZEALAND
TANZANIA
PAPUA NEW GUINEA
THAILAND
PERU
PHILIPPINES
SINGAPORE
SOUTH AFRICA
SWEDEN
TURKEY
UNITED KINGDOM
ZAMBIA
T I M M I N S
C A L G A RY
S A N T I A G O
6
MAJOR LOCATIONS WE OPERATE OUT OF
ALMATY, KAZAKHSTAN
BRISBANE
CALGARY, CANADA
EAST SUSSEX, UK
KALGOORLIE
PERTH
SANTIAGO, CHILE
TIMMINS, CANADA
JOHANNESBURG, SOUTH AFRICA
VALLENTUNA, SWEDEN
VA L L E N T U N A
E A S T
S U S S E X
A L M AT Y
J O H A N N E S B U R G
B R I S B A N E
P E RT H
K A L G O O R L I E
A N N U A L R E P O R T 2 0 0 7 IMDEX
7
M R I A N B U R S T O N
C H A I R M A N ’ S R E P O R T
It gives me great pleasure to report an outstanding fi nancial result for the Imdex Group for the year ended
30 June 2007 (FY07).
The dramatic increase in profi tability refl ects the many strategic and operational changes which have been made
during the past few years. The company is also benefi ting from the uplift in global exploration and resource
development activity.
The Imdex Group is continuing to deliver on the strategy I outlined at the 2006 Annual General Meeting.
This strategy aimed at building value for our shareholders through:
•
•
•
continued operational earnings improvement within Australia;
moving toward an increasing global presence;
achieving an overall improvement in Group fi nancial performance to make Imdex a competitive
investment in the Australian market; and
•
translating the improved performance into dividend income.
The Imdex Group achieved a 79% increase in revenue to $119.3 million and a 69% increase in total net profi t to
$13.5 million. This delivered earnings per share of 8.74 cents, up from 6.07 cents per share in FY06.
As well as focusing on growing our core businesses we have continued to extend our global reach through strategic
acquisitions and business partnerships. Through this two pronged approach, both divisions of Imdex have been
recording outstanding growth.
The Drilling Fluids and Chemicals division increased revenue by 50% and normalised EBITA by 82%.
Within the Drilling Products and Services division, revenue and normalised EBITA were up 124% and a massive
235%, respectively. Our global expansion continued with the acquisition of Flexit from 1 May 2007 and the
purchases of Poly-Drill in Canada and a 75% interest in Suay Energy Services in Kazakhstan with effect from
1 July 2007.
Flexit is a signifi cant global supplier of borehole survey systems to the mineral exploration, mining, tunnelling and
geotechnical industries. The acquisition of Flexit complements the recent purchases of Refl ex and Chardec.
8
Poly-Drill manufactures and sells polymer drilling fl uid based systems and solids control systems from Calgary. Poly-Drill
is close to commercialising a solids control system for the removal of oil from drill cuttings. There is strong demand for
such systems due to increasing environmental concerns worldwide.
Suay provides drilling fl uids and services to the Kazakhstan oilfi elds and the surrounding Caspian Sea region.
These acquisitions provide an expanded global capability. Combined with our strategic alliances with other international
drilling and supply companies, these initiatives will give us access to new clients and markets in North America, Latin
America, Africa, the CIS and Asia.
The acquisitions will expand the Imdex product range and consolidate Imdex’s position as a leading global supplier of
technologically advanced down hole instrumentation, fl uids and chemicals. They will also strengthen Imdex’s existing
research and development and manufacturing skill base allowing Imdex to be a market leader in sophisticated down
hole instrumentation.
As part of the company’s growth plans, the management and board are actively reviewing the group’s ongoing
management requirements. Important additional skills and resources have come with the business acquisitions we have
made in recent years. However, there is a need to recruit additional senior management with industry experience to
ensure successful implementation of our strategies.
As part of the strategic repositioning of the company, Imdex successfully recovered all outstanding amounts owing from
Rashid Trading Establishment and sold its remaining 20% interest in Imdex Arabia.
The greatly improved fortunes of the company and the attractive outlook have encouraged directors to declare an
increased dividend. Imdex paid a 1 cent per share interim dividend and the Board has approved the payment of a
further 1.5 cents per share fi nal dividend.
The Board’s goal of delivering a sustainable and increasing dividend stream, consistent with the capital needs of the
Company, remains a high priority.
I would like to thank all our employees, my fellow Board members and the company’s consultants for their special
efforts during the year as it has taken a lot of hard work and dedication to deliver these outstanding results.
I would also like to recognise the importance of our customers and the role played by all shareholders in supporting the
activities of the company.
I look forward to seeing many of you at the forthcoming Annual General Meeting to be held in Perth on 19 October 2007.
I F Burston
C h a i r m a n
A N N U A L R E P O R T 2 0 0 7 IMDEX
9
M R B E R N I E R I D G E W AY
M A N A G I N G D I R E C T O R ’ S R E P O R T
The last year has been an exciting time of strategic expansion and business growth.
•
Financially, we increased revenue by 79% and net profi t by 69%;
• Operationally, we successfully integrated Refl ex and Chardec, the two businesses we acquired in 2006, with
better than expected results; and
•
Strategically, we pursued our global expansion plans through organic growth and additional
off-shore acquisitions.
We have been engaged in a multi-year business plan which has been delivering successively better outcomes. We
begin the new fi nancial year in a far stronger strategic position both geographically and technically, leaving us poised
for another year of signifi cant growth and improved shareholder returns.
The management team is very pleased with the outstanding results achieved. Special mention should be made of
the growing number of people contributing to the performance in many different parts of the world as a result
of the global repositioning of the company we began a few years ago. The results are a strong indicator of the
commitment and skill of the managers and staff in our more recently acquired businesses as well as those in the
ongoing operations.
There were many highlights in the past year, including:
•
•
•
•
•
profi t growth in all our core businesses;
a rise in group sales of 79% to $119.3 million;
growth in earnings before interest, tax and amortisation of 116% to $25.8 million;
a 1.5 cents per share fi nal dividend to be paid in October 2007 compared with the 1 cent per share fi nal
dividend in 2006;
purchase and successful integration of the Swedish-based Refl ex Group and the United Kingdom-based
Chardec Technologies;
1 0
“We are a
market leader in many
of our disciplines”
Imdex assisted to pioneer horizontal directional drilling in the coal bed methane industry in Scotland
•
•
•
•
acquisition of the Swedish-based Flexit in May 2007;
completion of capital and debt raisings to support our growth strategy;
recovery of all outstanding amounts due from Rashid Trading Establishment and the sale of the remaining 20%
interest in Imdex Arabia; and
acquisition of 100% of Canadian-based Poly-Drill and a 75% interest in Kazakhstan-based Suay Energy Services,
both effective from 1 July 2007.
RECENT ACQUISITIONS
FLEXIT
The Swedish-based Flexit Group was acquired with effect from 1 May 2007. Flexit has a global perspective and focuses
on the technologically advanced down hole survey tool market. This acquisition complements the earlier acquisitions of
Refl ex and Chardec.
One of the benefi ts brought to the Group by Flexit is a new generation micro-electro-mechanical systems (MEMS) gyro.
This gives Imdex market leading technology.
The transaction valued Flexit at $22 million. A cash payment of $12 million was made on 1 May 2007. The balance is
payable on 1 May 2009 through the issue of 5 million fully paid ordinary Imdex shares at an issue price of $2 per share
to the vendors. If the Imdex share price at that time is less than $2.00 per share, an additional amount of cash will be
paid to bring the combined market value of shares issued and cash paid at that time to $10 million.
POLY-DRILL DRILLING SYSTEMS
Canadian-based Poly-Drill Drilling Systems Limited (Poly-Drill) was acquired with effect from 1 July 2007. The purchase
price of $3.5 million was made up of $1.75 million cash and the balance in Imdex shares which are subject to voluntary
escrow for a period of 12 months.
Poly-Drill manufactures and sells polymer drilling fl uid based systems and solids control systems from Calgary in Canada.
Its fl uid systems enable drilling without the use of numerous conventional drilling fl uid products, such as fl uid loss control
additives and gels. The fl uid systems are in use in the mining and oil & gas markets throughout North America and have
established new standards in drilling fl uid technology.
A N N U A L R E P O R T 2 0 0 7 IMDEX
1 1
M A N A G I N G D I R E C T O R ’ S R E P O R T C o n t .
Poly-Drill is also close to commercialising a solids control system for the removal of oil from drill cuttings. Many
countries require oil cuttings/sludge from oilfi eld drilling activities to be removed and some countries are seeking to
enforce a zero impact policy for environmental protection reasons. This will provide exciting new markets for the
Poly-Drill solids control equipment complementing the existing range of Imdex group products.
SUAY ENERGY SERVICES (Suay)
Imdex acquired a 75% interest in Kazakhstan-based Suay Energy Services LLP (Suay) with effect from 1 July 2007 for
a cash consideration of US$393,000. Imdex also holds an option to acquire the remaining 25% at fair value.
Suay had been a privately held company established in 2004 by an experienced executive with a long history in
the industry within the region. The purchase complements the existing businesses of Imdex. It facilitates our global
expansion by giving us an excellent platform for extending our presence into this highly prospective oil and gas
region. The business will offer advantages in servicing markets in Turkmenistan, Kurdistan, Azerbaijan and Uzbekistan
and the border regions of Russia.
ASSET SALES
During 2006/07, Imdex successfully recovered all outstanding amounts due from Rashid Trading Establishment (RTE)
and sold its remaining 20% interest in Imdex Arabia to RTE. Total cash received amounted to $1.1 million. This
amount has been treated as ‘Other Income’ in the statement of fi nancial performance as these assets had previously
been written down to a zero value.
DIVISONAL OPERATING RESULTS
DRILLING FLUIDS AND CHEMICALS DIVISION
The Drilling Fluids and Chemicals division (DFC) comprises the Australian Mud Company (AMC) and Samchem
Drilling Fluids and Chemicals (Pty) Ltd (Samchem). Both Suay and Poly-Drill will be reported as part of DFC in
FY08.
This division focuses on the provision of drilling fl uids and chemicals to the mining, oil and gas, water well and
horizontal directional drilling industries. Fluids and chemicals are required in the drilling process primarily to cool
and lubricate the drill bit, keep the hole open and to return cuttings to the surface.
Divisional revenue increased 50% to $62.4 million (FY06 - $41.7 million) and normalised EBITA increased 82% to
$10.4 million (FY06 - $5.7 million).
The DFC trading results have benefi ted from buoyancy in the worldwide resources and energy markets. These
market conditions have led to strong growth in exploration and development expenditure, particularly in Australia,
Africa and Asia.
As well as expanding sales in Australia, DFC has increased its market penetration in Africa and South East Asia and
our products are now sold to over 30 countries worldwide.
In the year ahead, integration and growth of Suay and Poly-Drill will be a high priority to ensure we maximise the
benefi ts of those acquisitions.
1 2
“We demonstrate our commitment
to the environment by using
cardboard packaging”
M A N A G I N G D I R E C T O R ’ S R E P O R T C o n t .
We will also be aiming to ensure high standards of service for our existing clients whilst targeting growth in a
broader range of international markets including previously under-exploited markets in Africa and Latin America.
Our ability to penetrate these and other global markets will be assisted by strategic alliances with major international
drilling and supply companies as well as the marketing footprint of our own businesses.
DRILLING PRODUCTS AND SERVICES DIVISION
The Drilling Products and Services division (DPS) comprises the Refl ex Group of companies (Refl ex), Chardec
Technologies (Chardec), Flexit, Ace Drilling Supplies (Ace) and Surtron Technologies and Surtron Technologies
UK (together Surtron). This division has grown signifi cantly in the current year primarily due to the acquisitions of
Refl ex, Chardec and Flexit. Notwithstanding the growth due to acquisitions, we are very pleased with the organic
growth achieved by our ongoing operations.
Divisional revenue increased 124% to $56.1 million ($25.0 million in FY06). Divisional normalised EBITA increased
235% to $17.6 million ($5.3 million in FY06).
The strong growth in this division during the year refl ected the acquisitions of Refl ex, Chardec and Flexit. However,
the existing Ace and Surtron business units also delivered outstanding increases in profi tability through the organic
growth opportunities within their market segments.
Key drivers in the success of DPS were:
•
•
•
•
the continued international roll out of the Ace Core Tool, with particularly strong revenue growth coming
from Canada;
cost savings from integration of the Refl ex and Chardec general management and administration functions;
lower costs from taking better advantage of the technical skills across previously separate companies to allow
a renewed focus on research and development; and,
new contracts for Surtron in Western Australia and South Australia as well as growth offshore with additional
work in China, Mauritania and the United Kingdom.
The outlook during FY08 for the DPS division is continued strong growth assisted by global alliances with
international drilling and supply companies.
NON-OPERATING INVESTMENT
SINO GAS & ENERGY LTD (SGE)
Imdex holds 13.6% of the ordinary share capital of Sino Gas & Energy Limited (SGE), an energy company operating in
the coal bed methane industry in China. It has also extended a secured loan facility to the company on commercial
terms. The investment in SGE which cost $0.3 million had a fair value for accounting purposes of $4.5 million at 30
June 2007.
The company plans to exit this investment during FY08.
COMPANY OUTLOOK
As a service provider to the oil and gas and mining industries, Imdex will benefi t from continuing growth in global
demand for raw materials. Continuing strong exploration and development activity within the natural resources
industry will be necessary if the industry is to meet the demands for additional supplies in the coming years.
The company’s growing global presence provides the springboard for further signifi cant earnings growth in the
current year. Our performance will also be assisted by a number of strategic alliances with major international
drilling and supply companies.
1 4
Imdex will continue to develop technology to increase effi ciency in the drilling industry.
The company’s experience in integrating new acquisitions has grown considerably and, in the coming year, the
integration and growth of Suay and Poly-Drill will be a priority.
Asian Pacifi c operations should grow organically as demand for products continues to be fuelled by the energy and
resources needs of emerging economies in China and South East Asia.
Within Africa, the company expects to extend its sales footprint beyond an already strong position in South Africa. The
company will benefi t from higher rates of mining and exploration activity in other parts of Africa, including the emerging
oilfi eld sector in East Africa. It is also positioning itself to take advantage of the demand for environmental management
products in Africa as well as in Europe and Australia.
In the Americas, the company’s expanded tool offering should help consolidate its market leadership in Canada.
Expansion into the United States onshore oil and gas market is a priority.
The company is confi dent of achieving signifi cant market penetration in Latin America. Key markets include Mexico and
Chile and a senior Chilean based manager has been appointed. Recent acquisitions will help in the plans to extend the
presence of the group in this part of the world.
The emphasis on research and development including establishment of manufacturing centres of excellence in Europe
and the United Kingdom will continue. This will help maintain the company’s competitive edge in the provision of
technologically advanced down-hole tools, permitting further expansion into the oil and gas sector.
Overall, as the Chairman announced when we released our fi nancial results in August, we are, based on current market
conditions and Group structure, expecting further signifi cant growth in operating revenue in FY08 at similar margins to
those we were able to achieve in FY07.
As always, these outcomes depend on many factors being aligned including there being no material change in the
business environment. There is nothing we can see at this point which would qualify our enthusiasm about the coming
year. Based on current business plans, there should be another increase in the underlying value of the company through
our focus on core skills and the competitive advantages which we have steadily built in an increasingly global company.
Bernie Ridgeway
M a n a g i n g D i r e c t o r
A N N U A L R E P O R T 2 0 0 7 IMDEX
1 5
B O A R D O F D I R E C T O R S
MR IAN BURSTON AM Non EXECUTIVE CHAIRMAN Age: 72 years
Mr Burston holds a Diploma in Aeronautical Engineering and a Bachelor of Engineering (Mechanical). He is a Fellow
of the Institution of Engineers, Australia, a Fellow of the Australasian Institute of Mining and Metallurgy and he is a
Fellow of the Australian Institute of Company Directors. Mr Burston was appointed Chairman at the Annual General
Meeting held on 22 November 2000. Mr Burston has been the Managing Director of Hamersley Iron, the Chief
Executive Offi cer for Kalgoorlie Consolidated Gold Mines, the Managing Director and Chief Executive Offi cer of
Aurora Gold Ltd and the Managing Director of Portman Limited. Mr Burston’s vast experience at the helm of public
companies, both listed and unlisted, makes him well qualifi ed to lead Imdex during this important growth phase of
the Company.
MR BERNARD RIDGEWAY B.Bus (ACCTG) ACA MANAGING DIRECTOR Age: 53 years
Mr Ridgeway was appointed to the Board on 23 May 2000 and appointed Managing Director effective from 3
July 2000. He is a qualifi ed Chartered Accountant and a Member of the Institute of Chartered Accountants in
Australia and a Member of the Australian Institute of Company Directors. Mr Ridgeway has been involved with a
number of public and private companies for the last 20 years as an Owner, Director or Manager. He embraces a
hands-on management style and has extensive experience and expertise in fi nance, administration, marketing and
business development.
1 6
FROM LEFT TO RIGHT: Mr Bernard Ridgeway, Mr Ross Kelly, Mr Ian Burston, Mr Kevin Dundo, Mr Magnus Lemmel
MR ROSS KELLY BE(HONS) FAICD NON EXECUTIVE DIRECTOR Age: 69 years
Mr Kelly graduated as an engineer from the University of Western Australia and has worked in Australia and many
overseas countries. Mr Kelly was appointed to the Board on 14 January 2004. Mr Kelly is a qualifi ed engineer, a Fellow
of the Institute of Company Directors, a Director of Clough Limited and a commissioner with the Western Australian
Football Commission. He has previously been Chairman of Clough Limited, Sumich Group Limited, Orbital Corporation
Limited, Beltreco Limited and a Director of Aurora Gold Limited, PA Consulting Services Ltd and the Fremantle Football
Club. He has specialised in the mining and heavy process industries and has consulted to many of Australia’s major
mining companies and the Western Australian Government. He has also worked in the offshore gas, oil refi ning and steel
industries. Mr Kelly was previously a Councillor of the Australian Institute of Company Directors, and a Member of the
Advisory Board, Curtin Graduate School of Business.
MR KEVIN DUNDO B. Com, LLB NON EXECUTIVE DIRECTOR Age: 56 years
Mr Dundo practises as a lawyer in Perth. He was appointed to the Board on 14 January 2004. He is also a Director of
Intrepid Mines Ltd ASX: IAU (formerly NuStar Mining Corporation Limited) and Computercorp Limited (ASX:CZP).
Previous directorships include St Barbara Mines Limited (ASX: SBM) and Defi ance Mining Corporation (listed on the
Toronto Stock Exchange). Mr Dundo gained a Bachelor of Commerce from the University of Western Australia and a
Bachelor of Laws from the Australian National University. Mr Dundo specialises in the commercial and corporate areas
(in particular mergers and acquisitions) with experience in the mining sector, the service industry and the fi nancial
services industry. Mr Dundo is a Member of the Law Society of Western Australia, a Member of the Law Council of
Western Australia, a Fellow of the Australian Society of Certifi ed Practising Accountants and a Member of the Australian
Institute of Company Directors.
MR MAGNUS LEMMEL B. A. NON EXECUTIVE DIRECTOR Age: 67 years
Mr Lemmel is a management consultant based in Brussels, Belgium and involved in developing small business in Sweden.
Mr Lemmel is a former Senior Vice President of Ericsson Telecommunications and Chief Executive Offi cer of the
Federation of Swedish Industries as well as Director General for Enterprise Policy of the European Commission. He has
a vast experience from working as a Director of companies and institutions.
Mr Lemmel was the President of Smaforetagsinvest AB, the previous owners of Refl ex, and it was a condition of the
Refl ex acquisition that Mr Lemmel be appointed to the Imdex Board. Due to his previous association with Refl ex and
the technology, he is the Chairman of the Technical Advisory Committee of Refl ex/Chardec and with his network in
Sweden and internationally, will bring added value to the Board.
Mr Lemmel was appointed to the Board on 19 October 2006.
A N N U A L R E P O R T 2 0 0 7 IMDEX
1 7
“Our tools help our clients
achieve their goals”
1 8
Directors’ Report 20
Independent Audit Report 30
Directors’ Declaration 32
F I N A N C I A L
R E P O R T
Auditors’ Independence Declaration 33
Corporate Governance Statement 34
Income Statement 38
Balance Sheet 39
Statement of Changes in Equity 40
Cash Flow Satement 41
Notes to the Financial Report 42
Additional Stock
Exchange Information 91
A N N U A L R E P O R T 2 0 0 7 IMDEX
1 9
IMDEX LIMITED
IMDEX LIMITED
and its controlled entities
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
The Directors of Imdex Limited (“Imdex” or “the Company”) present their report together with the annual Financial Report of the
Company and its Subsidiaries (“the Group”) for the financial year ended 30 June 2007.
The Directors of Imdex Limited (“Imdex” or “the Company”) present their report together with the annual Financial Report of the
Company and its Subsidiaries (“the Group”) for the financial year ended 30 June 2007.
In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows:
In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows:
IMDEX LIMITED
(a) Directors
(a) Directors
and its controlled entities
The names and particulars of the Directors of the Company during or since the end of the financial year are:
The names and particulars of the Directors of the Company during or since the end of the financial year are:
Name
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
Particulars
Particulars
Name
Role
Role
Age
Age
Mr I F Burston
Mr I F Burston
Independent, Non Executive Chairman
Independent, Non Executive Chairman
72
72
The Directors of Imdex Limited (“Imdex” or “the Company”) present their report together with the annual Financial Report of the
Company and its Subsidiaries (“the Group”) for the financial year ended 30 June 2007.
Mechanical Engineer
Mechanical Engineer
Member of the Audit and Compliance &
Member of the Audit and Compliance &
Remuneration Committees
Remuneration Committees
Director since November 2000
Director since November 2000
Mr B W Ridgeway
In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows:
Managing Director
Managing Director
Mr B W Ridgeway
53
53
Chartered Accountant
Chartered Accountant
Director since May 2000
Director since May 2000
Mr R W Kelly
Mr R W Kelly
(a) Directors
Independent, Non Executive Director
Independent, Non Executive Director
69
69
The names and particulars of the Directors of the Company during or since the end of the financial year are:
Name
Mr K A Dundo
Mr K A Dundo
Role
Independent, Non Executive Director
Independent, Non Executive Director
Mr I F Burston
Independent, Non Executive Chairman
Mr M Lemmel
Mr M Lemmel
Independent, Non Executive Director
Independent, Non Executive Director
Mr B W Ridgeway
Managing Director
Mr H H Al-Merry
Mr H H Al-Merry
Mr R W Kelly
Non Executive Director
Non Executive Director
Independent, Non Executive Director
Mr I R Freeman
Mr K A Dundo
Mr I R Freeman
Non Executive Director
Independent, Non Executive Director
Non Executive Director
Age
55
55
72
68
68
53
45
45
69
65
55
65
Engineer
Engineer
Member of the Audit and Compliance &
Member of the Audit and Compliance &
Remuneration Committees
Remuneration Committees
Director since 14 January 2004
Director since 14 January 2004
Particulars
Lawyer
Lawyer
Chairman of the Audit and Compliance &
Chairman of the Audit and Compliance &
Mechanical Engineer
Remuneration Committees
Remuneration Committees
Member of the Audit and Compliance &
Director since 14 January 2004
Director since 14 January 2004
Remuneration Committees
Director since November 2000
Management Consultant
Management Consultant
Director since 19 October 2006
Director since 19 October 2006
Chartered Accountant
Director since May 2000
President of Rashid Trading Establishment
President of Rashid Trading Establishment
(involved in a Joint Venture with Imdex, known
(involved in a Joint Venture with Imdex, known
Engineer
as the RTE/Imdex Joint Venture)
as the RTE/Imdex Joint Venture)
Member of the Audit and Compliance &
Director since April 2002
Director since April 2002
Remuneration Committees
Office vacated 18 August 2006
Office vacated 18 August 2006
Director since 14 January 2004
Chemical Technology and Production Engineer
Chemical Technology and Production Engineer
Lawyer
Director since 23 August 2005
Director since 23 August 2005
Chairman of the Audit and Compliance &
Resigned 10 April 2007
Resigned 10 April 2007
Remuneration Committees
Director since 14 January 2004
Additional information on the Director’s experience and qualifications is set out under Director Profiles.
Additional information on the Director’s experience and qualifications is set out under Director Profiles.
Mr M Lemmel
Independent, Non Executive Director
68
Management Consultant
Director since 19 October 2006
(b) Directorships of other listed companies
(b) Directorships of other listed companies
Mr H H Al-Merry
Non Executive Director
Directorships of other listed companies held by the Directors in the 3 years immediately before the end of the financial year are as
follows:
Directorships of other listed companies held by the Directors in the 3 years immediately before the end of the financial year are as
follows:
45
Name
Name
Company
Company
Position
Position
Mr I F Burston
Mr I F Burston
Mr I R Freeman
Non Executive Director
Mincor Resources NL
Mincor Resources NL
Aviva Corporation Ltd
Aviva Corporation Ltd
Aztec Resources Ltd
Aztec Resources Ltd
Kansai Mining Corporation
Kansai Mining Corporation
Cape Lambert Iron Ore Ltd
Cape Lambert Iron Ore Ltd
Non Executive Director
Non Executive Director
65
Non Executive Director
Non Executive Director
Chairman and Chief Executive Officer
Chairman and Chief Executive Officer
Non Executive Director
Non Executive Director
Non Executive Chairman
Non Executive Chairman
Additional information on the Director’s experience and qualifications is set out under Director Profiles.
