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Providing Drilling Fluids and Leading Down Hole Instrumentation to the World.
Annual Report
Contents
Imdex Group at a Glance
FY09 Snapshot
2009 Comparative Financial Performance
Imdex’s Board of Directors
Chairman’s Report
Managing Director’s Report
2
5
6
8
11
12
Oil & Gas Market
R&D and Operational Efficiencies
Global Business
Quality, Health, Safety & Environment
Managing Risk
FY09 Financial Report
17
18
20
22
23
25
Oil & Gas Market17
R&D & Operational Efficiencies 18
Global Business20
Imdex achieved solid financial results and
maintained its strategy of expanding its
rental business model; continuing to build
relationships with global customers; targeted
research and development; and
increasing market share within the oil
and gas sector.
Mr. Bernie Ridgeway
Managing Director
Imdex 2009 Annual Report | 1
Imdex Group at a glance
Key Data as at 30 June 2009
Market Capitalisation
Shares on Issue
Shareholders
$125,006,671
193,808,793
4,358
Employees
278
Imdex is a Western Australian based S&P/ASX 300 listed company which principally
provides drilling fluids and leading down hole instrumentation to the mining, oil and
gas, water well, and civil engineering industries worldwide.
The Company has established operations in all of the key mineral exploration and
mining regions of the world, including Asia Pacific, the Americas and Africa, and has
revenue generating activities in others.
Imdex has streamlined its business into two clearly defined and distinct operational
divisions, the Drilling Fluids and Chemicals (DFC) Division, and the Down Hole
Instrumentation (DHI) Division.
Group Structure
IMDEX LIMITED
DIVISIONS
TRADING COMPANIES
RESEARCH & DEVELOPMENT
DRILLING FLUIDS &
CHEMICALS DIVISION
SAMCHEM
AUSTRALIAN
MUD
COMPANY
POLY-DRILL
SUAY
ENERGY
SOUTHERN-
LAND
FLEXIT
(OIL & GAS)
REFLEX
(MINERALS)
IMDEX TECH
GERMANY
IMDEX TECH
UK
IMDEX TECH
SWEDEN
IMDEX TECH
AUSTRALIA
AMC Drilling Fluids
Reflex Survey Instrumentation
2 | Imdex 2009 Annual Report
Drilling Fluids & Chemicals (DFC) Division
The DFC Division provides a complete drilling fluids solution by providing an extensive range of drilling fluids and treating chemicals,
fluid transfer and containment equipment and environmental site remediation products.
The drilling process generates
chips of rock known as cuttings.
Fluid is pumped down the drill
pipe lubricating the drill bit and
returning cuttings to the surface.
Fluids stabilise and keep the
bore hole open.
Continuous circulation of drilling fluids.
What are Drilling Fluids?
Drilling fluids, or mud, as it is known in the industry, are a key part of
the drilling process for mining, oil and gas, and civil applications. There
is a broad range of drilling fluids, all with unique properties and uses;
however they are principally used to clean, cool and lubricate the drill
bit, return chips of rock known as cuttings to the surface, and keep the
borehole stabilised and open.
During the drilling process, a continuous circulation of drilling fluid is
used where fluid is pumped down the drill pipe, through the drill bit,
and up the space between the drill pipe and the borehole which
brings the cuttings to the surface. Traditionally the fluid then circulates
through a shale shaker or mud tanks to remove the cuttings from the
fluid for reuse.
Down Hole Instrumentation (DHI) Division
The DHI Division designs, manufactures and provides advanced down hole survey, core orientation, and directional steering
instrumentation for the mineral exploration / mining and oil and gas markets.
A 2 degree deviation at the surface can lead to a 35 metre
lateral displacement at a hole depth of 1000 metres.
Core orientation allows geoscientists
to determine structural geology.
Drilling multiple wells from a single platform.
What are Down Hole Instruments?
Survey Instruments
Down hole survey instruments give geologists, engineers and drillers
comprehensive information about a borehole including azimuth
(compass direction) and dip. This allows them to determine the exact
location and trajectory of the borehole, even when it is thousands of
metres below the surface.
Borehole deviations, where the actual path is different from the planned
path, are common. Variable geology, drilling parameters (including
excessive or irregular thrust) and hole design, are just some of the
reasons a borehole may deviate. A 2 degree deviation at the surface can
lead to a 35 metre lateral displacement at a hole depth of 1000 metres,
resulting in significant additional drilling costs and loss of opportunity if
zones of economic mineralisation are missed. By surveying the borehole
throughout the drilling process, deviations can be corrected and the
likelihood of intercepting planned targets or avoiding known obstacles is
significantly enhanced.
Core Orientation
Core Orientation instruments are used to determine the exact
position of a core sample in the ground prior to extraction. This
allows geoscientists to accurately assess the sample to determine the
structural geology, which often controls a mineralised ore system. By
understanding the structural geology, time and money are not wasted
drilling in the wrong location or direction. Core orientation is also
particularly important during mine planning and development to avoid
potential problem areas such as faults or slip zones.
Gyroscopes & Directional Steering
Drilling is becoming increasingly complex and challenging due to
diminishing accessible reserves, high exploration costs and environmental
concerns. As a result, energy companies are drilling deeper and for
smaller targets, re-entering existing wells, and drilling multiple wells
from a single platform or wellbore. In such an environment, technology
and accurate data is crucial to locate reserves efficiently, and to avoid
collision with existing wells which can be catastrophic and costs millions
of dollars to remediate.
Imdex has specifically designed a range of advanced navigational
instruments for challenging multiple well environments in areas of
high magnetic interference. This allows directional drillers to accurately
monitor the path of their wells, to determine actual position
versus planned.
Imdex 2009 Annual Report | 3
FY09 Rewarding
Yet Challenging
4 | Imdex 2009 Annual Report
Reflex technician demonstrating the Reflex Maxibor II survey instrument
FY09 Snapshot
Operational Highlights
• 1 September 2008, acquisition of Wildcat Chemicals Australia Pty Ltd.
• Successful launch of new survey instrumentation to the mineral
• Commissioning of a partially hydrolysed polyacrylamide (PHPA)
exploration / mining market.
manufacturing plant in Johannesburg, South Africa.
• Restructuring the research and development centres as centres of
• Commissioning of a drilling fluids manufacturing plant in Santiago,
excellence under the banner of Imdex Technology.
Chile.
• Relocation of Reflex’s manufacturing facility at Imdex Technology UK
• Commercialisation of Imdex’s unique surface solids control unit
to Imdex Technology Australia.
(SSCU) for the global diamond drilling industry.
• Drilling Fluids & Chemicals Division increased revenue by 7% to $91.7
• Establishment of a new drilling fluids research laboratory at Osborne
million (FY08 - $85.7 million).
Park, Western Australia.
• Continued support of Imdex’s global alliances with Boart Longyear,
Major Drilling, Layne Christensen and Sandvik.
• Commercialisation of Flexit’s suite of down hole instrumentation for
the oil and gas market.
• Repositioning of the Down Hole Instrumentation Division’s trading
brands, Flexit and Reflex, to target and market directly to the global
oil and gas and mineral exploration / mining industries.
Market Review
• Continued upward trend in revenue from the oil & gas sector which
contributed 19% of Group revenue in FY09, (FY08 – 9%) and is
expected to exceed 25% in FY10.
• Final instalment in relation to the August 2006 acquisition of Chardec
was made. Importantly, there are now no outstanding vendor liabilities
owed by Imdex for the nine acquisitions made over the last four years.
• Severe downturn in mineral exploration expenditure globally,
• Increased activity within the coal bed methane sector.
particularly from November 2008.
• Significant fall in commodity prices.
• Rig utilisation rate within the mineral industry fell below 50% in the
2H09. The oil and gas sector was affected to a lesser extent.
• Signs of market recovery became evident in 4Q09. Recovery was
region specific with the greatest increase seen in Australia.
Operational Challenges
• Additional refinement and capability to instrumentation for the oil and gas industry delayed commercialisation.
• Reducing costs at the same speed at which revenue reduced, particularly in 2H09.
• Rationalising the global workforce.
• Continuing research and development spend in the face of declining revenue and margins.
• Declining rental tool fleet and significant Down Hole Instrumentation sales reduction.
Financial Performance
• Revenue from continuing operations (excluding interest revenue) of
• Strong balance sheet with conservative gearing levels and net debt /
$137.0 million.
capital of 16%.
• EBITA from continuing operations (excluding non-operational items)
of $24.5 million, including one off costs relating to the restructure
and relocation of down hole tool manufacturing ($0.8 million) and
rationalisation of global workforce ($0.8 million).
• Net profit after tax from continuing operations (excluding non-
operational items) of $11.3 million.
• Bank facilities extended to 2014 with no rollover events until then.
• Interim dividend of 1 cent per share with no final dividend,
reflecting prevailing economic conditions and prudent approach
to capital management.
• Net assets of $116.2 million.
• Flexit agreement renegotiated where $10 million liability has been
• Strong cash generation with cash flow from operations of
satisfied by the issue of 10 million Imdex Limited shares.
$16.2 million.
• Continued investment in technology, R&D and new product
development to underpin future growth – capex spend for FY09 of
$7.7 million.
Imdex 2009 Annual Report | 5
FY09 Rewarding
Yet Challenging
2009 Comparative
Financial Performance
Consolidated
2007
$’000
2008
$’000
2009
$’000
08-09 Var
%
Revenue from continuing operations (excluding interest income)
103,849
142,009
136,968
Operating Profit before Interest, Tax, Depreciation & Amortisation
25,467
Depreciation
(3,207)
42,068
(3,266)
27,817
(3,318)
Earnings before Interest, Tax & Amortisation (EBITA)
22,260
38,802
24,499
EBITA margin
Amortisation
Earnings before Interest & Tax (EBIT)
Net interest expense
Net profit before tax
Income tax expense
21%
27%
18%
(3,430)
(6,055)
(6,535)
18,830
(1,836)
16,994
(5,829)
32,747
(862)
31,885
(10,804)
17,964
(826)
17,138
(5,811)
Net Profit after Tax (before non-operational items)
11,165
21,081
11,327
Net trading result of Surtron* after tax
1,568
1,001
-
Non-operational items
Forex gain on loan to SGE
RTE / Imdex Joint Venture recovery
Profit on sale of Surtron* business
Tax effect of non-operational items
Net Profit for the Year after Tax
Basic earnings per share from continuing operations (cents)
Net Cash provided by Operating Activities
Cash on hand
Net Assets
Total Borrowings
Net Tangible Assets per Share
* Imdex disposed of non core Surtron business effective 31 October 2007.
-
1,121
-
(336)
13,518
7.72 ¢
16,259
15,271
76,614
40,437
7.69 ¢
-
-
12,139
(2,219)
32,002
11.22 ¢
10,257
13,276
1,057
-
-
(317)
12,067
6.37 ¢
16,175
11,975
105,643
116,198
35,552
14.02 ¢
34,039
19.10 ¢
(4%)
(34%)
2%
(37%)
(33%)
8%
(45%)
(4%)
(46%)
(46%)
(46%)
-
-
-
-
-
(62%)
(43%)
58%
(10%)
10%
(4%)
36%
6 | Imdex 2009 Annual Report
Imdex continued to strengthen its already strong balance sheet and the
Company’s cash flow from operations increased 58% to $16.2 million. Net
debt to total capital was 16% with interest cover to EBITA of 30 times.
Earnings and Dividends per Share (cents)
3.66
1 / 1 / 6.07
1 / 1.5 / 7.72
1 / 6.37
1.75 / 2.25 / 11.22
Earnings per share
Interim Dividend
Final Dividend
FY09 saw a drop in earnings due to the global financial crisis.
Dividend payout levels were impacted similarly.
Normalised Revenue by Division ($m)
23.2 / 7.2 total 30.4
41.7 / 11.2 total 52.9
DFC Division
DHI Division
62.4 / 41.4 total 103.8
85.7 / 56.3 total 142.0
91.7 / 45.3 total 137.0
Revenue remained strong despite global financial crisis in FY09.
Normalised EBITA ($m)
5.2
7.4
22.3
24.5
38.8
EBITA remained above FY07 levels, despite the difficult trading conditions in FY09.
Net Assets ($m)
19.0
32.6
76.6
105.6
116.2
Net assets continued to grow as Imdex expanded its business globally.
FY05
FY06
FY07
FY08
FY09
FY05
FY06
FY07
FY08
FY09
FY05
FY06
FY07
FY08
FY09
FY05
FY06
FY07
FY08
FY09
Imdex 2009 Annual Report | 7
Imdex's Board of Directors
Mr. Ross Kelly BE (HONS) FAICD
Non Executive Director. Age: 71 years
Mr. Ian Burston AM
Non Executive Chairman. Age: 75 years
• Appointed to the Board 14 January 2004.
• Qualifications – Bachelor of Electrical Engineering with Honours, Fellow
Australian Institute of Company Directors.
• Previously Chairman and Non Executive Director of Clough Limited,
Sumich Group Limited, Orbital Corporation Limited, Beltreco Limited,
Fraser Range Granite NL and Director of Aurora Gold Limited, PA
Consulting Services Ltd and the Fremantle Football Club Ltd.
• Appointed to the Board 22 November 2000.
• Previously Managing Director of Hamersley Iron, Chief
Executive Officer for Kalgoorlie Consolidated Gold
Mines, Managing Director and Chief Executive Officer
of Aurora Gold, and Managing Director of Portman
Limited.
• Diploma in Aeronautical Engineering and a Bachelor of
• Advisor to the Western Australian Government on water policy and
Engineering (Mechanical).
water reform.
• Consultant to a number of major Australian companies within the mining,
offshore gas, oil refining, steel, construction and heavy process industries.
• Councillor of the Australian Institute of Company Directors and Member
of the Advisory Board of the Curtin University Graduate School of Business.
• Fellow of the Institution of Engineers Australia,
Australasian Institute of Mining and Metallurgy, and the
Australian Institute of Company Directors.
The Board’s goal of delivering a sustainable and
increasing dividend stream, reflecting the earnings
profile and capital requirements of the Company
remains a high priority.
I F Burston
Chairman
Mr. Bernard Ridgeway B.Bus
(ACCTG) ACA
Managing Director. Age: 55 years
• Appointed to the Board 23 May 2000.
• Over 25 years experience with public
and private companies as owner, director
and manager.
• Qualified Chartered Accountant.
• Member of the Institute of Chartered
Accountants Australia, and the Australian
Institute of Company Directors.
• Director of Sino Gas and Energy Holdings
Limited.
Mr. Magnus Lemmel B.A.
Non Executive Director. Age 69 years
• Appointed to the Board 19 October 2006.
• Management Consultant based in Brussels,
Belgium.
• Involved in small business development in
Sweden and Chairman of the Technical
Advisory Committee for Reflex and
Imdex Technology (UK) Limited (formerly
Chardec). Chairman of Fiberform Vindic
Holding AB, Imdex's largest shareholder,
and member of the board of Norfram S.A.,
Luxemburg.
• Previously Senior Vice President of Ericsson
Telecommunications, Chief Executive Officer
of the Federation of Swedish Industries and
Director General for Enterprise Policy of the
European Commission.
Mr. Kevin Dundo B.Com, LLB
Non Executive Director. Age: 56 years
• Appointed to the Board 14 January 2004.
• Practising Lawyer specialising in commercial
and corporate law and, in particular, mergers
and acquisitions with experience in the mining
services and financial services industries.
• Director of ComputerCORP Limited.
• Previously a director of St Barbara Mines
Limited, Intrepid Mines Limited (ASX; TSX)
and Defiance Mining Corporation (TSX).
• Bachelor of Commerce and Bachelor of Laws.
• Member of the Law Society of Western
Australia, Law Council of Western Australia,
Australian Institute of Company Directors, and
a Fellow of the Australian Society of Certified
Practicing Accountants.
Proven Strategy
10 | Imdex 2008 Annual Report
Reflex EZ-Trac survey instrument
Chairman's Report
I am pleased to report that despite the challenging market conditions,
brought about by the global financial crisis and sudden downturn in
mineral exploration expenditure, Imdex’s 2009 full year (FY09) financial
results have demonstrated the Company’s strength, its strategy, and
the dedication of Imdex’s employees.
crisis. Significant opportunities still exist for
Imdex to enter new geographical markets
and expand its presence in current markets,
and the Company will continue to pursue
these opportunities through its international
operations and global alliances in FY10.
Expansion of our operations in the global
oil and gas market is a key part of Imdex’s
strategy. This sector is significantly less cyclical
in nature than the mineral exploration market,
which makes it attractive for sustainable
growth. During FY09 significant achievements
were made which align with this strategy.
The Company acquired Brisbane based
Wildcat Chemicals Australia Pty Ltd (Wildcat)
which has been successfully integrated into
the Group. This acquisition has provided
expansion opportunities, additional expertise
and products for the oil and gas market. In
addition, Imdex’s Down Hole Instrumentation
Division refined and commercialised its suite
of survey instrumentation for the oil and
gas industry. These unique and advanced
instruments are based on intellectual property
owned by Imdex and are expected to facilitate
significant expansion in this sector during FY10.
Imdex’s commitment to product leadership
through research and development allowed
the Company to emerge from FY09 in a
strong position to take advantage of future
product development opportunities. During
FY10, both the Drilling Fluids and Chemicals
Division and Down Hole Instrumentation
Division will continue to enhance Imdex’s
competitive advantage by refining its product
range for its global customers.
Adopting a rental model in preference to
a sales model within Imdex’s Down Hole
Instrumentation Division proved to be a good
decision. Core rental activity continued to
generate revenue and cash flows for Imdex
when sales significantly decreased due to
customer cost control measures. During FY10
the Company will increase the proportion
of rental based revenue from both Divisions,
with a view to generating greater and more
sustainable returns for shareholders in the
medium to long term.
Dividends
Due to the combined impact of the global
financial crisis on profitability in the second half
of FY09, Imdex’s focus on ongoing research
and development, and its commitment to
capital expenditure for future growth, the
Directors considered it prudent not to pay
a final dividend for FY09, maintaining the full
year dividend at 1 cent per share. The Board’s
commitment to delivering a sustainable and
increasing dividend stream, which reflects the
earnings profile and capital requirements of the
Company, notwithstanding, remains unchanged.
FY10 and Beyond
Signs of recovery were evident towards the
end of FY09 and the outlook for FY10 remains
positive. Recovery is likely to be boosted
by the fundamental long term supply versus
demand imbalances and the demand of
emerging economies for energy and resources
which drives exploration spending. A gradual
recovery in the mineral exploration industry
and expansion within the oil and gas market is
expected during FY10.
On behalf of my fellow Board members,
I would like to acknowledge and thank Imdex’s
valued shareholders for their ongoing support
throughout the volatile 2009 financial year.
I also extend my gratitude and appreciation to
Imdex’s Managing Director, Bernie Ridgeway,
and Imdex’s General Manager, Gary Weston,
the management team, and all of Imdex’s
employees and contractors for their support
throughout a challenging yet successful year.
As announced in September, I have made
the decision to retire as Imdex’s Chairman
following the Annual General Meeting on 15
October 2009 and hand over to Mr Ross Kelly
who has been a member of the Board since
2004. Since my appointment in November
2000, I have seen Imdex evolve into a truly
global company with world class expertise,
research and development capabilities,
together with advanced products for both the
mineral exploration and oil and gas industries.
I am extremely proud of these achievements
and have every confidence in the Company’s
Board, management team and Imdex’s ability
to grow and prosper for its shareholders.
With my retirement, it presents a timely
opportunity to increase the oil and gas
expertise on the Board which fits neatly with
Imdex expanding its business within that
sector. We expect to make an appointment in
this regard shortly.
I F Burston
Chairman
Imdex 2009 Annual Report | 11
Mr. Ian Burston
Imdex’s FY09 full
year financial results
demonstrate the
strength of the
Company and its
strategy.
Financial Performance
Total revenue for FY09 was $137.0 million
which represents a 4% decrease in comparison
to FY08. It is pleasing to note, however, that
revenue generated from Imdex’s Drilling Fluids
and Chemicals Division increased 7%, and
revenue generated from the oil and gas sector
increased from 9% to 19% of Group revenue.
EBITA from continuing operations was down
37% to $24.5 million, with net profit after tax
before non operational items down 46% to
$11.3 million. Costs were not able to be cut
at the same rate as revenue, principally due to
the speed and severity of the downturn within
the mineral exploration sector.
Imdex continued to strengthen its already
strong balance sheet and the Company’s
cash flow from operations increased 58% to
$16.2 million. Net debt to total capital was
16% with interest cover to EBITA of 30 times.
It should also be highlighted that in the past
four years, Imdex has successfully integrated
nine strategic acquisitions into the Group,
and on 31 July 2009, the final instalment of
£1.1 million relating to the acquisition of Imdex
Technology UK (formerly Chardec) was paid.
This payment discharged the Company’s final
liability relating to these nine acquisitions.
Robust Strategy
The Board remains confident that the strategy
developed and set down in FY07 is robust,
and the Directors remain committed to
increasing shareholder value by growing its
global business, expanding into new markets,
particularly the oil and gas market, maintaining
product leadership, increasing rental based
revenue, and achieving operational efficiencies.
I am proud to report that Imdex has successfully
established itself as a global business. Such a
global presence, with broad and diversified
market exposure, contributed to Imdex’s ability
to deal with the impact of the global financial
Managing Director's Report
The 2009 financial year was a rewarding yet challenging one, with unprecedented market
volatility for the Imdex Group. Despite being significantly ahead of budget and yielding
record revenues and profitability prior to October 2008, the global economic crisis and
subsequent downturn in exploration activity, disrupted the upward trend of revenue and
EBITA which the Company has achieved over the last 5 years.
N
otwithstanding these
challenging conditions, I am
pleased to report that Imdex
achieved solid financial results
and maintained its strategy of
expanding its rental business model; continuing
to build relationships with global customers;
targeted research and development; and
increasing market share within the oil and
gas sector.
Revenue* ($m)
32.8
39.0
43.2
37.1
26.2
30.5
Q308
Q408
Q109
Q209
Q309
Q409
Mr. Bernie Ridgeway
Maintenance of this
strategy, together with
a sound balance sheet,
conservative gearing levels
and a strong management
team, has seen Imdex
emerge from FY09 with
a resilient business model,
better technology
and in a stronger
position to realise
opportunities in
FY10 and beyond.
Maintenance of this strategy, together with
a sound balance sheet, conservative gearing
levels and a strong management team, has
seen Imdex emerge from FY09 with a resilient
business model, better technology and in a
stronger position to realise opportunities in
FY10 and beyond.
FY09 Group Financial Performance
The principal financial results for the FY09 full
year are as follows:
• Revenue from continuing operations
(excluding interest revenue) of $137.0 million
(FY08 – $142.0 million);
• EBITA from continuing operations (excluding
non-operational items) of $24.5 million
(FY08 – $38.8 million), including one off
costs relating to the restructure and
relocation of down hole tool manufacturing
($0.8 million) and rationalisation of our global
workforce ($0.8 million);
• Net profit after tax from continuing
operations (excluding non-operational items
of $11.3 million) (FY08 – $21.1 million);
• Strong cash generation with cash flow
from operations of $16.2 million (FY08 –
$10.3 million);
• Conservative gearing levels (net debt /
capital) at 16.0% and bank facilities extended
until 2014; and
• Net assets of $116.2 million (30 June 2008 –
$105.6 million).
