Annual Report 2017 IMDEX | Real-time subsurface intelligence solutions T R O P E R L A U N N A 7 1 0 2 D E T I M I L X E D M I 216 Balcatta Road Balcatta WA 6021 PO Box 1262 T +61 (8) 9445 4010 imdex@imdexlimited.com Osborne Park WA 6916 F +61 (8) 9445 4042 www.imdexlimited.com 216 Balcatta Road Balcatta WA 6021 Australia PO Box 1262 Osborne Park WA 6916 Australia T +61 (0) 8 9445 4010 E imdex@imdexlimited.com © Imdex Limited September 2017 REAL-TIME SUBSURFACE INTELLIGENCE SOLUTIONS We are a leading global METS * company. “Our solutions improve the process of identifying and extracting what is below the earth’s surface for drilling contractors and resource companies - we let clients know where it is and what it is…now. Our vision is to be the leading provider of real-time subsurface intelligence solutions to the global minerals industry.” Bernie Ridgeway IMDEX Managing Director * Mining equipment, technology and services 2 | IMDEX Limited AMC supporting geothermal drilling at Scarborough beachfront, Western Australia About this Report This report is intended to provide IMDEX’s shareholders with IMDEX Limited (IMDEX) ABN 78 008 947 813 information on our company, for the financial year ended 30 June 2017. Australian Securities Exchange (ASX) Listing Date 24 September 1987 This year, we have also produced an online Annual Report ASX Code: IMD which is available on our website at www.imdexlimited.com/investors. Registered Office 216 Balcatta Road, Balcatta, Western Australia 6021 Head Office 216 Balcatta Road, Balcatta, Our Corporate Governance Statement discloses the extent Western Australia 6021 to which IMDEX has complied with the Australian Securities Exchange Corporate Governance Council’s ‘Corporate Governance Principles & Recommendations – 3rd edition’. This Statement is available at www.imdexlimited.com. FY17 Annual General Meeting Our Annual General Meeting will be held on 19 October, 2017 at 11:00 am (WST) at IMDEX’s Head Office located at 216 Balcatta Road, Balcatta, Western Australia. Members of our Board and leadership team will be available to discuss the company’s performance and operations. FY18 CORPORATE CALENDAR 31 December 2017 FY18 Half Year End 19 February 2018 FY18 Half Year Results Presentation and Webcast 30 June 2018 FY18 Year End 20 August 2018 Release of FY18 Financial Results Dates to be confirmed FY18 Full Year Roadshow 18 October 2018 FY18 Annual General Meeting If there are any changes to these dates, the Australian Securities Exchange will be notified. 4 | IMDEX Limited Contents 06 FY17 Highlights & Key Data 08 Our Company Leading Brands Global Business 13 Our Operating Environment FY17 Market Conditions REFLEX Instruments on Hire 16 FY17 Financial Performance Revenue and Earnings Balance Sheet and Working Capital Summary of Financial Highlights 20 IMDEX Board of Directors 22 24 25 27 30 Chairman’s Report QHSE Governance & Risk Corporate Governance Risk Management Managing Director’s Report Our People Executive Management Team Global Workforce Diversity and Equal Opportunity The IMDEX Way 36 37 Our Focus for FY18 Our History Annual Report 2017 | 5 Highlights & Key Data Increased revenue and earnings FY16 Successful capital raising Paid out Bain Capital in full Early stages of minerals industry upswing Continued to invest in R&D Commenced internal digital transformation project Board renewal Appointment of new Non-Executive Chairman and Non-Executive Director FY17 6 | IMDEX Limited Strong balance sheet $30 million Bankwest facility secured on attractive terms 100% minerals focused Divestment of wholly owned oil and gas businesses REFLEX instruments on hire increased Commercialised new technologies Refreshed branding to align with vision Key Data at 30 June $176.2 million FY17 Revenue¹ $31.5m EBITDA¹ 1.1 EPS (cents) $3.6m NPAT $20.7m Operating Cash Flow² $159.8m Net Assets $279.3m Market Capitalisation 437 Number of Employees 367.5m No. of shares on issue 6.2 TRIFR Key Data Revenue1 EBITDA1 NPAT EPS (cents) Operating Cash Flow 2 Net Assets Market Capitalisation Shares on Issue TRIFR (Per million hours worked) Number of Employees 3 Banking Institutions Legal Advisors Auditors Share Registry 1 Continuing Operations 2 Continuing Operations and Excluding Financing Costs 3 FY16 included oil and gas employees FY 2017 176.2m 31.5m 3.6m 1.1c 20.7m 159.8m 279.3m 367.5m 6.2 437 FY 2016 143.3m 20.3m -56.2m -23.1c 10.0m 115.6m 52.2m 248.6m 4.11 468 Bankwest Hopgoodganim Bain Capital Hopgoodganim Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu Computershare Computershare Annual Report 2017 | 7 Our Company Strengths Global presence Market leading brands Client Benefits Chain of custody Quality data World-class research and development capabilities Timeliness IMDEX Solutions for exploration, mining and development IMDEXHUB-IQ™ Streamlined processes 8 | IMDEX Limited ANALYTICSSOFTWARERESOURCECOMPANIESCONTRACTORSIMDEXHUB-IQ™IMDEX SOLUTIONSCOLLECT DATATAKE ACTIONINFOANALYSISACTIONANALYSISINFODATADATA1. Traditional Process( TIME )Data Access & AnalysisACTIONREPORTS &INTEGRATIONData Access, Management & Optimisation2. IMDEXHUB-IQ™DEVELOPMENTEXPLORATIONMININGDrilling OptimisationDownhole NavigationStructural GeologyIn-field GeoanalysisDriller Operable Geophysics “Our company delivers IMDEX Solution Sets that include our leading REFLEX and AMC brands. We assist clients to reduce their costs and increase their productivity by providing end-to-end solutions across the full mining life cycle.” Structural Geology Downhole Navigation IMDEXHUB-IQ™ Drilling Optimisation In-field Geoanalysis Driller Operable Geophysics Annual Report 2017 | 9 Leading Brands AMC REFLEX AMC redefines the way drilling fluids, equipment, REFLEX is a global supplier of advanced subsurface technologies and software are used to optimise drilling intelligence solutions comprising advanced downhole programs – it strives to maximise productivity while instrumentation, data management and analytical software enhancing safety and sustainability. AMC is also growing its for geological modelling. presence within the horizontal directional drilling, waterwell For more information, visit www.reflexnow.com. and civil construction sectors. For more information, visit www.amcmud.com. Company Structure 10 | IMDEX Limited Global Business East Sussex - UK Rastede - Germany Timmins - Canada Amsterdam - Netherlands Smithers - Canada Vancouver - Canada Salt Lake City - USA San Luis Obispo - USA Torreón - Mexico Coahuila - Mexico Accra - Ghana Parauapebas - Brazil Belo Horizonte - Brazil Itajai - Brazil Lima - Peru Mendoza - Argentina Santiago - Chile Dubai - UAE Manila - Phillipines Jakarta - Indonesia Lae, Papua New Guinea Johannesburg South Africa Kalgoorlie - WA PERTH - WA Townsville - QLD Brisbane - QLD Mudgee - NSW Adelaide - SA Melbourne - VIC Auckland - NZ Operating Leverage At IMDEX we have operations in all of the key mining regions of the world. Our global presence and comprehensive distribution network allow us to: provide local support to clients; have greater access to international mineral exploration markets; and efficiently introduce new solution sets to these markets. During FY17 we opened a new facility in Peru, which is a growth area for the company. We also relocated a manufacturing facility from Calgary in Canada to Salt Lake City in the USA to better service our clients. Annual Report 2017 | 11 AMC’s HDD drilling fluid range 12 | IMDEX Limited Our Operating Environment FY17 Market Conditions MAJOR GOLD DISCOVERIES Increased activity in the minerals sector – particularly in Canada, Latin America, West Africa and Australia Activity uplift initially associated with stronger gold price – now a broader-based recovery Major, intermediate and junior companies well-funded with increased budgets Large resource companies – continuing to focus on increasing efficiencies and cost reduction New technologies are gaining momentum in order to drive efficiencies and productivity Mining companies need to replace depleting reserves 0 9 9 1 1 9 9 1 2 9 9 1 3 9 9 1 4 9 0 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 1 9 9 9 1 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 Gold in Reserves, Resources and Post Production (Moz) Estimated Gold Production (Moz) Gold Price (US$/oz) Discovery-orientated Gold Budgets (US$M) MAJOR COPPER DISCOVERIES 0 9 9 1 1 9 9 1 2 9 9 1 3 9 9 1 4 9 0 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 1 9 9 9 1 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 Copper in Reserves and Resources (Moz) Estimated Copper Production (Moz) Discovery-orientated Copper Budgets (US$M) Source: S&P Global Market Intelligence Despite increased expenditure, gold and copper discoveries are not keeping up with production. Grades are decreasing and are deeper. Ore bodies are becoming more complex, resulting in longer lead times to develop. Annual Report 2017 | 13 AMC’s HDD drilling fluid range Mechanical engineering at Imdex’s head office 14 | IMDEX Limited REFLEX Instruments on Hire Increased demand for and adoption of traditional survey and core orientation instrumentation, together with more recent technologies Most newer technologies yield higher rental rates due to greater value add for clients As more rigs return to work, additional instrumentation is required – all commodities Instruments on hire increased during calendar 2014 to calendar 2016, despite a significant decrease in exploration expenditure over those three years 30 June 2017, 42% increase compared to 30 June 2016 (UNITS ON HIRE) 8 0 C E D 9 0 N U J 9 0 C E D 0 1 N U J 0 1 C E D 1 1 N U J 1 1 C E D 2 1 N U J 2 1 C E D 3 1 N U J 3 1 C E D 4 1 N U J 4 1 C E D 5 1 N U J 5 1 C E D 6 1 N U J 6 1 C E D 7 1 N U J Mechanical engineering at Imdex’s head office REFLEX product training underground Annual Report 2017 | 15 FY17 Financial Performance Revenue from continuing operations of $176.2 million, up 23% (FY16: $143.3 million) MINERALS REVENUE ($m) 241.7 EBITDA from continuing operations of $31.5 million, up 55% (FY16: $20.3 million) Net profit after tax of $3.7 million (FY16: a loss of $56.2 million) Operating cash flow from continuing operations (excluding financing costs) of $20.7 million (FY16: normalised $10.0 million), up 107% Strong balance sheet – as at 30 June 2017, net assets increased by $44.2 million and net cash totalled $12.3 million Successful capital raising – as announced to the market 5 September 2016 Secured a new $30 million Bankwest facility on attractive terms 177.7 182.7 FY17 Asia Pacific Americas EMEA 176.2 142.3 143.3 125.4 FY11 FY12 FY13 FY14 FY15 FY16 FY17 EBITDA ($m) 83.6 53.3 41.7 1 31.5 20.3 1 15.6 1 7.4 1 Paid out the Bain Capital facility in full FY11 FY12 FY13 FY14 FY15 FY16 FY17 1 Normalised minerals revenue - continuing operations 16 | IMDEX Limited BALANCE SHEET $ MILLIONS UNLESS INDICATED OTHERWISE 30 JUN 2017 30 JUN 2016 Cash Receivables Inventory Assets held for sale 1 Fixed assets Intangibles Other assets / deferred tax TOTAL ASSETS Payables Bank loans HP finance Other liabilities, provisions, current tax TOTAL EQUITY 1 Oil and gas technology written-off. WORKING CAPITAL 31.5 (5.9) 19.4 41.5 29.9 - 32.2 60.4 27.5 210.9 30.4 6.5 0.6 13.6 159.8 13.0 28.8 27.4 3.2 38.2 60.9 24.9 196.4 20.8 43.0 1.2 15.8 115.6 (1.5) (3.4) 20.7 EBITDA from continuing operations Working Capital Other Taxes Cash from continuing operations (excl. financing costs)2 2 Represents cash inflows of $19.5m (prior to financing costs) adjusted for cash outflows from discontinued operations of $1.2m. “We exceeded our financial targets for the year, achieving a 23% increase in revenue and a 55% increase in EBITDA. This positive outcome was due to improving market conditions globally, our regional expertise and further market penetration for our differentiated technologies.” Annual Report 2017 | 17 AMC in North America 18 | IMDEX Limited Summary of Financial Highlights FOR THE YEAR ENDED 30 JUNE 2017 (AUDITED RESULTS) REVENUE FROM CONTINUING OPERATIONS (EXCLUDING INTEREST INCOME) 143,346 176,225 23% EARNINGS BEFORE INTEREST, TAX, DEPRECIATION & AMORTISATION (EBITDA) FROM CONTINUING OPERATIONS 15,078 31,496 109% 2016 2017 16-17 Var $’000 $’000 % EBITDA margin Depreciation and impairment Amortisation EARNINGS BEFORE INTEREST & TAX (EBIT) Net interest expense Net profit/(loss) before tax Income tax expense/benefit 10.5% 17.9% (8,830) (10,692) (592) (583) 5,656 20,221 70.5% 21% (2%) 258% (10,052) (16,413) 63% (4,396) 3,808 535 (1,243) (332%) NET PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS (3,861) 2,565 Profit / (Loss) from discontinued operations (52,392) 1,098 NET PROFIT/(LOSS) AFTER TAX (56,253) 3,663 Basic earnings / (loss) per share from continuing and discontinued operations (cents) (23.11 ¢) 1.14 ¢ - Net Cash provided by Operating Activities (6,567) 13,071 Cash on hand Net Assets Total Borrowings 12,977 19,379 49% 115,593 159,820 38% 44,159 7,147 (84%) Net Tangible Assets per Share 22.03 ¢ 27.07 ¢ 23% Annual Report 2017 | 19 AMC in North America IMDEX Board of Directors MR BERNIE RIDGEWAY Managing Director MS SALLY-ANNE LAYMAN Non-Executive Director MR ANTHONY WOOLES Non-Executive Chairman MR IVAN GUSTAVINO Non-Executive Director MR KEVIN DUNDO Non-Executive Director Appointed to the Board 23 May 2000 Appointed to the Board 6 Feb 2017 Appointed as Chairman 1 July 2016 Appointed to the Board 3 July 2015 Appointed to the Board 14 Jan 2004 For further information refer to pages 4 to 20 in the Directors’ Report within our 2017 Financial Report or on our website at www.imdexlimited.com/about-us/board-of-directors 20 | IMDEX Limited Our Board of Directors has extensive professional expertise, business experience and technical knowledge of financial markets and the mineral exploration, mining and technology industries. On 6 February 2017 Sally-Anne Layman joined IMDEX’s Board as a Non-Executive Director. Ms Layman has extensive experience within the mining sector and financial markets with significant international and cross commodity experience. She spent twelve years with Macquarie Group Limited (Macquarie), including four as Division Director in North America. Her most recent role was Division Director & Joint Head of the Perth office for the Key priorities for the Board included: de-risking the balance Metals, Mining & Agriculture Division. sheet; replacing the Bain Capital facility; safety; and strategy development to support sustainable earnings growth for shareholders. FY17 Developments Ms Layman is a Certified Practicing Accountant and worked in this capacity at Western Metals Ltd and Normandy Yandal Ltd. Prior to moving into finance, she undertook various mining roles including Production Engineer/Alternate Underground Manager at Great Central Mines Limited and On 1 July 2016, Anthony Wooles commenced as Non-Executive Mining Engineer at Mount Isa Mines Limited. Chairman following the retirement of Ross Kelly on 30 June 2016. Her professional qualifications include a Bachelor of Mr Wooles is a highly qualified and successful professional Engineering, Mining Engineering from Curtin University, who has held executive and