GETTING IT RIGHT
14/15
ANNUAL REPORT
MACMAHON ANNUAL REPORT 2015 II
CONTENTS
AT A GLANCE
CHAIRMAN’S REVIEW
OPERATIONAL AND FINANCIAL REVIEW
OPERATIONAL
FINANCIAL
BUSINESS STRATEGY
RISK MANAGEMENT
CORPORATE RESPONSIBILITY
SAFETY
PEOPLE
ENVIRONMENT
BOARD PROFILES
EXECUTIVE PROFILES
FINANCIAL REPORT
2
4
6
8
10
11
12
14
14
16
18
19
20
21
MACMAHON ANNUAL REPORT 2015 MACMAHON ANNUAL REPORT 2015
1
BUILDING A MORE RESILIENT
AND DYNAMIC MACMAHON
Macmahon is known for its pioneering spirit.
With a proud history spanning more than 50 years, Macmahon has
demonstrated time and time again that it has the tenacity to overcome the
toughest of challenges.
We know that as our customers’ needs change, so must we. Indeed, the key to
our long term success will continue to be our ability to adapt our business to
best match the cyclical nature of the resource industry.
There is no denying that current market conditions are challenging for those
operating in the sector. However, this is where our mettle is tested and as
always, we’re up for the challenge.
We’ve been through this cycle before and we will, as we have in the past,
demonstrate our resilience by listening to our customers, recognising where
the best opportunities lie and putting the right strategies in place to maximise
the return to both the business and our clients.
Today, Macmahon is a smarter, leaner, more streamlined operation.
We see exciting times ahead as our flexible business structure enables us to
“right-fit” ourselves to any project and deliver world class mining techniques
and technology faster and more efficiently than ever before.
MACMAHON ANNUAL REPORT 2015 MACMAHON ANNUAL REPORT 2015
2
AT A GLANCE
MACMAHON
TODAY
TOTAL
REVENUE
$
$660M
ORDER
BOOK
$1.15B
PROJECT
PIPELINE
$2B
TOTAL
WORKFORCE OF
~1200
5.5
MILLION
MAN HOURS WORKED
WORKING IN
40ºC
- 40ºC
TO
MINING
10
DIFFERENT
COMMODITIES
ACROSS 6 COUNTRIES
167M
TONNES MOVED
1.96M
UNDERGROUND METRES DRILLED
OVER
150
DUMPTRUCKS
OVER
100
EXCAVATORS AND LOADERS
OVER
50
DRILL
RIGS
MACMAHON ANNUAL REPORT 2015 MACMAHON ANNUAL REPORT 2015 4
CHAIRMAN’S
REVIEW
MACMAHON ANNUAL REPORT 2015
RIGHT SIZING TO MEET
OUR CUSTOMERS’ NEEDS
The 2015 financial year saw market conditions continue to deteriorate with mining
companies responding in a number of ways, including taking operations in house,
rationalising their cost structures, and reducing activity levels. This resulted in
a sharp reduction in work for Macmahon and a subsequent downward shift in
revenue as major projects including Christmas Creek, Eaglefield, Tavan Tolgoi
and Waihi concluded.
As a result, the Board made the decision to significantly
restructure the business to better meet the challenges before
us. During the year we made solid progress on the objectives
we set ourselves: to streamline our business model, reduce
operating costs, strengthen our balance sheet, and improve
project delivery.
Given the ongoing challenges facing the industry, the Board has
determined that no dividend will be declared for the year ending
30 June 2015. The Board remains committed to returning value
to shareholders and will seek to implement a number of capital
management initiatives as soon as the Company reaches
sustainable profitability.
Of particular note, we successfully consolidated our head
office and world class maintenance facilities at Perth Airport
and implemented a sustainable reduction in overheads to
match current business requirements. Our new organisational
structure has reduced the layers of management between our
projects and the executive team, which has already resulted in
an improvement in performance across our key operations.
The settlement of the CSA claim and the recent sale of our
business in Mongolia have significantly strengthened our
balance sheet and I am pleased to report that the Company is
now in a much stronger, net cash position.
FINANCIAL PERFORMANCE
Whilst our current financial position is now much stronger,
I am disappointed to report that the Company recorded a net
loss after tax of $217.9 million for the 2015 financial year.
This loss directly relates to the ongoing challenging market
conditions impacting the sector which resulted in the Company
incurring significant restructuring costs and needing to impair
a significant amount of idle equipment and excess inventory.
Excluding these one-off items, the Company’s underlying profit
after tax was $10 million.
OUTLOOK
Whilst market conditions remain challenging for the resources
sector, there has been an increase in the number of contracting
opportunities coming to market as mining companies continue
to seek additional ways to reduce their cost base. As a result,
the Company is currently tendering more than $2.2 billion of
new work, both in Australia and overseas. This work is spread
across a range of commodities including gold, copper, nickel,
iron ore, coal and phosphate.
With Macmahon’s improved balance sheet position, our
strategy for the forthcoming period is to return the Company to
profitability, and to target growth by:
∆ maintaining a low cost base;
∆
improving operational performance; and
∆ pursuing targeted growth opportunities.
Whilst securing new work is a clear priority, Macmahon is
remaining disciplined in regards to tendering new work. Our
current focus is on improving our performance across all
existing contracts and ensuring that all operations achieve
benchmarked performance rates.
MACMAHON ANNUAL REPORT 2015 5
With Sybrandt’s appointment confirmed, I have now
relinquished my executive duties and resumed my previous
role as Non-executive Chairman of the Board.
GOVERNANCE AND THE BOARD
The Board is committed to maintaining high standards
of governance, compliance, business ethics and safety
performance. We strongly believe that good corporate
governance is critical to the long term sustainability of the
organisation. With this in mind we have continued to monitor
and review our corporate governance and reporting practices
to ensure alignment with the latest ASX principles and
recommendations. In addition to this report, our corporate
governance statement can be found on our website, and we
encourage all shareholders to read it.
In keeping with the Board’s commitment to an orderly renewal
process, further changes were made to the composition of
the Board during the year. As foreshadowed at the Company’s
Annual General Meeting in November, Non-executive Director
and Deputy Chairman, Mr Barry Cusack, resigned from the
Macmahon Board in January. In line with the Company’s revised
size and structure, a replacement for Mr Cusack’s position
has not been sought. On behalf of the Board I wish to take this
opportunity to thank Mr Cusack for his contribution to the
Company during his service as a director over the past 12 and
half years.
SHAREHOLDERS AND SUPPLIERS
In closing, I wish to acknowledge and thank our shareholders
and our suppliers for their ongoing support during the year.
This has certainly been a challenging period for Macmahon and
the sector more broadly and I thank you for your patience and
trust in the Company.
We remain firmly committed to returning the Company
to sustainable profitability and are continuing to make the
necessary changes to our business in order to achieve the
returns that shareholders deserve.
CHAIRMAN’S
REVIEW
PEOPLE
The past 12 months have been exceptionally challenging for
our people as we have resized and restructured the business.
On behalf of the Board, I wish to take this opportunity to
sincerely thank those employees who have left the business,
for their passion and commitment over the years.
In January 2015, I assumed the role of Executive Chairman
following the resignation of Ross Carroll, our Chief Executive
Officer. Ross had been with the Company since 2006 in a
number of senior roles including Chief Financial Officer and Chief
Operating Officer – Mining, before taking on the role of Chief
Executive Officer in 2012. On behalf of the Board, I wish to take
this opportunity to thank Ross for his hard work and dedication
during what has been a very challenging period for the Company.
We wish him the best in his future endeavours.
Over the past six months I have taken the opportunity to
implement a new organisational structure in order to drive
accountability across our senior project and operational
personnel.
As a result of this revised structure, several changes to
the Company’s senior management team have also been
made. The new leadership team now has a clear objective to
deliver improved returns to shareholders through enhanced
performance – both operationally and financially. I am confident
that with our new streamlined operating model and a much
lower cost base in place, this new team will be successful in
delivering on their objectives.
New Chief Executive Officer
In July 2015, following an extensive search process, the Board
appointed Sybrandt van Dyk to the role of Chief Executive
Officer. Sybrandt has been with Macmahon since April 2014,
when he was appointed as Chief Financial Officer. Prior to joining
the Company, Sybrandt was at the WesTrac Group where he held
a number of senior operational roles, including Chief Operating
Officer (WA), Chief Financial Officer (Group) and General
Manager – Mining (WA/NSW).
I am pleased to report that since joining Macmahon, Sybrandt
has been instrumental in reshaping the Company into the leaner,
more dynamic and resilient business that we are today. He has an
intimate understanding of the Company’s history and importantly,
knows what is required to grow the business and deliver
sustainable profits. Accordingly, the Board and I are confident
that Sybrandt has what it takes to deliver on the Company’s
strategic vision – to be a leading international contractor.
Jim Walker
CHAIRMAN
MACMAHON ANNUAL REPORT 2015 MACMAHON ANNUAL REPORT 2015
6
OPERATIONAL AND
FINANCIAL REVIEW
THE RIGHT FIT
FOR ANY PROJECT
SURFACE MINING
AND CONSTRUCTION
UNDERGROUND
MINING
ENGINEERING
PLANT AND
MAINTENANCE
■ MINE PLANNING
■ MINE MANAGEMENT
■ DRILLING AND BLASTING
■ MINING (BULK AND SELECTIVE)
■ CRUSHING AND SCREENING
■ FIXED PLANT MAINTENANCE
■ CAMP AND MINE MANAGEMENT
■ TRAIN LOADOUT MANAGEMENT
■ OPERATE AND MAINTAIN CLIENT EQUIPMENT
■ TOTAL MINE MANAGEMENT
■ UNDERGROUND DEVELOPMENT
■ UNDERGROUND PRODUCTION
■ PORTAL ESTABLISHMENT
■ RAISEDRILLING
■ CABLEBOLTING
■ SHOTCRETING
■ REMOTE SHAFT LINING
■ PRODUCTION DRILLING
■ SHAFT SINKING
■ DESIGN AND ENGINEERING, ELECTRICAL AND MECHANICAL WORKS FROM
CONCEPT TO TURNKEY PACKAGES
■ FABRICATION, INSTALLATION AND MAINTENANCE OF STRUCTURAL, MECHANICAL,
MINING AND ELECTRICAL PLANT AND EQUIPMENT FOR SURFACE AND
UNDERGROUND CLIENTS
■ PROCUREMENT, INCLUDING EQUIPMENT SELECTION, DESIGN AND FABRICATION
■ PROJECT MANAGEMENT AND COMMISSIONING
■ INSTALLATION WORKS, WITH RAPID MOBILISATION TO BUILD PROJECTS
■ COMMISSIONING, SHUTDOWN AND MAINTENANCE MANAGEMENT
■ OPERATION AND MAINTENANCE OF CLIENT-OWNED PLANT AND INFRASTRUCTURE
■ WATER MANAGEMENT AND TAILINGS DAM MAINTENANCE SERVICES
■ MODIFICATION TO EXISTING PLANT TO SUIT CLIENTS’ NEEDS
■ DESIGN, CONSTRUCT, COMMISSION AND MAINTAIN CRUSHING AND SCREENING PLANT
■ SPECIALISED ENGINEERING - ORE FLOW SYSTEM MANAGEMENT
■ 3D SCANNING AND MODELLING
■ SPECIALISED SERVICE TEAM
MACMAHON ANNUAL REPORT 2015 7
MACMAHON ANNUAL REPORT 2015 8
OPERATIONAL AND
FINANCIAL REVIEW
Macmahon is an international contracting company offering the complete
package of mining services to clients in Australia, New Zealand, South East Asia,
Central Asia and Africa. Headquartered in Perth, the Company has extensive
knowledge and experience in both surface and underground mining as well as
engineering design and fabrication, construction and maintenance services.
OPERATIONAL
SURFACE MINING AND CONSTRUCTION
Macmahon offers a full range of surface mining and
construction services, including, but not limited to, mine
planning, drill and blast, bulk and selective mining, crushing
and screening, materials handling, resource infrastructure
development, civil construction, water management, and plant
operation and maintenance.
Project activity
∆ Macmahon is currently providing a full range of mining
services at the Tropicana Gold Mine in Western Australia for
AngloGold Ashanti and Independence Group. Over the past
six months project performance has improved significantly
and the Company remains on target to achieve further
productivity gains.
∆
In January 2015, the Company was awarded a 3 year
contract extension by Rio Tinto to continue its tailings dam
management operations at the Argyle Diamond Mine in
Western Australia.
∆ Throughout the year the Company successfully entered
into a number of short-term, wet and dry equipment hire
agreements with a range of customers across Australia.
∆ The Company’s Maintenance Service business unit also
continued to grow the volume of work from external clients
during the year – successfully offsetting reduced internal
workload demand.
