Imdex Limited Annual Report 2021

Plain-text annual report

ANNUAL REPORT 2021 DRILLING OPTIMISATION PRODUCTS ROCK KNOWLEDGE SENSORS REAL-TIME DATA AND ANALYTICS IMDEX IS A LEADING MINING-TECH COMPANY We believe mining is essential to all aspects of modern life. Our opportunity is to change the minerals drilling industry forever. WHY WE DELIVER A strong core business that outperforms industry growth A strong financial platform with quality revenue and increasing EBITDA margins Established global presence and client network Market leading technologies with unique defendable IP A committment to targeted R&D to maintain technical leadership End-to-end solutions that are applicable across the mining value chain Opportunities to enhance less-cyclical earnings by extension into adjacent mining production markets The ability to make acquisitions to complement existing product offering Experienced leadership team and world-class geoscience capabilities A low carbon footprint and opportunities to enhance the sustainability of operations for clients 3 IMDEX Annual Report 2021 ABOUT THIS REPORT This Annual Report provides a summary of Imdex Limited’s operations and performance for the 2021 financial year (FY21). A digital version of our FY21 Annual Report is available on our website at www.imdexlimited.com/investors. Unless otherwise stated: references to ‘IMDEX’, the ‘Group’, the ‘Company’, ‘we’, ‘us’ and ‘our’ refer to Imdex Limited and its controlled entities. References to a year are to the financial year ended 30 June; and references to dollar figures are in AUD currency. FORWARD LOOKING STATEMENTS This report may contain forward looking statements. Further information can be found on page 136 of this report. SUSTAINABILITY REPORT 2021 SUSTAINABILITY REPORT Further details regarding our sustainability approach, health and safety performance and other material information for FY21 is included in our FY21 Sustainable Report. Together the Annual Report and Sustainability Report provide a complementary review of our business. For further information or feedback, please contact Kym Clements – IMDEX Investor Relations Officer at kym.clements@imdexlimited.com IMDEX’s focus on its people and its broad approach to their wellbeing, was particularly evident this year. ANTHONY WOOLES, IMDEX CHAIRMAN TABLE OF CONTENTS OVERVIEW About IMDEX Operational Highlights Financial Highlights Chairman’s Address CEO Review of Operations Executive Leadership Committee 09 09 14 17 18 20 25 FINANCIAL PERFORMANCE AND STRATEGY Financial Summary Quality Revenue Model Growth Strategy OPERATING ENVIRONMENT COVID-19 Market and Industry Review 28 28 33 34 36 36 37 CORPORATE Risk Safety & Quality People & Culture Sustainability GOVERNANCE Board of Directors Corporate Governance Directors Report 39 39 41 45 49 51 51 53 56 REMUNERATION 60 FINANCIAL STATEMENTS SHAREHOLDER INFORMATION Contacts Shareholder Statistics Key Announcements Annual General Meeting Corporate Calendar Company History 79 130 130 131 133 134 134 135 OVERVIEW ABOUT IMDEX IMDEX is a leading global Mining-Tech company that enables drilling contractors and resource companies to find, mine and define orebodies with precision and at speed. Our product offering includes a broad range of drilling optimisation products, rock knowledge sensors and real-time data and analytics. This product offering is commodity agnostic and can be applied across the mining value chain. We have two market leading brands, AMC and REFLEX. Increasingly we are working with clients to provide integrated IMDEX solutions that unlock real-value and provide critical insights. OUR PRODUCT OFFERING Drilling Drilling Optimisation Drilling Optimisation Optimisation Products Products Products 1.33 1.33 1.33 Rock Rock Rock Knowledge Knowledge Knowledge Sensors Sensors Sensors Drilling Optimisation Products ......... ......... ......... Real-time Data Real-time Data Real-time Data and Analytics and Analytics and Analytics Rock Knowledge Sensors 1.33 1.33 1.33 EXPLORATION EXPLORATION EXPLORATION RESOURCE DELINEATION RESOURCE RESOURCE DELINEATION DELINEATION Applicable across mining value chain Applicable across mining value chain Applicable across mining value chain PRE-FEASIBILITY PRE-FEASIBILITY PRE-FEASIBILITY FRAGMENTATION FRAGMENTATION FRAGMENTATION MINING MINING MINING OPPORTUNITY TO GAIN IN SITU ROCK KNOWLEDGE OPPORTUNITY TO GAIN IN SITU ROCK KNOWLEDGE OPPORTUNITY TO GAIN IN SITU ROCK KNOWLEDGE UNDERGROUND UNDERGROUND UNDERGROUND STOCK PILING AND BLENDING STOCK PILING STOCK PILING AND BLENDING AND BLENDING PROCESSING PROCESSING PROCESSING Real-time Data and Analytics ......... ......... ......... Our Drilling Optimisation suite of products enhance drilling productivity while improving safety and the impact on the environment Our best-in-class sensors collect critical data on the four elements of rock knowledge – location, grade, mineralogy and texture Our cloud platform and market leading geoscience analytical software enrich data and enable real-time decisions to be made further upstream • Drilling Fluids • Solids Removal Units • Remote Fluid Testing Technologies • Rig Alignment Technologies • Drilling Productivity Technologies • Downhole Survey Sensors • Core Orientation Sensors • Gamma Logging Sensors • Structural Orientation Sensors • In-Field Sampling and Analysis • Cloud-based Data Collection and Validation Platform (IMDEXHUB-IQ™) • Advanced Reporting Software (IMDEX Mobile™) • Geoscience analytics software (ioGAS™) • Interpretive mineralogy software (aiSIRIS™) SALES AND RENTAL REVENUE RENTAL REVENUE SaaS REVENUE OUR INTEGRATED SOLUTIONS Drilling Optimisation Products 1.33 Rock Knowledge Sensors ......... Real-time Data and Analytics Applicable across mining value chain EXPLORATION RESOURCE DELINEATION PRE-FEASIBILITY FRAGMENTATION MINING STOCK PILING AND BLENDING PROCESSING OPPORTUNITY TO GAIN IN SITU ROCK KNOWLEDGE UNDERGROUND 1.33 ......... 9 IMDEX Annual Report 2021ROCK KNOWLEDGE & QUALITY DATA MANY $BN MINING INVESTMENT DECISIONS ARE MADE HAVING SAMPLED ONLY 1% OF 1% OF THE OREBODY. Rock knowledge is an understanding of location, texture, grade and mineralogy. It answers the questions where to drill next and how processing can be optimised. We enable the timely delivery of quality data, giving clarity on the nature of the rock to allow real-time decisions to be made, rather than having to wait weeks or months. Seam Every mine in the world makes decisions on the four components of rock knowledge - location, texture, grade and mineralogy. Our technology stack currently addresses three of these components and aiSIRIS satisfies the fourth - mineralogy. PAUL HOUSE, IMDEX CEO 10 IMDEX Annual Report 2021THE FOUR COMPONENTS OF ROCK KNOWLEDGE LOCATION IMDEXHUB-IQTM connected survey tools mean geologists can see where their holes are anywhere and anytime, rather than relying on paper based flows. TEXTURE IMDEX’s Structural-IQ solution combines multiple sensors to allow geologists to see the position of their structures in 3D as they log in the core farm. This replaces workflow where data gathering and interpretation were separated by weeks or months. MINERALS AusSpec’s aiSIRIS SaaS product provides a real-time mineralogy solution to IMDEX’s rock knowledge offering. It replaces a workflow reliant on laboratory and expert interpretation that is asynchronous to data collection. GRADE IMDEX’s In-field GeoAnalysis solution enables geoscientists to obtain quality assay data at the rig or core farm rather than waiting for laboratory results. IMDEXHUB-IQTM Timely information for critical decision making Au Au Fe Cu Fe Cu Ag Ag Au Fe Cu Ag QUALITY DATA REPRESENTIVITY TIME SAVINGS • Industry leading sensors • QA/QC at point of data collection • Digital workflows remove risk of human error • AI and machine learning remove human subjectivity • Cost effective methods allowing data to be collected for every metre drilled • Repeatable sensor-based data (IoG) • Actionable information in real-time • Driller operable instrumentation - not reliant on third-party service providers • More efficient digital workflows 11 IMDEX Annual Report 2021 OUR ESTABLISHED GLOBAL BUSINESS replace with Timaru Our global presence is unrivalled. This presence provides a compelling opportunity to embed real value for clients and maximise revenue and earnings for IMDEX. During FY21 we supported clients in more than 100 countries. We have 22 IMDEX facilities, together with warehouses and calibration centres in key mining regions of the world. Our Head Office is located in Balcatta, Western Australia. Smithers - Canada Vancouver - Canada East Sussex - UK Rastede - Germany Timmins - Canada Amsterdam - Netherlands Salt Lake City - USA San Luis Obispo - USA Phoenix - USA Torreón - Mexico Coahuila - Mexico Quito - Ecuador Lima - Peru Mendoza - Argentina Santiago - Chile IMDEX Facilities (Excluding distributors) Exploration & Mining Projects Accra - Ghana Parauapebas - Brazil Belo Horizonte - Brazil Itajai - Brazil Manila - Phillipines Jakarta - Indonesia Johannesburg South Africa Kalgoorlie - WA PERTH - WA Townsville - QLD Brisbane - QLD Adelaide - SA Melbourne - VIC Timaru - New Zealand Arrowtown 12 MARKET CAP494.4mSTRONG MARKETPRESENCE ON70%OF MINERAL RIGSGLOBALLYIMDEX Annual Report 2021 OUR CLIENTS AND BUSINESS PARTNERS Our long-standing client base includes large drilling contractors and tier-1 resource companies within the global minerals industry. We are creating a collaborative ecosystem, where we partner with all clients to optimise orebodies. OPERATING IN ALL KEY MINING REGIONS OF THE WORLD SALES IN 100+ COUNTRIES 80% OF OUR TOP 100 CLIENTS HAVE BEEN WITH IMDEX FOR >5 YEARS 13 IMDEX Annual Report 2021OPERATIONAL HIGHLIGHTS IMPROVED SAFETY PERFORMANCE (LTIFR FY21: 1.85 v FY20: 3.97) CONTINUED TO SUCCESSFULLY NAVIGATE COVID-19 with increasing pressure on supply chains and people A STRONG FOCUS ON ENHANCING EMPLOYEE WELLBEING workplace flexibility and diversity ACQUIRED AusSPEC and its aiSIRIS software to enhance real-time rock knowledge offering with spectral mineralogy and AI technologies IMPLEMENTED A SUSTAINABILITY POLICY release first Sustainability Report in September 2021 SIGNED THREE JDAs1 to support new product development and delivery with future opportunities being discussed with a variety of clients 1 Joint development agreements. CONVERTED CLIENT TRIALS FOR DRILLING OPTIMISATION FLUIDS in the mining production market into recurring operational revenue A RECORD NUMBER of rock knowledge sensors on rent UP 35% on pre-COVID-19 peak IMDEXHUB-IQ™ connected revenue UP 30% INCREASED PRODUCTION CAPABILITIES for gyro-related technologies in response to demand RESPONDED TO INCREASING DEMAND FOR REMOTE WORKING SOLUTIONS upgraded IMDEXHUB-IQ™ and released ioGAS 7.3™ geochemistry data analysis software DIVIDENDS PAID an interim fully franked dividend of 1.0cps DIVIDENDS DECLARED a final fully franked dividend of 1.4cps a fully franked SPECIAL DIVIDEND of 0.4cps FINANCIAL HIGHLIGHTS Compared to FY20 at 30 June 2020 RECORD REVENUE of EBITDA of $264.4 million up 11.2% (up 18% on a constant currency basis) STRONG CASH GENERATION with cash from operations UP 8.6% $75.5 million up 38.8% (up 50% on a constant currency basis) ROBUST BALANCE SHEET with a strong net cash position of $47.4 million UP 47.7% KEY METRICS $m (unless indicated otherwise) Revenue EBITDA1 EBITDA1 Margin % NPBT NPAT EPS (cents) Operating Cash Flow Operating Cash Flow Per Share (cents) Net Assets (at 30 June) Net Cash (at 30 June)2 Fully Franked Final Dividend (cents) Fully Franked Special Dividend (cents) Full Time Employees (at 30 June) FY21 264.4 75.5 28.5 44.5 31.7 8.0 56.9 14.4 253.1 47.4 1.4 0.4 521 FY20 237.7 54.4 22.9 29.1 21.8 5.6 52.4 13.6 221.6 32.1 0.7 2.0 485 1 Excluding $3.6m gain on VES sale in FY20 and $2.9m net gain in FY21 on Flexidrill and AusSpec deferred consideration fair value adjustment. 2 Cash less external borrowings (excluding lease liabilities) VAR % 11.2 38.8 24.5 52.9 45.5 42.0 8.6 5.9 14.2 47.7 100 - 7.4 17 IMDEX Annual Report 2021CHAIRMAN’S ADDRESS Dear shareholders, On behalf of the IMDEX Board of Directors (the Board) I’m pleased to present the Company’s Annual Report for the 2021 financial year (FY21). FY21 was another positive year for IMDEX. The Company protected its people, performed strongly, delivered on its growth strategy and maintained its sustainable dividend policy. PROTECTING OUR PEOPLE IMDEX’s focus on its people and its broad approach to their wellbeing, was particularly evident this year. Pleasingly, the Company’s safety performance improved considerably and its lost time and total recordable injury frequency rates reduced by half. Other notable achievements included: the introduction of an IMDEX Diversity Policy and a global diversity program; new employee entitlements that deliver greater workplace flexibility; targeted training and capability development; a formal employee recognition program; and a new reward and remuneration framework. All of these important initiatives enhance IMDEX’s employee value proposition and align with the Company’s strategic milestones. Further information regarding IMDEX’s safety performance and people can be found on pages 41-43 of this report. Similarly, the Company will expand on these topics in its first Sustainability Report, due to be released in September 2021. The Board and Executive Leadership Team are committed to enhancing IMDEX’s ESG related disclosure. We have adopted a stepwise approach to ensure this disclosure is material and supports informed decision making by all stakeholders. OUTPERFORMING EXPECTATIONS The strength of IMDEX’s underlying business enabled the Company to leverage buoyant market conditions and perform strongly. The revenue result of $264.4m represented an 11.2% increase on FY20, and EBITDA was $75.5m, a 38.8% increase on the previous year. A SUSTAINABLE DIVIDEND POLICY The Board declared a fully franked final dividend of 1.4 cents per share. This in line with the Company’s historical 30% payout ratio. In light of the strong growth and cash balance a special dividend of 0.4 cents per share was also declared. This brings the full year dividend total to 2.8 cents per share. IMDEX maintains a sustainable dividend policy, while continuing to invest in technologies and software that have the potential to deliver substantial growth for shareholders. Dividend record and payment dates are 28 September and 12 October 2021, respectively. DELIVERING ON STRATEGY A RESPONSIVE AND TALENTED TEAM Earlier this year, we were pleased to welcome Trace Arlaud as a Non-executive Director. Trace is a very practical and candid professional who has slotted in seamlessly with our The Company did an excellent job of adapting to the Board. Her industry experience, technical knowledge and challenges presented by COVID-19 and executing its geographic network enable her to provide valuable counsel growth strategy. Paul provides greater detail in his Review and client insights. Further information regarding Trace’s of Operations; however, I would like to highlight three appointment and her complementary expertise can be found achievements: in IMDEX’s market announcement on 11 February 2021. • The acquisition of AusSpec and its aiSIRIS platform to strengthen IMDEX’s real-time rock knowledge offering for all clients across the mining value chain; • Delivery against the Company’s disciplined and stage- gated development roadmap to maintain technical leadership; and • Greater industry collaboration to overcome restrictions and advance client-lead solutions. My sincere thanks to all of our Board members. Everyone has continued to do a terrific job, well above and beyond what is required. It is a true pleasure working with you. I would also like to express my gratitude to Paul House, who settled in impeccably and did an excellent job during his first year as CEO. The Executive Leadership Committee and all of IMDEX’s global team should be congratulated for their unwavering commitment, particularly in uncharted operating During FY22, key priorities for our Board include: conditions. • • • • • Continued improvement in safety at all levels and the wellbeing of IMDEX’s people; The Board is excited about the prospects for IMDEX as the Company continues to evolve as a leading Mining-Tech Strong corporate governance, including emerging ESG company with considerable global reach. related requirements; Rigorous assessment of the performance of the Company’s underlying business; Guiding the next phase of IMDEX’s growth strategy; and Clear focus on the milestones underpinning IMDEX’s Long Term Incentive Plan. Anthony Wooles IMDEX Chairman 19 IMDEX Annual Report 2021CEO REVIEW OF OPERATIONS Dear Shareholders, I am pleased to provide a review of our operations for the 2021 financial year, my first twelve months as IMDEX CEO. FY21 was truly challenging, and ultimately a rewarding year. I am often asked what I enjoy most about my role as CEO. My response has always been, ‘because it’s fun’. This would not be so, if it were not for the multitude of talented people around me. Their innovation, commitment, and intricate knowledge of orebodies and data platforms astounds me every day. RECORD FINANCIAL PERFORMANCE OPERATIONAL ACHIEVEMENTS Our results were a highlight. We generated record revenue I would like to echo the comments by Anthony regarding our of $264.4m and our EBITDA of $75.5m was up 38.8%. On safety performance. Many organisations have experienced a constant currency basis, revenue and earnings grew 18% an increase in HSE incidents as both the pressure and and 50% respectively, highlighting the real strength in the change of work practices under COVID-19 impact their underlying business. Our strong uplift in earnings reflected the increasing percentage of revenue coming from our higher-margin teams. Pleasingly, we have seen the opposite. It has taken a lot of attention and engagement, and it is a testament to our team. sensors and software business. At the close of FY21, rentals Safety is more than just the incidents that we report. It is the and subscriptions represented 55% of revenue. Our focus way we look after ourselves and each other. At work and at on streamlining operations and the benefits of our digital home. transformation - Digital 1.0 - were evident. There are a number of other achievements I would like to The investment we have made in Digital 1.0 to improve the highlight: cost to serve, and the quality of service, is delivering leverage in gross and net margins. This leverage allows us to spend more time engaging with clients and building a pipeline of new and next generation technologies. In a year when balance sheet management was critical for most organisations, we outperformed. And we did so in all the jurisdictions we operate. It may be easy to attribute our strong results with the overall strength of the market, but that would take away from the true underlying performance of our business. Our objective has always been to outperform our market proxies. In FY21 we achieved this in an exceptional way. 20 • Our joint development agreements (JDAs) to support new product development and delivery in partnership with our clients; • Our record number of rock knowledge sensors on rent and the growth of our IMDEXHUB-IQ™ connected revenue; and • Our ability to respond to changing client needs. JDAs to support new product development and delivery Our conscious step to build JDAs to bring new products to market has been a success in its first year. With three agreements signed and four in the works, we are excited by this model. IMDEX Annual Report 2021Increasingly, the solutions that we are designing benefit multiple players within the mining value chain. The JDA INDUSTRY AND MARKET UPDATE model ensures that any of these players come together in a Activity recovered throughout 1H21, boosted by strong structured manner. Throughout the year we made great progress in soliciting client feedback. We have developed multiple user communities that play a key role in shaping the products and technologies we build. In one case, we have a group industry fundamentals and a keen willingness by clients to sustain and increase operations. This positive momentum continued into 2H21. The pace of growth was tempered due to supply chain pressures, and short-term labour and rig shortages – notably in Australia, comprising 33 resource companies that provide critical Canada, and the USA. insights. The power of this engagement is that a 500-person company like IMDEX, can be a 5000-person company contributing to better technologies and better outcomes. Record Sensors on Rent and Growth of our IMDEXHUB-IQ™ Connected Revenue Demand for our sensors was reflective of our leading technologies and strong market conditions. We had a record December 2020 and a strong uptake in January 2021. At the close of FY21, we had achieved the highest number of sensors on hire, and revenue from all regions was near to, or exceeded pre-COVID-19 levels. Over the same period, our recurring IMDEXHUB-IQ™ connected revenue was up 30% and connected metres drilled was up 60%. This uplift on the previous year, is more than our revenue growth, and highlights that our technologies enable better workflows for clients. This is a true measure of success. Responded to Increasing Demand for Remote Working Solutions I am immensely proud of how everyone in our business COVID-19 increased industry pressure on our supply chain, particularly delivery times and freight charges. Fortunately, we have multiple supply chain contingencies and continue to support clients without material disruption. In most of our jurisdictions, mining operations are considered essential to economic recovery and are exempt from hard lockdowns. Pleasingly, the implementation of COVID-19 vaccination programs began to support greater mobility, particularly in the USA. We will continue to closely monitor risks and leverage positive industry structural changes, together with increasing demand for technologies and software that enable remote operations. GROWTH STRATEGY Although COVID-19 impacted our market and business, our underlying strategy remains unchanged: • Growth of our core business by enhancing technical leadership and embedding value for clients; and amended their priorities and helped clients navigate • Expansion within the larger production stage of the COVID-19. Our ability to be flexible and redirect resources to meet mining value chain, which is a larger market and less subject to cyclical impact. changing needs is a highlight of our results and culture. To deliver, we are committed to targeted R&D, providing Two examples include the upgrade of IMDEXHUB-IQ™ and end-to-end IMDEX solutions, and leveraging our core the release of IMDEX ioGAS 7.3™ geochemistry data analysis competencies throughout the mining value chain. The software. Enabling clients to work remotely, efficiently, securely, and safely are key components of our customer value proposition. strength of our balance sheet and net cash position also enables us to make on-strategy acquisitions as they present. To be on-strategy, these acquisitions must complement our product offering, have unique IP, and accelerate our development roadmap to deliver real-time orebody knowledge. 21 IMDEX Annual Report 2021FOCUS AREAS FOR FY22 CULTURE AND PEOPLE For the balance of FY22 our people will remain front and There is a well known phrase that culture will eat strategy for centre. Concurrently, we will focus on four key operational breakfast. The reason it is well known is that it is true. The initiatives: 1. Prosecuting our R&D roadmap to accelerate growth and build scale; culture that we are building to take that next step as a growth company made great strides this year. We have expanded on these achievements on pages 45 - 47 of this Report and within our first Sustainability Report, which we are proud to 2. Securing additional joint development agreements to release in September 2021. engage with resource companies and drilling clients for new product development and delivery; Later in the year we will also launch our refreshed IMDEX brand and values in line with our 40th Anniversary. Key 3. Building key account management capabilities to embed value for clients and enhance IMDEX solution selling; and themes include: Our global thinking; 4. Commencing our digital Transformation 2.0 to further streamline costs and enhance client experience. • An awareness that the work we do has a direct impact on efficient and sustainable mining practices At all times we will ensure a high level of discipline and a relentless execution to be best-in-class. • • Innovation to solve industry challenges The importance of collaboration. 