advisory roles with leading Western Australia and a Bachelor of Commerce, Accounting private and public companies. He also has extensive and Finance from the University of Southern Queensland. She knowledge of financial and capital markets. In his advisory is also an accredited dealer by the Australian Financial Markets capacity Mr Wooles has worked closely with companies Association and holds a First Class Mine Managers Certificate including BHP Minerals; Coles Myer; Telstra; Coca-Cola of Competency by the Department of Mines and Petroleum, Amatil; FAL and Western Power. Western Australia. His professional qualifications include: a Bachelor of Ms Layman is an active member of the Australian Institute Commerce (Economics) from Deakin University, a Graduate of Company Directors, the Australian Financial Markets Diploma of Securities Analysis from the Securities Institute Association and CPA Australia. of Australia and a MBA (Finance) from the Wharton School of the University of Pennsylvania. Annual Report 2017 | 21 Chairman’s Report Dear Shareholders, A Positive Year These outcomes allowed our Management Team to focus clearly on our core minerals business, where we have a significant competitive advantage due to our cutting edge R&D, global presence, market leading solutions and On behalf of the IMDEX Board of Directors I’m pleased to IMDEXHUB-IQ™ enabled technologies. present the company’s Annual Report for the 2017 financial year. It was a positive year and I have enjoyed being part of the dynamic team at IMDEX. Our minerals business generated $176.2 million in revenue, a 23% increase on the company’s 2016 result. Group EBITDA from these continuing operations was $31.5 million, During the first half of FY17 we successfully addressed the pleasingly a 55% increase on the previous year. sub-optimal capital structure of the company by way of an equity raising and new debt facility. Details can be found in the Managing Director’s Report on page 27. We further divested the majority of the company’s oil and gas interests and wrote off the balance. Our commitment to technology leadership is enabling IMDEX to significantly upgrade our customer value proposition. Our end-to-end IMDEX Solution Sets, incorporating both our AMC products and REFLEX connected technologies, provide critical outcomes that enhance the efficiency of clients’ operations and support key decision making for exploration, mining and production. 22 | IMDEX Limited IMDEX’s safety performance for the year was, however, These growth initiatives will be pursued with close attention disappointing. Our internal target for the year was a 5% to administrative efficiencies and operating leverage. reduction on our FY16 total reportable injury frequency rate (TRIFR), which was 4.11 injuries per million hours worked. Unfortunately we did not achieve this target. Keeping our people safe is absolutely critical, hence the Board and Management Team will heighten its focus on safety performance for the balance of FY18 and beyond. In addition to leveraging improving market conditions and pursuing strong organic growth, we have identified exciting opportunities for significant growth through market extension within the minerals industry. This potential involves leveraging our established R&D capabilities and key client I would like to acknowledge the expertise and counsel that the Board has contributed to the progression of IMDEX throughout the year. Similarly, my thanks to our leadership team and employees, led by Managing Director, Bernie Ridgeway. Importantly, on behalf of the Board, I would like to express our gratitude to the valued shareholders of IMDEX. Whilst the company will not be issuing a dividend for the 2017 financial year we remain committed to returning to an attractive dividend policy in the very near future. relationships in order to support the mining and production Kind regards phases of our clients’ operations. We will of course remain alert to acquisitions that complement both our core business and our growth strategies, always with the objective of delivering sustainable earnings growth. Anthony Wooles Chairman Rig alignment technology Annual Report 2017 | 23 Quality, Health, Safety & Environment During FY17, our safety performance was measured against the WA Worksafe Mining Services (Other) and WA Chemical Manufacturing safety benchmarks. Our internal target was a 5% reduction on our FY16 total reportable injury frequency rate (TRIFR) of 4.11 injuries per million hours worked. Unfortunately we did not meet this target; however, our safety results remain better than the industry benchmarks. As set out in the graph below, our TRIFR for the year was 6.4 and our lost time injury frequency rate (LTIFR) was 3.2. Throughout the year all of our locations were working towards a 4 Star QHSE rating, which recognises an advanced QHSE culture. It is pleasing to report the majority of our global locations have now achieved this rating. Other initiatives included: promoting the importance of incident and injury