Period of Directorship
President of Rashid Trading Establishment
(involved in a Joint Venture with Imdex, known
as the RTE/Imdex Joint Venture)
Director since April 2002
Office vacated 18 August 2006
2003 – Current
2003 – Current
Chemical Technology and Production Engineer
2003 – 2006
2003 – 2006
Director since 23 August 2005
2004 – 2006
2004 – 2006
Resigned 10 April 2007
2006 – Current
2006 – Current
2006 – Current
2006 – Current
Period of Directorship
Mr R W Kelly
Mr R W Kelly
Clough Limited
Clough Limited
Non Executive Director
Non Executive Director
1996 – Current
1996 – Current
(b) Directorships of other listed companies
Mr K A Dundo
Mr K A Dundo
Non Executive Director
Directorships of other listed companies held by the Directors in the 3 years immediately before the end of the financial year are as
Non Executive Director
follows:
Non Executive Director
Non Executive Director
2006 – Current
2002 – Current
2006 – Current
2002 – Current
Computercorp Limited
Computercorp Limited
Intrepid Mines Ltd (formerly
Intrepid Mines Ltd (formerly
NuStar Mining Corp Ltd)
NuStar Mining Corp Ltd)
Name
Company
Position
Period of Directorship
Mr I F Burston
Mincor Resources NL
Aviva Corporation Ltd
Aztec Resources Ltd
Kansai Mining Corporation
Cape Lambert Iron Ore Ltd
Non Executive Director
Non Executive Director
Chairman and Chief Executive Officer
Non Executive Director
Non Executive Chairman
Mr R W Kelly
Clough Limited
Non Executive Director
2003 – Current
2003 – 2006
2004 – 2006
2006 – Current
2006 – Current
1996 – Current
Mr K A Dundo
Computercorp Limited
Intrepid Mines Ltd (formerly
NuStar Mining Corp Ltd)
Non Executive Director
Non Executive Director
2006 – Current
2002 – Current
Page 1 of 73
Page 1 of 73
2 0
Page 1 of 73
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
(c) Company Secretary
Mr P A Evans
Chartered Accountant aged 44. Mr Evans joined Imdex Limited on 17 October 2006. After leaving professional practice he worked in a
range of commercial and financial roles in the media, manufacturing and telecommunications industries. Mr Evans is a Member of the
Institute of Chartered Accountants in Australia.
(d) Directors’ Meetings
The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial
year and the number of meetings attended by each Director (while they were a Director or committee member). During the financial
year, six Board meetings, two Audit and Compliance Committee and two Remuneration Committee meetings were held.
Board of Directors
Audit and Compliance
Committee
Remuneration Committee
Held
Attended
Held
Attended
Held
Attended
6
6
1
6
6
4
4
6
6
-
6
4
3
3
2
-
-
2
2
-
-
2
-
-
2
2
-
-
2
-
-
2
2
-
-
2
-
-
2
2
-
-
I F Burston
B W Ridgeway
H H Al-Merry
R W Kelly
K A Dundo
I R Freeman
M Lemmel
(e) Directors’ Shareholdings
At the date of this report the Directors held the following interests in shares and options of the Company:
Directors
I F Burston
B W Ridgeway
R W Kelly
K A Dundo
M Lemmel
Shares Held
Directly
Shares Held
Indirectly
Options Held
Directly
-
-
260,000
1,000,000
3,500,000
2,000,000
143,200
121,800
-
300,000
200,000
200,000
-
-
-
At the date of this report, the options on issue by the Company are disclosed at (g) below and in Note 33.
Page 2 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
2 1
IMDEX LIMITED
and its controlled entities
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
The Directors of Imdex Limited (“Imdex” or “the Company”) present their report together with the annual Financial Report of the
Company and its Subsidiaries (“the Group”) for the financial year ended 30 June 2007.
In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows:
(f)
Remuneration Report
(a) Directors
Remuneration policy for Directors and Executives
The names and particulars of the Directors of the Company during or since the end of the financial year are:
The Board seeks the approval of Shareholders in relation to the aggregate of Non Executive Directors’ remuneration and any options
that may be granted to Directors. The remuneration for Non Executive Directors is reviewed from time to time, with due regard to current
IMDEX LIMITED
market rates. The cash remuneration of Non Executive Directors is not linked to the Company’s performance. Other than statutory
superannuation, no Non Executive Director is entitled to any additional benefits on retirement from the Company.
and its controlled entities
Independent, Non Executive Chairman
Mr I F Burston
Particulars
Name
Role
Age
72
Mechanical Engineer
Member of the Audit and Compliance &
Remuneration Committees
Director since November 2000
The Managing Director’s remuneration is determined by the Remuneration Committee with due regard to current market rates.
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
Managing Director
Mr B W Ridgeway
53
Chartered Accountant
Director since May 2000
Mr R W Kelly
Independent, Non Executive Director
In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows:
The Managing Director has a short term incentive bonus amounting to 20% of his cash compensation package. Of this bonus, 75% is
payable on achievement of the FY07 EBIT budget by Group companies and 25% on the purchase of Flexit AB prior to 30 June 2007.
The Remuneration Committee set these performance hurdles as the achievement of Group EBIT and purchase of Flexit AB are closely
linked to Imdex’s increased growth and profitability and hence shareholder value. The balance of his cash compensation package for
the current year is not linked to the Group’s performance.
Mr K A Dundo
The Directors of Imdex Limited (“Imdex” or “the Company”) present their report together with the annual Financial Report of the
Company and its Subsidiaries (“the Group”) for the financial year ended 30 June 2007.
Engineer
Member of the Audit and Compliance &
Remuneration Committees
Director since 14 January 2004
Lawyer
From time to time options may be issued to the Managing Director as an additional performance incentive. The portion of the Managing
Chairman of the Audit and Compliance &
Director’s compensation package that comprises options is linked to the Company’s performance. The issue of any such options
Remuneration Committees
Director since 14 January 2004
requires the approval of Shareholders in General Meeting. No such options were granted to the Managing Director in the current year.
Management Consultant
Director since 19 October 2006
All Executives, and all staff of the Company, are subject to formal annual reviews of their performance. The remuneration of Executives
Role
comprises a fixed monetary total, not linked to the performance of the Company, although bonuses related to the performance of the
Company may be agreed between that Executive and the Company from time to time. Refer table on page 5 for further details.
Mechanical Engineer
President of Rashid Trading Establishment
Member of the Audit and Compliance &
(involved in a Joint Venture with Imdex, known
All Executives are employed under permanent contracts, none of which provide for any termination payments. Mr G E Weston’s contract
Remuneration Committees
as the RTE/Imdex Joint Venture)
Director since November 2000
Director since April 2002
provides a 12 month notice period, Mr D J Loughlin’s a 3 month notice period, Mr S J Lyons’s a 2 month notice period and Mr P A
Office vacated 18 August 2006
Evans, Mr D L Kinley and Mr C S Munyard’s contracts provide for a 1 month notice period.
The names and particulars of the Directors of the Company during or since the end of the financial year are:
Independent, Non Executive Chairman
Independent, Non Executive Director
Independent, Non Executive Director
Non Executive Director
Mr H H Al-Merry
(a) Directors
Managing Director
Mr I F Burston
Mr M Lemmel
Particulars
Name
Age
55
69
53
68
45
72
Mr B W Ridgeway
Mr I R Freeman
Non Executive Director
The remuneration policy for the Managing Director is linked to the Company’s performance as an additional incentive to build
Engineer
shareholder value. The remuneration of Non Executive Directors is not linked to the Company’s performance except as noted below, in
Member of the Audit and Compliance &
order to preserve their independence. The increase in the net profits of the Company and hence the increase in shareholder value over
Remuneration Committees
the last five years is indicative of the success of this policy.
Director since 14 January 2004
Additional information on the Director’s experience and qualifications is set out under Director Profiles.
Independent, Non Executive Director
Mr R W Kelly
69
Chartered Accountant
Director since May 2000
65
Chemical Technology and Production Engineer
Director since 23 August 2005
Resigned 10 April 2007
Lawyer
Management of the Company believes that in order to retain quality Non Executive Directors on the Board, some incentive to maintain
Chairman of the Audit and Compliance &
their future involvement, commitment and loyalty to the Company, is required on certain occasions, over and above nominal Directors'
Remuneration Committees
fees.
Director since 14 January 2004
Directorships of other listed companies held by the Directors in the 3 years immediately before the end of the financial year are as
follows:
Mr K A Dundo
(b) Directorships of other listed companies
Independent, Non Executive Director
55
Name
Mr M Lemmel
Independent, Non Executive Director
Mr I F Burston
Mr H H Al-Merry
Management Consultant
Company
To this end, a total of 1,000,000 options were issued during the current year to Mr Ian Burston, a Non Executive Director, who has been
Director since 19 October 2006
a member of the Board of the Company (and Chairman) for 5 years. Management of the Company intends that these options will
2003 – Current
Non Executive Director
2003 – 2006
Non Executive Director
operate as an incentive for Mr Burston to assist in the future performance and growth of the Company. Management of the Company
President of Rashid Trading Establishment
2004 – 2006
Chairman and Chief Executive Officer
(involved in a Joint Venture with Imdex, known
acknowledge the valuable contribution that Mr Burston has made and is expected to make to the Company in the future.
2006 – Current
Non Executive Director
as the RTE/Imdex Joint Venture)
2006 – Current
Non Executive Chairman
Director since April 2002
The Company is mindful of the ASX Corporate Governance Council's (Principles of Good Corporate Governance and Best Practice
Office vacated 18 August 2006
Recommendations) recommendation that Non Executive Directors should not be remunerated via the issue of options. However as
Chemical Technology and Production Engineer
noted above, the Company regards the incentive created to Non Executive Directors by allowing them the opportunity to share in the
Director since 23 August 2005
growth of the Company via the issue of the Options (and thereby assist in the future performance and growth of the Company) to be
Resigned 10 April 2007
aligned to and consistent with long-term benefit to investors in achieving such growth. The issue of these options was approved by the
shareholders at the 2006 Annual General Meeting on 19 October 2006.
Mincor Resources NL
Aviva Corporation Ltd
Aztec Resources Ltd
Kansai Mining Corporation
Cape Lambert Iron Ore Ltd
Additional information on the Director’s experience and qualifications is set out under Director Profiles.
Computercorp Limited
Intrepid Mines Ltd (formerly
NuStar Mining Corp Ltd)
Non Executive Director
Non Executive Director
Mr R W Kelly
Mr I R Freeman
2006 – Current
2002 – Current
Period of Directorship
Non Executive Director
Non Executive Director
Non Executive Director
1996 – Current
Clough Limited
Mr K A Dundo
Position
68
45
65
(b) Directorships of other listed companies
Directorships of other listed companies held by the Directors in the 3 years immediately before the end of the financial year are as
follows:
Name
Company
Position
Period of Directorship
Mr I F Burston
Mincor Resources NL
Aviva Corporation Ltd
Aztec Resources Ltd
Kansai Mining Corporation
Cape Lambert Iron Ore Ltd
Non Executive Director
Non Executive Director
Chairman and Chief Executive Officer
Non Executive Director
Non Executive Chairman
Mr R W Kelly
Clough Limited
Non Executive Director
Mr K A Dundo
Computercorp Limited
Intrepid Mines Ltd (formerly
NuStar Mining Corp Ltd)
Non Executive Director
Non Executive Director
2003 – Current
2003 – 2006
2004 – 2006
2006 – Current
2006 – Current
1996 – Current
2006 – Current
2002 – Current
Page 1 of 73
Page 1 of 73
Page 3 of 73
2 2
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
Director and Executives details
The Directors of Imdex Limited during the year were:
(i)
(ii)
Mr I F Burston (Non Executive Chairman);
Mr B W Ridgeway (Managing Director);
(iii)
Mr R W Kelly (Non Executive Director);
(iv) Mr K A Dundo (Non Executive Director);
(v)
Mr M Lemmel (Non Executive Director), appointed 19 October 2006;
(vi) Mr H H Al-Merry (Non Executive Director), office vacated 18 August 2006; and
(vii) Mr I R Freeman (Non Executive Director), resigned 10 April 2007.
The Executives of Imdex Limited during the year were:
(i)
(ii)
(iii)
Mr G E Weston (Group General Manager);
Mr D J Loughlin (General Manager: Products and Services Division), appointed 1 September 2006;
Mr S J Lyons (Company Secretary), resigned 17 October 2006;
(iv) Mr P A Evans (Company Secretary and Chief Financial Officer), appointed 17 October 2006;
(v)
Mr D L Kinley (Group Financial Controller), ceased to be an executive 17 October 2006; and
(vi)
Mr C S Munyard (Manager: Surtron), ceased to be an executive 1 September 2006.
Elements of Director and Executive Remuneration
Remuneration packages contain the following key elements:
(i)
Short-term benefits – salary/fees, bonuses and non monetary benefits including motor vehicles and health benefits;
(ii)
Post-employment benefits – including superannuation and prescribed retirement benefits;
(iii) Equity – share options granted under the Staff Option Scheme (Note 33) or any other options granted as approved by
Shareholders in General Meeting; and
(iv) Other benefits.
Page 4 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
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3
2 4
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
Elements of remuneration related to performance
(i)
(ii)
(iii)
Managing Director: Of the cash remuneration package of the Managing Director, 20% is linked to the performance of the
Company by way of short term cash incentives. In addition options have been the long term method by which Imdex has sought
to reward key executives in a manner linked to the performance of the Company. Any such options to the Managing Director, or
any Director, require the approval by Shareholders in General Meeting.
Non Executive Directors: The remuneration of Non Executive Directors is not linked to the performance of the Company. The
maximum total remuneration payable to Non Executive Directors was approved by Shareholders at the 2006 Annual General
Meeting and is currently $500,000. In the current year remuneration to Non Executive Directors totalled $385,897, including
statutory superannuation. The Board determines the apportionment of directors’ fees between each Director.
Group Executives: The remuneration of specified Executives generally comprises a fixed monetary total that is not linked to the
performance of the Company. Bonuses related to the performance of the Company may, however, be agreed between that
Executive and the Company from time to time. In addition, subject to a qualifying period, Group Executives may be issued
options in the Staff Option Plan at the discretion of the Board. The percentage of the value of remuneration that consisted of
options for each Executive is set out below.
Value of options issued to Directors and Executives
The following table discloses the value of options granted, exercised or lapsed during the year:
Options
Granted (i)
Options
Exercised
Options
Lapsed
Value at grant
date
Value at
exercise date
Value at lapsing
date
Total value of
options
granted,
exercised and
lapsed
Value of
options
included in
remuneration
during the
year(ii)
Percentage of
remuneration
for the year
that consisted
of options
$
$
$
$
$
%
I F Burston
352,000
B W Ridgeway
G E Weston
-
-
D J Loughlin
279,500
S J Lyons (iii)
-
P A Evans (iv)
144,300
-
-
214,075
-
-
-
-
-
-
-
-
-
352,000
122,623
60%
-
214,075
-
-
279,500
56,935
-
-
144,300
29,394
-
-
24%
-
14%
(i)
(ii)
(iii)
(iv)
The total value of options granted during the year is calculated based on the fair value of the option at grant date multiplied by
the number of options issued during the year.
The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB 124
“Related Party Disclosures”.
Transactions applicable for the period 1 July 2006 to date of resignation on 17 October 2006.
Transactions applicable for the period 17 October 2006 to 30 June 2007.
Page 6 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
2 5
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
(g) Share options
(i)
Share options granted to Directors and Executives
During or since the end of the financial year an aggregate of 1,800,000 options were granted to the following directors and executives of
the Group.
Name
I F Burston
D J Loughlin
P A Evans
Number of
options granted
Issuing entity
Number of ordinary
shares under option
1,000,000
Imdex Limited
1,000,000
500,000
Imdex Limited
300,000
Imdex Limited
500,000
300,000
(ii)
Share options on issue at the date of this report
Details of unissued shares or interests under option are:
Issuing
Entity
Class of option
Class of
shares
Exercise
price of
option
Issue date of
option
Expiry date of
option
Key terms
of option
Number of
shares under
option
Imdex
Limited
Imdex
Limited
Imdex
Limited
Imdex
Limited
Imdex
Limited
Staff Share
Options
Staff Share
Options
Staff Share
Options
Staff Share
Options
Staff Share
Options
Imdex
Limited
Managing
Director Options
Imdex
Limited
Chairman’s
Options
Ordinary
180 cents
12 Jun 2007
11 Jun 2012
(aa)
675,000
Ordinary
100 cents
23 Feb 2007
22 Feb 2012
(aa)
4,350,000
Ordinary
75 cents
23 Feb 2007
22 Feb 2012
(aa)
700,000
Ordinary
35 cents
1 Feb 2006
31 Jan 2011
(aa)
2,154,905
Ordinary
20 cents
1 Aug 2004
31 Jul 2009
(aa)
2,067,167
Ordinary
30 cents
15 Sep 2005
14 Sep 2010
(bb)
2,000,000
Ordinary
75 cents
19 Oct 2006
18 Oct 2011
(bb)
1,000,000
(aa) exercisable one year after the date of issue, in one-third lots each year thereafter; and
(bb) exercisable at any point from 2 years after date of issue until expiry.
2 6
Page 7 of 73
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
(iii) Share options exercised during or since the end of the financial year
Issuing
Entity
Class of option
Class of
shares
Exercise
price of
option
Issue date of
option
Expiry date of
option
Number of
shares
issued
Ordinary
35 cents
1 Feb 2006
31 Jan 2011
463,428
Ordinary
20 cents
1 Aug 2004
31 Jul 2009
961,166
Ordinary
100 cents
23 Feb 2007
22 Feb 2012
75,000
Ordinary
20 cents
23 Dec 04
31 Jul 09
100,000
Ordinary
20 cents
23 Dec 04
31 Oct 07
2,000,000
Ordinary
35 cents
23 Dec 04
31 Oct 07
1,000,000
Imdex
Limited
Imdex
Limited
Imdex
Limited
Staff Share
Options
Staff Share
Options
Staff Share
Options
Imdex
Limited
Corporate
Advisors Options
Imdex
Limited
Corporate
Advisors Options
Imdex
Limited
Corporate
Advisors Options
(h) Principal Activities
The Group’s principal continuing activities during the course of the financial year were the manufacturing and sale of a range of drilling
products and services.
(i)
Review of Operations
A review of the operations for the financial year together with future prospects is contained in the Chairman’s Report, the Managing
Director’s Review and the Financial Report.
(j)
Dividends
A fully franked interim dividend of 1 cent per ordinary share was paid on 26 March 2007 to shareholders registered on 13 March 2007. A
fully franked final dividend of 1 cent per ordinary share was paid on 13 October 2006 to shareholders registered on 10 October 2006. In
the prior year a fully franked interim dividend of 1 cent per ordinary share was paid on 30 March 2006 to shareholders registered on 23
March 2006. Since 30 June 2007 the Directors have declared a fully franked final dividend of 1.5 cents per ordinary share, the financial
effect of which has not been reflected in the Financial Report.
(k) Changes in State Of Affairs
During the financial year the Group acquired three down hole tool survey businesses, Chardec Technology Ltd, the Reflex Group and
the Flexit Group.
Other than the above, there were no significant changes in the state of affairs of the Group.
Page 8 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
2 7
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
(l)
Subsequent Events
Effective 1 July 2007 Imdex Limited acquired 100% of the issued share capital of the Canadian based Poly-Drill Drilling Systems Ltd
(Poly-Drill) for a total of $3,500,000. The purchase price was settled by way of $1,750,000 cash and 1,212,751 fully paid ordinary shares
in Imdex Limited with a fair value of $1,750,000. The issue price of the Imdex shares was the weighted average share price on the 5
business days prior to 1 July 2007. The issued shares are under a voluntary escrow until 30 June 2008. Poly-Drill manufactures and
sells polymer drilling fluid based systems and solids control systems. Additional disclosures with respect to this acquisition are
impractical at this stage as the acquisition accounting is still being finalised.
Effective 1 July 2007, Imdex Limited acquired 75% of the issued share capital of Suay Energy Services LLP (Suay), a private company
incorporated in Kazakhstan. The purchase price was US$393,000 (A$450,000) payable in cash. Of this amount US$200,000
(A$230,000) was paid in May 2007 with the balance paid on settlement. Imdex Limited has the right to acquire the remaining 25%
interest at fair value. Suay supply drilling fluids and chemicals to the oil and gas industry in the Caspian Sea region. Additional
disclosures with respect to this acquisition are impractical at this stage as the acquisition accounting is still being finalised.
On 31 July 2007 Imdex Limited paid the next deferred settlement instalment of GBP 2,180,000 (A$5,373,000) due to the vendors of
Chardec Technology Limited.
On 3 August 2007, a Heads of Agreement was signed to acquire Southernland S.A., a drilling fluids and chemicals manufacturer and
distributor based in Santiago, Chile. The purchase price is US$2,550,000 (A$3,000,000), with 50% payable in cash on settlement and
50% to be paid in fully paid ordinary shares in Imdex Limited to be escrowed for two years from the date of settlement. The shares will
be issued at the weighted average closing price of the 5 days immediately prior to settlement. The proposed settlement date is 1
October 2007. The acquisition of Southernland S.A. provides the Imdex Group with manufacturing capability in Chile in order to access
the growing Central and Southern American markets. Additional disclosures with respect to this acquisition are impractical at this stage
as the due diligence process is still being finalised.
Subsequent to year end the Directors declared a 1.5 cent per share fully franked dividend with an entitlement date of 5 October 2007
and a payment date of 17 October 2007. The effect of this dividend has not been reflected in this financial report.
(m) Future Developments
Disclosure of information regarding likely developments in the operations of the Group in future financial years and the expected results
of those operations is likely to result in unreasonable prejudice to the Group. Accordingly, this information has not been disclosed in this
report.
(n) Environmental Regulations
The only entity in the Group that is subject to environmental regulations is Samchem Drilling Fluids and Chemicals (Pty) Ltd. They are
required to comply with the South African National Water Act, Act No 36 of 1998 which requires the management of effluent discharge.
This is controlled through an effluent pit system using an oil separator. No known environmental breaches have occurred in relation to
the Group’s operations.
(o) Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 6 to
the Financial Report.
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the
auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 6 to the financial statements do not compromise the external
auditor’s independence, based on advice received from the Audit and Compliance Committee, for the following reasons:
•
•
All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor, and
None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as
advocate for the Company or jointly sharing economic risks and rewards.
2 8
Page 9 of 73
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2007
(p) Auditor’s Independence Declaration
The auditor’s independence declaration is included on page 14 of the Annual Report.
(q)
Indemnification of Officers and Auditors
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company
Secretary, and all Executive Officers of the Company and of any related body corporate against a liability incurred as such a Director,
Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of
the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or
agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer
or auditor.
(r)
Rounding Off of Amounts
The Company is a Company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class
Order amounts in the Directors’ report and the financial report are rounded off to the nearest thousand dollars.
Signed in accordance with a resolution of the Directors made pursuant to S.298(2) of the Corporations Act 2001.
On behalf of the Directors
Mr I F Burston
Chairman
Mr Ian Burston
Chairman
PERTH, Western Australia, 15 August 2007.
Page 10 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
2 9
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
DX 206
Tel: +61 (0) 8 9365 7000
Fax: +61 (0) 8 9365 7001
www.deloitte.com.au
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
DX 206
Tel: +61 (0) 8 9365 7000
Fax: +61 (0) 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report
to the members of Imdex Limited
Independent Auditor’s Report
to the members of Imdex Limited
We have audited the accompanying financial report of Imdex Limited, which comprises the balance
sheet as at 30 June 2007, and the income statement, cash flow statement and statement of changes in
equity for the year ended on that date, a summary of significant accounting policies, other explanatory
notes 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 19 to
We have audited the accompanying financial report of Imdex Limited, which comprises the balance
sheet as at 30 June 2007, and the income statement, cash flow statement and statement of changes in
equity for the year ended on that date, a summary of significant accounting policies, other explanatory
notes 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 19 to
71.
38 to 90.
71.
Directors’ Responsibility for the Financial Report
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal control relevant to the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In
Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of
Financial Statements, that compliance with the Australian equivalents to International Financial
Reporting Standards ensures that the consolidated financial statements and notes, comply with
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal control relevant to the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In
Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of
Financial Statements, that compliance with the Australian equivalents to International Financial
Reporting Standards ensures that the consolidated financial statements and notes, comply with
International Financial Reporting Standards.
International Financial Reporting Standards.
Auditor’s Responsibility
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. These Auditing 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.
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. These Auditing 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 entity’s
preparation and fair presentation of the financial report 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 entity’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
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 entity’s
preparation and fair presentation of the financial report 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 entity’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.
evaluating the overall presentation of the financial report.
Liability limited by a scheme approved under Professional Standards Legislation.
3 0
Liability limited by a scheme approved under Professional Standards Legislation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s Opinion
In our opinion:
(a) the financial report of Imdex Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at
30 June 2007 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
(b) the consolidated financial statements and notes also comply with International Financial Reporting
Standards as disclosed in Note 2.
DELOITTE TOUCHE TOHMATSU
KEITH F JONES
Partner
Chartered Accountants
Perth, 15 August 2007
A N N U A L R E P O R T 2 0 0 7 IMDEX
3 1
IMDEX LIMITED
and its controlled entities
DIRECTORS’ DECLARATION
The Directors declare that:
(a)
(b)
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;
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
Company and the Group; and
(c)
the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the
deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in
accordance with the deed of cross guarantee.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order
applies, as detailed in note 25 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are,
or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the Directors made pursuant to s.295(5) for the Corporations Act 2001.
Dated at Perth, 15 August 2007.
Ian F Burston
Chairman
3 2
Page 13 of 73
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
DX 206
Tel: +61 (0) 8 9365 7000
Fax: +61 (0) 8 9365 7001
www.deloitte.com.au
The Board of Directors
Imdex Limited
Level 1, 15 Rehola Street
WEST PERTH WA 6005
15 August 2007
Dear Board Members
Imdex 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 Imdex Limited.
As lead audit partner for the audit of the financial statements of Imdex Limited for the
financial year ended 30 June 2007, 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 faithfully
DELOITTE TOUCHE TOHMATSU
KEITH F JONES
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
IMDEX LIMITED
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
(a) ASX Governance Principles and ASX Recommendations
The Australian Stock Exchange Corporate Governance Council sets out best practice recommendations, including corporate
governance practices and suggested disclosures. ASX Listing Rule 4.10.3 requires companies to disclose the extent to which they
have complied with the ASX recommendations and to give reasons for not following them.
Unless otherwise indicated the best practice recommendations of the ASX Corporate Governance Council, including corporate
governance practices and suggested disclosures, have been adopted by the Company for the full year ended 30 June 2007. In addition,
the Company has a Corporate Governance section on its website: www.imdex.com.au (under the “Investor” heading) which includes the
relevant documentation suggested by the ASX Recommendations.
The extent to which Imdex has complied with the ASX Recommendations during the year ended 30 June 2007, and the main corporate
governance practices in place are set out below.
(b) Principle 1: Lay solid foundation for management and oversight
The Board has implemented a Board Charter that formalises the functions and responsibilities of the Board. The Charter is published
on the Company’s website.
(c) Principle 2: Structure the Board to add value
Imdex’s Board structure is consistent with the ASX Recommendations on Principle 2, with the exception that it does not have a separate
nomination committee for the reasons detailed below.
(i) Board Structure
The Board consists of a Non Executive Chairman, three Non Executive Directors and one Executive Director. Of the five Board
members, four are considered independent.
In accordance with the Company’s Constitution the minimum number of Directors is three. There is no maximum number, although it
would be expected that the optimal number of Directors would be five or six.
The names of the Directors of the Company in office at the date of this Statement are set out in the Directors’ Report and further details
concerning the skills, experience, expertise and term of office of each Director is set out in the Director’s Profiles in the first section of
the Annual Report.