22 The pride I feel in how our people around the world have responded to overcome barriers between families, colleagues and clients has been truly remarkable PAUL HOUSE, IMDEX CEO A REMARKABLE TEAM AND A POSITIVE OUTLOOK My sincere thanks to our Board members, Paul Evans, our XCo, and everyone at IMDEX for your guidance and positive contributions. This year I can say confidently, despite travel restrictions, the distance between the Board Room and our front-line teams has been shorter than it has ever been. The pride I feel in how our people around the world have responded to overcome barriers between families, colleagues and clients has been truly remarkable. Against this backdrop the outlook remains brighter than at any time in our past. The underlying fundamentals for our industry are excellent. The pipeline of our technologies that has been put together with input from our clients is long. And the team we have assembled both to build and deliver those products has never been stronger. We have the talent, the network and the balance sheet to respond to market needs and opportunities as they present. We look forward with great excitement to FY22 and what the years that follow will bring to IMDEX’s team, its clients and ultimately its shareholders. Paul House IMDEX CEO 23 EXECUTIVE LEADERSHIP COMMITTEE PAUL EVANS Chief Financial Officer & Company Secretary Time with IMDEX Commenced as Chief Financial Officer and Company Secretary in 2006 Experience 35 years within the mining services, media, manufacturing, and telecommunications sectors Expertise Finance, governance, and general management Professional Qualifications Chartered Accountant Australia and New Zealand Memberships and Associations Fellow of Chartered Accountants Australia and New Zealand Graduate Member of Australian Institute of Company Directors SHAUN SOUTHWELL Chief Operating Officer Time with IMDEX Joined Imdex in 2018 as Vice President Asia Pacific and Global Supply Chain Manager, transition to Chief Operating Officer in 2020 Experience 27 years with Gearhart United – a subsidiary of SGS and a leading designer and manufacturer of oilfield equipment in Australia Expertise General management and all aspects of supply chain including manufacturing, service, fleet management and logistics The drilling and equipment industry Professional Qualifications Leading Organisational Impact – Melbourne Business School Executive Program PAUL HOUSE Chief Executive Officer Time with IMDEX Joined as Chief Executive of REFLEX in 2017. Transitioned to Chief Operating Officer in 2019 and commenced as CEO in 2020 Experience 30 years within the resources and technologies sectors Lived and worked in a wide range of international markets including the USA, Australia, Africa, India, the Middle East, and Southeast Asia 14 years with SGS, the world’s leading inspection and testing firm, with a dominant presence in the resources geochemistry assay and metallurgy sectors Expertise Management, strategy, operations, corporate finance and governance Professional Qualifications Bachelor of Commerce from the University of Western Australia Memberships and Associations Fellow of the Australian Institute of Management Graduate Member of Australian Institute of Company Directors 25 IMDEX Annual Report 2021 MICHELLE CAREY Chief of Product Management and Marketing DAVE LAWIE Chief Geoscientist / Chief Technologist – Mining Solutions MATHEW REGAN Chief of Corporate Shared Services Time with IMDEX Commenced as Chief Information and Transformation Officer in 2017. Transitioned to Chief of Shared Corporate Services in 2020 Experience 19 years with CBH in senior and executive roles including Chief Information Officer, Shared Services, Innovation and Strategy and Transformation Time with IMDEX Joined following IMDEX’s acquisition of ioGlobal in 2012. Appointed to General Manager of IMDEX Product Development in 2019. Transitioned to Chief Product and Marketing Officer in 2020 Experience Over 25 years experience in the mining industry. Expertise Business transformation, strategy, innovation, supply chain optimisation and digital technologies More than 10 years’ experience as a geoscientist in technical and management roles for tier one mining companies Professional Qualifications Bachelor of Computer Science from Edith Cowan University and a Master of Information Technology from the University of Western Australia Stanford University Executive Program Memberships and Associations Member of the Curtin University Faculty of Science and Engineering Advisory Board 15 years focusing on mining technology development Expertise Innovation and product development within the mining industry Professional Qualifications PhD in Geochemistry from Monash University Memberships and Associations Member of Austmine Board Member of the Insead Alumni Association 26 Time with IMDEX Joined as Chief Geoscientist following IMDEX’s acquisition of ioGlobal in 2012. Appointed Chief Geoscientist and Chief Technologist - Mining Solutions in 2015 Experience Global positions in exploration geochemistry and R&D with Pasminco and Anglo American before co- founding ioGlobal in 2004 Expertise Geochemistry, geometallurgy, innovation, analytics and cloud-based data management and analysis Professional Qualifications PhD in Geosciences and Analytics from the University of New England Trade qualified Instrument Technician Memberships and Associations A member of AusIMM IMDEX Annual Report 2021TIM PRICE Chief of Engineering and Research and Development KIAH GRAFTON Executive General Manager of Human Resources Time with IMDEX Joined in 2011 as General Manager of Engineering and Product Development, IMDEX Technology Germany Experience 35 years’ experience in engineering and product development 20 years with Scientific Drilling International holding positions from Design Engineer to Senior Vice President of Engineering 5 years in Aerospace and Semiconductor Test Industries Expertise Downhole instrumentation, engineering management and research and development Professional Qualifications Bachelor of Science in Electronic Engineering and Master of Science in Electrical Engineering from California Polytechnic State University, San Luis Obispo Memberships and Associations Member of Institute of Electrical and Electronic Engineers Member of Society of Petroleum Engineers Time with IMDEX Joined as Human Resources Manager Asia Pacific in 2017. Transitioned to Global Head of Human Resources then Executive General Manager of Human Resources Experience Over 18 years as a human resources generalist Broad industry experience including resources, banking, hospitality and not-for-profit sectors for national and global organisations Expertise Strategy, talent acquisition, industrial relations, and organisational development Professional Qualifications Bachelor of Business, Human Resources Management & Management, Edith Cowan University Memberships and Associations Graduate Member of Australian Institute of Company Directors Graduate Member of Chief Executive Women (CEW) Leaders Program MICHAEL TOMASZ General Counsel and Company Secretary Time with IMDEX Joined in 2021 as General Counsel and Company Secretary Experience International experience gained across a wide range of markets, including North America, Asia Pacific, the Middle East, Japan, and Europe Worked with a tier one mining company and one of world’s largest oilfield services companies Expertise Corporate and commercial law Building collaborative partnerships within the resources sector Professional Qualifications Admitted as a barrister and solicitor in the Supreme Court of New South Wales; admitted as a Solicitor in England & Wales Master of Business Administration from Curtin University, Bachelor of Laws from Murdoch University, Bachelor of Science (Geology) from University of Western Australia Memberships and Associations AMPLA (Australian Mining and Petroleum Lawyers Association) ACC Australia (Association of Corporate Counsel) 27 IMDEX Annual Report 2021FINANCIAL PERFORMANCE AND STRATEGY FINANCIAL SUMMARY REVENUE 13% 5 YEAR CAGR (Comparable S&P CAGR 8.3%**) 264.4 243.7 237.7 218.5 176.2 EBITDA 23.5%++ 5 YEAR CAGR 75.5*^ 52.3 + 54.4* 48.0 + 42.4 + + 31.5 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 AFRICA/EUROPE AMERICAS ASIA PAC $m $m $m$m EBITDA MARGIN % EBITDA RECONCILIATION 28.5 21.3++ 22.2++ 23.9++ 22.9 75.5*^ (8.8) (1.4) (7.1) (1.3) 56.9 FY17 FY18 FY19 FY20 FY21 %% * Including AASB 16 + Excluding AASB 16 EBITDA Working Other Tax Capital Finance Costs Cash from Operations $m $m ^ Excluding $2.9m net gain in FY21 on Flexidrill and AusSpec deferred consideration fair value adjustment ** IMDEX uses S&P Market Intelligence global exploration expenditure for nonferrous metals as an industry benchmark for growth ++ Notionally adjusted for inclusion of the impact of AASB 16 28 IMDEX Annual Report 2021 A COMMITMENT TO RESEARCH & DEVELOPMENT RESEARCH & DEVELOPMENT R&D SPEND ($M) ) m $ ( d n e p S D & R 20 18 16 14 12 10 8 6 4 2 0 19.1 17.5 16.5 12.7 5.8% 6.8% 7.3% 7.2% FY18 FY19 FY20 FY21 % of Revenue INVESTMENT IN R&D IN ALL MARKET CONDITIONS ABILITY TO TARGET AND REDIRECT R&D SPEND IN LINE WITH DEMAND DISCIPLINED STAGE GATE PRODUCT DEVELOPMENT PROCESS INCREASING PERCENTAGE OF EXPENDITURE ON SOFTWARE VERSUS HARDWARE R&D IS LARGELY EXPENSED BALANCE SHEET $m Cash Receivables Inventory Fixed assets 1 Intangibles 2 Other assets / deferred tax TOTAL ASSETS Payables Borrowings 3 Other liabilities, provisions and current tax 4 TOTAL EQUITY ROE ROCE 30 JUNE 2021 30 JUNE 2020 58.5 58.2 41.5 78.6 92.9 36.4 366.1 37.9 11.1 64.0 253.1 13.3% 15.5% 38.3 43.5 41.2 79.6 83.6 31.9 318.1 26.9 6.1 63.5 221.6 9.9% 11.4% INTERIM FULLY-FRANKED DIVIDEND OF 1.0 CPS FINAL FULLY-FRANKED DIVIDEND OF 1.4 CPS IN LINE WITH HISTORICAL 30% PAYOUT RATIO SPECIAL FULLY FRANKED DIVIDEND OF 0.4 CPS CONTINUED INVESTMENT IN LEADING TECHNOLOGIES TO DRIVE FUTURE GROWTH 1 Includes leases assets of $33.0m in June 2021 ($36.5m June 2020) 2 Includes intangibles of $9.8 arising from the acquisition of AusSpec 3 Increased USD borrowings to manage our currency exposures 4 Includes lease liabilities of $38.9m ($41.5m June 2020) and deferred consideration for the purchase of Flexidrill of $12.2m ($14.7m June 2020) and AusSpec $2.5m SUMMARY OF FINANCIAL HIGHLIGHTS Revenue from continuing operations (excluding interest income) FY21 $m 264.4 FY20 $m 237.7 Earnings before interest, tax, depreciation & amortisation (EBITDA) from continuing operations1 78.4 58.0 EBITDA margin Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of Intangible Assets Earnings before tnterest & tax (EBIT) Net interest expense Net profit before tax Income tax expense Net profit after tax from continuing operations 29.7% (20.3) (6.0) (4.5) 47.6 (3.1) 44.5 (12.9) 31.7 24.4% (19.0) (5.9) (1.6) 31.5 (2.4) 29.1 (7.4) 21.7 Basic earnings per share from continuing and discontinued operations (cents) 8.0 5.6 Net cash provided by operating activities Cash on hand Net assets Total borrowings Net tangible assets per share (cents per share) 56.9 52.4 58.5 38.3 253.1 221.6 11.1 6.1 40.4 35.6 1 FY21 includes $2.9m relating to the fair value gain on deferred consideration. FY20 contains $3.6m relating to the sale of interest in VES 31 IMDEX Annual Report 2021 The strength of IMDEX’s underlying business enabled the Company to take full advantage of buoyant market conditions and outperform expectations. ANTHONY WOOLES, IMDEX CHAIRMAN QUALITY REVENUE MODEL SENSORS & SOFTWARE % 44 44 57 57 56 56 43 43 PRODUCTION EXPOSURE % 10 10 20 20 90 90 80 80 27 27 25 25 10 15 10 15 7 8 7 8 35 35 34 34 31 31 30 30 39 39 44 44 45 45 50 50 FY17 FY17 FY21 FY21 FY17 FY17 FY21 FY21 FY17 FY17 FY21 FY21 FY17 FY17 FY21 FY21 SALES RENTAL AND SAAS EXPLORATION & DEVELOPMENT (PRINCIPALLY NEAR MINE) MINING PRODUCTION • Increasing revenue from sensors and software – higher margins and quality recurring revenue • Increasing revenue from mining production phase – a larger addressable market and less-cyclical 44 44 57 57 56 56 43 43 10 10 20 20 90 90 80 80 AMERICAS % 27 27 25 25 BROAD COMMODITY EXPOSURE % 7 8 7 8 10 10 15 15 35 35 34 34 31 31 30 30 39 39 44 44 45 45 50 50 FY17 FY17 FY21 FY21 FY17 FY17 FY21 FY21 FY17 FY17 FY21 FY21 FY17 FY17 FY21 FY21 AMERICAS APAC EUROPE/ AFRICA GOLD CRITICAL METALS IRON ORE OTHER • Increasing revenue from the • Product offering is commodity Americas agnostic • Critical metals are expected to grow at a faster rate 33 IMDEX Annual Report 2021GROWTH STRATEGY IMDEX has a clear strategy to achieve sustainable earnings growth, which includes: • Growing its core business in exploration and development; and • Expansion within mining production phase, which is a less-cyclical larger market. To deliver this growth strategy the Company invests in: complementary acquisitions; ongoing and targeted R&D to maintain technical leadership; and industry collaboration to optimise orebodies and deliver end-to-end solutions. IMDEX’s strong financial position, world-class R&D capabilities, established global presence and strong leadership team, support its ongoing success for shareholders. LARGER TAM LESS CYCLICAL* S E I G O L O N H C E T / S T C U D O R P W E N I G N T S I X E NEW PRODUCTS, SENSORS AND SOFTWARE NEW PRODUCTS, SENSORS AND SOFTWARE CORE BUSINESS NEXT GENERATION PRODUCTS, SENSORS AND SOFTWARE MARKET EXTENSION OF CORE BUSINESS EXPLORATION & DEVELOPMENT MINING PRODUCTION MARKETS *Total addressable market 34 IMDEX Annual Report 2021 KEY FOCUS AREAS AND OPERATIONAL INITIATIVES FOR FY22 Protecting our people Protecting the continuity of our business to support clients Increased R&D for connected sensors and software solutions to accelerate growth and build scale Joint development agreements to engage with resource companies and drilling clients for new product development and delivery Key account management to embed value for clients and enhance IMDEX solution selling Digital transformation 2.0 to further streamline costs and enhance client experience IMDEX BLASTDOGTM OPERATING ENVIRONMENT COVID-19 EVOLUTION OF COVID-19 GOVERNMENT MANDATED RESTRICTIONS ON IMDEX MINING REGIONS This table shows the impact of government mandated COVID-19 lock-downs on our key regions from April 2020. In most jurisdictions mining is considered essential to economic recovery and is exempt from hard lockdowns. NO LOCKDOWN NO LOCKDOWN (REGULATED) SOFT LOCKDOWN HARD LOCKDOWN (MINING EXEMPTED) HARD LOCKDOWN (NOT EXEMPTED) KEY OPPORTUNITIES KEY CHALLENGES • • • • Acceleration of positive industry structural change New efficient ways of working - beneficial for the long-term Increasing demand for IMDEXHUB-IQ™ cloud-based technologies and software Increasing demand for solutions to support clients to work remotely, efficiently, securely, and safely • • • Increasing pressure on industry processes to protect labour and supply chains Corporate restrictions continue to limit access to sites, including for trials of new products Government restrictions continue to be fluid, impacting labour mobility and project continuity 36 IMDEX Annual Report 2021MARKET AND INDUSTRY REVIEW Broad-based recovery in the minerals sector globally Recovery spanned all key mining areas and was particularly evident in the Americas Strong commodity prices supported by government stimulus, decarbonisation targets and demand across a broad range of sectors including consumer, industrial and government related industries Large, mid-cap and junior resource companies are well funded and increased their expenditure to replace diminishing reserves Short-term supply chain pressure, labour, and rig constraints Exploration was predominantly focused on lower-risk brownfield projects New discoveries are likely to be under cover and at depth resulting in larger drilling campaigns Increasing demand for mining-technologies to deliver real-time orebody knowledge Increasing demand for mining-technologies that support remote working The industry is clearly willing to invest in capital and increase exploration expenditure. The challenge will be the speed at which it can move. The industry drivers of depleting reserves, strong commodity pricing and the trend towards decarbonisation, is driving substantially increased industry exploration budgets. Delivery against these targets will require time and investment in labour, drilling rigs, and other supply chain pressures that are a current constraint.” PAUL HOUSE, IMDEX CEO - JUNE 2021 MACQUARIE EMERGING LEADERS CONFERENCE 37 IMDEX Annual Report 2021CORPORATE RISK RISK MANAGEMENT REGULATORY COMPLIANCE Throughout the year we broadened and deepened our risk We strengthened our regulatory compliance framework management practices across all aspects of our business and improved the compliance maturity of our global IMDEX including: businesses. Our aim was to embed procedures and contact • • • • Enterprise risk Anti-bribery and anti-corruption risk New product project risk Shared services risk. To support best-practice risk processes, we expanded our dedicated internal risk function. This function is responsible for promoting and facilitating stronger engagement in risk management activities from identification to assessment, management and control. A key focus was ensuring a strong targeted framework for COVID-19 resilience. Protecting our people and our business was critical and included infection prevention and control, crisis management and business continuity. points in daily business processes. Other achievements included: • Significant investment into new systems and processes for compliance risk management, compliance tracking and action management; • Expansion of our internal capability with the goal of supporting a consistently high level of regulatory compliance performance across all jurisdictions; and • A 3-year strategy update to strengthen our regulatory compliance maturity, processes and systems in consultation with global IMDEX businesses, the IMDEX XCo, IMDEX Board and external stakeholders. MODERN SLAVERY ENGAGEMENT WITH INTERNAL AUDIT Our internal audit function was integrated into the risk and regulatory compliance function to better align with our We were pleased to publish our first Modern Slavery Statement in FY20. As part of this process, we engaged a broad range of stakeholders within our business to strengthen modern slavery awareness and risk management strategic objectives and the functions of the IMDEX Board practices. ARCC. Other notable achievements included: • Additional capability and systems to support internal stakeholders in managing and resolving internal audit When preparing our Modern Slavery Statement, suppliers comprising 98% of our annualised spend were subject to a risk assessment. Other initiatives included: • Implementation of a targeted audit program on high-risk findings; and suppliers; and • Stronger links between risk management, regulatory compliance, quality systems, information security and the internal audit functions to ensure that the function is risk-based, proportionate, and focused on adding value • Development of a three-year strategy to strengthen and enhance our risk management strategies for modern slavery, child labour, and other forms of forced labour in the IMDEX global supply chain. to our business. Our FY20 Modern Slavery Statement can be found on our website at: https://www.imdexlimited.com/about-us/corporate-governance Our FY21 Modern Slavery Statement will be released in December 2021 39 IMDEX Annual Report 2021This year I can say confidently, despite travel restrictions, the distance between the Board Room and our front-line teams has been shorter than it has ever been. PAUL HOUSE, IMDEX CEO SAFETY AND QUALITY Our HSE team partners with all stakeholders to provide trusted advice, support regional needs and uphold global standards to eliminate work- related injuries and illness. Further information regarding our QHSE Policies can be found on our website at: KEY FOCUS AREAS FOR FY22 • Managing High Potential Incidents through enhanced reporting and investigation workflows. • Developing a Management & Supervisors Essentials course that includes HSE as a core component. • Building on existing HSE training resources within https://www.imdexlimited.com/about-us/qhse IMDEX Academy. KEY SAFETY INITIATIVES FOR FY21 • Safety Engagement through individual objectives, for every part of the business • Enhancing communication via monthly performance reports, updates, and Safety Alerts OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEM QHSE Standards are central to our IMDEX Management System. These Standards form a robust framework to minimise operational risk, provide a safe working • Driving accountability through live leading indicator environment and protect the health and wellbeing of our dashboards, highlighting individual performance, from team. front line to the CEO The QHSE Standards cover all employees and workers at any • Establishing five new QHSE Courses in IMDEX Academy, of our locations globally and everyone is required to adhere covering topics from Hazard and Risk Management to to our IMDEX QHSE Management System. Health & Wellbeing To enhance the effectiveness of this system, an internal Notable achievements throughout the year included audit program is in place to target higher risk activities. the continued success of iAuditor to enhance safety engagement and our improved lost time injury rates. Our Safety Engagement average increased from 12 to 17.6. This rate is measured in iAuditor and records the number of safety activities per employee. Pleasingly, our Lost Time and Total Recordable Injury Frequency Rates reduced by half. Our six largest facilities around the world are independently certified to ISO 9001:2015 and ISO 45001:2018. IMDEX Lost Time & Total Recordable Injuries Frequency Rate (LTIFR & TRIFR) - 12 Months to date 41 IMDEX Annual Report 2021 HAZARD IDENTIFICATION, RISK ASSESSMENT, AND INCIDENT INVESTIGATION OCCUPATIONAL HEALTH SERVICES AND TRAINING During the year we complemented our confidential Employee The identification of workplace hazards during routine and Assistance Program and IMDEX Wellness Series with non-routine tasks is supported by online applications, Take a Mental Health Strategy and regional Peer Supporter 5 and Job Safety Analysis, together with detailed workplace Program. inspections and Safety Observations. Additional supporting courses have been created in IMDEX All hazards and incidents are managed via our IMDEX Quality Academy, including: Alert system. We have also adopted the Incident Cause Analysis Method (ICAM) to investigate incidents, identify causal factors and implement improvement opportunities. Leadership is a key part of our safety culture. Leaders perform physical and virtual Safety Walkthroughs, engage with team members and promote safe work practices. Managers are accountable for the risk assessments and registers that relate to their teams. All workers are responsible for workplace safety and are encouraged to stop work if they feel unsafe or observe an unsafe act. WORK-RELATED INJURIES During FY21 there were three recordable injuries relating to sprains, strains and minor lacerations. All injured workers made a full recovery. • • HSE Induction Health & Wellbeing • Work Related Stress Other opportunities for safety participation and training include: • Monthly Health & Safety meetings • • Our online Quality Alert System Our Digital Workplace, which provides mobile access to all resources and business applications. 42 IMDEX Annual Report 2021DATA SECURITY During FY21 we focussed on improving visibility in the Key focus areas in FY22 include: network, building out our DevSecOps program and building an Architecture Development Methodology. Notable achievements during the period included: • Development and implementation of a data classification scheme • Deploying a Data Loss Prevention system to address the • Deploying an industry leading Security Information and Event Management solution to correlate logs and risk of data loss generate alerts for anomalies • Improving the DevSecOps program by conducting an in-house Capture the Flag exercise to train developers about secure software development • Developing an enterprise architecture framework following TOGAF framework and embedding a software architect in each of the software development projects. • Implementing a Cloud Access Security Broker to reduce the risk from cloud apps We will also work to expand our ISO/IEC 27001 certification to include aiSIRIS, a product included in the IMDEX offering through the acquisition of AusSpec. TOGAF is a proven Enterprise Architecture methodology and framework used by the world’s leading organisations to improve business efficiency. It is the most prominent and reliable Enterprise Architecture standard. By embedding a software architect with security skills in each software development team, IMDEX will also ensure that software developed for the consumption by customers is safe and secure. ISO/IEC 27001:2013 CERTIFICATION Last year we achieved ISO/IEC 27001:2013 certification through SGS – a globally renowned inspection, verification, testing and certification company. ISO/IEC 27001:2013 is an international information security standard, which is recognised in 161 countries. Our certification demonstrates we operate an Information Security Management System that is compliant with its mandatory requirements, have systematic processes for managing information security risks, and have implemented controls mandated by the standard. Our certification comprises a comprehensive range of activities including: • • Software development processes The product development life-cycle for its real-time subsurface intelligent solutions • Manufacturing and deployment of products and technologies • • Client support processes Information technology systems for supporting these activities and digital functions This was a significant milestone for our Company and provides additional assurance to clients regarding the end-to- end security of their information – for example, ordering and dispatch using our Global Digital Rentals platform, critical data collection and transfer with our award-winning cloud solution IMDEXHUB-IQ™ and ongoing support via our 24/7 Customer Care portal. 43 IMDEX Annual Report 2021PEOPLE AND CULTURE During FY21 our global workforce increased by over 7% to 521 people, largely due to growth in software engineering and supply chain teams. DIVERSITY AND INCLUSION We value and encourage diversity in our global workforce. We seek to employ, retain and develop employees for the long-term, assisting in their professional development and the development of the culture and values of our Company. Our aim is to build a diverse workforce and inclusive environment where everyone feels able to participate and achieve their potential. This strategy extends beyond legal compliance and seeks to add value by contributing to our employees’ health and well-being. IMDEX is 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. By building and developing teams that reflect the diversity of our clients, and the local cultures we operate in, we continue to grow as a global business spread across culturally diverse regions. IMDEX WOMEN-EQ Our IMDEX WOMEN-EQ program continues to act as a forum to share learnings and provide guidance, leadership, inspiration, empowerment, and support for the personal and professional development of all women at IMDEX. This program is currently facilitated in APAC and South Africa. EMPLOYEE WELLBEING To support the health and well-being of our employees, we continue to offer an Employee Assistance Program (EAP). We launched a ‘Caring for the IMDEX Community’ program aligned to our mental health and wellness strategy. The program, and supporting initiatives, aim to ensure psychological safety at work; employees feel supported to bring their ‘full selves’ to work to be the best they can be and feel connected to IMDEX. A Peer Supporter network initiative was launched to promote better understanding and awareness of mental health challenges globally. EMPLOYEE REWARDS We take a holistic view to reward, to encourage a positive Our approach to diversity is simple – we want everyone to cultural environment that influences the attraction and feel welcome at IMDEX and to achieve success in what they retention of employees. Programs are designed to be fair, do in an environment that values different perspectives and equitable and compliant with local practices. collaboration. Pay analysis was conducted to evolve the Remuneration We do this by deploying inclusion initiatives that support all Framework in most locations that IMDEX operates, to people to engage and collaborate without barriers, making a enable us to review internal consistency and market better workplace for everyone. In 2021, IMDEX supported our competitiveness globally. workforce on more inclusive workplace practices including: A Global Recognition Framework was developed to provide • Updating our remote-working policies to create more our employees with a set of tools to encourage recognition. flexibility Introducing paid domestic violence leave and support From a simple ‘thank you’ to a special appreciation gift, the framework helps create an environment more conducive of the culture needed to meet the challenges and opportunities Improving paid parental leave provisions. of the future. • • Further information can be found within our Diversity Policy and Global Code of Conduct Policy on our website. Further information relating to our remuneration policies for Key Management Personnel are set out in the Remuneration Report within the FY21 Financial Report. 