reporting globally; best practice injury management; and utilising our Quality Alert System to support continuous improvement. TOTAL REPORTABLE INJURY FREQUENCY RATE (TRIFR) & LOST TIME INJURY FREQUENCY RATE (LTIFR) S E I R U J N I F O . O N 8 6 4 2 0 6 1 L U J 6 1 G U A 6 1 P E S 6 1 T C O 6 1 V O N 6 1 C E D 7 1 N A J 7 1 B E F 7 1 R A M 7 1 R P A 7 1 Y A M 7 1 N U J TRIFR = Number of total recordable injuries / diseases for each one million hours worked. LTIFR = Number of lost time injuries / diseases for each one million hours worked LTIFR TRIFR LTIFR Benchmark TRIFR Benchmark Medical Treatment Lost Time 24 | IMDEX Limited Governance & Risk Corporate Governance Risk Management The Australian Securities Exchange Corporate Governance Council sets out best practice recommendations, including corporate governance practices and suggested disclosures (ASX Recommendations). ASX Listing Rule 4.10.3 requires companies to disclose the extent to which they have complied with the ASX The identification and proper management of risk within IMDEX is an important priority for the Board and management. The Board has sought to minimise the business’ risks by focusing on the company’s core business. The Board is responsible for ensuring that the company’s risk management systems are adequate and operating effectively. Recommendations and to give reasons for not following them. An annual review of the risks faced by the company is Unless otherwise indicated the ASX Recommendations including corporate governance practices and suggested disclosures, have been adopted by our company for the full year ended 30 June 2017. We also provide a undertaken. For future reporting periods the Managing Director and Chief Financial Officer will attest to the adequacy of the system of risk oversight, management and internal control on a formal basis every six months. Corporate Governance section on our website, which The Board believes that through the Board itself, the includes the relevant documentation suggested by the ASX Audit Committee, the Internal Audit Function and external Recommendations. auditors there is adequate oversight of the company’s risk www.imdexlimited.com/about-us/corporate-goverance. management and internal controls. Annual Report 2017 | 25 REFLEX IQ-LOGGER™ 26 | IMDEX Limited Managing Director’s Report Dear Shareholders, Mine Digitisation I am pleased to provide our shareholders with IMDEX’s Another key observation regarding our market conditions is Annual Report for the financial year ending 30 June 2017 the pace in which new technologies are gaining momentum (FY17). Market Conditions Conditions within the global minerals industry were positive for our company during FY17. Access to funding and commodity prices are traditionally the biggest drivers on within our industry to drive efficiencies and productivity. Resource companies and service providers are harnessing digital technology to ensure better, faster and safer mining. For instance, advanced sensing technology and real-time operational data are being used to inform decision-making. Equipment is being automated for increased productivity, while predictive algorithms are enhancing the precision and activity levels in the minerals sector and it is pleasing to note speed of operations. both are currently favourable. Resource companies, large and small, are well-funded and progressive companies to transform their operations and our commodity prices have been slowly moving in a positive industry as a whole. We are excited and proud to be collaborating with such direction. We witnessed the beginning of the recovery in the minerals Financial Performance market in 4Q16, which was largely due to the stronger gold We exceeded our financial targets for the year, achieving a price and associated capital raisings, however since that 23% increase in revenue and a 55% increase in EBITDA. This time, it has become a broader-based recovery. We are positive outcome was due to improving market conditions confident we are in the early stages of a cyclical upswing, globally, our regional expertise and further market penetration which is supported by increased activity in all major mining for our differentiated technologies. Further information regions globally. In addition to funding and commodity prices, the uplift in activity is being driven by a fundamental need to replace reserves. Mining companies are depleting reserves at a faster rate than they are replacing them resulting in increased exploration budgets. The Major Gold Discoveries and Major Copper Discoveries graphs sourced from S&P Global Market Intelligence on page 13 of this report, illustrate this point. regarding our revenue and earnings can be found on pages 16 to 19 of this report and our 2017 Financial Report. It is also pleasing to note our operating cash flow from continuing operations for FY17, prior to financing costs, was $20.7 million – this represents a 107% increase on the normalised equivalent in FY16. As at 30 June 2017 our balance sheet was in a stronger position