Projects successfully completed
∆
In February 2015 Fortescue Metals Group consolidated its
two Christmas Creek Mines in Western Australia. As a result,
Macmahon’s mining services contract at the Christmas
Creek Expansion Project concluded on 20 May 2015.
∆
In May 2015, Newmont Waihi Gold announced that
Macmahon’s mining contract at the Martha Mine in New
Zealand would be concluding ahead of schedule. The decision
to cease operations early was due to a geotechnical issue
with the mine wall. The Company has since successfully
demobilised from site.
∆ During the period, operations at Peabody’s Eaglefield Mine
in Queensland were completed ahead of schedule and
demobilisation activities were finalised safely and efficiently.
Other achievements
During the period the Company successfully transitioned its
indigenous joint-venture partnership with Triodia Tropicana Pty
Ltd to a standalone business. The successful joint venture was
established in an effort to bridge the gap between the mining
sector and the Great Victorian Desert communities through the
creation of employment opportunities and workplace training.
Following the successful completion of the program, Triodia
Tropicana now has sole responsibility for providing Light Vehicle
Workshop services to Macmahon and AngloGold Ashanti at the
Tropicana Gold project.
MACMAHON ANNUAL REPORT 2015 OPERATIONAL AND
FINANCIAL REVIEW
9
UNDERGROUND MINING
INTERNATIONAL OPERATIONS
Macmahon specialises in providing high quality underground
development and production services and its expertise extends
to the provision of ground support services (rock bolting, cable
bolting and shotcreting) as well as the full suite of ventilation and
access services (shaft sinking, raise drilling and shaft lining).
Project activity
∆ Macmahon is currently providing a range of underground
mining services at BHP Billiton’s Olympic Dam Mine in South
Australia. The Company is on track to successfully complete
its development contract in September 2015. Separately,
Macmahon is currently delivering raise drilling services at
Olympic Dam which are contracted to 2018.
∆ Macmahon’s Mining Services business currently provides
a range of services (including drilling, shotcreting, raise
drilling, shaft sinking, cablebolting and engineering design)
to a number of projects including the Mount Wright Gold Mine
in Queensland for Carpentaria Gold, Lanfranchi and Savannah
Mines in Western Australia for Panoramic Resources,
Ballarat Gold Project in Victoria for Castlemaine Gold Fields
and Newcrest Mining’s Cadia Project in New South Wales.
∆ During the period Macmahon was awarded a new drilling
contract at George Fisher utilising a new Canadian designed
drill rig. This rig is the first of its kind in Macmahon’s
underground fleet and offers great flexibility in relation to
mobility, drill length and drill diameter.
Projects substantially completed
∆ Construction of ERA’s Ranger 3 Deeps exploration decline in
the Northern Territory was successfully completed during
the period. In June 2015 ERA announced that the expansion
project would not proceed amid depressed uranium prices.
Macmahon has been retained on site to provide care and
maintenance services.
Macmahon has been operating successfully overseas for more
than 25 years.
The Company’s international operations span a number of
regions including Central Asia, South East Asia and Africa.
Macmahon is currently providing a range of mining services in
these regions and is continuing to seek new opportunities to
further expand its footprint.
Project activity
∆ Macmahon is currently providing mining services for
Lafarge at a number of operations in Malaysia, Indonesia
and Nigeria.
∆ During the period Macmahon was awarded a new
5 year contract at the Lafarge Kanthan Quarry in Malaysia
where the Company has been contracted since 2003.
The contact was awarded following an open tender process,
demonstrating the Company’s ability to provide quality
services at a competitive price.
Projects successfully completed
∆ Quarrying activities at Lafarge’s Rawang cement project in
Malaysia were successfully completed following the end of
the five year contract with Lafarge in mid-October 2014.
∆ The Company’s operations at the Tavan Tolgoi Mine ceased in
August 2014 (see separate note below).
Other achievements
∆ Highlighting the Company’s long term commitment to its
African operations, during the period existing hire fleet was
replaced by Macmahon owned assets, reducing cost and
improving plant availability.
∆ Works at Rio Tinto’s Argyle Diamond Mine in Western Australia
Mongolia
were completed in August 2014.
∆ Mining Services also completed drilling activities at the
Tritton Mine in New South Wales for Straits Resources during
the period.
Other achievements
Highlighting Macmahon’s commitment to utilising leading edge
technologies, the Company is currently trialling a new blind
box-hole borer developed by Atlas Copco. The technological
advances of this machine enable it to be setup within hours
(compared to days for conventional machines). The requirement
for site preparation is also drastically reduced, as there is no
requirement for a bolt down pad, which significantly reduces
cost. This rig can also be operated by a single driller creating
greater efficiencies.
In August 2014, the Company’s operations at the Tavan Tolgoi
coal project in Mongolia were suspended following a dispute with
the client regarding payment delays for work completed. Failure
to reach an agreement led both parties to enter into a standstill
agreement in September 2014.
In June 2015, Macmahon announced the sale of its Mongolian
business to a private company for US$65 million. Full payment
was received by Macmahon prior to the year-end resulting in net
proceeds of approximately US$62 million.
This transaction concludes Macmahon’s current mining
operations in Mongolia. However, the Company remains
optimistic about the future of the mining industry in Mongolia
and is currently investigating a number of new opportunities in
the region.
MACMAHON ANNUAL REPORT 2015 10
10
OPERATIONAL AND
FINANCIAL REVIEW
FINANCIAL
PROFIT AND LOSS
Income
The Company reported total revenue of $660.2 million.
Revenue was lower than the 2014 financial year, due to the
completion of the Ore Body 18 and George Fisher projects
in financial year 2014, completion of the Eaglefield, Argyle
Underground and Tavan Tolgoi projects midway through the 2015
Financial Year and the termination of the Christmas Creek 2
project in May 2015.
The Company reported a consolidated loss after tax of $217.9
million for the 2015 financial year. This was largely due to a
number of significant one off items, the most significant being
an impairment charge of $202.0 million and inventory write-
downs of $27.3 million. Excluding significant one off items, the
Company reported an underlying Net Profit After Tax of $10
million.
Expenditure
Recurring expenditure from continuing operations
(consisting of materials, sub-contractors, operating leases
and personnel costs) was $558.8 million.
Depreciation of property, plant and equipment from continuing
operations for the 2015 financial year was $59.6 million.
The vast majority of the Company’s plant and equipment is
depreciated on cumulative hours worked.
Net finance costs of $23.7 million was greater than the
2014 financial year. The increase was primarily a result of
the recognition of an $8.2 million loss on interest rate swaps
and a $3.2 million write-down of capitalised borrowing costs
associated with the Company’s Syndicated Debt Facility.
Tax expense
The Group reported a tax expense of $0.5 million for continuing
operations. The effective tax rate for continuing operations for
the year was 0.2 percent. This was impacted by adjustments
for impairments and inventory write-downs and the sale of the
Company’s Mongolian operations. Excluding the adjustments
the effective tax rate would be 29.8%.
Dividend
The Board has determined that a dividend will not be declared for
the year ending 30 June 2015. The Board remains committed to a
50 percent dividend payout ratio, however its focus at this time is
on strengthening the Company’s balance sheet.
MACMAHON ANNUAL REPORT 2015
BALANCE SHEET
Financing
The Company’s balance sheet is in a strong position, with a
cash balance of $236.9 million at year end against a total debt of
$162.7 million. This resulted in a net cash position of $74.2 million.
On 31 July 3015, the Company repaid it’s Syndicated Debt
Facility in full. The Company is currently assessing a number of
alternative financing options. Moving forward, the Company’s
existing bank guarantees will be cash backed.
Working capital
Current trade and other receivables were $66.8 million at
30 June 2015, while current trade and other payables were
$89.1 million at 30 June 2015. The reduction in receivables and
payables was largely due to the completion of the Orebody 18,
Eaglefield and Christmas Creek 2 projects and the sale of the
Company’s Mongolian operations.
Non-current assets
As at 30 June 2015, the value of the Company’s property,
plant and equipment, totalled $141.5 million, compared to
$442.9 million from the prior year. The reduction in property
plant and equipment was driven largely by an impairment
charge of $183.7 million, depreciation and the disposal of the
Company’s Mongolian assets on 23 June 2015.
Despite the closure of several projects, the Company has
redeployed some of its surplus equipment to existing projects
and as a result maintains a manageable level of idle equipment.
Management recognises the importance of discipline with
regards to its capital expenditure and will seek to transition idle
fleet when appropriate either via deployment to new projects
or disposal.
Cash flow
Net operating cash during the year totalled $53.8 million.
Excluding cash outflows of $6.7 million related to the
discontinued construction business, continuing operations
generated operating cash flows of $60.5 million.
The Company realised $79.0 million from investment activities
primarily relating to the sale of its Mongolian operations for
$84.1 million. Offsetting this inflow the Company incurred net
capital expenditure of $5.7 million.
Net cash outflows from financing activities in the 2015 financial
year totalled $8.3 million consisting of borrowing costs and
leasing expenditure.
Impairment and write-downs
In addition to the impairment of property, plant and equipment,
of $183.7 million and inventory write-downs of $27.3 million, the
Company recognised an impairment of goodwill of $18.3 million,
totalling $229.3 million.
MACMAHON ANNUAL REPORT 2015
MACMAHON ANNUAL REPORT 2015
BUSINESS
STRATEGY
THE RIGHT
STRATEGY
11
11
Macmahon’s overarching objective is to secure and deliver work that is profitable
and repeatable in order to deliver sustainable returns to shareholders.
As outlined in last year’s annual report, Macmahon has
implemented a two-tiered business strategy.
The first tier centres on strengthening the Company’s operations
in its base market of Australia, where it has an established
reputation. The second tier focuses on growth via diversification
into geographies that offer strong market growth based on
Macmahon’s existing expertise and international experience.
Whilst current market conditions remain challenging,
Macmahon remains committed to this strategy, and is currently
focusing on securing new work by capitalising on its reputation
as a highly experienced contractor with proven mining and
construction capabilities. Furthermore, the Company’s recent
organisational restructure and cost reduction program have
enabled the business to adjust its pricing model which has
in turn, significantly bolstered its competitiveness – both
domestically and overseas.
Macmahon’s core domestic Surface Mining business strategy
revolves around improving safety and operational performance,
customer focus and project selection, ensuring that the
business increases its contract retention and tender win rates
while maintaining discipline on the use of its balance sheet and
resources.
In its Underground Mining business, Macmahon’s strategic
focus is on improving its safety and operational performance,
bolstering its client engagement activities and developing a
competitive advantage through the implementation of a range
of new technologies and cost effective mining techniques.
Internationally, Macmahon’s strategy is to capitalise on its
foothold in South East Asia, Central Asia and Africa. These
regions are continuing to produce new opportunities which
provide the Company with an ideal platform for global expansion.
The Macmahon Way
The Macmahon Management Operating System is the
cornerstone for how we undertake our work and ensure that we
achieve the Company’s strategic business objectives. We believe
that we can minimise risk and improve performance by having
clear and comprehensive documented processes which guide
the behaviour of our leaders and employees. With the restructure
of the business over the past 12 months, we recognise the need
to ensure that the Macmahon Management Operating System is
updated to reflect these changes. We will revise and continually
improve our business processes during the 2016 financial year
to ensure they deliver on the needs of the business.
MACMAHON ANNUAL REPORT 2015
12
RISK
MANAGEMENT
THE RIGHT
APPROACH TO RISK
Macmahon defines risk management as the identification, assessment
and management of risks that have the potential to materially impact the
Company’s operations, people, reputation, and financial results.
Macmahon’s risk management framework is embedded
within existing processes and is aligned to the Company’s
strategic business objectives. Given the breadth of operations
and the geographies and markets in which the Company
operates, a wide range of risk factors have the potential to
affect the achievement of these objectives.
Set out below is an overview of a number of material risks
facing Macmahon. These risks are not set out in any particular
order and do not comprise every risk that Macmahon could
encounter when conducting its business. Rather, they are the
most significant risks that, in the opinion of the Board, should
be monitored and managed and considered by investors before
investing in the Company.
Health, Safety, Sustainability and Environment Risk
The mining industry involves a high degree of operational
risk. Macmahon believes it takes reasonable precautions to
manage safety and environmental risks and thereby ensure
the continued sustainability of it’s business. However, there
can be no assurance that the Company will avoid significant
costs, liability and penalties or criminal prosecution. This risk
is mitigated by progressively improving on already high safety
performance standards across the business. Central to this is
the Company’s Safety Lifesaving Rules which are well embedded
and embraced across the business.