45 IMDEX Annual Report 2021HR TECHNOLOGY AND INNOVATION CAPABILITY DEVELOPMENT Further enhancements to People HUB, our human resources information system, have been launched over the course of the year. In June 2021, Succession Planning and Career Development modules were introduced to the platform to help manage career pathways for individuals, identify key talent, and mitigate risks against business-critical roles. Remuneration Reviews were launched in the platform to help guide managers with pay structures across our global locations. GLOBAL INTERNSHIP PROGRAMS During FY21 we continued to mature and expand our Global Internship Programs. The Programs offer undergraduates and new graduates the opportunity to work at one of our global facilities and provide a hands-on learning environment and practical experience, together with coaching and mentoring opportunities. The Internship Programs were run in Asia Pacific and the Americas and enrolments spanned diverse disciplines including: engineering; finance; legal; human resources; quality; and information technology. CULTURAL TRANSFORMATION A cultural transformation roadmap was developed in response to our global engagement survey to drive development of IMDEX’s brand proposition, vision, and values, to create greater connection for our employees. Team alignment strategies were facilitated with the Executive team to create synergy and focus on collectively driving delivery of strategic objectives. We employ great minds to develop great solutions for our clients. Our Learning and Development (L&D) framework was launched to foster a culture of continuous learning and offer development opportunities to our people. The L&D Framework outlines development opportunities at four levels: 1. How we align new employees to IMDEX 2. Creating operational excellence in each function 3. Fostering leadership growth 4. Building strategic leadership. Nominated IMDEX employees participated in the IMDEX ‘XSell Customer Solutions’ program aimed at developing capabilities within our global sales team. The program focused on equipping sales teams with skills to deliver value propositions and present value based IMDEX solutions to address client requirements. As a result of the leadership capability assessment project, we designed and implemented the ‘Leading IMDEX into the Future Program (LIFT)’ focussing on: • • • • • • Delivering a compelling vision and strategy Instilling trust and fostering team performance Finding a way to deliver Decisive decision-making Courage to challenge Cultivating innovation. 46 IMDEX Annual Report 2021OUR EMPLOYEE VALUE PROPOSITION REMUNERATION REFLECTING BUSINESS REQUIREMENTS, STRATEGIC MILESTONES AND MARKET PRACTICES BENEFITS TANGIBLE AND INTANGIBLE OFFERINGS THAT REPRESENT IMDEX’S BRAND AND SUPPORT WELLBEING AND DEVELOPMENT WORKPLACE AN ENVIRONMENT THAT SUPPORTS ENGAGEMENT AND PRODUCTIVITY RECOGNITION DEVELOPMENT FORMAL AND INFORMAL PROGRAMS THAT ALIGN WITH CORPORATE VALUES AND INSTIL A CULTURE OF CELEBRATION PROGRAMS AIMED AT FUTURE PROOFING IMDEX AND SUPPORTING EMPLOYEES TO THRIVE SUSTAINABILITY We are committed to enhancing our ESG related disclosure and delivering solutions that support the sustainability of our clients’ operations. INSIDE IMDEX During FY21 we established an IMDEX Sustainability Policy, undertook an ESG materiality assessment and prepared our first Sustainability Report. Our Sustainability Report will be released to the market on 15 September 2021. OUTSIDE IMDEX Our products and technologies are designed to enhance efficiency, productivity and safety while reducing costs and environmental impact. Examples of positive contributions to sustainable operations include: • • • • • • • Reduced water consumption Reduced site footprint and risk of environmental contamination Enhanced safety for site personnel and wildlife Reduced energy consumption Reduced transportation to and from site Availability of biodegradable and reusable packaging Dust suppression. SUSTAINABILITY REPORT 2021 SUSTAINABILITY REPORT Our FY21 Sustainability Report will be released to the market on 15 September 2021. The Sustainability Report can be found on our website at https://www.imdexlimited.com/investors/annual-reports 49 IMDEX Annual Report 2021The Company did an excellent job of adapting to the challenges presented by COVID-19 and executing its growth strategy. ANTHONY WOOLES, IMDEX CHAIRMAN GOVERNANCE BOARD OF DIRECTORS Our Board has extensive professional expertise, business experience and knowledge of the mineral exploration, mining, and technology industries. It also has considerable experience within capital and financial markets. Members of the Board are well respected in these sectors and play an active role in our Company’s strategic planning. Key priorities for the Board during FY21 included: • • • • Enhancing safety performance Underlying business performance and growth Rigorous strategy development Governance and enhancing ESG disclosure During FY22 the Board will remain focused on these priorities together with disciplined cost management, execution of our strategy and achieving performance milestones. In February 2021 Ms Trace Arlaud was appointed Non-Executive Director. Trace has critical skills in mining engineering, geology, and geophysics, together with broad international experience. Based in Colorado, USA, she will contribute significantly to the governance of IMDEX given our growing presence and prospects within that region. Ms Sally-Anne Layman Non-Executive Director Mr Kevin Dundo Non-Executive Director Mr Anthony Wooles Non-Executive Chairman Mr Ivan Gustavino Non-Executive Director Appointed to the Board 6 February 2017 Appointed to the Board 14 January 2004 Appointed as Chairman 1 July 2016 Appointed to the Board 3 July 2015 Expertise: Exploration, mining and finance Expertise: Corporate and commercial Law Expertise: Financial and capital markets and strategic marketing Expertise: Strategic growth and transactions within the technology sector 51 IMDEX Annual Report 2021CORPORATE GOVERNANCE CORPORATE GOVERNANCE STATEMENT Our Corporate Governance Statement sets out the key features of our governance framework and discloses the extent to which we have followed the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendation (ASX Recommendations). We regularly review our corporate governance practices and policies against the requirements of both the Corporations Act 2001 (Cth) (Corporations Act) and the Listing Rules of the Australian Securities Exchange (ASX), and current best practice. In FY21 we completed a review of our governance documents and are pleased to be able to report that the majority of our governance practices align to the 4th edition of the ASX Recommendations. Our Corporate Governance Statement is accurate and current as at the date of this annual report and has been approved by the Board. Our Corporate Governance Statement can found on our website at: https://www.imdexlimited.com/about-us/corporate-governance IMDEX CODE OF CONDUCT SUPPLIER CODE OF CONDUCT Our IMDEX Code of Conduct (the Code) provides a We are committed to transparent, safe, and ethical framework for our decisions and actions and outlines the procurement practices. Our aim is to partner with like- standard of conduct expected of everyone who works for or minded suppliers to help us deliver leading solutions that on behalf of the Company. All employees are expected to be familiar with and understand the Code and complete training regarding the key areas on an annual basis. The Code is endorsed by our Board and Executive Leadership Team and is reviewed and updated regularly to support the growth of our business. enhance our clients’ operations. To achieve this, we have developed a Supplier Code of Conduct, which clearly sets out our minimum expectations of suppliers, their subsidiaries, and subcontractors (suppliers). The Supplier Code of Conduct aligns with our Corporate Governance Polices, company values and internal expected behaviours. Central to these polices, values and behaviours is: • Safety for employees, contractors, clients, suppliers, and • • • the public Compliant and ethical business practices Diversity and human rights Protecting the environment and communities in which we operate • Respect, transparency, and support to speak-up. We may choose not to work with, or cease to work with, suppliers who do not meet these minimum expectations. Our IMDEX Code of Conduct and Supplier Code of Conduct can be found on our website at: https://www.imdexlimited.com/about-us/corporate-governance 53 IMDEX Annual Report 2021ETHICS AND CONFLICTS OF INTEREST CERTIFICATION SPEAK-UP POLICY Our Speak-Up Policy supports our Code of Conduct and is To safeguard the ongoing ethical and compliant operation of designed to ensure that: our global business, all employees are required to complete an Ethics and Conflicts of Interest Certification annually. This • We maintain the highest standards of corporate governance and ethical conduct across all our involves employees: operations • Certifying that they have read and understand IMDEX’s • Our Company is a safe, respectful, and inclusive place Speak Up Policy, Code of Conduct and the Anti-Bribery & to work Anti-Corruption Policy • Confirming that, to the best of their knowledge, they All employees are encouraged to ask questions, query, and report actual or suspected violations of our Code of Conduct have been compliant with the Code, the two Policies and or other IMDEX Polices without fear of retribution. all applicable laws and regulations • Completing a conflict of interest declaration and updating this declaration if their circumstances change This process aims to ensure that all relevant risks are being adequately reported and addressed and provides another confidential means for employees to communicate potential breaches or concerns. Several methods are provided for making confidential reports. In the first instance employees are encouraged to report any matters of concern directly to their manager or supervisor. Alternatively, they can make a report via phone, email, mail or anonymously through our reporting platform, IntegraCall®. IntegraCall® is multilingual and can be accessed anytime from any mobile or device using either the mobile app or the web portal. We are committed to ensuring that: • All matters that are reported will be treated respectfully and confidentially • Any investigations will be conducted in a timely manner and will be fair and independent from any persons to whom the disclosure relates • No one will suffer any detriment as a result of making a report. Our Speak-Up Policy can be found on our website at: https://www.imdexlimited.com/about-us/corporate-governance 54 IMDEX Annual Report 2021STAKEHOLDERS We are committed to providing all stakeholders with transparent and genuine engagement to enhance and support their experience with our products and business globally. Further information on how we engage and collaborate with stakeholders is provided in our FY21 Sustainability Report. KEY STAKEHOLDERS GOVERNMENT & REGULATORS SUPPLIERS INDUSTRY PARTNERS DISTRUBUTORS CLIENTS EMPLOYEES COMMUNITY SHAREHOLDERS BOARD OF DIRECTORS BOARD COMMITTEES ESG COMMITTEE * AUDIT, RISK & COMPLIANCE COMMITTEE RENUMERATION & NOMINATION COMMITTEE DIGITAL ADVISORY GROUP * POLICIES & PROCEDURES CORPORATE CULTURE & VALUES RISK MANAGEMENT & INTERNAL CONTROL SYSTEMS CHIEF EXECUTIVE OFFICER IMDEX MANAGEMENT & EMPLOYEES * These are not formally appointed Board Committees, but instead have Board and Management representation 55 IMDEX Annual Report 2021IMDEX LIMITED and its controlled entities DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 DIRECTORS REPORT 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 2021. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows: Directors The names and particulars of the Directors of the Company during or since the end of the financial year are: Name Role Particulars Mr. A. Wooles Non-Executive Chairman Ms. S. Layman Independent, Non-Executive Director • Corporate Advisor and Executive • Director and Chairman since 1 July 2016 • Chair of the Remuneration and Nomination Committee • Member of the Audit, Risk and Compliance Committee • Has held executive and advisory roles in diverse industries including mining, oil and gas, power generation, manufacturing, telecommunications, food and beverages and retail Non-Executive Director of High Peak Royalties Limited (2012 – current) • Engineer and Certified Practicing Accountant Director since 6 February 2017 Chair of the Audit, Risk and Compliance Committee • • • • Member of the Australian Institute of Company Directors and CPA Australia • Extensive experience within the mining sector and financial markets with significant international and cross commodity experience. Previously Division Director – Metals & Energy Capital Division at Macquarie Bank Limited Non-Executive Director of Pilbara Minerals Ltd (2018 – current), Beach Energy Limited (2019 – current), Newcrest Mining Ltd (2020 – current), and formerly a Non-Executive Director of Perseus Mining Ltd (2017 – 2020) and Gascoyne Resources Limited (2017 – June 2019) • Mr. K. Dundo Independent, Non-Executive Director Lawyer Director since 14 January 2004 • • • Member of the Remuneration and Nomination Committee and the Audit, Risk and • Compliance Committee Non-Executive Director of Red 5 Limited (2010 – Current), Avenira Limited (2019 – Current) and formerly a Non-Executive of Cash Converters International Limited (2015 – 2020) Mr. I. Gustavino Independent, Non-Executive Director Ms. T. Arlaud Independent, Non-Executive Director 56 • • • • • Corporate Advisor Director since 3 July 2015 • • • Member of the Remuneration and Nomination Committee • Prior to his role as a corporate advisor, Mr. Gustavino was a co-founding shareholder and Director of Surpac Software, now Dassault Systèmes GEOVIA Inc. Non-Executive Chairman of CVCheck Limited (2018 – current) Corporate Advisor Director since 10 February 2021 Since 2019, Ms Arlaud has been Chief Executive Officer – Mining Specialist at IMB, Inc, Frisco in Colorado, USA. Prior to this role she was Regional Director Mining for the US and Western Canada/Mass Mining Lead (Globally) Non-Executive Director of Global Atomic Corporation (TXX: GLO) (June 2020 – current) and Non-Executive Director of Seabridge Gold (TSX: SEA, NYSE:SA) (June 2021 – current) IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 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). Board of Directors Audit, Risk and Compliance Committee Remuneration and Nomination Committee (Number) (Number) (Number) Held Attended Held Attended Held Attended A Wooles K A Dundo I Gustavino S Layman T Arlaud (i) 7 7 7 7 2 7 7 7 7 2 5 5 N/A 5 N/A 5 5 N/A 5 N/A 5 5 5 N/A N/A 5 5 5 N/A N/A (i) Ms T. Arlaud became a Non-Executive Director on 10 February 2021. Company Secretary Mr. P. Evans Mr. Evans, a Chartered Accountant, joined IMDEX 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 Chartered Accountants Australia and New Zealand. Mr. M. Tomasz Mr Tomasz joined IMDEX in May 2021. He is admitted as a barrister and solicitor in the Supreme Court of New South Wales and admitted as a Solicitor in England & Wales. He has experience in both corporate and commercial law gained from a variety of multinational resource and industrial conglomerate companies. Operations Review Principal Activities IMDEX is a leading global Mining-Tech company that enables resource companies and drilling contractors to safely find, mine and define orebodies with precision and at speed. The Company’s product offering includes an integrated range of drilling optimisation products, cloud-connected rock knowledge sensors, and data and analytical software. This product offering is commodity agnostic and can be applied across the mining value chain. During FY21 IMDEX supported clients in more than 100 countries. The Company’s long-standing client base typically includes tier 1 drilling contractors and resource companies operating within the global minerals industry. IMDEX has 22 facilities in all key mining regions of the world. Its head office is in Balcatta, Western Australia. Review of Operations A review of the operations of the consolidated entity during the financial year and of the results of those operations is contained in the Annual Report. 57 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Dividends The following dividends have been paid by the Company or declared by the Directors since the commencement of the financial year ended 30 June 2021: (i) (ii) (iii) (iv) fully-franked final dividend of 0.7 cents (2019: 1.4 cents) per share paid on 13 October 2020; fully-franked interim dividend of 1.0 cents (2020: 1.0 cents) per share paid on 23 March 2021; fully-franked final dividend of 1.4 cents (2020: 0.7 cents) per share to be paid on 12 October 2021; and fully-franked special dividend of 0.4 cents (2020: 2.0 cents) per share to be paid on 12 October 2021. Changes in State of Affairs There were no significant changes in the state of affairs of the Group. Subsequent Events There have been no matters or circumstances that have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations of the Group, the result of these operations, or the state of affairs of the Group in future financial years. 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 system. 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 5.8 to the financial statements. 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 fees paid for services provided as disclosed in note 5.8 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit, Risk and Compliance Committee, for the following reasons: • All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and • None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing economic risks and rewards. Auditor’s Independence Declaration The auditor’s independence declaration is included in the Annual Report immediately prior to the Audit Report. 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. 58 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Rounding Off of Amounts The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) where noted ($’000) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies. ASX Governance Principles and ASX Recommendations 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 Recommendations and to give reasons for not following them. Unless otherwise indicated, the ASX Recommendations including corporate governance practices and suggested disclosures have been adopted by IMDEX for the full year ended 30 June 2021. In addition, 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. The IMDEX Group’s Corporate Governance Statement (Statement) for the financial year ending 30 June 2021 is dated as at 30 June 2021 and was approved by the Board of IMDEX (Board) on 15 August 2021. The extent to which IMDEX has complied with the ASX Recommendations during the year ended 30 June 2021, and the main corporate governance practices in place can be viewed in the Corporate Governance section on the Company website. 59 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD REMUNERATION aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT Remuneration Report (Audited) This Remuneration Report for the year ended 30 June 2021 outlines the remuneration arrangements of the Company in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act. The report is presented under the following sections: 1. Introduction 2. Highlights for FY21 3. Remuneration Governance 4. Executive Remuneration Arrangements A. Remuneration principles and strategy B. Approach to setting remuneration and details of incentive plans C. Executive contracts D. Looking forward to FY22 5. Executive Remuneration Outcomes for FY21 6. Non-Executive Director Remuneration 7. Additional Disclosures Relating to Options and Shares 8. Other Transactions 1. Introduction The Remuneration Report details the remuneration arrangements for Key Management Personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company. The table below details the KMP of the Company during FY21. Each was a KMP for the entire period unless otherwise stated. For the purposes of this report, the term “Executive” includes the Senior Executives of the Company. Non-Executive Directors Mr A. Wooles Mr K. Dundo Mr I. Gustavino Ms S. Layman Ms T. Arlaud Senior Executives Mr P. House1 Mr P. Evans Mr S. Southwell2 Mr M. Regan3 Ms M. Carey4 Mr T. Price5 Mr D. Loughlin6 Mr B. Ridgeway7 Non-Executive Chair Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director (appointed 10 February 2021) Chief Executive Officer Chief Financial Officer and Company Secretary Chief Operating Officer Chief of Corporate Shared Services Chief of Product Management and Marketing Chief of Engineering and R&D Global Business Development Director (ceased 8 February 2021) Former Managing Director (ceased 1 July 2020) Mr House commenced as Chief Executive Officer on 1 July 2020. Mr Southwell commenced as Chief Operating Office and a member of KMP on 1 July 2020. Prior to this date, Mr Southwell occupied a non-KMP role. Mr Regan was appointed to the role of Chief of Corporate Shared Services effective 1 July 2020. Ms Carey was appointed to the role of Chief of Product Management and Marketing effective 1 July 2020. Mr Price’s position title was amended effective 1 July 2020. Mr Loughlin left employment with the Company and ceased as a member of KMP on 8 February 2021. Mr Ridgeway retired and ceased as a member of KMP effective 1 July 2020. 1. 2. 3 4. 5. 6. 7. 60 Page 1 of 68 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 2. Highlights for FY21 As a result of changes to the IMDEX operating model, the roles and responsibilities of Mr Regan and Ms Carey were significantly expanded in FY21. Their base salaries were reviewed and adjusted in consideration of appropriate external benchmarks relevant to the new roles. Executive Fixed Remuneration increases Market adjustments for two executives There were no other increases for Executives during the year. The CEO’s base salary remained unchanged at $700,000 per annum during FY21. Short-term incentive (“STI”) outcomes 100% of maximum Long-term incentive (“LTI”) outcomes 2017 LTI 85% vesting Where applicable, the 20% reduction in pay for the period 1 April 2020 to 30 June 2020 in response to the COVID-19 pandemic, was reinstated effective 1 July 2020. See Statutory Remuneration in Section 5 for more details. The Company had strong financial and safety performance in FY21, exceeding budget EBITDA and Group Lost Time Injury Frequency Rate (LTIFR), resulting in STI payments of 100% of maximum for Executives. The CEO was awarded 100% of maximum. To increase his shareholding, the CEO elected to receive the entire award (100%) in performance rights subject to a three-year deferral period requiring continued employment. The Board also resolved to match the deferred component of the award at the future vesting date, subject to Mr House’s continued service over the period. See Section 5 for more information. The 2017 LTI (FY18) had a three-year performance period ending on 30 June 2020. As result of performance testing untaken in September 2020, the Board approved vesting of this award at 85%. For the three-year performance period ending 30 June 2021, the 2018 LTI (FY19) is anticipated to vest at 72%. Note - the outcome for this award will not be known until all peer company reports for the comparator group are released (typically from August to October 2021). Indicative testing of results for this award have been provided in Section 5 of this report with final outcomes to be disclosed in the FY22 Remuneration Report. See Section 5 for more information. There were no increases to fees for NEDs in FY21. Non-Executive Directors (NEDs) remuneration increases Review of the Executive Remuneration Framework NIL The 20% reduction in Fees for the period 1 April 2020 to 30 June 2020 in response to the COVID-19 pandemic, was reinstated effective 1 July 2020. Refer to Section 6 for disclosures regarding our NEDs. The review of our Executive Remuneration Framework was concluded during FY21. Key changes to apply from 1 July 2021 include: • • • Remuneration mix revised to emphasise greater ‘at risk’ STI deferral introduced LTI measures revised to relative TSR (50%), absolute EPS (20%) and strategic milestones (30%) The Board welcomes shareholder feedback in relation to the revised framework for FY22, and ongoing to ensure IMDEX’s remuneration remains appropriate. Please refer to Section 4D for key changes relating to FY22. 61 Page 2 of 68 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 3. Remuneration Governance Remuneration and Nomination Committee The Remuneration and Nomination Committee (the Committee) comprises three independent NEDs. The Committee has delegated decision making authority for some matters related to the remuneration arrangements for NEDs and Executives and is required to make recommendations to the Board on other matters. Specifically, the Board approves the remuneration arrangements of the Chief Executive Officer (CEO) and other Executives, and all awards made under the short-term incentive (STI) and long-term incentive (LTI) plans, following recommendations from the Committee. The Board also sets the aggregate remuneration of NEDs, which is then subject to shareholder approval, and NED fee levels. The Committee approves the level of the STI pool, having regard to the recommendations made by the CEO. The Committee meets regularly through the year. The CEO attends certain Committee meetings by invitation, where management input is required and is not present during any discussions related to his own remuneration arrangements. Further information on the Committee’s role, responsibilities and membership can be seen at www.imdexlimited.com Use of remuneration consultants To ensure the Committee is fully informed when making remuneration decisions, it seeks external remuneration advice. Remuneration consultants are engaged by, and report directly to the Committee. In selecting remuneration consultants, the Committee considers potential conflicts of interest and requires independence from the Company’s KMP and other Executives as part of their terms of engagement. During the financial year, the Committee engaged The Reward Practice Pty Ltd as remuneration consultants to provide remuneration services in respect to external benchmarking and general insights for Executive remuneration structures. During the period no remuneration recommendations, as defined by the Corporations Act, were provided by The Reward Practice Pty Ltd. Remuneration report approval at 2020 AGM The FY20 Remuneration Report received strong shareholder support at the 2020 AGM with a vote of 99.81% in favour. 