It is important to note that signs of market
recovery were evident late in the second half
of FY09. During 4Q09 the Imdex Group
achieved revenue from continuing operations
of $30.5 million compared to $26.2 million
in 3Q09 and I remain optimistic about
opportunities for the Group in FY10.
*excludes other income & discountinued operations
FY09 Divisional Performance
Drilling Fluids & Chemicals (DFC) Division
The DFC Division contributed 67% of
Imdex’s full year revenue and, despite market
conditions, achieved a 7% increase to $91.7
million. The marginal increase on the previous
financial year continued the year on year
growth trend and validates Imdex’s strategy in
both mining and oil and gas.
Revenue was boosted by the continued
support of global alliances with Boart Longyear,
Major Drilling, Layne Christensen and Sandvik,
and the acquisition of Wildcat Chemicals
Australia Pty Ltd (Wildcat) based in Brisbane.
Operational EBITA decreased 26% to
$10.3 million (FY08 – $14.0 million).
Highlights for the DFC Division during FY09
included:
• Acquisition of Brisbane based Wildcat for
$1.9 million, effective 1 September 2008.
Wildcat specialises in the manufacture
and production of completion chemicals
for the oil and gas industry. The acquisition
provides Imdex with additional expansion
opportunities, East Coast manufacturing
capabilities, expertise and products for
this sector;
• Commissioning of a partially hydrolysed
polyacrylamide (PHPA) manufacturing plant
in Johannesburg, South Africa. This plant
allows greater control over the manufacturing
process and provides cost benefits and
shorter lead times to the local African market;
• Commissioning of a drilling fluids
manufacturing plant in Santiago, Chile. The
plant is facilitating further expansion into the
Latin American market;
12 | Imdex 2009 Annual Report
AMC Drilling Fluids
Signs of
Recovery
in 4Q09
AMC Drilling Fluids
Imdex 2009 Annual Report | 13
Positive
Outlook
for FY10
14 | Imdex 2009 Annual Report
Offshore oil rig
Managing Director's Report continued
associated with the restructure of research and
development centres and the relocation of
manufacturing facilities also had an impact.
Australia. By relocating during a period of
minimal activity, Imdex was able to achieve
this objective efficiently with little disruption.
Divisional highlights for the DHI Division
during FY09 included:
• Commercialisation of Flexit’s suite of down
hole instrumentation for the oil and gas
market. These products were launched
in May at the 2009 Offshore Technology
Conference (OTC) in Houston and are
expected to yield positive returns in FY10
and beyond;
• Repositioning of the DHI Division’s trading
brands, Flexit and Reflex, to target and
market directly to the global oil and gas and
mineral exploration / mining industries;
• The successful launch of new survey
instrumentation to the mineral exploration
/ mining market. Ongoing product
development ensures Reflex maintains its
position at the forefront of its markets as
a supplier of advanced instrumentation
technologies;
• Restructuring the research and development
centres as centres of excellence under the
banner of Imdex Technology;
• Relocation of Reflex’s manufacturing facility at
Imdex Technology UK to Imdex Technology
Australia; and
• Variation of the Flexit purchase agreement
whereby the $10 million consideration due
on 1 May 2009 was satisfied by the issue of
10 million Imdex shares at $1.00 per share at
that date.
Response To The Downturn
In the second half of FY09, Imdex
implemented the following initiatives to
protect shareholder wealth and the long term
strength of the Company:
• Existing bank facilities were extended to
2014 which allowed comfortable headroom
in all banking covenants;
• Human resource requirements were
reviewed which resulted in a 13% reduction.
Redundancies were primarily in the United
Kingdom, Sweden and South Africa and will not
jeopardise the scale of operations or long term
growth strategies. One off redundancy costs
incurred in FY09 were $0.8 million and are
expected to yield full year savings of $3 million;
• A comprehensive review of costs and
working capital requirements. A number
of actions were taken to reduce costs and
improve cash flow, including a twelve month
deferral of the December 2008 salary
reviews; and
• Acceleration of the planned relocation of
the Down Hole Instrumentation Division’s
manufacturing from the United Kingdom to
Postive Outlook For FY10
Signs of market recovery were evident in the
fourth quarter of FY09, including improved
debt and equity markets, higher commodity
prices and positive sentiments from customers,
and I remain optimistic about the opportunities
for Imdex in FY10 and beyond.
Imdex’s focused strategy of having two
distinct operational divisions, drilling fluids and
down hole instrumentation, supplying two
end markets, mining and oil and gas, remains
unchanged for FY10. More specifically
the Company will continue to focus on the
following five areas:
• Renting products in preference to selling;
• Growing relationships with global customers;
• Expanding Imdex’s presence in the oil and
gas market;
• Investing in research and development to
continue technology leadership; and
• Enhancing operational efficiencies.
During FY10, Imdex will advance a number
of initiatives which align with this strategy
including:
• Further development of AMC’s Equipment
Division;
• Expansion within the oil and gas sector by
marketing production and treating chemicals
and advanced down hole instrumentation;
and
• Utilising the Company’s global scale and
alliances to gain market share in new and
underpenetrated markets.
I am confident that these initiatives will yield
additional revenue in FY10 and beyond.
I am proud to say that Imdex has a very
strong management team which supports the
Company’s strategies for growth. On behalf
the Board of Directors, I thank them, and all
of Imdex’s employees, for their dedication and
hard work in supporting the Company and its
customers throughout FY09 and I look forward
with great optimism to FY10.
Bernie Ridgeway
Managing Director
Imdex 2009 Annual Report | 15
Poly-Drill Drilling Fluids
I am confident that
these initiatives
will yield additional
revenue in FY10
and beyond.
• Commercialisation of Imdex’s unique
surface solids control unit (SSCU) for the
global diamond drilling industry. SSCU’s
eliminate the need to dig conventional mud
pits and limit the environmental impact on
site. Due to both drilling contractors and
mining companies becoming increasingly
environmentally conscious, demand for these
units is strong; and
• Establishment of a new drilling fluids research
laboratory at Osborne Park, Western
Australia. This laboratory is equipped with
specialised analytical equipment to test and
develop fluids used in the oilfield, mining,
water well and specialised drilling sectors.
Down Hole Instrumentation (DHI)
Division
The DHI Division generated $45.3 million
(FY08 - $56.3 million) in revenue which
represented 33% of Imdex’s full year revenue.
The 20% decrease from FY08 can be
attributed to the severe downturn in global
mineral exploration. EBITA decreased 44%
to $15.3 million (FY08 - $27.3 million) and
earnings were affected by lower demand,
additional research and development, and
the commercialisation of instrumentation
for the oil and gas industries. One off costs
Market
Diversification
16 | Imdex 2008 Annual Report
Onshore Oil Rig, North West of Australia
Oil & Gas Market
Expansion into the global oil and gas market is central to Imdex’s strategy for future
sustainable growth. Such business sector diversification is logical, and is an extension
of the Company’s existing business into a field in which it has considerable expertise.
D
uring FY09 Imdex made
significant achievements which
align with this strategy, including
the acquisition of Wildcat
Chemicals Australia Pty Ltd and
the commercialisation of its suite of advanced
instrumentation. The Group also increased
revenue generated from the oil and gas market
from 9% to 19% and expects this percentage
to exceed 25% in FY10. Imdex’s objective over
the next two to four years continues to focus
on generating at least 40% of Group revenue
from the oil and gas industry.
The oil and gas market is significantly less
cyclical in nature than the mineral exploration
market and a fundamental imbalance remains
between supply and demand. In early June
2009, the International Energy Agency stated
that 64 million barrels per day of gross capacity
needs to be installed by 2030 to meet demand
growth and offset decline.
Budgeted spending on exploration and
production worldwide for 2009 was recorded
as US$375 billion. This represents a 21%
decrease on 2008 expenditure, however,
it remains the third highest level of spend
historically and is close to 2007 levels. Global
offshore drilling expenditure over the next five
years is estimated to be US$367 billion, or
approximately 19,570 wells, which represents a
healthy increase of 32% compared to the 2004-
2008 period. Energy business analysts, Douglas
Westwood, estimate that by 2013, the global
drilling market will be worth approximately
US$89 billion per annum, which is more than
double that of 2004.
Wildcat Acquisition
During FY09 Imdex’s Drilling Fluids and
Chemicals (DFC) Division established a
dedicated oil and gas department to focus
on niche markets in the onshore oil and gas
and coal bed methane (CBM) industries. This
department forms part of Imdex’s existing DFC
Division, and markets drilling fluids and treating
chemicals via its operations in Australia, South
Africa and Kazakhstan.
Imdex’s acquisition of Brisbane based Wildcat
Chemicals Australia Pty Ltd (Wildcat) in
September 2008 complements the DFC Oil
and Gas Department and plays a significant role
in the development and manufacture of new
product lines. Wildcat manufactures specialty
oilfield chemicals and has brought significant
expertise and facilities to Imdex’s DFC Division
and facilitates further expansion into the oil and
gas and CBM industries.
Commercialisation of Advanced
Down hole Instrumentation
Throughout FY09 Imdex focused on
commercialising its world class down hole
instrumentation for the oil and gas industry.
The Company has developed three advanced
instruments which were introduced to the oil
and gas market in May 2009 at the Offshore
Technology Conference (OTC) in Houston.
The OTC is considered to be one of the
most significant events for the development of
offshore resources for the drilling, exploration,
production, and environmental protection
industries.
Commercialisation of these instruments took
longer than originally planned, however they
are expected to generate significant returns
in FY10 and beyond due to the increasing
requirement for sophisticated down hole
technology, particularly in the offshore market.
Imdex's range of oil and gas instrumentation,
marketed by Flexit, includes:
• The Flexit Target INS, a north seeking high
speed continuous gyro;
• The Flexit HTGS, a high temperature
MEMS gyro; and
• The Flexit HTMS, a high temperature
multishot.
Flexit Target INS trials North West of Houston
The Group increased
revenue generated
from the oil and gas
market from 9% to
19% and expects
this percentage
to exceed 25%
in FY10.
Imdex's Strategy for Revenue Growth by Market Sector
Early Stage Minerals
Past
1%
Late Stage Minerals
49%
50%
Oil & Gas
FY09
Medium Term (2-4 years)
20%
19%
61%
Imdex 2009 Annual Report | 17
Commitment to R&D
& Operational Efficiencies
During FY09 Imdex remained committed to targeted research and
development and achieving operational efficiencies.
T
he Company’s commitment
to continual improvement
throughout the downturn,
allowed it to emerge from FY09
with enhanced products, more
efficient facilities and the expertise to take
advantage of future opportunities and better
service customers going into FY10.
Key achievements within Imdex’s Drilling
Fluids and Chemicals Division included
commissioning of new drilling fluid
manufacturing facilities in South Africa and
Chile; completion of an advanced research and
development laboratory in Perth, Australia, and
the establishment of a supply agreement with
Bentonite Products.
Significant achievements within Imdex’s Down
Hole Instrumentation Division included the
repositioning of trading brands Reflex and
Flexit; further product upgrades, establishment
of research and development centres of
excellence; improvements to survey and
core orientation for the mineral industry and
the successful relocation of manufacturing
facilities from Imdex Technology UK to Imdex
Technology Australia.
Advanced PHPA Plant, South Africa
In November 2008 construction of a
partially hydrolysed polyacrylamide (PHPA)
facility in Johannesburg, South Africa was
completed. The plant was commissioned for
the production of PHPA polymer emulsion,
which is used to stabilise reactive clay and
shale formations in the drilling environment
and as an injection fluid for foam drilling. The
PHPA plant allows greater control over the
manufacturing process and is yielding a number
of benefits including:
• The ability to supply superior quality
PHPA products;
• Significant cost efficiencies and shorter lead
times associated with local production; and
• The ability to produce a greater range
of products.
This plant is completely automated and one of
the most advanced, safest and environmentally
friendly systems of its kind. The computerised
system allows a single plant supervisor to
monitor the entire production process, including
endothermic and exothermic reactions,
agitation processes, heating and cooling, and
PHPA Plant, South Africa
The Company’s
commitment to continual
improvement throughout
the downturn, allowed
it to emerge from FY09
with enhanced products,
more efficient facilities
and the expertise to take
advantage of future
opportunities and
better service
customers going
into FY10.
18 | Imdex 2009 Annual Report
the pump and valve systems. It is supported by
a 361 amp generator to eliminate the risk of
power failure and utilises state-of-the-art pumps
supported by stop-start controls that reduce
electricity consumption and wear and tear. The
plant is also designed to eliminate effluent runoff
into the drainage system. All waste is stored
in a separate tank where it is collected by an
environmental disposal company.
Manufacturing Plant Chile
Completion of Manufacturing Plant
in Chile
In January 2009, the manufacturiang plant
at Imdex’s premises in Santiago, Chile was
completed.
The new facility has been designed to blend
and package both powders and liquids, and
enhances Imdex’s capability and capacity to
market drilling fluids and chemicals within Latin
America. This local facility also substantially
reduces lead times and costs associated with
freight to this region. Chile is considered to be
one of the most attractive locations for mining
and exploration investment in Latin America,
and Imdex is now well placed to offer quality
products at competitive prices to grow its
presence in this market.
Reflex EZ Com
Surface Solids Control Unit
DHI Market Focused
Branding Structure
In 2H09, Imdex’s Down Hole Instrumentation
Division aligned the branding structure of
its trading companies Reflex and Flexit with
its principal markets, the mining and mineral
exploration market, and the oil and gas market.
The initiative to segment its target markets
removed the competition between Reflex
and Flexit and allows Imdex’s Down Hole
Instrumentation Division to focus on the
provision of specialised products and a higher
level of customer service through dedicated
brands and trading companies.
Reflex focuses on the mining and mineral
exploration market and directly offers its
range of instruments for mining and mineral
exploration applications. In addition, it now
markets and supports the Reflex Gyro
(GyroSmart) previously offered by Flexit to
the mining and mineral exploration industry.
Flexit focuses solely on the energy sector,
marketing instrumentation specifically designed
for the oil and gas industry.
Bentonite Supply Agreement
In February 2009, Imdex’s Drilling Fluids and
Chemicals Division established an agreement
with Queensland based Bentonite Products,
for the exclusive supply of quality bentonite
which is endorsed by the CSIRO for the
drilling industry. This agreement provides cost
and logistical efficiencies for the Division.
Success for Equipment &
Rental Department
AMC’s Equipment and Rental Department
made significant progress during FY09 including
successful field trials with BHP Billiton and
Mosslake, and an official launch of its unique
surface solids control unit in March 2009.
Both national and international drilling
contractors and mining companies have shown
considerable interest in the solids control units
as the demand for environmental, portable and
efficient solids control alternatives increases.
During FY10, the Equipment and
Rental Department will continue to enhance
its range of equipment for customers and
increase its market presence in the coal bed
methane industry.
Reflex
Flexit
Reflex Ez - Shot
Reflex Ez - Trac
Reflex Maxibor II
Reflex Gyro
Reflex ACT / ACT II Digital core orientation
Single shot magnetic survey
Multi shot magnetic survey
Optical survey
Gyroscopic survey
Global Mining /
Mineral
Exploration
Market
Target INS Inertial navigation system
HTMS
HTGS
High temperature Multi - Shot
High temperature Gyro - Smart
Global Oil
& Gas Market
Company is in the process of upgrading the
facility to accommodate ongoing research and
development and future growth.
Continual Improvement & Product
Upgrades
In March 2009, Imdex’s Down Hole
Instrumentation Division introduced three new
product upgrades to the mineral exploration
and mining industry at the Prospectors and
Developers Association of Canada’s (PDAC)
Convention held in Toronto. The new survey
and core orientation instruments included the
Reflex Gyro; Reflex EZ-Com II, and the Reflex
ACT II RD. Continual product improvements
ensure that Imdex remains a leading provider
of advanced down hole instrumentation.
Imdex Technology, R&D Centres
of Excellence
During FY09 Imdex’s Down Hole
Instrumentation Division restructured its
research and development and manufacturing
resources under the banner of Imdex
Technology. Imdex Technology has
established dedicated centres of excellence
for the development of MEMS technology,
mineral and oil and gas exploration technology,
and conventional gyro technology allowing
them to produce innovative and leading
instrumentation.
Advanced Research Laboratory
Towards the end of FY09, Imdex
commissioned an advanced drilling fluids
research laboratory at its premises in Osborne
Park, Western Australia.
The laboratory is equipped with specialised
analytical equipment to test and develop
fluids used in the oilfield, mining, water well
and specialised drilling sectors, and is central
to Imdex’s Drilling Fluids and Chemicals’
Technical Department.
The establishment of the improved laboratory
provides enhanced analytical support, research
and development services, and more efficient
drilling fluid products and operations for
Imdex’s DFC customers globally.
During FY10, the Technical Department
will work with the National Association
of Testing Authorities (N.A.T.A) to achieve
the ISO 17025 certification which is
internationally recognised.
Successful Relocation of
Manufacturing Facility
At the end of March 2009, Imdex closed its
manufacturing facility at Imdex Technology in
the United Kingdom and successfully relocated
it to Perth, Western Australia. The planned
relocation was accelerated to take advantage
of the downturn to minimise disruption
to operations.
The integration of this manufacturing unit into
Imdex’s existing facility in Perth will generate
cost savings and efficiencies in FY10 and allow
greater control over the manufacturing process.
Production commenced in July 2009 and the
Imdex 2009 Annual Report | 19
Global Business
Imdex has established operations in all of the key mineral exploration
and mining regions of the world, including Asia Pacific, the Americas,
and Africa, and has revenue generating activities in others.
Calgary - Canada
americas
Timmins - Canada
Santiago - Chile
Imdex's Global Operations
20 | Imdex 2009 Annual Report
I am proud to report that Imdex
has successfully established
itself as a global business
Mr. I F Burston
Chairman
europe
Aktau - Kazakhstan
Vallentuna - Sweden
Riegel - Germany
East Sussex - UK
asia pacific
africa
Johannesburg - SA
Perth - WA
Brisbane - QLD
Kalgoorlie - WA
Imdex 2009 Annual Report | 21
Quality Health, Safety,
& the Environment
During FY09 Imdex continued to maintain and implement the International Standard for
Quality Management (ISO9001) in accordance with its quality and continual improvement
policy to ensure the key principles of quality and customer satisfaction are upheld.
Key Achievements for FY09
• Imdex Technology (UK) transferred its
certification to Imdex Technology (Australia)
to align with the relocation of manufacturing
facilities.
• Imdex Limited, AMC, Reflex Asia Pacific and
Samchem successfully maintained certification
to ISO9001.
• ISO9001 implementation is scheduled for
Imdex Chile, which includes Imdex Limited
Chile, AMC, and Reflex South America,
during 2H10.
Key Statistics:
SAFEWORK Loss Time Incident Frequency
Rate Benchmark (number of lost time injuries/
diseases for each one million hours worked)
• ISO9001 implementation commenced
• SAFEWORK Benchmark = 8.6 / LTIFR
• Imdex Group Result = 1.71
Work-Safe Loss Time Incident Rate
Benchmark (number of lost time injuries/
diseases for each one hundred workers)
• SAFEWORK Benchmark = 2.8 / LTIR
• Imdex Group Result = 0.34
for Wildcat Chemicals Australia Pty Ltd and
Reflex Canada during FY09. Certification is
expected to be completed before the first
half of FY10.
• New QA representatives were appointed for
Reflex Canada, Imdex Chile and Samchem
to assist the Group QA/HSE Manager
implement global strategies.
• The Company’s internal benchmark system
for managing customer satisfaction, HS&E
and continual improvement within the
organisation was completely redeveloped in
FY09. The new system introduced work-
flow and risk management prioritisation.
Reflex technician demonstrating
Reflex EZ-Com controller
Imdex outperforms
the stringent Australian
National Benchmark
SAFE WORK
AUSTRALIA
(Mining).
Imdex measures global Injury performance against a stringent Australian National Benchmark
SAFE WORK AUSTRALIA (Mining). This Benchmark is reported on a monthly basis, using a
2 month rolling snapshot.
22 | Imdex 2009 Annual Report
Managing Risk
Imdex believes that the identification and management of risk is central to
delivering long-term value to shareholders. Each year, the Board reviews
and considers the risk profile for the whole business.
• Identification of risk areas where additional
work is required by Internal Audit and/or the
business itself to reduce the risk exposure to
the business.
The principal aim of the Group’s risk
management governance structure and
system of internal control is to manage
business risks, with a view to enhancing
the value of shareholders’ investments and
safeguarding assets.
Management has put in place a number of key
policies, processes and independent controls
to provide assurance to the Board and the
ACC as to the integrity of our reporting and
effectiveness of our systems of internal control
and risk management.
Corporate Governance Structure
The Board has delegated the oversight of risk
management to the Audit and Compliance
Committee (ACC). The ACC monitors the
Group’s obligations in relation to financial
reporting, internal control structure, risk
management systems and the internal and
external audit functions.
The ACC is supported by an Internal Audit
function which regularly conducts reviews and
location based internal audits.
Risk Management Framework
Imdex operates a risk management
framework that provides an over-arching and
consistent framework for the assessment
and management of risks. Risks are ranked
using a common methodology. Where a
risk is assessed as material, it is reported and
reviewed by senior management.
Imdex’s risk management framework
incorporates the following factors:
• Consideration of other ASX listed risk
frameworks;
• Consultation with Senior Management in
identifying the business risk areas;
• Consideration of the Imdex Quality
Assurance risk assessment system to
ensure that the same risk language is used
across both operational and commercial
environments within Imdex;
• A review of all internal and external audit
management letters and audit reports;
• Development of a central risk register to
record and assess the risk, evaluate existing
controls and record recommendations to
reduce risk exposure; and
Reflex Gyro survey instrument
The principal aim of the
Group’s risk management
governance structure and
system of internal control
is to manage business risks,
with a view to enhancing
the value of
shareholders’
investments and
safeguarding assets.
Imdex 2009 Annual Report | 23
Long Term
Value to
Shareholders
24 | Imdex 2008 Annual Report
24 | Imdex 2009 Annual Report
Reflex Maxibor II survey instrument
Financial Report 2009
Directors’ Report
Auditors’ Independence Declaration
Independent Audit Report
Directors’ Declaration
Corporate Governance Statement
Income Statement
26
37
38
40
41
45
Balance Sheet
Statement of Changes in Equity
Cash Flow Statement
Notes to the Financial Report
46
47
49
50
Additional Stock Exchange Information
107
Imdex 2009 Annual Report | 25
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
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 2009.
In order to comply with the provisions of the Corporations Act 2001, the Directors’ report as follows:
(a)
Directors
The names and particulars of the Directors of the Company during or since the end of the financial year are:
Name
Role
Age
Particulars
Mr I F Burston
Independent, Non
Executive
Chairman
74
Mr B W Ridgeway
Managing Director
55
(cid:131) Mechanical Engineer
(cid:131) Member of the Audit and Compliance & Remuneration Committees
(cid:131) Director since 22 November 2000
(cid:131) Previously Managing Director of Hamersley Iron, Chief Executive
Officer for Kalgoorlie Consolidated Gold Mines, Managing Director and
Chief Executive Officer of Aurora Gold, and Managing Director of
Portman Limited
(cid:131) Extensive experience leading publicly listed and private companies
(cid:131) Chartered Accountant
(cid:131) Director since 23 May 2000
(cid:131) Over 20 years experience with public and private companies as owner,
director and manager
(cid:131) Member of the Institute of Chartered Accountants in Australia and
Australian Institute of Company Directors
Mr R W Kelly
Independent, Non
Executive Director
71
(cid:131) Engineer
(cid:131) Member of the Audit and Compliance Committee Chairman of the
Mr K A Dundo
Independent, Non
Executive Director
Mr M Lemmel
Independent, Non
Executive Director
Remuneration Committee
(cid:131) Director since 14 January 2004
(cid:131) Previously Chairman and Non Executive Director of Clough Limited,
Sumich Group Limited, Orbital Corporation Limited, Beltreco Limited
and Director of Aurora Gold Limited, PA Consulting Services Ltd and
the Fremantle Football Club.