(ii) Board Independence
Directors are expected to bring independent judgement to bear in the decision making of the Board. To facilitate this, each Director has
the right to seek independent legal advice at the Group’s expense with the prior approval of the Chairman, which may not be
unreasonably withheld.
In assessing Director independence, materiality has been determined from both a quantitative and qualitative perspective. An amount
of over 5% of turnover is considered material. Similarly, a transaction of any amount, or a relationship, is deemed material if knowledge
of it impacts, or may impact, the Shareholders’ understanding of the Director’s performance. The Board has conducted a review of each
Director’s independence and reports as follows:
Director
Mr I F Burston,
Non Executive Chairman
Mr B W Ridgeway,
Managing Director
Mr R W Kelly,
Non Executive Director
Mr K A Dundo,
Non Executive Director
Mr M Lemmel,
Non Executive Director
(iii) Board Nomination
Assessment
Existence of any matters contained in
ASX Recommendation 2.1 affecting Independence
Independent
Nil
Not Independent
Managing Director
Independent
Independent
Independent
Nil
Nil
Nil
The Board does not have a separate nomination committee and, given the Company’s size, does not intend to form such a committee.
However, the composition of the Board is determined using the following principles:
•
•
The Board should comprise a majority of independent, Non Executive Directors with a broad range of experience, skills and
expertise;
The Chairman of the Board should be an independent, Non Executive Director; and
Page 15 of 73
3 4
IMDEX LIMITED
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
•
The roles of the Chairman and the Managing Director should not be exercised by the same individual.
(iv) Procedure for the selection and appointment of new Directors to the Board
The Company has published on its website, procedures for the selection and appointment of new Directors to the Board. The Company
also has terms and conditions which govern the appointment of Non Executive Directors. These are subject to the Company’s
Constitution and the Corporations Act 2001, and cover: appointment, retirement, Corporate Governance, remuneration, Board meetings,
and Board Committees.
The Board does not impose on Directors an arbitrary time limit on their tenure. Under the Company’s Constitution and the ASX Listing
Rules however, each Director must retire by rotation within a three year period following their appointment. In such cases, the Director’s
nomination for re-election should be based on performance and the needs of the Company.
(d) Principle 3: Promote ethical and responsible decision-making
(i) Code of Conduct
The Company has developed a Code of Conduct that applies to all employees, officers and Directors of the Company. The Code
addresses matters relevant to the Company’s legal and other obligations to its Shareholders and covers: the way in which we must
discharge our duties; compliance with laws; conflicts of interest; confidentiality; insider trading; the use of the Company’s resources and
the environment, health and safety.
The Code is published on the Company’s website.
(ii) Share Trading Policy
The Board has developed a Share Trading Policy that restricts Directors and Senior Management to trading in the Company’s shares
during the one month periods following the annual and half yearly results announcements and the Annual General Meeting.
At all other times the Chairman must be approached, prior to trading, to determine whether trading at that particular time is appropriate.
The Policy also reminds other staff of the laws applying to insider trading and stipulates that employees must not engage in short term
trading of Imdex’s shares.
Each of the Directors has signed an agreement requiring them to provide immediate notification to the Company of any changes in
securities held, or controlled, by the Director. The Company makes an immediate notification to the ASX providing details of any
changes in a Director’s shareholding.
The Policy is published on the Company’s website.
(e) Principle 4: Safeguard integrity in financial reporting
(i) Statement by the Managing Director and Chief Financial Officer
The Managing Director and the Chief Financial Officer have signed a declaration to the Board attesting to the fact that the 2007 Annual
Financial Report presents a true and fair view, in all material respects, of the Company’s financial condition and operational results and
are in accordance with relevant accounting standards.
(ii) The Audit and Compliance Committee
The Audit and Compliance Committee consists of three independent Non Executive Directors and operates under a formal charter
approved by the Board. The Charter is published on the Company’s website.
The Committee is chaired by an independent Chairperson who is not the Chairman of the Board of Directors.
The role of the Committee is to advise on the establishment and maintenance of a framework of internal control, risk management
protocols and appropriate ethical standards for the management of the Company. It also gives the Board assurance regarding the
quality and reliability of financial information prepared for use by the Board in determining policies for inclusion in Financial Statements.
The members of the Audit Committee during the year and at the date of this Statement were:
Mr K A Dundo (Chairman);
Mr I F Burston; and,
Mr R W Kelly.
The experience and qualifications of each committee member is set out in the Directors’ Profiles in the first section of the Annual Report.
The Company Secretary acts as secretary of this Committee.
The external auditors, the Managing Director and the Chief Financial Officer are invited to Audit Committee meetings at the discretion of
the Committee. The Audit Committee met twice during the year as set out in the Directors’ Report.
Page 16 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
3 5
IMDEX LIMITED
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
(iii) External Auditors
The Board reviews the performance, skills, cost and other matters when assessing the appointment of external auditors. This review is
generally undertaken at the completion of the preparation of the Annual Financial Report and involves discussions with the auditors and
the Group's senior management. Information concerning the selection and appointment of external auditors is published on the
Company’s website.
The external auditors are invited to attend the Annual General Meeting of the Company and to be available to answer questions from
Shareholders.
(f) Principle 5: Make timely and balanced disclosure
(i) Continuous disclosure policies and procedures
The Company has developed procedures to ensure that it complies with the disclosure requirements of the ASX Listing Rules. The
procedures are published on the Company’s website.
The procedures set out who is responsible for determining whether information is of a type or nature that requires disclosure, the Boards
role in reviewing the information disclosed to ASX and the procedures for ensuring that the information is released to ASX.
All information disclosed to the ASX is published on the Company’s website as soon as practicable.
(g) Principle 6: Respect the rights of Shareholders
Shareholders Communications Strategy: The Board aims to ensure that Shareholders are informed of all major developments affecting
the Group 's state of affairs. Information is communicated to Shareholders through:
(i) the Annual Report distributed to all Shareholders (unless a Shareholder has specifically requested not to receive the Report). The
Board ensures that the Annual Report includes relevant information about the operations of the Group during the year, changes in the
state of affairs of the Group and details of future developments, in addition to the other disclosures required by the Corporations Act
2001;
(ii) the Half-Yearly Report which contains summarised financial information and a review of the operations of the Group during the
period. Half-Year Financial Report prepared in accordance with the requirements of Accounting Standards and the Corporations Act
2001 are lodged with the Australian Securities & Investments Commission and the Australian Stock Exchange. The Half-Year Financial
Report is sent to any Shareholder who requests them;
(iii) regular reports released through the ASX and the media;
(iv) proposed major changes in the Group, which may impact on share ownership rights are submitted to a vote of Shareholders; and
(v) the Board encourages full participation by Shareholders at the Annual General Meeting to ensure a high level of accountability and
identification with the Group 's strategy and goals. Important issues are presented to the Shareholders as single resolutions. The
Shareholders are responsible for voting on the re-appointment of Non Executive Directors.
Further information concerning the Company and the full text of the various announcements and reports referred to above are available
on the Company’s website: www.imdex.com.au. Further information can also be obtained by emailing the Company at:
imdex@imdex.com.au and Shareholders may register on the Company’s website to receive automatic notification of ASX
announcements.
The auditor is also invited to the Company’s Annual General Meetings and is available to answer Shareholders questions concerning
the conduct of the audit.
The Company’s Shareholder Communications Strategy is published on the Company’s website.
(h) Principle 7: Recognise and manage risk
(i) Risk oversight and management policies
The Board has sought to minimise the business' risks by focusing on the Company's core business, making changes as outlined in the
Chairman’s Report and the Managing Director’s Report. The Board is responsible for ensuring that the Company’s risk management
systems are adequate and operating effectively.
The Company does not have a separate internal audit function and, given the Company’s size, the Board does not intend to implement
such a function.
The Board believes that through the Board itself, the Audit Committee and the external auditors there is adequate oversight of the
Company’s risk management and internal controls.
The risk management policy is published on the Company’s website.
Page 17 of 73
3 6
IMDEX LIMITED
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
(ii) Statement by the Managing Director and Chief Financial Officer
The Managing Director and the Chief Financial Officer have signed a declaration to the Board attesting to the fact that the integrity of
Financial Reports are founded on a sound system of risk management and internal compliance and control which implements the
policies adopted by the Board, and that the system is operating efficiently and effectively in all material respects.
(i) Principle 8: Encourage enhanced performance
(i) Performance evaluation of the Board, its Committees, individual Directors and key executives
There is an informal process in place to enable the Chairman to discuss and evaluate with each Director their contribution to the Board
and to enable that Director to comment on all facets of the operation of the Board. A formal performance evaluation of the Board was
not conducted during the year.
Given the Company’s size, the Board considers that this process is adequate and does not envisage forming a Nomination Committee
to perform this function or to formalise the performance evaluation process.
All other Executives, and all staff of the Company, are subject to formal annual reviews of their performance as set out in the Directors’
Report.
The description of the process for performance evaluation is published on the Company’s website.
(j) Principle 9: Remunerate fairly and responsibly
(i) Company’s remuneration policies
Details on the remuneration of Directors and Executives are set out in Note 32. The Company’s remuneration policies are set out in the
Remuneration Report contained in the Directors Report.
(ii) Remuneration Committee
The Remuneration Committee consists of three Non Executive Directors and assists the Board in determining executive remuneration
policy, determining the remuneration of Executive Directors and reviewing and approving the remuneration of senior management.
The members of the Committee during the year and at the date of this Statement were:
Mr R W Kelly (Chairman);
Mr I F Burston; and,
Mr K A Dundo.
The experience and qualifications of each committee member is set out in the Directors’ Profiles in the first section of the Annual Report.
The Remuneration Committee Charter is published on the Company’s website.
(iii) Non Executive Director’s remuneration
The terms and conditions governing the remuneration of Non Executive Director’s are set out in their appointment letter.
All Non Executive Directors are remunerated by way of fixed cash fees. Non Executive Directors are not provided with retirement
benefits other than statutory superannuation. The maximum total remuneration payable to Non Executive Directors was approved by
Shareholders at the 2006 Annual General Meeting and is currently $500,000.
(k) Principle 10: Recognise the legitimate interests of stakeholders
(i) Code of Conduct
As set out in Principle 3 above, the Company has developed and published to its website a Code of Conduct.
Page 18 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
3 7
IMDEX LIMITED
and its controlled entities
INCOME STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007
Consolidated
Company
Year Ended Year Ended Year Ended Year Ended
30 June 2007 30 June 2006 30 June 2007 30 June 2006
Notes
$’000
$’000
$’000
$’000
Revenue from sale of goods, rendering of services and operating
lease rental
Other revenue from operations
Total revenue
Other income
Share of losses of associates accounted for using the equity
method
Raw materials and consumables used
Employee benefit expense
Depreciation expense
Amortisation expense
Finance costs
Change in fair value of investments held for trading
Impairment adjustment
Other expenses
Profit before income tax expense
Income tax expense
4
4
4
4
4
4
4
9(i)
4
4
5
118,440
900
119,340
1,597
-
(53,618)
(16,092)
(4,368)
(3,430)
(2,886)
-
-
(20,131)
20,412
66,614
178
66,792
76
(301)
(32,776)
(11,086)
(2,431)
-
(216)
4,500
(2,275)
(10,419)
11,864
22,503
2,849
25,352
8,084
-
(7,202)
(3,646)
(2,269)
-
(1,543)
-
-
(5,691)
13,085
11,379
82
11,461
1,402
-
(4,415)
(2,179)
(1,268)
-
(40)
4,199
(3,460)
(3,193)
2,507
(6,894)
(3,880)
(3,219)
(1,329)
Profit attributable to ordinary equity holders of Imdex Limited
13,518
7,984
9,866
1,178
Earnings per share:
Basic earnings per share (cents)
Diluted earnings per share (cents)
20
20
8.74
8.00
6.07
5.95
The Income Statement should be read in conjunction with the accompanying notes.
3 8
Page 19 of 73
IMDEX LIMITED
and its controlled entities
BALANCE SHEET
AS AT 30 JUNE 2007
Current Assets
Cash and Cash Equivalents
Trade and Other Receivables
Inventories
Other Financial Assets
Other
Non Current Assets classified as held for sale
Total Current Assets
Non Current Assets
Other Financial Assets
Property, Plant and Equipment
Goodwill
Other Intangible Assets
Other
Total Non Current Assets
Total Assets
Current Liabilities
Trade and Other Payables
Borrowings
Current Tax Payables
Provisions
Total Current Liabilities
Non Current Liabilities
Borrowings
Deferred Tax Liabilities
Provisions
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Capital
Foreign Currency Translation Reserve
Employee Equity-Settled Benefits Reserve
Retained Profits/(Accumulated Losses)
Total Equity
Consolidated
Company
30 June 2007 30 June 2006 30 June 2007 30 June 2006
Notes
$’000
$’000
$’000
$’000
30
7
8
9
10
11
9
12
13
14
10
15
16
5
17
16
5
17
18
19
19
15,271
27,806
13,839
11,556
224
68,696
4,500
73,196
-
13,207
35,033
27,746
664
76,650
149,846
16,741
11,881
8,913
1,212
38,747
28,556
5,481
448
34,485
73,232
76,614
60,982
(2,137)
751
17,018
76,614
6,421
18,798
9,707
4,500
12
39,438
-
39,438
-
9,967
1,906
1,313
124
13,310
52,748
13,629
1,391
2,058
830
17,908
1,503
458
226
2,187
20,095
32,653
26,490
(494)
105
6,552
32,653
962
10,213
2,085
12,176
49
25,485
4,500
29,985
43,339
4,886
-
429
664
49,318
79,303
5,570
2,685
5,450
265
13,970
10,064
796
116
10,976
24,946
54,357
60,982
-
751
(7,376)
54,357
2,003
3,153
1,081
6,849
4
13,090
-
13,090
2,172
4,088
-
-
124
6,384
19,474
3,111
498
1,973
189
5,771
220
1,038
40
1,298
7,069
12,405
26,490
-
105
(14,190)
12,405
The Balance Sheet should be read in conjunction with the accompanying notes.
Page 20 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
3 9
IMDEX LIMITED
and its controlled entities
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007
CONSOLIDATED
Notes
$'000
$'000
$'000
$'000
$'000
Contributed Capital
Ordinary
Shares
Mandatory
Convertible
Capital
Foreign
Currency
Translation
Reserve
Employee
Equity-
Settled
Benefits
Reserve
Retained
Earnings /
(Accumulated
Losses)
Total
Attributable to
Equity
Holders of the
Entity
$'000
Balance at 1 July 2005
Exchange differences on translation of foreign
operations after taxation
Net income recognised directly in equity
Profit for the period
Total recognised income and expense for the
period
Dividend paid
Share based payments
Issue of shares as part consideration for the
acquisition of Samchem
Issue of equity securities for working capital
Share issue costs (net of tax)
Issue of shares under staff option plan
Balance at 30 June 2006
Exchange differences on translation of foreign
operations after taxation
Net income recognised directly in equity
Profit for the period
Total recognised income and expense for the
period
Dividend paid
Share based payments
Issue of equity securities for working capital
Issue of equity securties on conversion of debt
Issue of equity securities on purchase of entity
Share issue costs (net of tax)
Issue of shares under staff option plan
Deferred consideration - mandatory convertible
capital
Balance at 30 June 2007
COMPANY
Balance at 1 July 2005
Profit for the period
Total recognised income and expense for the
period
Dividend paid
Share based payments
Issue of shares as part consideration for the
acquisition of Samchem
Issue of equity securities for working capital
Share issue costs (net of tax)
Issue of shares under staff option plan
Balance at 30 June 2006
Profit for the period
Total recognised income and expense for the
period
Dividend paid
Share based payments
Issue of equity securities for working capital
Issue of equity securities on conversion of debt
Issue of equity securities on purchase of entity
Share issue costs (net of tax)
Issue of shares under staff option plan
Deferred consideration - mandatory convertible
capital
Balance at 30 June 2007
19
19
18
18
18
18
19
19
18
18
18
18
18
18
19
18
18
18
18
19
18
18
18
18
18
18
19,008
-
-
-
-
-
-
3,592
3,990
(111)
11
26,490
-
-
-
-
-
-
16,500
10,400
200
(510)
1,202
-
54,282
19,008
-
-
-
-
3,592
3,990
(111)
11
26,490
-
-
-
-
16,500
10,400
200
(510)
1,202
-
54,282
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(494)
(494)
-
-
-
-
-
-
-
-
(494)
(1,643)
(1,643)
-
-
-
-
-
-
-
-
-
6,700
6,700
-
(2,137)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,700
6,700
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
48
-
-
-
-
-
59
-
-
-
(2)
105
-
-
-
-
-
728
-
-
-
-
(82)
-
751
48
-
-
-
59
-
-
-
(2)
105
-
-
-
728
-
-
-
-
(82)
-
751
(36)
19,020
-
-
7,984
7,984
(1,396)
-
-
-
-
-
6,552
-
-
13,518
13,518
(3,052)
-
-
-
-
-
-
-
17,018
(13,972)
1,178
1,178
(1,396)
-
-
-
-
-
(14,190)
9,866
9,866
(3,052)
-
-
-
-
-
-
-
(7,376)
(494)
(494)
7,984
7,984
(1,396)
59
3,592
3,990
(111)
9
32,653
(1,643)
(1,643)
13,518
13,518
(3,052)
728
16,500
10,400
200
(510)
1,120
6,700
76,614
5,084
1,178
1,178
(1,396)
59
3,592
3,990
(111)
9
12,405
9,866
9,866
(3,052)
728
16,500
10,400
200
(510)
1,120
6,700
54,357
Page 21 of 73
4 0
IMDEX LIMITED
and its controlled entities
CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007
Consolidated
Company
Year Ended Year Ended Year Ended Year Ended
30 June 2007 30 June 2006 30 June 2007 30 June 2006
Notes
$’000
$’000
$’000
$’000
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Intercompany management fees received
Intercompany dividend received
Interest and other costs of finance paid
Income tax paid
Net cash provided by Operating Activities
Cash Flows From Investing Activities
Interest and bill discounts received
Payment for property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from Rashid Trading Establishment
Proceeds from sale of Imdex Minerals
Payment for development costs capitalised
Payment for shares of Flexit net of cash acquired
Payment for shares of Reflex net of cash acquired
Payment for shares of Chardec net of cash acquired
Payment for the acquisition of patent
Payment for the acquisition of the business of Samchem
Amounts advanced to Sino Gas & Energy Ltd
Amounts repaid by Sino Gas & Energy Ltd
Payment of deferred acquisition costs
Net cash provided by / (used in) Investing Activities
Cash Flows From Financing Activities
Advances from / (to) Controlled Entities
Proceeds from issue of equity securities
Payment for share issue costs
Cash received on exercise of options
Dividend paid
Hire purchase and lease payments
Proceeds from borrowings
Repayment of borrowings
Net cash provided by/(used in) Financing Activities
Net Increase / (Decrease) in Cash and Cash Equivalents
Held
Cash and Cash Equivalents At The Beginning Of The Financial
Year
Effects of exchange rate changes on the balance of cash and
cash equivalents held in foreign currencies
Cash and Cash Equivalents At The End Of The Financial
Year
30(c)
28
14
26(a)
26(b)
26(c)
26(d)
18
18
21
30(a)
128,311
(105,288)
-
-
(1,490)
(5,392)
16,141
267
(5,733)
710
1,121
-
(429)
(10,274)
(15,194)
(6,352)
(328)
-
(11,307)
200
(540)
(47,859)
-
16,500
(729)
1,120
(3,052)
(1,801)
33,890
(5,700)
40,228
67,509
(55,633)
-
-
(6)
(1,796)
10,074
97
(5,295)
652
928
6,271
-
-
-
-
-
(3,011)
-
-
(350)
(708)
-
3,990
(112)
10
(1,396)
(1,507)
-
(3,625)
(2,640)
18,124
(12,701)
1,363
3,000
(1,022)
(3,241)
5,523
217
(3,358)
2,886
1,121
-
(429)
-
-
-
(328)
-
(11,307)
200
(540)
(11,538)
(20,444)
16,500
(729)
1,120
(3,052)
(721)
18,000
(5,700)
4,974
10,568
(10,207)
1,020
344
-
-
1,725
82
(2,847)
122
928
6,271
-
-
-
-
-
(3,011)
-
-
(350)
1,195
2,435
3,990
(112)
10
(1,396)
(506)
-
(3,625)
796
8,510
6,726
(1,041)
3,716
6,421
340
(364)
59
2,003
(1,713)
-
962
-
2,003
30(a)
15,271
6,421
The Cash Flow Statement should be read in conjunction with the accompanying notes.
Page 22 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
4 1
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
1
Adoption of New and Revised Accounting Standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. The adoption of
these new and revised Standards and Interpretations has resulted in a change to the Group’s accounting policies in the following areas:
•
•
•
Investments classified as at fair value through profit or loss (AASB 2005-04 ‘Amendments to Australian Accounting
Standards’);
Accounting for business combinations involving entities or businesses under common control (AASB 2005-6 ‘Amendments
to Australian Accounting Standards’); and
Accounting for financial guarantee contracts (AASB 2005-9 ‘Amendments to Australian Accounting Standards’).
At the date of authorisation of the financial report, the following Standards and Interpretations were in issue but not yet effective:
Standard / Interpretation
Effective Date
AASB 7 ‘Financial Instruments: Disclosures’ and consequential amendments to
other accounting standards resulting from its issue
Effective for annual reporting periods beginning
on or after 1 January 2007
AASB 101 ‘Presentation of Financial Statements’ – revised standard
Interpretation 10 ‘Interim Financial Reporting and Impairment’
Effective for annual reporting periods beginning
on or after 1 January 2007
Effective for annual reporting periods beginning
on or after 1 November 2006.
AASB 8 ‘Operating Segments’ and consequential amendments to other
accounting standards resulting from its issue
Effective for annual reporting periods beginning
on or after 1 January 2009
AASB 123 ‘Borrowing Costs’ revised
Effective for annual reporting periods beginning
on or after 1 January 2009
AASB 2007-4 ‘Amendments to Australian Accounting Standards arising from ED
151 and Other Amendments’
Effective for annual reporting periods beginning
on or after 1 July 2007
AASB 2007-7 ‘Amendments to Australian Accounting Standards - June 2007’
Interpretation 11 ‘AASB 2 – Group and Treasury Share Transactions’
Interpretation 12 ‘Service Concession Arrangements’
Interpretation 13 ‘Customer Loyalty Programmes’
Effective for annual reporting periods beginning
on or after 1 July 2007
Effective for annual reporting periods beginning
on or after 1 March 2007
Effective for annual reporting periods beginning
on or after 1 January 2008
Effective for annual reporting periods beginning
on or after 1 July 2008
Interpretation 14 ‘Limit on a defined benefit asset, Minimum Funding
Requirements and their Interaction’
Effective for annual reporting periods beginning
on or after 1 January 2008
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact
on the financial statements of the Company or the Group.
The circumstances addressed by Interpretation 10, which prohibits the reversal of certain impairment losses, does not affect either the
Company’s or the Group’s previously reported results and accordingly, there will be no impact to these financial statements on adoption
of the Interpretation.
The application of AASB 101 (revised), AASB 7, AASB 8, AASB 123, AASB 2007-4, AASB 2007-7 and Interpretation 11 are not
expected to have a material effect on any of the amounts recognised in the financial statements, but may change the disclosures
presently made in relation to the Company’s and the Group’s assets, liabilities, segments, financial instruments and the objectives,
policies and processes for managing capital.
The circumstances addressed by Interpretations 12, 13 and 14 do not have application to the business of the Company or Group.
These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual reporting period
beginning after the effective date of each pronouncement.
4 2
Page 23 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
1
Adoption of New and Revised Accounting Standards (continued)
Limitation of ability to designate financial assets and financial liabilities through profit or loss
The Australian Accounting Standards Board released AASB 2005-4 “Amendments to Australian Accounting Standards” in June 2005.
AASB 2005-4 amends AASB 139 “Financial Instruments: Recognition and Measurement” by limiting the ability of entities to designate
any financial asset or financial liability as ‘at fair value through profit or loss’.
Financial assets that can no longer be designated as ‘at fair value through profit or loss’ shall be classified into either loans and
receivables, held-to-maturity investments or available-for-sale investments, as appropriate, and measured at amortised cost or at fair
value with changes in fair value recognised in equity, depending on classification. Financial liabilities that can no longer be designated
as ‘at fair value through profit or loss’ shall be classified as ‘other’ financial liabilities and measured at amortised cost. Although ordinarily
the designation of a financial asset as available-for-sale is made on initial recognition, the transitional provisions of the standard allow
such designation to be made on the date of de-designation (1 July 2005).
The changes introduced by AASB 2005-4 are applied by the Group with effect from the beginning of the comparative reporting period
presented in this financial report (i.e. with effect from 1 July 2005). Financial assets and financial liabilities designated by the Group as
‘at fair value through profit or loss’ continue to meet the revised designation rules and accordingly, the application of these amendments
has no impact on the financial statements.
Accounting for business combinations involving entities or businesses under common control
The AASB released AASB 2005-6 ‘Amendments to Australian Accounting Standards’ in June 2006. AASB 2005-6 amends AASB 3
‘Business Combinations’ by removing business combinations involving entities or businesses under common control from its scope. The
effect of the scope amendment is that there is no longer any explicit guidance under Accounting Standards as to how to account for
these types of business combinations.
Due to the requirements of AASB 1 ‘First-Time Adoption of the Australian Equivalents to International Financial Reporting Standards’
permitting the non-restatement of pre-transition business combinations, the amendments has no effect on the financial statements of the
Company or Group for the current or prior reporting periods,. However, future transactions involving entities under common control will
be affected. Details of the entity’s accounting policies in relation to common control transactions are outlined in note 2(h).
Accounting for financial guarantee contracts
The AASB released AASB 2005-9 ‘Amendments to Australian Accounting Standards’ in September 2005. AASB 2005-9 amends AASB
139 ‘Financial Instruments: Recognition and Measurement’ to require certain financial guarantee contracts to be recognised in
accordance with AASB 139 and measured initially at their fair values, and subsequently measured at the higher of the amount
recognised as a provision and the amount initially recognised less cumulative amortisation in accordance with the revenue recognition
policies described in note 2(q).
The changes introduced by AASB 2005-9 are applied by the Group with effect from the beginning of the comparative reporting period
presented in this financial report (i.e. with effect from 1 July 2005). The Company is party to a deed of cross guarantee with other
entities in the Group. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees, to
each creditor, payment in full of any debt in accordance with the deed of cross guarantee.