than the previous corresponding period - net assets had increased by $44.2 million and we had net cash of $12.3 million. Annual Report 2017 | 27 REFLEX IQ-LOGGER™ The balance sheet was strengthened by a capital raising whereby we issued approximately 81.82 million shares at a REFLEX Instruments on Hire price of $0.55 per share to raise $45 million. The share issue Our REFLEX rental fleet has traditionally been a lead indicator was significantly oversubscribed and the funds raised were of market conditions within the minerals industry – as applied to debt reduction. As announced to the market on 28 December 2016, we also secured a $30 million banking facility with Bankwest to replace the Bain Capital facility (formerly Sankaty Advisors LLC), which attracted an interest rate of 10.75%. The Bankwest facility currently has attractive terms and as at 30 June 2017, was drawn to $7.1 million. This facility reduces by $1.0 million per quarter. Operating Achievements During FY17 we continued to strengthen our product and service offering for the global minerals industry – the key operating achievements included: • The sale of wholly owned oil and gas businesses - IMDEX is now a 100% minerals focused business; • An increase in the number of REFLEX instruments on hire; more rigs return to work, more instruments are required. As at 30 June 2017, the number of REFLEX instruments on hire was up 42% compared to 30 June 2016. The increase in demand was for traditional survey and core orientation instrumentation, together with our more recent technologies, which generally yield higher rental rates due to the additional value they provide clients. It is also pleasing to note that our REFLEX instruments on hire increased in calendar 2014 to calendar 2016, despite significant decreases in exploration expenditure over those three years. We believe this is affirmation of our differentiated technologies. Research and Development In line with our commitment to delivering leading real-time technologies, we continued to invest in research and development, which resulted in the commercialisation of new products for our clients. A good example is the release of our IMDEXHUB-IQ™ early in the second half of FY17. • Continued investment in research and development This complete Software-as-a-Service solution for the collection, resulting in the commercialisation of new technologies; storage and reporting of critical operational, geological and assay data, provides us with a significant advantage over our competitors. I am also pleased to report that there have been a number of examples where clients have chosen IMDEX technologies over competitors due to our connectivity and the ability to view data from anywhere, anytime. Our commitment to ongoing research and development throughout the cycles has also resulted in an exciting pipeline of solution sets spanning exploration, development and mining. The development of these IMDEX solution sets, which incorporate AMC and REFLEX products and technologies, are designed to improve our clients operations and provide more sustainable earnings growth for our shareholders. • • • The continued globalisation and growth of AMC; Our internal digital transformation project; and Rebranding to align with our IMDEX solution selling and company vision. Sale of Wholly Owned Oil and Gas Businesses During the second half we completed the sale of our wholly owned oil and gas businesses - AMC Oil & Gas and Wildcat Production Chemicals Australia - in line with our strategy of focusing on sustainable earnings growth via our minerals business. We also wrote-off $3.2 million associated with our oil and gas technology. All material costs associated with the divestment of these businesses were accounted for in the 2016 financial year and a non-recurring benefit of $2.1 million was recorded in FY17. 4 Before tax - 1H17 $1.1m and 2H17 $1.0m 28 | IMDEX Limited Digital Transformation Project Consistent with the differentiated technologies and cloud capability we are delivering to the minerals industry, our companies are generally well-funded; and new technologies are gaining momentum within the industry to drive greater efficiency and productivity – we are delivering these real-time or near real-time technologies and have a significant first company is undergoing an internal digital transformation. mover advantage. Our company is committed to maintaining This is an exciting project that will enhance our systems and this advantage through its investment in research and processes – and importantly, will allow us to significantly product development during FY18. improve our customer service and business outcomes. Rebrand We are excited to officially launch our new branding and logos on 10 October 2017. A Great Team We have an expert and highly capable team of people who combine their skills to work together for the benefit of our company. It is a pleasure to work with them all. Over the past 3 – 4 years we have been successfully Looking after our employees is vital and we will be