(cid:131) Lawyer
(cid:131) Chairman of the Audit and Compliance Committee
(cid:131) Member of the Remuneration Committee
(cid:131) Director since 14 January 2004
(cid:131) Previously Director of Intrepid Mines Ltd, St Barbara Mines Ltd and
Defiance Mining Corporation
(cid:131) Management Consultant
(cid:131) Director since 19 October 2006
(cid:131) Previously Senior Vice President of Ericsson Telecommunications,
Chief Executive Officer of the Federation of Swedish Industries, Director
General for Enterprise Policy of the European Commission and
President of Småföretagsinvest AB (previous owners of Reflex)
56
70
(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
Fortescue Metals Group Ltd
NRW Holdings Ltd
Kansai Mining Corporation
Mincor Resources NL
Cape Lambert Iron Ore Ltd
Aztec Resources Ltd
Aviva Corporation Ltd
Non Executive Director
Non Executive Chairman
Non Executive Director
Non Executive Director
Non Executive Chairman
Chairman and Chief Executive Officer
Non Executive Director
2008 – Current
2007 – Current
2006 – Current
2003 – Current
2006 – 2008
2004 – 2006
2003 – 2006
Mr R W Kelly
Clough Limited
Non Executive Director
1996 – 2008
Mr K A Dundo
Computercorp Limited
Intrepid Mines Ltd
Non Executive Director
Non Executive Director
2006 – Current
2002 – 2009
26 | Imdex 2009 Annual Report
Page 1 of 83
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
(c)
Company Secretary
Mr P A Evans
Mr Evans, a Chartered Accountant, 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 Fellow 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, seven Board meetings, three Audit and Compliance Committee meetings and four Remuneration Committee meetings were held.
Board of Directors
Audit and Compliance
Committee
Remuneration Committee
Held
Attended
Held
Attended
Held
Attended
I F Burston
B W Ridgeway
R W Kelly
K A Dundo
M Lemmel
7
7
7
7
7
6
7
7
6
5
3
-
3
3
-
2
-
3
3
-
4
-
4
4
-
3
-
4
4
-
(e)
Directors’ Shareholdings
At the date of this report the Directors held the following interests in shares and options in shares 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
-
-
-
-
393,786
1,000,000
3,500,000
2,000,000
380,000
300,000
500,000
299,267
-
-
-
Details of options on issue at the date of this report are disclosed at (g) below. Details of options on issue at the end of the financial year
are disclosed in note 34.
Imdex 2009 Annual Report | 27
Page 2 of 83
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
(f)
Remuneration Report
Remuneration policy for Directors and Executives
Non Executive Directors
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 cash remuneration of Non Executive Directors is not linked to the Company’s performance in order to preserve
independence. Other than statutory superannuation, no Non Executive Director is entitled to any additional benefits on retirement from
the Company.
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. No Director received a payment during the current or prior years as consideration for agreeing to hold the relevant position.
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 $427,677, including statutory
superannuation. The Board determines the apportionment of directors’ fees between each Director.
Managing Director
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 28% of his cash compensation package. Should the Company
perform above budget, additional amounts will become payable. This is not the case in the current financial year. Each year the
Remuneration Committee sets the key performance indicators (KPIs) for the Managing Director to earn this short term incentive bonus.
These KPIs include financial, strategic and risk based measures. The Remuneration Committee set these performance hurdles as they
are significant profit and cash flow drivers which are linked to Imdex’s increased growth and profitability and hence shareholder value.
Performance is measured relative to budget and forecast results as these are the most accurate measures available against which to
assess the achievement of set hurdles. The balance of his cash 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 number of options granted are
determined with regard to current market trends. 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.
The Managing Director is employed under a permanent contract that provides for a 12 month termination period. No additional benefits
above those already entitled to will become payable on termination.
Executives and Staff
All Executives and staff of the Company are subject to a formal annual performance review. The remuneration of Executives comprises
a fixed monetary total, which is 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 base component of Executive salaries is
benchmarked against current market trends and is not linked to Company performance as it serves to attract and retain suitably
qualified and experienced staff. Performance incentives that are linked to Company performance are used to reward Executives for
exceptional performance that benefits the Company and Shareholders.
Each year the Remuneration Committee sets the KPIs for each key management person. These KPIs include people, customer,
system, financial, strategic and risk based measures. The Remuneration Committee set these performance hurdles as they are
significant profit and cash flow drivers which are linked to Imdex’s increased growth and profitability and hence shareholder value.
Performance is measured relative to budget and forecast results as these are the most accurate measures available against which to
assess the achievement of set hurdles. No bonus is awarded where hurdles are not met.
From time to time options may be issued to the Executives and staff as an additional performance incentive. The portion of
remuneration package that comprises options is linked to the Company’s performance. The number of options granted are determined
with regard to current market trends. The issue of any such options requires the approval of Shareholders in General Meeting. No such
options were granted to any Executives or staff in the current year.
All Executives are employed under permanent contracts, none of which provide for any termination payments. Mr G E Weston’s contract
provides a 12 month notice period and Mr D J Loughlin’s and Mr P A Evans’ contracts provide a 6 month notice period. Mr P J Mander’s
contract provides for a 3 month notice period. No additional benefits above those already entitled to will become payable on termination.
28 | Imdex 2009 Annual Report
Page 3 of 83
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
Director and Senior Management details
The Directors of Imdex Limited during the year were:
(i)
(ii)
(iii)
(iv)
(v)
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); and
Mr M Lemmel (Non Executive Director).
The term ‘Senior Management’ is used in this remuneration report to refer to the following persons:
(i)
(ii)
(iii)
(iv)
Mr G E Weston (Group General Manager);
Mr D J Loughlin (General Manager: Down Hole Instrumentation Division);
Mr P J Mander (General Manager: Fluids and Chemicals (Minerals) Division) (appointed 1 September 2008) and
Mr P A Evans (Company Secretary and Chief Financial Officer).
Except as noted above Directors and Senior Management held their current position for the hole of the financial year and since the end
of the financial year.
Elements of Director and Senior Management Remuneration
Remuneration packages contain the following key elements:
(i)
(ii)
(iii)
Short-term benefits – salary/fees, bonuses and non monetary benefits including motor vehicles and health benefits;
Post-employment benefits – including superannuation and prescribed retirement benefits;
Equity – share options granted under the Staff Option Scheme (note 34) or any other options granted as approved by
Shareholders in General Meeting; and
(iv) Other benefits.
Earnings and Movements in Shareholder Wealth
The table below sets out summary information about the Consolidated Entity’s earnings and movements in shareholder wealth for the
five years to June 2009:
30 June 2009
30 June 2008
30 June 2007
30 June 2006
30 June 2005
Revenue – continuing and
discontinued operations ($000s)
Net profit before tax from continuing
operations ($000s)
Net profit after tax from continuing
operations ($000s)
Share price at start of year (cents)
Share price at end of year (cents)
Interim dividend (cents) – fully
franked
Final dividend (cents) – fully franked
Basic earnings per share (cents) –
continuing operations
Diluted earnings per share (cents) –
continuing operations
138,992
18,195
12,067
165
64.5
1.00
-
6.37
6.23
150,493
119,340
31,885
21,081
150
165
1.75
2.25
11.22
10.79
18,115
11,950
61
150
1.00
1.50
7.72
7.09
66,792
11,864
7,984
22
61
1.00
1.00
6.07
5.95
40,051
5,005
3,282
11.5
22
-
-
3.66
3.66
Imdex 2009 Annual Report | 29
Page 4 of 83
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^
Imdex 2009 Annual Report | 31
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
(i) Mr B W Ridgeway is a party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable
annually. The service contract specifies a twelve month notice period in the event that the contract is terminated. If the contract is
terminated without notice, the notice period will become payable in cash. There are no termination benefits specified in this contract.
Additional performance incentives may be agreed between Mr Ridgeway and Imdex Limited from time to time. The Managing Director’s
compensation is reviewed and determined annually by the Remuneration Committee.
No bonus was earned in the current year as the profitability related hurdles were not met. During the prior year Mr Ridgeway earned a
cash bonus of $60,000, representing 60% of the possible bonus payable for the year. This bonus was earned on the satisfaction of
performance criteria linked to Group operational progress and profitability.
No options were granted to Mr Ridgeway in the current year or in the prior year. Although 2,000,000 options were approved by the
shareholders at the 2008 Annual General Meeting, these were not granted due to the impacts of the global financial crisis with the
knowledge that this would be considered in future employee share option allocations.
(ii) Mr G E Weston is party to a service contract with Imdex Limited, which sets out a fixed compensation package, reviewable annually.
The service contract stipulates a twelve 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 Imdex Limited from time to time.
Additionally, Mr Weston is party to a deed with Imdex Limited, granting Mr Weston the right of first refusal of Australian Mud Company
Pty Ltd, a 100% held subsidiary of Imdex Limited, in the event that an offer is received by the directors of Imdex Limited to purchase
100% of the Imdex Limited shares on issue. This ‘right’ lapses automatically should Mr Weston no longer be employed by Imdex
Limited.
No bonus was earned in the current year as the profitability related hurdles were not met. During the prior year Mr Weston earned a
cash bonus of $60,000. This represents 100% of the possible bonus available for that year and was earned on the satisfaction of
operational and EBITA related hurdles.
No options were granted to Mr Weston in the current year. In the prior year Mr Weston was granted 500,000 options under Staff Option
Scheme Tranche 7 along with other staff of the Group. The percentage of the value of prior year compensation that consisted of options
was 4%. The options expense shown in the tables above includes a portion of the value of options granted in past years that has been
spread over the three year vesting period. Refer note 34 for further details.
(iii) 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 six 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.
No bonus was earned in the current year as the profitability related hurdles were not met. Mr Loughlin earned a bonus of $47,250 in the
prior year. This represents 100% of the possible bonus available for that year and was earned on the satisfaction of operational and
EBITA related hurdles.
No options were granted to Mr Loughlin in the current or prior year. The options expense shown in the tables above includes a portion of
the value of options granted in past years that has been spread over the three year vesting period. Refer note 34 for further details.
(iv) Mr P J Mander was appointed to the position of General Manager: Fluids and Chemicals (Minerals) Division on 1 September 2008,
hence the disclosures in this report only relate to the period when in office. Mr Mander 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 Mander and Imdex Limited from time to time.
No bonus was earned in the current year as the profitability related hurdles were not met.
No options were granted to Mr Mander in the current year.
(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 six 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.
No bonus was earned in the current year as the profitability related hurdles were not met. During the prior year Mr Evans earned a cash
bonus of $50,000, representing 100% of the possible bonus payable for the year. This bonus was paid on the satisfaction of specific
EBITA, people and systems based criteria.
No options were granted to Mr Evans in the current year. In the prior year, Mr Evans was granted 200,000 options, under Staff Option
Scheme Tranche 7, along with other staff of the Group. The percentage of the value of prior year compensation that consisted of
options was 19%. The options expense shown in the table above includes a portion of the value of options granted in past years that
has been spread over the three year vesting period. Refer note 34 for further details.
32 | Imdex 2009 Annual Report
Page 7 of 83
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
Bonuses granted to Directors and Senior Managers
The table below sets out the bonuses earned by Directors and Senior Managers in the current year. Bonuses are paid on the
achievement of performance criteria specific to the individual. Where performance hurdles are not met, no bonus is paid. The
performance criteria used are chosen by the Remuneration Committee annually and are linked to the financial performance of the
company and hence shareholder value. Performance criteria typically revolve around areas of risk management, people development,
systems improvement and EBITA performance. Performance criteria are reviewed by the Remuneration Committee against budgeted
outcomes before granting bonuses.
Bonus
% of possible
bonus earned
% of possible
bonus forfeited
% of compensation for the
year consisting of
performance based
bonuses
B W Ridgeway
G E Weston
D J Loughlin
P J Mander
P A Evans
$
-
-
-
-
-
%
0%
0%
0%
0%
0%
%
100%
100%
100%
100%
100%
%
0%
0%
0%
0%
0%
Value of options issued to Directors and Senior Managers
The following table discloses the value of options granted, exercised or lapsed during the year:
Options
Granted
Options
Exercised
Options
Lapsed
Value at
grant
date
Value at
exercise
date
Value at
lapsing
date
Total value of
options
granted,
exercised
and lapsed
Number of
options
vested in the
current year
Value of
options
included in
remuneration
during the
year (i)
Percentage of
remuneration
for the year that
consisted of
options
$
$
$
$
Number
$
%
I F Burston
B W Ridgeway
G E Weston
D J Loughlin
P J Mander (ii)
P A Evans
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
53,377
-
500,000
166,667
50,000
166,667
-
64,734
62,111
15,160
57,333
31%
-
14%
16%
8%
15%
(i)
(ii)
The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB 2
“Share Based Payments”. These non-cash numbers reflect the value of options issued in prior periods that are being expensed
in the current period to recognise progressive vesting conditions.
Mr P J Mander was appointed to a key management position on 1 September 2008. Disclosures above relate only to the period
when in office.
Share options granted to Directors and Senior Managers
No share options were granted to Directors or Senior Managers during or since the end of the financial year.
Imdex 2009 Annual Report | 33
Page 8 of 83
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
(g)
(i)
Share options
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
Imdex
Limited
Imdex
Limited
Imdex
Limited
Staff Share
Options
Staff Share
Options
Staff Share
Options
Staff Share
Options
Staff Share
Options
Staff Share
Options
Managing
Director Options
Chairman’s
Options
Ordinary
300 cents
28 Mar 2008
27 Mar 2013
(aa)
4,655,000
Ordinary
180 cents
18 Oct 2007
17 Oct 2012
(aa)
500,000
Ordinary
180 cents
12 Jun 2007
11 Jun 2012
(aa)
625,000
Ordinary
100 cents
23 Feb 2007
22 Feb 2012
(aa)
3,242,668
Ordinary
75 cents
23 Feb 2007
22 Feb 2012
(aa)
700,000
Ordinary
35 cents
1 Feb 2006
31 Jan 2011
(aa)
1,716,205
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.
(bb) exercisable at any point from 2 years after date of issue until expiry.
The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the
Company or of any other body corporate or registered scheme.
(ii)
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
Imdex
Limited
Staff Share
Options
Ordinary
20 cents
1 Aug 2004
31 Jul 2009
1,106,666
No options were exercised by Directors in the current year.
(h)
Principal Activities
The Group’s principal continuing activities during the course of the financial year were manufacturing and sale and rental of a range of
drilling fluids and chemicals and down hole instrumentation.
34 | Imdex 2009 Annual Report
Page 9 of 83
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
(i)
Review of Operations
During the current financial year the Imdex Group continued to sell drilling fluids and chemicals as well as rent and sell technologically
advanced down hole instrumentation to the mining and oil & gas industries. The Group earned revenue from continuing operations
including interest of $139.0 million (2008: $143.9 million) and profit after tax of $12.1 million (2008: $32.0 million).
(j)
Dividends
A fully franked interim dividend of 1.00 cent per ordinary share was paid on 24 March 2009 to shareholders registered on 6 March 2009.
A fully franked final dividend of 2.25 cents per ordinary share was paid on 31 October 2008 to shareholders registered on 17 October
2008.
In the prior year a fully franked interim dividend of 1.75 cents per ordinary share was paid on 25 March 2008 to shareholders registered
on 7 March 2008 and a fully franked final dividend of 1.50 cents per ordinary share was paid on 2 November 2007 to shareholders
registered on 15 October 2007.
(k)
Changes in State Of Affairs
During the financial year the Group acquired Wildcat Chemicals Australia Pty Ltd, a drilling fluids manufacturing business in Brisbane.
More details of this acquisition is contained in note 27(a).
Other than the above, there were no significant changes in the state of affairs of the Group.
(l)
Subsequent Events
On 21 July 2009 Imdex Limited announced a conditional proposal to merge with Coretrack Limited (Coretrack). The merger was to be
effected through a Scheme of Arrangement where Imdex was to issue Coretrack shareholders 0.61 fully paid Imdex ordinary shares for
every one Coretrack fully paid ordinary share, and 0.305 fully paid Imdex ordinary shares for every one Coretrack listed option, and
consideration based on similar terms for Coretrack’s unlisted options. Coretrack share and option holders were to receive a total of
$28.4 million in the form of 43.39 million Imdex shares issued at 65.5 cents per share. On 31 July 2009 it was announced that, following
a due diligence process the proposed merger was terminated.
On 31 July 2009 Imdex Limited paid the final deferred settlement instalment of GBP 1,045,000 (A$2.1 million) due to the vendors of
Imdex Technology UK Limited (formerly Chardec Technology Limited). No further amounts remain outstanding in relation to this
acquisition.
(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.
Imdex 2009 Annual Report | 35
Page 10 of 83
IMDEX LIMITED
and its controlled entities
DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2009
(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:
(cid:120)
(cid:120)
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.
(p)
Auditor’s Independence Declaration
The auditor’s independence declaration is included in the Annual Report immediately prior to the Audit 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 unless otherwise
indicated.
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 Ian Burston
Chairman
PERTH, Western Australia, 14 August 2009.
36 | Imdex 2009 Annual Report
Page 11 of 83
Imdex 2009 Annual Report | 37
38 | Imdex 2009 Annual Report
Imdex 2009 Annual Report | 39
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 26 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) of the Corporations Act 2001.
Dated at Perth, 14 August 2009.
Ian F Burston
Chairman
40 | Imdex 2009 Annual Report
Page 15 of 83
IMDEX LIMITED
IMDEX LIMITED
IMDEX LIMITED
and its controlled entities
and its controlled entities
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
ASX Governance Principles and ASX Recommendations
ASX Governance Principles and ASX Recommendations
ASX Governance Principles and ASX Recommendations
The Australian Stock Exchange Corporate Governance Council sets out best practice recommendations, including corporate
The Australian Stock Exchange Corporate Governance Council sets out best practice recommendations, including corporate
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
governance practices and suggested disclosures. ASX Listing Rule 4.10.3 requires companies to disclose the extent to which they have
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.
complied with the ASX recommendations and to give reasons for not following them.
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
Unless otherwise indicated the best practice recommendations of the ASX Corporate Governance Council, including corporate
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 2009. In addition,
governance practices and suggested disclosures, have been adopted by the Company for the full year ended 30 June 2009. In addition,
governance practices and suggested disclosures, have been adopted by the Company for the full year ended 30 June 2009. In addition,
the Company has a Corporate Governance section on its website: www.imdexlimited.com (under the “Investors” heading) which
the Company has a Corporate Governance section on its website: www.imdexlimited.com (under the “Investors” heading) which
the Company has a Corporate Governance section on its website: www.imdexlimited.com (under the “Investors” heading) which
includes the relevant documentation suggested by the ASX Recommendations.
includes the relevant documentation suggested by the ASX Recommendations.
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 2009, and the main corporate
The extent to which Imdex has complied with the ASX Recommendations during the year ended 30 June 2009, and the main corporate
The extent to which Imdex has complied with the ASX Recommendations during the year ended 30 June 2009, and the main corporate
governance practices in place are set out below.
governance practices in place are set out below.
governance practices in place are set out below.
Principle 1: Lay solid foundation for management and oversight
Principle 1: Lay solid foundation for management and oversight
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 Board has implemented a Board Charter that formalises the functions and responsibilities of the Board. The Charter is published on
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.
the Company’s website.
the Company’s website.
The performance of Senior Executives is measured against prescribed criteria as set by the Remuneration Committee. These criteria
The performance of Senior Executives is measured against prescribed criteria as set by the Remuneration Committee. These criteria
The performance of Senior Executives is measured against prescribed criteria as set by the Remuneration Committee. These criteria
are set annually and individual performance is assessed annually.
are set annually and individual performance is assessed annually.
are set annually and individual performance is assessed annually.
Principle 2: Structure the Board to add value
Principle 2: Structure the Board to add value
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
Imdex’s Board structure is consistent with the ASX Recommendations on Principle 2, with the exception that it does not have a separate
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.
nomination committee for the reasons detailed below.
nomination committee for the reasons detailed below.
(i) Board Structure
(i) Board Structure
(i) Board Structure
The Board consists of a Non Executive Chairman, three Non Executive Directors and one Executive Director. Of the five Board
The Board consists of a Non Executive Chairman, three Non Executive Directors and one Executive Director. Of the five Board
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.
members, four are considered independent.
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
In accordance with the Company’s Constitution the minimum number of Directors is three. There is no maximum number, although it
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.
would be expected that the optimal number of Directors would be five or six.
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
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
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
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
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.
the Annual Report.
the Annual Report.
(ii) Board Independence
(ii) Board Independence
(ii) Board Independence
Directors are expected to bring independent judgement to the decision making of the Board. To facilitate this, each Director has the
Directors are expected to bring independent judgement to the decision making of the Board. To facilitate this, each Director has the
Directors are expected to bring independent judgement to 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
right to seek independent legal advice at the Group’s expense with the prior approval of the Chairman, which may not be unreasonably
right to seek independent legal advice at the Group’s expense with the prior approval of the Chairman, which may not be unreasonably
withheld.
withheld.
withheld.
In assessing Director independence, materiality has been determined from both a quantitative and qualitative perspective. An amount
In assessing Director independence, materiality has been determined from both a quantitative and qualitative perspective. An amount
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 over 5% of turnover is considered material. Similarly, a transaction of any amount, or a relationship, is deemed material if knowledge
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
of it impacts, or may impact, the Shareholders’ understanding of the Director’s performance. The Board has conducted a review of each
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’s independence and reports as follows:
Director’s independence and reports as follows:
Director
Director
Director
Mr I F Burston,
Mr I F Burston,
Mr I F Burston,
Non Executive Chairman
Non Executive Chairman
Non Executive Chairman
Mr B W Ridgeway,
Mr B W Ridgeway,
Mr B W Ridgeway,
Managing Director
Managing Director
Managing Director
Mr R W Kelly,
Mr R W Kelly,
Mr R W Kelly,
Non Executive Director
Non Executive Director
Non Executive Director
Mr K A Dundo,
Mr K A Dundo,
Mr K A Dundo,
Non Executive Director
Non Executive Director
Non Executive Director
Mr M Lemmel,
Mr M Lemmel,
Mr M Lemmel,
Non Executive Director
Non Executive Director
Non Executive Director
Assessment
Assessment
Assessment
Existence of any matters contained in
Existence of any matters contained in
Existence of any matters contained in
ASX Recommendation 2.1 affecting Independence
ASX Recommendation 2.1 affecting Independence
ASX Recommendation 2.1 affecting Independence
Independent
Independent
Independent
Nil
Nil
Nil
Not Independent
Not Independent
Not Independent
Managing Director
Managing Director
Managing Director
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Imdex 2009 Annual Report | 41
Page 16 of 83
Page 16 of 83
Page 16 of 83
IMDEX LIMITED
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
(iii) Board Nomination
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:
(cid:120)
(cid:120)
(cid:120)
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
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.