The application of these amendments results in such financial guarantees now being recognised and measured at the higher of the best
estimate of the expenditure required to settle the obligation and the amount initially recognised less, where appropriate, accumulated
amortisation.
No material adjustment is required in the separate financial statements of the Company to recognise the financial guarantee liability
associated with its exposure under the deed of cross guarantee.
Page 24 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
4 3
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2 Summary of Significant Accounting Policies
The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001 and
Accounting Standards and interpretations and complies with other requirements of the law. Accounting Standards include Australian
equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with the A-IFRS ensures that the consolidated
financial statements and notes of the Group comply with International Financial Reporting Standards (‘IFRS’). The parent entity financial
statements and notes also comply with IFRS except for the disclosures requirements in IAS 32 Financial Instruments: Disclosure and
Presentation as the Australian equivalent Accounting Standard, AASB 132 Financial Instruments: Disclosure and Presentation does not
require such disclosures to be presented by the parent entity where its separate financial statements are presented together with the
consolidated financial statements of the group.
The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.
The financial statements were authorised for issue by the directors on 15 August 2007.
(a)
Basis of preparation
The Financial Report has been prepared on the basis of historical cost except for the revaluation of certain non-current assets and
financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in
Australian dollars, unless otherwise noted.
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class
Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.
In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets
and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of
making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgments made by management in the application of A-IFRS that have significant effects on the financial statements and estimates
with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial
statements.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of
relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
The following significant accounting policies have been adopted in the preparation and presentation of the Financial Report:
(b)
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding
bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(c)
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
(i)
(ii)
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows
are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing
activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
(d)
Goodwill
Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination
over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Goodwill is
subsequently measured at its cost less any impairment losses.
For the purpose of impairment testing goodwill is allocated to each of the Group’s cash-generating units (CGU’s), or groups of CGU’s,
expected to benefit from the synergies of the business combination. CGU’s (or groups of CGU’s) to which goodwill has been allocated
are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.
If the recoverable amount of the CGU (or group of CGU’s) is less than the carrying amount of the CGU (or groups of CGU’s), the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or groups of CGU’s) and then to
the other assets of the CGU (or groups of CGU’s) pro-rata on the basis of the carrying amount of each asset in the CGU (or groups of
CGU’s). An impairment loss recognised for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent
period
On disposal of an operation within a CGU, the attributable amount of goodwill is included in the determination of the profit or loss on
disposal of the operation.
Page 25 of 73
4 4
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
Summary of Significant Accounting Policies (continued)
(e)
Inventories
Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable
overhead expenses, are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the
majority being valued on a first in first out basis. Net realisable value represents the estimated selling price less all estimated costs of
completion and costs necessary to make the sale.
(f)
Property, plant and equipment
Plant and equipment, leasehold improvements and equipment under finance lease are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part
of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as
at the date of acquisition.
Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated
residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter,
using the straight line method. The estimated useful lives, residual values and depreciation method is reviewed at the end of each
annual reporting period, with the effect of any changes recognised on a prospective basis.
The annual depreciation rates used for each class of assets are as follows:
Plant and equipment:
10% to 40%
Equipment rented to third parties:
10% to 40%
Equipment under finance lease:
13% to 22.5%
(g)
Share-based payments
Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity
instrument at the grant date. Fair value is measured by the use of the Black-Scholes Model. The expected life used in the model has
been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural
considerations. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in
note 33.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of shares that will eventually vest.
(h)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its
subsidiaries) (referred to as ‘the Group’ in these financial statements). Control is achieved where the Company has the power to govern
the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective
date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those
used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Page 26 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
4 5
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(i)
Summary of Significant Accounting Policies (continued)
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is
measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business
Combinations’ are recognised at their fair values at the acquisition date, except for non-current 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’, which are
recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If,
after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities
exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
(j)
Borrowing costs
Borrowing costs are expensed as incurred.
(k)
Foreign currency
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the
entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of
each entity are expressed in Australian dollars, which is the functional currency of the Group, and the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair
value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary
items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the
net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or
loss on disposal of the net investment.
On consolidation, the assets and liabilities of the Group’s foreign operations (including comparatives) are translated into Australian
dollars at exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at
the average exchanges rates for the period, unless exchange rates fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to
the Group’s translation reserve. Such exchange differences are recognised in profit or loss in the period in which the foreign operation is
disposed.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are treated
as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date. Goodwill arising on
acquisitions before the date of transition to A-IFRS is treated as an Australian dollar denominated asset.
(l)
Financial assets
Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms
require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net
of transaction costs.
Subsequent to initial recognition, investments in subsidiaries are measured at cost. Subsequent to initial recognition, investments in
associates are accounted for under the equity method in the consolidated financial statements and the cost method in the Company
financial statements.
Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-to-
maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and
purpose of the financial assets and is determined at the time of initial recognition.
4 6
Page 27 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(i)
Summary of Significant Accounting Policies (continued)
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of
the financial asset, or, where appropriate, a shorter period.
Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit
or loss’.
(ii)
Financial assets at fair value through profit or loss
Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:
•
•
•
Has been acquired principally for the purpose of selling in the near future;
Is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern
of short-term profit-taking; or
Is a derivative that is not designated and effective as a hedging instrument.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The
net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.
(iii)
Available-for-sale financial assets
Available-for-sale assets are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in the
investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest rate method and
foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed
of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included
in profit or loss for the period.
The fair value of available-for-sale monetary assets held in a foreign currency is determined in that foreign currency and translated at
the spot rate at reporting date. The change in fair value attributable to translation differences that results from a change in amortised
cost of the asset is recognised in profit or loss, and other changes are recognised in equity.
(vi)
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are
classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest rate method
less impairment.
Interest is recognised by applying the effective interest rate.
(v)
Impairment of financial assets
Financial assets other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet
date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets
carried at amortised cost, the amount of the impairment 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.
The carrying value of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade
receivables where the carrying value is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is
written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is
reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of available-for-sale instruments, any subsequent increase in fair value after an impairment loss is recognised directly in
equity.
Page 28 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
4 7
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(m)
(i)
Summary of Significant Accounting Policies (continued)
Financial instruments issued by the Company
Debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual
arrangement.
(ii)
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.
(iii)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss.
The net gain or loss recognised through profit or loss incorporates any interest paid on the financial liability. Fair value is determined in
the manner described in note 31.
(iv)
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest rate method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected
life of the financial liability, or, where appropriate, a shorter period.
(n)
(i)
Intangible assets
Intangible assets acquired in a business combination
All intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the
definition of an intangible asset and their value can be measured reliably. Identifiable intangible assets comprise intellectual property,
technology, contracts, customers and trade marks. These are recorded at cost less accumulated amortisation and impairment.
Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is
reviewed at the end of each annual reporting period.
Estimated useful lives are as follows:
Intellectual property
indefinite
Technology
5-7 years
Contracts
Customers
5 years
6 years
Trade Marks
5-6 years
Intellectual property recognised by the Company has an indefinite useful life and is not amortised. Each period, the useful life of this
asset is reviewed to determine whether events and circumstances continue to support an indefinite useful life assessment for the asset.
Such assets are tested for impairment in accordance with the policy stated in note 2(s).
(ii)
Research and development costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred. An intangible asset
arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following are
demonstrated:
•
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Capitalised development costs are stated at cost less accumulated amortisation and impairment, and are amortised on a straight-line
basis over their useful life of 5 years, commencing on commercialisation of the underlying projects.
4 8
Page 29 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(o)
(iii)
Summary of Significant Accounting Policies (continued)
Taxation
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss
for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current
tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
(iv)
Deferred tax
Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of
an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that
asset or liability for tax purposes.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent
that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses
and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to
them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) that affects neither
taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences
arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and
joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with
these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability
giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by
reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner
in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the
Company/Group intends to settle its current tax assets and liabilities on a net basis.
(v)
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or
debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting
for a business combination, in which case it is taken into account in the determination of goodwill or excess.
(vi)
Tax consolidation
The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law.
Imdex Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets
arising from temporary differences in the members of the tax-consolidated group are recognised in the separate financial statements of
the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in
the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets
and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group are
recognised by the Company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as
payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable
between the parent entity and the other members of the tax-consolidated group in accordance with the arrangement. Further information
about the tax funding arrangement is detailed in note 5 to the financial statements. Where the tax contribution amount recognised by
each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any
deferred tax asset arising from unused tax losses and tax credit in respect of that period, the difference is recognised as a contribution
from (or distribution to) equity participants.
Page 30 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
4 9
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
Summary of Significant Accounting Policies (continued)
(p)
Leased assets
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to
the lessee. All other leases are classified as operating leases.
(i)
Group as Lessor
Amounts due from lessees under finance leases are recorded as receivables. Finance lease receivables are initially recognised at
amounts equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual
value expected to accrue at the end of the lease term. Finance lease payments are allocated between interest revenue and reduction of
the lease receivable over the term of the lease in order to reflect a constant periodic rate of return on the net investment outstanding in
respect of the lease.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease.
(ii)
Group as Lessee
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the
minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly
attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs.
Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic
basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(iii)
Lease incentives
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(q)
Revenue
Revenue is measured at the fair value of the consideration received or receivable.
(i)
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
•
•
•
•
the Group has transferred to the buyer the significant risks and rewards of ownerships of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective
control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the entity; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
(ii)
Rendering of services
Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract.
(iii)
Royalties
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.
(iv)
Dividend and interest revenue
Dividend revenue from investments is recognised when the shareholders right to receive payment has been established. Interest
revenue is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying
amount.
5 0
Page 31 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(r)
(i)
Summary of Significant Accounting Policies (continued)
Employee benefits
Provisions
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave
when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present
value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.
(ii)
Defined contribution plans
Contributions to defined contribution superannuation plans are expensed when incurred.
(s)
Impairment of other tangible and intangible assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and
whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher 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 for which the estimates of future cash flows have not been adjusted. If the recoverable amount
of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating
unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised in profit or loss immediately.
(t)
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive), as a result of a past event, it is probable that
the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting
date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows
estimated to settle the present obligation, its carrying amount is the present value of those cashflows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable
is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured
reliably.
(u)
Non-current assets held for sale
Non-current assets (and disposal groups) classified as held for sale are measured, with certain exceptions, at the lower of carrying
amount and fair value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a
sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is
available for immediate sale in its present condition subject only to terms that are usual or customary for such a sale and the sale is
highly probable. The sale of the asset (or disposal group) must be expected to be completed within one year from the date of
classification, except in the circumstances where sale is delayed by events or circumstances outside the Group’s control and the Group
remains committed to a sale.
Page 32 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
5 1
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
3
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
In the application of the Group’s accounting policies, which are described in note 2, management is required to make judgements,
estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstance, the results of which form the basis of making the judgements. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical judgements in applying the entity’s accounting policies
Management have not made any significant critical judgements in the process of applying the Group’s accounting policies.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year:
Value of Shares
Notes 9 and 11 describe the investment held in Sino Gas & Energy Ltd (SGE). Australian Accounting Standards require this investment
to be held at the lower of carrying value and fair value less costs to sell. In making the assessment of which value is the lower, the
Directors have had to make estimates of the fair value of this investment and the expected costs to sell. The Directors have estimated
this investment to have a fair value in excess of its carrying value of $4,500,000 at 30 June 2007. (2006: $4,500,000)
The fair value of this non-listed investment has been determined using the Directors' best estimate. The Directors have estimated the
fair market value by having regard to share placements previously made by SGE, the results of exploration activity to date, discussions
with potential investors and having regard to the fact that SGE is an unlisted entity and the shares held in SGE can not be readily traded
on any share market.
Value of Intangibles
Notes 14 and 26 describe intangibles that have arisen on business combinations during the current year. The Directors have engaged
independent valuation professionals to identify and value such intangibles. The valuers have used industry accepted valuation
techniques such as the relief-from-royalty, multi-period excess earnings and replacement cost methodologies as appropriate to value
these assets. Data inputs into these models are derived largely from internal management budgets. Should actual financial results differ
from managements budgeted expectations, this would have a consequent effect on the value of intangibles.
Value of Goodwill
Notes 13 and 26 describe the goodwill that has arisen on business combinations in the current year. Goodwill acquired in a business
combination is initially measured at its cost, being the excess of the cost of the business combination over the acquirer’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities recognised. Goodwill is subsequently measured at its cost less
any impairment losses.
Any change in the value of the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
recognised would have had a consequent impact on the carrying value of goodwill at the time of initial recognition. Goodwill is
impairment tested annually.
5 2
Page 33 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
4
Profit from Operations
(a) Revenue from operations
Revenue from the sale of goods
Revenue from the rendering of services
Operating rental income
Interest income
Other operating revenue
(b) Profit before income tax
Other than as disclosed on the face of the income statement, profit
before income tax has been arrived at after crediting / (charging) the
following gains and losses:
Gain on disposal of property, plant and equipment (i)
Foreign exchange gain/(loss) (ii)
(i) In the current year the Company sold some items of plant and
equipment to a subsidiary company. This profit is eliminated on
consolidation.
(ii) Foreign exchange loss in the parent arises primarily on intercompany
loans. These amounts are eliminated on consolidation.
Profit before income tax has been arrived at after charging the following
items of income and expense:
Other income
Gain on disposal of property, plant and equipment
Management fees from Subsidiaries
Dividends from Subsidiaries
Amounts received from Rashid Trading Establishment (i)
Other revenue
(i) Comprises $812,000 in full recovery of a loan considered to have
been impaired at 30 June 2006 and $309,000 for the sale of the
Company's remaining 20% interest in Imdex Arabia previously carried in
the Company's books at nil. No further amounts remain outstanding from
Rashid Trading Establishment. Refer note 29(b)(v)(e)
Depreciation and amortisation of Non Current Assets
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance costs
Interest on hire purchase liabilities
Interest on convertible note
Interest on deferred acquisition consideration
Interest on commercial bills
Interest on bank loan
Interest on overdraft
Other interest
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
82,244
16,650
19,546
900
-
119,340
47,251
13,843
5,520
97
81
66,792
10,002
-
12,501
2,849
-
25,352
5,859
-
5,520
82
-
11,461
76
(372)
(296)
76
(15)
61
2,200
(953)
1,247
38
533
571
76
-
-
1,121
400
1,597
4,368
3,430
7,798
225
464
707
923
350
18
199
2,886
76
-
-
-
-
76
2,431
-
2,431
210
-
-
-
-
-
6
216
2,200
1,363
3,000
1,121
400
8,084
2,269
-
2,269
57
464
-
923
-
11
88
1,543
38
1,020
344
-
-
1,402
1,268
-
1,268
40
-
-
-
-
-
-
40
Page 34 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
5 3
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
4
Profit from Operations (continued)
(b) Profit before income tax (continued)
Profit before income tax has been arrived at after charging the following
items of income and expense:
Other expenses
Commissions
Consultancy fees
Legal and professional expenses
Foreign exchange loss / (gain)
Rent and premises costs
Repairs and maintenance
Research and development costs immediately expensed
Travel and accommodation
Motor vehicle costs
Other expenses
Employee benefits expense
Post-employment benefits:
Defined contribution superannuation costs
Share based payments:
Equity-settled share based payments
Other employee benefits
Cost of sales
Impairment of trade receivables
Operating lease rental expense (minimum lease payments)
Impairment adjustment
Receivable due from Rashid Trading Enterprise
Investment in RTE/Imdex Joint Venture
5
Income Taxes
(a) Income tax recognised in the income statement
Tax expense comprises:
Current tax expense
Deferred tax expense relating to the origination and reversal of
temporary differences
(Over)/under provision per prior year
Total tax expense
5 4
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
1,650 1,243 49 24
1,834 626 338 141
618 316 447 246
372 15 953 (533)
1,489 1,275 473 306
1,511 1,097 982 553
1,007
-
2,186 1,215 437 216
1,167 1,057 198 165
8,297 3,575 1,814 2,075
-
-
20,131
10,419
5,691
3,193
426
728
14,938
16,092
53,618
173
1,682
-
-
-
2,488
59
8,539
11,086
32,776
2
1,443
875
1,400
2,275
74
728
2,844
3,646
7,202
(43)
478
-
-
-
59
59
2,061
2,179
4,415
2
312
875
2,585
3,460
Consolidated
Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
9,924
(2,727)
(303)
6,894
2,835
1,430
(385)
3,880
3,297
57
(135)
3,219
153
1,564
(388)
1,329
Page 35 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
5
Income Taxes (continued)
Consolidated
Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
The prima facie income tax expense on pre-tax accounting profit
from operations reconciles to the income tax expense in the
financial statements as follows:
Profit from operations
20,412
11,864
13,085
Income tax expense calculated at 30%
Tax benefit of losses not previously brought to account
Impairment of investment in RTE/Imdex Joint Venture
Intercompany dividends received
Bad debts
Non-deductible share based payments
Additional provincial tax arising in a foreign jurisdiction
Non-deductible interest on deferred payments
Other non-deductible expenses
Tax rate differential arising from foreign entities
Adjustments in respect of prior year deferred tax balances
(Over) / under provision of prior year income tax
The tax rate used in the above reconciliation is the corporate tax rate of
30% payable by Australian corporate entities on taxable profits under
Australian law. There has been no change in the corporate tax rate
when compared with the previous reporting period.
(b) Income tax recognised directly in equity
The following current and deferred amounts were charged directly to
equity during the period:
Current tax: Share issue expenses
Deferred tax: Share issue expenses deductible over five years
Deferred tax: Translation of foreign operations
(c) Current tax assets and liabilities
Current tax payable
(d) Deferred tax balances
Deferred tax assets comprise:
Provisions
Inventory
Property, plant and equipment
Accruals
Foreign currency translation reserves
Share issue expenses
Deferred tax liabilities comprise:
Property, plant and equipment
Intangible assets
Non-current assets classified as held for sale (current year) /
Fair value through profit and loss financial assets (prior year)
Net deferred tax balances
Unrecognised deferred tax assets:
The following have not been brought to account as assets:
Temporary differences relating to the translation of investments in
subsidary undertakings
6,124
(23)
-
-
-
218
142
212
232
38
254
(303)
6,894
3,559
-
420
-
263
18
-
-
11
(6)
-
(385)
3,880
3,926
-
-
(900)
-
218
-
-
10
-
100
(135)
3,219
2,507
752
-
776
(103)
263
18
-
-
11
-
-
(388)
1,329
(53)
(165)
(71)
(289)
48
-
212
260
(53)
(165)
-
(218)
48
-
-
48
8,913
2,058
5,450
1,973
304
125
1,871
518
282
204
3,304
(4)
(7,521)
(1,260)
(8,785)
(5,481)
455
-
-
262
212
38
967
(146)
(19)
(1,260)
(1,425)
(458)
86
-
-
175
-
203
464
-
-
153
-
-
90
-
38
281
(59)
-
(1,260)
(1,260)
(796)
(1,260)
(1,319)
(1,038)
427
-
-
-
Page 36 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
5 5
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
5
Income Taxes (continued)
Tax Consolidation
Relevance of tax consolidation to the Group
Legislation to allow groups, comprising a parent entity and its Australian resident wholly-owned entities, to elect to consolidate and be
treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. The Company and its wholly-owned
Australian resident entities are eligible to consolidate for tax purposes under this legislation and have elected to be taxed as a single
entity from 1 July 2003. The head entity in the tax consolidated group for the purposes of the tax consolidation system is Imdex Limited.
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding and a tax-sharing agreement with the head entity. Under the
terms of this agreement, Imdex Limited and each of the entities in the tax consolidated group has agreed to pay a tax equivalent
payment to or from the head entity, based on the net accounting profit or loss of the entity and the current tax rate. Such amounts are
reflected in amounts receivable from or payable to other entities in the tax consolidated group.
The tax sharing agreement entered into between members of the tax consolidated group provides for the determination of the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the
tax consolidated group. The effect of the tax sharing agreement is that each member's liability for tax payable by the tax consolidated
group is limited to the amount payable by the head entity under the tax funding arrangement.
6
Remuneration of Auditors
Auditor of the parent entity - Deloitte Touche Tohmatsu
Audit or review of the financial report
Taxation services - mainly compliance work and transfer
pricing and global restructuring advice
Other non-audit services: Other consulting services
Other non-audit services: A-IFRS assistance
Other auditors
Audit or review of the financial report
Other non-audit services: Accounting assistance and taxation
advice
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
175,715
122,190
175,715
122,190
251,549
-
-
427,264
356,471
78,814
435,285
24,182
9,850
35,439
191,661
27,501
14,462
41,963
251,549
-
-
427,264
24,182
9,850
35,439
191,661
-
-
-
-
-
-
862,549
233,624
427,264
191,661
5 6
Page 37 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
7
Trade and Other Receivables
Current
Trade receivables
Allowance for doubtful debts
Notes
(i)
Due from Quadripart Investment Holdings (Pty) Ltd
Other receivables
29(b)(v)(b)
Consolidated
Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
27,966
(479)
27,487
-
319
27,806
18,660
(306)
18,354
444
-
18,798
10,173
(71)
10,102
-
111
10,213
3,267
(114)
3,153
-
-
3,153
(i) The average credit period on sales of goods is 60 days. Trade receivables are interest free. An allowance has been made for estimated
irrecoverable amounts from the sale of goods, determined by reference to past default experience. The movement in the allowance was
recognised in the income statement for the current year.
8
Inventories
Current
Raw materials - at cost
Work in progress - at cost
Finished goods - at cost
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
1,251
51
12,537
13,839
420
-
9,287
9,707
-
-
2,085
2,085
-
-
1,081
1,081
9
Other Financial Assets
Current
Financial assets carried at fair value through profit or
loss
Shares
Loans carried at amortised cost
Loan to Sino Gas & Energy Limited
Loans to Subsidiaries
Non-current
Loans carried at amortised cost
Loans to Subsidiaries
Investments carried at cost
Investments in Subsidiaries
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
Notes
(i)
(ii)
(iii)
(iii)
-
4,500
-
4,500
11,556
-
11,556
-
-
4,500
11,556
620
12,176
-
2,349
6,849
-
-
-
-
-
-
40,638
-
2,701
43,339
2,172
2,172
Page 38 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
5 7
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
9
Other Financial Assets (continued)
(i) In the prior year the Group held 19.1% of the ordinary share capital of Sino Gas & Energy Limited (SGE), an energy company
operating in China. These shares were classified as 'at fair value through profit or loss' as it is the intention of the Company to dispose
of these shares as soon as it is practicable. In the prior year these shares were revalued from their carrying value of $300,000 to their
fair value of $4,500,000 with the revaluation being recognised on the face of the income statement.
(ii) During the current period the Group advanced $11,307,000 million to SGE as a short term facility pending the finalisation of their
capital raising initiatives. This loan comprised of two advances, one of A$5,000,000 and one of US$5,000,000. A total of $200,000 of
this loan was repaid during the year and a foreign currency revaluation loss of $184,000 was recorded. Interest of $633,000 was
charged on the balance. The funds advanced are secured by a fixed and floating charge over all the assets held by SGE. The loan
bears interest at 13.5% per annum and is repayable on the IPO of SGE. The loan carries the option for Imdex Limited to convert the
loan balance into equity in SGE at market price.
As a result of the above and Imdex’s holding of 13.6% (percentage reduced from 19.1% to 13.6% in the current period), the Company
has determined that it has significant influence. However, as the Company’s intention is to realise the value of the investment through
sale and it meets the requirements of AASB 5: ‘Non-Current Assets Held for Sale and Discontinued Operations’ the investment is not
within the scope of AASB 128: ‘Investments in Associates’. Accordingly, the investment has been classified as a non-current asset held
for sale. Refer to Note 11.
(iii) Loans to Subsidiaries have no specific terms or conditions other than the loans to Samchem Drilling Fluids and Chemicals (Pty) Ltd
and Imdex Sweden AB which were put in place in the current year. These loans are repayable in quarterly instalments commencing on
1 July 2007 with the last payment due on 30 June 2017. The loan to Samchem carries interest at the South African prime overdraft rate
(currently 14.5%) plus a 2% margin. The loan to Imdex Sweden carries interest at the Stockholm Interbank Offered Rate (currently
3.65%) plus a weighted average margin of 0.75%.
10
Other Current Assets
Notes
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
Current
Prepayments
Non-current
Deferred acquisition costs
(i)
224
224
664
664
12
12
124
124
49
49
664
664
4
4
124
124
(i) Comprises legal, consulting and other direct costs associated with the acquisitions of Suay and Poly-Drill in the current year (refer note 34)
and Reflex and Chardec in the prior year. These costs will be included in the cost of investment on settlement.
11
Non-Current Assets Classified as Held for Sale
Shares held for sale
Notes
(i)
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
4,500
4,500
-
-
4,500
4,500
-
-
(i) The investment in SGE has been classified as a non-current asset held for sale as its carrying amount will be recovered principally
through a sale transaction.