Project Delivery Risk
The execution and delivery of projects involves judgment
regarding the planning, development and operation of complex
operating facilities and equipment. Some parts of Macmahon’s
business are involved in large-scale, complex projects that may
occur over extended time periods. As a result, the Company’s
operations, cash flows and liquidity could be affected if
Macmahon miscalculates the resources or time needed to
complete a project, if it fails to meet contractual obligations, or
if it encounters delays or unspecified conditions.
Competition Risk
The market in which Macmahon operates is highly competitive,
which may result in downward pressure on prices and margins.
If Macmahon is unable to compete effectively in its markets, it
runs the risk of losing market share.
Demand Risk
Macmahon is a contractor operating predominantly in the
mining and resources sector. As a result, failure to obtain
contracts, delays in awards of contracts, cancellations or
terminations of contracts, delays in completion, changes in
economic conditions and the volatile and cyclical nature of
commodity prices means that the demand for Macmahon’s
goods and services can vary markedly over relatively short
periods. Accordingly, changes in market conditions could impact
Macmahon’s financial performance.
Order Book Risk
Generally in the mining industry, most contracts can be
terminated for convenience by the customer at short notice
and without penalty, with the customer paying for all work
completed to date, unused material and in most cases
demobilisation from the site and redundancies. As a result,
there can be no assurance that work in hand will be realised
as revenue in any future period. Macmahon is selective in
the contracts that it enters into and always seeks to extend
contracts where possible in an effort to maximise its return
on capital.
Contract Pricing Risk
Macmahon has mixed exposure to contract types. However, if
the Company materially underestimates the cost of providing
services, equipment, or plant, there is a risk of a negative impact
on Macmahon’s financial performance.
Contractual Risk
Macmahon operates under contracts that are generally
complex and require skill to administer correctly. From time
to time, the Company is involved in disputes with clients about
contractual entitlements. If the Company fails to provide
the necessary documentation to substantiate claims or is
otherwise unsuccessful in negotiating a reasonable settlement,
Macmahon’s financial performance could be affected.
MACMAHON ANNUAL REPORT 2015 RISK
MANAGEMENT
13
Legal Claims and Proceedings Risk
Interest rate risk
Macmahon may be subject to various claims or legal proceedings
which arise in the ordinary course of business. These claims may
seek compensation for, amongst others things, personal injury,
breach of work place practices, breach of contract or statutory
duty, property damage, liquidated damages and lost profits.
The outcomes of these disputes can be difficult to predict. An
adverse determination on such claims or proceedings may harm
our reputation and in certain instances where our insurance
coverage is inadequate, may cause a material negative impact
on any one year’s financial performance.
Liquidity Risk
The risk of Macmahon not being able to meet its financial
obligations as they fall due is managed by maintaining adequate
cash reserves and available borrowing facilities, as required.
Errors or unforeseen changes in actual and forecast cash flows
that then create a mismatch against the maturity profiles of
financial assets and liabilities could have a detrimental effect on
the Company’s liquidity. The Company’s approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Company’s reputation.
Partner Risk
Macmahon, in some cases, may undertake services through
and participate in, joint ventures or partnering/alliance
arrangements. The success of these partnering activities
depends on the satisfactory performance by Macmahon’s
partners. The failure of partners to meet performance
obligations could impose additional financial and performance
obligations that could cause significant impact on Macmahon’s
reputation and financial results, including loss or termination of
the contract and loss of profits.
The risks associated with fluctuating interest rates, specifically
on the Company’s variable rate borrowings is managed under
the Company’s approved Treasury Policy in which interest rate
exposures on committed capital finance borrowings are hedged
in order to attain 100% fixed rates (by volume). The hedging
instruments approved by the Board of Directors for this purpose,
are interest rate swaps and interest rate caps and floors. Further
information is contained in note 31 of the financial statements.
Currency fluctuation
As a Company with international operations, Macmahon is
exposed to fluctuations in the value of the Australian dollar versus
other currencies. Because Macmahon’s consolidated financial
results are reported in Australian dollars, if Macmahon generates
sales or earnings or has assets and liabilities in other currencies,
the translation into Australian dollars for financial reporting
purposes can result in a significant increase or decrease in the
amount of those sales or earnings and net assets.
Other material risks that could affect Macmahon include:
∆ A major operational failure or disruption at key facilities or
to communication systems which interrupt Macmahon’s
business;
∆ Changing government regulation including tax, occupational
health and safety, and changes in policy and spending;
∆ Operating in international markets can expose Macmahon to
economic conditions, civil unrest, conflicts, and bribery and
corrupt practices;
∆ Loss of reputation through poor project outcomes,
unsafe work practices, unethical business practices, and
not meeting the market’s expectation of our financial
performance; and
∆ Loss of key Board, management or operational personnel.
MACMAHON ANNUAL REPORT 2015 MACMAHON ANNUAL REPORT 2015
14
CORPORATE
RESPONSIBILITY
SAFETY, PEOPLE
AND ENVIRONMENT
SAFETY
The safety of Macmahon’s people is core to every aspect of the business.
The Company’s vision, values and policies reflect it’s priority to ensure that all
employees return home safe and well at the end of every working day. Effective
health and safety performance is critical, and Macmahon believes that everyone
has a role in ensuring the care of their colleagues and in taking the appropriate
steps to prevent workplace-related injuries and illness.
Health and safety achievements and key milestones over the
past 12 months:
∆
Improved TRIFR ratio;
∆ Kanthan, Malaysia operating 10 years LTI free;
∆ Eaglefield operating over 8 years LTI free;
∆ WAC workshop operating 7 years LTI free;
∆ Nebo workshop operating 7 years LTI free;
∆ Doorn-Djil Yoordaning – No LTIs recorded;
∆ Maintenance of certification to ISO18001 and AS/NZS 4801;
∆ 14247 Safe Act Observations conducted; and
∆ 3869 Planned Task Observations conducted.
In 2016, we will continue to focus on leadership and culture as
well as building on our systems, standards and governance.
We believe that these focus areas and related initiatives will
help drive our safety performance and deliver on our priority to
ensure that all our people return home safe and well at the end
of every working day.
Macmahon’s vision and values are reflected in the processes
and controls it has in place throughout the Company.
Regardless of where it’s people are located, the site at which
they operate or the type of work they undertake, Macmahon
strives to create a working environment that is safe. Safety is a
Macmahon priority as set out in our company values and is seen
as an integral discipline in all of our activities. As such, workers
at all levels within the business are expected to live these values
and articulate them through consistent behaviour.
Macmahon recognises that Lost Time Injury Frequency
Rate (LTIFR) is a lag indicator where lower rates do not
necessarily equate to a safer workplace. Rather, we believe
that the promotion of a reporting culture where a higher
number of incidents are reported provides the opportunity
for improvement and the opportunity to avoid future injuries
across the Company.
In the 2015 financial year, a total of five lost time injuries were
recorded, the lowest number of injuries since the 2011 financial
year. This LTIFR result represents a significant improvement
and remains an order of magnitude better than the most recent
mining industry average published by Safe Work Australia.
While the overall safety performance shows room for
improvement, many of the Company’s projects recorded
exceptional safety results, with 70% of Macmahon’s projects
remaining LTI free for the entire year.
Macmahon is committed to continually improving its safety
performance and is determined to set the standard when it
comes to safety. Accordingly, during the year a number of
safety improvement initiatives were developed and rolled out
across the business, which focused on two central pillars: the
promotion of a safe and healthy culture and behaviours; and,
the consolidation of internal Health Safety Environment and
Quality systems and processes.
MACMAHON ANNUAL REPORT 2015 MACMAHON ANNUAL REPORT 2015 16
CORPORATE
RESPONSIBILITY
PEOPLE
MACMAHON ANNUAL REPORT 2015
Despite the current challenging economic conditions, Macmahon’s focus
has remained on its people as the core to building a better business.
Rightsizing the business
Throughout the year Macmahon restructured the business
to reduce costs and generate cash whilst still retaining
the capability to allow the business to further explore high
potential growth opportunities. Working together with external
consultants, a number of significant changes have been made
to the organisation structure including:
∆ Rationalisation of senior management from two levels to one
level to promote effective decision making;
∆ Decentralisation of plant maintenance to Project Managers
to drive operational effectiveness and accountability; and
∆ Centralisation of the tendering and business development
teams to ensure that maximum effort is applied to winning
new work.
Retaining talent
A number of projects were also completed during the year and
Macmahon maintained its commitment to retaining talent and
maximising opportunities for internal redeployment of impacted
employees. Over 143 people from an available pool of 180 were
successfully placed from our Orebody 18 (OB18) team into the
Christmas Creek and Tropicana projects, whilst 36 people were
placed into the business (predominantly into Tropicana and
Nigeria) at the conclusion of the Christmas Creek contract in
February 2015.
The Macmahon ERTO also developed and implemented the
MacTrain Online Training Portal that allows employees and
contractors across our domestic and international operations
to complete online Corporate and Operational inductions and
training programs that are specific to their site and job role.
The ERTO’s key achievements include:
∆ The issue of 1,224 Units of Competency to 612 people;
∆ The delivery of Mainpac systems training to 301 people; and
∆ The delivery of online training to 1888 employees and
contractors.
Leadership development
The Macmahon Leadership Pathways program has continued
to develop the current and future leaders of our business to
the highest standards. This has included completion of the
following:
∆ 8 Project and Senior Functional Managers through the
Impact Leadership program;
∆ 36 Supervisors and Superintendents through the core
Leadership Foundations program; and
∆ 25 Employees through the Financial Acumen program.
Apprenticeships
Macmahon continues to have a strong international focus
and engages over 400 direct employees, both expatriate and
national, in international projects. With likely future growth in our
international operations, building Macmahon’s global sourcing,
engagement and training capability and standards has been a key
focus for the management and HR team in the last year.
Macmahon’s Apprenticeship Program continued its success
with 20 apprentices completing their tradesman certification
in a range of trades, including HD fitter, boilermaker, auto
electrician and electricians. A further 47 apprentices are still on
the program, ensuring Macmahon continues as one of Western
Australia’s largest employers of apprentices.
Training and development
Traineeships
Macmahon is committed to the philosophy of continuous
improvement in the training and development of its people,
regardless of where Macmahon operates. At the centre of this
commitment is the Macmahon Enterprise Registered Training
Organisation (ERTO) which enables Macmahon employees to be
trained within an accredited qualification framework.
The Macmahon Traineeship Program offers site-based
employees the opportunity to gain the nationally recognised
RII30112 Certificate III in Surface Extraction Operations. 83
employees successfully completed the traineeship this year
with a further 47 employees currently enrolled.
MACMAHON ANNUAL REPORT 2015
MACMAHON ANNUAL REPORT 2015
18
CORPORATE
RESPONSIBILITY
ENVIRONMENT
MACMAHON ANNUAL REPORT 2015
Macmahon’s overarching goal for environmental management is to minimise,
and where possible eliminate, any impact of our operations on the environment.
The Company recognises that the efficient and responsible use of resources is critical
to the sustainability of our environment and it will continue to focus on reducing it’s
greenhouse gas emissions and on improving it’s energy use and efficiency.
During the year, Macmahon continued to refine it’s
environmental management strategies and plans to ensure
the highest levels of compliance, to minimise environmental
impacts and to reduce energy consumption and greenhouse
gas emissions. The Company sustained it’s industry leading
level of compliance across all jurisdictions in which we operate.
Macmahon had no environmental fines, breaches or major
environmental incidents during this period which contributes to
our unblemished record of compliance within the mining sector.
Key environmental achievements over the last 12 months:
∆ No environmental enforcement actions, prosecutions,
notices or fines;
∆ No environmental incidents causing reportable
environmental harm;
∆ All environmental operations covered by management
plans; and
∆ Maintenance of certification to ISO14001.
Although Macmahon’s environmental management systems
and processes have ensured the achievement of desired
environmental outcomes, the Company believes it can always
improve on it’s performance. In order to achieve continual
improvement Macmahon aims to learn from environmental
incidents that may occur and it’s performance evaluation
processes (including audits) and apply those lessons to our
future performance. Macmahon also seeks to learn from
positive impacts when projects make breakthroughs in
environmental management practices, such as minimising
habitat disturbance and reducing the volume and toxicity of
the wastes it generates.
MACMAHON ANNUAL REPORT 2015 BOARD
PROFILES
THE BOARD
19
Jim Walker
NON-EXECUTIVE DIRECTOR,
CHAIRMAN
Mr Walker has over 40 years of experience in the resources sector, most recently as
Managing Director and Chief Executive Officer of WesTrac Group, where he led the
Company’s rapid development in industrial and mining services locally and in China.
Prior to this, Mr Walker held various roles with other Australian Caterpillar dealers.