(v) Process for evaluating the performance of the Board, its committees and individual Directors
Board performance is measured primarily by means of monitoring Group profitability and share price performance in the market.
Individual Director performance is also measured by way of monitoring meeting attendance and individual contributions made at these
meetings.
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:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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.
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 2009 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.
42 | Imdex 2009 Annual Report
Page 17 of 83
IMDEX LIMITED
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
(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, appropriate ethical standards for the management of the Company and to approve the annual internal audit plan. 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. Details of meetings held by the Audit Committee during the year are set out in the Directors’ Report.
(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 be available to answer questions from
Shareholders.
(iv) Internal Audit
The Group has an internal audit function that reports directly to the Audit and Compliance Committee. The conduct and independence
of the internal audit function are governed by the Internal Audit Charter which is approved by the Audit and Compliance Committee. The
annual work plan of the internal audit function is approved annually by the Audit and Compliance Committee.
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.
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:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the Annual Report is made available to all Shareholders. 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;
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 made available to all Shareholders;
regular reports released through the ASX and the media;
proposed major changes in the Group, which may impact on share ownership rights are submitted to a vote of Shareholders;
and
Imdex 2009 Annual Report | 43
Page 18 of 83
IMDEX LIMITED
IMDEX LIMITED
and its controlled entities
and its controlled entities
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
(cid:120)
•
the Board encourages full participation by Shareholders at the Annual General Meeting to ensure a high level of accountability
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
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.
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
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.imdexlimited.com. Further information can also be obtained by emailing the Company at:
on the Company’s website: www.imdexlimited.com. Further information can also be obtained by emailing the Company at:
imdex@imdexlimited.com.
imdex@imdexlimited.com.
The auditor is also invited to the Company’s Annual General Meetings and is available to answer Shareholders questions concerning
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 conduct of the audit.
The Company’s Shareholder Communications Strategy is published on the Company’s website.
The Company’s Shareholder Communications Strategy is published on the Company’s website.
Principle 7: Recognise and manage risk
Principle 7: Recognise and manage risk
(i) Risk oversight and management policies
(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
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
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.
systems are adequate and operating effectively.
The Company has an independent internal audit function that operates under a Charter approved by the Audit and Compliance
The Company has an independent internal audit function that operates under a Charter approved by the Audit and Compliance
Committee. One of the tasks of the internal audit function is to review and evaluate the Company’s and Group’s risk management and
Committee. One of the tasks of the internal audit function is to review and evaluate the Company’s and Group’s risk management and
internal control processes on a continuous basis.
internal control processes on a continuous basis.
The risk management policy is published on the Company’s website.
The risk management policy is published on the Company’s website.
In addition to receiving Internal Audit Reports, the Audit and Compliance Committee also receives regular reports from the External
In addition to receiving Internal Audit Reports, the Audit and Compliance Committee also receives regular reports from the External
Audit function.
Audit function.
(ii) Statement by the Managing Director and Chief Financial Officer
(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
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
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.
policies adopted by the Board, and that the system is operating efficiently and effectively in all material respects.
Principle 8: Remunerate fairly and responsibly
Principle 8: Remunerate fairly and responsibly
(i) Company’s remuneration policies
(i) Company’s remuneration policies
Details on the remuneration of Directors and Executives as well as the Company’s remuneration policies are set out in the
Details on the remuneration of Directors and Executives as well as the Company’s remuneration policies are set out in the
Remuneration Report that is contained in the Directors Report.
Remuneration Report that is contained in the Directors Report.
(ii) Remuneration Committee
(ii) Remuneration Committee
The Remuneration Committee consists of three Non Executive Directors and assists the Board in determining executive remuneration
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.
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:
The members of the Committee during the year and at the date of this Statement were:
Mr R W Kelly (Chairman);
Mr R W Kelly (Chairman);
Mr I F Burston; and,
Mr I F Burston; and,
Mr K A Dundo.
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 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 operates under a written Charter that is published on the Company’s website.
The Remuneration Committee operates under a written Charter that is published on the Company’s website.
(iii) Structure of Non Executive Director’s remuneration
(iii) Structure of 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
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
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
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. From time to time additional benefits may be agreed with Directors with
the 2006 Annual General Meeting and is currently $500,000. From time to time additional benefits may be agreed with Directors with
due regard to market conditions.
due regard to market conditions.
44 | Imdex 2009 Annual Report
Page 19 of 83
Page 19 of 83
IMDEX LIMITED
and its controlled entities
INCOME STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009
Continuing operations
Revenue from sale of goods and operating lease rental
Other revenue from operations
Total revenue
Other income
Raw materials and consumables used
Employee benefit expense
Depreciation expense
Amortisation expense
Finance costs
Other expenses
Profit before tax
Income tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Attributable to:
Equity holders of the parent
Minority interest
Earnings per share
Continuing operations:
Basic earnings per share (cents)
Diluted earnings per share (cents)
Continuing and discontinued operations:
Basic earnings per share (cents)
Diluted earnings per share (cents)
Consolidated
Company
Year Ended Year Ended Year Ended Year Ended
30 June 2009 30 June 2008 30 June 2009 30 June 2008
Notes
$’000
$’000
$’000
$’000
136,968
2,024
138,992
142,009
1,900
143,909
-
3,822
3,822
-
3,338
3,338
253
369
16,902
27,474
-
(7,443)
(187)
-
(2,170)
(1,351)
9,573
(1,057)
8,516
-
8,516
8,516
-
8,516
-
(5,720)
(198)
-
(1,575)
(4,474)
18,845
(2,520)
16,325
-
16,325
16,325
-
16,325
(61,700)
(28,467)
(3,318)
(6,535)
(2,850)
(18,180)
18,195
(6,128)
12,067
-
12,067
12,067
-
12,067
6.37
6.23
6.37
6.23
(59,589)
(22,996)
(3,266)
(6,055)
(2,762)
(17,725)
31,885
(10,804)
21,081
10,921
32,002
31,966
36
32,002
11.22
10.79
17.04
16.38
4
4
4
4
4
4
4
4
5
29
21
21
21
21
The Income Statement should be read in conjunction with the accompanying notes.
Imdex 2009 Annual Report | 45
Page 20 of 83
IMDEX LIMITED
and its controlled entities
BALANCE SHEET
AS AT 30 JUNE 2009
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
Total Non Current Assets
Total Assets
Current Liabilities
Trade and Other Payables
Borrowings
Current Tax Payables
Provisions
Other Current Liabilities
Total Current Liabilities
Non Current Liabilities
Borrowings
Deferred Tax Liabilities
Provisions
Other Non Current Liabilities
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Capital
Foreign Currency Translation Reserve
Employee Equity-Settled Benefits Reserve
Retained Profits
Total Equity
Consolidated
Company
30 June 2009 30 June 2008 30 June 2009 30 June 2008
Notes
$’000
$’000
$’000
$’000
31
7
8
9
10
11
9
12
13
14
15
16
5
17
18
16
5
17
18
19
20
20
11,975
23,367
26,535
12,340
1,507
75,724
8,130
83,854
-
10,781
55,268
23,915
89,964
173,818
12,769
13,514
5,268
1,317
2,492
35,360
18,033
3,674
553
-
22,260
57,620
116,198
13,276
32,079
21,716
13,237
1,200
81,508
4,500
86,008
-
7,140
52,626
27,289
87,055
173,063
16,522
13,016
8,792
972
2,687
41,989
17,132
5,024
558
2,717
25,431
67,420
105,643
67,136
(4,105)
4,024
49,143
116,198
64,883
(4,863)
2,573
43,050
105,643
1,455
5,836
-
12,340
22
19,653
8,130
27,783
74,772
541
-
-
75,313
103,096
1,166
10,000
2,249
422
-
13,837
11,500
732
310
-
12,542
26,379
76,717
67,136
-
4,024
5,557
76,717
869
2,401
-
13,237
20
16,527
4,500
21,027
71,022
522
-
-
71,544
92,571
1,811
9,000
2,643
245
-
13,699
8,000
273
128
-
8,401
22,100
70,471
64,883
-
2,573
3,015
70,471
The Balance Sheet should be read in conjunction with the accompanying notes.
46 | Imdex 2009 Annual Report
Page 21 of 83
IMDEX LIMITED
and its controlled entities
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009
Fully Paid
Ordinary
Shares
Mandatory
Convertible
Capital
Foreign
Currency
Translation
Reserve
Employee
Equity-
Settled
Benefits
Reserve
Retained
Earnings
CONSOLIDATED
Notes
$'000
$'000
$'000
$'000
$'000
Total
Attributable to
Equity
Holders of the
Entity
$'000
54,282
6,700
(2,137)
751
17,018
76,614
-
-
-
-
-
-
1,750
1,387
(113)
877
58,183
-
-
-
-
-
-
Balance at 1 July 2007
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 Poly-Drill
Issue of shares as part consideration
for the acquisition of Southernland
Tax effect of prior period share issue
costs
Issue of shares under staff option
plan
Balance at 30 June 2008
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 Suay
Conversion of capital
Issue of shares as part consideration
for the acquisition of Imdex
Technology Sweden AB (formerly
Flexit AB)
Tax effect of prior period share issue
costs
Issue of shares under staff option
plan
Balance at 30 June 2009
20
22
20
19
19
19
19, 20
20
22
20
19
19
19
19
19, 20
-
-
-
-
-
-
-
-
-
(2,726)
(2,726)
-
-
-
-
-
-
-
-
-
-
-
-
2,025
-
-
-
-
(2,726)
-
31,966
31,966
(5,934)
-
-
-
-
(2,726)
31,966
31,966
(5,934)
2,025
1,750
1,387
(113)
-
6,700
-
(4,863)
(203)
2,573
-
43,050
674
105,643
-
-
-
-
-
-
278
6,700
-
(6,700)
1,900
(54)
129
67,136
-
-
-
-
758
758
-
-
-
-
-
-
-
-
-
-
-
-
-
1,487
-
-
-
-
-
758
-
12,067
12,067
(5,974)
-
-
-
-
-
758
12,067
12,067
(5,974)
1,487
278
-
1,900
(54)
-
(4,105)
(36)
4,024
-
49,143
93
116,198
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Imdex 2009 Annual Report | 47
Page 22 of 83
IMDEX LIMITED
and its controlled entities
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009
Fully Paid
Ordinary
Shares
Mandatory
Convertible
Capital
Foreign
Currency
Translation
Reserve
Employee
Equity-
Settled
Benefits
Reserve
Retained
Earnings /
(Accumulated
Losses)
COMPANY
Notes
$'000
$'000
$'000
$'000
$'000
Total
Attributable to
Equity
Holders of the
Entity
$'000
Balance at 1 July 2007
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 Poly-Drill
Issue of shares as part consideration
for the acquisition of Southernland
Tax effect of prior period share issue
costs
Issue of shares under staff option
plan
Balance at 30 June 2008
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 Suay
Conversion of capital
Issue of shares as part consideration
for the acquisition of Imdex
Technology Sweden AB (formerly
Flexit AB)
Tax effect of prior period share issue
costs
Issue of shares under staff option
plan
Balance at 30 June 2009
22
20
19
19
19
19, 20
22
20
19
19
19
19
19, 20
54,282
-
6,700
-
-
-
-
1,750
1,387
(113)
877
58,183
-
-
-
-
-
-
-
-
-
-
-
6,700
-
-
-
-
278
6,700
-
(6,700)
1,900
(54)
129
67,136
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
751
-
-
-
2,025
-
-
-
(203)
2,573
-
-
-
1,487
-
-
-
-
(7,376)
16,325
16,325
(5,934)
-
-
-
-
-
3,015
8,516
8,516
(5,974)
-
-
-
-
-
(36)
4,024
-
5,557
54,357
16,325
16,325
(5,934)
2,025
1,750
1,387
(113)
674
70,471
8,516
8,516
(5,974)
1,487
278
-
1,900
(54)
93
76,717
The Statement of Changes in Equity should be read in conjunction with the accompanying notes.
48 | Imdex 2009 Annual Report
Page 23 of 83
IMDEX LIMITED
and its controlled entities
CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009
Consolidated
Company
Year Ended Year Ended Year Ended Year Ended
30 June 2009 30 June 2008 30 June 2009 30 June 2008
Notes
$’000
$’000
$’000
$’000
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Intercompany management fees received
Interest and other costs of finance paid
Income tax paid
Net cash provided by / (used in) Operating Activities
Cash Flows From Investing Activities
Interest received
Intercompany dividend received
Payment for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payment for development costs capitalised
Payment for shares of Wildcat net of cash acquired
Payment for shares of Imdex Technology UK net of cash
acquired
Payment for shares of Poly-Drill net of cash acquired
Payment for shares of Suay net of cash acquired
Payment for shares of Southernland net of cash acquired
Payment for shares of ITG net of cash acquired
Proceeds on the sale of Surtron net of cash disposed
Net cash provided by / (used in) Investing Activities
Cash Flows From Financing Activities
Advances from / (to) Controlled Entities
Cash received on exercise of options
Dividend paid to equity holders of the parent
Hire purchase debt raised
Hire purchase and lease payments
Payment for interest rate cap
Payment of convertible note interest
Proceeds from borrowings
Repayment of borrowings
Net cash used in Financing Activities
31(c)
14
27(a)
27(g)
27(c)
27(d), (e)
27(f)
27(b)
29
22
161,981
(132,564)
-
(1,963)
(11,279)
16,175
154,253
(126,292)
-
(2,342)
(15,362)
10,257
119
-
(7,741)
2,113
(3,650)
(1,902)
(3,106)
-
(500)
-
-
-
(14,667)
-
93
(5,974)
1,838
(227)
-
-
7,000
(6,593)
(3,863)
451
-
(4,803)
1,138
-
-
(5,088)
(899)
(246)
(1,446)
(13,853)
18,000
(6,746)
-
674
(5,934)
-
(888)
(239)
(464)
12,000
(9,983)
(4,834)
Net Increase / (Decrease) in Cash and Cash Equivalents
Held
(2,355)
(1,323)
-
(8,285)
7,481
(1,530)
(1,046)
(3,380)
56
7,500
(236)
71
-
(1,902)
-
-
(500)
-
-
-
4,989
358
93
(5,974)
-
-
-
-
7,000
(2,500)
(1,023)
586
869
-
-
(7,565)
4,665
(1,562)
(8,907)
(13,369)
212
3,378
(42)
-
-
-
-
(1,571)
(246)
(1,533)
-
19,873
20,071
(5,443)
674
(5,934)
-
(89)
(239)
(464)
12,000
(7,300)
(6,795)
(93)
962
-
869
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
31(a)
13,276
15,271
1,054
(672)
31(a)
11,975
13,276
1,455
The Cash Flow Statement should be read in conjunction with the accompanying notes.
Imdex 2009 Annual Report | 49
Page 24 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
1
Adoption of New and Revised Accounting Standards
At the date of authorisation of the financial report, a number of Standards and Interpretations were in issue but not yet effective.
Initial application of the following Standards will not affect any of the amounts recognised in the financial report, but will change the
disclosures presently made in relation to the Group and the Company’s financial report:
Standard
AASB 101 ‘Presentation of Financial Statements’ (revised
September 2007), AASB 2007-8 ‘Amendments to Australian
Accounting Standards arising from AASB 101’, AASB 2007-10
‘Further Amendments to Australian Accounting Standards
arising from AASB 101’
AASB 8 ‘Operating Segments’, AASB 2007-3 ‘Amendments to
Australian Accounting Standards arising from AASB 8’
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial year
ending
1 January 2009
30 June 2010
1 January 2009
30 June 2010
AASB 2009-2 ‘Amendments to Australian Accounting Standards
– Improving Disclosures about Financial Instruments’
1 January 2009 (and that
ends on or after 30 April
2009)
30 June 2010
Initial application of the following Standards/Interpretations is not expected to have any material impact on the financial report of the
Group and the Company:
Standard
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial year
ending
AASB 123 ‘Borrowing Costs’ (revised), AASB 2007-6
‘Amendments to Australian Accounting Standards arising from
AASB 123’
1 January 2009
30 June 2010
AASB 3 ‘Business Combinations’ (revised), AASB 127
‘Consolidated and Separate Financial Statements’ (revised) and
AASB 2008-3 ‘Amendments to Australian Accounting Standards
arising from AASB 3 and AASB 127’
Business combinations
occurring after the beginning
of annual reporting periods
beginning 1 July 2009
30 June 2010
AASB 2008-1 ‘Amendments to Australian Accounting Standard -
Share-based Payments: Vesting Conditions and Cancellations’
1 January 2009
30 June 2010
AASB 2008-2 ‘Amendments to Australian Accounting Standards
– Puttable Financial Instruments and Obligations arising on
Liquidation’
1 January 2009
30 June 2010
AASB 2008-5 ‘Amendments to Australian Accounting Standards
arising from the Annual Improvements Project’
1 January 2009
30 June 2010
AASB 2008-6 ‘Further Amendments to Australian Accounting
Standards arising from the Annual Improvements Project’
1 July 2009
30 June 2010
AASB 2008-7 ‘Amendments to Australian Accounting Standards
– Cost of an Investment in a Subsidiary, Jointly Controlled Entity
or Associate
1 January 2009
30 June 2010
AASB 2008-8 ‘Amendments to Australian Accounting Standards
– Eligible Hedged Items’
July 2009
30 June 2010
AASB 2009-4 ‘Amendments to Australian Accounting Standards
arising from the Annual Improvements Process’
July 2009
30 June 2010
50 | Imdex 2009 Annual Report
Page 25 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
1
Adoption of New and Revised Accounting Standards (continued)
Standard
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial year
ending
AASB 2009-5 ‘Further Amendments to Australian Accounting
Standards arising from the Annual Improvements Process’
AASB 2009-6 “Amendments to Australian Accounting
Standards”
1 January 2010 (Applicable
to financial years beginning
on or after 1 January 2010,
except for the amendments
made to the guidance to
AASB 118 ‘Revenue’ that
have no explicit application
date and are taken to be
immediately effective)
1 January 2009 (Applicable
to financial years beginning
on or after 1 January 2009
that end on or after 30 June
2009)
30 June 2011
30 June 2010
AASB 2009-7 “Amendments to Australian Accounting
Standards”
1 July 2009
30 June 2010
AASB 1 ‘First-time Adoption of Australian Accounting Standards’
1 July 2009
30 June 2010
AASB Interpretation 15 ‘Agreements for the Construction of Real
Estate’
1 January 2009
30 June 2010
AASB Interpretation 16 ‘Hedges of a Net Investment in a
Foreign Operation’
1 October 2008
30 June 2010
AASB Interpretation 17 ‘Distributions of Non-cash Assets to
Owners’, AASB 2008-13 ‘Amendments to Australian Accounting
Standards arising from AASB Interpretation 17 – Distributions of
Non-cash Assets to Owners’
AASB Interpretation 18 ‘Transfers of Assets from Customers’
July 2009
30 June 2010
1 July 2009 (AASB
Interpretation 18 applies to
transfers of assets from
customers received on or
after 1 July 2009)
30 June 2010
The initial application of the expected issue of an Australian equivalent accounting Standard/Interpretation to the following
Standard/interpretation is not expected to have a material impact on the financial report of the Group and the Company:
Standard
Effective for annual reporting periods
beginning on or after
Expected to be initially
applied in the financial year
ending
Nothing issued up to last update of the document
Imdex 2009 Annual Report | 51
Page 26 of 83
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 Company and the Group comply with International Financial Reporting Standards (‘IFRS’).
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 14 August 2009.
(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.
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.
52 | Imdex 2009 Annual Report
Page 27 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(e)
Summary of Significant Accounting Policies (continued)
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 in order to write off the net cost of each asset over its expected useful life to its
estimated residual value. Leasehold improvements and assets held under finance lease 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 gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
The annual depreciation rates used for each class of assets are as follows:
Plant and equipment:
10% to 50%
Equipment rented to third parties:
10% to 50%
Equipment under finance lease:
20%
(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.
The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on
the Group’s estimate of shares that will eventually vest.
At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision
of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to
the employee equity-settled benefits reserve.
(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.
Imdex 2009 Annual Report | 53
Page 28 of 83
IMDEX LIMITED
IMDEX LIMITED
and its controlled entities
and its controlled entities
NOTES TO THE FINANCIAL REPORT
NOTES TO THE FINANCIAL REPORT
Borrowing costs
Borrowing costs
Foreign currency
Foreign currency
Summary of Significant Accounting Policies (continued)
Summary of Significant Accounting Policies (continued)
Business combinations
Business combinations
2
2
(i)
(i)
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
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is
instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business
measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity
combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB
instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business
3 ‘Business Combinations’ (2004) are recognised at their fair values at the acquisition date, except for non-current assets (or disposal
combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB
groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued
3 ‘Business Combinations’ (2004) are recognised at their fair values at the acquisition date, except for non-current assets (or disposal
Operations’, which are recognised and measured at fair value less costs to sell.
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,
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business
after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If,
exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.
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.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets,
liabilities and contingent liabilities recognised.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets,
liabilities and contingent liabilities recognised.
(j)
(j)
Borrowing costs are recognised in the profit or loss in the period in which they are incurred.
Borrowing costs are recognised in the profit or loss in the period in which they are incurred.
(k)
(k)
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
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which
of each entity are expressed in Australian dollars, which is the functional currency of Imdex Limited, and the presentation currency for
the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position
the consolidated financial statements.
of each entity are expressed in Australian dollars, which is the functional currency of Imdex Limited, 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,
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency
monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary
(foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair
monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary
value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
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
Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary
net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or
items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the
loss on disposal of the net investment.
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 are translated into Australian dollars at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless
On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars at exchange rates
exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used.
prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless
Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such exchange
exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used.
differences are recognised in profit or loss in the period in which the foreign operation is disposed.
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
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
acquisitions before the date of transition to A-IFRS is treated as an Australian dollar denominated asset.
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)
(l)
Derivative financial instruments
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to interest rate risk. This risk is primarily managed
through the use of an interest rate cap. Further details of derivative financial instruments are disclosed in the financial instrument note
The Group enters into derivative financial instruments to manage its exposure to interest rate risk. This risk is primarily managed
in the financial statements.
through the use of an interest rate cap. Further details of derivative financial instruments are disclosed in the financial instrument note
in the financial statements.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to
their fair value at each reporting date. The resulting gain or loss is recognised in the profit or loss immediately. The Group has not
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to
designated any financial instruments as being hedge accounted.
their fair value at each reporting date. The resulting gain or loss is recognised in the profit or loss immediately. The Group has not
designated any financial instruments as being hedge accounted.
(i)
(i)
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and
fair value recognised in profit or loss.
characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in
fair value recognised in profit or loss.