5 8
Page 39 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
12
Property, Plant and Equipment
Consolidated
Gross Carrying Value
Balance at 30 June 2005
Additions
Acquisitions through business combinations
Disposals
Net foreign currency exchange differences
Transfer
Balance at 30 June 2006
Additions
Acquisitions through business combinations
Disposals
Net foreign currency exchange differences
Balance at 30 June 2007
Accumulated Depreciation
Balance at 30 June 2005
Disposals
Acquisitions through business combinations
Depreciation expense
Net foreign currency exchange differences
Transfer
Balance at 30 June 2006
Disposals
Acquisitions through business combinations
Depreciation expense
Net foreign currency exchange differences
Balance at 30 June 2007
Net Book Value
As at 30 June 2006
As at 30 June 2007
Company
Gross Carrying Value
Balance at 30 June 2005
Additions
Disposals
Transfer
Balance at 30 June 2006
Additions
Disposals
Balance at 30 June 2007
Accumulated Depreciation
Balance at 30 June 2005
Disposals
Depreciation expense
Transfer
Balance at 30 June 2006
Disposals
Depreciation expense
Balance at 30 June 2007
Net Book Value
As at 30 June 2006
As at 30 June 2007
Plant and
Equipment at cost
$’000
Equipment
Rented to Third
Parties at cost
$’000
Equipment under
hire purchase at
cost
$’000
Capital works in
progress at cost
TOTAL
$’000
$’000
6,222 1,245 4,437 353 12,257
3,006 3,150 574 - 6,730
416 - - - 416
(54) - (1,052) - (1,106)
(71) - - - (71)
966 1,245 (2,022) (189) -
10,485 5,640 1,937 164 18,226
3,341 3,057 37 387 6,822
654 2,726 77 - 3,457
(368) (1,634) (107) - (2,109)
(109) (394) (4) (3) (510)
14,003 9,395 1,940 548 25,886
4,943 534 890 - 6,367
(9) - (521) - (530)
- - - - -
746 1,058 627 - 2,431
(9) - - - (9)
(612) 533 79 - -
5,059 2,125 1,075 - 8,259
(298) (1,130) (47) - (1,475)
278 1,399 8 - 1,685
1,484 2,691 193 - 4,368
(28) (129) (1) - (158)
6,495 4,956 1,228 - 12,679
5,426 3,515 862 164 9,967
7,508 4,439 712 548 13,207
477 1,245 1,361 298 3,381
96 3,150 147 - 3,393
- - (84) - (84)
613 1,245 (1,376) (300) 182
1,186 5,640 48 (2) 6,872
499 3,228 5 21 3,753
(55) (1,595) - - (1,650)
1,630 7,273 53 19 8,975
396 534 404 - 1,334
- - - - -
104 1,058 106 - 1,268
138 533 (489) - 182
638 2,125 21 - 2,784
(44) (926) 5 - (965)
200 2,064 6 - 2,270
794 3,263 32 - 4,089
548 3,515 27 (2) 4,088
836 4,010 21 19 4,886
Page 40 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
5 9
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
12
Property, Plant and Equipment (continued)
Aggregate depreciation allocated, whether recognised as an
expense or capitalised as part of the carrying amount of other
assets during the year:
Plant and equipment
Equipment under hire purchase
Consolidated
Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
4,175 1,804 2,264 1,162
193 627 6 106
4,368 2,431 2,270 1,268
13
Goodwill
Consolidated
Company
Notes
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Gross Carrying Amount
Balance at beginning of the financial year
Recognised on acquisition of Samchem Drilling Fluids &
Chemicals (Pty) Ltd
Recognised on acquisition of Reflex Holding AB
Recognised on acquisition of Chardec Technology Ltd
Recognised on acquisition of Flexit AB
Effect of foreign exchange movements
Balance at end of the financial year
(i)
(ii)
(ii)
(ii)
Accumulated Impairment Losses
Balance at beginning of the financial year
Impairment losses for the year
Balance at end of the financial year
Net Book Value
At the beginning of the financial year
At the end of the financial year
1,906
-
14,623
8,319
11,107
(922)
35,033
-
-
-
-
2,492
-
-
-
(586)
1,906
-
-
-
1,906
35,033
-
1,906
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6 0
Page 41 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
13
Goodwill (continued)
(i) Goodwill arose during the prior year on the acquisition by Samchem Drilling Fluids & Chemicals (Pty) Ltd, a wholly owned subsidiary
of Imdex Limited, of the business of SA Mud Services (Pty) Ltd and a range of clay and cement chemical additive inventory items
effective 1 August 2005. Refer note 26(d).
Samchem Drilling Fluids & Chemicals (Pty) Ltd is considered to be a separate cash generating unit since it operates independently from
other Imdex operations in a separate geographical area.
The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 6 year discounted cash
flow projection based on the 2008 budget. The projection assumes no additional growth in the business. A discount rate of 10%, being
the Imdex Group weighted average cost of capital has been used. Management believe that any reasonably possible change in the key
assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.
(ii) Goodwill arose during the year on the acquisition of 100% of the issued share capital of Reflex Holding AB (refer note 26(b)),
Chardec Technology Ltd (refer note 26(c)) and Flexit AB (refer note 26(a)).
These three operations are considered to be a single cash generating unit as they were purchased in close succession to create a
single vertically integrated operation in the Drilling Products and Services division. They operate in the same business segment and
geographical area and have the same operational management and a high level of operational and financial interdependency.
The recoverable amount of this goodwill has been determined based on a value in use calculation which uses a 6 year discounted cash
flow projection based on the 2008 budget. The projection assumes no additional growth in the business. A discount rate of 10%, being
the Imdex Group weighted average cost of capital has been used. Management believe that any reasonably possible change in the key
assumptions on which recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.
The key assumptions used in the value in use calculations for the various significant cash generating units are as follows:
Key Assumption
Samchem CGU
Reflex/Chardec/Flexit CGU
Budgeted sales
growth
Budgeted net
margins
Sales growth has been budgeted in
line with the expected increase in
activity in the local industries
serviced by Samchem.
Net margins have been budgeted
using the prior year actuals as a
base on which operational
improvements are expected to be
made.
Sales growth has been budgeted based on the expected activity
levels in the global down hole tool market plus an increment for the
market share expected to be gained from the release of new tools.
Net margins have been budgeted using the prior year actuals as a
base on which operational and integration improvements are
expected to be made.
Exchange rate
fluctuations
Exchange rate fluctuation expectations have been built into the budget numbers based on standard forecast
advice received from major lending institutions.
Page 42 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
6 1
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
14
Other Intangibles
Consolidated
Patents
Intellectual
Property
Technology
Based
Contract
Based
Customer
Based
Development
Costs
Trade
Name
TOTAL
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Gross Carrying Value
Balance at 30 June 2005
Additions through business
combinations
Written off
Impact of exchange rate
changes
Balance at 30 June 2006
Additions through business
combinations
Capitalised during the year
Impact of exchange rate
changes
Balance at 30 June 2007
Accumulated Amortisation
and Impairment
Balance at 30 June 2005
Amortisation expense
Impairment losses
Balance at 30 June 2006
Amortisation expense
Impact of exchange rate
changes
Impairment losses
Balance at 30 June 2007
Net Book Value
As at 30 June 2006
As at 30 June 2007
Company
Gross Carrying Value
Balance at 30 June 2005
Additions through business
combinations
Written off
Impact of exchange rate
changes
Balance at 30 June 2006
Additions through business
combinations
Capitalised during the year
Impact of exchange rate
changes
Balance at 30 June 2007
Accumulated Amortisation
and Impairment
Balance at 30 June 2005
Amortisation expense
Impairment losses
Balance at 30 June 2006
Amortisation expense
Impairment losses
Balance at 30 June 2007
Net Book Value
As at 30 June 2006
As at 30 June 2007
12
-
(12)
-
-
755
-
-
755
-
-
-
-
25
-
-
25
-
1,437
-
(124)
1,313
-
-
(143)
1,170
-
-
-
-
-
-
-
-
-
-
-
-
-
14,937
-
(234)
14,703
-
-
-
-
1,501
(41)
-
1,460
-
-
-
-
-
425
-
-
425
-
-
-
-
78
-
-
78
-
-
-
-
-
9,781
-
(483)
9,298
-
-
-
-
1,491
(71)
-
1,420
-
-
-
-
-
-
429
-
429
-
-
-
-
-
-
-
-
-
-
-
-
-
4,470
-
(202)
4,268
-
-
-
-
335
(16)
-
319
12
1,437
(12)
(124)
1,313
30,368
429
(1,062)
31,048
-
-
-
-
3,430
(128)
-
3,302
-
730
1,313
1,170
-
13,243
-
347
-
7,878
-
429
-
3,949
1,313
27,746
12
-
(12)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
429
-
429
-
-
-
-
-
-
-
-
429
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12
-
(12)
-
-
-
429
-
429
-
-
-
-
-
-
-
-
429
Page 43 of 73
6 2
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
14
Other Intangibles (continued)
Intellectual Property
Intellectual Property arose during the prior year on the acquisition by Samchem Drilling Fluids & Chemicals (Pty) Ltd, a wholly owned
subsidiary of Imdex Limited, of the business of SA Mud Services (Pty) Ltd and a range of clay and cement chemical additive inventory
items effective 1 August 2005. Refer note 26(d).
Intellectual Property has an indefinite life due to the uniqueness of the manufacturing processes and products, high cost barriers to entry
and the dominant market share held. Intellectual Property is therefore subjected to annual impairment testing.
The recoverable amount has been determined based on a value in use calculation which uses a 6 year discounted cash flow projection
based on the 2008 budget. The projection assumes no additional growth in the business. A discount rate of 10% has been used.
Management believe that any reasonably possible change in the key assumptions on which recoverable amount is based would not
cause the carrying amount to exceed its recoverable amount.
15
Trade and Other Payables
Trade payables
Accruals and other payables
Notes
(i)
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
12,290
4,451
16,741
11,280
2,349
13,629
3,562
2,008
5,570
2,202
909
3,111
(i) Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter interest is charged at commercial rates. The consolidated
entity has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
16
Borrowings
Current borrowings
Secured
At amortised cost
Commercial bill
Bank loan
Hire purchase liabilities
Other
Unsecured
At amortised cost
Deferred acquisition payments
Non-current borrowings
Secured
At amortised cost
Commerical bills
Bank loan
Hire purchase liabilities
Other
Unsecured
At amortised cost
Deferred acquisition payments
Notes
(i)
(ii)
(iii) 24
(iv)
(v) 34
(i)
(ii)
(iii) 24
(iv)
(v) 34
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
2,300
2,430
1,443
335
5,373
11,881
10,000
12,710
964
167
4,715
28,556
-
-
1,391
-
-
1,391
-
-
1,503
-
-
1,503
2,300
-
385
-
-
2,685
10,000
-
64
-
-
10,064
-
-
498
-
-
498
-
-
220
-
-
220
Page 44 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
6 3
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
16
Borrowings (continued)
(i) Commercial bills bear interest at 8.54% per annum. On 1 September 2007 a bill of $800,000 is repayable. Thereafter bills are
repayable in quarterly instalments of $500,000 each with the final payment due on 1 June 2013. The bills are secured by a Mortgage
Debenture over all the assets and liabilities of Imdex Limited, Australian Mud Company Pty Ltd, Surtron Technologies Pty Ltd, Imdex
International Pty Ltd, Chardec Technology Limited and Samchem Drilling Fluids and Chemicals (Pty) Ltd.
(ii) Comprises a loan of SEK 88,000,000 against an available facility of SEK 90,000,000. This loan, which was raised in the current year,
bears interest at the 7 day Stockholm Interbank Offered Rate ('STIBOR') plus a weighted average margin of 0.75% per annum and is
repayable in quarterly instalments of SEK 4,125,000 each starting on 1 December 2007 increasing to SEK 5,875,000 each from 1 June
2008 onwards with the final instalment due on 1 March 2013. The interest rate applicable at 30 June 2007 was 4.4% per annum. This
loan is secured over the assets of the Reflex and Flexit Groups of companies.
(iii) Hire purchase liabilities are secured over the assets to which they relate, the carrying value of which exceeds the value of the hire
purchase liability. The Group does not hold title to the equipment under hire purchase pledged as security.
(iv) Other current and non-current loans comprise sundry advances from third party lenders.
(v) Deferred acquisition payments are those portions of the purchase price of recent acquisitions that are due in future periods. The
cash component of these deferred amounts have been discounted to their present values using an interest rate of 8% per annum. For
further details refer to notes 26(b) and (c).
(vi) A convertible note with a face value of $10,400,000 was issued on 1 August 2006 and carried interest at the rate of 8% per annum
payable in arrears. The note carried the right to convert into 20.8 million fully paid ordinary Imdex shares at any time up to 1 August
2008. Conversion would be automatically triggered upon the Imdex share price reaching $1 per share. This condition was satisfied on
15 February 2007. Refer note 18 for details of shares issued. These shares will be held in voluntary escrow until 1 August 2008.
17
Provisions
Current provisions
Employee entitlements
Non-current provisions
Employee entitlements
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
Notes
(i)
1,212
830
265
189
448
226
116
40
(i) The majority of these entitlement are expected to be taken during the coming year. (2006: same)
6 4
Page 45 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
18
Contributed Capital
Issued and Paid Up Capital - Fully paid ordinary shares
Mandatory convertible capital
Notes
(i)
(ii)
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
54,282
6,700
60,982
26,490
-
26,490
54,282
6,700
60,982
26,490
-
26,490
(i) Fully paid ordinary shares carry one vote per share and the right to dividends.
(ii) Mandatory Convertible Capital relates to the future issue of 5 million fully paid ordinary shares as consideration for the acquisition of Flexit
AB. Refer to Note 26(a)(iv)
Consolidated and Company
2007
2006
Notes
Number
$'000
Number
$'000
Ordinary shares
Balance at beginning of the financial year
139,466,037
26,490
110,055,368
19,008
Issue of shares as part consideration for the acquisition of
Samchem
Issued on conversion of debt instrument
Issue of equity securities as part of working capital raising
Issue of shares as part consideration for the acquisition of
patent
Share issue costs (net of tax)
Issue of shares under staff option plan
Closing balance at end of the financial year
24(d)
16(vi)
-
20,800,000
15,000,000
155,039
-
4,527,927
179,949,003
-
10,400
16,500
200
(510)
1,202
54,282
16,059,002
13,300,000
-
-
51,667
139,466,037
3,592
3,990
-
(111)
11
26,490
Changes to the the Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998.
Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.
Share options granted under the staff option scheme
In accordance with the provisions of the staff option scheme, as at 30 June 2007, executives, directors and staff have options over 13,080,406
ordinary shares (all of which were vested), in aggregate. These options expire over a range of dates up to February 2012. As at 30 June 2006,
executives, directors and staff have options over 10,808,333 ordinary shares (all of which were vested), in aggregate. These options expire over
a range of dates up to January 2011.
Details of the Staff Option Plan can be found in note 33.
19
Reserves
Consolidated
2007
$’000
2006
$’000
Company
2007
$’000
2006
$’000
Notes
Foreign Currency Translation Reserve
Balance at beginning of the financial year
Translation of foreign operations after taxation
Balance at the end of the financial year
(494)
(1,643)
(2,137)
-
(494)
(494)
-
-
-
-
-
-
Exchange differences relating to the translation from the functional currencies of the Group's foreign controlled entities into Australian dollars are
brought to account by entries made directly to the foreign currency translation reserve. This reserve is shown net of deferred tax.
Employee Equity-Settled Benefits Reserve
Balance at beginning of the financial year
Options issued during the financial year
Options exercised during the financial year
Balance at the end of the financial year
4
105
728
(82)
751
48
59
(2)
105
105
728
(82)
751
48
59
(2)
105
The employee equity-settled benefits reserve arises on the grant of share options to Directors and employees. Amounts are transferred out of the
reserve and into issued capital when the options are exercised. Further information regarding the Staff Option Plan is contained in note 33.
Page 46 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
6 5
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
20
Earnings Per Share
Basic earnings per share
Diluted earnings per share
(a) Basic earnings per share
Consolidated
2007
Cents per share
2006
Cents per share
8.74
8.00
6.07
5.95
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Earnings
Consolidated
2007
$'000
2006
$'000
13,518
7,984
Shares
Shares
Weighted average number of ordinary shares per the purposes of basic earnings per share
154,717,072
131,472,906
(b) Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:
Net profit
Adjustment to exclude the impact of interest expense on convertible note
Earnings used in the calculation of diluted EPS
Consolidated
2007
$'000
2006
$'000
13,518
318
13,836
7,984
-
7,984
Shares
Shares
Weighted average number of ordinary shares for the purposes of diluted earnings per share
172,920,311
134,096,984
The weighted average number of ordinary shares for the purposes of diluted earnings per
share reconciles to the weighted average number of ordinary shares used in the calculation
of basic earnings per share as follows:
Weighted average number of ordinary shares used in the calculation of basic EPS
Potential ordinary shares arising on conversion of convertible note
Shares deemed to be issued for no consideration for employee and Director options
Weighted average number of ordinary shares used in the calculation of diluted EPS
(ii) The following potential ordinary shares are not dilutive and are therefore excluded from
the weighted average number of ordinary shares for the purposes of diluted earnings per
share:
Employees share options tranche 4
Employees share options tranche 5
(iii) Weighted average number of converted potential ordinary shares included in the
calculation of diluted earnings per share:
Convertible note
(iv) Shares issued after balance date
Shares
Shares
154,717,072
11,340,274
6,862,965
172,920,311
131,472,906
-
2,624,078
134,096,984
Shares
Shares
4,425,000
675,000
5,100,000
$'000
$'000
7,693,151
-
-
-
-
A total of 1,212,751 fully paid ordinary shares were issued after the balance date as part settlement of the acquisition of Poly-Drill
Drilling Systems Ltd. Refer note 34.
Page 47 of 73
6 6
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
21
Dividends
Recognised amounts
Notes
2007
Cents per
share
2007
Total
$’000
2006
Cents per
share
2006
Total
$’000
Fully paid ordinary shares - interim dividend franked to 30%
Fully paid ordinary shares - final dividend franked to 30%
(i)
(ii)
1.00
1.00
2.00
1,641
1,411
3,052
1.00
-
1.00
1,396
-
1,396
Unrecognised amounts
Fully paid ordinary shares - final dividend franked to 30%
(iii)
1.50
2,699
1.00
1,396
(i) The interim, fully franked dividend was paid on 26 March 2007 (2006: 30 March 2006). The record date for determining the entitlement to the
interim dividend was 13 March 2007 (2006: 23 March 2006). There are no dividend reinvestment plans in operation.
(ii) The final, fully franked dividend was paid on 13 October 2006 (2006: nil). The record date for determining the entitlement to the interim
dividend was 10 October 2006 (2006: nil). There are no dividend reinvestment plans in operation.
(iii) The final, fully franked dividend was declared on 15 August 2007 with an entitlement date of 5 October 2007 and a payment date of 17
October 2007. The financial effect of this dividend has not been recognised in the financial statements at 30 June 2007.
Consolidated
2007
$'000
2006
$'000
7,062
(1,157)
-
5,060
(598)
-
Adjusted franking account balance
Impact on franking account of dividends not recognised
Income tax consequences of unrecognised dividends
22
Commitments for Expenditure
(a) Capital expenditure commitments
At 30 June 2007 capital expenditure commitments were nil (2006: nil).
(b) Lease commitments
Hire purchase liabilities and non-cancellable operating lease commitments are disclosed in note 24.
23
Contingent Liabilities and Contingent Assets
Contingent Liabilities
Rental bond
Contingent Assets
Consolidated
Company
Notes
2007
$’000
2006
$’000
2007
$’000
2006
$’000
(i)
119
119
-
100
100
-
100
100
-
100
100
-
(i) Comprise bank guarantees supporting the extension of credit or the performance of the Group in respect of its operations. The Directors are
not aware of any circumstance or information which would lead them to believe that these liabilities will crystallise. Consequently no provisions
have been made in the Financial Report in respect of these matters. No material losses are expected to arise in respect of these guarantees.
Page 48 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
6 7
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
24
Leases
(a) Hire Purchases
Hire purchase arrangements
Hire purchase arrangements relate to plant and equipment with terms of up to 5 years. The Group has options to purchase the equipment for a
nominal amount at the conclusion of the arrangements.
Hire purchase commitments
Hire purchase commitments are payable as follows.
Due:
Within one year
Between one and five years
Later than five years
Minimum lease payments
Less: future finance charges
Minimum future lease payments
Present value of minimum future lease
payments
Consolidated
2007
2006
$’000
$’000
Company
2007
$’000
2006
$’000
Consolidated
2007
2006
$’000
$’000
Company
2007
$’000
2006
$’000
1,580 1,569 467 534 1,443 1,391 449 498
760 1,591 - 226 728 1,503 - 220
248 - - - 236 - - -
2,588 3,160 467 760 2,407 2,894 449 718
(181) (266) (18) (42) - - - -
2,407 2,894 449 718 2,407 2,894 449 718
Hire purchase liabilities provided for in the Financial Report
Current – Note 16
Non current - Note 16
(b) Operating Leases
Operating leasing arrangements
1,443 1,391 385 498
964 1,503 64
220
2,407 2,894 449 718
Operating leases relate to premises and the lease of motor vehicles used by the Group in its operations, generally with terms between 2 and 5
years. Some of the operating leases contain options to extend for further periods and an adjustment to bring the lease payments into line with
market rates prevailing at that time. The leases do not contain an option to purchase the leased property.
Non-cancellable operating lease payments
Within one year
Between one and five years
Later than five years
Consolidated
2007
2006
$’000
$’000
Company
2007
$’000
2006
$’000
1,062
1,911
686
3,659
791
1,478
851
3,120
162
352
-
514
86
11
-
97
6 8
Page 49 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
25
Subsidiaries
Parent Entity
Imdex Limited
Controlled Entities
Australian Mud Company Pty Ltd
Australian Mud Company Chile SA
Samchem Drilling Fluids & Chemicals (Pty) Ltd
Surtron Technologies Pty Ltd
Surtron Technologies UK Ltd
Surtron Technologies US Inc
Imdex International Pty Ltd
Imdex Sweden AB
Reflex Instruments Asia Pacific Pty Ltd
Chardec Technology Ltd
Reflex Holding AB
Reflex Instrument AB
Reflex Instrument North America
Reflex Instrument South America Ltda
Drill Hole Surveys (Pty) Ltd
Flexit AB
Flexit Navigation AB
Flexit Australia Pty Ltd
Nudge Geotechnical Instrumentation Inc
Notes
Country of
Incorporation
Ownership Interest
2007
%
2006
%
(i), (iii)
Australia
(iii), (iv)
(ii)
26(d)
(iii), (iv)
(v)
(iii), (iv), (vi)
(vii)
(viii)
26(c)
26(b)
26(b)
26(b)
26(b)
26(b)
26(a)
26(a)
(ix)
(x)
Australia
Chile
South Africa
Australia
United Kingdom
United States of America
Australia
Sweden
Australia
United Kingdom
Sweden
Sweden
Canada
Chile
South Africa
Sweden
Sweden
Australia
Canada
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Imdex Limited is the ultimate parent company and is the head entity within the tax consolidated group.
(ii) Under Chilean law an audit of this company is not required.
(iii) These companies are part of the tax consolidated group.
(iv) These wholly-owned subsidiaries have entered into a deed of cross guarantee with Imdex Limited pursuant to ASIC Class Order
98/1418 and are relieved from the requirement to prepare and lodge an audited financial report. Australian Mud Company Pty Ltd and
Surtron Technologies Pty Ltd became a party to the deed on 29 June 2006 and Imdex International Pty Ltd on 20 October 2006.
(v) This entity was incorporated on 16 November 2006
(vi) This entity was incorporated on 4 July 2006
(vii) This entity was incorporated on 5 July 2006
(viii) This entity was incorporated on 1 March 2007
(ix) This entity was incorporated on 11 May 2007
(x) 100% of the issued share capital of this entity was acquired on 1 May 2007. As this entity is non-trading and holds one asset being a
patent, this purchase transaction was accounted for as an acquisition of an asset, not as a business combination.
Page 50 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
6 9
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
25
Subsidiaries (continued)
The consolidated income statement of entities which are party to the deed of cross guarantee are:
Income Statement
2007
$’000
2006
$’000
Revenue from sale of goods, rendering of services and operating lease rental
Other revenue from operations
Total revenue
Other income
Share of losses of associates accounted for using the equity method
Change in fair value of investments held for trading
Impairment adjustment
Raw materials and consumables used
Employee benefit expenses
Depreciation and amortisation expense
Finance costs
Commissions
Consultancy fees
Legal and professional expenses
Rent and premises costs
Repairs and maintenance
Travel and accommodation
Motor vehicle costs
Foreign exchange gain/(loss)
Other expenses
Profit before income tax expense
Income tax expense relating to ordinary activities
Profit for the year
81,500
2,866
84,366
4,814
-
-
-
(36,495)
(11,593)
(3,533)
(2,402)
(1,170)
(1,399)
(449)
(1,008)
(1,008)
(1,654)
(911)
(958)
(5,770)
20,830
56,240
88
56,328
149
(301)
4,500
(2,275)
(26,578)
(9,145)
(2,322)
(211)
(939)
(614)
(95)
(1,186)
(998)
(1,110)
(854)
(572)
(3,579)
10,198
(6,657)
(3,568)
14,173
6,630
7 0
Page 51 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
25
Subsidiaries (continued)
The consolidated balance sheet of entities which are party to the deed of cross guarantee are:
Balance Sheet
Current Assets
Cash and Cash Equivalents
Trade and Other Receivables
Inventories
Other Financial Assets
Other
Total Current Assets
Non Current Assets
Other Financial Assets
Property, Plant and Equipment
Other Intangible Assets
Other
Total Non Current Assets
Total Assets
Current Liabilities
Trade and Other Payables
Borrowings
Current Tax Payables
Provisions
Total Current Liabilities
Non Current Liabilities
Borrowings
Deferred Tax Liabilities
Provisions
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Issued Capital
Employee Equity-Settled Benefits Reserve
Retained Profits *
Total Equity
* Retained Profit at the beginning of the financial year
Net Profit
Dividend provided for or paid
Retained Profit at the end of the financial year
2007
$’000
2006
$’000
7,171
24,861
11,085
60,871
56
104,044
8,492
11,768
429
664
21,353
125,397
14,871
9,060
5,358
1,475
30,764
15,678
303
116
16,097
46,861
78,536
60,982
751
16,803
78,536
5,682
14,173
(3,052)
16,803
5,816
15,164
8,538
4,500
12
34,030
6,658
9,382
-
28
16,068
50,098
11,364
1,391
1,823
1,037
15,615
1,503
663
40
2,206
17,821
32,277
26,490
105
5,682
32,277
448
6,630
(1,396)
5,682
Page 52 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
7 1
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
26
Acquisition of Businesses
(a) Acquisition of entity - Flexit AB
With effect from 1 May 2007, Imdex Sweden AB, wholly owned subsidiary of Imdex Limited, acquired 100% of the issued share capital of Flexit
AB (Flexit), a company incorporated in Sweden. Flexit AB has one Swedish wholly owned subsidiary, Flexit Navigation AB. Flexit are leading
developers and suppliers of borehole survey equipment to the exploration and mining industries globally. At the General Meeting of Shareholders
held on 30 April 2007, the shareholders of Imdex Limited approved this acquisition and the associated issue of shares. The numbers presented
below have been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill are as follows:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Trade and other receivables
Inventory
Deferred tax assets / (liabilities)
Property, plant and equipment
Technology based intangibles
Trade name based intangibles
Trade and other payables
Long term liabilities
Fair value of net identifiable assets acquired (other than cash and cash
equivalents)
Goodwill on acquisition
Total purchase consideration
Total purchase consideration comprises
Consideration in cash and cash equivalents
Less cash and cash equivalents acquired
Deferred consideration - Mandatory Convertible Capital
Direct costs relating to the acquisition
(i)
(i)
(i)
(ii)
(iv), 18
896
557
-
207
-
-
(1,203)
(54)
403
-
-
(2,124)
-
4,672
2,916
-
-
5,464
Operating results of the Flexit consolidated group included in the Consolidated Income Statement of Imdex Limited from
acquisition on 1 May 2007 to 30 June 2007:
Operating revenue
Total expenses
Loss for the period after tax
(v)
896
557
(2,124)
207
4,672
2,916
(1,203)
(54)
5,867
11,107
16,974
12,000
(1,842)
6,700
116
16,974
Results since
acquisition
$’000
1,275
(1,315)
(40)
(i) Technology based intangible assets of $4.7 million comprise technical knowledge and other know-how in existence at the time of acquisition.