Giles Everist
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Mr Everist brings a strong commercial background and extensive experience in the
contracting and resources sectors at both the Board and executive management level.
Mr Everist completed his Bachelor of Sciences (Honours) in Mechanical Engineering at
the University of Edinburgh and is also a Chartered Accountant.
Eva Skira
INDEPENDENT
NON-EXECUTIVE DIRECTOR
Ms Skira has a background in banking, capital markets, stockbroking and financial
markets, previously holding executive positions at Commonwealth Bank in the
Corporate Banking/Capital Markets divisions and later with stockbroker Barclays de
Zoete Wedd.
She has served on a number of boards in business, government and the not-for-profit
sectors across a range of industries.
Vyril Vella
NON-EXECUTIVE DIRECTOR
Mr Vella has over 40 years experience in the civil engineering, building, property and
construction industries.
During Mr Vella’s 34 years with the Leighton Group (now CIMIC) he held various positions
including General Manager NSW, Director of Leighton Contractors Pty Ltd, Founding
Director of Welded Mesh Pty Ltd, Managing Director of Leighton Properties and Associate
Director of Leighton Holdings
Sy Van Dyk
MANAGING DIRECTOR
Mr van Dyk was appointed as CEO and Managing Director in July 2015.
Mr van Dyk joined Macmahon as Chief Financial Officer in April 2014 and has more than
25 years’ finance experience primarily within the resources sector. He holds a Bachelor
of Commerce (Hons) and is a Chartered Accountant.
Prior to joining Macmahon, Mr van Dyk was with the WesTrac Group for 13 years where
he held a number of senior operational roles, including Chief Operating Officer Western
Australia and more recently Chief Financial Officer.
MACMAHON ANNUAL REPORT 2015 20
EXECUTIVE
PROFILES
THE EXECUTIVE TEAM
MACMAHON ANNUAL REPORT 2015
Sy Van Dyk
CHIEF EXECUTIVE OFFICER
Mr van Dyk was appointed as CEO and Managing Director in July 2015.
Mr van Dyk joined Macmahon as Chief Financial Officer in April 2014 and has more than
25 years’ finance experience primarily within the resources sector. He holds a Bachelor of
Commerce (Hons) and is a Chartered Accountant.
Prior to joining Macmahon, Mr van Dyk was with the WesTrac Group for 13 years where he held
a number of senior operational roles, including Chief Operating Officer Western Australia and
more recently Chief Financial Officer.
Greg Miller
GENERAL MANAGER
UNDERGROUND
Mr Miller holds a Bachelor of Engineering (Mining) and more than 15 years’ experience in
underground mining in Australia. More than nine of those years in senior management roles.
Working at Macmahon since 1996, Mr Miller has previously held a number of project manager
roles across Australia.
Mr Finnegan holds a Bachelor of Engineering (Mining) with 20 years’ experience in the mining
industry. The last 10 years have primarily been spent in senior line management positions.
Michael Finnegan
GENERAL MANAGER
SURFACE WEST AND SE ASIA
Mr Finnegan has a strong commercial and technical background and has spent time
in operations on the east and west coast of Australia as well as a number of countries
throughout Asia.
Mark Ruston
GENERAL MANAGER
SURFACE EAST AND AFRICA
Mr Ruston holds a Bachelor of Engineering (Civil), Graduate Diploma of Mining, and a Master
of Business Administration. He has more than 25 years mining industry experience, both with
mine owners and mining contractors, with a focus on the design, operation and management
of open cut operations.
More recently, Mr Ruston has held a number of executive management positions, and has
been responsible for creating significant value and building cultures that consistently deliver
exceptional performance.
Brenton Perry
GENERAL MANAGER
CONSTRUCTION
Mr Perry holds a Bachelor of Engineering (Civil) and a Master of Business Administration.
He has 24 years experience in construction and surface mining contracting.
Mr Perry commenced with Macmahon in 1993 and has previously held Project Manager roles
on a variety of projects throughout Australia.
Mr Perry has held business unit management roles for the last 4 years.
Coogee Barbuzza
GENERAL MANAGER
BD AND ESTIMATING
Mr Barbuzza holds a Bachelor of Engineering (Hons) (Civil). He has 33 years working in the
resources sector. Of this, 25 years has been with several mining contractors including
Macmahon (since 2010), Eltin, HWE and Downer.
Since 1994 he has primarily held senior tender management and work winning roles.
He has a wide understanding of mining contracting across a range of contract types,
different countries, minerals and mining companies
Peter Truscott
GENERAL MANAGER
PLANT AND MAINTENANCE
Mr Truscott holds a Bachelor of Engineering (Mechanical). He joined Macmahon in 2005 as
Engineering Manager for the Underground Division before becoming the Group National Plant
Manager and then Group General Manager Plant in 2005.
Mr Truscott has worked for 15 years in maintenance engineering and project management
roles across a diverse industrial background including processing plants, underground mine
infrastructure, surface and underground mobile plant
Roger Hughes
GENERAL MANAGER
HR AND HSEC
Mr Hughes holds a Bachelor of Commerce and a double major in Human Resources and
Industrial Relations.
Mr Hughes joined Macmahon in 2011 as the General Manager Human Resources for the
Mining Division before becoming the Group Manager for Human Resource Services in 2012.
Prior to joining Macmahon, Mr Hughes worked for 20 years in numerous senior human
resources, industrial relations and strategy roles, including senior management positions
with BHP Billiton and FMG. Roger has significant contractor management experience and his
BHP Billiton training includes the DuPont Safety Leadership program and ICAM.
MACMAHON ANNUAL REPORT 2015 21
MACMAHON ANNUAL REPORT 2015
30 JUNE 2015
FINANCIAL
REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT - AUDITED
CORPORATE GOVERNANCE STATEMENT
LEAD AUDITOR’S INDEPENDENCE DECLARATION
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDIT REPORT
SUMMARY OF CONSOLIDATED RESULTS
ASX ADDITIONAL INFORMATION
GLOSSARY
22
27
39
51
52
53
54
55
56
109
110
112
114
116
22
DIRECTORS’
REPORT
The Directors present their report, together with the financial
statements, on the consolidated entity (referred to hereafter as
the 'Group' or the 'consolidated entity') consisting of Macmahon
Holdings Limited (referred to hereafter as the 'parent entity'
or 'the Company') and the entities it controlled at the end of, or
during, the year ended 30 June 2015.
Company successfully completed operations at it's Eaglefield,
Argyle and Tavan Tolgoi operations.
Sale of Mongolia
The Company sold its Mongolian business in June 2015 for
proceeds of US$65 million (A$ equivalent $84.6 million).
DIRECTORS
Settlement of disputes
The following persons were Directors of Macmahon Holdings
Limited during the whole of the financial year and up to the date
of this report, unless otherwise stated:
J A Walker (Chairman, Non-executive) (Executive Chairman for
the period 22 January 2015 to 13 July 2015)
R A Carroll (Chief Executive Officer and Managing Director
resigned 22 January 2015)
B L Cusack (Deputy Chairman, Non-executive) (resigned 22
January 2015)
C R G Everist (Non-executive)
E Skira (Non-executive)
S J van Dyk (Chief Executive Officer and Managing Director
commencing 13 July 2015)
V A Vella (Non-executive)
PRINCIPAL ACTIVITIES
The principal activities of the consolidated entity consisted
of the provision of contract mining services. There were
no significant changes in the nature of the activities of the
consolidated entity during the financial year under review.
DIVIDENDS
There were no dividends paid, recommended or declared during
the current or previous financial year.
REVIEW OF OPERATIONS
The loss for the consolidated entity after providing for income tax
amounted to $217.9 million (June 2014: profit of $30.4 million).
A review of, and information about, the operations of the
consolidated entity during the financial year and of the results
of those operations, is contained on pages 1 to 20, which forms
part of this Directors’ Report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were a number of significant changes in the state of
affairs of the consolidated entity during the financial year.
Contract completions
In February 2015, the Company’s Christmas Creek 2 mining
services contract was terminated early by Fortescue Metals
Ltd resulting in a Material Contract Review Event under the
consolidated entity’s Syndicated Facility Agreement. In addition,
in May 2015, the Company was notified that its Olympic
Dam development contract would not be extended beyond
September 2015. Lastly, the Company’s Waihi mining services
contract was terminated early in June 2015. Additionaly, the
During the year the Company settled outstanding disputes
relating to the discontinued construction business as well as a
dispute related to the CSA contract which was terminated in the
2013 financial year. This resulted in a gain of $16.3 million.
Impairment and inventory write downs
The consolidated entity impaired its assets by $229.3 million
during the 2015 financial year, consisting of $183.7 million
impairment of property, plant and equipment, $18.3 million
impairment of intangible assets and $27.3 million write down of
inventory to net realisable value.
MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAL YEAR
Debt repayment
Following the sale of its Mongolian business in June 2015, the
Company repaid all its outstanding debt under the Syndicated
Facility Agreement on 31 July 2015. The Company is currently
in advanced negotiations regarding a new facility to provide
greater financial flexibility to capitalise on future work
opportunities.
CEO appointment
Mr S J van Dyk was appointed as Chief Executive Officer and
Managing Director on 13 July 2015.
Other than the matters noted above, no matter or circumstance
has arisen since 30 June 2015 that has significantly affected, or
may significantly affect the consolidated entity’s operations, the
results of those operations, or the consolidated entity’s state of
affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
OF OPERATIONS
Likely developments in the operations of the consolidated entity
in future financial years and the expected results of those
operations have been included generally within the financial
report and on pages 1 to 20.
ENVIRONMENTAL REGULATION
The consolidated entity is not subject to any significant
environmental regulation under Australian Commonwealth or
State law.
MACMAHON ANNUAL REPORT 2015
23
INFORMATION ON DIRECTORS
Mr Giles Everist
Mr James Walker
Title:
Title:
Independent Non-executive Director
Independent Non-executive Chairman (until 21 January 2015),
Executive Chairman (22 January 2015 to 13 July 2015)
Qualifications:
BSc (Hons), CA, GAICD
Qualifications:
GAICD, FAIM
Experience and expertise:
Mr Walker joined the Board as a Non-executive Director in
October 2013 and was appointed Chairman in March 2014.
From January 2015 until July 2015 Mr Walker assumed the role
of Executive Chairman while the Board sought a replacement
Chief Executive Officer.
Mr Walker has over 40 years of experience in the resources
sector, most recently as Managing Director and Chief Executive
Officer of WesTrac Pty Ltd, where he led the Company’s rapid
development in industrial and mining services locally and in
China. Prior to this, Mr Walker held various roles with other
Australian Caterpillar dealers. Mr Walker is a graduate member
of the Australian Institute of Company Directors (AICD) and
a fellow of the Australian Institute of Management (AIM WA),
holding the position of President WA (2008 - 2010) and National
President - Australia (2010 - 2013).
Other current directorships:
Mr Walker is currently a Non-executive Director of SKILLED
Group Limited (appointed November 2013), Seeing Machines
(appointed May 2014) and RACWA Holdings Pty Ltd (appointed
November 2013).
Experience and expertise:
Mr Everist joined the Board as a Non-executive Director in June
2013. Mr Everist has a strong commercial background and
extensive experience in the contracting and resources sectors
at both the Board and executive management level. Mr Everist
completed his Bachelor of Sciences (Honors) in Mechanical
Engineering at the University of Edinburgh and is also a
Chartered Accountant. He was previously the Chief Financial
Officer and Company Secretary at Monadelphous Group and has
also held senior roles at Fluor Australia, Hamersley Iron and Rio
Tinto London.
Other current directorships:
Mr Everist is a director of Decmil Group, LogiCamms and Austal
Former directorships (last 3 years):
None
Special responsibilities:
Mr Everist is currently a member of the Board’s Audit & Risk
Committee and the Board’s Remuneration & Nomination
Committee.
Interests in shares:
500,000
Former directorships (last 3 years):
Mr Walker was a director of Seven Group Holdings Ltd, National
Hire Group Limited and Coates Group Holdings Pty Ltd.
Interests in options:
None
Special responsibilities:
Mr Walker is currently a member of the Board’s Audit & Risk
Committee and the Board’s Remuneration & Nomination
Committee.
Interests in shares:
300,000
Interests in options:
None
MACMAHON ANNUAL REPORT 2015DIRECTORS’ REPORT 24
Ms Eva Skira
Title:
Mr Vyril Vella
Title:
Independent Non-executive Director
Non-independent Non-executive Director
Qualifications:
Qualifications:
BA (Hons), MBA, SF Fin, Life Member Fin, FAICD, FAID, FGIA, FCIS
BSc, BE (Hons), M.Eng.Sc, FIEAust, FAICD
Experience and expertise:
Experience and expertise:
Ms Skira joined the Board as a Non-executive Director in
September 2011. Ms Skira has a background in banking, capital
markets, stockbroking and financial markets, previously holding
executive positions at Commonwealth Bank in the Corporate
Banking/Capital Markets divisions and later with stockbroker
Barclays de Zoete Wedd. She has served on a number of boards
in business, government and the not-for-profit sectors across
a range of industries. Ms Skira completed her BA (1st Class
Honors, Economic History) at the University of New South Wales,
and obtained her Masters of Business Administration (Dux and
Distinction) at IMD Switzerland.