62 Page 3 of 68 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 44.. Executive Remuneration Arrangements 4A: Remuneration principles and strategy IMDEX’s Executive remuneration strategy is designed to attract, motivate and retain high performing individuals and align the interests of Executives and shareholders. The following diagram illustrates how the Company’s remuneration strategy aligns with the strategic direction and links remuneration outcomes to performance. Business Objective Providing leading mining solutions to enhance the productivity and efficiency of our client’s operation across the mining value chain. Align the interests of Executives with our shareholders Attract, motivate and retain high performing individuals How our Remuneration Strategy links to our Business Objective • • The Remuneration Framework incorporates “at-risk” components, including both short and longer term elements, delivered in cash and equity; and Performance is assessed against financial and non- financial measures, which are linked to IMDEX’s increased growth and profitability and hence, shareholder value. • • The remuneration offering is competitive for companies of a similar size and complexity; and Longer-term elements encourage retention. Remuneration Component Vehicle Purpose Base Salary Comprises cash base salary only. Superannuation/Pension STI LTI Compulsory superannuation/ pension contributions plus other cash and non-cash benefits. Default payment is cash unless Board discretion is applied (e.g., grant of performance rights). Awards are made in the form of performance rights. To provide a competitive base salary set with reference to the role, location and experience. Statutory requirement and benefits commensurate with role, location and experience. Focusses the efforts and rewards Executives for their contribution to achieving outcomes that are a priority for the Company in the financial year, in addition to individual performance. Rewards Executives for their contribution to the creation of shareholder value over the longer term. Link to Performance Company and individuial performance considered during the annual remuneration review. Benefits are considered during the annual remuneration review. EBITDA is the key financial metric. Also linked to other internal measures including safety, customer service, implementation of key growth initiatives, risk managment and people and capability. Vesting of awards is dependent on Total Shareholder Return (TSR) and Earnings Per Share (EPS) performance relative to a peer group of companies. Page 4 of 68 63 IMDEX Annual Report 2021 64 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Page 5 of 68 44.. Executive Remuneration Arrangements (Continue) 4B: Approach to setting remuneration and details of incentive plans In FY21, the Executive remuneration framework consisted of base salary and short and long-term incentives as outlined below. Overall remuneration level and mix How is overall remuneration and mix determined? Remuneration levels are considered annually through a review that considers comparative market data, the performance of the Company and individual, and the broader economic environment. The Company aims to reward Executives with a level and mix (proportion of base salary and other benefits, short term incentives and long-term incentives) of remuneration appropriate to their position, responsibilities, and performance within the Company and that which is aligned with targeted market comparators. Comparative companies are based on the following: • Industry peers with similar market capitalisation; • Mining, Equipment, Technology and Services companies with comparable market capitalisation; and • Other industry companies with which IMDEX competes for talent. In FY21 remuneration benchmarking was undertaken with reference to industry peers with a comparative market capitalisation. The Company’s policy is to position base salary around the 62.5 percentile of industry peers. The chart below summarises the CEO other Executives’ remuneration mix based on maximum opportunity for Fixed Remuneration (base salary plus superannuation), STI and LTI. The mix is considered appropriate for IMDEX based on market relativity and alignment to the Company’s short term and long-term strategic imperatives. CEO Executives (Avg.) Base salary and other benefits How is base salary and other benefits reviewed and approved? Base salary and other benefits are reviewed annually from benchmarked remuneration data, and any changes for Executives are subject to approval from the Board considering recommendations from the Remuneration and Nomination Committee. IMDEX Annual Report 2021IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Short Term Incentives What is the STI plan? The Company operates an annual STI program that is available to Executives subject to the attainment of clearly defined Company and individual financial and non-financial measures. What are the performance criteria and how do they align with business performance? Actual STI payments awarded to each Executive depend on the extent to which performance criteria set at the beginning of the financial year are met. The performance criteria consist of several Key Performance Indicators (KPIs) covering financial and non-financial, corporate, and business unit measures of performance which are focussed on key performance drivers for the business. Within each KPI, stretch objectives are set. Executives will only be eligible for a payment to the extent that the overarching EBITDA Gate is met or exceeded. EBITDA is considered a key measure against which Management and the Board assess the short-term financial performance of the Company. Targets are set based on budget, adequacy of challenge and business objectives. Targets reflect business expectations at that time and may vary from prior year performance depending on economic and market conditions. The targets and outcomes may be adjusted (up or down) to exclude the impacts of uncontrollable items such as fair value gains on deferred consideration and gains on sale of investment. The performance criteria and weightings are summarised as follows: Performance Criteria Weighting Detail of Measures Corporate Safety Individual Performance 50% 20% 30% Based on Group EBITDA outcomes versus target Based on Group LTIFR versus target Based on key measures identified annually for the executive and assessed against expectations for the role. A combination of scores assessed for executives based on individual goals relating to: • Customer Focus and Technical Leadership • Operational Excellence & Quality • Risk, Compliance & Safety • People & Capability • Strategic Initiatives As part of the assessment, the participant will be considered against the IMDEX values as part of determining final outcomes. What is the value of the STI award opportunity? How are STI payouts determined? What happens to STI awards on cessation of employment? The CEO has a maximum STI opportunity of 30% of base salary. Other Executives have a maximum STI opportunity of up to 25% of base salary if the EBITDA Gate is exceeded and all the stretch targets are met. On an annual basis, after consideration of performance against KPIs (including satisfying the EBITDA Gate), the Board in line with their responsibilities, determine the amount (if any) of the STI to be paid to each Executive, seeking recommendations from the CEO as appropriate. The use of the EBITDA Gate ensures that the STI payouts are affordable to the business and are capped at the sum of the individual’s target opportunity. If an Executive ceases employment before the end of the financial year, generally no STI is awarded for that year subject to overarching Board discretion. Page 6 of 68 65 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Long Term Incentive What is the LTI plan? Under the LTI plan, annual grants of performance rights (Rights) are made to Executives to align remuneration with creation of shareholder value over the long-term. How much can Executives earn? The number of Rights granted is calculated on a Face Value basis. The CEO has a maximum LTI opportunity of 50% of base salary. Other Executives also have a maximum LTI opportunity of between 35% to 50% of base salary. How is performance measured? Executives are not eligible to receive dividends, or dividend equivalent payments on unvested Rights. Awards are subject to two measures, weighted equally: relative TSR and relative EPS. Relative TSR is used to recognise the creation of shareholder value relative to market peers. Relative EPS (rather than absolute EPS) has been selected by the Board to incentivise long term behaviours and outcomes, relative to market peers. This is particularly important where resources sector returns simply reflect a ‘rising tide’ across the sector. Calculation of Relative TSR and relative EPS IMDEX’s TSR and EPS is measured relative to a comparator group of ASX-listed companies comprising the ASX300 Resources Index. These companies were chosen as they are of similar size and reflect the Company’s competitors for capital. The TSR and EPS for IMDEX and comparator companies is measured over three financial years (e.g., 1 July 2020 to 30 June 2023 for the 2021 LTI grant). Relative TSR measures the percentage change in a company’s share price, plus the value of dividends received during the period, assuming that all those dividends are reinvested into new shares. No vesting will occur when the TSR for the performance period is negative. Relative EPS is calculated as a company’s profit divided by the outstanding number of its ordinary shares. The resulting number serves as an indicator of a company’s profitability. EPS performance for each company in the comparator group (including IMDEX) uses reported basic EPS for both the base year and third year and calculates the percentage growth over the three years. Where a comparator company and/or IMDEX has a negative base year EPS and a positive final year EPS, the absolute growth is calculated, adjusted for the correct sign of growth. This is considered an equitable approach for determining the company performance over the performance period. Note where IMDEX and/or a comparator company results in a final year negative EPS the company is excluded from the analysis. Specifically, if IMDEX EPS results in a negative EPS final year, the LTI will not vest. The proportion of Rights that may vest based on relative TSR and relative EPS performance is determined based on a combined ranking approach. The TSR for IMDEX and each company in the comparator group is measured and the companies are ranked by their TSR performance. The EPS growth for IMDEX and each company in the comparator group is calculated and the companies are ranked by their EPS growth performance. The ranking results for each company are then combined with the percentage of LTI awards that vest to participants based on IMDEX’s percentile ranking against the combined results under the following vesting schedule: Combined percentile ranking of IMDEX Below the 50th percentile At the 50th percentile Between the 50th percentile and 90th percentile At or above the 90th percentile Portion of LTI that vests Nil vesting 33.33% Pro-rata 100% Note: Notwithstanding the percentile ranking, no vesting will occur where IMDEX’s TSR for the Performance Period is negative or the EPS in the final year is negative. Page 7 of 68 How is performance measured? (continued) 66 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Long Term Incentive The performance measures are tested at the end of the three-year performance period to determine the number of Rights that vest. There is no opportunity for re-testing. Rights will lapse if the performance measures are not met at the end of the performance period. Where a participant ceases employment prior to their award vesting due to resignation or termination for cause, all Rights will be forfeited. Where a participant ceases employment due to a qualifying reason (death, total and permanent disability, retirement, or redundancy), then vesting will be determined based on the amount of performance period remaining and subject to Board discretion. In these circumstances, vesting will be determined at the discretion of the Board. When is performance measured? What happens on cessation of employment? What happens if there is a change in control? 4C: Executive contracts Remuneration arrangements for KMP are formalised in employment agreements. The following outlines the details of contracts with KMP. CEO – Mr Paul House (effective 1 July 2020) Mr. House is employed under an ongoing contract, which can be terminated with notice by either side. Under the terms of the present contract: • Mr House receives a base salary of $700,000 per annum. • A maximum STI opportunity of 30% of base salary. • Eligibility to participate in the IMDEX LTI plan on terms determined by the Board. Maximum opportunity at Face Value is 50% of base salary. Termination provisions Termination provisions specify that the CEO or the Company may terminate the agreement without cause by giving 6 months written notice. In addition to payment for accrued but untaken annual and long service leave, an additional payment of 4 months’ base salary is payable on termination by the Company where termination is affected without cause on 6 months’ notice, inclusive of any redundancy payment payable to the CEO. The Company may otherwise terminate the contract on 3 months’ notice (due to illness or incapacity), 1 months’ notice (for misconduct) or no notice (if engaged in criminal activity which brings the Company into disrepute). IMDEX can make a payment in lieu of notice for all or some of the applicable notice period. All other Executives are employed on individual open-ended employment contracts that set out the terms of their employment. The termination provisions for other Executives are as follows: Reason Notice period Payment in lieu of notice Treatment of STI on termination Treatment of LTI on termination Resignation Up to 6 months Up to 6 months Unvested awards forfeited. Unvested awards forfeited. Termination for cause None None Unvested awards forfeited. Unvested awards forfeited. Termination in cases of death, disablement, redundancy, without cause Up to 6 months Up to 12 months Unvested awards forfeited subject to Board discretion Vesting will be determined based on the amount of performance period remaining and the Executive’s performance, subject to Board discretion. Page 8 of 68 67 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 4D: Looking forward to FY22 As foreshadowed in the 2020 Remuneration Report, a review of the Executive Remuneration Framework was deferred due to the pandemic and has now been completed. The review comprised a comprehensive assessment of Fixed Remuneration and the current STI and LTI Framework which included seeking external advice and market benchmarking. The Board considered all aspects of remuneration to ensure alignment with the business requirements, relevant market practice and key stakeholder expectations. As a result of the review, the following key design changes have been determined: Key change Remuneration mix revised to increase the percentage of the package that is ‘at risk’. Rationale Market alignment. STI modified to introduce mandatory deferral of half of the award for Executives into rights to IMDEX Limited shares. Encourage greater equity ownership aligned with shareholder interests and performance assurance. Revised performance measures for STI and LTI. Align with short and long-term business imperatives. The changes outlined below, in respect of Executives, have been approved by the Board for implementation from 1 July 2021. Fixed Remuneration There will be targeted increases to base salaries for two Executives. Consideration for these increases is driven by the responsibilities of the roles, performance of the individuals and relativity with our external market comparators. These target increases will be 13% on average. The CEO’s base salary will increase from $700,000 to $750,000 per annum. STI The key change is the mandatory deferral of half the award into Rights to IMDEX Limited shares. The Rights will be deferred for 12 months and are subject to continued service. An increase to the maximum opportunity is also outlined below. Component Vehicle Current Plan Default payment is cash unless Board discretion is applied (e.g., grant of performance rights). Revised Plan 50% cash 50% Rights, deferred for 12 months Maximum Opportunity (% of Base Salary) Performance Measures CEO – 30% Other Executives: 25% EBITDA Gate CEO – 50% Other Executives 35% EBITDA Gate remains EBITDA (50%) Safety (20%) Individual (30%) Corporate (50%) – including financial / non-financial Regional (20%) - including financial / non-financial Individual (30%) - including financial / non-financial LTI The key changes are the introduction of absolute EPS and strategic milestones and an increase to the maximum opportunity for all Executives in line with our external market comparators. The vesting schedule has also been amended to more align with relevant market practice. Component Vehicle Performance Period Current Plan Performance Rights Three years Maximum Opportunity Performance Measures CEO – 50% Other Executives: 35%-50% Relative TSR (50%) Relative EPS (50%) Revised Plan Performance Rights Three years CEO – 100% Other Executives: 70% Relative TSR (50%) Absolute EPS (20%) Strategic Measures (30%) Comparator Group Constituents of the S&P ASX300 Resources Index Constituents of the S&P ASX300 Resources Index 68 Page 9 of 68 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 5. Executive Remuneration Outcomes for FY21 Company performance A summary of IMDEX’s business performance as measured by a range of financial and other indicators, including disclosure required by the Corporations Act 2001, is outlined in the table below. Measure Revenue ($’000) Adjusted EBITDA ($’000) 1 Net profit before tax ($’000) Net profit after tax ($’000) Share price at start of year (cents) Share price at end of year (cents) Interim dividend (cents) – fully franked Final dividend (cents) – fully franked Special dividend (cents) – fully franked Basic earnings / (loss) per share (cents) Diluted earnings / (loss) per share (cents) FY21 264,375 75,501 44,531 31,667 111.0 204.0 1.0 1.4 0.4 8.01 7.80 FY20 237,691 54,447 29,142 21,758 131.0 111.0 1.0 0.7 2.0 5.64 5.46 FY19 243,655 52,336 37,452 27,608 123.5 131.0 0.8 1.4 - 7.37 7.01 FY18 218,475 42,384 28,591 21,115 75.5 123.5 - - - 5.73 5.37 FY17 186,702 31,496 5,906 3,663 21.0 75.5 - - - 1.14 1.06 1. Fair value gain on deferred consideration of $2.9m (FY21) and gain on sale of investment $3.6m (FY20) were deemed by the Board as uncontrollable and were therefore excluded in the EBITDA calculation. Company performance and its link to short-term incentives An STI payment will only be made to the extent that the overarching EBITDA Gate is met or exceeded. The following table shows IMDEX’s actual EBITDA performance to budget target over the three financial years from 1 July 2018 to 30 June 2021. Financial year EBITDA vs Gate FY21 FY20 FY19 Performance in FY21 Exceeded Not met Not met The table below sets out the STI measures for FY21 and performance outcomes against those measures. The EBITDA and Safety (LTIFR) performance significantly exceeded FY20 outcomes, which is testament to the efforts of the employees and management of IMDEX over the previous 12 months. This results in STI outcomes at or near maximum for Executives and is the first time in the last three years that the STI has been awarded. Objective Weighting Performance Achieved/Comments % Achieved Corporate 50% FY21 EBITDA of $75.5m is a material improvement on FY20 results and improvement on the FY21 budgeted EBITDA. This has resulted in the EBITDA Gate being achieved, and this portion of the STI being awarded in full. Safety 20% Actual LTIFR of 1.85 was significantly better than the target of <3.97, resulting in this portion of the STI being awarded in full. Individual 30% Individual objectives for the year related to achieving key results in Customer Focus & Technical Leadership, Operational Excellence & Quality, Risk, Compliance & Safety, People & Capability and strategic initiatives. 50% 20% 30% Page 10 of 68 69 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Objective Weighting Performance Achieved/Comments Based on individual performance throughout the year, Executives achieved 100% of outcomes. % Achieved The Board assessed the CEO’s individual performance as 100%. The following table outlines the STI outcomes for Executives, including the proportion of maximum STI that was earned and forfeited in relation to FY21. Corporate Outcome Safety Outcome Individual Outcomes Overall Outcomes STI Awarded Percentage of maximum STI Executive Mr P. House2 Mr P. Evans Mr S. Southwell Mr M. Regan Ms M. Carey Mr T. Price Mr D. Loughlin3 Mr B. Ridgeway4 (%) 100 100 100 100 100 100 - - (%) 100 100 100 100 100 100 - - (%) 100 100 100 100 100 100 - - (% of base salary) 30.0 22.5 25.0 22.5 25.0 25.0 - - ($) Awarded Forfeited 210,000 117,393 105,000 107,500 92,500 142,045 N/A N/A 100% 100% 100% 100% 100% 100% - - - - - - - - - - 1. 2. 3. 4. FY21 STI will be paid in September 2021, after the end of the performance period. Mr House has elected, and the Board agreed to defer his entire award into Rights to IMDEX Limited shares – see note below. Mr Loughlin left employment with the Company and ceased as a member of KMP on 8 February 2021. As such, he was not eligible to participate in the FY21 STI. Mr Ridgeway retired and ceased as a member of KMP effective 1 July 2020. As such, he was not eligible to participate in the FY21 STI. Voluntary Deferral of STI for the CEO To increase his shareholding in the Company, the CEO, Mr House elected, and the Board agreed to defer his entire FY21 STI award ($210,000) into Rights to IMDEX Limited shares. The Rights will be deferred for three years, vesting in 2024 and are subject to continued service. The Board also resolved to match the deferred component of the award at the future vesting date, subject to Mr House’s continued service over the period. 70 Page 11 of 68 IMDEX Annual Report 2021 71 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Page 12 of 68 Company performance and its link to long-term incentives LTI vesting is driven by the Company’s TSR and EPS performance relative to the companies within the ASX 300 Resources Index peer group. The chart below shows the performance of the Company as measured by the Company's three-year relative TSR and EPS compared to the peer group for each of the LTI grants vesting over the past five years. The following table provides a summary of the Company’s performance and vesting outcomes for each of the LTI grants. 2018 LTI1 2017 LTI2 2016 LTI 2015 LTI 2014 LTI3 Grant Date Jul-18 Jul-17 Jul-16 Jul-15 Jul-14 Expiry Date Jun-21 Jul-20 Jul-19 Jul-18 Jul-17 IMDEX 3-year TSR 62% 66% 382% 305% -5.2% IMDEX 3-year EPS Growth 33% 395% 132% 155% 144% Combined Percentile Rank 73rd 81st 76th 82nd 73rd Vesting Percentage 72% 85% 76% 87% 0% 1. 2018 (FY19) LTI is indicative only. The outcome will be known when company reports for the comparator group are released (typically from August to October 2021). 2. 2017 (FY18) LTI outcome has been updated to reflect final performance testing undertaken in September 2020. 3 2014 (FY15) LTI resulted in no vesting due to a negative TSR for IMDEX over the three-year performance period. IMDEX Annual Report 2021d e t a l e r e c n a m r o f r e P % l a t o T 5 s t i f e n e B n o i t a n m r e T i 4 s t n e m y a p d e s a b - e r a h S l t n e m y o p m e - t s o P s t i f e n e B % 5 3 % 3 2 % 1 3 % 2 2 % 8 2 - % 5 3 % 5 1 % 4 3 % 4 2 % 2 3 % 1 2 % 1 1 % 3 2 - % 0 3 - 2 5 3 , 2 3 6 4 6 2 , 0 4 7 5 1 1 , 0 4 6 3 2 7 , 6 2 6 0 3 2 , 0 1 7 0 5 7 , 9 8 4 7 5 4 , 3 2 6 0 4 9 , 7 4 4 9 3 0 , 3 3 9 2 5 4 , 2 1 8 8 4 1 , 7 6 4 3 2 9 , 1 1 6 - 8 6 0 , 8 4 1 , 1 2 6 0 , 3 6 2 , 1 9 2 9 , 8 4 2 , 5 4 9 5 , 7 9 8 , 4 - - - - - - - - - - - - - - 4 2 0 , 1 1 1 - 4 2 0 , 1 1 1 - 3 1 8 , 5 9 1 9 8 6 , 9 4 1 5 3 3 , 9 1 1 8 8 8 , 7 3 1 7 6 4 , 1 7 4 7 5 , 3 7 2 7 8 , 7 4 1 8 7 5 , 2 2 1 8 7 5 , 9 0 1 3 0 6 , 5 5 1 7 1 9 , 7 6 1 1 5 6 , 1 5 0 1 4 , 0 4 1 - 8 0 3 , 4 7 3 9 1 3 , 4 6 8 4 6 3 , 3 5 1 , 1 - - - - - - - - - - - - - - - - - r e h t O r e p u S 0 0 0 , 5 2 0 0 0 , 5 2 0 0 0 , 5 2 0 0 0 , 5 2 0 0 0 , 5 2 - 0 0 0 , 5 2 0 0 0 , 5 2 0 0 0 , 5 2 0 0 0 , 5 2 6 5 5 , 4 2 4 5 8 , 1 2 1 6 2 , 7 1 0 0 0 , 5 2 - 3 0 0 , 1 2 7 1 8 , 6 6 1 7 5 8 , 7 6 1 e v a e L 5 5 2 , 7 1 r e h t O 3 s t i f e n e B m r e t - g n o L r e h t O 0 0 0 , 0 1 2 - - 3 6 9 , 8 4 5 6 , 7 6 5 2 , 5 - 7 2 1 , 8 9 8 3 , 5 9 7 3 , 3 1 - - ) 5 5 4 , 3 ( ) 1 9 5 , 4 3 ( - ) 1 9 7 , 3 2 ( 5 2 5 , 9 4 ) 9 3 3 , 5 4 ( - - - - - - - - - - - - 7 8 5 , 7 2 8 7 3 , 8 2 8 7 3 , 8 2 7 8 5 , 7 3 2 s t i f e n e b m r e t - t r o h S y r a t e n o m - n o N 2 s u n o B 1 y r a l a S h s a C - - - - - - - - - - - - - - - - - - - - - 3 9 3 , 7 1 1 0 0 0 , 5 0 1 - 0 0 5 , 2 9 0 0 5 , 7 0 1 5 4 0 , 2 4 1 - - - - - - 8 3 4 , 4 6 5 - 0 0 0 , 0 0 7 3 6 6 , 7 5 4 3 7 5 , 9 6 4 3 7 5 , 9 6 4 0 0 0 , 0 2 4 1 3 7 , 1 2 4 6 7 1 , 1 9 3 0 0 0 , 0 7 3 3 7 9 , 7 0 3 8 4 2 , 3 8 5 3 0 3 , 4 9 5 7 6 6 , 0 9 2 4 0 1 , 1 8 4 - 2 4 5 , 1 9 8 9 1 2 , 5 5 2 , 3 4 3 3 , 3 9 5 , 3 r a e Y 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 1 2 Y F 0 2 Y F 6 e s u o H . 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Non-Executive Director Remuneration Remuneration policy The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually against fees paid to Non-Executive Directors of comparable ASX listed companies with similar market capitalisation of the Company, as well as similar sized industry comparators. The Board considers advice from external consultants when undertaking the annual review process. The Company’s constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by a general meeting. The latest determination was at the 2015 AGM when shareholders approved an aggregate fee pool of $700,000 per annum. Structure The remuneration of NEDs consists of Director Fees and Committee Fees. The payment of additional fees for serving on a committee recognises the additional time commitment required by NEDs who serve on sub-committees. The Board Chair attends all committee meetings but does not receive any additional fees in addition to the Board Chair fee. To ensure independence, NEDs do not participate in any incentive schemes. The table below summarises the NED fee policy for FY21: Director Fees Board Chair Non-Executive Directors Committee Fees Committee Chair Committee Member $245,000 $110,000 $25,000 - The remuneration of NEDs for FY21and FY20 is detailed below. Note figures for FY20 include a 20% reduction for the period 1 April 2020 to 30 June 2020 in response to the COVID-19 pandemic. Non-Executive Director Mr. A. Wooles1 Ms. S. Layman2 Mr. K. Dundo3 Mr. I. Gustavino4 Ms T. Arlaud5 Year FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 Short-term benefits Post-employment Director Fees Other Superannuation 245,000 233,127 135,000 128,638 98,536 97,353 96,162 99,727 42,778 - - - - - - - - - - - - - - - 9,544 9,474 9,544 9,474 - - Total 245,000 233,127 135,000 128,638 108,080 106,827 105,706 109,201 42,778 - Totals 636,564 577,793 1. Mr Wooles is a director of Trudo Consulting Pty Ltd. His director’s fees (which are subject to GST) were paid to Trudo Consulting Pty Ltd and are shown 617,476 558,845 19,088 18,948 FY21 FY20 - - net of GST. 2. Ms Layman is a director of RL Advisory Pty Ltd. Her director’s fees (which are subject to GST) were paid to RL Advisory Pty Ltd and are shown net of GST. 3 Mr Dundo is a director of KD Legal Pty Ltd. His director’s fees (which are subject to GST) were paid to KD Legal Pty Ltd and are shown net of GST. 4. Mr Gustavino is a director of Gustavino Capital Pty Ltd. His director’s fees (which are subject to GST) were paid to Gustavino Capital Pty Ltd and are shown net of GST. 5 Ms Arlaud was appointed as a Non-Executive Director on 10 February 2021. Fees for FY21 are reflective of her appointment date. Page 14 of 68 73 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 7. Additional Disclosures Relating to Options and Shares Performance Rights awarded, vested and lapsed during the year The following table sets out the Rights held by Executives, including the movements in Rights held during FY21. Executive Mr P. House Mr P. Evans Mr S. Southwell Mr M. Regan Ms M. Carey M. T. Price Mr D. Loughlin Balance at start of period 1 July 2020 Granted as remuneration Performance Rights exercised Performance Rights lapsed/ forfeited Balance1 at end of period 30 June 2021 544,030 483,336 105,255 310,877 398,507 592,078 491,836 319,635 150,091 134,247 196,346 168,950 202,527 - - (164,664) (188,590) - - (123,498) (220,752) (193,221) (30,090) (34,460) - - (22,568) (40,337) (114,621) 668,911 410,377 239,502 507,223 421,391 533,516 183,994 - - 1,389,608 Mr B. Ridgeway 1,389,608 1. 2. 3. Includes Performance Rights held directly, indirectly and beneficially by Executives. Mr Loughlin left employment with the Company and ceased as a member of KMP on 8 February 2021. Closing balance is at this date. Mr Ridgeway retired and ceased as a member of KMP effective 1 July 2020. Closing balance is at this date. Performance Rights in existence during the current year Award1 Grant Date Expiry Date Exercise Price Tranche 19 1-Jul-17 Jul-20 MD Tranche 19-Oct-17 Jul-20 Tranche 20 1-Jul-18 Jul-21 MD Tranche 4-Nov-18 Jul-21 Tranche 21 21-Oct-19 Jul-22 MD Tranche 21-Oct-19 Jul-22 Tranche 22 1-Jul-20 Jul-23 Nil Nil Nil Nil Nil Nil Nil Market Value at Grant $ Number of Performance Rights Opening balance Granted Satisfied by the allotment of shares Expired2 Closing balance 0.740 3,888,120 0.965 643,762 0.947 2,626,391 0.763 364,086 1.109 3,300,386 1.109 127,602 - - - - - - 1.254 - 3,640,787 (3,408,944) (479,176) (547,348) (96,414) - - - - - - - (188,240) 2,438,151 - 364,086 (399,462) 2,900,924 - 127,602 (79,745) 3,561,042 1. 