Trade name based intangibles of $2.9 million represents the value of the Flexit and GyroSmart trade names at acquisition. Deferred tax of $2.1
million was raised on these balances. These intangibles have been valued by independent valuation professionals using the replacement cost and
relief-from-royalty methods respectively. Data inputs into the model were derived from internal management budgets. Intangible assets are being
amortised over their estimated useful lives of 5 years.
(ii) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Flexit. In addition,
the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future
market development and the assembled workforce of Flexit. These benefits are not recognised separately from goodwill as the future economic
benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities
assumed in the acquisition.
(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2007 records the payment for the acquisition of Flexit as $10.3 million
being the total consideration of $20.3 million above less $10.0 million of deferred consideration.
(iv) The balance of the purchase price is due on 1 May 2009. This will be settled by way of the issue of 5 million fully paid ordinary shares in
Imdex Limited. Should the Imdex share price be below $2 per share at that time, an additional cash payment will be made to bring the total of
cash paid and shares issued at that time to $10 million. At the General Meeting of Shareholders held on 30 April 2007 the shareholders approved
the future issue of these shares to the vendors of Flexit. The deferred consideration has been recorded at $6,700,000 based on the Company's
analysis of the fair value of the consideration at acquisition date.
(v) Had the acquisition of Flexit been effected on 1 July 2006, the beginning of the financial year, the Flexit financial results included in the Imdex
consolidated results would have been revenue of approximately $9.2 million and profit of approximately $1.0 million. The results of Flexit are
included in the Drilling Products & Services segment. The Board considers these 'pro-forma' numbers to represent an approximate measure of the
performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.
Page 53 of 73
7 2
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
26
Acquisition of Businesses (continued)
(b) Acquisition of entity - Reflex Holding AB
With effect from 1 August 2006, Imdex Sweden AB, a wholly owned subsidiary of Imdex Limited, acquired 100% of the issued share capital of
Reflex Holding AB (Reflex), a company incorporated in Sweden. Reflex Holding AB is the parent of a group of companies operating in South
Africa, Europe, North and South America under the "Reflex Instrument" trading name. Reflex are leading developers and suppliers of borehole
survey equipment globally. At the General Meeting of Shareholders held on 8 August 2006, the shareholders of Imdex Limited approved this
acquisition and the associated issue of the convertible note. The numbers presented below have been accounted for using the acquisition method
of accounting.
Details of the assets, liabilities and goodwill are as follows:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Trade and other receivables
Inventory
Deferred tax assets / (liabilities)
Property, plant and equipment
Goodwill
Intangibles
Other non-current assets
Trade and other payables
Fair value of net identifiable assets acquired (other than cash and cash
equivalents)
Goodwill on acquisition
Total purchase consideration
Total purchase consideration comprises
Consideration in cash and cash equivalents
Less cash and cash equivalents acquired
Convertible note raised
Bank loan raised
Deferred vendor finance - due and paid on 31 January 2007
Direct costs relating to the acquisition
(i)
(i)
(ii)
(iv)
16
3,818
1,511
405
1,566
670
-
22
(4,966)
3,026
(14)
-
(3,174)
-
(670)
11,335
(19)
487
7,945
Operating results of the Reflex consolidated group included in the Consolidated Income Statement of Imdex Limited from
acquisition on 1 August 2006 to 30 June 2007:
Operating revenue
Total expenses
Profit for the period after tax
(v)
3,804
1,511
(2,769)
1,566
-
11,335
3
(4,479)
10,971
14,623
25,594
2,884
(111)
10,400
9,955
2,000
466
25,594
Results since
acquisition
$’000
18,492
(14,626)
3,866
(i) Customer based intangible assets of $9.8 million comprise customer lists and relationships at the time of acquisition. Trade name based
intangible assets of $1.5 million represent the value to the Group of the Reflex trading name in the markets in which they operate. Deferred tax of
$3.2 million was raised on these balances. These intangibles have been valued by independent valuation professionals using the multi period
excess earnings model. Data inputs into the model were derived from internal management budgets. These intangible assets are being amortised
over their estimated useful lives of 6 years each.
(ii) Goodwill arose because the cost of the combination included a control premium paid to acquire Reflex. In addition, the consideration paid for
the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the
assembled workforce of Reflex. These benefits are not recognised separately from goodwill as the future economic benefits arising from them
cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent liabilities assumed in the acquisition.
(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2007 records the payment for the acquisition of Reflex as $15.2 million
being the total consideration of $25.6 million above less the $10.4 million convertible note.
(iv) At the General Meeting of Shareholders held on 8 August 2006 the shareholders approved the issue of a convertible note with a face value of
$10.4 million. This convertible note converted into equity on 15 February 2007. Refer to notes 16 and 18.
(v) Had the acquisition of Reflex been effected on 1 July 2006, the beginning of the financial year, the Reflex financial results included in the
Imdex consolidated results would have been revenue of approximately $20.3 million and profit of approximately $4.6 million. The results of Reflex
are included in the Drilling Products & Services segment. The Board considers these 'pro-forma' numbers to represent an approximate measure of
the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.
Page 54 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
7 3
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
26
Acquisition of Businesses (continued)
(c) Acquisition of entity - Chardec Technology Ltd (previously Chardec Consultants Ltd)
With effect from 1 August 2006, Imdex International Pty Ltd, a newly incorporated, wholly owned subsidiary of Imdex Limited acquired 100% of
the issued share capital of Chardec Technology Ltd (Chardec), a company incorporated in the United Kingdom. Chardec is a leading developer
and supplier of borehole survey equipment globally. At the General Meeting of Shareholders held on 8 August 2006, the shareholders of Imdex
Limited approved this acquisition. The numbers presented below have been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill are as follows:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Trade and other receivables
Inventory
Deferred tax assets / (liabilities)
Technology based intangibles
Contract based intangibles
Trade and other payables
Fair value of net identifiable assets acquired (other than cash and cash
equivalents)
Goodwill on acquisition
Total purchase consideration
Total purchase consideration comprises
Consideration in cash and cash equivalents
Less cash and cash equivalents acquired
Direct costs relating to the acquisition
Deferred vendor finance
(i)(ii)
(i)
(ii)
(iii)
(v)
2,111
273
3
-
-
(2,456)
-
-
(3,207)
10,265
425
-
2,111
273
(3,204)
10,265
425
(2,456)
(69)
7,483
7,414
8,319
15,733
6,203
(175)
324
9,381
15,733
Results since
acquisition
$’000
6,685
(4,281)
2,404
Operating results of Chardec included in the Consolidated Income Statement from 1 August 2006 to 30 June 2007:
Operating revenue
Total expenses
Profit for the period after tax
(vi)
(i) Technology based intangible assets of $10.3 million comprise intellectual property and technical expertise contained within the business of
Chardec at the time of acquisition. Deferred tax of $3.1 million was raised on this balance. These intangibles have been valued by independent
valuation professionals using the multi period excess earnings model. Data inputs into the model were derived from internal management
budgets. Technology based intangible assets are being amortised over their estimated useful life of 7 years.
(ii) Contract based intangible assets of $0.4 million represent the value to the Group of the 5 year employment contract signed with the vendor
and now employee of Chardec. Deferred tax of $0.1 million was raised on this balance. This contract has been valued by independent valuation
professionals using the multi period excess earnings model. Data inputs into the model were derived from internal management budgets. Contract
based intangible assets are being amortised over the term of the contract which is 5 years.
(iii) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Chardec. In
addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth,
future market development and the assembled workforce of Chardec. These benefits are not recognised separately from goodwill as the future
economic benefits arising from them cannot be reliably measured. There were no acquisition provisions created, nor were there any contingent
liabilities assumed in the acquisition.
(iv) The Consolidated Cash Flow Statement for the year ended 30 June 2007 records the payment for the acquisition of Chardec as $6.4 million
being the total consideration of $15.7 million above less deferred consideration of $9.4 million.
(v) Further purchase price instalments are due as follows: GBP 2.18 million on 31 July 2007; GBP 1.09 million on 31 July 2008 and GBP 1.045
million on 31 July 2009. In addition a revenue based earn-out may also become payable. The additional revenue based earn-out payments have
been estimated by management as totalling nil over the three years. All expected future payments have been discounted to their present values
using a discount rate of 8% per annum.
(vi) Had the acquisition of Chardec been effected on 1 July 2006, the beginning of the financial year, the Chardec financial results included in the
Imdex consolidated results would have been revenue of approximately $7.3 million and profit of approximately $2.8 million. The results of
Chardec are included in the Drilling Products & Services segment. The Board considers these 'pro-forma' numbers to represent an approximate
measure of the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.
Page 55 of 73
7 4
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
26
Acquisition of Businesses (continued)
(d) Acquisition of business - Samchem Drilling Fluids and Chemicals (Pty) Ltd
With effect from 1 August 2005, Samchem Drilling Fluids & Chemicals (Pty) Ltd (Samchem), Imdex’s 100% owned South African subsidiary,
acquired the business of SA Mud Services (Pty) Ltd and a range of clay and cement chemical additive inventory items. SA Mud Services (Pty) Ltd
was the largest supplier of drilling fluids and chemicals to the mining industry in Africa. Samchem operates a manufacturing facility in
Johannesburg, South Africa from which it manufactures and markets a wide range of chemicals primarily for the drilling industry. At the General
Meeting held on 5 August 2005, the shareholders of Imdex Limited approved this acquisition and the associated share issue. This transaction has
been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill are as follows:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Trade and other receivables
Inventory
Property, plant and equipment
Intellectual property associated with clay chemical and mud brick
manufacture
Trade and other payables
Provision for employee entitlements
Deferred tax liabilities
Fair value of net identifiable assets acquired (other than cash and cash
equivalents)
Goodwill on acquisition
Total purchase consideration
Total purchase consideration comprises
Consideration in cash and cash equivalents
Less cash and cash equivalents acquired
Direct costs relating to the acquisition
Shares issued: 16,059,002 ordinary shares of Imdex Limited
(i)
(i)
(iv)
(iv)
(ii)
1,735
1,507
373
-
(523)
(44)
-
3,048
-
-
43
1,437
-
-
(417)
1,063
Operating results of the business of Samchem included in the Consolidated Income Statement of Imdex Limited from
acquisition on 1 August 2005 to 30 June 2006:
Operating revenue
Total expenses
Profit for the period after tax
(iii)
1,735
1,507
416
1,437
(523)
(44)
(417)
4,111
2,492
6,603
2,901
-
110
3,592
6,603
Results since
acquisition
$’000
10,391
(9,969)
422
(i) Imdex acquired the business of Samchem, and paid the premium (goodwill) over identifiable assets, due to the fact that Samchem is expected
to complement the business of the Australian Mud Company (AMC) (Imdex's wholly owned drilling fluids subsidiary). There were no acquisition
provisions created, nor were there any contingent liabilities assumed in the acquisition. The balances of goodwill and intellectual property, noted
above, do not tie to the Balance Sheet. This is due to the fact that these balances are translated at the exchange rates prevailing at the reporting
date, rather than the acquisition date as above.
In determining the value attributed to identifiable intangibles and goodwill, the following additional possible intangible assets were identified:
customer relationships, brands and unpatented technology. In all cases these intangibles did not meet the “identifiability” criteria and therefore
were not recognised.
The intellectual property associated with the clay chemical and mud brick manufacture has been assessed as having an indefinite useful life and
therefore has not been amortised. This estimated useful life of these assets will be reviewed annually.
(ii) The fair value of the ordinary shares issued were 22.37 cents each which was based on the weighted average share price of Imdex's ordinary
shares in the 10 trading days prior to the completion of the acquisition.
(iii) Had the acquisition of Samchem been effected on 1 July 2005, the beginning of the prior financial year, the revenue of Samchem included in
the consolidated Imdex results for the prior year would have been approximately $11.3 million and the profit would have been approximately $0.5
million. The results of Samchem are included in the Drilling Fluids & Chemicals segment. The Board considers these 'pro-forma' numbers to
represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point for
comparison in future periods.
(iv) The Consolidated Cash Flow Statement for the year ended 30 June 2006 records the payment for the acquisition of the business of Samchem
as $3.0 million comprising cash paid at acquisition of $2.9 million and direct costs of $0.1 million.
Page 56 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
7 5
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Segment Information
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable
basis. Unallocated items mainly comprise income earning assets and interest revenue, interest bearing loans, borrowings and expenses, and
corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are
expected to be used for more than one period.
Business Segments
The Group comprises the following business segments which are based on the Group's internal management reporting system:
(i) Drilling products and services: This segment comprises the provision of down hole surveying, geophysical
services as well as the sale and rental of down hole motors, cameras and drilling products; and
(ii) Drilling fluids and chemicals: This segment comprises the manufacture and supply of drilling fluids and chemicals to the mining, mineral
exploration, oil and gas and water well drilling industries.
logging and directional drilling
Geographical Segments
The Group operates in the following geographical segments which are based on the Group's internal management reporting system:
(i) Asia Pacific: Manufacture and sale of drilling fluids and chemicals; provision of drilling services; sale and rental of drilling products
(ii) European Union: Provision of drilling services; manufacture, sale and rental of drilling products
(iii) Africa: Manufacture and sale of drilling fluids and chemicals; provision of drilling services; sale and rental of drilling products
(iv) Americas: Sale of drilling fluids and chemicals; provision of drilling services; sale and rental of drilling products
Primary reporting: Business Segments
(a) Segment Revenues
Drilling fluids and chemicals
Drilling products and services
Total of all segments
Unallocated
Total revenue
(b) Segment Results
Drilling fluids and chemicals *
Drilling products and services
Total of all segments
Eliminations
Unallocated
Profit before income tax expense
Income tax expense
Profit for the year
External revenue
2007
2006
$'000
$'000
Inter-segment
Other
Total
2007
$'000
2006
$'000
2007
$'000
2006
$'000
2007
$'000
2006
$'000
62,337
56,103
118,440
41,593
25,021
66,614
-
-
-
-
-
-
16
36
52
96
2
98
62,353
56,139
118,492
848
119,340
11,570
14,155
25,725
-
(5,313)
20,412
(6,894)
13,518
41,689
25,023
66,712
80
66,792
3,462
5,253
8,715
-
3,149
11,864
(3,880)
7,984
* - Included in the current period is a $1.1 million recovery from the RTE/Imdex Joint Venture. The prior period includes an impairment
adjustment of $2.3 million relating to the same joint venture.
(c) Segment Assets and Liabilities
Drilling fluids and chemicals
Drilling products and services
Total of all segments
Eliminations
Unallocated
Consolidated
Assets
Liabilities
2007
$'000
2006
$'000
2007
$'000
2006
$'000
33,997
101,837
135,834
-
14,012
149,846
37,808
16,255
54,063
(2,393)
1,078
52,748
10,580
34,795
45,375
-
27,857
73,232
9,492
8,588
18,080
(443)
2,458
20,095
7 6
Page 57 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Segment Information (continued)
Drilling fluids and chemicals
Drilling products and services
Total of all segments
Unallocated
Consolidated
Drilling fluids and chemicals
Drilling products and services
Total of all segments
Unallocated
Consolidated
Secondary Reporting: Geographical Segments
Asia Pacific
European Union
Africa
Americas
Total
Depreciation
Acquisition of segment
assets
Significant non cash
expenses other than
depreciation and
amortisation
2007
$'000
2006
$'000
2007
$'000
2006
$'000
2007
$'000
2006
$'000
258
3,947
4,205
163
4,368
237
2,108
2,345
86
2,431
373
7,788
8,161
433
8,594
467
4,724
5,191
104
5,295
364
364
728
707
1,435
2,305
30
2,335
301
2,636
Carrying amounts of
associates / joint
ventures
Impairment losses
Share of profits/(losses)
of associates / joint
ventures
2007
$'000
2006
$'000
2007
$'000
2006
$'000
2007
$'000
2006
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,275)
-
(2,275)
-
(2,275)
-
-
-
-
-
-
-
-
(301)
(301)
Revenue from external
customers
Segment assets
Acquisition of segment
assets
2007
$'000
2006
$'000
2007
$'000
2006
$'000
2007
$'000
2006
$'000
77,858
5,057
22,858
13,567
119,340
51,835
648
13,014
1,295
66,792
99,199
37,501
4,783
8,363
149,846
45,581
585
5,411
1,171
52,748
6,302
1,334
293
665
8,594
4,916
-
379
-
5,295
Page 58 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
7 7
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
28
Discontinued Operations
On 1 February 2005, Imdex Limited initiated an active program to dispose of the Imdex Minerals Division, its industrial minerals processing
business. The sale was one part of the Company’s strategy to focus on its core business as a global provider of “drilling products and services”.
As announced to the Australian Stock Exchange on 9 June 2005, Imdex Limited entered into a definitive agreement for the sale of the Imdex
Minerals Division with the sale being completed on 1 July 2005.
Financial information relating to the discontinued operation for the period to the date of disposal is set out below.
Consolidated
2007
$’000
2006
$’000
Notes
Profit from discontinued operations
Revenue
Expenses
Profit before income tax
Income tax expense
Profit after income tax of discontinued operations
Gain/(loss) on remeasurement to fair value less costs to sell
Gain/(loss) on sale of the division before income tax
Income tax expense
Gain/(loss) on sale of the division after income tax
Profit from discontinued operations
Cash flows from discontinued operations
Net cash inflow from ordinary activities
Net cash inflow from investing activities (including the proceeds from the
sale of the business)
Net cash inflow from financing
Carrying amounts of assets and liabilities
Property, plant and equipment
Inventories
Prepayments
Total assets classified as held for sale
Hire purchase liabilities
Employee entitlements
Total liabilities associated with assets classified as held for sale
Net assets
Details of the sale of the division
Consideration received:
Cash
Additional deferred consideration
Total disposal consideration
Carrying amount of net assets sold
Gain/(loss) on sale before income tax
Income tax expense
Gain/(loss) on sale after income tax
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,271
-
6,271
-
-
-
-
-
-
-
-
6,271
-
6,271
(6,271)
-
-
-
(i)
(i) As part of the sale agreement, Imdex Limited is entitled to a further cash payment of $1.5 million, subject to the future profitability of certain
agricultural products which, at the time of sale, were still in the early stages of development and commercialisation. This has not been recognised
in the consideration received and the gain on sale of Imdex Minerals as the probability of receiving the deferred consideration cannot be
accurately predicted at this stage. If this consideration is recognised in a future period it will increase the gain on the sale of Imdex Minerals. This
entitlement lapses on 30 June 2008. As recovery of this amount is considered to be remote, it has not been shown as a contingent asset.
7 8
Page 59 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
29
Related Party Disclosures
(a) Equity interests in related parties
Details of the percentage ownership of subsidiaries and the wholly owned Group is set out in Note 25. The wholly owned Group consists of Imdex
Limited and its wholly owned subsidiaries.
(b) Transactions with key management personnel
(i) Key management personnel compensation
Details key management personnel compensation is set out in Note 32.
(ii) Loans to key management personnel
No loans were made during the current or prior years to key management personnel or their related parties.
(iii) Fully paid ordinary shares issued by Imdex Limited
2007
Balance at
1 July 2006
Granted as
compensation
Received on
exercise of
options
Cession as key
management
person
Net other
change
Balance at 30
June 2007
Balance held
nominally
Mr I F Burston
Mr B W Ridgeway
Mr H H Al-Merry
Mr R W Kelly
Mr K A Dundo
Mr I R Freeman
Mr M Lemmel *
Mr G E Weston
Mr D J Loughlin
Mr S J Lyons
Mr P A Evans
Mr D L Kinley
Mr C S Munyard
No.
200,000
5,000,000
755,000
265,000
300,000
16,059,002
-
-
-
50,000
-
120,000
25,000
22,774,002
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
-
-
-
-
-
500,000
-
-
-
-
-
-
-
-
-
(50,000)
-
(120,000)
(25,000)
(195,000)
No.
60,000
(1,500,000)
(755,000)
-
-
(16,059,002)
400,000
(500,000)
10,000
-
5,000
-
-
(18,339,002)
No.
260,000
3,500,000
-
265,000
300,000
-
400,000
-
10,000
-
5,000
-
-
4,740,000
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* - Represent on market transactions after appointment as a director. Mr M Lemmel's shareholding at the date of becoming a director was nil.
It should be noted that Mr S J Lyons resigned on 17 October 2006, Mr D L Kinley ceased to be a key management person on 17 October 2006 and Mr C
S Munyard ceased to be a key management person on 1 September 2006. Accordingly, the movement in equity holdings disclosed reflects only those
movements which took place during the period that these persons were key management persons. The balance of securities held as at 30 June 2007 is
nil as they are no longer key management persons and therefore the net change shown in the table above is not as a result of the sale of any securities
whilst being a key management person.
2006
Balance at
1 July 2005
Granted as
compensation
Received on
exercise of
options
Cession as key
management
person
Net other
change
Balance at 30
June 2006
Balance held
nominally
Mr I F Burston
Mr B W Ridgeway
Mr H H Al-Merry
Mr R W Kelly
Mr K A Dundo
Mr I R Freeman
Mr J P O'Neil
Mr S J Lyons
Mr D L Kinley
Mr G E Weston
Mr C S Munyard
No.
100,000
6,025,000
755,000
65,000
100,000
-
-
50,000
120,000
-
-
7,215,000
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
No.
100,000
(1,025,000)
-
200,000
200,000
16,059,002
12,847,202
-
-
-
-
28,381,204
No.
200,000
5,000,000
755,000
265,000
300,000
16,059,002
12,847,202
50,000
120,000
-
25,000
35,621,204
No.
-
-
-
-
-
-
-
-
-
-
-
-
Page 60 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
7 9
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
29
Related Party Disclosures (continued)
(iv) Share options issued by Imdex Limited
2007
Balance at 1
July 2006
Granted as
compensation
Exercised Cession as key
management
person
Balance at
30 June
2007
Vested but
not
exercisable
Vested and
exercisable
Options
vested
during year
Mr I F Burston
Mr B W Ridgeway
Mr H H Al-Merry
Mr R W Kelly
Mr K A Dundo
Mr I R Freeman
Mr M Lemmel
Mr G E Weston
Mr D J Loughlin
Mr S J Lyons
Mr P A Evans
Mr D L Kinley
Mr C S Munyard
No.
-
2,000,000
-
-
-
-
-
3,000,000
-
200,000
-
200,000
125,000
5,525,000
No.
No.
No.
1,000,000
-
-
-
-
-
-
-
500,000
-
300,000
-
-
-
-
-
-
-
-
-
(500,000)
-
-
-
-
-
1,800,000
(500,000)
No.
1,000,000
2,000,000
-
-
-
-
-
2,500,000
500,000
-
-
-
-
-
-
-
-
-
(200,000)
-
-
300,000
(200,000)
(125,000)
(525,000)
-
-
6,300,000
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,166,667
-
-
-
-
-
1,166,667
1,000,000
-
16,667
-
33,333
25,000
1,075,000
It should be noted that Mr S J Lyons resigned on 17 October 2006, Mr D L Kinley ceased to be a key management person on 17 October 2006
and Mr C S Munyard ceased to be a key management person on 1 September 2006. Accordingly, the movement in share options disclosed
reflects only those movements which took place during the period that these persons were key management persons. The balance of options held
as at 30 June 2007 is nil as they are no longer key management persons and therefore the net change shown in the table above is not as a result
of the any transaction whilst being a key management person.
2006
Balance at 1
July 2005
Granted as
compensation
Exercised Cession as key
Mr I F Burston
Mr B W Ridgeway
Mr H H Al-Merry
Mr R W Kelly
Mr K A Dundo
Mr I R Freeman
Mr J P O'Neil
Mr S J Lyons
Mr D L Kinley
Mr G E Weston
Mr C S Munyard
No.
-
-
-
-
-
-
-
50,000
100,000
2,000,000
75,000
2,225,000
No.
-
2,000,000
-
-
-
-
-
150,000
100,000
1,000,000
75,000
3,325,000
No.
-
-
-
-
-
-
-
-
-
-
(25,000)
(25,000)
management
person
No.
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
30 June
2006
Vested but
not
exercisable
Vested and
exercisable
Options
vested
during year
No.
-
2,000,000
-
-
-
-
-
200,000
200,000
3,000,000
125,000
5,525,000
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,667
33,333
666,667
-
716,667
No.
-
-
-
-
-
-
-
16,667
33,333
666,667
25,000
741,667
Options granted to D J Loughlin and P A Evans during the financial year were made in accordance with the Staff Option Plan, as further described
in Note 33. Options granted to I F Burston were approved by the shareholders at the 2006 Annual General Meeting on 19 October 2006. Each
share option converts into 1 ordinary share of Imdex Limited. No amounts were paid, or are payable, by the recipient on receipt of the option. The
options issued to D J Loughlin and P A Evans are exercisable in one third lots at the end of each of the first three years during their life. The
options issued to I F Burston are exerciseable at any time after 2 years from the date of issue until their expiry.
A total of 500,000 options were exercised by key management persons during the year. The exercise price was 20c per share. No amounts remain
unpaid on the options exercised during the financial year at year end.
8 0
Page 61 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
29
Related Party Disclosures (continued)
(v) Other transactions with key management personnel (and their related parties) of Imdex Limited
(a) Lot 1598 Willis Street, Newman was rented by Surtron Technologies Pty Ltd from Mr G E Weston on normal commercial terms and conditions for the
period 1 July 2005 to 16 January 2006. Total rental cost arising from this arrangement in the current year was nil (2006: $12,600)
(b) An amount of $ nil (2006: R2,364,160 or A$443,516) was owed to Samchem Drilling Fluids & Chemicals (Pty) Ltd, a wholly owned Imdex Limited
subsidiary, by Quadripart Investment Holdings (Pty) Ltd, a company in which Mr I R Freeman has an interest. This loan does not carry interest and has
no specific terms and conditions. Refer Note 7. Mr I R Freeman was a non-executive director of Imdex Limited from the beginning of the financial year
until his resignation on 10 April 2007.
(c) The premises on which the administration and factory buildings of Samchem Drilling Fluids & Chemicals (Pty) Ltd are located in Alrode, Alberton,
South Africa are leased on normal commercial terms and conditions from PTS Investments (Pty) Ltd and Basalt Properties (Pty) Ltd, companies in
which Mr I R Freeman has an interest. Mr I R Freeman was a non-executive director of Imdex Limited from the beginning of the financial year until his
resignation on 10 April 2007. Total lease cost arising from this arrangement was $129,460 (2006: $117,375)
(d) Mr K A Dundo is a Partner of the legal firm QLegal, that provided legal services to the Imdex Group on normal commercial terms and conditions.