Mr Vella joined the Board as a Non-independent Non-executive
Director in November 2007. Mr Vella has over 40 years’
experience in the civil engineering, building, property and
construction industries. During Mr Vella’s 34 years with the
Leighton Group he held various positions including General
Manager NSW, Director of Leighton Contractors Pty Ltd,
Founding Director of Welded Mesh Pty Ltd, Managing Director
of Leighton Properties and Associate Director of Leighton
Holdings. Mr Vella was a consultant to Leighton Holdings, where
he advised on investment in the residential market, general
property issues and major construction and infrastructure
projects.
Other current directorships:
Ms Skira is currently the Chairman of the Water Corporation WA,
Chairman of Trustees of St John of God Health Care Inc. and a
director of RCR Tomlinson.
Other current directorships:
None
Former directorships (last 3 years):
None
Former directorships (last 3 years):
Mr Vella was a Non-executive Director of Devine Limited from
April 2007 until April 2014.
Special responsibilities:
Special responsibilities:
Ms Skira is currently the Chair of the Board’s Audit & Risk
Committee and a member of the Board’s Remuneration &
Nomination Committee.
Mr Vella is currently Chairman of the Board’s Remuneration &
Nomination Committee and a member of the Board’s Audit &
Risk Committee.
Interests in shares:
None
Interests in options:
None
Interests in shares:
1,357,842
Interests in options:
None
‘Other current directorships’ quoted above are current
directorships for listed entities only and excludes directorships
of all other types of entities, unless otherwise stated.
‘Former directorships (in the last 3 years)’ quoted above are
directorships held in the last 3 years for listed entities only
and excludes directorships of all other types of entities, unless
otherwise stated.
COMPANY SECRETARIES
Mr Gettingby joined the Company in 2002 and was appointed
to the position of Group General Counsel / Company Secretary
in February 2011. Mr Gettingby previously held the roles of
Commercial Manager and Legal Counsel for the Company. Prior
to joining the Company he worked as a lawyer in private legal
practice.
MACMAHON ANNUAL REPORT 2015DIRECTORS’ REPORT
25
Mr Brown joined the Company in 2011 as Company Secretary. Mr Brown has previously held the role of Company Secretary for various
public companies and is a Chartered Secretary. Mr Brown has also worked as an in-house lawyer for a number of investment banks in
London and in private legal practice. Mr Brown resigned as joint Company Secretary on 17 July 2015.
MEETINGS OF DIRECTORS
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30
June 2015, and the number of meetings attended by each Director were:
FULL BOARD
MEETINGS
SPECIAL BOARD
MEETINGS 6
AUDIT & RISK
COMMITTEE MEETINGS
REMUNERATION &
NOMINATION COMMITTEE
MEETINGS
OTHER COMMITTEE
MEETINGS
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
J A Walker 1, 4
B L Cusack 2
R A Carroll 2
C R G Everist 3
E Skira 3
V A Vella 5
9
4
4
9
9
9
9
4
4
9
9
9
19
6
6
19
18
17
19
7
7
19
19
19
-
2
-
4
4
2
-
2
-
4
4
2
1
1
-
1
1
1
1
1
-
1
1
1
5
1
1
5
5
-
5
1
1
5
5
-
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.
1. Mr Walker was appointed Executive Chairman on 22 January 2015
2. Mr Carroll and Barry Cusack resigned 22 January 2015
3. Mr Everist and Ms Skira joined the Remuneration & Nomination Committee 1 May 2015
4. Mr Walker resigned from the Remuneration & Nomination Committee upon being appointed as Executive Chairman
5. Mr Vella Joined the Audit and Risk Committee 22 January 2015
6. Special meetings were held on short notice during the financial year due to corporate activity.
REMUNERATION REPORT (AUDITED)
PROCEEDINGS ON BEHALF OF THE PARENT ENTITY
The audited remuneration report is set out on pages 27 to 38
and forms part of this Director’s report.
INDEMNITY AND INSURANCE OF OFFICERS
The Company has indemnified the Directors and Executives of
the Company for costs incurred, in their capacity as a Director or
Executive, for which they may be held personally liable, except
where there is a lack of good faith.
During the financial year, the Company paid a premium in
respect of a contract to insure the Directors and Executives of
the Company against a liability to the extent permitted by the
Corporations Act 2001.
INDEMNITY AND INSURANCE OF AUDITOR
The Company has not, during or since the financial year,
indemnified or agreed to indemnify the auditor of the Company
or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium
in respect of a contract to insure the auditor of the Company or
any related entity.
No person has applied to the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on
behalf of the parent entity, or to intervene in any proceedings
to which the parent entity is a party for the purpose of taking
responsibility on behalf of the parent entity for all or part of
those proceedings.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-
audit services provided during the financial year by the auditor
are outlined in note 34 to the financial statements.
The Directors are satisfied that the provision of non-audit
services during the financial 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.
MACMAHON ANNUAL REPORT 2015DIRECTORS’ REPORT 26
The Directors are of the opinion that the services as disclosed
in note 34 to the financial statements do not compromise
the external auditor’s independence requirements of the
Corporations Act 2001 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 APES 110
Code of Ethics for Professional Accountants issued by the
Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own work, acting
in a management or decision-making capacity for the parent
entity, acting as advocate for the parent entity or jointly
sharing economic risks and rewards.
ROUNDING OF AMOUNTS
The parent entity is of a kind referred to in Class Order
98/100, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Class Order to
the nearest thousand dollars, or in certain cases, the nearest
dollar.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out on
page 51.
AUDITOR
KPMG continues in office in accordance with section 327 of the
Corporations Act 2001.
This report is made in accordance with a resolution of Directors,
pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the Directors
J A Walker
Director
27 August 2015
Perth
MACMAHON ANNUAL REPORT 2015DIRECTORS’ REPORT
27
REVIEW OF REMUNERATION FOR FY16
The Board has continued to review the Company’s remuneration
framework which was implemented on 1 July 2013. As a result,
the STI Plan has been simplified and hurdles strengthened, to
ensure reward is only for above budget performance.
The LTI Plan has been delayed until the financial position of the
Company is such that a suitable baseline and reward structure
can be established. Any change will be reflective of market
practice and will ensure the performance hurdle will challenge
senior management to achieve growth in shareholder value over
the long term.
KEY MANAGEMENT PERSONNEL
The recent restructure of the Company recognised the
much smaller size of the business, the smaller breadth of
responsibility and the number of managers reporting to the
CEO. As a result of this change the only roles that remain Key
Management Personnel within the Executive team are the CEO
and CFO roles.
The Committee believes the Company’s remuneration
framework continues to reward pay for performance. We
therefore seek your support for this Report at the Company’s
Annual General Meeting in November 2015.
Vyril Vella
Chairman of the Remuneration & Nomination Committee
Note: References to years relate to financial years (eg. ‘2015’ means the year ended 30
June 2015).
REMUNERATION
REPORT - AUDITED
INTRODUCTION FROM THE CHAIR OF THE REMUNERATION
AND NOMINATION COMMITTEE
Dear Shareholder,
On behalf of the Board, I present the Remuneration Report for
the financial year ended 30 June 2015 (“FY15”). It has been
a challenging twelve months for the Company and the mining
services sector. This has resulted in considerable change to the
structure of the Company and the Executive Team.
The Board is continuing to review the remuneration framework
to ensure we have the right remuneration structure to attract
and retain the calibre of executives and senior management
needed to rebuild Macmahon, and ensure the effective
execution of the Company’s business strategy to deliver
sustainable and positive long term performance.
FY 15 REMUNERATION OUTCOMES
The key remuneration outcomes in FY15 are outlined below:
1. The CEO and Managing Director, Ross Carroll, resigned his
position on 22 January 2015. His termination payment only
included payment in lieu of the required notice period and
accrued leave entitlements.
2. The Chairman of the Board took up the role of Executive
Chairman from 22 January 2015 with no additional
remuneration. These duties ceased as of 13 July 2015 with
the appointment of the new CEO.
3. The Board welcomed the appointment of Mr Sybrandt van
Dyk as the CEO and Managing Director as of 13 July 2015.
4.
There was a restructure of the Executive team with two
KMP roles being made redundant and the KMP being
reduced down to two roles, the CEO and CFO.
5. The Board elected not to replace the Board position
vacated by Mr Barry Cusack and also elected to take a 10%
reduction in Board and Committee fees from 1 May 2015.
In addition, the fees paid to the Chairperson of the Board
subcommittees were abolished from 1 May 2015. Details of
the new fees are set out in Section 4.
6.
In FY15, the Company did not meet the short-term
incentive (“STI”) payment gateway, resulting in no STI
payments being made to eligible Executives or staff.
Similarly, no performance rights under the Company’s Long
Term Incentive (“LTI”) Plans vested during FY15, given that
the hurdles for those rights to convert into shares were
not met.
MACMAHON ANNUAL REPORT 2015 28
REMUNERATION
REPORT - AUDITED
REMUNERATION REPORT
1. REMUNERATION OVERVIEW
This Remuneration Report forms part of the Directors’
Report for 2015 and outlines the remuneration strategy and
arrangements for the Company’s Directors and Executives
(together “Key Management Personnel” or “KMP”) in
accordance with section 300A of the Corporations Act. This
report has been audited by the Company’s external auditor.
REMUNERATION REPORT CONTENTS
SECTION
SUBJECT
PAGE
1 Remuneration
1.1 Key Management Personnel
Overview
1.2 Remuneration Strategy
1.3 Remuneration Governance
1.4 Group Performance Affecting
FY15 Outcomes
2 Executive
2.1 Target Remuneration Mix
Remuneration
Framework and
Outcomes
2.2 Remuneration Payment Cycle
2.3 Total Fixed Remuneration
2.4 Short Term Incentive (STI) Plan
2.5 Long Term Incentive (LTI) Plan
3 Executive
Remuneration
3.1 Managing Director and CEO
Remuneration
3.2 Executive Remuneration
3.3 Executive KMP Contracts
4.1 Non-Executive Director’s Fees
4 Non-Executive
Director’s Fees
28
29
29
29
30
30
30
31
31
33
33
36
37
1.1 Key Management Personnel
The Company’s KMP include all Directors and Executives of the
Company and its controlled entities who have the authority
and responsibility for planning, directing and controlling the
activities of the Company. As part of the recent restructure,
the roles and reporting lines were re-assessed in line with
the smaller size of the business and changes were made to
reduce the management structure reflecting the reduction in
operations. As a result, from 28 March 2015 a number or senior
executives who were previously considered KMP (due to the
roles they occupied and level of authority they possessed) no
longer fall into this category. These senior executives are listed
below. In some cases, these senior executives are continuing
their employment in the Company.
PERSON
POSITION
Non-Executive Directors
PERIOD IN POSITION
DURING THE YEAR
J A Walker
Non-executive Chairman 1 July 2014 -
22 January 2015
C R G Everist
Non-executive Director Full year
E D R Skira
Non-executive Director Full year
V A Vella
Non-executive Director Full year
Director – Executive
J A Walker
Executive Chairman
22 January 2015 -
13 July 2015
R A Carroll
Executives
Managing Director and
Chief Executive Officer
1 July 2014 -
22 January 2015
S J van Dyk 1
Chief Financial Officer
Full year
Former Key Management Personnel
R J Barker 2
B L Cusack
R M Hughes
G J Miller
F E Ramsay 2
D A Todd
Group General Manager -
Market Development
1 July 2014 –
27 March 2015
Non-executive Deputy
Chairman
1 July 2014 –
22 January 2015
Group General Manager
–Human Resources
1 July 2014 –
27 March 2015
Executive General
Manager - Underground
1 July 2014 –
27 March 2015
Chief Operating
Officer - Surface and
Infrastructure
Group General Manager
- Health, Safety,
Environment and Quality
1 July 2014 –
27 March 2015
1 July 2014 –
19 December 2014
1. Sybrandt van Dyk was appointed as CEO and Managing Director on 13 July 2015.
2. 27 March was the service end date for the two redundant executives R J Barker and F E
Ramsay and the change of structure whereby the KMP roles were reduced to the CEO and
CFO roles.