Embedded derivatives
Embedded derivatives
54 | Imdex 2009 Annual Report
Page 29 of 83
Page 29 of 83
IMDEX LIMITED
IMDEX LIMITED
and its controlled entities
and its controlled entities
NOTES TO THE FINANCIAL REPORT
NOTES TO THE FINANCIAL REPORT
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Effective interest method
Effective interest method
Summary of Significant Accounting Policies (continued)
Summary of Significant Accounting Policies (continued)
Financial assets
Financial assets
2
2
(m)
(m)
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
Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose
value, net of transaction costs except for those financial assets classified as ‘at fair value through the profit or loss’ which are initially
terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair
measured at fair value. Subsequent to initial recognition, investments in subsidiaries are measured at cost.
value, net of transaction costs except for those financial assets classified as ‘at fair value through the profit or loss’ which are initially
measured at fair value. Subsequent to initial recognition, investments in subsidiaries are measured at cost.
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
Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’, ‘held-
and purpose of the financial assets and is determined at the time of initial recognition.
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.
(i)
(i)
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
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over
life of the financial asset, or, where appropriate, a shorter period.
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’.
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)
(ii)
Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates where the Group has the positive
intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at
Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates where the Group has the positive
amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.
intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at
amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.
(iii)
(iii)
Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:
Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Held-to-maturity investments
Held-to-maturity investments
Has been acquired principally for the purpose of selling in the near future;
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 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.
Is a derivative that is not designated and effective as a hedging instrument.
Loans and receivables
Loans and receivables
Available-for-sale financial assets
Available-for-sale financial assets
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.
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.
(iv)
(iv)
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
Available-for-sale assets are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in the
and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is
investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest rate method
disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve
and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is
is included in profit or loss for the period.
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
The fair value of available-for-sale monetary assets held in a foreign currency is determined in that foreign currency and translated at
cost of the asset is recognised in profit or loss, and other changes are recognised in equity.
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.
(v)
(v)
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
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are
less impairment. Interest is recognised by applying the effective interest rate.
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.
(vi)
(vi)
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
Financial assets other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet
initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets
date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the
carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value
initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets
of estimated future cash flows, discounted at the original effective interest rate.
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
The carrying value of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade
is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the
receivables where the carrying value is reduced through the use of an allowance account. When a trade receivable is uncollectible, it
allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
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
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases
impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is
and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised
reversed does not exceed what the amortised cost would have been had the impairment not been 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.
In respect of available-for-sale instruments, any subsequent increase in fair value after an impairment loss is recognised directly in
equity.
Impairment of financial assets
Impairment of financial assets
Imdex 2009 Annual Report | 55
Page 30 of 83
Page 30 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(m)
(vi)
Summary of Significant Accounting Policies (continued)
Financial assets (continued)
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risk
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
(n)
(i)
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. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
(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.
A financial liability is held for trading if:
(cid:120)
(cid:120)
(cid:120)
it has been incurred principally for the purpose of repurchasing in the near future; or
it 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
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading is designated as ‘at fair value through profit or loss’ upon initial
recognition if:
(cid:120)
(cid:120)
(cid:120)
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its
performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment
strategy, and information about the grouping is provided internally or on that basis; or
it forms part of a contract containing one or more embedded derivatives, and AASB139 ‘Financial Instruments: Recognition
and Measurement’ permits the entire combined contract (asset or liability) to be designated as ‘at fair value through profit or
loss’.
(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.
56 | Imdex 2009 Annual Report
Page 31 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(o)
(i)
Summary of Significant Accounting Policies (continued)
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, development costs 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 - Samchem
Intellectual property – other
Technology
Contracts
Customers
Trade Names and Patents
indefinite
10 years
5-7 years
1-5 years (term of contract)
5-6 years
1-6 years
Intellectual property of Samchem 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(t).
(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:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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.
(p)
(i)
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).
Imdex 2009 Annual Report | 57
Page 32 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(p)
Summary of Significant Accounting Policies (continued)
Taxation (continued)
(ii)
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.
(iii)
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.
(iv)
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.
58 | Imdex 2009 Annual Report
Page 33 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(q)
Summary of Significant Accounting Policies (continued)
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
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.
(r)
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:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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.
(v)
Operating lease income
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
Imdex 2009 Annual Report | 59
Page 34 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
2
(s)
(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.
(t)
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.
(u)
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.
(v)
Non-current assets held for sale
Non-current assets (and disposal groups) classified as held for sale are measured 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.
60 | Imdex 2009 Annual Report
Page 35 of 83
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
Note 11 describes the investment held in Sino Gas & Energy Holdings 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 $8.1 million at 30
June 2009 (2008: $4,500,000).
The fair value of this unlisted 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.
Impairment of Goodwill and Intangibles
Determining whether goodwill and intangibles are impaired requires an estimation of the value in use of the cash-generating
units to which goodwill and intangibles are attributable. The value in use calculation requires the entity to estimate the future
cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
A forward looking estimation of this nature is inherently uncertain. No impairment losses have been booked in the current or
prior years. Refer notes 13 and 14.
Imdex 2009 Annual Report | 61
Page 36 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
4
Profit from Operations
(a) Revenue from operations
Revenue from continuing and discontinued operations consisted of
the following items:
Revenue from continuing operations
Revenue from the sale of goods
Operating rental income
Interest income - bank deposits
Interest income - other loans and receivables
Revenue from discontinuing operations
Revenue from the rendering of services
(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 from continuing and discontinued
operations:
(Loss) / gain on disposal of property, plant and equipment
Foreign exchange gain / (loss)
Gains attributable to:
Continuing operations
Discontinued operations
Losses attributable to:
Continuing operations
Discontinued operations
Loans and receivables (including cash and cash equivalents)
Interest revenue
Exchange gain/(loss)
Financial liabilities at amortised cost
Interest expense
Exchange gain/(loss)
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
103,055
33,914
118
1,905
138,992
118,109
23,900
451
1,449
143,909
-
6,584
-
-
56
3,766
3,822
-
-
-
211
3,127
3,338
-
138,992
150,493
3,822
3,338
(91)
2,334
2,243
2,334
-
2,334
(91)
-
(91)
2,243
2,024
2,014
4,038
(2,850)
320
(2,530)
91
(407)
(316)
91
-
91
(407)
-
(407)
(316)
1,900
(305)
1,595
(2,822)
102
(2,720)
41
2,352
2,393
2,393
-
2,393
-
-
-
2,393
3,822
1,724
5,546
(2,170)
222
(1,948)
-
(266)
(266)
-
-
-
(266)
-
(266)
(266)
3,338
(266)
3,072
(1,575)
-
(1,575)
62 | Imdex 2009 Annual Report
Page 37 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
4
Profit from Operations (continued)
Profit before income tax has been arrived at after charging the
following items of income and expense. The line items below
combine amounts attributable to both continuing and discontinued
operations:
Other income
Gain on disposal of property, plant and equipment
Gain on disposal of subsidiary
Management fees from subsidiaries
Dividends from subsidiaries
Other revenue
Depreciation and amortisation of Non Current Assets
Depreciation of property, plant and equipment (note 12)
Amortisation of intangible assets (note 14)
Depreciation and amortisation attributable to
Continuing operations
Discontinued operations
Finance costs
Interest on hire purchase liabilities
Interest on deferred acquisition consideration
Interest on commercial bills
Interest on bank loan
Interest on overdraft
Interest rate cap expense
Other interest
Finance costs - attributable to
Continuing operations
Discontinued operations
Other expenses
Commissions
Consultancy fees
Legal and professional expenses (i)
Foreign exchange (gain) / loss
Rent and premises costs
Travel and accommodation
Motor vehicle costs
Other expenses
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
-
-
-
-
253
253
3,318
6,535
9,853
9,853
-
9,853
53
194
1,315
421
195
229
443
2,850
2,850
-
2,850
91
-
-
-
278
369
3,733
6,055
9,788
9,321
467
9,788
66
404
1,487
744
-
-
121
2,822
2,762
60
2,822
41
-
9,361
7,500
-
16,902
187
-
187
187
-
187
-
-
1,315
-
193
229
433
2,170
2,170
-
2,170
-
974 1,425
1,257 2,026 306
2,020 1,742 1,012
(2,334) 407 (2,352)
2,847 2,244 239
3,840 3,450 780
1,629 1,374 85
7,947 5,771 1,281
18,180
18,439
1,351
-
17,245
6,671
3,379
179
27,474
198
-
198
198
-
198
3
-
1,487
-
-
-
85
1,575
1,575
-
1,575
-
305
990
266
172
514
100
2,127
4,474
(i) Includes legal, audit, accounting, share registry and corporate secretarial fees.
Imdex 2009 Annual Report | 63
Page 38 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
4
Profit from Operations (continued)
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Employee benefits expense
Post-employment benefits:
Defined contribution superannuation costs
Share based payments:
Equity-settled share based payments
Other employee benefits
Employee benefits expense attributable to
Continuing operations
Discontinued operations
Cost of sales
Cost of sales attributable to
Continuing operations
Discontinued operations
Movement in provision for doubtful debts
Movement attributable to
Continuing operations
Discontinued operations
1,399
1,487
25,581
28,467
28,467
-
28,467
61,700
61,700
-
61,700
(68)
(68)
-
(68)
807
2,025
20,768
23,600
22,996
604
23,600
63,119
59,589
3,530
63,119
198
198
-
198
Operating lease rental (minimum lease payments)
3,306
2,386
Operating lease rental expense attributable to
Continuing operations
Discontinued operations
5
Income Taxes
3,306
-
3,306
2,203
183
2,386
375
1,487
5,581
7,443
7,443
-
7,443
-
-
-
-
-
-
-
-
273
273
-
273
204
2,025
3,491
5,720
5,720
-
5,720
-
-
-
-
(71)
(71)
-
(71)
178
178
-
178
(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
Attributable to:
Continuing operations
Discontinued operations
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
6,740
(552)
(60)
6,128
6,128
-
6,128
15,483
(1,690)
(563)
13,230
10,804
2,426
13,230
371
616
70
1,057
1,057
-
1,057
2,736
150
(366)
2,520
2,520
-
2,520
64 | Imdex 2009 Annual Report
Page 39 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
5
Income Taxes (continued)
Prima facie income tax expense on pre-tax accounting profit
from operations reconciles to income tax expense in the
financial statements as follows:
Profit from continuing operations
Profit from discontinued operations
Profit from operations
Income tax expense calculated at 30%
Intercompany dividends received
Non-deductible share based payments
Additional provincial tax arising in a foreign jurisdiction
Non-deductible interest on deferred payments
Other non-deductible and non-assessable items
Tax rate differential arising from foreign entities
Carry forward losses not brought to account
Capital losses utilised
Non-assessable income from sale of foreign subsidiary
(Over) / under provision of prior year income tax
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
18,195
-
18,195
5,459
-
446
201
58
(224)
223
25
-
-
(60)
6,128
31,885
13,347
45,232
13,570
-
986
230
121
480
(171)
-
(844)
(579)
(563)
13,230
9,573
-
9,573
2,872
(2,250)
446
-
-
(81)
-
-
-
-
70
1,057
18,845
-
18,845
5,654
(1,014)
986
-
-
214
-
-
(844)
(2,110)
(366)
2,520
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:
Deferred tax: Share issue expenses deductible over five years
Deferred tax: Translation of foreign operations
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
(53)
(223)
(276)
(54)
473
419
(53)
-
(53)
(54)
473
419
(c) Current tax assets and liabilities
Current tax payable
(d) Deferred tax balances
Deferred tax assets comprise:
Provisions
Inventory
Property, plant and equipment
Carry forward tax losses in subsidiary companies
Accruals
Foreign currency translation reserves
Share issue expenses
Deferred tax liabilities comprise:
Accruals
Property, plant and equipment
Intangible assets
Non-current assets classified as held for sale
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 subsidiary undertakings
5,268
8,792
2,249
2,643
167
862
2,114
776
-
532
97
4,548
(111)
-
(6,617)
(1,494)
(8,222)
(3,674)
108
-
2,571
-
400
755
150
3,984
-
(4)
(7,744)
(1,260)
(9,008)
(5,024)
-
-
-
-
-
727
97
824
(62)
-
-
(1,494)
(1,556)
(732)
-
-
-
-
110
727
150
987
-
-
-
(1,260)
(1,260)
(273)
426
950
-
-
Imdex 2009 Annual Report | 65
Page 40 of 83
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.
The amount of contribution or distribution relating to tax consolidation in the current and prior year amounted to nil.
6
Remuneration of Auditors
Deloitte Touche Tohmatsu (Australia)
Audit or review of the financial report
Taxation services - mainly compliance work, transfer
pricing and global restructuring advice
Other non-audit services: Other consulting services
Deloitte Touche Tohmatsu (overseas affiliates)
Audit or review of the financial report
Taxation services - mainly compliance work, transfer
pricing and global restructuring advice
Other non-audit services: Other consulting services
Other auditors
Audit or review of the financial report
Other non-audit services: Accounting assistance and
taxation advice
Consolidated
Company
2009
$
2008
$
2009
$
2008
$
219,208
164,443
219,208
164,443
229,184
30,812
479,204
287,356
34,650
486,449
229,184
30,812
479,204
287,356
34,650
486,449
143,210
88,674
11,166
64,138
218,514
69,335
448
69,783
3,391
79,461
171,526
178,438
112,315
290,753
-
-
-
-
-
-
-
-
-
-
-
-
-
-
767,501
948,728
479,204
486,449
66 | Imdex 2009 Annual Report
Page 41 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
7
Trade and Other Receivables
Current
Trade receivables
Allowance for doubtful debts
Other receivables
Notes
(i)
(ii)
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
22,290
(609)
21,681
1,686
23,367
31,669
(677)
30,992
1,087
32,079
701
-
701
5,135
5,836
2,006
-
2,006
395
2,401
(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 and services, determined by reference to past default experience and specific knowledge of
individual debtors circumstances.
Ageing of past due but not impaired debtors
0 - 30 days past due
31 - 60 days past due
61 + days past due
1,455
4,362
1,454
7,271
3,006
2,636
879
6,521
-
-
701
701
128
-
1,138
1,266
The above analysis shows debtors that are past due at the end of the reporting date where no provision has been raised as the Group
believes that the amounts are still considered recoverable. The Group does not hold any collateral over these balances.
(ii) Movement in the allowance for doubtful debts
Balance at the beginning of the year
Amounts written off during the year
(Decrease)/Increase in allowance recognised in
profit or loss
Balance at the end of the year
All impaired debtors are in excess of 90 days overdue.
677
-
(68)
609
479
-
198
677
-
-
-
-
71
-
(71)
-
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade receivable from the
date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and
unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
8
Inventories
Current
Raw materials - at cost
Work in progress - at cost
Finished goods - at cost
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
4,052
1,527
20,956
26,535
3,383
797
17,536
21,716
-
-
-
-
-
-
-
-
Imdex 2009 Annual Report | 67
Page 42 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
9
Other Financial Assets
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
Notes
Current
Derivatives at fair value
Interest rate cap
Loans carried at amortised cost
Loan to Sino Gas and Energy Holdings Limited
Non-Current
Loans carried at amortised cost
Loans to Subsidiaries
Investments carried at cost
Investments in Subsidiaries
(i)
(ii)
(iii)
-
229
-
229
12,340
12,340
13,008
13,237
12,340
12,340
13,008
13,237
-
-
-
-
-
-
62,230
60,382
12,542
74,772
10,640
71,022
(i) Effective 1 January 2008 Imdex Limited entered into an interest rate cap. This instrument allows the interest paid on $10,000,000 of
debt to be capped at 7% per annum for a period of 3 years. Refer note 32 for further disclosures around this and other financial
instruments.
(ii) Comprises a loan from the Imdex Group to Sino Gas and Energy Holdings Ltd (SGE) in two tranches, one of A$5 million and one
of US$5 million, both inclusive of capitalised interest and exclusive of amounts converted to equity in SGE. Interest of $1.9 million was
recognised in the profit and loss in the current year (prior year $1.4 million). The funds advanced are secured by a fixed and floating
charge over the assets of SGE. The loan bears interest at 13.5% per annum and is repayable on 30 June 2010. The loan carries the
option for Imdex Limited to convert the loan balance into equity in SGE at market price. During the current year $3.63 million of
capitalised interest was converted into shares in SGE at $0.50 per share.
(iii) Loans to Subsidiaries are repayable on demand. These loans carry no interest other than the loans to Samchem Drilling Fluids
and Chemicals (Pty) Ltd, Imdex Sweden AB, Imdex South America S.A. and Suay Energy Services LLP. The loan to Samchem
carries interest at the South African prime overdraft rate (currently 11%) plus a 2% margin. The loan to Imdex Sweden carries interest
at the Stockholm Interbank Offered Rate (currently 0.65%) plus a margin of 0.3%. The loan to Imdex South America S.A. carries
interest at the Chilean Monetary Policy Rate (currently 0.75%) plus a margin of 1%. The loan to Suay Energy Services LLP carries
interest at the Kazakhstan prime overdraft rate (currently 8.5%) plus a margin of 2%.
10
Other Assets
Current
Prepayments
68 | Imdex 2009 Annual Report
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
1,507
1,507
1,200
1,200
22
22
20
20
Page 43 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
11
Non-Current Assets Classified as Held for Sale
Consolidated
Notes
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
Shares held for sale
(i)
8,130
4,500
8,130
4,500
(i) Comprises 22,260,000 fully paid ordinary shares in Sino Gas and Energy Holdings Ltd (SGE) (2008: 15,000,000 shares). The
investment comprises 19% of the issued share capital of SGE (2008: 13%). As a result of the loan to SGE described in note 9 and by
virtue of controlling 19% of the issued share capital of SGE, the Company is deemed to have significant influence over SGE.
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.
The Company intends to realise the value of this investment through sale via broker before 30 June 2010 subject to any escrow
arrangements.
The investment increased by $3.6 million in the current year due to the capitalisation of interest on the loan described in note 9 at
$0.50 per share.
12
Property, Plant and Equipment
Consolidated
Gross Carrying Value
Balance at 30 June 2007
Additions
Acquisitions through business combinations
Disposals
Disposal through sale of subsidiary
Net foreign currency exchange differences
Transfer
Balance at 30 June 2008
Additions
Acquisitions through business combinations
Disposals
Net foreign currency exchange differences
Transfer
Balance at 30 June 2009
Accumulated Depreciation
Balance at 30 June 2007
Disposals
Disposal through sale of subsidiary
Acquisitions through business combinations
Depreciation expense
Net foreign currency exchange differences
Transfer
Balance at 30 June 2008
Disposals
Acquisitions through business combinations
Depreciation expense
Net foreign currency exchange differences
Transfer
Balance at 30 June 2009
Net Book Value
As at 30 June 2008
As at 30 June 2009
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
14,003 9,395 1,940 548 25,886
3,420 1,281 - 517 5,218
561 - - - 561
(242) (2,143) (43) (4) (2,432)
(10,739) - (1,584) (436) (12,759)
(420) (201) (11) (36) (668)
425 (78) (282) (65) -
7,008 8,254 20 524 15,806
4,633 1,418 491 1,199 7,741
266 - - - 266
(2,953) (4,506) - - (7,459)
267 1,129 4 23 1,423
1,062 (283) (23) (756) -
10,283 6,012 492 990 17,777
6,495 4,956 1,228 - 12,679
(96) (1,283) (6) - (1,385)
(5,149) - (1,085) - (6,234)
250 - - - 250
1,397 2,241 95 - 3,733
(134) (239) (4) - (377)
218 (4) (214) - -
2,981 5,671 14 - 8,666
(1,295) (3,965) - - (5,260)
- - - - -
1,580 1,613 125 - 3,318
71 199 2 - 272
97 (81) (16) - -
3,434 3,437 125 - 6,996
4,027 2,583 6 524 7,140
6,849 2,575 367 990 10,781
Imdex 2009 Annual Report | 69
Page 44 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
12
Property, Plant and Equipment (continued)
Company
Gross Carrying Value
Balance at 30 June 2007
Additions
Transfer to subsidiary
Balance at 30 June 2008
Additions
Disposals
Balance at 30 June 2009
Accumulated Depreciation
Balance at 30 June 2007
Transfer to subsidiary
Depreciation expense
Balance at 30 June 2008
Disposals
Depreciation expense
Balance at 30 June 2009
Net Book Value
As at 30 June 2008
As at 30 June 2009
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
1,630 7,273 53 19 8,975
42 - - - 42
(381) (7,273) (53) (19) (7,726)
1,291 - - - 1,291
207 - - 29 236
(488) - - - (488)
1,010 - - 29 1,039
794 3,263 32 - 4,089
(223) (3,263) (32) - (3,518)
198 - - - 198
769 - - - 769
(458) - - - (458)
187 - - - 187
498 - - - 498
522 - - - 522
512 - - 29 541
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
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
Plant and equipment rented to third parties
Equipment under hire purchase
1,580 1,397 187 198
1,613 2,241
125 95
3,318 3,733 187 198
- -
- -
70 | Imdex 2009 Annual Report
Page 45 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
13
Goodwill
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
Notes
Gross Carrying Amount
Balance at beginning of the financial year
Recognised on acquisition of Wildcat Chemicals Australia
Pty Ltd
Recognised on acquisition of Imdex Technology Sweden
AB (formerly Flexit AB)
Recognised on acquisition of Suay Energy Services LLP
Recognised on acquisition of Poly-Drill Drilling Systems
Ltd
Recognised on acquisition of Southernland S.A.
Recognised on acquisition of Imdex Technology Germany
GmbH (ITG) (formerly System Entwicklungs GmbH)
Effect of foreign exchange movements
Balance at end of the financial year
(i)
19(i)
(ii)
(iii)
(iv)
(v)
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
Goodwill is allocated to cash-generating units as follows:
Samchem
Wildcat
Suay Energy Services
Poly-Drill Drilling Systems
Southernland
Reflex / Imdex Technology UK
Flexit / ITG
52,626
35,033
1,501
1,900
-
-
-
-
(759)
55,268
-
-
-
-
-
1,266
3,369
2,413
10,499
46
52,626
-
-
-
52,626
55,268
35,033
52,626
1,568
1,501
1,266
3,369
2,537
21,397
23,630
55,268
1,324
-
1,266
3,369
2,413
22,613
21,641
52,626
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Goodwill arose during the year on the acquisition of Wildcat Chemicals Australia Pty Ltd (Wildcat) by Imdex Limited effective 1
September 2008. (Refer note 27(a)). Wildcat is considered to be a separate cash generating unit since it operates independently from
other Imdex operations in a separate geographical area being the Queensland area and in a separate market, being the manufacture
of production and completion chemicals for oilfield operations. The recoverable amount of this goodwill has been determined based
on a value in use calculation which uses a 5 year discounted cash flow projection based on the 2010 budget plus a terminal value.
The projection assumes minor growth in the business beyond 2010. 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 prior year on the acquisition of 75% of the issued share capital of Suay Energy Services LLP (Suay) by
Imdex Limited effective 1 July 2007 and the remaining 25% of the issued share capital effective 30 June 2008. Refer notes 27(d) and
27(e). Suay is considered to be a separate cash generating unit since it operates independently from other Imdex operations in a
separate geographical area being Kazakhstan and the surrounding Caspian Sea region.
(iii) Goodwill arose during the prior year on the acquisition of Poly-Drill Drilling Systems Ltd (Poly-Drill) by Imdex Limited effective 1
July 2007. Refer note 27(c). Poly-Drill is considered to be a separate cash generating unit since it manufactures and sells products
independently from other Imdex operations in a separate geographical area being Canada.