Total legal costs arising from Qlegal were $208,785 (2006: $111,331)
(e) Imdex Limited was involved in a Joint Venture with Rashid Trading Establishment (RTE), a Company in which Mr H H Al-Merry is the President and
Owner. RTE also acts as the agent of the Joint Venture in some circumstances. No amounts were recognised during the year relating to transactions
between the Company and RTE as agent. During the prior year the investment balance in the Joint Venture of $1,400,000 (parent: $2,585,000) and the
receivable balance due from RTE of $875,000 (parent: $875,000) were considered to be fully impaired. The impairment adjustment is shown on the face
of the income statement in the prior period. During the current year $1,121,246 was received from RTE, $308,888 in payment for Imdex's 20% share in
the Imdex Arabia and $812,358 in full recovery of the receivable previously considered impaired after a $62,642 foreign exchange movement. Refer
note 4.
(f) Transactions with Directors
Profit from ordinary activities before income tax includes the following
items of
income and expenses relating to transactions, other than
compensation, with Directors or their related entities:
Other income
Operating lease rental expense
Legal services expense
Impairment adjustment
Total assets arising from transactions, other than compensation, with
Directors or their related entities:
Note
v(e)
v(a) v(c)
v(d)
v(e)
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
- 1,121,246
1,121,246
129,460 117,375
31,281 25,604 31,281 25,604
- 3,460,000
- 2,275,000
-
- -
Goodwill and intercompany loans (parent: acquisiton costs)
v(d)
177,504 85,727 177,504 85,727
Total assets and liabilities arising from transactions, other than
compensation, with Directors or their related entities:
Current Assets
Current Liabilities
(c) Transactions with other related parties
(i) Transactions within the wholly-owned Group
v(b)
v(c) v(d)
- 443,516
- 54,554
- -
- 34,196
Details of dividend revenue received by the ultimate parent entity is disclosed in Note 4. Amounts receivable from entities in the wholly-owned Group
are disclosed in Note 9. During the financial year Imdex Limited provided management services amounting to $1,363,000 (2006: $1,020,000) to entities
in the wholly-owned Group as disclosed in Note 4.
(d) Parent entity
The ultimate parent entity in the Group is Imdex Limited, a Company incorporated in Western Australia.
Page 62 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
8 1
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
30
Notes to the Cash Flow Statement
(a) Reconciliation of cash and cash equivalents
For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and in banks and investment in money
market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the year as shown in the Cash Flow Statement
is reconciled to the related items in the balance sheet as follows:
Cash and cash equivalents
Bank overdraft
Consolidated
Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
15,271
-
15,271
6,421
-
6,421
962
-
962
2,003
-
2,003
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents is
$15,271,482 (2006: $6,420,802)
(b) Non cash financing and investing activities
During the year the Group acquired $1.1 million (2006: $1.4 million) of equipment under a finance lease. This acquisition will be reflected in the
cash flow statement over the term of the finance lease via lease repayments.
(c) Reconciliation from the Profit for the Year to Net Cash Provided by Operating Activities
Consolidated
Company
2007
$’000
2006
$’000
2007
$’000
2006
$’000
13,518
7,984
9,866
1,178
Profit for the year
Adjustments for non-cash items
Depreciation of non-current assets
Amortisation of intangible assets
Share of associates losses
Non-cash interest on deferred payments
Interest earned on intercompany accounts
Interest received disclosed as investing activities
Share options expensed
Profit on sale of non-current assets
Interest on hire purchase liabilities
Fair value adjustment: Held for Trading investments
Impairment adjustment
Proceeds from Rashid Trading Establishment shown as
investing activities
Increase / (decrease) in current tax liability
Increase in deferred tax balances
Changes in assets and liabilities during the financial year
(Increase) / decrease in assets:
Current receivables
Current inventories
Other current assets
Increase / (decrease) in liabilities:
Current payables
Provision for employee entitlements
4,368
3,430
-
707
-
(267)
728
(76)
225
-
-
(1,121)
4,584
(3,082)
(3,169)
(1,791)
(212)
(2,305)
604
2,431
-
301
-
-
(97)
59
(76)
210
(4,500)
2,275
-
1,528
556
(4,851)
(1,284)
18
5,370
150
Net Cash Provided by Operating Activities
16,141
10,074
8 2
2,269
-
-
-
(1,999)
(217)
728
(2,200)
57
-
-
(1,121)
3,477
(23)
(6,876)
(1,004)
(45)
2,459
152
5,523
1,268
-
-
-
-
(82)
59
(38)
40
(4,199)
3,460
-
67
1,262
(1,772)
(158)
11
585
44
1,725
Page 63 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
30
Notes to the Cash Flow Statement (continued)
(d) Financing facilities
Total facilities available
Bank loan
Commercial bills
Equipment finance facility
Multi option facility (including bank overdraft)
Facilities utilised at balance sheet date
Bank loan
Commercial bills
Equipment finance facility
Multi option facility (including bank overdraft)
Facilities not utilised at balance sheet date
Bank loan
Commercial bills
Equipment finance facility
Multi option facility (including bank overdraft)
31
Financial Instruments
(a) Financial risk management objectives
15,484
12,300
2,591
2,522
32,897
15,140
12,300
2,407
-
29,847
344
-
184
2,522
3,050
1,870
-
-
1,130
3,000
-
-
-
-
-
1,870
-
-
1,130
3,000
-
12,300
633
2,020
14,953
-
12,300
449
-
12,749
-
-
184
2,020
2,204
1,870
-
-
1,110
2,980
-
-
-
-
-
1,870
-
-
1,110
2,980
The Group’s corporate treasury function provides services to the business, co-ordinates access to domestic and international markets,
monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures
by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk),
credit risk, liquidity risk and cash flow interest rate risk.
The corporate treasury function reports quarterly to the Board who monitor risks and policies implemented to mitigate risk exposures.
(b) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and
the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in note 2 to the financial statements.
(c) Foreign currency risk management
The group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters. Approved exchange rate policy allows the use of currency
management instruments where benefit exceeds cost. In all other cases exchange rates are managed within approved ranges, outside
of which the Group seeks to pass gains/losses on to customers and suppliers.
(d) Interest rate risk management
The Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed by
maintaining an appropriate mix between fixed and floating rate borrowings. The following table details the Group’s exposure to interest
rate risk.
Page 64 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
8 3
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
31
Financial Instruments (continued)
Notes Weighted
average
effective
interest rate
Floating
interest
rate
Less
than 1
year
Fixed Interest Maturing in:
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
5+ years
Total
Non-
interest
bearing
%
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
2007
Financial Assets
Cash and cash
equivalents
Receivables
Other
Financial Liabilities
Payables
Commercial bills
Bank loans
Hire purchase liabilities
Deferred acquisition
payments
Other borrowings
Employee entitlements
2006
Financial Assets
Cash and cash
equivalents
Receivables
Other
Financial Liabilities
Payables
Hire purchase liabilities
Employee entitlements
30
7
9,10,11
2.50%
-
13.50%
15
16
16
16
16
16
(i) 17
30
7
9, 10
15
16
(i) 17
-
8.54%
4.40%
7.60%
8.00%
5.15%
5.97%
4.10%
-
-
-
7.56%
5.97%
15,271
-
-
15,271
-
12,300
15,140
-
-
-
-
27,440
6,421
-
-
6,421
-
-
11,556
11,556
-
-
-
1,443
5,373
335
-
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-
-
-
-
-
-
-
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1,391
-
1,391
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-
-
-
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-
-
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-
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-
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2,494
146
-
3,367
2,221
17
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2,475
-
-
-
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-
986
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258
-
258
-
-
-
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4
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4
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172
-
172
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27,806
5,164
32,970
16,741
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18,401
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4,624
23,422
13,629
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17,579
(i) Employee entitlements to be settled in cash fall under the definition of financial liabilities. The weighted average interest rate is the discount
rate used to calculate Long Service Leave Liability.
(e) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group
has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of
mitigating the risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.
Trade accounts receivable consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing
credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit guarantee insurance cover is
purchased. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having
similar characteristics. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses,
represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.
(f) Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on
discounted cash flow analyses. The financial statements include holdings in unlisted shares which were measured at fair value in the prior
year. Details of the determination of this fair value is contained in note 9. The Directors consider that the carrying amount of financial assets
and financial liabilities recorded at amortised cost in the financial statements approximates their fair values.
(g) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board, who has built an appropriate liquidity risk management framework
for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages
liquidity risk by maintaining adequate reserves banking facilities and reserve borrowing facilities by continuously monitoring forecast and
actual cash flows and matching the maturity profiles of financial assets and liabilities.
Page 65 of 73
8 4
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Key Management Personnel Compensation
(a) Details of key management personnel
The key management personnel of Imdex Limited during the year were:
Mr I F Burston (Independent, Non Executive Chairman)
Mr B W Ridgeway (Managing Director)
Mr H H Al-Merry (Non Executive Director), office vacated 18 August 2006
Mr R W Kelly (Independent, Non Executive Director)
Mr K A Dundo (Independent, Non Executive Director)
Mr I R Freeman (Non Executive Director), appointed 23 August 2005, resigned 10 April 2007
Mr M Lemmel (Non Executive Director), appointed 19 October 2006
Mr G E Weston (Group General Manager)
Mr D J Loughlin (General Manager: Products and Services Division), appointed 1 September 2006
Mr S J Lyons (Company Secretary), resigned 17 October 2006
Mr P A Evans (Company Secretary and Chief Financial Officer), appointed 17 October 2006
Mr D L Kinley (Group Financial Controller), ceased to be a key management person on 17 October 2006
Mr C S Munyard (Manager: Surtron), ceased to be a key management person on 1 September 2006.
(b) Key management personnel compensation policy
The Board seeks the approval of Shareholders in relation to the aggregate of Non Executive Directors’ remuneration and any options
that may be granted to Directors. The remuneration for Non Executive Directors is reviewed from time to time, with due regard to current
market rates. The remuneration for Non Executive Directors is not linked to the Company’s performance. Other than statutory
superannuation, no Non Executive Director is entitled to any additional benefits on retirement from the Company.
The Managing Director’s remuneration is determined by the Remuneration Committee with due regard to current market rates. The
Managing Director has a short term incentive bonus amounting to 20% of his cash compensation package. Of this bonus, 75% is
payable on achievement of the FY07 EBIT budget by Group companies and 25% on the purchase of Flexit AB prior to 30 June 2007.
The Remuneration Committee set these performance hurdles as the achievement of Group EBIT and purchase of Flexit AB are closely
linked to Imdex’s increased growth and profitability and hence shareholder value. The balance of his compensation package for the
current year is not linked to the Group’s performance. From time to time options may be issued to the Managing Director as an
additional performance incentive. The portion of the Managing Director’s compensation package that comprises options is linked to the
Company’s performance. The issue of any such options requires the approval of Shareholders in General Meeting. No such options
were granted to the Managing Director in the current year.
All Executives, and all staff of the Company, are subject to formal annual reviews of their performance. The remuneration of Executives
comprises a fixed monetary total, not linked to the performance of the Company, although bonuses related to the performance of the
Company may be agreed between that Executive and the Company from time to time.
The remuneration policy for the Managing Director is linked to the Company’s performance as an additional incentive to build
shareholder value. The remuneration of Non Executive Directors is not linked to the Company’s performance except as noted below, in
order to preserve their independence. The increase in the net profits of the Company and hence the increase in shareholder value over
the last five years is indicative of the success of this policy.
Management of the Company believes that in order to retain quality Non Executive Directors on the Board, some incentive to maintain
their future involvement, commitment and loyalty to the Company, is required on certain occasions, over and above nominal Directors'
fees. To this end, a total of 1,000,000 options were issued during the current year to Mr Ian Burston, a Non Executive Director, who has
been a member of the Board of the Company (and Chairman) for 5 years. Management of the Company intends that these options will
operate as an incentive for Mr Burston to assist in the future performance and growth of the Company. Management of the Company
acknowledge the valuable contribution that Mr Burston has made and is expected to make to the Company in the future. The Company
is mindful of
the ASX Corporate Governance Council's (Principles of Good Corporate Governance and Best Practice
Recommendations) recommendation that Non Executive Directors should not be remunerated via the issue of options. However as
noted above, the Company regards the incentive created to Non Executive Directors by allowing them the opportunity to share in the
growth of the Company via the issue of the Options (and thereby assist in the future performance and growth of the Company) to be
aligned to and consistent with long-term benefit to investors in achieving such growth. The issue of these options was approved by the
shareholders at the 2006 Annual General Meeting on 19 October 2006.
Key management personnel compensation
The aggregate compensation of the key management personnel of the Group and the Company is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Consolidated
Company
2007
$
2006
$
2007
$
2006
$
1,412,941
93,068
34,785
-
208,952
1,749,746
1,399,249
86,041
28,075
-
23,306
1,536,671
1,150,003
72,022
20,020
-
208,952
1,450,997
882,514
48,531
4,789
-
9,768
945,602
The compensation of each member of the key management personnel of the Group is set out on the following page:
Page 66 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
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8 6
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Key Management Personnel Remuneration (continued)
(i) The Managing Director, Mr B W Ridgeway does not, currently, have a service contract with the Company. The Managing Director’s
compensation is reviewed and determined by the Remuneration Committee.
During the current year Mr B W Ridgeway earned a bonus of $75,000, representing 75% of the possible bonus payable for the year.
This bonus was paid on the satisfaction of two out of three criteria linked to current year audited EBIT and one out of one acquisition
related criteria. During the prior year a bonus of $50,000 was earned, representing 67% of the possible bonus payable for that year.
This bonus was paid on the satisfaction of two out of three criteria linked to prior year audited EBIT.
No options were granted to Mr Ridgeway in the current year. In the prior year, following approval by members in General Meeting, Mr
Ridgeway was granted 2,000,000 options. The options carry no rights to dividends and no voting rights. They expire on their expiry date
or three calendar months after ceasing to be a Director, and may be exercised after 2 years and at any time to their expiry date. The
percentage of the value of prior year compensation that consisted of options was 2.2%.
(ii) Mr H H Al-Merry is the President and owner of Rashid Trading Establishment (RTE), which was involved in a Joint Venture with
Imdex Limited in the Middle East. Mr Al-Merry is remunerated directly by the RTE/Imdex Joint Venture. None of the remuneration
received from the Joint Venture is in relation to work done for Imdex. Mr Al-Merry’s office was vacated on 18 August 2006.
(iii) Mr G E Weston is party to a service contract with the Australian Mud Company Pty Ltd, which sets out a fixed compensation
package, reviewable annually. The service contract stipulates a 12 month notice period in the event that the contract is terminated.
There are no termination benefits specified in this contract. Performance incentives may be agreed between Mr Weston and the
Australian Mud Company Pty Ltd from time to time. Additionally, Mr Weston is party to a deed with Imdex Limited, in respect of which Mr
Weston has a right of first refusal in the event that Imdex receives an offer to purchase 100% of the shares held by Imdex in the
Australian Mud Company Pty Ltd. This ‘right’ lapses automatically should Mr Weston no longer be employed by the Australian Mud
Company Pty Ltd.
During the current year Mr G E Weston was entitled to a bonus of $70,000 that was linked to the satisfaction of current year audited
EBIT figures. None of the required performance hurdles were achieved in the current year. During the prior year Mr G E Weston earned
a bonus of $20,000, representing 29% of the possible bonus payable for that year. This bonus was paid on the satisfaction of one out of
two criteria linked to current year audited EBIT. No options were granted to Mr Weston in the current year. In the prior year, Mr Weston
was granted 1,000,000 options under Staff Option Tranche 2, along with other staff of the Group, under the Staff Option Scheme as set
out in Note 33. The percentage of the value of prior year compensation that consisted of options was 3.9%.
(iv) Mr D J Loughlin is a party to a service contract with Imdex Limited, which sets out a fixed compensation package reviewable
annually. The service contract specifies a three month notice period in the event that the contract is terminated. There are no
termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Loughlin and Imdex Limited
from time to time.
In the current year, Mr Loughlin was granted 500,000 options, under Staff Option Tranche 3, along with other staff of the Group, under
the Staff Option Scheme as set out in Note 33. The percentage of the value of compensation that consisted of options was 24%.
(v) Mr P A Evans is a party to a service contract with Imdex Limited, which sets out a fixed compensation package reviewable annually.
The service contract specifies a one month notice period in the event that the contract is terminated. There are no termination benefits
specified in this contract. Additional performance incentives may be agreed between Mr Evans and Imdex Limited from time to time.
During the current year Mr P A Evans earned a bonus of $20,000, representing 67% of the possible bonus payable for the year. This
bonus was paid on the satisfaction of one out of one criteria linked to current year audited EBIT and nil out of one systems based
criteria. In the current year, Mr Evans was granted 300,000 options, under Staff Option Tranche 4, along with other staff of the Group,
under the Staff Option Scheme as set out in Note 33. The percentage of the value of compensation that consisted of options was 14%.
(vi) Mr S J Lyons was party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable annually.
The service contract specifies a two month notice period in the event that the contract is terminated. There are no termination benefits
specified in this contract. Additional performance incentives may be agreed between Mr Lyons and the Company from time to time. Mr
Lyons resigned on 17 October 2006.
During the prior year Mr S J Lyons earned a bonus of $3,900, representing 50% of the possible bonus payable for that year. This bonus
was paid on the satisfaction of one out of two criteria linked to current year audited EBIT. No options were granted to Mr Lyons in the
current year. In the prior year, Mr Lyons was granted 150,000 options, under Staff Option Tranche 2, along with other staff of the Group,
under the Staff Option Scheme as set out in Note 33. The percentage of the value of prior year compensation that consisted of options
was 0.8%.
(vii) Mr D L Kinley is a party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable
annually. The service contract specifies a one month notice period in the event that the contract is terminated. There are no termination
benefits specified in this contract. Additional performance incentives may be agreed between Mr Kinley and the Company from time to
time. Mr D L Kinley ceased to be a key management member on 17 October 2006 following the appointment of Mr P A Evans as
Company Secretary and Chief Financial Officer on that date.
In the prior year, Mr Kinley was granted 100,000 options, under Staff Option Tranche 2, along with other staff of the Group, under the
Staff Option Scheme as set out in Note 33. The percentage of the value of prior year compensation that consisted of options was 0.6%.
Page 68 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
8 7
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Key Management Personnel Remuneration (continued)
(viii) Mr C S Munyard is a party to a service contract with Surtron Technologies Pty Ltd, which sets out a fixed compensation package
reviewable annually. The service contract specifies a one month notice period in the event that the contract is terminated. There are no
termination benefits specified in this contract. Additional performance incentives may be agreed between Mr Munyard and Surtron
Technologies Pty Ltd from time to time. Mr C S Munyard ceased to be a key management member on 1 September 2006 following the
appointment of Mr D J Loughlin as General Manager: Products and Services Division on that date.
In the prior year, Mr Munyard was granted 75,000 options, under Staff Option Tranche 2, along with other staff of the Group, under the
Staff Option Scheme as set out in Note 33. The percentage of the value of prior year compensation that consisted of options was 0.3%.
33
Staff Option Scheme
(a) Share Based Payment Arrangements
Staff Option Plan
The Group has in place a Staff Option Scheme (Scheme) to reward employees (including Key Management Personnel) for their past
services as well as to provide an incentive for future efforts. The terms and conditions of the Scheme are set out in the Scheme Rules
with the Board of Directors responsible for the administration of the Scheme. The options carry no rights to dividends and no voting
rights. The options expire on their expiry date. The number of options granted to staff is generally based on an assessment of the
performance of that staff member as determined by the Board of Directors. Staff are only eligible to receive options when they have
been with the Company in excess of 12 months. Options expire when the option holder ceases to be employed by the Group. As at 30
June 2007 a total of 3,006,111 of these options had vested.
Chairman’s Options
During the current year options were issued to the Chairman as a reward for past performance and as an incentive for the future. These
options have been approved by members in General Meeting. The options carry no rights to dividends and no voting rights. The options
expire on their expiry date or when ceasing to be a Director, and may be exercised after 2 years at any time to their expiry date. As at
30 June 2007 none of these options had vested.
Managing Director’s Options
During the prior year options were issued to the Managing Director as a reward for past performance and as an incentive for the future.
The options carry no rights to dividends and no voting rights. As at 30 June 2007 none of these options had vested.
Corporate Advisors Options
During the prior year options were issued to Corporate Advisors of the Company as a reward for past performance and as an incentive
for the future. The options carry no rights to dividends and no voting rights. As at 30 June 2007 all of the options had vested.
(b) The following share based payment arrangements were in existence during the current and comparative periods:
2007
Issue Date
Expiry
Date
Exercise
Price
Fair Value
at Grant
$
Date
Opening
balance
Number of Options
Exercised
current year
Lapsed
current year
Closing
balance
Issued
current
year
Staff Options
Tranche 1 (i)
Tranche 2 (i)
Tranche 3 (i)
Tranche 4 (i)
Tranche 5 (i)
31-Jul-09 0.20
1-Aug-04
1-Feb-06
31-Jan-11 0.35
23-Feb-07 22-Feb-12 0.75
23-Feb-07 22-Feb-12 1.00
12-Jun-07 11-Jun-12 1.80
$
0.01
0.02
0.56
0.48
0.51
3,048,333
2,660,000
- 700,000
- 4,575,000
- 675,000
- (937,832) (20,000)
- (428,428) (41,667)
2,090,501
2,189,905
- - 700,000
- (150,000)
4,425,000
- - 675,000
Chairmans Options
Tranche 1 (ii)
19-Oct-06
18-Oct-11 0.75
0.35
- 1,000,000
- - 1,000,000
Managing Directors' Options
Tranche 1 (iii)
15-Sep-05 14-Sep-10 0.30
0.01
2,000,000
- - - 2,000,000
Corporate Advisors Options
Tranche 1 (iv)
Tranche 2 (v)
Tranche 3 (iv)
23-Dec-04
31-Jul-09 0.20
23-Dec-04 31-Oct-07 0.20
23-Dec-04 31-Oct-07 0.35
0.03
0.02
0.01
8 8
- (100,000)
100,000
- (2,000,000)
2,000,000
1,000,000
- (1,000,000)
10,808,333 6,950,000 (4,466,260) (211,667)
- -
- -
- -
13,080,406
Page 69 of 73
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
33
Staff Option Scheme (continued)
2006
Issue Date
Expiry
Date
Exercise
Price $
Fair Value
at Grant
Date
$
Opening
balance
Issued
current
year
Number of Options
Exercised
current year
Lapsed
current year
Closing
balance
Staff Options
Tranche 1 (i)
Tranche 2 (i)
1-Aug-04
1-Feb-06
31-Jul-09 0.20
31-Jan-11 0.35
0.01
0.02
3,160,000
- 2,680,000
- (51,667) (60,000)
- (20,000)
3,048,333
2,660,000
Managing Directors' Options
Tranche 1 (iii)
15-Sep-05 14-Sep-10 0.30
Corporate Advisors Options
Tranche 1 (iv)
Tranche 2 (v)
Tranche 3 (iv)
31-Jul-09 0.20
23-Dec-04
23-Dec-04 31-Oct-07 0.20
23-Dec-04 31-Oct-07 0.35
0.01
- 2,000,000
- - 2,000,000
0.03
0.02
0.01
100,000
2,000,000
1,000,000
6,260,000 4,680,000 (51,667) (80,000)
- - - 100,000
- - - 2,000,000
- - - 1,000,000
10,808,333
(i) Excercisable in one third lots in each year commencing one year after issue.
(ii) Expire on their expiry date or when ceasing to be a Director, and may be exercised after 2 years at any time to their expiry date.
(iii) Expire on their expiry date or 3 months after ceasing to be a Director, and may be exercised after 2 years at any time to their expiry
(iv) Exercisable at any time up to expiry.
(v) Exercisable at any time after Imdex shares trade at 30 cents for 5 consecutive trading days. This condition has been satisfied.
(c) Fair value of options granted during the financial year
The weighted average fair value of the share options granted during the financial year is $0.47 (2006: $0.02). Options were priced using
a Black-Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s
best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached
to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility trends.
2007
Inputs into the model
Grant date share price ($)
Exercise price ($)
Expected volatility
Option life (years)
Marketability discount
Risk-free interest rate
Dividend yield
2006
Inputs into the model
Grant date share price ($)
Exercise price ($)
Expected volatility
Option life (years)
Marketability discount
Risk-free interest rate
Dividend yield
Chairmans Options
Tranche 1
Staff Options
Tranche 3
Staff Options
Tranche 4
Staff Options
Tranche 5
1.08
1.00
50%
5.00
0%
6.00%
2.30%
1.40
1.80
50%
5.00
0%
6.38%
2.30%
0.80
0.75
50%
5.00
0%
5.89%
2.30%
1.08
0.75
50%
5.00
0%
6.00%
2.30%
Managing Directors
Options
Tranche 1
Staff Options
Tranche 2
0.25
0.30
9%
5.00
40%
5.50%
0.00%
0.20
0.35
9%
5.00
40%
5.75%
0.00%
Page 70 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
8 9
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
33
Staff Option Scheme (continued)
(d) Exercised during the financial year
2007
Option Series
Staff Options Tranche 1
Staff Options Tranche 2
Corp Advisor Tranche 1
Corp Advisor Tranche 2
Corp Advisor Tranche 3
2006
Option Series
Staff Options Tranche 1
Staff Options Tranche 1
Staff Options Tranche 1
Number
Exercised
Exercise
Date
Weighted Average
Share Price at
Exercise Date
937,832
428,428
100,000
2,000,000
1,000,000
4,466,260
Various
Various
24-Nov-06
Various
Various
0.97
0.97
0.78
0.74
0.77
Number
Exercised
Exercise
Date
Share Price at
Exercise Date
16,667
25,000
10,000
51,667
15-Nov-05
1-Feb-06
29-Jun-06
0.30
0.41
0.58
(e) Balance at end of the financial year
The share options outstanding at the end of the financial year had a weighted average exercise price of $0.67 (2006: $0.28), and a weighted average
remaining contractual life of 1398 days (2006: 796 days)
34
Subsequent Events
Effective 1 July 2007 Imdex Limited acquired 100% of the issued share capital of the Canadian based Poly-Drill Drilling Systems Ltd
(Poly-Drill) for a total of $3.5 million. The purchase price was settled by way of $1.75 million cash and 1,212,751 fully paid ordinary
shares in Imdex Limited with a fair value of $1.75 million. The issue price of the Imdex shares was the weighted average share price on
the 5 business days prior to 1 July 2007. The issued shares are under a voluntary escrow until 30 June 2008. Poly-Drill manufactures
and sells polymer drilling fluid based systems and solids control systems. Additional disclosures with respect to this acquisition are
impractical at this stage as the acquisition accounting is still being finalised.