MACMAHON ANNUAL REPORT 2015 REMUNERATION
REPORT - AUDITED
1.2 Remuneration Strategy
1.3 Remuneration Governance
29
The Board oversees the remuneration arrangements of the
Company. In performing this function the Board is assisted
by input and recommendations from the Remuneration &
Nomination Committee (“Committee”), external consultants
and internal advice. The Committee is responsible for
the overview and recommendation to the full Board, of
remuneration arrangements for Directors, the Chief Executive
Officer (“CEO”), and other Executives. The CEO, in consultation
with the Board, sets remuneration arrangements for other
Executives. No Executive is directly involved in deciding their
own remuneration (including the CEO).
Further details of the role and function of the Committee are
set out in the Charter for the Remuneration & Nomination
Committee on the Company’s website at http://www.
macmahon.com.au.
The Committee obtains advice and market remuneration data
from external remuneration advisors as required. When advice
and market remuneration data is obtained, the Committee
follows protocols regarding the engagement and use of external
remuneration consultants to ensure ongoing compliance with
executive remuneration legislation. These protocols ensure that
any remuneration recommendation from an external consultant
is free from undue influence by any member of the Company’s
KMP to whom it relates.
During the 2015 financial year, the Committee did not seek any
external advice in relation to CEO and Executive remuneration
related matters.
1.4 Group Performance Affecting FY15 Outcomes
KPIs for both short-term and long-term Executive incentive
schemes are linked to the Company’s strategic objectives and
as a result, pay outcomes are directly aligned with Company
performance against these objectives.
The following Company performance measures are among
those that have been included in incentive plans for relevant
Executives. Whilst the performance for FY15 demonstrates
unsatisfactory outcomes and the KPIs for the short-term
incentive scheme were not met, the Committee believes these
KPIs are aligned to shareholder wealth and returns to investors.
The Board is continuing to review the remuneration framework
to ensure the Company attracts and retains the calibre of
Executive and senior management to rebuild Macmahon and
ensure the effective execution of the Company’s strategy.
BUSINESS STRATEGY
Our overarching objective is to secure and deliver work that
is profitable in order to achieve sustainable returns for
shareholders. Our strategy centres on strengthening the
Company’s operations in its base market of Australia and
diversifying into geographies that offer strong market growth
based on Macmahon’s existing expertise and international
experience.
REMUNERATION STRATEGY
The primary goal of the remuneration strategy is to encourage
stronger than market growth in shareholder value over the short
and longer term. This is achieved by setting a remuneration
framework that attracts and retains key talent, drives business
performance and grows shareholder returns.
FY15 REMUNERATION FRAMEWORK
ATTRACT & RETAIN
TALENT
DRIVE BUSINESS
PERFORMANCE
GROW SHAREHOLDER
RETURNS
TOTAL FIXED
REMUNERATION (TFR)
SHORT-TERM
INCENTIVE (STI)
LONG-TERM INCENTIVE
(LTI)
∆ TFR is targeted
at the 62.5th
percentile
compared to
peer companies
∆ Peer companies
are those with
broadly similar
revenue, market
capitalisation
and are in related
industries
∆ TFR is reviewed
annually
∆ Payment
∆ Performance
assessed over 3
years
∆ Value will only be
realised to the
extent that Total
Shareholder
Return and
Earnings Per
Share targets
are achieved or
exceeded
∆ Grants of
performance
rights are
based on the
participants’
ability to
influence returns
to Shareholders
gateway is 90%
of budgeted
profit
∆ Award
opportunity for
achievement of
Key Performance
Indicators
(KPI) linked
to business
strategy
∆ Financial and
non-financial
KPIs, for example
customer
metrics and
safety
∆ Deferral of a
portion of the STI
for Executives
with a clawback
for the CEO
MACMAHON ANNUAL REPORT 2015 30
1.4 Group Performance Affecting FY15 Outcomes (continued)
Reported net profit/(loss) attributable to
equity holders of the parent (NPAT) ($m)
Reported return on equity (ROE) (%)
Reported basic earnings per share (EPS)
(cents)
Order book ($m)
New contracts and extensions ($m)
Safety - Total recordable injury frequency
rate (TRIFR)
Dividends declared (cents)
Share price at 30 June (cents)
Total Shareholder Return (TSR) (%)
FY15
(217.92)
(98.25)
(17.34)
1,150
68
5.44
-
6.6
(34.00)
FY14
30.4
7.3
2.4
2,573
387
8.5
-
10.0
(20.6)
FY13
(29.5)
(7.8)
(3.0)
3,230
1,846
7.7
-
13.0
(70.0)
FY12
56.1
16.5
7.7
3,139
2,997
7.7
4.0
57.5
3.8
FY11
1.0
0.3
0.1
2,013
1,052
3.5
-
56.0
7.0
2. EXECUTIVE REMUNERATION FRAMEWORK AND OUTCOMES
For the 2015 financial year, Macmahon continued the remuneration framework and structure that was established in FY13.
2.1 Target remuneration mix
With the change of structure of the KMP and size of the Company, a change to the overall remuneration for the Managing Director and
CEO as well as remuneration mix was considered appropriate. A significantly lower TFR combined with a reduced STI and stronger focus
on long term outcomes has been proposed by the Board. The new remuneration mix for the CEO as well as the CFO’s remuneration mix
is set out in Diagram below.
CEO
CFO
40% TFR
20% STI
40% LTI
50% TFR
25% STI
25% LTI
2.2 Remuneration payment cycle
The diagram below outlines the timing and components of the Managing Director’s and KMP’s remuneration packages for both FY15
and FY16. Each component is linked to the remuneration mix and, in the case of the STI and LTI, is dependent on achievement of
performance outcomes.
Year 1
Year 2
Year 3
Year 4
TFR
Total
Rem
STI opportunity
25% STI Deferral
LTI opportunity
(entitlement;
30 June Year 3)
2.3 Total Fixed Remuneration (TFR)
All Executive KMP and Senior Management receive a TFR package that is based on the size and scope of their role, knowledge
and experience and market benchmarks for that role. TFR comprises base salary, any applicable role specific allowances, and
superannuation.
Macmahon regularly reviews and benchmarks the base salaries and TFR of KMP and Senior Management to ensure that the
remuneration is appropriate and competitive with its market and industry peers. Benchmarking was completed using industry surveys
and reports.
The KMP’s TFR is outlined in the remuneration table on page 38 of this report.
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED 31
2.4 Short-Term Incentive (STI) Plan
2.4.3 Deferral and clawback
The FY15 Macmahon Short Term Incentive Plan is applied to
all KMP and senior management and is designed to reward
performance against key performance indicators (KPIs) that are
considered to drive positive business outcomes.
The STI Plan provides for deferral of 25% of the KMP’s STI
achieved award for a period of two years. If an Executive leaves
during this two year period, payment will be at the Board’s
discretion. This has been retained for the FY16 STI Plan.
The common KPIs applied to the KMP for FY15 include:
∆ Net Profit After Tax (NPAT);
∆ Return on Equity (ROE);
∆ Total Recordable Injury Frequency Rate (TRIFR); and
∆ Order Book.
Group and Business Unit level financial and safety targets are
agreed with the Board and personal KPIs are set in consultation
with the relevant member of the KMP.
The Board considers these measures key to driving shareholder
and investor returns.
The key features of the STI Plan for FY15 are outlined below.
2.4.1 Eligibility
Eligibility is extended to senior management employees who
have a significant influence on the business performance of the
Company, aligning incentives with Company performance.
2.4.2 Structure
In line with the strategy to place more emphasis on ‘At Risk’ pay
and drive improved performance against budget expectations
the following achievement hurdles were applied to the FY15 STI
Plan for the CEO/Managing Director and KMP:
% OF TFR
EARNED ON
THRESHOLD
ACHIEVEMENT
% OF TFR
EARNED
ON TARGET
ACHIEVEMENT
% OF TFR
EARNED ON
STRETCH
ACHIEVEMENT
% OF TFR
EARNED ON
MAXIMUM
ACHIEVEMENT
(90% OF
BUDGET)
31.25%
12.5%
(100% OF
BUDGET)
(112.5% OF
BUDGET)
(125% OF
BUDGET)
75%
37.5%
100%
50%
125%
62.5%
10%
30%
40%
45%
CEO
CFO, COO
and EGM
Group
General
Managers
For the FY16 STI Plan proposed changes have been made to
simplify the structure and make the ‘Threshold’ achievement
targets match expectations that STI awards will relate to
‘budget and above’ performance only. The new plan structure is
set out below:
% OF TFR EARNED
ON THRESHOLD
ACHIEVEMENT
% OF TFR EARNED
ON TARGET
ACHIEVEMENT
% OF TFR EARNED
ON STRETCH
ACHIEVEMENT
2.4.4 STI Gateway and conditions
The FY15 plan has a requirement that 90% of the Company’s
NPAT is achieved before any STI payment can be made, subject
to Board discretion. The Board may exercise discretion to award
STI where the gateway has not been met for exceptional safety
or business unit performance.
If a fatality occurs, the safety KPI will have a nil STI contribution
for that year for all line management and the business unit
involved. Depending on the cause of the fatality, the Board may
further amend potential bonus payments.
STI is forfeited if an Executive resigns or is terminated before
the payment date. In exceptional circumstances this may be
reviewed by the Board.
2.4.5 STI outcomes for FY15
The STI achievement award for the Managing Director and CEO
and all KMP, both past and present, was nil and 100% of the
STI has been forfeited as the Company did not meet the NPAT
payment gateway. Therefore none of the other performance
KPIs were considered, despite there being good performance,
particularly in safety.
The departing Executives from FY15, Rob Barker, Fraser
Ramsay and David Todd, were not employed for the full year and
forfeited any right to a STI payment.
2.5 Long Term Incentive (LTI) Plan
The FY16 LTI Plan has been deferred as the Board believes
that the current share price and uncertainty at the time of
considering the LTI Plan makes it difficult to set a fair baseline
and the Board also wishes to consider the new tax applications
to options that may make a more suitable and tax effective LTI
structure.
The FY15 LTI Plan that was offered to Executives and other
senior personnel applied the structure set out in the 2014
Annual Report and is designed to ensure reward for long term
positive shareholder outcomes.
The FY15 Plan offered performance rights with the opportunity
to receive fully paid ordinary shares in the Company for no
consideration. The number of performance rights granted was
determined by applying the executive remuneration mix as
outlined in the 2014 Annual Report and is at the discretion of the
Board. Details of the number of performance rights issued are
set out in 3.2.4 of this report.
(100% OF BUDGET)
(112.5% OF
BUDGET)
(125% OF BUDGET)
2.5.1 Eligibility
CEO
CFO
25%
25%
50%
50%
75%
75%
The FY15 Plan was open to Executives and Senior Management
of Macmahon as determined by the Board, including the CEO.
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED 32
2.5.2 Structure
Earnings Per Share (EPS)
For the FY15 Plan, half of the performance rights (50%) are
tested against a relative Total Shareholder Return (TSR)
performance hurdle against two comparator groups. The
remaining half of the performance rights (50%) are tested
against an absolute Earnings Per Share (EPS) performance
hurdle. Both performance conditions are measured over a three
year period. There is no time-based component of the Plan.
2.5.3 Performance Hurdles
The EPS performance hurdle for the FY15 LTI Plan is based on
the compounded annual growth rate (“CAGR”) of Macmahon’s
EPS measured from a starting point, to the EPS reported by
Macmahon for the financial year ending 30 June 2017. The
starting point for the EPS performance hurdle was set against
the reported EPS as at 30 June 2014.
The proportion of EPS performance rights eligible to vest at the
end of the performance period will be determined as follows:
The FY15 LTI Plan is based on applying measures against both
TSR and EPS performance as set out below.
MACMAHON’S EPS CAGR OVER THE
PERFORMANCE PERIOD
PROPORTION OF PERFORMANCE RIGHTS
THAT ARE ELIGIBLE TO VEST
Total Shareholder Return (TSR)
The TSR performance hurdle measures the growth in the
Company’s share price together with the value of dividends
during that period, on the basis that the dividends are
reinvested into new shares.