2. MD Tranche relates to the former Managing Director of IMDEX. Rights expire due to not meeting the service and/or performance conditions. 74 Page 15 of 68 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 Performance rights on issue at the date of this report There were no alterations to the terms and conditions of Performance Rights awarded as remuneration since their award date Issuing Entity Award1 Class of shares Exercise price Grant date Expiry date Key terms Number of shares under Performance Rights IMDEX Performance Rights (Tranche 20) Ordinary Nil 1 Jul 2018 Jul 2021 (aa) 2,438,151 IMDEX Performance Rights (Managing Director Tranche 9) Ordinary Nil 4 Nov 2018 Jul 2021 (bb) 364,086 IMDEX Performance Rights (Tranche 21) Ordinary Nil 21 Oct 2019 Jul 2022 (cc) 2,900,924 IMDEX Performance Rights (Managing Director Tranche 10) Ordinary Nil 21 Oct 2019 Jul 2022 (dd) 127,602 IMDEX Performance Rights (Tranche 22) Ordinary Nil 1 Jul 2020 Jul 2023 (ee) 3,561,042 1. (aa) (bb) (cc) (dd) (ee) Managing Director Tranche relates to the former Managing Director of IMDEX. To be satisfied by the issue of fully paid ordinary shares in IMDEX on or about September 2021. A combination of Performance Rights subject to the achievement of specified performance hurdles and ongoing employment tenure, and Performance Rights subject only to ongoing employment tenure. To be satisfied by the issue of fully paid ordinary shares in IMDEX on or about September 2021. Subject to achievement of specified performance hurdles and ongoing employment tenure. To be satisfied by the issue of fully paid ordinary shares in IMDEX on or about September 2022. A combination of Performance Rights subject to the achievement of specified performance hurdles and ongoing employment tenure. To be satisfied by the issue of fully paid ordinary shares in IMDEX on or about September 2022. Subject to achievement of specified performance hurdles and ongoing employment tenure. To be satisfied by the issue of fully paid ordinary shares in IMDEX on or about September 2023. Subject to achievement of specified performance hurdles and ongoing employment tenure. Page 16 of 68 75 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2021 KMP Shareholdings The table below details the number of shares held in IMDEX and the movement during FY21. Class of shares Balance at start of period 1 July 2020 Shares allocated under remuneration framework1 Non-Executive Directors Mr A. Wooles Ms S. Layman Mr K. Dundo Mr I. Gustavino Ms T. Arlaud3 Senior Executives Mr P. House Mr P. Evans Mr S. Southwell4 Mr M. Regan Ms M. Carey Mr T. Price Mr D. Loughlin5 Mr B. Ridgeway6 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 700,000 70,000 204,546 62,077 - - 659,021 - - 200,906 546,164 479,000 4,970,907 - - - - - 164,664 188,590 - - 123,498 220,752 193,221 - Number of Performance Rights2 not vested at year- end Balance1 at end of period 30 June 2021 400,000 70,000 204,546 62,077 - 164,664 687,611 - - 259,404 552,159 580,000 - - - - - 668,911 410,377 239,502 507,223 421,391 533,516 183,994 Net change Other (300,000) - - - - - (160,000) - - (65,000) (214,757) (92,221) - 4,970,907 1,389,608 1. 2. 3. 4 5. 6. All shares were issued for nil consideration. Includes Ordinary Shares and Performance Rights held directly, indirectly and beneficially by KMP. Ms Arlaud was appointed as a Non-Executive Director on 10 February 2021. Data in the table above is reflective of her appointment date. Mr Southwell commenced as a member of KMP on 1 July 2020. Data in the table above is reflective of his appointment date. Mr Loughlin left employment with the Company and ceased as a member of KMP on 8 February 2021. Closing balance is at this date. Mr Ridgeway retired and ceased as a member of KMP effective 1 July 2020. Closing balance is at this date. 8. Other Transactions Mr. I Gustavino is a director and shareholder in consulting company Atrico Pty Ltd, that during the financial year from 1 July 2020 to 30 September 2020 (when the agreement was terminated), provided consulting services to the value of $16,200 (2020: $86,100) to the IMDEX Group on normal commercial terms and conditions. At the direction of the vendors of AusSpec International Limited (Refer Note 5.2 Acquisition of subsidiaries), the Group issued IMDEX shares to Atrico Pty Ltd to satisfy a fee owed by the vendors to Atrico Pty Ltd. Refer to ASX announcement 12 August 2020. There are no other transactions and balances with key management personnel and their related parties. End of Remuneration Report. 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. Anthony Wooles Chairman PERTH, Western Australia, 15 August 2021 76 Page 17 of 68 IMDEX Annual Report 2021 IIMMDDEEXX LLIIMMIITTEEDD aanndd iittss ccoonnttrroolllleedd eennttiittiieess 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 Group; (c) in the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in note 1.1 to the financial statements; and (d) 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 2016/191. 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 5.3 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, Western Australia, 15 August 2021 Mr. Anthony Wooles Page 18 of 68 77 IMDEX Annual Report 2021 CONTENTS FINANCIAL STATEMENTS Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 79 80 81 82 83 NOTES TO THE FINANCIAL STATEMENTS About this Report 1.1 Basis of Presentation 1.2 Basis of Consolidation 1.3 Changes to Accounting Policies 1.4 Critical Accounting Judgements and Key Sources of Estimation Uncertainty Operating Performance 2.1 Earnings per Share 2.2 Segment Information 2.3 Revenue and Expenses 2.4 Dividends 2.5 Other Income Debt & Capital 3.1 Cash 3.2 Borrowings 3.3 Issued Capital 3.4 Financial Risk Management 3.5 Commitments For Expenditure Other Assets & Liabilities 4.1 Trade and Other Receivables 4.2 Inventories 4.3 Property, Plant & Equipment 4.4 Leases 4.5 Intangible Assets 4.6 Trade & Other Payables 4.7 Provisions 4.8 Deferred Consideration Other 5.1 Taxation 5.2 Acquisition of subsidiaries 5.3 Parent Entity & Subsidiary Information 5.4 Reserves 5.5 Contingent Assets & Liabilities 5.6 Key Management Personnel Compensation 5.7 Related Party Transactions 5.8 Auditor Remuneration 5.9 Subsequent Events 84 84 86 91 97 106 SHAREHOLDER INFORMATION 130 IMDEX Annual Report 2021 FINANCIAL STATEMENTS IMDEX LIMITED and its controlled entities CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 Revenue from sale of goods, rentals and software Other income Raw materials and consumables used Employee benefit expense Depreciation and amortisation expense Finance costs Other expenses Profit before tax Income tax expense Profit for the period Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences arising on the translation of foreign operations Other comprehensive income for the year, net of income tax Total comprehensive income for the year Year Ended 30 June 2021 Year Ended 30 June 2020 Notes $’000 $’000 2.3 2.5 2.3 2.3 2.3 2.3 5.1 264,375 237,691 3,042 3,814 (81,572) (67,090) (30,783) (3,246) (40,195) 44,531 (77,573) (66,448) (26,488) (2,631) (39,223) 29,142 (12,864) (7,384) 31,667 21,758 (1,416) (1,416) (3,177) (3,177) 30,251 18,581 Profit attributable to owners of the parent 31,667 21,758 Total comprehensive income attributable to owners of the parent 30,251 18,581 Earnings per share Basic profit per share (cents) Diluted profit per share (cents) 2.1 2.1 8.01 7.80 5.64 5.46 The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 80 Page 20 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021 AS AT 30 JUNE 2021 Notes 30 June 2021 $’000 30 June 2020 $’000 Current assets Cash and Cash Equivalents Trade and other receivables Inventories Current tax assets Other Total current assets Non-current assets Property, plant and equipment Right-of-Use Assets Deferred tax assets Intangible assets Other Total non-current assets Total assets Current liabilities Trade and other payables Lease liabilities Deferred consideration Current tax liabilities Provisions Total current liabilities Non-current liabilities Lease liabilities Deferred consideration Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity 3.1 4.1 4.2 5.1 4.3 4.4 5.1 4.5 4.6 4.4 4.8 5.1 4.7 4.4 4.8 3.2 4.7 3.3 5.4 The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 58,477 58,243 41,501 2,330 5,185 165,736 45,621 32,960 25,144 92,943 3,708 200,376 366,112 37,885 4,064 5,741 4,582 5,693 57,965 34,809 8,926 11,128 233 55,096 113,061 253,051 169,078 1,088 82,885 253,051 38,263 43,520 41,161 3,155 4,001 130,100 43,143 36,489 24,808 83,582 - 188,022 318,122 26,876 6,385 107 2,382 4,621 40,371 35,132 14,619 6,115 253 56,119 96,490 221,632 158,697 4,464 58,471 221,632 Page 21 of 68 81 IMDEX Annual Report 2021 2 1 0 0 2 2 , ) 1 2 9 2 ( , 1 9 0 , 7 1 2 ) 7 7 1 3 ( , 8 5 7 1 2 , 1 8 5 8 1 , 5 3 0 3 , - ) 5 7 0 7 1 ( , 2 3 6 , 1 2 2 ) 6 1 4 1 ( , 7 6 6 1 3 , 1 5 2 0 3 , ) 3 1 5 ( 0 1 4 1 1 0 3 , - 0 0 0 5 , ) 0 4 7 6 ( , 1 5 0 , 3 5 2 8 6 f o 2 2 e g a P l a t o T l o t e b a t u b i r t t A l s r e d o H y t i u q E y t i t n E e h t f o 0 0 0 $ ' 9 0 7 6 5 , ) 1 2 9 2 ( , 8 8 7 , 3 5 - 8 5 7 1 2 , 8 5 7 1 2 , - - ) 5 7 0 7 1 ( , 1 7 4 , 8 5 - 7 6 6 1 3 , 7 6 6 1 3 , ) 3 1 5 ( - - - - ) 0 4 7 6 ( , 5 8 8 , 2 8 3 8 4 6 5 1 , - 3 8 4 , 6 5 1 - - - - - 4 1 2 2 , 7 9 6 , 8 5 1 - - - - - - - 1 8 3 5 , 0 0 0 5 , 0 2 8 6 , - 0 2 8 , 6 - ) 7 7 1 3 ( , ) 7 7 1 3 ( , 5 3 0 3 , ) 4 1 2 2 ( , - 4 6 4 , 4 - ) 6 1 4 1 ( , ) 6 1 4 1 ( , - 0 1 4 1 1 0 3 , ) 1 8 3 5 ( , - - 1 8 0 9 , - 1 8 0 , 9 - - - 5 3 0 3 , ) 5 8 0 2 ( , - 1 3 0 , 0 1 - - - - - - 0 1 4 1 1 0 3 , ) 7 8 3 5 ( , ) 1 6 2 2 ( , - ) 1 6 2 , 2 ( - ) 7 7 1 3 ( , ) 7 7 1 3 ( , - - - ) 8 3 4 , 5 ( - ) 6 1 4 1 ( , ) 6 1 4 1 ( , - - - - - - - - - - - - - ) 9 2 1 ( - ) 9 2 1 ( - - - - - - 6 - - 8 7 0 , 9 6 1 8 8 0 , 1 5 6 0 , 8 ) 4 5 8 , 6 ( ) 3 2 1 ( i d e n a t e R i s g n n r a E i d a P y l l u F s e r a h S y r a n d r O i s e v r e s e R l a t o T e v r e s e R s t i f e n e B n o i t a l s n a r T l n a P s t h g i R e e y o p m E l d e l t t e S - y t i u q E n g i e r o F y c n e r r u C d e v r e s e r s e r a h S e c n a m r o f r e P r o f I Y T U Q E N I 0 0 0 $ ' 0 0 0 $ ' 0 0 0 $ ' 0 0 0 $ ' e v r e s e R 0 0 0 $ ' 0 0 0 $ ' s e t o N 3 2 . 4 5 . 3 1 . 3 2 . 1 5 . 4 5 . 2 5 . r e t f a s n o i t a r e p o n g e r o f i f o n o i t a l s n a r t n o s e c n e r e f f i d e g n a h c x E ) d e t a t s e r s a ( 9 1 0 2 y l u J 1 t a e c n a a B l s t h g i r e c n a m r o f r e p - s t n e m y a p d e s a b e r a h S s t h g i r e c n a m r o f r e p f o t n e m e l t t e s / g n i t n a r G r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T 0 2 0 2 e n u J 0 3 t a e c n a a B l i d a p s d n e d i v i D r a e y e h t r o f t i f o r P n o i t a x a t r e t f a s n o i t a r e p o n g e r o f i f o n o i t a l s n a r t n o s e c n e r e f f i d e g n a h c x E r a e y e h t r o f t i f o r P n o i t a x a t - a - s a - e r a w t f o S d e s a b - d u o l c r o f g n i t n u o c c a n i e g n a h c f o t c e f f E r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T s t h g i r e c n a m r o f r e p - s t n e m y a p d e s a b e r a h S s t h g i r e c n a m r o f r e p f o t n e m e l t t e s / g n i t n a r G s t n e m y a p d e s a b - e r a h s e h t n o t c e f f e x a T s t n e m e g n a r r a ) S a a S ( e c i v r e S n o i t i s i u q c a o t g n i t a e r l s e r a h s f o e u s s I f o n o i t a c i l p p a l a i t i n i r o f y c i l o p g n i t n u o c c a n i e g n a h c f o t c e f f E 6 1 B S A A l d a e r e b d u o h s y t i u q E n i s e g n a h C f o t n e m e t a t S e h T 1 2 0 2 e n u J 0 3 t a e c n a a B l i d a p s d n e d i v i D 1 2 0 2 E N U J 0 3 D E D N E R A E Y E H T R O F ) d e t r o p e r y l s u o i v e r p s a ( 9 1 0 2 e n u J 0 3 t a e c n a a B l . s e t o n g n i y n a p m o c c a e h t h t i w n o i t c n u n o c n j i Y T I U Q E N I S E G N A H C F O T N E M E T A T S D s E e T i t i t A n e D d I e L l l o O r t n S o c N O d C n a s t i I D E T M I L X E D M I 82 1 2 0 2 S E G N A H C F O T N E M E T A T S D E T A D I L O S N O C E N U J 0 3 D E D N E R A E Y E H T R O F IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest and other costs of finance paid Income tax paid Net cash provided by operating activities Cash flows from investing activities Interest received Payment for property, plant and equipment Payment for intangible assets Proceeds on sale of investment Acquisition of AusSpec Acquisition of Flexidrill Net cash used in investing activities Cash flows from financing activities Repayment of borrowings Proceeds from borrowings Dividends paid Hire purchase payments Repayment of lease liabilities Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at the end of the financial year Year Ended 30 June 2021 $’000 Year Ended 30 June 2020 $’000 Notes 272,359 (207,890) (491) (7,080) 56,898 270,722 (208,176) (527) (9,649) 52,370 142 (24,567) (2,572) - (1,004) - (28,001) (8,129) 13,363 (6,740) - (6,890) (8,396) 20,501 38,263 (287) 58,477 189 (23,171) - 6,362 - (2,537) (19,157) (200) - (17,075) (67) (6,392) (23,734) 9,479 29,476 (692) 38,263 3.1 5.2 3.1 The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. Page 23 of 68 83 IMDEX Annual Report 2021 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. A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: • • • • • • derecognises the assets liabilities of the subsidiary; (including goodwill) and derecognises the carrying amount of any non-controlling interest; recognises the fair value of the consideration received; recognises the fair value of any investment retained; recognises any surplus or deficit in profit or loss, and; reclassifies to profit or loss or transfers directly to retained earnings, as appropriate, the parent’s share of components other comprehensive income. recognised previously in Certain prior year disclosures have been reclassified for consistency with the current year presentation. These reclassifications are not material to the current period financial report. NOTES TO THE FINANCIAL STATEMENTS IMDEX LIMITED and its controlled entities ABOUT THIS REPORT ABOUT THIS REPORT IMDEX Limited (the Company) is a listed public company, incorporated in Western Australia and along with its subsidiaries (collectively the “Group”) operates in Asia-Pacific, Africa / Europe and the Americas. For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity. 1.1 Basis of Presentation The Financial Report has been prepared on the going concern basis and on the basis of historical cost. 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 and accounting policies have been applied consistently in all periods presented. The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) where noted ($’000) under the option available to the Company under ASIC Corporations Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies. (Rounding in The Financial Report is a general purpose financial report which: • • • • in accordance with Australian has been prepared Accounting Standards (AASBs), including Australian Accounting Interpretations adopted by the Australian Accounting Standards Board, and the Corporations Act 2001. The Financial Report of the Group also complies with International Financial Reporting Standards (IFRSs) and Interpretations as issued by the International Accounting Standards Board (IASB); presents reclassified comparative information where appropriate to enhance comparability with the current period presentation. adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the Group and effective for reporting periods beginning on or after 1 July 2020. Refer to note 1.3 for further details; does not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective, unless otherwise disclosed. Refer to note 1.3 for further details; and The financial statements were authorised for issue by the Directors on 15 August 2021. 1.2 Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Group has power over an entity and is exposed to, or has rights over, the variable returns of the entity, as well as the ability to use this power to affect the variable returns of the entity. 84 Page 24 of 68 IMDEX Annual Report 2021 1.4 of Estimation Uncertainty Critical Accounting Judgements and Key Sources In the application of the Group’s accounting policies, 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 other relevant factors. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined in the following notes: • • • • • • 4.1 – Recoverability of receivables 4.3 – Recoverability of non-current assets 4.5 – Intangible Assets 4.8 – Deferred consideration 5.1 – Taxation 5.2 – Acquisition of subsidiaries IMDEX LIMITED and its controlled entities ABOUT THIS REPORT ABOUT THIS REPORT 1.3 Changes to Accounting Policies The Group has adopted all new and amended Australian Accounting Standards and Interpretations which were required to be applied from 1 July 2020. Amendments to existing standards effective and adopted from 1 July 2020 but not relevant or significant to the Group: Amendments to AASB 2020-4 COVID-19 Related Rent Concessions Amendments to IAS 1/IAS 8 Definition of material Interpretation to IAS 38 Configuration or Customisation Costs in a Cloud Computing Arrangement IMDEX has revised its accounting policy at 30 June 2021 to align with the recent interpretation from the IFRS Interpretations Committee in relation to accounting for cloud-based Software-as- a-Service (SaaS) arrangements. The recent interpretation clarifies the circumstances in which configuration and customisation services associated with SaaS arrangements may be capitalised, with emphasis on the requirement for ‘control’ of the intellectual property of the underlying software code. As a result of this change in accounting policy at 30 June 2021, IMDEX has de- recognised $0.6 million of SAAS configuration or customisation costs previously capitalised to the balance sheet, and opening adjustment to retained earnings of $0.5 million and a net $0.1 million impact to the profit and loss for the year ended 30 June 2021. New standards and amendments to standards that have been issued but not yet effective or early adopted by the Group: AASB 17 Insurance Contracts Amendments to AASB 1 Amendments to AASB 3 Amendments to AASB 16 Amendments to AASB 137 Classification of Liabilities as Current or Non-current Reference to the Conceptual Framework Property, Plant and Equipment – Proceeds Before Intended Use Onerous Contracts – Cost of Fulfilling Contract 85 Page 25 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OPERATING PERFORMANCE OPERATING PERFORMANCE 2.1 Earnings per Share Profit attributable to equity holders of the Company in the calculation of basic and diluted earnings per share Weighted average number of ordinary shares for the purposes of basic earnings per share Weighted average number of ordinary shares used in the calculation of diluted earnings per share From continuing operations Basic earnings per share Diluted earnings per share 2021 $'000 2020 $'000 31,667 21,758 Number of Shares 395,286,525 385,882,006 406,065,175 398,460,563 8.01 7.80 5.64 5.46 2.2 Segment Information The primary means by which the Board view the business and make key decisions is based on geographical lines. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group), whose operating results are regularly reviewed by the Group’s Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Management will also consider other factors in determining operating segments such as the existence of a regional general manager and the level of segment information presented to the Board of Directors. Information reported to the CODM for the purposes of resource allocation and assessment of segment performance focuses on the regions serviced. The Directors of the Company have chosen to organise the Group around different geographical markets serviced by the entity’s products and services. No operating segments have been aggregated in arriving at the reportable segments of the Group. All segments are in the business of the manufacture and sale/rental of products and software to the mining sector along the following geographical lines: AM - Americas APAC - Asia Pacific AE – Africa / Europe 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 deferred tax assets, treasury cash, net financing costs for the Group and the corporate portion of head office costs. 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. The following is an analysis of the revenue and results for the year, analysed by reportable segment. 86 Page 26 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OPERATING PERFORMANCE OPERATING PERFORMANCE 2.2 Segment Information (continued) Segment Revenues AM – Americas APAC – AsiaPac AE – Africa / Europe Total Revenue Segment Results AM – Americas APAC – AsiaPac AE – Africa / Europe Total of all Segments IMDEX Technology (i) Central Administration Costs (ii) Gain on sale of investment Fair value gain on revaluation of deferred consideration Finance costs (iii) Profit before Income Tax Income Tax Expense Profit attributable to ordinary equity holders of IMDEX 2021 $'000 115,307 81,700 67,368 264,375 2020 $'000 98,169 80,462 59,060 237,691 27,026 24,389 23,991 75,406 (25,823) (6,590) - 2,917 (1,379) 44,531 (12,864) 31,667 9,665 26,808 18,633 55,106 (22,715) (5,868) 3,625 - (1,006) 29,142 (7,384) 21,758 (i) (ii) (iii) During the year IMDEX revised the presentation of Engineering and Product Development (EPD) costs together with Product Management costs, presenting these costs together as ‘Imdex Technology Costs’ to align with information presented to the Board of Directors and management structure. In the prior year, EPD activities were reflected as a separate unallocated cost, whilst Product Management costs were included within the operating segment results. Prior year comparatives have been reclassified for consistency. EPD spend in FY21 totalled $19.1 million (FY20: $17.5 million). Central Administration Costs comprise the corporate portion of head office costs. Head office costs attributable to operations are allocated to reportable segments in proportion to the revenues earned from those segments. Unallocated finance costs represent the finance costs associated with the Group treasury function. Interest on lease liabilities is considered directly attributable to the segments and has been included in their segment results. Segment Assets and Liabilities AM - Americas APAC - AsiaPac AE – Africa / Europe Total of all segments Unallocated Consolidated Assets Liabilities 2021 $'000 2020 $'000 2021 $'000 2020 $'000 110,575 129,604 58,470 298,649 67,463 366,112 91,326 133,751 50,799 275,876 42,246 318,122 24,036 50,982 7,666 82,684 30,377 113,061 18,506 48,030 6,731 73,267 23,223 96,490 For the purposes of monitoring segment performance and allocating resources between segments: • • • All assets are allocated to reportable segments other than tax assets and treasury cash. All liabilities are allocated to reportable segments other than tax liabilities, the external loan and the deferred consideration. Certain prior year disclosures have been reclassified for consistency with the current year presentation. These reclassifications are not material to the financial report. Page 27 of 68 87 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OPERATING PERFORMANCE OPERATING PERFORMANCE 2.2 Segment Information (continued) Other Segment Information 2021 Depreciation on property plant and equipment Depreciation on right of use assets Amortisation of intangible assets Interest on lease liabilities Acquisition of segment net assets Significant non-cash expenses other than depreciation and amortisation 2020 Depreciation on property plant and equipment Depreciation on right of use assets Amortisation of intangible assets Interest on lease liabilities Acquisition of segment net assets Significant non-cash expenses other than depreciation and amortisation AM - Americas $'000 APAC - AsiaPac $'000 AE – Africa / Europe Unallocated Total $'000 $'000 $'000 9,446 2,084 1,961 324 4,299 - 9,958 2,053 570 264 8,980 - 4,503 1,480 1,388 557 3,012 - 4,236 1,289 724 317 6,095 - 4,550 859 1,145 50 2,443 - 3,462 1,037 271 67 5,524 - 1,782 1,585 - 936 (1,639) 2,917 1,324 1,564 - 977 2,572 3,035 20,281 6,008 4,494 1,867 8,115 2,917 18,980 5,943 1,565 1,625 23,171 3,035 88 Page 28 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OPERATING PERFORMANCE OPERATING PERFORMANCE 2.3 Revenue and Expenses Revenue Sale of goods (i) Rentals and software (ii) Note 2021 $’000 108,857 155,518 264,375 2020 $’000 110,401 127,290 237,691 (i) (ii) The Group typically satisfies the obligation associated with the sale of goods at a point in time upon shipment or delivery when control is transferred to customers. The Group typically satisfies the obligation to provide rental products and software subscriptions over time. Expense analysis by nature: Employee benefits expense Salaries and wages Defined contribution superannuation/pension costs Share based payments Depreciation and amortisation expense Depreciation of Property, Plant and Equipment Depreciation of Right-of-Use assets Amortisation of Intangible Assets Finance costs Interest on lease liabilities Accretion of interest on deferred considerations Amortisation of borrowing costs Interest and other financing costs Note 4.3 4.4 4.5 4.4 4.8 3.2 2021 $’000 (60,540) (3,539) (3,011) (67,090) (20,281) (6,008) (4,494) (30,783) (1,867) (791) (97) (491) (3,246) 2020 $’000 (59,944) (3,469) (3,035) (66,448) (18,980) (5,943) (1,565) (26,488) (1,625) (413) (66) (527) (2,631) Page 29 of 68 89 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OPERATING PERFORMANCE OPERATING PERFORMANCE 2.3 Revenue and Expenses (continued) Other expenses Commissions Consulting and legal expenses (i) Rent and premises costs Travel and accommodation Motor vehicle costs Obsolete stock Doubtful debts Software and network infrastructure Materials associated with developing technologies Other expenses Note 2021 $’000 2020 $’000 (1,900) (11,262) (2,773) (1,419) (2,036) (1,962) (759) (3,625) (4,777) (9,682) (40,195) (1,556) (9,677) (3,190) (3,749) (2,034) (527) (2,153) (2,781) (3,361) (10,195) (39,223) 4.1 (i) Includes legal, audit, taxation, share registry, corporate secretarial fees and consulting services During the period, the Group received $0.4 million (2020: nil) of COVID-19 related overseas government grants. These have been offset against employee benefits expense. Defined contribution plans Contributions to defined contribution superannuation/pension plans are expensed when incurred. 2.4 Dividends The following dividends have been paid by the Company or declared by the Directors since the commencement of the financial year ended 30 June 2021: (i) (ii) (iii) (iv) fully-franked final dividend of 0.7 cents (2020: 1.4 cents) per share paid on 13 October 2020; fully-franked interim dividend of 1.0 cents (2020: 1.0 cents) per share paid on 23 March 2021; fully-franked final dividend of 1.4 cents (2020: 0.7 cents) per share to be paid on 12 October 2021; and fully-franked special dividend of 0.4 cents (2020: 2.0 cents) per share to be paid on 12 October 2021. The franking account balance is $42.1 million (2020: $44.1 million). 