(iv) Goodwill arose during the prior year on the acquisition of Southernland S.A. (Southernland) by Imdex South America S.A., a newly
incorporated wholly owned subsidiary of Imdex Limited effective 1 July 2007. Refer note 27(f). Southernland is considered to be a
separate cash generating unit since it manufactures and sells products independently from other Imdex operations in a separate
geographical area being Latin America.
Imdex 2009 Annual Report | 71
Page 46 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
13
Goodwill (continued)
(v) Goodwill arose during the prior year on the acquisition of 100% of the issued share capital of Imdex Technology Germany GmbH
(ITG) (formerly System Entwicklungs GmbH) (refer note 27(b)). ITG and Imdex Technology Sweden AB (ITS) (formerly Flexit AB), a
Swedish entity acquired in the FY07 financial year, 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 Down Hole Instrumentation 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.
(vi) The recoverable amount of goodwill has been determined based on a value in use calculation which uses a 5 year discounted
cash flow projection based on the 2010 budget plus a terminal value. The projection assumes conservative additional growth in cash
generating units beyond 2010. 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:
Budgeted sales growth
Discount
Rate
Budgeted net margins
Exchange rate
fluctuations
Samchem
CGU
Wildcat CGU
Sales growth has been budgeted in
line with the expected activity in the
local industries serviced by
Samchem.
Sales growth has been budgeted in
line with the expected activity in the
local oil & gas industries serviced by
Wildcat and potential new on and
offshore opportunities, some of which
have been brought about by the
integration into the broader Imdex
Group.
Suay CGU
Sales growth has been budgeted in
line with the expected activity in the
local industries serviced by Suay.
Poly-Drill
CGU
Southernland
CGU
Reflex / ITU
CGU
Flexit / ITG
CGU
Sales growth has been budgeted in
line with the expected activity in the
local industries serviced by Poly-Drill
as well as growth expected to arise
from the global alliances.
Sales growth has been budgeted in
line with the expected activity in the
local industries serviced by
Southernland as well as growth
expected to arise from the global
alliances.
Sales growth has been budgeted
based on the expected activity levels
in the global minerals down hole tool
market plus an increment for the
market share expected to be gained.
Sales growth has been budgeted
based on the expected activity levels
in the global oil & gas down hole tool
market plus an increment for the
market share expected to be gained.
18%
10%
15.5%
7.25%
7.75%
10%
10%
Net margins have been budgeted
using the prior year actuals as a
base on which operational
improvements and economies of
scale are expected to be gained.
Net margins have been budgeted
using the prior year actuals as a
base on which operational
improvements and economies of
scale are expected to be gained.
Net margins have been budgeted
using the prior year actuals as a
base on which operational
improvements and economies of
scale are expected to be gained.
Net margins have been budgeted
using the prior year actuals as a
base on which operational
improvements and economies of
scale are expected to be gained.
Net margins have been budgeted
using the prior year actuals as a
base on which operational
improvements and economies of
scale are expected to be gained.
Net margins have been budgeted
using the prior year actuals as a
base. In addition an increase is
expected to arise from the
business model trend away from
sales towards rentals.
Net margins have been budgeted
using the prior year actuals as a
base. In addition an increase is
expected to arise from the
business model trend away from
sales towards rentals.
72 | Imdex 2009 Annual Report
Exchange rate
fluctuation
expectations
have been built
into the budget
numbers based
on forecasted
exchange rates
published by
major lending
institutions.
Page 47 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
14
Other Intangible Assets
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 2007
Additions through business
combinations
Impact of exchange rate changes
Balance at 30 June 2008
Capitalised during the year
Impact of exchange rate changes
Balance at 30 June 2009
Accumulated Amortisation and
Impairment
Balance at 30 June 2007
Amortisation expense
Impact of exchange rate changes
Impairment losses
Balance at 30 June 2008
Amortisation expense
Impact of exchange rate changes
Impairment losses
Balance at 30 June 2009
Net Book Value
As at 30 June 2008
As at 30 June 2009
Company
Gross Carrying Value
Balance at 30 June 2007
Transferred to subsidiary entity
Balance at 30 June 2008
Transferred to subsidiary entity
Balance at 30 June 2009
Accumulated Amortisation and
Impairment
Balance at 30 June 2007
Amortisation expense
Impairment losses
Balance at 30 June 2008
Amortisation expense
Impairment losses
Balance at 30 June 2009
Net Book Value
As at 30 June 2008
As at 30 June 2009
755
6
-
761
-
-
761
25
152
-
-
177
152
-
-
329
584
432
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,170
14,703
425
9,298
429
4,268
31,048
1,505
(258)
2,417
-
169
2,586
-
46
14,749
-
(337)
14,412
-
75
-
-
75
151
-
-
226
1,460
2,382
(10)
-
3,832
2,398
(156)
-
6,074
890
-
1,315
-
-
1,315
78
530
-
-
608
530
-
-
1,138
2,996
99
12,393
-
(772)
11,621
1,420
1,883
(2)
-
3,301
2,255
(464)
-
5,092
-
-
429
3,650
-
4,079
-
86
-
-
86
86
-
-
172
251
42
4,561
-
(351)
4,210
319
947
(9)
-
1,257
963
(182)
-
2,038
5,648
(71)
36,625
3,650
(1,291)
38,984
3,302
6,055
(21)
-
9,336
6,535
(802)
-
15,069
2,342
2,360
10,917
8,338
707
177
9,092
6,529
343
3,907
3,304
2,172
27,289
23,915
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
429
(429)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
429
(429)
-
-
-
-
-
-
-
-
-
-
-
-
Imdex 2009 Annual Report | 73
Page 48 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
14
Other Intangible Assets (continued)
Intellectual Property
The net book value of Intellectual Property of $2.4 million is comprised of Intellectual Property in Samchem Drilling Fluids &
Chemicals (Pty) Ltd (Samchem) of $1.1 million and Intellectual Property in Imdex Technology Germany GmbH (ITG) (formerly System
Entwicklungs GmbH) of $1.3 million.
The Intellectual Property of Samchem 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. This portion of the Intellectual Property is therefore subjected to annual
impairment testing.
The recoverable amount of the Samchem Intellectual Property has been determined based on a value in use calculation which uses a
5 year discounted cash flow projection based on the 2010 budget plus a terminal value. The projection assumes no additional growth
in the business beyond 2010. A discount rate of 18% 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
Due to the vendors of Imdex Technology Germany
GmbH (formerly System Entwicklungs GmbH)
Due to the vendors of Suay Energy Services LLP
Notes
(i)
27(b)
27(e)
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
7,921
4,122
726
-
12,769
9,836
5,252
656
778
16,522
179
987
-
-
1,166
207
826
-
778
1,811
(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
Non-current borrowings
Secured
At amortised cost
Commercial bills
Bank loan
Hire purchase liabilities
74 | Imdex 2009 Annual Report
Consolidated
Company
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
(i)
(ii)
(iii) 25
(i)
(ii)
(iii) 25
10,000
3,029
485
13,514
11,500
5,354
1,179
18,033
9,000
4,016
-
13,016
8,000
9,132
-
17,132
10,000
-
-
10,000
11,500
-
-
11,500
9,000
-
-
9,000
8,000
-
-
8,000
Page 49 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
16
Borrowings (continued)
(i) Commercial bills bear interest at 3.34% per annum. The Group has an interest rate cap in operation that caps the maximum
interest payable on $10,000,000 of this debt at 7% per annum. Refer note 32(g) for further details. Bills totalling $7 million are
repayable on demand. The balance of bills amounting to $14.5 million are repayable in quarterly instalments due at the end of each
calendar quarter. There are 19 instalments of $750,000 each and one final instalment on 30 June 2014 of $250,000. Bills are secured
by a Mortgage Debenture over all the assets and liabilities of Imdex Limited, Australian Mud Company Pty Ltd, Reflex Instruments
Asia Pacific Pty Ltd, Imdex International Pty Ltd, Imdex Technology UK Limited, Imdex Technology Australia Pty Ltd, Wildcat
Chemicals Australia Pty Ltd, Samchem Drilling Fluids and Chemicals (Pty) Ltd, Imdex Sweden AB, Imdex Technology Sweden AB
and Reflex Instrument Sweden AB. This Mortgage Debenture excludes assets held under hire purchase arrangements.
(ii) Comprises of a loan of SEK 52,525,000 bearing interest at the 7 day Stockholm Interbank Offered Rate ('STIBOR'), currently
0.65% plus a weighted average margin of 2.62% per annum. The loan is repayable in quarterly instalments at the end of each
calendar quarter as follows: one instalment of SEK 5,775,000 in September 2009; then 8 quarterly instalments of SEK 4,400,000 each
until September 2011, followed by 7 instalments of SEK 1,650,000 each until June 2013. This loan is secured over the assets of the
Reflex and Flexit companies that are domiciled in Sweden and is guaranteed with a Standby Letter of Credit. The fee for this
guarantee is 1.75% of the balance of the loan.
(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. The weighted average
interest rate applicable to these liabilities was 7.9% (2008: 7.6%).
17
Provisions
Current provisions
Employee entitlements
Non-current provisions
Employee entitlements
Consolidated
Company
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
(i)
1,317
972
422
245
553
558
310
128
(i) The majority of these entitlements are expected to be taken during the coming year. (2008: same)
18
Other Liabilities
Other Current Liabilities
Unsecured
At amortised cost
Consolidated
Company
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Deferred acquisition payments
(i) 35
2,492
2,492
2,687
2,687
Other Non-Current Liabilities
Unsecured
At amortised cost
Deferred acquisition payments
(i)
-
-
2,717
2,717
-
-
-
-
-
-
-
-
(i) Deferred acquisition payments are those portions of the purchase price of Imdex Technology UK Ltd that are due in future periods.
Instalments are due as follows: GBP 1.045m due on 31 July 2009 and GBP 1.09m due on 31 July 2008 (paid). In addition a revenue
based earn-out may also become payable. The additional revenue based earn-out has been estimated by management as being nil.
The cash components of these deferred amounts have been discounted to their present values using an interest rate of 8% per
annum.
Imdex 2009 Annual Report | 75
Page 50 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
19
Contributed Capital
Issued and Paid Up Capital - Fully paid ordinary shares
Mandatory convertible capital
Notes
(i)
(ii)
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
67,136
-
67,136
58,183
6,700
64,883
67,136
-
67,136
58,183
6,700
64,883
(i) Fully paid ordinary shares carry one vote per share and the right to dividends.
(ii) Converted into fully paid ordinary shares on 11 May 2009. See Conversion of Capital paragraph below.
Ordinary shares
Balance at beginning of the financial year
Issue of shares as part consideration for the acquisition of
Poly-Drill
Issue of shares as part consideration for the acquisition of
Southernland
Issue of shares as part consideration for the acquisition of
Suay
Conversion of capital
Issue of shares as part consideration for the acquisition of
Imdex Technology Sweden AB (formerly Flexit AB)
Tax effect of share issue costs
Issue of shares under staff option plan
Closing balance at end of the financial year
Consolidated and Company
2009
2008
Notes
Number
$'000
Number
$'000
183,490,932
58,183
179,949,003
54,282
27(c)
27(f)
27(e)
(i)
(i)
(ii)
-
-
168,530
5,000,000
5,000,000
-
149,331
193,808,793
-
-
1,212,751
723,679
278
6,700
1,900
(54)
129
67,136
-
-
-
-
1,605,499
183,490,932
1,750
1,387
-
-
-
(113)
877
58,183
Changes to 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.
(i) Conversion of capital and issue of shares to acquire Imdex Technology Sweden AB (formerly Flexit AB)
On 11 May 2009 a total of 10,000,000 Imdex Limited fully paid ordinary shares were issued to the previous owners of Imdex Technology
Sweden AB (formerly Flexit AB). These shares were issued pursuant to the original purchase agreement effective 1 May 2007 as modified by
a Deed of Variation dated 13 February 2009. The original agreement provided for the conversion of 5,000,000 fully paid Imdex Limited shares
in May 2009, the fair value of which at the time of signing the agreement on 1 May 2007 was $6.7 million. The Deed of Variation provided for
the issue of 5,000,000 additional fully paid Imdex Limited shares at May 2009, the fair value of which at the time of signing the agreement on
13 February 2009 was $1.9 million. An additional cash payment may become payable by Imdex Limited on 1 May 2012 should the Imdex
Limited share price not have reached $1.00 per share at any time between 11 May 2009 and 1 May 2012. The payment will be calculated as
the difference between $1 and the Imdex Limited share price on 1 May 2012 multiplied by 10,000,000. At 30 June 2009 it is estimated that the
liability at 1 May 2012 will be nil. The market price of Imdex Limited ordinary shares at the date of the issue of the 10,000,000 shares was $0.51 per share.
(ii) Share options granted under the staff option plan
No options were granted under the staff option plan in the current year.
In accordance with the provisions of the staff option plan, as at 30 June 2009, executives, directors and staff have options over 15,580,539
ordinary shares (10,468,862 of which had vested), in aggregate. These options expire over a range of dates up to March 2013. As at 30 June
2008, executives, directors and staff have options over 16,194,872 ordinary shares (5,019,872 of which had vested), in aggregate. These
options expire over a range of dates up to March 2013. Share options granted under the employee share option plan carry no rights to
dividends and no voting rights.
Details of the Staff Option Plan can be found in note 34.
76 | Imdex 2009 Annual Report
Page 51 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
20
Reserves
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’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
(4,863)
758
(4,105)
(2,137)
(2,726)
(4,863)
-
-
-
-
-
-
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 expensed after taxation
Options exercised during the financial year
Balance at the end of the financial year
4
2,573
1,487
(36)
4,024
751
2,025
(203)
2,573
2,573
1,487
(36)
4,024
751
2,025
(203)
2,573
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
34.
21
Earnings Per Share
Basic earnings per share
From continuing operations
From discontinued operations
Total basic earnings per share
Diluted earnings per share
From continuing operations
From discontinued operations
Total diluted earnings per share
(a) Basic earnings per share
The earnings and weighted average number of ordinary shares used in the
calculation of basic earnings per share are as follows:
Earnings (i)
Earnings from continuing operations (i)
Weighted average number of ordinary shares for the purposes of basic
earnings per share
(i) Earnings used in the calculation of total basic earnings per share and basic
earnings per share from continuing operations reconciles to net profit in the
income statement as follows:
Net profit
Earnings used in the calculation of basic EPS
Adjustments to exclude profit for the period from discontinued operations
Earnings used in the calculation of basic EPS from continuing operations
Consolidated
2009
Cents per share
2008
Cents per share
6.37
-
6.37
6.23
-
6.23
11.22
5.82
17.04
10.79
5.59
16.38
$'000s
$'000s
12,067
12,067
31,966
21,045
Shares
Shares
189,479,588
187,578,226
$'000s
$'000s
12,067
12,067
-
12,067
31,966
31,966
(10,921)
21,045
Imdex 2009 Annual Report | 77
Page 52 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
21
Earnings Per Share (continued)
(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:
Earnings (ii)
Earnings from continuing operations (ii)
Weighted average number of ordinary shares for the purposes of diluted
earnings per share (iii)
(ii) Earnings used in the calculation of total diluted earnings per share and
diluted earnings per share from continuing operations reconciles to net profit in
the income statement as follows:
Net profit
Earnings used in the calculation of diluted EPS
Adjustments to exclude profit for the period from discontinued operations
Earnings used in the calculation of diluted EPS from continuing operations
(iii) 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
Shares deemed to be issued for no consideration in respect of employee and
Director options
Weighted average number of ordinary shares used in the calculation of diluted
EPS
(iv) 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:
Chairman's options
Employees share options tranche 3
Employees share options tranche 4
Employees share options tranche 5
Employees share options tranche 6
Employees share options tranche 7
Consolidated
2009
2008
$'000s
$'000s
12,067
12,067
31,966
21,045
Shares
Shares
193,625,987
195,112,068
$'000s
$'000s
12,067
12,067
-
12,067
31,966
31,966
(10,921)
21,045
Shares
Shares
189,479,588
187,578,226
4,146,399
7,533,842
193,625,987
195,112,068
Shares
Shares
1,000,000
700,000
3,242,668
625,000
500,000
4,655,000
10,722,668
-
-
-
625,000
500,000
4,815,000
5,940,000
78 | Imdex 2009 Annual Report
Page 53 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
22
Dividends
Recognised amounts
Notes
2009
Cents per
share
2009
Total
$’000
2008
Cents per
share
2008
Total
$’000
Fully paid ordinary shares - interim dividend franked to 30%
Fully paid ordinary shares - final dividend franked to 30%
(i)
(ii)
1.00
2.25
3.25
1,839
4,135
5,974
1.75
1.50
3.25
3,212
2,722
5,934
Unrecognised amounts
Fully paid ordinary shares - final dividend franked to 30%
-
-
2.25
4,129
(i) The interim, fully franked dividend was paid on 24 March 2009 (2008: 25 March 2008). The record date for determining the entitlement to
the interim dividend was 6 March 2009 (2008: 7 March 2008). There are no dividend reinvestment plans in operation.
(ii) The final, fully franked dividend was paid on 31 October 2008 (2008: 2 November 2007). The record date for determining the entitlement
to the final dividend was 17 October 2008 (2008: 15 October 2007). There are no dividend reinvestment plans in operation.
Consolidated
2009
$'000
2008
$'000
19,652
-
-
13,521
(1,770)
-
Adjusted franking account balance
Impact on franking account of dividends not recognised
Income tax consequences of unrecognised dividends
23
Commitments for Expenditure
(a) Capital expenditure commitments
At 30 June 2009 the Group had a capital expenditure commitments amounting to $3,344,000. This comprised $3,186,000 for gyro
purchases in ITG and software and sundry software and equipment purchase commitments amounting to $158,000. The Company
had capital expenditure commitments of $118,000 relating to software purchases.
At 30 June 2008 the Group had a capital expenditure commitments amounting to $927,000. This commitment comprised $475,000
relating to the construction of a PHPA plant at Samchem and $452,000 representing gyro purchase commitments in ITG. The
Company had no capital expenditure commitments.
(b) Lease commitment
Hire purchase liabilities and non-cancellable operating lease commitments are disclosed in note 25.
24
Contingent Liabilities and Contingent Assets
There are no contingent liabilities or contingent assets in the current or prior years.
Imdex 2009 Annual Report | 79
Page 54 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
25
Leases
(a) Hire Purchases
Hire purchase arrangements
Hire purchase arrangements relate to plant and equipment with terms of up to 4 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
Company
Consolidated
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
2009
$’000
2008
$’000
2009
$’000
2008
$’000
607 - - - 485 - - -
1,279 - - - 1,179 - - -
- - - - - - - -
1,886 - - - 1,664 - - -
(222) - - - - - - -
1,664 - - - 1,664 - - -
Hire purchase liabilities provided for in the Financial Report
Current – Note 16
Non current – Note 16
(b) Operating Leases
Operating leasing arrangements
485 - - -
1,179 - - -
1,664 - - -
Operating leases relate to premises and equipment (including 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
Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
2,662
3,661
190
6,513
1,838
3,785
1,139
6,762
424
221
-
645
162
365
-
527
80 | Imdex 2009 Annual Report
Page 55 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
26
Subsidiaries
Parent Entity
Imdex Limited
Controlled Entities
Australian Mud Company Pty Ltd
Samchem Drilling Fluids & Chemicals (Pty) Ltd
Imdex International Pty Ltd
Imdex Sweden AB
Reflex Instruments Asia Pacific Pty Ltd
Imdex Technology UK Ltd (formerly Chardec Technology Ltd)
Reflex Instrument AB
Reflex Instrument North America
Reflex Instrument South America Ltda
Reflex Instruments Europe Ltd
Drillhole Surveying Instruments (Pty) Ltd
Imdex Technology Sweden AB (formerly Flexit AB)
Flexit Australia Pty Ltd
Suay Energy Services LLP
Poly-Drill Drilling Systems Ltd
Imdex South America S.A.
Southernland S.A.
Wildcat Chemicals Australia Pty Ltd
Imdex Technology Australia Pty Ltd
Flexit Americas Inc
AMC Reflex Argentina S.A.
AMC Reflex Peru S.A.C.
Imdex Technology Germany GmbH (formerly System
Entwicklungs GmbH)
Notes
Country of
Incorporation
Ownership Interest
2009
%
2008
%
(i), (ii), (iii)
Australia
(ii), (iii)
(ii), (iii)
(ii), (iii)
(ii)
27(d) (e)
27(c)
27(f)
27(f)
(ii), 27(a)
(ii), (iv)
(iv)
(v)
(v)
27(b)
Australia
South Africa
Australia
Sweden
Australia
United Kingdom
Sweden
Canada
Chile
United Kingdom
South Africa
Sweden
Australia
Kazakhstan
Canada
Chile
Chile
Australia
Australia
United States of America
Argentina
Peru
Germany
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
100
(i) Imdex Limited is the ultimate parent company and is the head entity within the tax consolidated group.
(ii) These companies are part of the Australian tax consolidated group.
(iii) 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 became a party to the
deed on 29 June 2006, Imdex International Pty Ltd on 20 October 2006 and Reflex Instruments Asia Pacific Pty Ltd on 14 September 2007.
(iv) These entities were incorporated on 26 September 2008.
(v) These entities were incorporated on 10 February 2009.
Imdex 2009 Annual Report | 81
Page 56 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
26
Subsidiaries (continued)
The consolidated income statement of entities which are party to the deed of cross guarantee are:
Income Statement
Revenue from sale of goods and operating lease rental
Other revenue from operations
Total revenue
Other income
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
Travel and accommodation
Motor vehicle costs
Foreign exchange gain/(loss)
Other expenses
Profit before income tax expense
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
2009
$’000
2008
$’000
86,339
3,822
90,161
6,633
(46,168)
(15,629)
(3,851)
(2,241)
(115)
(318)
(1,068)
(1,434)
(2,047)
(808)
(46)
(1,056)
22,013
(7,324)
14,689
-
14,689
91,161
3,356
94,517
9,615
(42,784)
(11,888)
(3,243)
(1,998)
(1,259)
(1,834)
(1,330)
(1,242)
(2,012)
(655)
(1,018)
(10,320)
24,549
(9,127)
15,422
15,855
31,277
82 | Imdex 2009 Annual Report
Page 57 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
26
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
Deferred Tax Asset
Total Non Current Assets
Total Assets
Current Liabilities
Trade and Other Payables
Borrowings
Current Tax Payables
Provisions
Other Current Liabilities
Total Current Liabilities
Non Current Liabilities
Borrowings
Deferred Tax Liabilities
Provisions
Other Non-Current Liabilities
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed 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
2009
$’000
2008
$’000
12,019
26,190
13,507
20,470
281
72,467
84,757
6,263
1,306
-
92,326
164,793
10,566
10,000
6,530
1,182
2,492
30,770
11,500
492
310
-
12,302
43,072
121,721
66,836
4,024
50,861
121,721
7,341
31,946
14,214
51,243
30
104,774
40,752
7,216
1,543
130
49,641
154,415
10,293
11,687
8,071
800
2,687
33,538
8,000
-
558
2,717
11,275
44,813
109,602
64,883
2,573
42,146
109,602
42,146
14,689
(5,974)
50,861
16,803
31,277
(5,934)
42,146
Imdex 2009 Annual Report | 83
Page 58 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Acquisition of Businesses
(a) Acquisition of entity - Wildcat Chemicals Australia Pty Ltd
With effect from 1 September 2008, Imdex Limited, acquired 100% of the issued share capital of Wildcat Chemicals Australia Pty Ltd (Wildcat), a
company incorporated in Australia and operating out of premises north of Brisbane. Wildcat manufacture production and completion chemicals for
the oil and gas industry. The numbers presented below have been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Trade and other receivables
Inventory
Property, plant and equipment
Trade and other payables
Fair value of net identifiable assets acquired
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
427
393
266
(685)
401
-
-
-
-
-
(i)
(ii)
Operating results of Wildcat included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 September
2008 to 30 June 2009:
Revenue
Total expenses
Profit after tax for the period
427
393
266
(685)
401
1,501
1,902
1,843
-
59
1,902
Results since
acquisition
$’000
3,267
(3,045)
222
(i) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Wildcat. 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 Wildcat. 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. No identifiable intangibles were present in this acquisition.