In the FY15 Plan the Company’s TSR is measured as a percentile
ranking compared to the TSR of the two comparator groups over
the performance period. The proportion of TSR performance
rights which are eligible to vest at the end of the performance
period will be determined as follows:
MACMAHON’S TSR RANK RELATIVE TO
THE COMPARATOR GROUP
PROPORTION OF TSR SHARE
PERFORMANCE RIGHTS THAT ARE
ELIGIBLE TO VEST
Less than 50th percentile
50th percentile
Between 50th and
75th percentile
At or above the
75th percentile
0%
50%
50% plus an additional 2% of
this award for each additional
percentile ranking above the
50th percentile
The Company’s TSR will be measured against the TSR
performance of the following two comparator groups of listed
entities over the performance period, weighted at 50% each:
∆ Seven companies with similar businesses to Macmahon,
being:
Ω Ausdrill Limited;
Ω Downer EDI Limited;
Ω Leighton Holdings Limited (now CIMIC Group Ltd);
Ω Monadelphous Group Limited;
Ω NRW Holdings Limited;
Ω Decmil Limited;
Ω MACA Limited;
and
∆ Companies ranked between 101-200 in the ASX 200
classified as materials or industrials.
less than 5% EPS CAGR
5% EPS CAGR
0%
50%
Between 5% EPS CAGR and
12% EPS CAGR
50% plus an additional 7.1% of
this award for each additional
EPS CAGR % above 5% EPS
CAGR.
At or above 12% EPS CAGR
100%
2.5.4 Vesting schedule
The LTI Plan provides for 100% of performance rights to
vest after three years if performance hurdles are met and
employment is continued.
2.5.5 Re-testing
There is no re-testing for LTI grants.
2.5.6 Restrictions on disposals
Vested plan shares held in trust are subject to disposal
restrictions, in line with the Company’s Trading in Shares Policy.
Macmahon seeks to limit dilution of existing Shareholders. At 30
June 2015 the Company had 23,996,621 performance rights
on issue, which was less than 2% of the number of ordinary
shares. Macmahon currently purchases shares for all Executive
performance rights on market and holds them in trust, and in
these circumstances dilution is not applicable.
2.5.8 Dividends
Performance rights do not carry any rights to dividends or
voting rights. Shares allocated upon vesting of performance
rights rank equally with other ordinary shares on issue.
2.5.9 Change of control
If a change of control occurs or if the Company is wound
up or delisted, the Board may (in its absolute discretion)
determine that all or a portion of the performance rights will
vest notwithstanding that time restrictions or performance
conditions applicable to the share performance have not been
satisfied.
2.5.10 Cessation of employment
If an Executive ceases employment before performance rights
vest, rights to unvested Plan shares lapse immediately unless
the Board in its absolute discretion determines otherwise.
100%
2.5.7 Dilution limits
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED 33
3. EXECUTIVE REMUNERATION
3.2.2 No hedging of performance rights
The Board has adopted the Macmahon Trading in Shares Policy
which prohibits employees from entering into transactions
that limit the economic risk of participating in unvested
employee entitlements. Hedging of unvested equity will result in
immediate forfeiture.
3.2.3 LTI performance rights
During the period the company issued 21,100,000 performance
rights under the FY2015 LTI Plan to Executives and key talent.
Following shareholder approval at the 2014 Annual General
Meeting, 9,500,000 Class D CEO Performance Rights were
issued to Mr Carroll on 13 November 2014. These performance
rights lapsed when Mr Carroll resigned on 22 January 2015.
During the period relevant performance hurdles were tested and
as no hurdles were met, no performance rights vested. As at
30 June 2015, Macmahon had 23,996,621 performance rights
outstanding from all grants under past LTI plans.
3.1 Managing Director and CEO Remuneration
In FY15, Mr Ross Carroll’s remuneration package comprised the
following components:
1. Total Fixed Remuneration (TFR) of $1,100,000 per annum,
inclusive of superannuation. This was reviewed in FY15 and
was not increased due to the challenging market conditions
experienced by the Company. Mr Carroll had not received a
remuneration increase since being appointed in September
2012.
2. Under the terms of his employment contract Mr Carroll was
entitled to a pro-rata payment of the STI up until the date
of his resignation. However, his STI Plan was aligned with
other senior Executives under the same Plan rules with
KPIs that align to winning work, profitable performance and
safety. As a result of the STI Plan not achieving the NPAT
gateway, there was no pro-rata payment of the STI to Mr
Carroll for FY15.
3. Under the terms of the various LTI Plans to which Mr Carroll
was invited, his resignation resulted in the forfeiture of all
of his entitlements to receive share performance rights
convertible into fully paid shares. There was therefore no
entitlements converted or currently due to be allocated to
Mr Carroll as a result of his departure from the Company.
It is intended to invite the new CEO to participate in the FY16
LTI Plan once it is formalised by the Board. If required this
participation will be put to the shareholders for approval.
For the period 22 January 2015 to 30 June 2015, Mr Jim Walker
was paid $84,445, whilst holding the position of Executive
Chairman. This represented the fees that Mr Walker would have
received as Chairman of the Board and there were no additional
payments made whilst holding this position.
3.2 Executive Remuneration
3.2.1 Executive Salary Adjustments
With the restructure of the company and the drive to find cost
savings within the business, a 10% salary reduction was applied
to all Executives from 1 June 2015 as part of the introduction
of a nine day fortnight across the senior salaried workforce
within the Corporate support functions. The nine day fortnight
has been introduced as an interim roster change until such time
as the performance of the company is sufficient to support
reinstating the pre-existing roster.
There were no pay increases during the year for the current or
previous KMP.
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED 34
3.2.4 Options and Rights
3.2.4.1 Rights over equity instruments granted as compensation
Details of rights over ordinary shares in the Company that were granted as compensation to each KMP during the reporting period are
as follows:
RIGHTS
Current KMP
S J van Dyk
2,500,000
Former KMP
R A Carroll
9,500,000
R J Barker
1,350,000
R M Hughes
950,000
G J Miller
1,900,000
F E Ramsay
2,500,000
D A Todd
500,000
NUMBER OF RIGHTS
GRANTED DURING FY15
VESTING CONDITION
GRANT DATE
FAIR VALUE AT
GRANT DATE
EXPIRY DATE
1,250,000
EPS (2014)
625,000
625,000
Relative TSR (2014) -
Adjusted ASX 200
Relative TSR (2014) -
Board Selected
4,750,000
EPS (2014)
2,375,000
2,375,000
Relative TSR (2014) -
Adjusted ASX 200
Relative TSR (2014) -
Board Selected
675,000
EPS (2014)
337,500
337,500
Relative TSR (2014) -
Adjusted ASX 200
Relative TSR (2014) -
Board Selected
475,000
EPS (2014)
237,500
237,500
Relative TSR (2014) -
Adjusted ASX 200
Relative TSR (2014) -
Board Selected
950,000
EPS (2014)
475,000
475,000
Relative TSR (2014) -
Adjusted ASX 200
Relative TSR (2014) -
Board Selected
1,250,000
EPS (2014)
625,000
625,000
Relative TSR (2014) -
Adjusted ASX 200
Relative TSR (2014) -
Board Selected
250,000
EPS (2014)
125,000
125,000
Relative TSR (2014) -
Adjusted ASX 200
Relative TSR (2014) -
Board Selected
7 August 2014
7 August 2014
$0.105
$0.078
30 June 2017
30 June 2017
7 August 2014
$0.077
30 June 2017
13 November 2014
13 November 2014
$0.087
$0.064
30 June 2017
30 June 2017
13 November 2014
$0.063
30 June 2017
7 August 2014
7 August 2014
$0.105
$0.078
30 June 2017
30 June 2017
7 August 2014
$0.077
30 June 2017
7 August 2014
7 August 2014
$0.105
$0.078
30 June 2017
30 June 2017
7 August 2014
$0.077
30 June 2017
7 August 2014
7 August 2014
$0.105
$0.078
30 June 2017
30 June 2017
7 August 2014
$0.077
30 June 2017
7 August 2014
7 August 2014
$0.105
$0.078
30 June 2017
30 June 2017
7 August 2014
$0.077
30 June 2017
7 August 2014
7 August 2014
$0.105
$0.078
30 June 2017
30 June 2017
7 August 2014
$0.077
30 June 2017
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED 35
3.2.4.2 Details of equity incentives affecting current and future remuneration
Details of vesting profiles of the rights over ordinary shares in the Company held by each KMP are detailed below:
NAME
GRANT DATE
NUMBER
GRANTED
NUMBER
VESTED IN
FY15
NUMBER
FORFEITED IN
FY15
OTHER
CHANGES*
HELD AT
30 JUNE 2015
FINANCIAL YEAR IN WHICH
THE GRANT VESTS, SUBJECT
TO MEETING PERFORMANCE
HURDLES
FY16
FY17
Current KMP
S J van Dyk
7-Aug-14
2,500,000
Former KMP
Rob Barker
25-Jul-13
7-Aug-14
Ross Carroll
15-Jan-10
17-Jun-11
1-Jul-12
13-Dec-13
13-Nov-14
Roger Hughes
25-Jul-13
Greg Miller
7-Aug-14
15-Jan-10
17-Jun-11
1-Jul-12
25-Jul-13
7-Aug-14
Fraser Ramsay 15-Jan-10
17-Jun-11
1-Jul-12
25-Jul-13
7-Aug-14
7-Aug-14
D A Todd
600,000
1,350,000
1,588,437
1,934,700
709,390
6,225,310
9,500,000
500,000
950,000
317,687
483,675
515,920
1,000,000
1,900,000
397,109
483,675
515,920
1,500,000
2,500,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
1,350,000
1,588,437
1,934,700
709,390
6,225,310
9,500,000
-
-
-
-
-
-
-
397,109
483,675
515,920
1,500,000
2,500,000
500,000
-
-
-
-
-
-
-
-
-
-
(317,687)
(362,756)
-
-
-
-
-
-
-
-
-
2,500,000
2,500,000
-
-
-
-
-
-
-
500,000
950,000
-
120,919
515,920
1,000,000
1,900,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,919
206,368
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
950,000
-
-
309,552
1,000,000
1,900,000
-
-
-
-
-
-
*Other changes represent rights that lapsed during the year.
All performance rights held at 30 June 2015 have not vested and are neither exercisable or unexercisable.
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED
36
3.2.5 Shareholdings
The number of shares in the Company held during the financial year by each Director and other members of the KMP of the consolidated
entity, including their personally related parties, is set out below:
BALANCE AT THE START
OF THE YEAR
PURCHASES
RECEIVED ON EXERCISE
OF OPTIONS/ GRANTED
SOLD
BALANCE AT END
OF THE YEAR*
Directors
J A Walker
G Everist
E D R Skira
V A Vella
Executives
S J van Dyk
Former Directors & Executives
R A Carroll
B L Cusack
R Barker
R Hughes
G J Miller
F E Ramsay
D Todd
Total
0
0
0
300,000
500,000
-
357,842
1,000,000
0
1,400,000
2,699,006
1,500,000
124,000
21,739
314,918
353,341
0
-
-
-
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
500,000
0
1,357,842
1,400,000
N/A
N/A
N/A
121,739
314,918
N/A
N/A
5,370,846
3,300,000
-
-
3,994,499
* The holdings of KMP who have terminated are not shown in the end of year balance given these individuals were not KMP at 30 June 2015.
3.3 Executive KMP contracts
3.3.1 Employment contract
All Executives have an employment contract with Macmahon that is ongoing and has no fixed end date. The employment details of the
CEO and each Executive are outlined in this section.
3.3.2 Annual performance review
An annual performance review is undertaken with each Executive, through the Company performance and development review
process, whereby discussions are held on performance, KPI achievement and development needs. This is an important human
resource practice in the ongoing development of our people to recognise their achievements and focus on continual improvement of
performance.
3.3.3 Executive service contracts
Remuneration and other terms of employment for the CEO and other Executives are formalised in service agreements. Major provisions
of the agreement relating to the newly appointed CEO are set out below. The CFO role was being recruited at the time of this report. The
notice period for the CFO role is proposed to be 3 months.
EXECUTIVE
S J van Dyk
Promoted to CEO 13 July 2015.
APPOINTMENT TO KMP
NOTICE PERIOD FOR CONTRACT CESSATION
Chief Executive Officer
The contract is ongoing and has no fixed term.
S J van Dyk
Appointed to KMP 14 April 2014 as CFO.
Chief Financial Officer
The contract was ongoing and had no fixed term.
All contracts contain retrenchment / severance benefits in accordance with applicable legislation
The CEO contract can be terminated by either party with
12 months’ notice or payment in lieu.
The CFO contract was able to be terminated by either
party with 6 months’ notice or payment in lieu.
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED
37
4. NON-EXECUTIVE DIRECTORS’ FEES
The structure of remuneration for Non-executive Directors is distinct from that applicable to Executives. Fees for Non-executive
Directors are fixed and are not linked to the financial performance of the Company. Fees reflect Board and Committee responsibilities.
In the context of supporting the drive to reduce costs a 10% reduction in Board fees was undertaken by the Board, effective from 1 May
2015. This follows a similar 10% reduction applied in November 2012, thereby amounting to an effective 19% reduction in base Board
fees since that time.