2.5 Other Income Other income Fair value gain on deferred consideration Gain on sale of investment Interest Income Other Note 4.8 2021 $’000 2020 $’000 2,917 - 142 (17) 3,042 - 3,625 189 - 3,814 90 Page 30 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DEBT & CAPITAL DEBT & CAPITAL 3.1 Cash Reconciliation of cash For the purposes of the Statement of Cash Flows, cash includes cash on hand and held at banks, net of outstanding bank overdrafts. Cash at bank earns interest at floating rates based on daily bank deposit rates. Cash at the end of the year as shown in the Statement of Cash Flows is reconciled to the related items in the balance sheet as follows: Cash Reconciliation from the Profit for the Year to Net Cash Provided by Operating Activities Profit for the year Adjustments for non-cash items Depreciation and amortisation of non-current assets Interest received disclosed as investing activities Share options and performance rights expensed Gain on sale of investment Fair value gain on deferred consideration Interest on lease liabilities Amortisation of borrowing costs Other Changes in assets and liabilities during the financial year (Increase) / decrease in assets: Current receivables Current inventories Other current assets Other non-current assets Increase / (decrease) in liabilities: Current payables Provision for employee entitlements Current and deferred tax liability Net Cash provided by Operating Activities 2021 $’000 2020 $’000 58,477 38,263 31,667 21,758 30,783 (142) 3,011 - (2,917) 1,867 97 (181) (17,137) (2,844) (1,598) (3,708) 11,135 1,081 5,784 56,898 26,488 (189) 3,035 (3,625) - 1,625 66 1,470 8,420 (6,654) 3,551 - 2,683 (1,455) (4,803) 52,370 Page 31 of 68 91 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DEBT & CAPITAL DEBT & CAPITAL 3.2 Borrowings Non-current borrowings Secured Bankwest Commonwealth Bank of Australia 2021 $’000 - 11,128 11,128 2020 $’000 6,115 - 6,115 30-Jun-20 Cash flows Non-cash changes 30-Jun-21 $’000 Repaid $’000 Drawn $’000 Foreign Exchange Movement $’000 Bankwest Facility Non-current borrowings 6,115 (6,129) - (155) Commonwealth Bank of Australia Non-current borrowings Total liabilities from financing activities - (2,000) 13,363 (163) 6,115 (8,129) 13,363 (318) $’000 - - - Reclassification Other $’000 $’000 169 - (72) 11,128 97 11,128 All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable fees, premiums paid and transaction costs. After initial loans and borrowings are recognition, subsequently measured at amortised cost using the effective interest method. interest-bearing Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. On 29 September 2020, the Group replaced the previous Bankwest facility with a new facility from the Commonwealth Bank of Australia. The key terms of the Commonwealth Bank Facility are as follows: Term: The facility has no repayment requirements other than at expiry. The facility is due to expire on 1 July 2023. Maximum Facility: $30 million. Drawn Balance at 30 June 21: $10.9 million, and bank guarantees and credit card borrowings $0.25 million. Undrawn Balance at 30 June 21: $18.9 million. Weighted Average Interest Rate: 2.49%. 92 Page 32 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DEBT & CAPITAL DEBT & CAPITAL 3.3 Issued Capital Issued and Paid-Up Capital - Fully paid ordinary shares Notes Number $'000 Number $'000 2021 2020 Balance at beginning of the financial year 388,057,257 158,697 378,825,085 156,483 Issue of shares Issue of shares under performance rights Closing balance at end of the financial year (ii) 5.4 (i) 4,438,851 3,956,292 5,000 5,381 - 9,232,172 396,452,400 169,078 388,057,257 - 2,214 158,697 (i) (ii) Fully paid ordinary shares carry one vote per share and carry the right to dividends. During the current period, the Company issued 4.4 million shares to the owner of AusSpec International Limited. Refer to note 5.2. from the proceeds. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. Where any Group company purchases the Company’s equity instruments, for example as the result of a share buy- back or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the owners of the Company as treasury shares until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the owners of the Company. 3.4 Financial Risk Management Categories of financial instruments Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Lease liabilities Borrowings 2021 $’000 58,477 61,951 120,428 37,885 38,873 11,128 87,886 2020 $’000 38,263 43,520 81,783 26,876 41,517 6,115 74,508 Financial risk management objectives The Group is exposed to financial risks through the normal course of its business operations. The key financial risks impacting the Group relate to its financial instruments as per those disclosed in the statement of financial position. Specifically, those key risks are considered to be foreign currency risk and interest rate risk. The Group monitors its exposure to these risks on a regular basis and may enter into derivative financial instruments to manage these risks where appropriate. There are no derivative financial instruments in operation at the reporting date. Page 33 of 68 93 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DEBT & CAPITAL DEBT & CAPITAL 3.4 Financial Risk Management (continued) Foreign currency risk management Exposure The functional currency of the Company is Australian dollars. Certain financial instruments of the Group are exposed to movements in various currencies. 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 instruments were used to manage foreign derivative exchange risk. The carrying amount in Australian dollars of the Group’s monetary assets and liabilities denominated in currencies other than Australian dollars at the reporting date are as per the table below. Non-Australian dollar liabilities include trade creditors and borrowings recorded in Australian as well as non-Australian entities. Non-Australian dollar assets include cash on hand and debtors recorded in Australian as well as non-Australian entities. Any fluctuation in exchange rates relative to the Australian dollar will cause the below assets and liabilities to change in value. Liabilities Assets 2021 $'000 2020 $'000 2021 $'000 2020 $'000 17,265 1,936 857 1,500 1,763 13,277 3,290 827 1,609 2,330 34,809 4,713 3,384 10,335 7,751 21,557 3,394 1,906 5,094 10,975 United States Dollars Euro South African Rand Canadian Dollars Other Sensitivity The Group is mainly exposed to United States Dollars, Euro and Canadian Dollars. The following table details the Group’s sensitivity to a 10% (2020: 10%) increase o r decrease in the Australian Dollar against the relevant foreign currencies. 10% increase 10% decrease 10% increase 10% decrease United States Dollar Impact 2021 $'000 2020 $'000 Canadian Dollar Impact 2020 2021 $'000 $'000 884 (884) 348 (348) 1,754 (1,754) 828 (828) Euro Impact 2021 $'000 277 (277) 2020 $'000 10 (10) Profit / (loss) impacts are mainly attributable to exposure on outstanding receivables and payables at the reporting date denominated in the applicable foreign currency. 94 Page 34 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DEBT & CAPITAL DEBT & CAPITAL 3.4 Financial Risk Management (continued) Interest rate risk management The Group’s cash flow is exposed to interest rate risk as entities in the Group borrow, lend and deposit funds at floating rates of interest. The following table details the Group’s pre-tax loss sensitivity to a 1% increase and decrease in variable interest rates: Increased interest rate Decreased interest rate Consolidated Impact 2021 $ '000 (500) 500 2020 $ '000 (476) 476 Credit risk management The Group’s maximum exposure to credit risk is the carrying amount of those assets as indicated in the statement of financial position. Credit risk on financial instruments refers to the potential financial loss to the Group that may result from counterparties failing to meet their contractual obligations. The Group manages its counterparty risk by limiting its transactions to counterparties of sound credit worthiness. The Group faced no significant credit exposures at the balance date. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who monitors 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. At 30 June 2021 the Company/Group has undrawn facilities of $18.9 million. Maturity of financial liabilities The following tables detail the Company’s and the Group’s remaining contractual maturity 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 may be required to pay. The table includes both interest and principal cash flows. for Weighted average effective interest rate % - 4.50% 2.49% - 4.50% 2.11% 0-3 months 3 months to 1 year 1-5 years 5+ years Total $’000 $’000 $’000 $’000 $’000 37,885 1,416 - 39,301 26,876 1,475 - 28,351 - 4,248 - 4,248 - 4,426 - 4,426 - 15,798 11,128 26,926 - 15,861 6,115 21,976 - 30,078 - 30,078 - 31,194 - 31,194 37,885 51,540 11,128 100,553 26,876 52,956 6,115 85,947 2021 Trade and other payables Lease liabilities CBA credit facility 2020 Trade and other payables Lease liabilities Bankwest credit facility Page 35 of 68 95 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities DEBT & CAPITAL DEBT & CAPITAL 3.4 Financial Risk Management (continued) Maturity of financial assets The following tables detail the Company’s and the Group’s remaining contractual maturity for its 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. Weighted average effective interest rate 0-3 months 3 months to 1 year 1-5 years 5+ years Total % $’000 $’000 $’000 $’000 $’000 2021 Trade and other receivables Cash 2020 Trade and other receivables Cash - 0.27% - 0.75% 58,243 58,477 116,720 43,520 38,263 81,783 - - - - - - 3,708 - 3,708 - - - - - - - - - 61,951 58,477 120,428 43,520 38,263 81,783 Non- derivative financial instruments 3.5 Commitments for Expenditure Recognition and measurement Capital expenditure commitments At 30 June 2021 the Group had $8.8 million capital commitments (2020: $0.5 million). Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular purchases or sales of financial assets are recognised and derecognised on a trade date basis, where the 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. Fair value of financial Instruments The Directors consider that the carrying amount of financial assets and liabilities recorded in the financial statements represents or approximate their respective fair values. 96 Page 36 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.1 Trade and Other Receivables Current Trade receivables Less allowance Other receivables Notes (i) (ii) 2021 $’000 2020 $’000 60,538 (3,505) 57,033 1,210 58,243 43,007 (4,059) 38,948 4,572 43,520 (i) The average credit period on sales of goods is approximately 60 days. Trade receivables are interest free unless outside of terms at which point interest may be charged. (ii) Movement in the loss allowance Balance at the beginning of the year Amounts written off during the year Increase in allowance recognised in profit or loss Balance at the end of the year 4,059 (1,313) 759 3,505 2,711 (805) 2,153 4,059 The expected credit loss calculation for trade receivables considers both quantitative information from historic losses as well as qualitative information on different debtor profiles. 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 loss allowance above. Ageing of past due but not impaired debtors 0 - 30 days past due 31 - 60 days past due 61 + days past due 6,794 2,480 4,968 2,965 2,842 3,330 9,137 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. 14,242 4.2 Inventories Current Raw materials Work in progress Finished goods 2021 $’000 1,624 1,034 38,843 41,501 2020 $’000 1,376 692 39,093 41,161 Inventories are valued at the lower of cost or 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. An allowance for diminution of stock of $2.2 million existed at 30 June 2021 (2020: $0.9 million). Page 37 of 68 97 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.3 Property, Plant and Equipment Plant and Equipment at cost $’000 Leasehold Improvements at cost $’000 Capital Works in Progress at cost TOTAL $’000 $’000 Notes 5.2 4.5 2.3 2021 Cost Accumulated depreciation Total carrying value Movement Carrying amount at the beginning of the year Additions (i) Acquisition of a subsidiary Transfer to intangible assets Depreciation expense Foreign currency exchange differences Carrying amount at the end of the year 2020 Cost Accumulated depreciation Total carrying value Movement Carrying amount at the beginning of the year Additions (i) Acquisition of a subsidiary Disposals Depreciation expense Foreign currency exchange differences Carrying amount at the end of the year 109,927 (68,131) 41,796 38,768 23,795 3 (1,482) (19,450) 162 41,796 82,295 (43,527) 38,768 35,996 21,157 417 801 (18,185) (1,418) 38,768 7,166 (5,689) 1,477 2,098 231 - - (831) (21) 1,477 9,276 (7,178) 2,098 2,596 307 - (10) (795) - 2,098 2,348 - 2,348 2,277 541 - (503) - 33 2,348 2,277 - 2,277 775 1,707 - (148) - (57) 2,277 119,441 (73,820) 45,621 43,143 24,567 3 (1,985) (20,281) 174 45,621 93,848 (50,705) 43,143 39,367 23,171 417 643 (18,980) (1,475) 43,143 (i) Includes external acquisitions and transfers from inventory. Property, plant and equipment Plant and equipment and leasehold improvements 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. 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. Capital works in progress Capital works in progress in the course of construction for production or supply purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation 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 are depreciated over the estimated useful life, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis. The annual depreciation rate for plant and equipment is 33% and the annual depreciation range for leasehold improvement is 10 – 33%. Depreciation of capital works in progress, on the same basis as other property, plant and equipment assets, commences when the assets are ready for their intended use. 98 Page 38 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.4 Leases Right of use assets 2021 Cost Accumulated depreciation Total carrying value Movement Carrying amount at the beginning of the year Additions Disposals Lease remeasurements Depreciation Other Foreign currency exchange differences Carrying amount at the end of the year 2020 Cost Accumulated depreciation Total carrying value Movement Carrying amount at the beginning of the year Additions Acquisition of a subsidiary Lease remeasurements Depreciation Foreign currency exchange differences Carrying amount at the end of the year Lease liabilities Opening Additions Acquisition of a subsidiary Disposal of lease liability Lease remeasurements Repayments Accretion of interest Net foreign exchange differences Carrying amount at 30 June Current Non-current Carrying amount at 30 June Land and Buildings $’000 Motor Vehicles $’000 Other TOTAL $’000 $’000 37,578 (7,582) 29,996 33,686 1,128 (29) (279) (4,440) 169 (239) 29,996 37,542 (3,856) 33,686 25,156 13,701 72 57 (4,682) (618) 33,686 3,128 (1,299) 1,829 1,303 1,202 (73) 497 (1,129) - 29 1,829 1,986 (683) 1,303 1,292 1,024 - (69) (910) (34) 1,303 1,925 (790) 1,135 1,500 78 (5) - (439) - 1 1,135 1,840 (340) 1,500 1,249 492 - 78 (351) 32 1,500 42,631 (9,671) 32,960 36,489 2,408 (107) 218 (6,008) 169 (209) 32,960 41,368 (4,879) 36,489 27,697 15,217 72 66 (5,943) (620) 36,489 2021 $’000 41,517 2,408 - (11) 218 (6,890) 1,867 (236) 38,873 2021 $’000 4,064 34,809 38,873 2020 $’000 31,824 15,217 74 - 66 (6,392) 1,625 (897) 41,517 2020 $’000 6,385 35,132 41,517 Page 39 of 68 99 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.4 Leases (Continued) The table below presents the contractual undiscounted cash flows associated with the Group’s lease liabilities, representing principal and interest. The figures will not necessarily reconcile with the amounts disclosed in the consolidated statement of financial position. Due for payment in: 1 year or less 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years recognises a Right-of-Use asset at The Group the commencement date of the lease, initially measured at the present value of the future lease payments, with the right-of- use asset adjusted by the amount of any lease payments pre- commencement date plus any make good obligations. The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-of- use asset. The Right-of-Use asset is depreciated over the shorter of the asset’s useful life and the term of the lease, on a straight-line basis. Lease Liabilities At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease payments that are unpaid at that date. The lease payments include: • • • • Fixed payments, offset by any lease incentives receivable; Variable lease payments linked to an index or rate; Exercise price of a purchase option (where the Group is reasonably certain to exercise that option); and Payment of penalties for terminating the lease (where the life of the lease has assumed termination). For short-term leases (lease term of 12 months or less) and leases of low-value assets (which includes tablets and personal computers, small items of office furniture and telephones), the Group has opted to recognise a lease expense on a straight-line basis as permitted by AASB 16. This expense is presented within ‘other expenses’ in profit or loss (30 June 2021: $0.7 million, June 2020: $0.2 million). 2021 $’000 5,664 4,594 4,035 3,797 3,372 30,078 51,540 2020 $’000 5,901 4,952 4,090 3,647 3,172 31,194 52,956 Key Estimates and Judgements (a) Control Judgement is required to assess whether a contract is or contains a lease at inception by assessing whether the Group has the right to direct the use of the identified asset and obtain substantially all the economic benefits of the use of that asset. (b) Lease term Judgement is required when assessing the term of the lease and whether to include optional extension and termination periods. Option periods are only included in determining the lease term at inception when they are reasonably certain to be exercised. Lease terms are reassessed when a significant change in circumstances occurs. The Group included the renewal period as part of the lease term for the lease of the corporate head office and the lease of the Western Australian manufacturing and distribution facility, as both properties were purpose built for the Group and the extensions of these leases is reasonably certain. Renewal options for motor vehicles are not included as part of the lease term because the Group typically leases vehicles for not more than five years and is not likely to exercise any renewal options. (c) Discount rates Judgement is required to determine the discount rate, where the discount rate is the Group’s incremental borrowing rate if the rate implicit in the lease cannot be readily determined. The incremental borrowing rate is determined with reference to the Group’s borrowing portfolio at the inception of the arrangement or the time of the modification. 100 Page 40 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.5 Intangible Assets Notes 5.2 4.3 2.3 At cost Accumulated amortisation Accumulated impairment losses Net carrying amount as at 30 June 2021 Movement As at 30 June 2020 Additions Acquisition of assets/subsidiary Transfer from property, plant and equipment Disposals due to SaaS adjustment (i) Amortisation expense Foreign currency exchange differences As at 30 June 2021 At cost Accumulated amortisation Accumulated impairment losses Net book value as at 30 June 2020 Movement As at 30 June 2019 Additions Acquisition of assets/subsidiary Amortisation expense Foreign currency exchange differences As at 30 June 2020 Goodwill $’000 86,399 - (24,295) 62,104 57,784 - 4,271 - - - 49 62,104 82,079 - (24,295) 57,784 59,177 - - - (1,393) 57,784 Patents and licences with definite useful life $’000 33,244 (5,802) - 27,442 25,798 - 5,500 - - (3,847) (9) 27,442 27,755 (1,957) - 25,798 354 - 27,059 (1,565) (50) 25,798 Software (ii) TOTAL $’000 5,203 (1,806) - 3,397 - 2,572 - 1,985 (513) (647) - 3,397 $’000 124,846 (7,608) (24,295) 92,943 83,582 2,572 9,771 1,985 (513) (4,494) 40 92,943 - - - - - - - - - 109,834 (1,957) (24,295) 83,582 59,531 - 27,059 (1,565) (1,443) 83,582 (i) (ii) Effect of change in accounting policy for IFRS Interpretations in relation to accounting for cloud-based Software-as-a-Service (SaaS) arrangements. Refer to note 1.3 for further details. Of which, $1.2 million of software is under development and not available for use at 30 June 2021. Goodwill is allocated to operating segments as follows: Africa / Europe Asia Pacific Americas 2021 $’000 8,182 33,658 20,264 62,104 2020 $’000 7,100 32,334 18,350 57,784 Page 41 of 68 101 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.5 Intangible Assets (continued) Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired. Where the fair value of the consideration paid for a business acquisition exceeds the fair value of the identifiable assets acquired and liabilities assumed, the difference is treated as goodwill. Goodwill is not amortised but is tested for impairment at least annually. Identifiable intangibles Patents and licences with finite useful lives were acquired in the Flexidrill acquisition (completed January 2020) and AusSpec Acquisition (see note 5.2). These intangible assets are amortised on a straight-line basis over the estimated useful life (up to 10 years). Impairment Testing of Assets IMDEX assesses impairment at the Operating Segment level for Goodwill. Goodwill exists in relation to three Segments: • • • Asia Pacific Africa / Europe Americas IMDEX assesses impairment at the Cash Generating Unit (CGU) level for fixed assets and other intangible assets. A CGU being the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs identified are at a lower level than each Operating Segment (based on regional hubs). The Group has five CGUs: Asia Pacific Europe Africa • • • • North America South America • The Group reviews the carrying amounts of its CGU’s at each reporting period, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, a formal estimate of the asset’s recoverable amount is calculated. 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 carrying amount of the CGU exceeds its recoverable amount, the asset or CGU is written down and an impairment loss is recognised in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased 102 carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. Significant accounting estimates and assumptions The determination of involves the use of impairment judgements and estimates that include, but are not limited to, the cause, timing and measurement of the impairment. Goodwill is tested at least annually and where there is an indicator of impairment through testing of the Operating Segments (groups of CGU’s) to which the goodwill has been allocated. Fixed assets and other intangible assets are grouped into CGUs that have been identified as being the smallest identifiable group of assets that generate cash flows, which are independent of cash flows of other assets or groups of assets. The determination of these CGUs is based on management’s judgement in regard to shared infrastructure, geographical proximity, and similar exposures to market risk and materiality. Determining whether goodwill, intangibles and fixed assets are impaired requires an estimation of the “Value in Use” of the Operating Segment or CGU to which these assets are attributable. The Value in Use calculation requires the entity to estimate the future cash flows expected to arise from the Operating Segment or CGU and a suitable discount rate in order to calculate present value. A forward-looking estimation of this nature is inherently uncertain. Management is required to make significant judgements concerning the identification of impairment indicators, such as changes in competitive positions, expectations of growth, increased cost of capital, and other factors that may indicate impairment. In addition, management is also required to make significant estimates regarding future cash flows and the determination of fair values when assessing the recoverable amount of assets (or group of assets). Inputs into these valuations require assumptions and estimates to be made about forecast earnings before interest and tax and related future cash flows, growth rates, applicable discount rates, useful live and residual values. IMDEX’s forecasted results reflect the activity levels within the minerals industry. The judgements, estimates and assumptions used in assessing impairment are management’s best estimates based on current and forecast market conditions. Changes in economic and operating conditions impacting these assumptions could result in changes in the recognition of impairment charges in future periods. Page 42 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.5 Intangible Assets (continued) Management has considered a range of external, internal and other indicators that may indicate some level of impairment at the individual asset level. These include evidence of obsolescence or physical damage of an asset, and evidence available from internal reporting that indicates that the economic performance of an asset is, or will be, worse than expected. The Group continues to monitor the impact of the COVID-19 pandemic. The below plan performance experienced in the South America (SAM) CGU in the prior period, impacted by COVID-19 disruptions, has continued to recover throughout the period, with a return to plan performance and expected return to pre-COVID levels in 2022. Whilst a level of uncertainty continues to remain around the economic impact and duration that COVID-19 related issues will have on the markets in which the Group operates, COVID-19 was not considered an indicator of impairment for the Group’s asset values at 30 June 2021. At 30 June 2021, the Group held intangible assets of $22.9 million relating to intellectual property acquired in the acquisitions of Flexidrill (completed January 2020). The Group continues to progress the development of the associated Maghammer and Corevibe technologies. Management assesses the recoverability of the associated intangible assets at each reporting date as these technologies progress towards commercialisation. These assessments did not impairment for any of the CGUs. identify any indicators of Value in Use assessments and sensitivities: Inputs to impairment calculations For Value in Use calculations, cash flow projections are based on IMDEX’s corporate plans and business forecasts prepared by management and approved by the Board for the 2022 financial year. The key assumptions impacting the discounted cashflow models used to determine the Value in Use for each CGU were as follows: • Revenue growth has been based on a range of growth rates. Initial rates are based on the forecasted numbers approved by the Board of Directors for FY22 and are in the range of 8%-15%; • Subsequent growth rates are between 2% - 5% for 5 years up to the terminal (5 years) period; • Cash flows beyond the five-year period are extrapolated using an estimated growth rate of 2.5%, which is based on Group estimates, taking into consideration historical performance as well as expected long-term operating conditions to arrive at a terminal value. Growth rates do not exceed the consensus forecasts of the long-term average growth rate for the industry in which the CGU operates. • Capital investment for the 2022 financial year is based on the forecasted numbers approved by the Board of Directors. Going forward to terminal date, capital investment gradually increases each year so that it equals the replacement cost of assets, excluding growth capital investment by terminal date; • Tax rates used were those applicable to the countries in the region; and • Post-tax discount rates used were country risk adjusted and based on data supplied by external sources and ranged from 8.5%-11.5%. Other assumptions are determined with reference to internal and external sources of information. in discount rates or changes Increases in other key assumptions, such as operating conditions or financial performance, may cause the recoverable amounts to fall below carrying values. Management have considered various reasonably possible sensitivities in Use assessment, with changes to the following key assumptions: in the Value • • • Increase/decrease of 1% to the terminal growth rate. Increase/decrease of 1-2% to the discount rate. Increase/decrease of 5% in operating margins. The above sensitivities have been performed in isolation, with all other assumptions in the Value in Use assessment held constant. No reasonably possible change made to these key assumptions has given rise to an impairment. However, forward looking estimation of this nature is inherently uncertain and the outcomes of these sensitivities may vary in the future. Impairment losses recognised by cash generating unit: There have been no impairment losses for any CGU in the current or prior year. Page 43 of 68 103 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.6 Trade & Other Payables Trade payables Accruals and other payables Notes (i) (ii) 2021 $’000 19,173 18,712 37,885 2020 $’000 15,882 10,994 26,876 (i) (ii) Trade payables are interest free for periods ranging from 30 to 180 days. Thereafter interest may be charged at commercial rates. The consolidated entity has financial risk management policies in place to endeavour pay all payables within the credit timeframe. Accruals and other payables include a $6.0 million accrual for the FY21 STI bonuses. 