(ii) The Consolidated Cash Flow Statement for the year ended 30 June 2009 records the payment for the acquisition of Wildcat as $1.9 million
being the total consideration including on-costs that was paid in cash in the current year.
(iii) Had the acquisition of Wildcat been effected on 1 July 2008, the beginning of the current year, the Wildcat financial results included in the
Imdex consolidated results would have been revenue of approximately $3.9 million and profit of approximately $0.3 million. The results of Wildcat
are included in the Drilling Fluids and 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.
84 | Imdex 2009 Annual Report
Page 59 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Acquisition of Businesses (continued)
(b) Acquisition of entity - Imdex Technology Germany GmbH (formerly System Entwicklungs GmbH)
With effect from 1 January 2008, Imdex Limited, acquired 100% of the issued share capital of Imdex Technology Germany GmbH (ITG) (formerly
technologically advanced down hole
System Entwicklungs GmbH), a company incorporated in Germany.
instrumentation for use in the drilling industry from their facility located in Riegel, Germany. The numbers presented below have been accounted
for using the acquisition method of accounting.
ITG manufacture and sell
Details of the assets, liabilities and goodwill:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Receivables
Inventory
Property, plant and equipment
Technology and customer based intangibles
Trade and other payables
Deferred tax
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
(i)
(v)
(i)
(ii)
(iii)
446
838
35
-
(1,914)
-
(595)
-
-
-
5,642
-
(1,693)
3,949
Operating results of ITG included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 January 2008
to 30 June 2008:
Revenue
Total expenses
Profit after tax for the period
(iv)
446
838
35
5,642
(1,914)
(1,693)
3,354
10,499
13,853
14,100
(637)
390
13,853
Results since
acquisition
$’000
2,418
(2,130)
288
(i) Intangible assets of $5.6 million comprise technical knowledge and other know-how as well as customer relationships in existence at the time of
acquisition. Deferred tax of $1.7 million was raised on these balances. These intangibles have been valued by independent valuation
professionals using the replacement cost and relief-from-royalty methods. Data inputs into the model were derived from internal management
budgets. Intangible assets are being amortised over their estimated useful lives of between 1 and 10 years.
(ii) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire ITG. 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 ITG. 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 2008 records the payment for the acquisition of ITG as $13.9 million being
the total consideration of $14.1 million above plus direct costs of $0.4 million and less $0.6 million of cash and cash equivalents acquired.
(iv) Had the acquisition of ITG been effected on 1 July 2007, the beginning of the prior financial year and assuming all units were sold and none
rented, the ITG financial results included in the Imdex consolidated results would have been revenue of approximately $4.8 million and profit of
approximately $0.6 million. The results of ITG are included in the Down Hole Instrumentation 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.
(v) Included in Trade and Other Payables above is an amount due to the vendors of ITG of EUR 0.4 million (A$0.7 million) at 30 June 2009.
Imdex 2009 Annual Report | 85
Page 60 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Acquisition of Businesses (continued)
(c) Acquisition of entity - Poly-Drill Drilling Systems Limited
With effect from 1 July 2007, Imdex Limited, acquired 100% of the issued share capital of Poly-Drill Drilling Systems Limited (Poly-Drill), a
company incorporated in Canada. Poly-Drill undertake the manufacture and sale of polymer based drilling fluids as well as various solids control
activities from Calgary, Canada. The numbers presented below have been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Inventory
Property, plant and equipment
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
Issue of ordinary shares
Direct costs relating to the acquisition
(i)
(ii), 19
(iii)
178
150
(696)
(368)
-
-
-
-
Operating results of Poly-Drill included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 July 2007
to 30 June 2008:
Revenue
Total expenses
Profit after tax for the period
178
150
(696)
(368)
3,369
3,001
1,849
(673)
1,750
75
3,001
Results since
acquisition
$’000
2,727
(2,422)
305
(i) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Poly-Drill. 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 Poly-Drill. 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.
(ii) Comprised the issue of 1,212,751 fully paid ordinary shares in Imdex Limited at $1.443 per share. The issue price of the shares was
determined using the closing weighted average share price over the 5 business days prior to 1 July 2007. These shares will be held in voluntary
escrow for a period of 12 months from 1 July 2007. The issue of shares was approved by shareholders at the Annual General Meeting on 19
October 2007.
(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of Poly-Drill as $0.9 million
being the total consideration of $3.0 million above less $1.8 million settled in shares and $0.3 million paid in the previous year.
86 | Imdex 2009 Annual Report
Page 61 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Acquisition of Businesses (continued)
(d) Acquisition of initial 75% of entity - Suay Energy Services LLP
With effect from 1 July 2007 Imdex Limited acquired 75% of the issued share capital of Suay Energy Services LLP (Suay), a company
incorporated in Kazakhstan. The purchase of Suay is complementary to the existing drilling fluids and chemicals businesses of Imdex. Suay
provide drilling fluids and chemicals to the Kazakhstan oilfields in the Caspian Sea region. The numbers presented below have been accounted
for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Trade and other receivables
Inventory
Property, plant and equipment
Trade and other payables
Fair value of net identifiable assets acquired (other than cash and cash
equivalents)
Goodwill on acquisition
Less: Minority interests
Total purchase consideration
Total purchase consideration comprises
Consideration in cash and cash equivalents
Direct costs relating to the acquisition
(i)
(ii)
123
317
43
(420)
63
-
-
-
-
-
Operating results of Suay included in the Consolidated Income Statement of Imdex Limited from acquisition on 1 July 2007 to
30 June 2008:
Revenue
Total expenses
Profit after tax for the period
123
317
43
(420)
63
505
(16)
552
473
79
552
Results since
acquisition
$’000
2,108
(1,963)
145
(i) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire a 75% interest in
Suay. 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 Suay. 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.
(ii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of Suay as $0.2 million being
the total consideration of $0.6 million above less $0.4 million paid in the previous year.
Imdex 2009 Annual Report | 87
Page 62 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Acquisition of Businesses (continued)
(e) Acquisition of minority interest - Suay Energy Services LLP
With effect from 30 June 2008 Imdex Limited acquired the remaining 25% of the issued share capital of Suay Energy Services LLP (Suay) from
the minority shareholders. The original 75% of the issued share capital of Suay was purchased with effect from 1 July 2007, refer note 27(d). The
numbers presented below have been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Cash and cash equivalents
Trade and other receivables
Inventory
Property, plant and equipment
Trade and other payables
Fair value of net identifiable assets acquired
25% thereof
Goodwill on acquisition
Total purchase consideration
Total purchase consideration comprises
Consideration in cash and cash equivalents
Issue of ordinary shares
Direct costs relating to the acquisition
10
494
572
212
(1,106)
182
-
-
-
-
-
-
10
494
572
212
(1,106)
182
46
761
807
500
278
29
807
(i)
(ii)
(iii)
(i) Although Imdex Limited already controlled Suay, an additional goodwill amount became payable on the acquisition of the remaining 25% due to
growth in the business and future prospects as well as a premium to obtain complete 100% control. 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.
(ii) Comprised the issue of 168,530 fully paid ordinary shares in Imdex Limited. These shares had a fair value of $1.65 per share, being the closing
market price at 30 June 2008. These shares were issued on 1 July 2008 and are not subject to escrow. The issue of these shares is not required to
be formally approved by shareholders as they fall below the 15% threshold level.
(iii) The purchase consideration of $0.8 million was paid on 1 July 2008 and is shown in the Consolidated Cash Flow Statement for the year ended
30 June 2009.
88 | Imdex 2009 Annual Report
Page 63 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
27
Acquisition of Businesses (continued)
(f) Acquisition of entity - Southernland S.A.
On 1 November 2007 Imdex South America S.A., a newly incorporated wholly owned subsidiary of Imdex Limited, settled the purchase of 100%
of the issued share capital of Southernland S.A. (Southernland), a company incorporated in Chile. The acquisition was structured under a mandate
so as to entitle the Group to the profits from 1 July 2007 onwards. Southernland manufacture and supply drilling fluids and chemicals to the Latin
American market, complementing the existing fluids and chemicals businesses of Imdex and providing access to new geographic markets. The
numbers presented below have been accounted for using the acquisition method of accounting.
Details of the assets, liabilities and goodwill:
Book value
Notes
$’000
Fair value
adjustments
$’000
Fair value on
acquisition
$’000
Trade and other receivables
Inventory
Property, plant and equipment
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
Issue of ordinary shares
Direct costs relating to the acquisition
(i)
(ii), 19
(iii)
538
273
83
(474)
420
-
-
-
-
-
Operating results of Southernland included in the Consolidated Income Statement of Imdex Limited from 1 July 2007 to 30
June 2008:
Revenue
Total expenses
Profit after tax for the period
538
273
83
(474)
420
2,413
2,833
1,413
(87)
1,387
120
2,833
Results since
acquisition
$’000
3,062
(2,616)
446
(i) Goodwill arose in the business combination because the cost of the combination included a control premium paid to acquire Southernland. 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 Southernland. 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.
(ii) Comprised the issue of 723,679 fully paid ordinary shares in Imdex Limited at $1.9163 per share. The issue price of the shares was determined
using the closing weighted average share price over the 5 business days prior to 1 November 2007. These shares were held in voluntary escrow
for a period of 24 months from 1 November 2007. The issue of these shares is not required to be formally approved by shareholders as this issue
falls below the 15% threshold level.
(iii) The Consolidated Cash Flow Statement for the year ended 30 June 2008 records the payment for the acquisition of Southernland as $1.4
million being the total consideration of $2.8 million above less $1.4 million paid in shares.
(g) Acquisition of entity - Imdex Technology UK Ltd (formerly Chardec Consultants Ltd)
On 31 July 2008 the second of three deferred acquisition payments and earn out, being GBP 1.5 million ($3.1 million), was paid. The first deferred
acquisition payment of GBP 2.2 million ($5.1 million) was paid on 31 July 2007. The third and final payment of GBP 1 million is due on 31 July
2009. Refer note 35 for details of payment made post year end.
Imdex 2009 Annual Report | 89
Page 64 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
28
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) Down Hole Instrumentation: This segment comprises the manufacture, sale and rental of down hole instrumentation. Until 31 October 2007
this division also provided down hole surveying, geophysical logging and directional drilling services through its Surtron business which was
sold on that date; 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.
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; sale and rental of down hole instrumentation
(ii) Europe: Manufacture, sale and rental of down hole instrumentation
(iii) Africa: Manufacture and sale of drilling fluids and chemicals; sale and rental of down hole instrumentation
(iv) Americas: Manufacture and sale of drilling fluids and chemicals; sale and rental of down hole instrumentation
Primary reporting: Business Segments
(a) Segment Revenues
Drilling Fluids and Chemicals
Down Hole Instrumentation
Total of all segments
Unallocated
Total revenue - continuing operations
Discontinued operation - Surtron (note 29)
Total revenue - all operations
(b) Segment Results
Continuing operations
Drilling Fluids and Chemicals
Down Hole Instrumentation
Total of all segments
Eliminations
Unallocated
Profit before tax
Income tax expense
Profit for the year from continuing operations
Discontinued operations
Drilling Fluids and Chemicals
Down Hole Instrumentation
Total of all segments
Eliminations
Unallocated
Profit before tax
Income tax expense
Profit for the year from discontinued operations
2009
$'000
91,687
45,281
136,968
2,024
138,992
-
138,992
2008
$'000
85,711
56,298
142,009
1,900
143,909
6,584
150,493
10,315
8,731
19,046
-
(850)
18,195
(6,128)
12,067
-
-
-
-
-
-
-
-
13,981
21,221
35,202
-
(3,317)
31,885
(10,804)
21,081
-
13,347
13,347
-
-
13,347
(2,426)
10,921
Profit attributable to ordinary equity holders of Imdex Limited
12,067
32,002
90 | Imdex 2009 Annual Report
Page 65 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
28
Segment Information (continued)
(c) Segment Assets and Liabilities
Drilling Fluids and Chemicals
Down Hole Instrumentation
Total of all segments
Unallocated
Consolidated
(d) Other segment information
Assets
Liabilities
2009
$'000
2008
$'000
2009
$'000
2008
$'000
62,999
90,349
153,348
20,470
173,818
54,194
101,361
155,555
17,508
173,063
7,941
15,640
23,581
34,039
57,620
12,895
18,973
31,868
35,552
67,420
Drilling Fluids and
Chemicals
2009
$'000
2008
$'000
Down Hole
Instrumentation
2009
$'000
2008
$'000
Unallocated
Total
2009
$'000
2008
$'000
2009
$'000
2008
$'000
Depreciation
Amortisation
Acquisition of segment assets
Significant non cash expenses other
than depreciation and amortisation
836
-
3,226
229
-
1,408
2,295
6,535
4,279
3,306
6,055
3,768
1,041
1,418
446
608
187
-
236
194
198
-
42
404
3,318
6,535
7,741
3,733
6,055
5,218
1,681
2,430
Secondary Reporting: Geographical Segments
Asia Pacific
Europe
Africa
Americas
Total
Revenue from external
customers
Segment assets
Acquisition of segment
assets
2009
$'000
2008
$'000
2009
$'000
2008
$'000
2009
$'000
2008
$'000
77,659
8,185
23,209
29,939
138,992
83,485
8,207
28,710
30,091
150,493
101,675
49,439
8,287
14,417
173,818
112,298
42,380
10,615
7,770
173,063
2,934
2,033
1,084
1,690
7,741
1,405
862
1,729
1,222
5,218
Imdex 2009 Annual Report | 91
Page 66 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
29
Discontinued Operations
Effective 31 October 2007, the Group disposed of 100% of its shares in Surtron Technologies Pty Ltd, Surtron Technologies UK Ltd and
Surtron Technologies US Inc, collectively known as the Surtron business. The disposal was part of the Group's decision to focus its efforts on
the core competencies of selling drilling fluids and selling and renting down hole instrumentation. The financial results of the Surtron business
up to the date of disposal included in the Group results are summarised below.
Profit from discontinued operations
Revenue
Expenses
Profit before income tax
Income tax expense
Profit after income tax of discontinued operations
Gain on sale of the entities before income tax
Income tax expense
Gain on sale of the entities after income tax
Profit from discontinued operations
Cash flows from discontinued operations
Net cash (outflow)/inflow from ordinary activities
Net cash inflow from investing activities (including the proceeds from the sale of
the entities)
Net cash inflow from financing activities
Consolidated
4 months ended
31 Oct 2007
$’000
6,584
(5,376)
1,208
(207)
1,001
12,139
(2,219)
9,920
10,921
(1,737)
20,002
1,121
19,386
The assets and liabilities of Surtron at the date of disposal were as follows:
Consolidated
31 Oct 2007
$’000
Carrying amounts of assets and liabilities
Cash and cash equivalents
Trade and other debtors
Inventories
Deferred tax asset
Property, plant and equipment
Total assets
Intercompany balances
Trade and other creditors
Hire purchase liabilities
Employee entitlements
Total liabilities
Net assets
Details of the sale of the entities
Consideration received:
Cash received
Carrying amount of net assets sold (net of intercompany balances)
Costs of disposal
Gain on sale before income tax
Income tax expense
Gain on sale after income tax
92 | Imdex 2009 Annual Report
1,873
4,382
306
221
6,528
13,310
(2,612)
(2,590)
(2,300)
(686)
(8,188)
5,122
Consolidated
4 months ended
31 Oct 2007
$’000
20,002
(7,734)
(129)
12,139
(2,219)
9,920
Page 67 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
30
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 26. 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 of key management personnel compensation is set out in note 33.
(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) Key management personnel equity holdings
2009
Balance at
1 July 2008
Granted as
compensation
Received on
exercise of
options
Inception as key
management
person
Net other
change ^
Balance at
30 June 2009
Balance held
nominally
Mr I F Burston
Mr B W Ridgeway
Mr R W Kelly
Mr K A Dundo
Mr M Lemmel
Mr G E Weston
Mr D J Loughlin
Mr P J Mander *
Mr P A Evans
No.
343,786
3,500,000
290,000
300,000
447,347
-
-
-
10,000
4,891,133
No.
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
-
90,000
-
351,920
-
-
-
35,000
526,920
No.
393,786
3,500,000
380,000
300,000
799,267
-
-
-
45,000
5,418,053
No.
-
-
-
-
-
-
-
-
-
-
* - Mr P J Mander became a Key Management Person when he was appointed to the position of General Manager: Fluids and Chemicals
(Minerals) Division on 1 September 2008. Disclosures above relate only to the period when in office.
^ - represent on market transactions
2008
Balance at
1 July 2007
Granted as
compensation
Received on
exercise of
options
Cession as key
management
person
Net other
change ^
Balance at
30 June 2008
Balance held
nominally
Mr I F Burston
Mr B W Ridgeway
Mr R W Kelly
Mr K A Dundo
Mr M Lemmel
Mr G E Weston
Mr D J Loughlin
Mr P A Evans
No.
260,000
3,500,000
265,000
300,000
400,000
-
10,000
5,000
4,740,000
^ - represent on market transactions
No.
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
-
-
500,000
-
-
-
-
-
-
-
-
-
83,786
-
25,000
-
47,347
(500,000)
(10,000)
5,000
(348,867)
No.
343,786
3,500,000
290,000
300,000
447,347
-
-
10,000
4,891,133
No.
-
-
-
-
-
-
-
-
-
Imdex 2009 Annual Report | 93
Page 68 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
30
Related Party Disclosures (continued)
(iv) Share options issued by Imdex Limited
2009
Balance at
1 July 2008
Granted as
compensation
Exercised
Inception as
key
management
person
Balance at
30 June
2009
Vested but
not
exercisable
Vested and
exercisable
Options
vested
during year
Mr I F Burston
Mr B W Ridgeway
Mr R W Kelly
Mr K A Dundo
Mr M Lemmel
Mr G E Weston
Mr D J Loughlin
Mr P J Mander *
Mr P A Evans
No.
1,000,000
2,000,000
-
-
-
2,500,000
500,000
-
500,000
6,500,000
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
-
150,000
No.
1,000,000
2,000,000
No.
-
-
-
2,500,000
500,000
150,000
500,000
6,650,000
-
-
-
-
-
-
-
-
-
-
No.
1,000,000
2,000,000
-
-
-
No.
1,000,000
-
-
-
-
2,166,666
333,333
50,000
266,667
5,816,666
500,000
166,667
50,000
166,667
1,883,334
* - Mr P J Mander became a Key Management Person when he was appointed to the position of General Manager: Fluids and Chemicals
(Minerals) Division on 1 September 2008. Disclosures above relate only to the period when in office.
2008
Balance at
1 July 2007
Granted as
compensation
Exercised Cession as key
management
person
Balance at
30 June
2008
Vested but
not
exercisable
Vested and
exercisable
Options
vested
during year
Mr I F Burston
Mr B W Ridgeway
Mr R W Kelly
Mr K A Dundo
Mr M Lemmel
Mr G E Weston
Mr D J Loughlin
Mr P A Evans
No.
1,000,000
2,000,000
-
-
-
2,500,000
500,000
300,000
6,300,000
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
500,000
(500,000)
-
200,000
700,000
-
-
(500,000)
No.
1,000,000
2,000,000
No.
-
-
-
2,500,000
500,000
500,000
6,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No.
-
No.
-
2,000,000
2,000,000
-
-
-
-
-
-
1,666,667
166,667
100,000
3,933,334
1,000,000
166,667
100,000
3,266,667
No options were granted to key management personnel in the current year. Options granted to G E Weston and P A Evans during the prior
financial year were made in accordance with the Staff Option Plan, as further described in note 34. 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 G E Weston and
P A Evans are exercisable in one third lots at the end of each of the first three years during their life.
A total of 500,000 options were exercised by key management personnel during the prior year. The exercise price was 20c per share. No
amounts remain unpaid on the options exercised.
94 | Imdex 2009 Annual Report
Page 69 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
30
Related Party Disclosures (continued)
(v) Other transactions with key management personnel (and their related parties) of Imdex Limited
(a) 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 $251,081 (2008: $216,202)
(b) Transactions with Directors
Note
Consolidated
Company
2009
$
2008
$
2009
$
2008
$
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:
Legal services expense
Total assets arising from transactions, other than
compensation, with Directors or their related entities:
Goodwill and intercompany loans (parent: acquisition
costs)
Total assets and liabilities arising from transactions,
other than compensation, with Directors or their related
entities:
Current Liabilities
(c) Transactions with other related parties
(i) Transactions within the wholly-owned Group
v(a)
193,865 134,314 193,865 134,314
v(a)
57,216 81,888 57,216 81,888
v(a)
41,420 3,573 41,420 3,573
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 $9,361,401
(2008: $6,671,293) 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.
Imdex 2009 Annual Report | 95
Page 70 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
31
Notes to the Cash Flow Statement
(a) Reconciliation of cash and cash equivalents
For the purposes of the Cash Flow Statement, 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
2009
$’000
2008
$’000
2009
$’000
2008
$’000
11,975
-
11,975
13,276
-
13,276
1,455
-
1,455
869
-
869
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
$11,975,244 (2008: $13,275,763)
(b) Non cash financing and investing activities
During the year the Group acquired equipment under a finance lease of $1.8 million (2008: $0.7 million). This equipment acquisition will be
reflected in the cash flow 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
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Profit for the year
12,067
32,002
8,516
16,325
Adjustments for non-cash and non-operational items
Depreciation of non-current assets
Amortisation of intangible assets
Non-cash interest on deferred payments
Interest earned on intercompany accounts
Dividends received disclosed as investing activities
Interest received disclosed as investing activities
Share options expensed
Loss / (profit) on sale of non-current assets
Interest on hire purchase liabilities
Fair value adjustment on interest rate cap
Profit on sale of Surtron before tax
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
Current tax liability
Deferred tax balances
3,318
6,535
194
-
-
(119)
1,487
86
53
229
-
8,129
(5,321)
(307)
(5,365)
340
(3,524)
(1,627)
3,733
6,055
404
-
-
(451)
2,025
(91)
66
10
(12,139)
(10,096)
(6,577)
(976)
(2,132)
556
(121)
(2,011)
187
-
-
(1,861)
(7,500)
(56)
1,487
(41)
-
229
-
(4,842)
-
(2)
133
359
(394)
405
198
-
-
(1,678)
(3,378)
(212)
2,025
-
3
10
(17,245)
(3,454)
-
23
258
143
(5,797)
(590)
Net Cash Provided by / (used in) Operating Activities
16,175
10,257
(3,380)
(13,369)
96 | Imdex 2009 Annual Report
Page 71 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
31
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)
32
Financial Instruments
(a) Capital Risk Management
Consolidated
2009
$’000
2008
$’000
Company
2009
$’000
2008
$’000
8,383
24,500
2,177
220
35,280
8,383
21,500
-
-
29,883
-
3,000
2,177
220
5,397
13,148
17,000
76
2,020
32,244
13,148
17,000
-
-
30,148
-
-
76
2,020
2,096
-
24,500
2,177
220
26,897
-
21,500
-
-
21,500
-
3,000
2,177
220
5,397
-
17,000
76
2,020
19,096
-
17,000
-
-
17,000
-
-
76
2,020
2,096
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 16, cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes
19 and 20. Management and the Board review the capital structure regularly. The treasury function present regular updates to the
Board. As a part of these reviews management considers the cost of capital and the risks associated with each class of capital. Based
on the outcome of these reviews the Group will balance its overall capital structure through payment of dividends and issue of new
shares as well as the issue of new debt or repayment of existing debt. The Board does not have a specific optimum gearing target
other than to maintain a competitive weighted average cost of capital.