Effective 1 July 2007, Imdex Limited acquired 75% of the issued share capital of Suay Energy Services LLP (Suay), a private company
incorporated in Kazakhstan. The purchase price was US$0.4 million (A$0.5 million) payable in cash. Of this amount US$0.2 million
(A$0.2 million) was paid in May 2007 with the balance paid on settlement. Imdex Limited has the right to acquire the remaining 25%
interest at fair value. Suay supply drilling fluids and chemicals to the oil and gas industry in the Caspian Sea region. Additional
disclosures with respect to this acquisition are impractical at this stage as the acquisition accounting is still being finalised.
On 31 July 2007 Imdex Limited paid the next deferred settlement instalment of GBP 2.2 million ($5.4 million) due to the vendors of
Chardec Technology Limited.
On 3 August 2007, a Heads of Agreement was signed to acquire Southernland S.A., a drilling fluids and chemicals manufacturer and
distributor based in Santiago, Chile. The purchase price is US$2.6 million, with 50% payable in cash on settlement and 50% to be paid
in fully paid ordinary shares in Imdex Limited to be escrowed for two years from the date of settlement. The shares will be issued at the
weighted average closing price of the 5 days immediately prior to settlement. The proposed settlement date is 1 October 2007. The
acquisition of Southernland S.A. provides the Imdex Group with manufacturing capability in Chile in order to access the growing Central
and Southern American markets. Additional disclosures with respect to this acquisition are impractical at this stage as the due diligence
process and acquisition accounting are still being finalised.
Subsequent to year end the Directors declared a 1.5 cent per share fully franked dividend with an entitlement date of 5 October 2007
and a payment date of 17 October 2007. The effect of this dividend has not been reflected in this financial report.
9 0
Page 71 of 73
IMDEX LIMITED
and its controlled entities
ADDITIONAL STOCK EXCHANGE INFORMATION
AS AT 13 AUGUST 2007
(a)
Distribution of Shareholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Holding less than a marketable parcel
(b)
Substantial Shareholders
Ordinary Shareholders
Fiberform Vinidic Holding AB
ANZ Nominees Limited
J P Morgan Nominees Australia Limited
Fully Paid
Ordinary
Shares
Options
238
1,044
730
1,239
138
3,389
36
-
-
9
95
22
126
-
Fully Paid
Number
Percentage
20,800,000
12,051,399
9,952,463
11.47%
6.65%
5.49%
(c)
Twenty Largest Holders of Quoted Equity Securities
Ordinary Shareholders
Fiberform Vinidic Holding AB
ANZ Nominees Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
RBC Dexia Investor Services Australia Nominees Pty
Limited (PIIC Account)
Queensland Investment Corporation Limited
RBC Dexia Investor Services Australia Nominees Pty
Limited (PIPooled Account)
RBC Dexia Investor Services Australia Nominees Pty
Limited (BKCust Account)
Telic Alcatel (Australia) Pty Ltd
Wear Services Pty Ltd
HSBC Custody Nominees (Australia) Limited
Bond Street Custodians Limited
WB Nominees Limited
Mr Petrus Cornelius Nicolaas Middendorp
Primbee Investments Pty Ltd
Longo Pty Ltd
Citicorp Nominees Pty Limited
Mr Robert Whipple
Chippell Pty Ltd
Fully Paid
Number
Percentage
20,800,000
12,051,399
9,952,463
7,314,593
6,698,865
6,610,314
5,569,120
4,591,351
4,312,763
3,603,152
3,500,000
3,266,893
2,200,000
1,800,000
1,753,500
1,615,921
1,572,826
1,343,725
1,212,751
1,210,273
11.47%
6.65%
5.49%
4.03%
3.69%
3.65%
3.07%
2.53%
2.38%
1.99%
1.93%
1.80%
1.21%
0.99%
0.97%
0.89%
0.87%
0.74%
0.67%
0.67%
100,979,909
55.69%
Page 72 of 73
A N N U A L R E P O R T 2 0 0 7 IMDEX
9 1
IMDEX LIMITED
and its controlled entities
ADDITIONAL STOCK EXCHANGE INFORMATION
AS AT 13 AUGUST 2007
(d)
Director and Company Secretary Shareholdings
Number of
Shares
3,500,000
260,000
265,000
300,000
400,000
5,000
4,730,000
Number of
Options
2,000,000
1,000,000
-
-
-
300,000
3,300,000
Name
Mr B W Ridgeway
Mr I F Burston
Mr R W Kelly
Mr K A Dundo
Mr M Lemmel
Mr P A Evans
(e)
Company Secretary
Mr Paul Anthony Evans
(f)
Registered Office
Level 1, Canute House
15 Rheola Street
West Perth
Western Australia
Phone: (08) 9481 5777
(g)
Share Registry
Computershare Investory Services
Level 2
45 St Georges Terrace
Perth WA 6000
Phone: (08) 9323 2000
9 2
Page 73 of 73
T
R
O
P
E
R
L
A
U
N
N
A
7
0
0
2
w w w . i m d e x . c o m . a u
ABN 78 008 947 813
NOTICE OF ANNUAL GENERAL MEETING
Notice is given that the 2007 Annual General Meeting of Shareholders of Imdex Limited will be held at
The Celtic Club, 48 Ord Street, West Perth, Western Australia, on 19 October 2007
commencing at 11.00am WST
Agenda
Ordinary Business
1
To receive and consider the Annual Financial Report, together with the Directors’ and Auditor’s
reports for the year ended 30 June 2007.
2
To consider and, if thought fit, pass the following Resolution as an Ordinary Resolution:
That, for all purposes, Mr Kevin Dundo, who retires from the office of Director by rotation, and
being eligible, offers himself for re-election, is re-elected as a Director.
3
To consider and, if thought fit, pass the following resolution as an Ordinary Resolution:
That, for all purposes, Mr Magnus Lemmel, who was appointed to the Board of Directors on
19 October 2006 as an additional Director, and being eligible, offers himself for re-election, is re-
elected as a Director.
4
To consider and, if thought fit, pass, with or without amendment, the following resolution as an
Ordinary Resolution:
That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, the Company ratifies the
allotment and issue of 1,367,790 fully paid ordinary shares in the capital of the Company on the
terms set out in the accompanying Explanatory Memorandum.
Voting Exclusion: The Company will disregard any votes cast on Resolution 4 by Robert Whipple or David Scott or
any person who participated in the issue and any associate of such person. However, the Company need not
disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the
direction on the proxy form, or it is cast by the person chairing the Meeting as a proxy for a person who is entitled to
vote, in accordance with a direction on the proxy form to vote as the proxy decides.
5
To consider and, if thought fit, pass, with or without amendment, the following resolution as an
Ordinary Resolution:
That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, the Company ratifies the
allotment and issue of 1,919,627 fully paid ordinary shares in the capital of the Company issued
upon the exercise of Staff Options on the terms and conditions set out in the accompanying
Explanatory Memorandum.
Voting Exclusion: The Company will disregard any votes cast on Resolution 5 by any person who participated in the
issue and any associate of such person. However, the Company need not disregard a vote if it is cast by a person
as a proxy for a person who is entitled to vote, in accordance with the direction on the proxy form, or it is cast by the
person chairing the Meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the
proxy form to vote as the proxy decides.
NOTICE OF ANNUAL GENERAL MEETING
6
To consider and, if thought fit, pass the following resolution as an Advisory Resolution:
That, for all purposes, the Directors’ and Executives’ Remuneration Report, included within the
Directors’ Report, for the year ended 30 June 2007 be approved.
7
To consider any other business that may be brought before the Meeting in accordance with the
Company’s Constitution.
Explanatory Memorandum
Shareholders are referred to the Explanatory Memorandum accompanying and forming part of this Notice
of Annual General Meeting.
Snap Shot Time
Regulation 7.11.37 of the Corporations Regulations 2001 permits the Company to specify a time, not
more than 48 hours before the meeting, at which a “snap shot” of Shareholders will be taken for the
purposes of determining Shareholder entitlements to vote at the Meeting.
The Company’s Directors have determined that all Shares of the Company that are quoted on ASX at
5pm WST, 17 October 2007 shall, for the purposes of determining voting entitlements at the Annual
General Meeting, be taken to be held by the persons registered as holding the Shares at that time.
Proxies
Please note that:
(a) a member of the Company entitled to attend and vote at the Annual General Meeting is entitled to
appoint a Proxy;
(b) a Proxy need not be a member of the Company; and
(c) a member of the Company entitled to cast two or more votes may appoint two proxies and may
specify the proportion or number of votes each Proxy is appointed to exercise, but where the
proportion or number is not specified, each Proxy may exercise half of the votes.
The enclosed Proxy Form for the Annual General Meeting provides further details on appointing Proxies
and lodging the Proxy Form. Proxies must be returned by 11.00am WST on 17 October 2007.
Corporate Representative
If a representative of a Shareholder corporation is to attend the meeting the attached “Appointment of
Corporate Representative” form should be completed and produced prior to admission.
Dated 11 September 2007
By Order of the Board of Directors
Imdex Limited
Paul Evans
Company Secretary
EXPLANATORY MEMORANDUM
1 Purpose of this Document
This Explanatory Memorandum has been prepared to assist Shareholders with their consideration of the
Resolutions in the accompanying Notice of Annual General Meeting.
2 Resolution 2 and 3 – Re-election of Directors
In accordance with ASX Listing Rule 14.4 and Article 17.4 of the Constitution, at every Annual General
Meeting, one third of the Directors for the time being must retire from office and are eligible for re-election.
The Directors to retire are to be those who have been longest in office since their appointment or last re-
appointment or, if the Directors have been in office for an equal length of time and unless mutually
agreed, by lot.
Mr Kevin Dundo, a Director of the Company since 14 January 2004, seeks re-election by reason of his
retirement by rotation pursuant to Resolution 2 of the Notice of Meeting. A record of Mr Kevin Dundo’s
attendances at Board meetings over the 12 month period to 30 June 2007 is set out in the 2007 Annual
Report as are further details concerning his qualifications and experience.
Article 17.3 of the Constitution, requires that any Director appointed by the Board to fill a casual vacancy
or as an additional Director, must retire at the next Meeting of the Company following his or her
appointment, but is eligible for re-election at that Meeting.
Mr Magnus Lemmel, who was appointed to the Board on 19 October 2006 following the completion of the
Reflex acquisition, seeks re-election as a Director pursuant to Resolution 3 of the Notice of Meeting.
Further details concerning Mr Lemmel’s qualifications and experience are set out in the 2007 Annual
Report.
The Directors recommend that Shareholders vote in favour of Resolution 2 and 3 to appoint Mr Kevin
Dundo and Mr Magnus Lemmel.
3 Resolution 4 – Ratification of the issue of 1,367,790 Shares
Resolution 4 seeks Shareholder ratification for the issue and allotment of 1,367,790 Shares which relate
to recent acquisitions by the Company of two Canadian companies. 1,212,751 Shares were issued to
Robert Whipple as part consideration for the purchase of all of the shares of Poly Drill Drilling Systems
Limited (Poly Drill), and the remaining 155,039 Shares were issued to David Scott as part consideration
for the purchase of all of the Shares in Nudge Geotechnical Instrumentation Inc (Nudge).
3.1 Poly Drill Drilling Systems Limited
1,212,751 Shares were issued as part consideration for the purchase of Poly Drill, a Canadian based
company which specialises in the provision of polymer drilling fluid base systems. The business of Poly
Drill is complementary to the existing drilling products and services business of Imdex. The total
consideration for the purchase of all of the shares of Poly Drill was $3,500,000, consisting of a payment of
$1,750,000 and the issue of 1,212,751 Shares at a deemed issue price of $1.443 per share.
3.2 Nudge Geotechnical Instrumentation Inc
155,039 Shares were issued as part consideration for the acquisition of all the shares in Canadian
company Nudge. Nudge's significant asset is the ownership of a Canadian patent which is similar in
operation to the Ace Orientation Core Tool owned by the Company. The total consideration for the
purchase of all of the shares in Nudge was $500,000, consisting of a payment of $300,000 and the issue
of 155,039 Shares at a deemed issue price of $1.29 per Share.
Page 1
EXPLANATORY MEMORANDUM
3.3 ASX Listing Rule 7.4
ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to
issue during any 12 month period any equity securities, or other securities with rights to conversion to
equity (such as an option), if the number of those securities exceeds 15% of the number of securities in
the same class on issue at the commencement of that 12 month period.
ASX Listing Rule 7.4 sets out an exception to ASX Listing Rule 7.1. It provides that where a company in
general meeting ratifies the previous issue of securities made pursuant to ASX Listing Rule 7.1 (and
provided that the previous issue did not breach Listing Rule 7.1) those securities will be deemed to have
been made with shareholder approval for the purpose of ASX Listing Rule 7.1.
Ratification by the shareholders of the Company is now sought pursuant to ASX Listing Rule 7.4 in order
to reinstate the Company’s capacity to issue up to 15% of its issued capital, if required, in the next 12
months without shareholder approval.
ASX Listing Rule 7.5 requires that the following information be provided to shareholders in relation to the
Shares the subject of Resolution 4:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
the total number of Shares issued by the Company was 1,367,790 Shares;
1,212,751 Shares were issued on 2 August 2007
1,212,751 of these Shares are subject to voluntary escrow for 12 months from 1 July 2007,
being the shares issued by the Company in relation to the purchase of Poly Drill;
1,212,751 of the Shares were issued at a deemed price of $1.443 per Share, being the closing
weighted average share price of the Company's Shares on ASX on the five business days prior
to 1 July 2007;
1,212,751 Shares were allotted to Robert Whipple as part consideration for the purchase by the
Company of Poly Drill Drilling Systems Limited;
155,039 Shares were issued on 9 May 2007;
155,039 Shares were issued at a deemed price of $1.29 per Share, being the average traded
price of the Company's shares on the ASX on April 16 2007.
155,039 Shares were allotted to David Scott as part consideration for the purchase by the
Company of Nudge Geotechnical Instrumentation Inc;
all of the Shares allotted and issued rank equally in all respects with the Company’s existing
Shares on issue;
no Shares were issued to any related party of the Company; and
no monies were raised by either issue as the issues were in part consideration for the purchase
by the Company of all of the shares in Poly Drill Drilling Systems Limited and Nudge
Geotechnical Instrumentation Inc respectively.
The Directors recommend that Shareholders vote in favour of Resolution 4.
Page 2
EXPLANATORY MEMORANDUM
4 Resolution 5 – Ratification of the issue of Staff Shares
Resolution 5 seeks Shareholder ratification for the issue and allotment of 1,919,627 Shares which were
issued to employees and consultants of the Company (Staff Shares).
4.1 Staff Shares
1,919,627 Staff Shares were issued to various employees and consultants of the Company on the
exercise of employee options previously granted by the Board in accordance with the Company's Staff
Option Plan as incentives and rewards for staff loyalty and performance. The Company notes that the
Staff Option Plan has since been superseded by an Employee Option Plan approved by Shareholders at
a general meeting held on 30 April 2007.
The full details of all the Staff Shares issued are provided at Annexure A, however by way of summary:
(a)
(b)
999,532 Shares were issued at a price of $0.20; and
920,095 Shares were issued at a price of $0.35;
4.2 ASX Listing Rule 7.4
ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to
issue during any 12 month period any equity securities, or other securities with rights to conversion to
equity (such as an option), if the number of those securities exceeds 15% of the number of securities in
the same class on issue at the commencement of that 12 month period.
ASX Listing Rule 7.4 sets out an exception to ASX Listing Rule 7.1. It provides that where a company in
general meeting ratifies the previous issue of securities made pursuant to ASX Listing Rule 7.1 (and
provided that the previous issue did not breach Listing Rule 7.1) those securities will be deemed to have
been made with shareholder approval for the purpose of ASX Listing Rule 7.1.
Ratification by the shareholders of the Company is now sought pursuant to ASX Listing Rule 7.4 in order
to reinstate the Company’s capacity to issue up to 15% of its issued capital, if required in the next 12
months without shareholder approval.
ASX Listing Rule 7.5 requires that the following information be provided to shareholders in relation to the
Shares the subject of Resolution 5:
(a)
(b)
(c)
(d)
(e)
(f)
The total number of Shares issued by the Company was 1,919,627 Shares;
999,532 Shares were issued at a price of $0.20 per Share, and 920,095 Shares were issued at
a price of $0.35 per Share. The Shares were issued on the dates detailed in the table in
Annexure A, which dates are between 2 January 2007 and 25 June 2007;
The Shares were allotted to employees and consultants of the Company by the exercise of Staff
Options held by the employees and consultants, which Staff Options had been issued by way of
incentive and reward for performance and loyalty pursuant to the Company's Staff Option Plan;
The Shares allotted and issued rank equally in all respects with the Company’s existing Shares
on issue;
No Shares were issued to any related party of the Company; and
$521,940 in total was raised by the issue, which was used as general working capital.
The Directors recommend that Shareholders vote in favour of Resolution 5.
Page 3
EXPLANATORY MEMORANDUM
5 Resolution 6 – Remuneration Report
Included in the Directors' Report contained within the 2007 Annual Report is a Remuneration Report that
sets out the details of the remuneration of all Directors and the highest paid group executives. In addition,
it describes the Board’s remuneration policy.
The Board submits the Remuneration Report to Shareholders for their consideration and adoption by way
of a non-binding resolution as required by the Corporations Act.
The Directors recommend that Shareholders vote in favour of Resolution 6.
6 Glossary
In this Explanatory Memorandum, the following terms have the following meanings unless the context
otherwise requires:
AGM
ASIC
ASX
means the 2007 Annual General Meeting of the Company to be held at 11.00am
on 19 October 2007.
means the Australian Securities & Investments Commission.
means the Australian Securities Exchange operated by ASX Limited ABN 98 008
624 691.
means the Board of Directors.
Board
means Imdex Limited ABN 78 008 947 813.
Company
Constitution
means the Constitution of the Company.
Corporations Act means the Corporations Act 2001 (Cth).
Director
Nudge
Poly Drill
Share
Shareholder
Staff Options
means a Director of the Company.
means Nudge Geotechnical Instrumentation Inc
means Poly Drill Drilling Systems Ltd
means a fully paid ordinary share in the capital of the Company.
means a holder of a Share.
means the options issued to employees and/or consultants of the Company
pursuant to the Staff Option Plan
Staff Option Plan means the previous option plan for employees and consultants of the Company.
Staff Shares
WST
means the Shares issued on the exercise of the Staff Options.
means Australian Western Standard Time.
Page 4
ANNEXURE A – STAFF SHARES
Date of exercise of options Number of Staff
Issue Price ($)
Shares issued
2/01/2007
8/02/2007
8/02/2007
16/02/2007
20/02/2007
22/02/2007
2/03/2007
5/03/2007
5/03/2007
7/03/2007
7/03/2007
7/03/2007
7/03/2007
22/03/2007
28/03/2007
28/03/2007
13/04/2007
13/04/2007
13/04/2007
13/04/2007
13/04/2007
23/04/2007
27/04/2007
27/04/2007
10/05/2007
15/05/2007
15/05/2007
15/05/2007
16/05/2007
21/05/2007
21/05/2007
22/05/2007
22/05/2007
23/05/2007
500,000
10,000
10,000
8,333
15,000
16,666
500,000
66,500
33,300
33,333
50,000
16,666
150,000
10,000
33,334
16,666
3,333
30,000
6,666
3,333
10,000
28,000
33,333
16,667
16,500
16,700
3,333
50,000
100,000
50,000
16,666
16,666
16,666
3,333
$0.35
$0.20
$0.35
$0.35
$0.20
$0.20
$0.20
$0.20
$0.35
$0.20
$0.20
$0.35
$0.35
$0.20
$0.20
$0.35
$0.20
$0.20
$0.35
$0.35
$0.35
$0.20
$0.20
$0.35
$0.35
$0.20
$0.35
$0.35
$0.20
$0.20
$0.35
$0.35
$0.35
$0.35
Page 5
ANNEXURE A – STAFF SHARES
(continued)
Date of exercise of options Number of Staff
Issue Price ($)
Shares issued
5/06/2007
5/06/2007
19/06/2007
19/06/2007
19/06/2007
25/06/2007
8,333
5,000
3,333
3,300
6,667
2,000
Total
1,919,627
$0.35
$0.35
$0.20
$0.35
$0.35
$0.35
Page 6
Shareholder Details
This is to certify that by a resolution of the Directors of:
(Insert name of shareholder company)
The Company has appointed:
(Insert name of corporate representative)
CORPORATE REPRESENTATIVE
CERTIFICATE
(Company)
(Authorised corporate representative)
in accordance with the provisions of section 250D of the Corporations Act 2001, to act as the body corporate representative of
that Company at the Annual General Meeting of Imdex Limited to be held on 19 October 2007 and at any adjournments of that
meeting.
DATED
………………………………………………………………………………………………………………………………..2007
Please sign here
Executed by the Company
in accordance with its constituent documents
Signed by authorised representative
Signed by authorised representative
Name of authorised representative (print)
Name of authorised representative (print)
Position of authorised representative (print)
Position of authorised representative (print)
Instructions for Completion
1. Insert name of appointor Company and the name or position of the appointee (eg “John Smith” or “each Director of the
Company”).
2. Execute the Certificate following the procedure required by your Constitution or other constituent documents.
3. Print the name and position (eg Director) of each Company officer who signs this Certificate on behalf of the Company.
4. Insert the date of execution where indicated.
5. The certificate must be produced prior to admission to the Meeting. You may send or deliver the Certificate to Imdex
Limited, Level 1, 15 Rheola Street, West Perth WA 6005 or fax to (08) 9481 6527.
Imdex Limited
ABN 78 008 947 813
000001
000
IMD
MR SAM SAMPLE
121 SAMPLE STREET
MELBOURNE VIC 3000
All correspondence to:
Computershare Investor Services Pty Limited
GPO Box 242 Melbourne
Victoria 3001 Australia
Enquiries (within Australia)
1300 850 505
(outside Australia)
61 3 9415 4000
Facsimile
61 8 9323 2033
www.computershare.com
Holder Identification Number (HIN)
X 1234567890
I N D
I/We being a member/s of Imdex Limited and entitled to attend and vote hereby appoint
or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in
accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the Annual General Meeting of Imdex Limited to be held at The Celtic Club, 48 Ord Street, West Perth,
Western Australia on Friday, 19 October 2007 at 11.00am (WST) and at any adjournment of that meeting.
For
Against
Abstain*
Item 2
Re-election of Mr Kevin Dundo as a Director
Item 3
Re-election of Mr Magnus Lemmel as a Director
Item 4
Ratification of issue of 1,367,790 Shares
Item 5
Ratification of issue of Shares - Staff Options
Item 6
Approval of Remuneration Report
In addition to the intention advised above, the Chairman of the Meeting intends to vote undirected proxies in favour of each of the other items of business.
* If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in
computing the required majority on a poll.
In addition to signing the Proxy Form in the above box(es) please provide the information below in case we need to contact you.
I M D
1 P R
IMD_4_1_053474/000001/000001
How to complete the Proxy Form
1 Your Address
This is your address as it appears on the company’s Share register. If this information is incorrect, please mark the box and make the correction on the
form. Securityholders sponsored by a broker (in which case your reference number overleaf will commence with an ‘x’) should advise your broker of any
changes. Please note, you cannot change ownership of your securities using this form.
2 Appointment of a Proxy
If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the individual or body corporate you wish to appoint as your proxy is
someone other than the Chairman of the Meeting please write the full name of that individual or body corporate in the space provided. If you leave this
section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a securityholder of
the company. Do not write the name of the issuer company or the registered securityholder in the space.
3 Votes on Items of Business
You may direct your proxy how to vote by placing a mark in one of the three boxes opposite each item of business. All your securities will be voted in
accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of
securities you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she
chooses. If you mark more than one box on an item your vote on that item will be invalid.
4 Appointment of a Second Proxy
You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form
may be obtained by telephoning the company's Share registry or you may copy this form.
To appoint a second proxy you must:
(a) indicate that you wish to appoint a second proxy by marking the box.
(b) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of securities applicable to that
form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your
votes. Fractions of votes will be disregarded.
(c) return both forms together in the same envelope.
5 Signing Instructions
You must sign this form as follows in the spaces provided:
Individual: where the holding is in one name, the holder must sign.
Joint Holding: where the holding is in more than one name, all of the securityholders should sign.
Power of Attorney: to sign under Power of Attorney, you must have already lodged this document with the registry. If you have not
previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form
when you return it.
Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that
person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a
Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director
or a Company Secretary. Please indicate the office held by signing in the appropriate place.
If a representative of a corporate Securityholder or proxy is to attend the meeting the appropriate "Certificate of Appointment of Corporate
Representative" should be produced prior to admission. A form of the certificate may be obtained from the company's Share registry or at
www.computershare.com.
Lodgement of a Proxy
This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below no later than 48 hours before the
commencement of the meeting at 11.00am (WST) on Friday, 19 October 2007. Any Proxy Form received after that time will not be valid for the
scheduled meeting.
Documents may be lodged:
IN PERSON
BY MAIL
BY FAX
Registered Office - PO Box 1325 West perth WA 6872
Share Registry - Computershare Investor Services Pty Limited, Level 2, 45 St Georges Terrace, Perth WA 6000 Australia
Registered Office - PO Box 1325 West perth WA 6872
Share Registry - Computershare Investor Services Pty Limited, GPO Box 242, Melbourne VIC 3001 Australia
61 8 9323 2033
Imdex Limited
ABN 78 008 947 813
000001 000 IMD
MR SAM SAMPLE
121 SAMPLE STREET
MELBOURNE VIC 3000
14 September 2007
Dear Shareholder
LEGISLATION CHANGE - WHAT THIS MEANS FOR YOU
The Australian Government recently introduced legislation changing the default
option for receiving annual reports to be via a company's website. You will now
receive timely, cost effective and greener online annual reports unless you
request a printed version.
To assist us with our commitment to the environment and our focus on cost
control, we further encourage you to provide your email address and receive all
your shareholder communications online. Please refer to the back of this letter
to make your communication selection.
If you have any questions about this letter please contact an investor services
representative on 1300 850 505.
Yours sincerely
Paul Evans
Company Secretary
IMD_4_1_053474/000001/000002/i
X1234567890
0800
000001 000 IMD
MR SAM SAMPLE
121 SAMPLE STREET
MELBOURNE VIC 3000
X 1234567890
I N D
IMD