4.7 Provisions Current provisions Employee entitlements Others Non-current provisions Employee entitlements 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. Significant accounting estimates and assumptions 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 cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. 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. 2021 $’000 4,943 750 5,693 2020 $’000 4,621 - 4,621 233 253 Employee entitlements 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 short term, 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 short term 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. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. Termination benefit A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs. 104 Page 44 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER ASSETS & LIABILITIES OTHER ASSETS & LIABILITIES 4.8 Deferred Consideration Gross Carrying Amount Balance at beginning of the financial year Acquisition of assets/subsidiaries Interest accretion Fair value (gain)/loss on deferred consideration Effect of foreign exchange movements Balance at end of the financial year Current deferred consideration Non-current deferred consideration Significant accounting estimates and assumptions Fair Value of Deferred Consideration - Flexidrill acquisition A deferred consideration liability of $12.2 million was recognised in respect of the acquisition of Flexidrill (completed in January 2020). The fair value of the deferred consideration includes the estimated fair value of revenue- based instalments associated with the Flexidrill technologies (Corevibe and Maghammer), determined after estimating the fair value of the dividend and share price appreciation components of the deferred consideration. The fair value of the deferred consideration has been estimated using a Discounted Cash Flow model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, the discount rate, future dividends, future share prices of IMDEX, future AUD/NZD exchange rates and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value of the deferred consideration. Estimates around future share prices of IMDEX were determined using an Option Pricing Model that included inputs for the IMDEX share price, volatility in IMDEX’s share price and the risk-free interest rate at reporting date. Note 2021 $’000 2020 $’000 5.2 2.3 2.5 14,726 2,100 791 (2,917) (33) 14,667 5,741 8,926 - 14,825 413 - (512) 14,726 107 14,619 Current deferred consideration includes an amount of $1.0 million in relation to the acquisition of AusSpec. This was paid on 1 July 2021, following achievement of certain new revenue-generating contracts. The balance of the current deferred consideration the acquisition of Flexidrill, including the issue of NZ$2.5 million of IMDEX Limited ordinary sharers and the payment of NZ$2.5 million cash upon the successful commercialisation of Maghammer. ($4.7 million) relates to Non-current deferred consideration includes the non-current portion of the consideration for AusSpec ($1.5 million), which includes the payment of $1.0 million cash and the issue of $0.5 million of IMDEX Limited ordinary shares in July 2022 on the achievement of certain new revenue-generating contracts. The balance of non-current deferred consideration relates to the acquisition of Flexidrill ($7.5 million), representing the fair value of the revenue-based instalments. The estimated fair value of the deferred consideration at 30 June 2021 resulted in recognition of a fair value gain of $2.9 million in the profit and loss for the period. Page 45 of 68 105 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.1 Taxation Income tax expense recognised in the income statement Tax expense comprises: Current tax expense Deferred tax expense/(benefit) relating to the origination and reversal of temporary differences Losses brought to account from prior year Under/(over) provision in prior year income tax Total tax expense Income tax expense recognised in equity Deferred tax expense/(benefit) relating to the origination and reversal of temporary differences Prima facie income tax expense on pre-tax accounting profit from continuing operations reconciles to income tax expense in the financial statements as follows: Profit before tax from continuing operations Income tax expense calculated at 30% (i) Tax losses not recognised or impaired Other deferred tax assets brought to account Non-assessable gain on VES sale Other non-deductible and non-assessable items Tax rate differential arising from foreign entities Losses brought to account from prior year Under/(over) provision in prior year income tax At the effective income tax rate of 29% (2020: 25%) 2021 $’000 2020 $’000 12,966 15,111 74 (842) 666 12,864 (6,053) (1,406) (268) 7,384 (410) - 44,531 13,359 302 (237) - 1,085 (1,706) (605) 666 12,864 29,142 8,743 992 - (1,909) 1,418 (624) (968) (268) 7,384 (i) 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 year. Recognised Current and Deferred Tax Balances Current tax assets and liabilities Current tax receivable Current tax payable Deferred tax balances Deferred tax assets comprise balances that relate to: Provisions Inventory Property, plant and equipment Leases Carry forward tax losses Unrealised FX Other Net deferred tax balances 106 2021 $’000 2020 $’000 2,330 (4,582) 3,155 (2,382) 4,025 2,657 9,250 1,581 5,574 (691) 2,748 25,144 2,385 1,645 10,485 1,474 7,613 (814) 2,020 24,808 Page 46 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.1 Taxation (continued) Unrecognised Deferred Tax Assets Temporary differences relating to the translation of investments in subsidiary undertakings Deferred Tax Assets in respect of unrecognised tax losses Deferred Tax Assets in respect of unrecognised provisions Current tax The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the income statement because of items of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. The Company and the Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Company and the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable from deductible temporary differences associated with such 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. future. Deferred tax assets arising The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 2021 $’000 2,859 1,378 286 2020 $’000 3,901 1,771 214 Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of tax deferred consequences that would follow from the manner in which the Company and the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. liabilities and assets reflects the tax Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the period Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is included in the accounting for the business combination. Relevance of tax consolidation to the Group The Company and its wholly-owned Australian resident entities are an income tax consolidated group and are taxed as a single entity. IMDEX Limited is the head company of the Australian 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. Page 47 of 68 107 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.1 Taxation (continued) Significant accounting estimates and assumptions Relevance of tax consolidation to the Group (continued) 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 tax amounts paid or payable between the parent entity and the other members of the tax consolidated Group in accordance with the arrangement. A net deferred tax asset of $25.1 million has been recognised on the face of the Consolidated Statement of Financial Position. The largest components of this asset are the future tax benefits available to the Group in respect of unused tax losses and timing differences between the recording of expenses for accounting purposes and the claiming of a deduction for the expense for taxation purposes. These tax benefits will be realised over the coming years when future taxable profits are available against which the unused tax losses can be utilised and as timing differences move. This net asset has been raised as it is considered more likely than not that it will be realised due to trading and/or sale of assets. In making this assessment of likelihood, a forward- looking estimation of tax payments and the likelihood of business success needs to be made. A forward-looking estimation of this nature is inherently uncertain. As part of the process for preparing the Group’s financial statements, management is required to calculate income tax accruals. This process involves estimating the current tax exposures together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Consolidated Statement of Financial Position. While the Group aims to ensure the accruals for its tax liabilities are accurate, the process of agreeing tax liabilities with the relevant tax authorities can take time. Management estimate is therefore required in determining the provision for income tax and the recognition of deferred tax assets and liabilities and therefore the actual tax liabilities could differ from the amounts accrued. 108 Page 48 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.2 Acquisition of Subsidiaries On 22 July 2020, the Group acquired 100 per cent of the issued share capital of AusSpec International Limited (“AusSpec”), incorporated in New Zealand and operating out of premises located in New Zealand. AusSpec is a leading provider of spectral mineralogy through its unique aiSIRIS platform – Artificial Intelligence (AI) Spectral InfraRed Interpretation System. The AusSpec acquisition enhances IMDEX’s rock knowledge offering with spectral mineralogy and AI technologies. The agreed acquisition price was $8.5 million. The Group paid $1.0 million in cash and issued IMDEX Limited ordinary shares to the value of $5.0 million on the settlement date. The balance of the agreed acquisition price will be settled through: • • The payment of $1.0 million cash in July 2021 on the achievement of certain new revenue-generating contracts; The payment of $1.0 million cash and the issue of $0.5 million of IMDEX Limited ordinary shares in July 2022 on the achievement of certain new revenue-generating contracts. Assets acquired and liabilities assumed at the date of acquisition: Cash Receivables (i) Property, plant & equipment Intangibles Payables Deferred tax liability Net assets acquired $’000 11 130 3 5,500 (150) (1,650) 3,844 (i) The fair value of the receivables of $0.1 million equals the gross contractual value of $0.1 million. Satisfied by: Cash Equity instruments (4,438,851 ordinary shares of IMDEX Limited) Contingent and deferred consideration arrangements Fair value of consideration paid/payable Goodwill arising on acquisition: Estimated purchase consideration Less: fair value of identifiable net assets acquired Goodwill arising on acquisition 1,015 5,000 2,100 8,115 8,115 (3,844) 4,271 Goodwill of $4.3 million arose on the acquisition of AusSpec (including goodwill of $1.6 million associated with recognition of deferred tax liabilities in relation to identified intangible assets). The goodwill recognised reflects the growth potential and synergies arising from the acquisition. Net cash outflow arising on acquisition: Cash consideration Less: cash and cash equivalent balances acquired Net cash outflow 1,015 (11) 1,004 As at 30 June 2021, the balance of deferred consideration liability in relation to the acquisition of AusSpec is $2.5 million. Subsequent to year end, on 1 July 2021, a payment of $1.0 million was made. The remaining deferred consideration will be satisfied through the payment of $1.0 million cash and the issue of $0.5 million of IMDEX Limited ordinary shares in July 2022 on the achievement of certain new revenue-generating contracts. Included in the Group result for the year is a loss after tax of $0.1 million in relation to AusSpec. Revenue for the year includes $0.8 million in respect of AusSpec. Had the acquisition occurred on 1 July 2020, the Group’s financial performance for the period would not be significantly different. Page 49 of 68 109 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.2 Acquisition of Subsidiaries (continued) On 6 January 2020, the Group acquired 100 per cent of the issued share capital of Flex drill Constructions Limited and Flexidrill Limited (together “Flexidrill”), obtaining control of Flexidrill. Flexidrill are public unlisted companies involved in the Research and Development of Patent-Protected Drilling Technologies COREVIBETM and MAGHAMMERTM. The Group acquired Flexidrill for the purpose of commercialising those technologies. The agreed acquisition price is NZ$40 million. The Group has paid $7.1 million in cash and issued IMDEX Limited ordinary shares to the value $5.2 million up to and including the settlement date. The balance of the agreed acquisition price will be settled through: • • • • The issue of NZ$2.5 million of IMDEX Limited ordinary shares and the payment of NZ$2.5 million cash upon the successful commercialisation of MAGHAMMERTM; The payment of quarterly instalments equivalent to 10% of revenues generated from the COREVIBETM and MAGHAMMERTM technologies; The payment of dividends on the IMDEX Limited ordinary shares issued over a 4-year period from the date of their issue; and The share price appreciation on those IMDEX Limited ordinary shares over a 4-year period from the date of their issue. The Group chose to early adopt “AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business” in the prior year which resulted in this transaction being considered an asset acquisition, not a business combination under “AASB 3 Business Combinations”. The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below. Cash Receivables (i) Inventory Other assets Property, plant and equipment Intangibles Payables Loans Provisions Net assets acquired Satisfied by: Cash Equity instruments (4,737,656 ordinary shares of IMDEX Limited) Contingent and deferred consideration arrangements Fair value of consideration paid/payable Net cash outflow arising on acquisition: Cash consideration Less: cash and cash equivalent balances acquired Net cash outflow $’000 344 716 1,778 51 483 27,059 (1,082) (2,126) (66) 27,157 7,141 5,191 14,825 27,157 7,141 (344) 6,797 (i) The fair value of the receivables of $0.7 million equals the gross contractual value of $0.7 million. A deferred consideration liability of $14.8 million was recognised in respect of elements of the acquisition price that was settled post 6 January 2020. We expect that the majority of this cash flow will be incurred over a six-year period and that all will be incurred by the end of FY26. The potential undiscounted amount of all future payments that the Group could be required to make in respect of the deferred consideration liability is estimated to be between $15.2 million and $20.2 million. The fair value of the 4,737,656 ordinary shares issued as part of the consideration paid for Flexidrill ($5.2 million) was determined with reference to the volume weighted average price of IMDEX Limited securities over the 10 trading days preceding their issue. Flexidrill operated as a Research and Development enterprise, focusing on the development of the Patent-Protected Drilling Technologies COREVIBETM and MAGHAMMERTM with all Research and Development activities conducted during the financial year funded by IMDEX. If the acquisition of Flexidrill had been completed on the first day of the financial year 2020, Group revenue for the year would have been unchanged at $237.7 million and Group profit would have been unchanged at $21.8 million. 110 Page 50 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.3 Parent Entity & Subsidiary Information The ultimate parent entity in the Group is IMDEX Limited, a company incorporated in Western Australia. The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Financial Position Assets Current Assets Non-Current Assets Total Assets Liabilities Current Liabilities Non-Current Liabilities Total Liabilities Net Assets Equity Issued Capital Employee Equity-Settled Benefits Reserve Foreign Currency Translation Reserve Accumulated Losses Total Equity Financial Performance Profit for the year Other comprehensive income, net of income tax Total comprehensive profit/(loss) Retained loss at the beginning of the financial year Effect of change in accounting for cloud-based SaaS arrangements Profit for the year Effect of initial adoption of AASB16 Dividend paid Retained loss at the end of the financial year 30 June 2021 $’000 30 June 2020 $’000 47,151 104,079 151,230 10,532 30,608 41,140 110,090 169,078 7,436 (1,695) (64,729) 110,090 32,038 87,978 120,016 7,102 43,771 50,873 69,143 158,697 9,805 (1,695) (97,664) 69,143 Year Ended 30 June 2021 $’000 Year Ended 30 June 2020 $’000 26,708 - 26,708 (97,664) (513) 26,708 - 6,740 (64,729) 9,313 - 9,313 (87,231) - 9,313 (2,671) (17,075) (97,664) The profit for the year and associated increase in total assets is primarily due to the receipt of intercompany dividends which have no impact on the consolidated Group as a whole. Page 51 of 68 111 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.3 Parent Entity & Subsidiary Information (continued) Guarantee provided under the deed of cross guarantee Commitments for the acquisition of property, plant and equipment by the parent entity Within one year 30 June 2021 $’000 30 June 2020 $’000 103,377 93,523 334 334 14 14 Subsidiaries Parent Entity Imdex Limited Notes Country of Incorporation Ownership Interest 2020 2021 % % (i),(ii),(iii) Australia (ii),(iii) (ii),(iii) (ii),(iii) Controlled Entities Australian Mud Company Pty Ltd Samchem Drilling Fluids & Chemicals (Pty) Ltd Imdex International Pty Ltd Reflex Instruments Asia Pacific Pty Ltd Reflex Instrument North America Ltd Reflex Instrument South America Ltda Reflex Instruments Europe Ltd AMC Europe GmbH Flexit Australia Pty Ltd Imdex South America S.A. AMC Chile S.A. AMC Reflex Argentina S.A. AMC Reflex Peru S.A.C. AMC Drilling Fluids Pvt Limited Imdex Nominees Pty Ltd Imdex USA Inc Imdex Technologies USA LLC AMC USA LLC Reflex USA LLC AMC Oilfield Services Pte Ltd Imdex DO Brasil Industria e Comercio Ltda Imdex Global B.V. AMC Oil & Gas International Limited BVI AMC Drilling Fluids & Products – Mexico S. de RL de C.V. Mexico AMCREFLEX CIA LTDA Flexidrill Limited Flexidrill Construction Limited AusSpec International Limited (ii) (ii) (iv) (v) (vi) Australia South Africa Australia Australia Canada Chile United Kingdom Germany Australia Chile Chile Argentina Peru India Australia United States of America United States of America United States of America United States of America Singapore Brazil Netherlands British Virgin Islands Mexico Ecuador New Zealand New Zealand New Zealand 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 112 Page 52 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.3 (i) (ii) (iii) (iv) (v) (vi) Parent Entity & Subsidiary Information (continued) IMDEX Limited is the ultimate parent company and is the head entity within the tax consolidated group. These companies are part of the Australian tax consolidated group. These wholly-owned subsidiaries 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 Jun 2006, Imdex International Pty Ltd on 20 Oct 2006, Reflex Instruments Asia Pacific Pty Ltd on 14 Sep 2007, and Reflex Technology International Pty Ltd on 28 Apr 2011 (de-registered 19 Sep 2019). This entity was liquidated on 2 June 2021. This entity was liquidated on 7 May 2021. This entity was acquired on 22 July 2020. The consolidated income statement of the entities which are party to the deed of cross guarantee are: Income Statement 2021 $’000 2020 $’000 Revenue from sale of goods, rentals and software 125,345 118,625 Other income Foreign exchange gain / (loss) Raw materials and consumables used Employee benefit expenses Depreciation and amortisation expense Write back / (down) of intercompany loans Finance costs Consulting and legal expenses Commissions Rent and premises costs Travel and accommodation Motor vehicle costs Research and development costs Doubtful debts Other expenses Profit/(loss) before income tax expense Income tax expense Profit/(loss) for the year 23,049 (903) (44,812) (36,324) (11,070) - (2,438) (9,192) (1,339) (1,161) (604) (184) (12,289) 167 (11,319) 16,926 (1,869) 15,057 37,362 (390) (39,706) (33,824) (11,516) 11,183 (2,351) (6,553) (1,074) (374) (1,587) (148) (2,432) (632) (5,739) 60,844 (6,919) 53,925 Page 53 of 68 113 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.3 Parent Entity & Subsidiary Information (continued) The consolidated statement of financial position of the 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 Total current assets Non-current assets Other financial assets Property, plant and equipment Right-of-use assets Other intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Lease liabilities Provisions Total current liabilities Non-current liabilities Other financial liabilities Lease liabilities Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed capital Employee equity-settled benefits reserve Foreign currency translation reserve Retained earnings (i) Total equity (i) Retained Earnings at the beginning of the financial year Effect of change in accounting for cloud-based SaaS arrangements Net profit/(loss) Dividends received Retained earnings at the end of the financial year 2021 $’000 2020 $’000 47,609 41,122 20,293 1,426 110,450 93,805 8,783 26,352 3,397 6,848 139,185 249,635 36,773 1,923 3,670 42,366 19,489 30,161 11,128 233 61,011 103,377 146,258 169,042 7,534 7,239 (37,557) 146,258 (52,101) (513) 15,057 - (37,557) 29,668 41,523 19,537 64 90,792 81,377 10,563 29,565 1,043 3,886 126,434 217,226 32,395 3,279 3,423 39,097 17,098 30,960 6,115 253 54,426 93,523 123,703 158,662 9,903 7,239 (52,101) 123,703 (106,026) - 16,563 37,362 (52,101) 114 Page 54 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.4 Reserves The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of IMDEX, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment. On consolidation, the assets and liabilities of the Group’s foreign operations 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 exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed. Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date. Goodwill arising on acquisitions before the date of transition to A-IFRS is treated as an Australian dollar denominated asset. Equity-settled performance rights 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, Binomial Tree Method or Monte-Carlo Simulation as appropriate. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non- restrictions, and behavioural transferability, exercise considerations. The fair value determined at the grant date of the performance right 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 performance rights 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. Performance Rights Plan At the Imdex Limited Annual General Meeting on 15 October 2009 the Shareholders approved the formation of a Performance Rights Plan (PRP or Plan) and subsequently renewed at the Annual General Meeting on 18 October 2012, 20 November 2015 and 4 October 2018. The Plan allows for the issue of performance rights to employees from time to time. The quantum of performance rights granted to employees is at the discretion of the Directors and is generally based on seniority and level of contribution to the strategic goals of IMDEX. A performance right is the right to receive one fully paid IMDEX ordinary share for nil consideration should set hurdles be achieved and tenure of employment be maintained. The hurdles are set by the Directors when performance rights are issued and are generally linked to the achievement of financial or other strategic goals of IMDEX. Page 55 of 68 115 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.4 Reserves (continued) Performance rights granted in the current year Performance rights granted in the prior year Staff Performance Rights Staff Performance Rights 3,640,787 performance rights were issued to employees (Level 5 and above) Upon successful achievement of the below hurdles, allotment of these performance rights will be in September 2023 (once the 2023 financial year independent audit report is signed). in July 2020. The performance rights are subject to a number of hurdles: a market based vesting condition in Total Shareholder Return (TSR) and a non-market based vesting condition in Earnings Per Share (EPS). In the case of the TSR and the EPS hurdles, IMDEX’s performance will be measured against the TSR and EPS of a peer group consisting of the ASX300 Resources Index over the 3-year measurement period (2021 to 2023 financial year). 