The Group’s overall capital management strategy remains unchanged from prior years.
(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) Categories of financial instruments
Financial Assets
Cash and cash equivalents
Loans and receivables
At fair value through profit and loss
Financial Liabilities
Amortised cost
Consolidated
2008
$ 000s
2009
$ 000s
Company
2009
$ 000s
2008
$ 000s
11,975
35,707
-
13,276
45,087
229
1,455
80,406
-
869
75,791
229
46,808
52,074
22,666
18,811
Imdex 2009 Annual Report | 97
Page 72 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Financial Instruments (continued)
(d) Financial risk management objectives
The Group’s treasury function provides services to the business, co-ordinates access to domestic and international financial markets,
monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures
by degree and magnitude of risks. These risks include market risk (including currency risk and fair value interest rate risk), credit risk,
liquidity risk and cash flow interest rate risk.
The Group seeks to minimise the effects of these risks by using natural hedges where possible and derivative financial instruments to
hedge remaining risk exposures where the benefit of the hedge outweighs the cost. The use of financial derivatives is governed by the
Group’s treasury policies which are approved by the Board of Directors. These policies describe the Group’s policies with respect to
foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the
investment of excess liquidity. The Group does not enter into or trade financial instruments, including derivative financial instruments
for speculative purposes. The only derivative instrument in operation at year end is an interest rate cap as described in note (g) below.
(e) Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (note (f) below) and
interest rates (note (g) below). The Group monitors its exposure to these risks on a regular basis and enters into derivative financial
instruments to manage these risks where appropriate. The only derivative financial instrument currently being used is an interest rate
cap. At a Group and at a company level market risk exposures are measured by sensitivity analyses and scenario modelling.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk.
(f) Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to foreign exchange rate fluctuations
arise. Exchange rate exposures are managed with the use of natural hedges where possible and with the use of financial instruments
where benefit outweighs cost within approved policy parameters. During the current and prior year no financial instruments were used
to manage foreign exchange risk.
The carrying amount of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date is as follows:
United States Dollars
South African Rand
Canadian Dollars
Swedish Kroner
British Pound
European Dollar
Chilean Pesos
Other - mostly Kazakhstani Tenge
Foreign currency sensitivity
Liabilities
Assets
2009
$ 000s
2008
$ 000s
2009
$ 000s
2008
$ 000s
1,234
1,274
390
8,495
5,165
204
195
59
487
1,770
44
13,564
4,953
728
2,040
786
12,148
3,806
2,057
3,176
2,984
3,056
1,453
819
14,045
3,782
4,222
3,975
401
416
2,745
459
The Group is mainly exposed to United States Dollars, Swedish Kroner, Canadian Dollars, British Pounds, European Dollars and
South African Rand.
The following table details the Group’s sensitivity to a 5% (2008: 2%) increase and decrease in the Australian Dollar against the
relevant foreign currencies. The sensitivity rate of 5% (2008: 2%) is the rate used when performing regular reporting on foreign
currency risk internally. Foreign exchange risk is reported regularly to key management personnel and the Board. The estimated
movement of 5% (2008: 2%) represents management’s assessment of the possible change in foreign currency exchange rates which
is based on regular forecasts received from major lending institutions. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjust their translation at the period end for a 5% (2008: 2%) change in foreign currency
rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination
of the loan is in a currency other than the currency of the lender or the borrower. A positive number indicates an increase in profit or
loss and other equity where the Australian Dollar strengthens against the respective currency. For a weakening of the Australian
Dollar against the respective currency there would be an equal and opposite impact on the profit and other equity, and the balances
below would carry the opposite sign.
98 | Imdex 2009 Annual Report
Page 73 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Financial Instruments (continued)
(f) Foreign currency risk management (continued)
United States Dollar Impact
South African Rand Impact
Consolidated
Company
2009
$ 000's
2008
$ 000's
2009
$ 000's
2008
$ 000's
Consolidated
2009
$ 000's
2008
$ 000's
Company
2009
$ 000's
2008
$ 000's
Profit or (loss)
Other equity
(546)
-
(271)
-
-
-
-
-
(i)
(ii)
(127)
-
(40)
-
-
-
-
-
(i)
(ii)
Swedish Kroner Impact
Canadian Dollar Impact
Consolidated
Company
2009
$ 000's
2008
$ 000's
2009
$ 000's
2008
$ 000's
Consolidated
2009
$ 000's
2008
$ 000's
Company
2009
$ 000's
2008
$ 000's
Profit or (loss)
Other equity
266
-
192
-
-
-
-
-
(i)
(ii)
(83)
-
(84)
-
-
-
-
-
(i)
(ii)
British Pound
European Dollar
Consolidated
Company
2009
$ 000's
2008
$ 000's
2009
$ 000's
2008
$ 000's
Consolidated
2009
$ 000's
2008
$ 000's
Company
2009
$ 000's
2008
$ 000's
Profit or (loss)
Other equity
(i) Profit and loss impacts are mainly attributable to exposure on outstanding receivables and payables at year end denominated in
the applicable foreign currency
(143)
-
109
-
(i)
(ii)
(i)
(ii)
91
-
6
-
-
-
-
-
-
-
-
-
(ii) Equity movements are attributable to the net investment in a foreign operation denominated in the applicable foreign currency
(g) Interest rate risk management
The Company and the Group are exposed to interest rate risk as entities in the Group borrow funds at floating interest rates. Interest
rate risk is managed within defined treasury policy guidelines. This is achieved by the Group by maintaining an appropriate mix
between fixed and floating rate borrowings and by the use of an interest rate cap to limit the maximum exposure to interest rate rises
on part of Group debt.
The Company and the Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk
management section of this note.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative
instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant
throughout the reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the possible changes in interest rates based on consultation
with appropriately qualified financial professionals.
Group sensitivity
At reporting date, if interest rates had been 100 basis points higher and all other variables were held constant, the Group’s net profit
would decrease by $0.3 million (2008: 0.2 million). There would be a nil impact on equity other than via profit. A 100 basis point
decrease in interest rates, holding all other variables constant would yield an increase in the Group’s net profit of $0.3 million (2008:
$0.3 million). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. The profit increase /
decrease effect in the prior year is not symmetrical due to the presence of an interest rate cap which limits the Group’s maximum
exposure to interest rates on $10 million of its debt. This effect is symmetrical in the current year as the interest cap maximum
threshold is not being exceeded.
Imdex 2009 Annual Report | 99
Page 74 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Financial Instruments (continued)
(g) Interest rate risk management (continued)
Company sensitivity
At reporting date, if interest rates had been 100 basis points higher and all other variables were held constant, the Company’s net
profit would decrease by $0.2 million (2008: $0.1 million). There would be a nil impact on equity other than via profit. A 100 basis point
decrease in interest rates, holding all other variables constant would yield an increase in the Company’s net profit of $0.2 million
(2008: $0.2 million). This is mainly attributable to the Company’s exposure to interest rates on its variable rate borrowings. The profit
increase / decrease effect is not symmetrical in the prior year due to the presence of an interest rate cap which limits the Group’s
maximum exposure to interest rates on $10 million of its debt. This effect is symmetrical in the current year as the interest cap
maximum threshold is not being exceeded.
Interest rate cap
On 1 January 2008 the Company entered into an interest rate cap arrangement for a 3 year period. This interest rate cap, costing
$0.2 million, enabled the Company to limit the maximum exposure to interest rate movements on $10 million of its debt to 7% per
annum. At 30 June 2009 this interest rate cap had a fair value of nil (30 June 2008: $0.2 million). (note 9) These fair values have been
determined by seeking market valuations at year end for an interest rate cap with identical terms that terminates on 31 December
2011.
(h) 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
monitored on a weekly basis and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit
exposure is controlled by counterparty limits that are reviewed regularly by management.
Trade receivables 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.
The Group does not have any significant credit risk exposure to any single counterparty or group of counterparties having similar
characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with
high credit-ratings assigned by international credit-rating agencies.
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 collateral obtained. At 30 June 2009 no such collateral had
been obtained. (30 June 2008 : nil)
(i) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who monitor short, medium and long term
liquidity requirements through the use of financial models. The treasury function reports regularly to key management personnel and
the Board on matters affecting liquidity risk. 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. Included in note 31(d) is a listing of additional undrawn facilities that the Company/Group has at its disposal to
further reduce liquidity risk.
100 | Imdex 2009 Annual Report
Page 75 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Financial Instruments (continued)
(i) Liquidity risk management (continued)
Liquidity and interest risk tables
The following tables detail the Company’s and the Group’s remaining contractual maturity for its non–derivative financial liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
Group can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the
possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the carrying amount
of the financial liability on the balance sheet.
Consolidated
2009
Non-interest bearing
Finance lease liability
Variable interest rate
instruments
2008
Non-interest bearing
Finance lease liability
Variable interest rate
instruments
Company
2009
Non-interest bearing
Finance lease liability
Variable interest rate
instruments
2008
Non-interest bearing
Finance lease liability
Variable interest rate
instruments
Weighted average
effective interest
rate
0-3 months
3 months to 1
year
1-5 years
5+ years
%
-
7.89%
4.57%
-
-
8.20%
$’000
$’000
$’000
$’000
8,877
152
9,011
18,040
10,948
-
2,101
13,049
6,384
455
5,267
12,106
8,261
-
12,788
21,049
-
1,279
18,387
19,666
2,717
-
19,606
22,323
Weighted average
effective interest
rate
0-3 months
3 months to 1
year
1-5 years
5+ years
%
-
-
5.09%
-
-
9.70%
$’000
$’000
$’000
$’000
583
-
8,020
8,603
906
-
908
1,814
583
-
3,004
3,587
905
-
9,256
10,161
-
12,872
12,872
-
-
9,584
9,584
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Imdex 2009 Annual Report | 101
Page 76 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Financial Instruments (continued)
(i) Liquidity risk management (continued)
The following tables detail the Company’s and the Group’s remaining contractual maturity for its non–derivative financial assets. The
tables have been drawn up based on the undiscounted cash flows of financial assets including interest that will be earned on those
assets except where the Company/Group anticipates that the cash flow will occur in a different period. The adjustment column
represents the possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the
carrying amount of the financial asset on the balance sheet.
Consolidated
Weighted average
effective interest
rate
0-3 months
3 months to 1
year
1-5 years
5+ years
2009
Non-interest bearing
Variable interest rate
instruments
Fixed interest rate instruments
2008
Non-interest bearing
Variable interest rate
instruments
Fixed interest rate instruments
Company
%
-
2.75%
13.50%
-
4.40%
13.50%
$’000
$’000
$’000
$’000
23,367
11,975
-
35,342
32,079
13,276
-
45,355
-
-
12,340
12,340
-
-
13,008
13,008
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Weighted average
effective interest
rate
0-3 months
3 months to 1
year
1-5 years
5+ years
2009
Non-interest bearing
Variable interest rate
instruments
Fixed interest rate instruments
2008
Non-interest bearing
Variable interest rate
instruments
Fixed interest rate instruments
%
-
2.75%
13.50%
-
4.40%
13.50%
$’000
$’000
$’000
$’000
5,836
1,455
-
7,291
2,401
869
-
3,270
-
-
12,340
12,340
-
-
13,008
13,008
-
-
-
-
-
-
-
-
62,230
-
-
62,230
60,382
-
-
60,382
The following table details the Company’s and Group’s liquidity analysis for its derivative financial instrument. The table has been
drawn up based on the undiscounted gross cash inflows / (outflows) since derivative financial instrument, being the interest rate cap,
settles on a gross basis. Since the amounts payable and receivable are not fixed, the amount disclosed has been determined by
reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
2009
Interest rate cap
2008
Interest rate cap
102 | Imdex 2009 Annual Report
0-3 months
$’000
3 months to 1
year
$’000
1-5 years
5+ years
$’000
$’000
-
20
-
60
-
200
-
-
Page 77 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
32
Financial Instruments (continued)
(j) Fair value of financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
(cid:120)
(cid:120)
the fair value of financial assets and financial liabilities (excluding derivative financial instruments) are determined in accordance
with generally accepted pricing models based on discounted cash flow analysis using pricing models based on observable
current market transactions; and
the fair value of derivative financial instruments are calculated using quoted market prices
The financial statements include holdings in unlisted shares which are measured at cost due to them being held for disposal (note 11).
The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial
statements approximates their fair values.
33
Key Management Personnel Compensation
The aggregate compensation of the key management personnel of the Group and the Company is set out below:
Consolidated
Company
2009
$
2008
$
2009
$
2008
$
1,987,338
154,812
36,688
-
252,715
2,431,553
1,656,713
112,836
116,291
-
419,325
2,305,165
1,987,338
154,812
36,688
-
252,715
2,431,553
1,301,545
88,225
39,790
-
399,119
1,828,679
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
34
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. Each employee share option converts to one ordinary share of Imdex Limited on
exercise. No amounts are paid or payable by the recipient on receipt of the option. Options may be exercised at any time from the
date of vesting to the date of expiry. 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 normally 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.
Chairman’s Options
Options were issued to the Chairman as a reward for past performance and as an incentive for the future. These options have been
approved a General Meeting of shareholders. 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 2009
all of these options had vested.
Managing Director’s Options
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 2009 all of these options had vested.
At the 2008 Annual General Meeting 2,000,000 options were approved by the shareholders for issue to the Managing Director. These
were however not granted due to the impacts of the global financial crisis with the knowledge that this would be considered in future
employee share option allocations.
Imdex 2009 Annual Report | 103
Page 78 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
34
Staff Option Scheme (continued)
(b) The following share based payment arrangements were in existence during the current and comparative periods:
2009
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)
Tranche 6 (i)
Tranche 7 (i)
1-Aug-04
31-Jul-09 0.20
31-Jan-11 0.35
1-Feb-06
23-Feb-07 22-Feb-12 0.75
23-Feb-07 22-Feb-12 1.00
12-Jun-07 11-Jun-12 1.80
18-Oct-07
17-Oct-12 1.80
28-Mar-08 27-Mar-13 3.00
$
0.01
0.02
0.56
0.48
0.51
0.81
0.42
1,178,333
1,812,872
700,000
3,563,667
625,000
500,000
4,815,000
- (36,667)
- 1,141,666
- (41,666) (55,001) 1,716,205
- - - 700,000
- (70,999) (250,000) 3,242,668
- - - 625,000
- - - 500,000
- - (160,000) 4,655,000
Chairman's 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
16,194,872
- - - 2,000,000
15,580,539
- (149,332) (465,001)
2008
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)
Tranche 6 (i)
Tranche 7 (i)
31-Jul-09 0.20
1-Aug-04
31-Jan-11 0.35
1-Feb-06
23-Feb-07 22-Feb-12 0.75
23-Feb-07 22-Feb-12 1.00
12-Jun-07 11-Jun-12 1.80
18-Oct-07
17-Oct-12 1.80
28-Mar-08 27-Mar-13 3.00
$
0.01
0.02
0.56
0.48
0.51
0.81
0.42
2,090,501
2,189,905
700,000
4,425,000
675,000
- 500,000
- 4,875,000
- (912,168)
- 1,178,333
- (306,998) (70,035) 1,812,872
- - - 700,000
- (386,333) (475,000) 3,563,667
- - (50,000) 625,000
- - 500,000
- (60,000) 4,815,000
Chairman's 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
13,080,406 5,375,000 (1,605,499) (655,035)
- - - 2,000,000
16,194,872
(i) Exercisable 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
date.
104 | Imdex 2009 Annual Report
Page 79 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
34
Staff Option Scheme (continued)
(c) Fair value of options granted during the financial year
No share options were issued in the current year. The weighted average fair value of share options granted during the prior financial
year was $0.45. Options were priced using a Black-Scholes option pricing model. Where relevant, the expected life used in the
model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including
the probability of meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on
the historical share price volatility trends.
2008
Inputs into the model
Grant date share price ($)
Exercise price ($)
Expected volatility
Option life (years)
Risk-free interest rate
Dividend yield
Staff Options
Tranche 6
Staff Options
Tranche 7
1.87
1.80
45%
5.00
6.47%
1.66%
1.79
3.00
50%
5.00
6.18%
1.96%
(d) Exercised during the financial year
2009
Option Series
Staff Options Tranche 3
Staff Options Tranche 1
Staff Options Tranche 2
Staff Options Tranche 3
Staff Options Tranche 3
Staff Options Tranche 2
Staff Options Tranche 3
Staff Options Tranche 1
Staff Options Tranche 2
Staff Options Tranche 1
2008
Option Series
Staff Options Tranche 1
Staff Options Tranche 2
Staff Options Tranche 3
Number
Exercised
Exercise
Date
Share Price at Exercise
Date
Amount Paid
($)
Amount
Unpaid ($)
50,000
10,000
20,000
8,333
4,333
5,000
8,333
16,667
16,666
10,000
149,332
17-Jul-08
25-Jul-08
25-Jul-08
15-Aug-08
1-Sep-08
3-Sep-08
3-Sep-08
15-Oct-08
15-Oct-08
12-Jun-09
156.5
157
157
168
191
186
186
77
77
65
37,500
2,000
7,000
6,250
3,250
1,750
6,250
3,333
5,833
2,000
-
-
-
-
-
-
-
-
-
-
Number
Exercised
Exercise
Date
Weighted Average
Share Price at Exercise
Date
Amount Paid
($)
Amount
Unpaid ($)
912,168
306,998
386,333
1,605,499
Various
Various
Various
1.86
1.86
1.86
182,434
107,449
289,750
-
-
-
Imdex 2009 Annual Report | 105
Page 80 of 83
IMDEX LIMITED
and its controlled entities
NOTES TO THE FINANCIAL REPORT
34
Staff Option Scheme (continued)
(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 $1.41 (2008: $1.41), and a
weighted average remaining contractual life of 911 days (2008: 1279 days)
(f) Reconciliation of movements in share options during the year
The following reconciles the outstanding share options granted under the Staff Option Scheme at the beginning and end of the financial
year
2009
2008
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Number of
Options
Number of
Options
Balance at beginning of the financial year
Granted during the financial year
Forfeited during the financial year
Exercised during the financial year
Expired during the financial year
Balance at end of the financial year
Exercisable at end of the financial year
35
Subsequent Events
1.41
16,194,872
13,080,406 0.67
- - 5,375,000 2.89
- - - -
(1,605,499) 0.42
(149,332)
1.16
(465,001)
16,194,872 1.41
15,580,539
10,468,872
0.62
1.86
1.41
5,019,872
(655,035)
On 21 July 2009 Imdex Limited announced a conditional proposal to merge with Coretrack Limited (Coretrack). The merger was to be
effected through a Scheme of Arrangement where Imdex was to issue Coretrack shareholders 0.61 fully paid Imdex ordinary shares
for every one Coretrack fully paid ordinary share, and 0.305 fully paid Imdex ordinary shares for every one Coretrack listed option,
and consideration based on similar terms for Coretrack’s unlisted options. Coretrack share and option holders were to receive a total
of $28.4 million in the form of 43.39 million Imdex shares issued at 65.5 cents per share. On 31 July 2009 it was announced that,
following a due diligence process the proposed merger was terminated.
On 31 July 2009 Imdex Limited paid the final deferred settlement instalment of GBP 1,045,000 (A$2.1 million) due to the vendors of
Imdex Technology UK Limited (formerly Chardec Technology Limited). No further amounts remain outstanding in relation to this
acquisition.
106 | Imdex 2009 Annual Report
Page 81 of 83
IMDEX LIMITED
and its controlled entities
ADDITIONAL STOCK EXCHANGE INFORMATION
AS AT 28 AUGUST 2009
(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
Invia Custodian Pty Limited
National Nominees Limited
Citicorp Nominees Pty Limited
(c)
Twenty Largest Holders of Quoted Equity Securities
Ordinary Shareholders
Invia Custodian Pty Limited
National Nominees Limited
Citicorp Nominees Pty Limited
ANZ Nominees Limited
HSBC Custody Nominees (Australia) Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
J P Morgan Nominees Australia Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Telic Alcatel (Australia) Pty Ltd
Wear Services Pty Ltd
Mr Petrus Middendorp
Longo Pty Ltd
Keeble Nominees Pty Ltd
Mr Clarke James Roycroft
Methuen Holdings Pty Ltd
Dimana Holdings Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Fortis Clearing Nominees P/L
Cogent Nominees Pty Limited
Mr Richard Hill
Number of Fully
Paid Ordinary
Shareholders
Number of
Option holders
353
1,376
1,021
1,517
166
4,433
118
-
6
28
149
26
209
-
Fully Paid
Number
Percentage
24,300,000
19,355,823
10,263,686
12.47%
9.93%
5.27%
Fully Paid
Number
Percentage
24,300,000
19,355,823
10,263,686
9,527,852
6,091,693
5,333,243
5,295,072
3,821,538
3,603,152
2,079,630
1,992,500
1,572,826
1,420,370
1,015,000
1,000,000
900,000
888,920
856,267
843,378
803,931
100,964,881
12.47%
9.93%
5.27%
4.89%
3.13%
2.74%
2.72%
1.96%
1.85%
1.07%
1.02%
0.81%
0.73%
0.52%
0.51%
0.46%
0.46%
0.44%
0.43%
0.41%
51.80%
Imdex 2009 Annual Report | 107
IMDEX LIMITED
and its controlled entities
ADDITIONAL STOCK EXCHANGE INFORMATION
AS AT 28 AUGUST 2009
(d)
Director and Company Secretary Shareholdings
Number of
Shares
3,500,000
393,786
380,000
300,000
799,267
45,000
Number of
Options
2,000,000
1,000,000
-
-
-
500,000
5,418,053
3,500,000
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
108 | Imdex 2009 Annual Report
Contact Details
Imdex Limited
Level 1, 15 Rheola Street
West Perth 6005 Western Australia
PO Box 1325 West Perth 6872
Western Australia
Telephone: +61 8 9481 5777
Fax: +61 8 9481 6527
Email: imdex@imdexlimited.com
ABN: 78 008 947 813
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Providing Drilling Fluids and Leading Down Hole Instrumentation to the World.
Annual Report
Imdex Limited
Imdex Limited, an ASX listed Australian global drilling products company, based in Perth Western Australia.
Imdex specialises in drilling fluids and leading down hole instrumentation for the mineral, oil & gas, water well and civil industries.
Imdex operates in Australia and internationally and has a wealth of experience in diverse drilling environments.
www.imdexlimited.com