focusing repositioning ourselves as a technology company with a on improving our safety performance in FY18 and beyond. vision of being the leading provider of real-time subsurface intelligence solutions to the global minerals industry. This transformation commenced with the acquisition of ioGlobal and our ability to connect our market leading technologies to the IMDEXHUB-IQ™ to provide accurate and timely data. To all of IMDEX’s team – our shareholders, employees, clients and industry partners – thank you for your dedication and for being part of our business during FY17. We remain committed to achieving our vision of being the leading provider of subsurface intelligence solutions to the global Our rebrand was undertaken to align our corporate branding minerals industry. with our company’s vision and focus on IMDEX solution selling. Outlook The outlook for IMDEX remains positive and we anticipate a stronger financial performance in FY18. The global minerals industry is in the early stages of a cyclical upswing and activity has increased across all major mining regions. Furthermore, across the industry there remains a fundamental need to replace diminishing reserves; resource Kind regards Bernie Ridgeway IMDEX Managing Director Annual Report 2017 | 29 Executive Management Team Mr Bernie Ridgeway Managing Director (May 2000) • Bachelor of Business and Qualified Chartered Accountant • Member of the Institute of Chartered Accountants Australia and the Australian Institute of Company Directors • • Non-Executive Director of Sino Gas and Energy Holdings Limited Over 31 years’ experience with public and private companies as a business owner, Director and Manager. Mr Paul Evans Chief Financial Officer and Company Secretary (since October 2006) • • • Chartered Accountant Fellow of the Institute of Chartered Accountants in Australia Extensive experience in commercial, general management and financial roles - industry experience covering the media, manufacturing, mining services and telecommunications industries. 30 | IMDEX Limited Mr Troy Giesler General Manager, AMC • • • 5 years in senior management positions at IMDEX Over 31 years’ experience within the drilling industry 19 years with MI-Swaco, including 7 years as Global Business Line Manager for the company’s HDD, mining and waterwell operations • Bachelor of Science from Colorado State University with a major in Business Administration. Mr Derek Loughlin Chief Executive, REFLEX • • • 11 years in executive management positions at IMDEX 28 years’ experience within the drilling industry 17 years with leading drilling company Boart Longyear in engineering, operations, sales and global exports, working in Ireland, Australia and Germany • Honours Degree in Mining Engineering from the Camborne School Of Mines, UK; Diploma of Executive Development at the International Institute for Management and Development in Lausanne. Tim Price General Manager of Engineering and Product Development • • • 6 years with IMDEX 31 years’ experience in engineering and product development 20 years with Scientific Drilling International holding positions from Design Engineer to Senior Vice President of Engineering • 11 years combined Executive and Senior Management experience at IMDEX and Scientific Drilling International • • 5 years in Aerospace and Semiconductor Test Industries 7 US patents granted for Oil and Gas Instrumentation • Master of Science in Electrical Engineering from California Polytechnic State University, San Luis Obispo • Bachelors of Science in Electronic Engineering from California Polytechnic State University, San Luis Obispo • Member Tau Beta Pi National Engineering Honor Society. Annual Report 2017 | 31 AMC supporting regional sites 32 | IMDEX Limited Global Workforce During FY17 our global workforce reduced by 7% to 437 people (FY16 468), which reflects the divestment of our wholly owned oil and gas businesses, together with increased activity for our minerals business. Additional personnel were principally within sales and operations. FY17 EMPLOYEES BY REGION FY16 EMPLOYEES BY REGION Africa (48) APAC (184) Europe (34) Middle East (3) North America (80) South America (88) Total Employees 437 Africa (48) APAC (189) Europe (76) Middle East (7) North America (77) South America (71) Total Employees 468 FY17 EMPLOYEES BY GENDER FY16 EMPLOYEES BY GENDER Female 23% Male 77% Total Employees 437 Female 22% Male 78% Total Employees 468 FY17 EMPLOYEES BY BUSINESS UNITS FY16 EMPLOYEES BY BUSINESS UNITS Corporate (21%) AMC Minerals (44%) REFLEX (25%) REFLEX Technologies (10%) Corporate (20%) AMC Minerals (34%) REFLEX (27%) AMC Oil & Gas (16%) Oil & Gas Instrumentation (3%) Annual Report 2017 | 33 AMC supporting regional sites Diversity & Equal Opportunity at IMDEX At IMDEX we value diversity in our workforce. We seek to employ, retain and develop employees for the long-term, assisting in their development and the development of the culture and values of our company. This is done by promoting the value of different perspectives, ideas and