3,407,658 performance rights were issued to employees (Level 5 and above) Upon successful achievement of the below hurdles, allotment of these performance rights will be in September 2022 (once the 2022 financial year independent audit report is signed). in July 2019. The performance rights are subject to a number of hurdles: a market based vesting condition in Total Shareholder Return (TSR) and a non-market based vesting condition in Earnings Per Share (EPS). In the case of the TSR and the EPS hurdles, IMDEX’s performance will be measured against the TSR and EPS of a peer group consisting of the ASX300 Resources Index over the 3-year measurement period (2020 to 2022 financial year). The specified conditions for performance rights relating to each employee level are: The specified conditions for performance rights relating to each employee level are: Employee Level Specified Conditions Employee Level Specified Conditions 5, 6, 7 and 8 50% based on EPS and 50% based on TSR 5, 6, 7 and 8 50% based on EPS and 50% based on TSR Exercise of the performance rights at the end of the 3-year period (30 June 2023) will commence when the Company’s performance (as calculated by the Performance Measures) is at 50% and above of the Peer Group performance. At 50%, the allocation will be 33% of the total entitlement. This entitlement increases on a linear scale and achieves 100% entitlement when the Company’s performance is at the 90th percentile against the Peer Group. The fair value of a market performance right (TSR) at grant date was $0.84 per right. The expected total cost of the estimated 1,780,521 fully paid ordinary shares to be issued in IMDEX will therefore be $1,495,638. This value will be expensed over the vesting period from July 2020 to June 2023, with $497,634 expensed in the current year. The fair value of a non-market performance right (EPS) at grant date was $1.254 per right. For the purposes of the 2021 financial statements, the Directors have made an estimate that out of the 1,780,521 non-market performance rights issued, 75% will meet the required hurdles and will result in 1,335,391 fully paid IMDEX shares being issued. The expected total cost of the estimated 1,335,391 fully paid ordinary shares to be issued in IMDEX will therefore be $1,674,580. This value will be expensed over the vesting period from July 2020 to June 2023, with $557,173 expensed in the current year. Exercise of the performance rights at the end of the 3-year period (30 June 2022) will commence when the Company’s performance (as calculated by the Performance Measures) is at 50% and above of the Peer Group performance. At 50%, the allocation will be 33% of the total entitlement. This entitlement increases on a linear scale and achieves 100% entitlement when the Company’s performance is at the 90th percentile against the Peer Group. The fair value of a market performance right (TSR) at grant date was $0.86 per right. The expected total cost of the estimated 1,450,462 fully paid ordinary shares to be issued in IMDEX will therefore be $1,247,397. This value will be expensed over the vesting period from July 2019 to June 2022, with $393,766 expensed in the current year. The fair value of a non-market performance right (EPS) at grant date was $1.357 per right. For the purposes of the 2021 financial statements, the Directors made an estimate that out of the 1,450,462 non-market performance rights issued, 75% (FY20: 50%) will meet the required hurdles and will result in 1,087,847 fully paid IMDEX shares being issued. The expected total cost of the estimated 1,087,847 fully paid ordinary shares to be issued in IMDEX will therefore be $1,476,208. This value will be expensed over the vesting period from July 2019 to June 2022, with $547,714 expensed in the current year. 116 Page 56 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.4 Reserves (continued) Former Managing Director’s Performance Rights 381,760 performance rights were granted to the former Managing Director on 21 October 2019 following approval by the shareholders at the Annual General Meeting. The former Managing Director forfeited 254,158 performance rights on his retirement on 1 July 2020. Upon successful achievement of the below hurdles, the remaining 127,602 performance rights will vest and convert to fully paid ordinary shares in the Company (once the 2022 financial year independent audit report is signed). The former Managing Director is subject to two hurdles each with equal weighting; a market based vesting condition in Total Shareholder Return (TSR) and a non-market based vesting condition in Earnings Per Share (EPS). In each case the TSR and the EPS of IMDEX will be measured against the TSR and EPS of a peer group consisting of the ASX300 Resources Index over the 3-year measurement period (2020 to 2022 financial year). Exercise of the performance rights at the end of the 3-year period (30 June 2022) will commence when the Company’s performance (as calculated by the Performance Measures) is at 50% and above of the Peer Group performance. At 50%, the allocation will be 33% of the total entitlement. This entitlement increases on a linear scale and achieves 100% entitlement when the Company’s performance is at the 90th percentile against the Peer Group. The fair value of a market performance right (TSR) at grant date was $0.86 per right. The expected total cost of the estimated 65,801 fully paid ordinary shares to be issued in IMDEX will therefore be $54,869. This value will be expensed over the vesting period from October 2019 to June 2022, with $2,040 expensed in the current year. The fair value of a non-market performance right (EPS) at grant date was $1.357 per right. For the purposes of the 2021 financial statements, the Directors have made an estimate that out of the 63,801 non-market performance rights issued, 75% (FY20: 50%) will meet the required hurdles and will result in 47,851 fully paid IMDEX shares being issued. The expected total cost of the estimated 47,851 fully paid ordinary shares to be issued in IMDEX will therefore be $64,933. This value will be expensed over the vesting period from October 2019 to June 2022, with $11,049 expensed in the current year. Page 57 of 68 117 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.4 Reserves (continued) Outstanding Performance Rights 2021 Grant Date 1-Jul-17 19-Oct-17 1-Jul-18 4-Nov-18 21-Oct-19 21-Oct-19 1-Jul-20 Grant Date 1-Jul-16 25-Nov-16 1-Jul-17 19-Oct-17 1-Jul-18 4-Nov-18 21-Oct-19 21-Oct-19 Expiry Date Jul-20 Jul-20 Jul-21 Jul-21 Jul-22 Jul-22 Jul-23 Expiry Date Jul-19 Jul-19 Jul-20 Jul-20 Jul-21 Jul-21 Jul-22 Jul-22 Tranche 19 MD Tranche Tranche 20 MD Tranche Tranche 21 MD Tranche Tranche 22 2020 Tranche 18 MD Tranche Tranche 19 MD Tranche Tranche 20 MD Tranche Tranche 21 MD Tranche Estimated Number of Performance Rights Market Value at Grant Date $ Exercise Price $ Opening balance Granted - - - - - - - 0.740 3,888,120 643,762 0.965 2,626,391 0.947 364,086 1.079 3,300,386 1.109 127,602 1.109 - 1.047 - - - - - - 3,640,787 Satisfied by the allotment of shares (3,408,944) (547,348) - - - - - Expired ^ Closing balance (479,176) (96,414) - - (188,240) 2,438,151 364,086 (399,462) 2,900,924 127,602 (79,745) 3,561,042 - - Market Value at Grant Date $ 0.220 0.620 0.740 0.965 0.947 1.079 1.109 1.109 Exercise Price $ - - - - - - - - Estimated Number of Performance Rights Opening balance 9,332,504 2,268,946 4,017,730 643,762 2,789,476 364,086 - - Granted - - - - - - 3,407,658 381,760 Satisfied by the allotment of shares (7,510,042) (1,722,130) - - - - - - Expired ^ (1,822,462) (546,816) (129,610) - (163,085) - (107,272) (254,158) Closing balance - - 3,888,120 643,762 2,626,391 364,086 3,300,386 127,602 ^ - Performance rights expire either on failure to maintain employment tenure or on failure to satisfy performance hurdles. Significant accounting estimates and assumptions Share-based payments recorded for the performance rights are subject to estimation as they are calculated using the Black-Scholes option pricing, Binomial Tree Method or Monte-Carlo Simulation model, as appropriate, which is based on significant assumptions such as volatility, dividend yield, expected term and forfeiture rate. 118 Page 58 of 68 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.5 Contingent Assets & Liabilities The Group is party to legal proceedings and claims which arise in the normal course of business. Any liabilities may be mitigated by legal defences, insurance, and third-party indemnities. Unless recognised as a provision (refer Note 4.7), management do not consider it to be probable that they will require settlement at the Group’s expense. (i) Contingent Liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non- occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Group does not recognise a contingent liability but discloses its existence in the financial statements. (ii) Contingent Assets A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non- occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. A subsidiary of the Group (Australian Mud Company Pty Ltd or “AMC”) is currently a party to litigation in relation to infringement of patents by a third party. The courts have found in favour of AMC on the matter, and the company is awaiting an outcome on the quantum of the financial settlement. 5.6 Key Management Personnel Compensation The aggregate compensation of the Key Management Personnel of the Group and the Company is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments (i) 5.7 Included the compensation of former Managing Director. Related Party Transactions 2021 $ 4,057,244 166,817 49,525 111,024 864,319 5,248,929 2020 (i) $ 3,621,712 167,857 (45,339) - 1,153,364 4,897,594 Other Transactions with Key Management Personnel (and their related parties) of IMDEX Mr. I. Gustavino is a director and shareholder of the consulting company Atrico Pty Ltd, that provided consulting services to the IMDEX Group on normal commercial terms and conditions from 1 July 2020 to 30 September 2020 (when the agreement was terminated). Transactions with Directors Profit from ordinary activities before income tax includes the following items of expense: Consultancy expense 2021 $ 2020 $ 16,200 86,100 During the reporting period, at the direction of the vendors of AusSpec International Limited (Refer Note 5.2), the Group issued IMDEX shares to Atrico Pty Ltd to satisfy a fee owed by the vendors to Atrico Pty Ltd. Refer to ASX announcement 12 August 2020. Page 59 of 68 119 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities OTHER OTHER 5.8 Auditor Remuneration The auditor of IMDEX is Deloitte Touche Tohmatsu. During the year, the following fees were paid or were payable for services provided by the auditor of the parent entity and its related practices: Notes 2021 $ 2020 $ Deloitte and related network firms Audit or review of the financial report - Group - Subsidiary Other assurance and agreed-upon procedures under other legislation or contractual arrangements Other services: - Tax and corporate compliance services - Legal services - IT support services Other auditors and their related network firms Audit or review of the financial report - Subsidiaries Other services: - Tax compliance services - Accounting and other services (i) 407,500 125,480 532,980 367,850 78,410 446,260 12,750 12,350 2,440 2,660 13,322 18,422 564,152 16,159 37,213 31,809 85,181 543,791 105,534 195,271 - 884 884 106,418 24,687 6,066 30,753 226,024 (i) IT support services performed by Presence of IT, an existing supplier to IMDEX, whose team joined Deloitte on 9 December 2019. Amounts paid are for support services during the period up to transition of this contract to a new service provider. 5.9 Subsequent Events There have been no matters or circumstances that have arisen since the end of the financial year that have significantly affected, or may significantly affect, the operations of the Group, the result of these operations, or the state of affairs of the Group in future financial years. 120 Page 60 of 68 IMDEX Annual Report 2021 Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2, Brookfield Place 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au The Board of Directors IMDEX Limited 216 Balcatta Road Balcatta WA 6021 15 August 2021 Dear Board Members AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo IIMMDDEEXX LLiimmiitteedd In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of IMDEX Limited. As lead audit partner for the audit of the financial report of IMDEX Limited for the year ended 30 June 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DDEELLOOIITTTTEE TTOOUUCCHHEE TTOOHHMMAATTSSUU DD KK AAnnddrreewwss Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 121 IMDEX Annual Report 2021 Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2, Brookfield Place 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee mmeemmbbeerrss ooff IIMMDDEEXX LLiimmiitteedd RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt Opinion We have audited the financial report of IMDEX Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 122 IMDEX Annual Report 2021 KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr AAccccoouunnttiinngg ffoorr tthhee aaccqquuiissiittiioonn ooff AAuussSSppeecc As disclosed in Note 5.2, effective 22 July 2020 Imdex Limited acquired 100% of the issued share capital of of AusSpec International Limited (“AusSpec”) for an agreed consideration of $8.1 million. The assets acquired consist largely of intangible assets in relation to the intellectual property associated with the the aiSIRIS platform. Judgement was exercised in: • Assessing whether the transaction is accounted for as an asset acquisition or a business combination in accordance with the requirements of AASB 3 Business Combinations; • Determining the value of the deferred consideration to be recognised as a liability at acquisition date; and • Assessing the fair values of identifiable assets and liabilities acquired and the adjustment to carrying values on acquisition. RReeccoovveerraabbiilliittyy ooff nnoonn--ccuurrrreenntt aasssseettss Included in the Group’s consolidated statement of financial position at 30 June 2021 are goodwill, intangible assets, right of use lease assets and property, plant and equipment totalling $197 million. Management undertakes impairment testing to test the recoverability of goodwill annually. Additionally, an assessment is made as to whether any non-current asset or cash generating unit (‘CGU’) may be impaired at balance date. The assessment requires significant judgement due to assumptions and estimates involved in preparing a value in use model (‘VIU’) to estimate a CGU’s recoverable amount, including: Forecast future cash flows; and - - Discount rates. Our audit procedures included, but were not limited to: • Reviewing the Share Sale Agreement to understand key terms and conditions, including the elements of consideration payable under the agreement; • Obtaining management’s assessment and calculations for the acquisition accounting and performing the following: o Evaluating the fair value of the consideration payable, including assessing the probability of the contingent consideration being paid and calculating the fair value of the deferred consideration payable at acquisition date; o Engaging our internal valuation specialists to challenge the fair value determined for the intangible assets acquired; and o Assessing the fair value of the remaining identifiable assets acquired and liabilities assumed and the adjustments to derive the values at acquisition. • We also assessed the appropriateness of the disclosures in the Notes to the financial statements. Our procedures included, but were not limited to: • Evaluating the risk of impairment in each CGU, or group of CGU’s to which goodwill is allocated, by assessing whether a CGU’s implied EBITDA multiple exceeded an acceptable market-based EBITDA multiple at balance date; • Obtaining management’s impairment assessment carried out for CGU’s, and groups of CGU’s to which goodwill is allocated, and assessing the work performed against the requirements of the relevant accounting standard; • Assessed the recoverable value modelling for the African and South American CGU’s, as these CGU’s demonstrated characteristics that suggested impairment testing was required, by: 123 IMDEX Annual Report 2021 o Inquiring of management and the directors in relation to forecasting assumptions within the VIU models and agreeing these to the board approved budgets; o Reviewing the mathematical accuracy and modelling integrity of the VIU models; o Challenging the assumptions contained in the cash flow forecasts, including the revenue projections, forecast gross margins and capital expenditures, including the ongoing impact of COVID-19; o Assessing the appropriateness of the discount rates used in the value in use models, with the assistance of our internal valuation specialists,, and o Performing sensitivity analysis on key assumptions within the model, including the expected revenues, margins, growth rates and discount rates. • We also assessed the appropriateness of the disclosures in the Notes to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 124 IMDEX Annual Report 2021 Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • • • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report 125 IMDEX Annual Report 2021 because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in on pages 60 to 76 of the Directors’ Report for the year ended 30 June 2021. In our opinion, the Remuneration Report of IMDEX Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DDEELLOOIITTTTEE TTOOUUCCHHEE TTOOHHMMAATTSSUU DD KK AAnnddrreewwss Partner Chartered Accountants Perth, 15 August 2021 126 IMDEX Annual Report 2021IMDEX LIMITED and its controlled entities ADDITIONAL SECURITIES EXCHANGE INFORMATION ADDITIONAL SECURITIES EXCHANGE INFORMATION AS AT 11 AUGUST 2021 AS AT 11 AUGUST 2021 (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 MORGAN STANLEY L1 CAPITAL PTY LTD FMR LLC YARRA FUNDS MANAGEMENT FIL LIMITED (c) Twenty Largest Holders of Quoted Equity Securities Ordinary Shareholders HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED CS THIRD NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMINEES PTY LTD SANDHURST TRUSTEES LTD MR RICHARD KARL HILL HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 UBS NOMINEES PTY LTD WARBONT NOMINEES PTY LTD MR BERNARD RIDGEWAY CS FOURTH NOMINEES PTY LIMITED NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> MR BRUCE CRAIG MUNRO WEAR SERVICES PTY LTD Number of Fully Paid Ordinary Shareholders Number of Performance Rights Holders 1,083 1,248 549 749 116 3,745 262 - 2 5 50 25 82 - Fully Paid Number Percentage 41,494,745 32,595,205 22,495,350 17,712,047 17,133,650 10.50 8.20 5.70 4.50 4.30 Fully Paid Number Percentage 83,942,117 76,802,773 76,731,074 21,207,642 20,683,224 12,641,255 7,154,942 6,703,567 5,100,000 4,565,645 4,535,398 3,894,579 3,349,126 3,161,279 2,369,715 1,883,859 1,666,611 1,453,101 1,300,258 1,015,166 340,161,331 21.17 19.37 19.35 5.35 5.22 3.19 1.80 1.69 1.29 1.15 1.14 0.98 0.84 0.80 0.60 0.48 0.42 0.37 0.33 0.26 85.80 Page 67 of 68 127 IMDEX Annual Report 2021 IMDEX LIMITED and its controlled entities ADDITIONAL SECURITIES EXCHANGE INFORMATION ADDITIONAL SECURITIES EXCHANGE INFORMATION AS AT 11 AUGUST 2021 AS AT 11 AUGUST 2021 (d) Director and Company Secretary Shareholdings Number of Shares Number of Performance Rights 400,000 204,546 70,000 62,077 - - - - - - 687,611 410,377 - - 1,384,234 410,377 Name Mr. A. Wooles Mr. K. Dundo Ms. S. Layman Mr. I. Gustavino Ms T. Arlaud Mr. P. Evans Mr. M Tomasz (e) Company Secretary Mr Paul Anthony Evans Mr Michael Tomasz (f) Registered Office 216 Balcatta Road Balcatta Western Australia 6021 Phone: (08) 9445 4010 (g) Share Registry Computershare Investor Services Level 11 172 St Georges Terrace Perth Western Australia 6000 Phone: (08) 9323 2000 128 Page 68 of 68 IMDEX Annual Report 2021 SHAREHOLDER INFORMATION CORPORATE INFORMATION Registered Company Name: IMDEX Limited ABN: Exchange: ASX Code: 78 008 947 813 Listed on the Australian Securities Exchange (ASX) IMD Listing Date: 24 September 1987 Registered Head Office: 216 Balcatta Road Balcatta Western Australia 6021 Registered PO Box: PO BOX 1262 Osborne Park Western Australia 6916 Telephone: Email: +61 (8) 9445 4010 imdex@imdexlimited.com Web Address: www.imdexlimited.com Bank Institutions: Commonwealth Bank of Australia Auditors: Deloitte Touche Tohmatsu Legal Advisors: HopgoodGanim Share Registry: Computershare SHARE REGISTRY ENQUIRIES Investors seeking information about their shareholdings should contact IMDEX’s share registry: Computershare Investor Services Pty Limited Computershare can assist with queries on share transfers, dividend payments, the dividend reinvestment plan, notification of tax file numbers and changes of name, address or bank account details. Address: Level 11, 172 St Georges Terrace Perth WA 6000 Postal address: GPO Box D182 Perth WA 6840 Telephone: 1300 558 507 (within Australia) +61 3 9415 4632 (outside Australia) Facsimile: +61 3 9473 2500 Email: web.queries@computershare.com.au Further information and downloadable forms can be found at https://www.imdexlimited.com/investors/shareholder-services 130 IMDEX Annual Report 2021SHAREHOLDER STATISTICS SHARE PRICE AND MARKET CAPITALISATION AT 30 JUNE 2021 Share Price Shares on Issue Market Capitalisation $2.04 $396.5m $808.8m SHARE PRICE PERFORMANCE SHARES BY COMPOSITION SHARES BY GEOGRAPHY Total sharesholder % Total shares by % composition Institutional Retail Broker Corporate 71% 7% 13% 2% geography Australia North America United Kingdom Europe 60% 16% 12% 3% 131 IMDEX Annual Report 2021KEY ANNOUNCEMENTS 16/6/2021 4/6/2021 11/2/2021 8/2/2021 8/2/2021 8/2/2021 8/2/2021 8/2/2021 8/1/2021 Macquarie Emerging Leaders Conference Market Update Appointment of Additional Company Secretary Director Appointment/Resignation IMDEX 2021 Half Year Results Teleconference Script Dividend/Distribution - IMD Half Yearly Results Presentation Half Yearly Results Announcement Half Yearly Report and Accounts 1H21 Teleconference Details 26/10/2020 Change of Directors Interest Notice 15/10/2020 Results of Meeting 15/10/2020 Chairman’s Address to Shareholders 23/9/2020 11/9/2020 17/8/2020 17/8/2020 17/8/2020 17/8/2020 17/8/2020 17/8/2020 17/8/2020 17/8/2020 12/8/2020 12/8/2020 12/8/2020 12/8/2020 11/8/2020 10/8/2020 10/8/2020 4/8/2020 22/7/2020 22/7/2020 7/7/2020 1/7/2020 Employee Rights Plan Appendix 2A and Appendix 3G Notice of Annual General Meeting/Proxy Form FY20 Results Webcast Script Dividend/Distribution - IMD Full Year Results Presentation Full Year Results Announcement Appendix 4G and Corporate Governance Statement Full Year Statutory Accounts Annual Report to shareholders Preliminary Final Report Reinstatement to Official Quotation Change of Director’s Interest Notice Court Orders Granted Suspension from Official Quotation Court Application Update Trading Halt Delayed Appendix 2A and Cleansing Notice FY20 Results Teleconference Details Proposed issue of Securities - IMD IMDEX completes strategic AusSpec acquisition Acquisition of AusSpec IMDEX confirms retirement of Managing Director 133 IMDEX Annual Report 2021ANNUAL GENERAL MEETING Our Annual General Meeting will be held on 7 October 2021, at 11:00 am (AWST) at IMDEX’s Head Office 216 Balcatta Road, Balcatta, Western Australia. Members of our Board and Executive Leadership Team will be available to discuss the Company’s performance, operations, and technologies. CORPORATE CALENDAR 16 August 2021 16 - 20 August 2021 15 September 2021 07 October 2021 31 December 2021 7 February 2022 7 - 11 February 2022 30 June 2022 15 August 2022 Release of FY21 Full Year Financial Results FY21 Full Year Results Road Show Release of FY21 Sustainability Report FY21 Annual General Meeting 1H22 Year End Release of 1H22 Results 1H22 Results Road Show FY22 Full Year End Release of FY22 Results 15 - 19 August 2022 FY22 Results Road Show 134 IMDEX Annual Report 2021COMPANY HISTORY December 1980 Australian company Pilbara Gold NL incorporated July 1985 Pilbara Gold NL changed name to IMDEX Limited September 1987 IMDEX Limited listed on the ASX 1988 1997 2001 2005 2005 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 July Sale of IMDEX Minerals August Acquisition of African based company Samchem August 2006 Acquisition of Swedish based REFLEX Group of Companies and United Kingdom based company Chardec May 2007 Acquisition of Swedish based company Flexit July 2007 Ace merged with REFLEX. IMDEX finalised the sale of its interest in IMDEX Arabia to RTE Acquisition of Canadian based Poly-Drill and a 75% interest in Kazakhstan based Suay Energy Services October 2007 Sale of Surtron Technologies November 2007 Acquisition of Chilean based company Southernland January 2008 Acquisition of German based company System Entwicklungs July 2008 Acquisition of the remaining 25% of Kazakhstan based Suay Energy Services September 2008 Acquisition of Australian based company Wildcat Chemicals Australia July 2010 New regional structure implemented and business reporting streamlined into Minerals and Oil & Gas Divisions September 2010 Acquisition of Australian based companies Fluidstar and Ecospin March 2011 Acquisition of German based company Mud-Data July 2011 Formation of DHS Services joint venture Acquisition of Australian based company Australian Drilling Specialties Pty Ltd August 2011 Acquisition of Brazilian based company System Mud Indústria e Comércio Ltda January 2012 Acquisition of Vaughn Energy Services (VES) by IMDEX’s DHS Services joint venture November 2012 Acquisition of ioGlobal Pty Ltd, ioAnalytics Pty Ltd and ioGlobal Solutions Inc. (together ioGlobal) December 2012 DHS Services and Vaughn Energy Services rebranded as VES International September 2014 Acquisition of 2iC June 2015 Divestment of Suay Energy Services 2016 Divestment of AMC Oil & Gas January 2018 Option to acquire Flexidrill Limited and Flexidrill Construction Limited (together Flexidrill) January 2020 Completed acquisition of Flexidrill July 2020 Completed acquisition of AusSpec International 135 IMDEX Annual Report 2021FORWARD LOOKING STATEMENTS This report may contain certain ‘forward-looking statements’ and projections provided by or on behalf of Imdex limited (IMDEX). Forward looking statements can generally be identified by the use of forward- looking words such as, ‘expect’, ‘anticipate’, ‘likely’, ‘intend’, ‘should’, ‘could’, ‘may’, ‘predict’, ‘plan’, ‘propose’, ‘will’, ‘believe’, ‘forecast’, ‘estimate’, ‘target’ ‘outlook’, ‘guidance’ and other similar expressions within the meaning of securities laws of applicable jurisdictions. These forward looking statements reflect various assumptions made by or on behalf of IMDEX. You are cautioned not to place undue reliance on forward looking statements. The statements, opinions and estimates in this report are based on assumptions and contingencies subject to change without notice, as are statements about market and industry trends, projections, guidance, and estimates. The forward looking statements contained in this report are not guarantees or predictions of future performance and involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of IMDEX, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. The forward looking statements are subject to significant business, economic and competitive uncertainties and contingencies associated with the Mining-Tech industry which may be beyond the control IMDEX, which could cause actual results or trends to differ materially, including but not limited to retention of key business relationships, environmental impacts and claims, operational and executional risks, research and development and intellectual property risks, an inability to meet customer demand, price and currency fluctuations, operating results, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries, approvals and cost estimates, environmental risks, ability to meet funding requirements and share price volatility. Accordingly, there can be no assurance that such statements and projections will be realised. IMDEX makes no representations as to the accuracy or completeness of any such statement of projections or that any forecasts will be achieved. A number of important factors could cause actual results, achievements or performance to differ materially from the forward looking statements, including the risks and uncertainties set out above. Investors should consider the forward looking statements contained in this report in light of those matters. the forward looking statements are based on information available to IMDEX as at the date of this report. Except as required by law or regulation (including the ASX listing rules), IMDEX undertakes no obligation to provide any additional or updated information whether as a result of new information, future events, or results or otherwise. indications of, and guidance or outlook on, future earnings or financial position or performance are also forward looking statements. 136 IMDEX Annual Report 2021imdex@imdexlimited.com www.imdexlimited.com

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