benefits brought by engaging employees from all available talent. Our Diversity Policy can be found on our website at www.imdexlimited.com/about-us/corporate-governance. Our company is also committed to providing equal opportunities for all employees. We ensure employment decisions are made solely on the basis of merit, taking into account relevant skills, qualifications, experience and ability, and without bias or prejudice - further information can be found within our Code of Conduct Policy at www.imdexlimited.com/about-us/corporate-governance. Software engineering at Head Office 34 | IMDEX Limited The IMDEX Way The IMDEX Way sets out the key principles and expected behaviours that govern our company’s decision making, business practices and employee reward programs. Integrity Communicating openly and honestly. Avoiding activities or organisations that are unethical, harm people or the environment. Teamwork Working collaboratively, safely and with respect for diversity within IMDEX’s Group to achieve the best results for the Company, clients and colleagues. Accountability Taking responsibility for and delivering on IMDEX’s commitments to the Company, clients and colleagues. Being Dynamic Maintaining an efficient global Company with the flexibility to provide localised client solutions and the adaptability to react quickly to new opportunities and change. Innovation Leveraging IMDEX’s advanced technologies and research and development capabilities to deliver innovative, leading edge products and services that optimise client operations. Continuous Improvement Pursuing IMDEX’s strategy of ongoing growth and reward for shareholders, clients and employees through continuous improvement of the Company’s products, services and work practices. Annual Report 2017 | 35 Software engineering at Head Office Our Focus for FY18 AMC warehouse Achieving and exceeding financial and EVA targets for FY18 Delivering the technology and product development roadmap for FY18 Prioritising our new product development projects to generate organic growth Pursuing our initiatives in the production / mining phase for transformational growth Developing our branding and sales capability to achieve revenue growth Strengthening our business to support solution selling and IMDEX Solution Sets Successfully delivering the IMDEX Digital Platform roadmap for FY18 Enhancing our HSE performance Identifying and mitigating quality risks 36 | IMDEX Limited Company History 17 Dec 1980 Australian company Pilbara Gold NL incorporated 21 July 1985 Pilbara Gold NL changed name to IMDEX Limited 24 Sept 1987 IMDEX Limited listed on the ASX 1988 1997 2001 Formation of Australian Mud Company Acquisition of Surtron Technologies Pty Ltd and Ace Drilling Supplies Joint venture formed with IMDEX and Rashid Trading Establishment (RTE) in Saudi Arabia 1 July 2005 Sale of IMDEX Minerals 1 Aug 2005 Acquisition of African based company Samchem 1 Aug 2006 Acquisition of Swedish based REFLEX Group of Companies and United Kingdom based company Chardec 1 May 2007 Acquisition of Swedish based company Flexit 1 July 2007 Ace merged with REFLEX. IMDEX finalised the sale of its interest in IMDEX Arabia to RTE. 1 July 2007 Acquisition of Canadian based Poly-Drill and a 75% interest in Kazakhstan based Suay Energy Services 31 Oct 2007 Sale of Surtron Technologies 1 Nov 2007 Acquisition of Chilean based company Southernland 1 Jan 2008 Acquisition of German based company System Entwicklungs 1 July 2008 Acquisition of the remaining 25% of Kazakhstan based Suay Energy Services 1 Sept 2008 Acquisition of Australian based company Wildcat Chemicals Australia AMC warehouse 1 July 2010 New regional structure implemented and business reporting streamlined into Minerals and Oil & Gas Divisions 1 Sept 2010 Acquisition of Australian based companies Fluidstar and Ecospin 1 Mar 2011 Acquisition of German based company Mud-Data 1 July 2011 Formation of DHS Services joint venture 1 July 2011 Acquisition of Australian based company Australian Drilling Specialties Pty Ltd 1 Aug 2011 Acquisition of Brazilian based company System Mud Indústria e ComércioLtda 1 Jan 2012 Acquisition of Vaughn Energy Services (VES) by IMDEX’s DHS Services joint venture 1 Nov 2012 Acquisition of ioGlobal Pty Ltd, ioAnalytics Pty Ltd and ioGlobal Solutions Inc. (together ioGlobal) 1 Dec 2012 DHS Services and Vaughn Energy Services rebranded as VES International 1 Sept 2014 Acquisition of 2iC 30 June 2015 Divestment of Suay Energy Services 2016 Divestment of AMC Oil & Gas Annual Report 2017 | 37 REFLEX EZ-GYRO™ in Mexico REFLEX EZ-GYRO™ in Mexico Annual Report 2017 IMDEX | Real-time subsurface intelligence solutions T R O P E R L A U N N A 7 1 0 2 D E T I M I L X E D M I 216 Balcatta Road Balcatta WA 6021 PO Box 1262 T +61 (8) 9445 4010 imdex@imdexlimited.com Osborne Park WA 6916 F +61 (8) 9445 4042 www.imdexlimited.com 216 Balcatta Road Balcatta WA 6021 Australia PO Box 1262 Osborne Park WA 6916 Australia T +61 (0) 8 9445 4010 E imdex@imdexlimited.com © Imdex Limited September 2017