Further, the Board has agreed to abolish fees paid to Chairpersons of Board subcommittees and each Non-executive Director will
receive only one committee fee allowance of $8,505, providing a total Board fee allowance of $97,605 (inclusive of superannuation).
The Board will not seek any increase to the relevant fee pool at the 2015 Annual General Meeting.
FEE APPLICABLE FROM 1 JULY 2015
Chairman
Non-executive Directors
FEE
$
178,200
97,605
The maximum aggregate amount that can be paid to Non-executive Directors (the fee pool) is currently $1,100,000 per annum,
including superannuation, which includes an allowance for an increase in the number of Directors if required. Actual Directors’ fees for
the reporting period were $611,524. No retirement benefits other than superannuation were paid to Non-executive Directors. There
has been no increase in the fee pool amount since its approval by Shareholders at the 2008 Annual General Meeting.
Please refer to Page 38 for KMP Remuneration
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED
38
KMP Remuneration
Short-term
Post employment
Share-
based
payment
Committee
fees
$
Salary
$
Cash
bonus/
STI
$
Non-
monetary
benefits
$
Total
short-
term
$
Leave
Payout
Payments
$
Other
long-term
benefits7
$
Year
Super
annuation
$
Termination
payments
$
Options
and rights
$
Performance
related
%
Non-
performance
related
%
Compensation
consisting of
options and
rights
%
Total
compensation
$
Current KMP as at 30 June 2015
Directors Non-executive
J A Walker 1
(Chairman)
B L Cusack 2
(Deputy Chairman)
C R G Everist
E D R Skira
V A Vella
Total compensation for
Non-executive directors
Directors - Executive
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
101,035
90,509
76,233
143,100
-
-
-
-
97,350
9,293
99,000
7,327
88,904
15,884
90,618
15,469
88,904
13,000
90,618
18,107
452,426
38,177
513,845
40,903
J A Walker 1
2015
77,118
(Executive Chairman)
2014
S J van Dyk
2015
514,229
Chief Financial Officer
2014
112,936
Former Key Management Personnel
R J Barker 5
Group General Manager -
Market Development
2015
2014
289,407
355,979
R A Carroll 3
2015
627,083
Chief Executive Officer
2014
1,075,070
R M Hughes
Group General Manager -
Human Resources
G J Miller
EGM Underground
F E Ramsay 5
Chief Operating Officer
- Surface Mining &
Infrastructure
D A Todd 6
Group General Manager
- HSEC
Total compensation
executive personnel
"Total compensation:
2015
2014
2015
2014
2015
2014
2015
2014
240,275
316,832
311,198
395,036
426,325
549,199
120,563
233,132
2015
2,606,198
2014
3,038,184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
101,035
90,509
76,233
143,100
106,643
106,327
104,788
106,087
-
101,904
-
-
-
-
-
108,725
490,603
554,748
77,118
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,598
8,372
7,242
-
-
-
9,955
9,813
9,681
10,057
36,476
28,242
7,326
5,878
520,107
26,481
29,931
50,000
1,198
164,134
-
5,814
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
76,042
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,125
294,532
51,539
(48,148)
36,820
151,036
(22,000)
10,314
366,293
-
32,928
-
22,000
13,211 1,088,281
24,930
3,807
244,082
3,963
22,826
8,600
325,432
-
24,907
1,293
312,491
267,922 (293,754)
22,083
10,716
405,752
35,950
-
-
-
-
-
613,565
47,229
18,333
155,258
175,108
5,490
431,815
358,768 (395,646)
19,324
463,804
(190,324)
11,243
560,442
-
50,801
-
199,057
2,963
123,526
10,714
(2,367)
16,789
56,159
4,699
237,831
-
19,208
-
-
-
29,217 2,635,415 1,187,793 (1,263,475)
169,682
1,220,998
(473,729)
50,000
59,981 3,148,165
-
-
194,538
-
1,028,063
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12
29
(5)
5
100
100
100
100
100
100
100
100
100
100
100
100
100
100
88
71
105
95
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12
-
(5)
5
110,633
98,881
83,475
143,100
106,643
106,327
114,743
115,900
111,585
118,782
527,079
582,990
84,445
652,561
169,948
463,779
421,221
36
15
5
33
28
(28)
25
-
-
(14)
25
(12)
22
64
85
95
67
72
128
75
100
100
114
75
112
78
36
15
5
33
28
(28)
25
1,726,776
318,100
368,672
464,000
616,810
687,741
810,300
-
-
204,821
257,039
(14)
3,476,685
24
4,370,766
(12)
4,003,767
21
4,953,756
Directors and Executives" 2015
3,058,625
38,177
-
29,217 3,126,020 1,187,793 (1,263,475)
206,160
1,220,998
(473,729)
2014
3,552,029
40,903
50,000
59,981 3,702,913
-
222,780
-
1,028,063
1 J A Walker assumed the role of Executive Chairman on 22 January 2015.
2 B J Cusack stepped down as Deputy Chairman on 22 January 2015.
3 R A Carroll ceased employment on 22 January 2015 and was paid entitlements in accordance with his contract of employment.
4 R Hughes and G J Miller were no longer classified as KMP effective 27 March 2015.
5 R J Barker and F E Ramsay ceased employment on 27 March 2015 and were paid all leave and notice/severance entitlements in accordance with their contracts of employment.
6 D A Todd ceased employment on 19 December 2014 and was paid his termination entitlements in accordance with his contract of employment.
7 Represents accruals for annual and long service leave balances including reversals when key management personnel leave the company
4,661
631,744
498,850 (554,004)
14,583
549,999
(539,934)
(90)
190
(90)
601,238
MACMAHON ANNUAL REPORT 2015REMUNERATION REPORT - AUDITED CORPORATE GOVERNANCE
STATEMENT
Macmahon is committed to operating in accordance with high
standards of corporate governance. We believe that doing so
enhances the Company’s sustainable long-term performance
and value creation for all stakeholders.
This Statement reports on Macmahon’s key governance
principles and practices which are reviewed regularly
and revised as appropriate to reflect changes in law and
developments in corporate governance.
As required by the Australian Securities Exchange Limited (“ASX”)
Listing Rules (“ASX Listing Rules”), this Statement also reports on:
∆
∆
the extent to which the Company has followed the Corporate
Governance Recommendations contained in the ASX
Corporate Governance Council’s Corporate Governance
Principles and Recommendations (3rd edition) (“ASXCGC
Recommendations”); and
the reasons for any departures from the ASXCGC
Recommendations, in compliance with the “if not, why not”
regime.
The Board of Macmahon (the “Board”) is satisfied that the
Company either meets the ASXCGC Recommendations, or
where it does not, has sound reasons for not doing so as
explained in this Statement. A checklist cross-referencing the
ASXCGC Recommendations to the relevant sections of this
Statement and other Company publications is provided later in
the Statement.
THE BOARD OF DIRECTORS
1.1 Board role and responsibilities
The Company’s constitution provides that the business and
affairs of the Company are to be managed by or under the
direction of the Board. The Board has established and disclosed
(on the Company’s website) its Board Charter which details
the Board’s role, powers, duties and functions. Other than
as specifically reserved to the Board in the Board Charter,
responsibility for the management of Macmahon’s business
activities is delegated to the Chief Executive Officer (“CEO”)
who is accountable to the Board. The Board Charter and the
delegation of Board authority to the CEO are reviewed regularly.
During the year Macmahon undertook a significant restructure
in response to market conditions. As part of that restructure
Mr Walker assumed the role of Executive Chairman in January
2015 while the Board conducted an extensive executive search
process for a new CEO. Mr van Dyk’s appointment marked the
conclusion of that process.
Following Mr van Dyk’s appointment, the Company returned to
its standard convention of separating the role of Chief Executive
Officer and Chairman. Consequently, references in Company
charters and policies to the CEO implied reference to the
Executive Chairman in the interim period.
1.2 Board composition and expertise
The current Board composition includes two independent
non-executive directors, two non-independent non-executive
directors, and the CEO, who is also the Managing Director.
Details on each of the directors including experience,
knowledge and skills and their status as an independent or non-
independent director are set out in the Directors’ Report and on
the Company’s website.
39
In assessing the composition of the Board, the directors have
regard to the following policies:
∆
∆
∆
∆
∆
the Chairman should be an independent, non-executive;
the role of the Chairman and CEO should not be filled by the
same person;
the CEO should be a full-time employee of the Company;
the Board should represent a broad range of qualifications,
diversity, experience and expertise considered of benefit to
the Company; and
the Board should include a majority of independent non-
executive directors.
As previously noted, given the Company’s restructure initiatives,
Mr Walker assumed the role of Executive Chairman for an
interim period while the Company undertook an executive
search process to appoint a new CEO. As a consequence of
Mr Walker having recently held executive responsibilities the
Board has determined that he should now, for the time being,
be considered as a non-independent non-executive director.
The Board will reassess this determination as the time since Mr
Walker last held executive responsibilities increases.
Where a casual vacancy arises, the Board will seek to appoint
a non-executive director with the appropriate skills and
experience to fill any potential expertise gaps.
The directors on the Board collectively have the skills and
experience outlined in the Board Skills Matrix on the Company’s
website. The Board considers that the non-executive directors
collectively bring an appropriate range of skills, knowledge and
experience to direct the Company.
Section 1.6 on Board succession planning provides further
information on the mix of skills and diversity the Board seeks to
achieve in membership of the Board.
1.3 Chairman of the Board
Mr Jim Walker, who joined the Board in October 2013, assumed
the Chairmanship when Mr Scott-Mackenzie retired in March
2014. This succession was part of the ongoing Board renewal
plan as has been highlighted previously to shareholders.
His appointment to the Board was as an independent, non-
executive director, however as discussed above, Mr Walker is
currently considered to be non-independent non-executive
director. Details of Mr Walker’s career including experience,
knowledge and skills are set out in the Directors’ Report and on
the Company’s website.
As Chairman of the Board, Mr Walker is responsible for
leadership and effective performance of the Board and for the
maintenance of relations between directors and management
that are open, cordial and conducive to productive cooperation.
The Chairman’s responsibilities are set out in more detail in the
Board Charter.
Mr Walker is currently a non-executive director of SKILLED
Group Limited (appointed November 2013), Seeing Machines
(appointed May 2014) and RACWA Holdings Pty Ltd (appointed
November 2013). The Board does not consider that these roles,
nor any of his other commitments, interfere with the discharge
of his duties to the Company. The Board is satisfied that Mr
Walker commits the time necessary to discharge his role
effectively.
MACMAHON ANNUAL REPORT 2015 40
1.4 Director independence
1.6 Board succession planning and performance evaluation
In assessing the independence of each director, the Board
considers, amongst other things, whether the director is a
substantial Shareholder of the Company (as defined by the
Corporations Act) or an officer of, or otherwise associated
directly with a substantial Shareholder of the Company;
∆ within the last three years, has been employed in an
executive capacity by the Company or another Group
member or been a director after ceasing to hold any such
employment;
∆ within the last three years, has been a principal of a material
professional advisor or a material consultant to the Company
or another Group member, or an employee materially
associated with the service provided;
∆
is a material supplier or customer of the Company or other
Group member, or an officer of or otherwise associated
directly or indirectly with a material supplier or customer;
∆ has a material contractual relationship with the Company
or another Group member other than as a director of the
Company;
∆ has served on the Board for a period which could or could
reasonably be perceived to materially interfere with the
director’s ability to act in the bests interests of the Company;
and
∆
is free from any interest and any business or other
relationship which could, or could reasonably be perceived
to, materially interfere with the director’s ability to act in the
best interests of the Company.
Applying the above criteria, the Board has determined that Mr
Giles Everist and Ms Eva Skira are independent directors.
The independent status of directors standing for election or
re-election is identified in the notice of the Company’s annual
general meeting (“AGM”). If the Board’s assessment of a
director’s independence changes, that change is disclosed.
1.5 Conflicts of interest
Directors are required to disclose any actual or potential conflict
or material personal interests on appointment as a director and
are required to keep these disclosures up to date.
In the event that there is, or may be, a conflict between the
personal or other interests of a director, then the director with
an actual or potential conflict of interest in relation to a matter
before the Board does not receive the Board papers relating
to that matter. When the matter comes before the Board
for discussion, the director withdraws from the meeting for
the period the matter is considered and takes no part in the
discussion or decision making process.
Minutes reporting on matters in which a director is considered
to have a conflict of interest are not provided to that director.
However, the director might be given notice of the broad nature
of the matter for discussion and is updated in general terms on
the progress of the matter.
The Company has established and disclosed (on its website) a
Board Conflict of Interest Policy that dictates the appropriate
procedures to be followed.
The Board manages its succession planning with the assistance
of the Remuneration & Nomination Committee, reviewing its
size, composition, diversity and effectiveness as a whole and
the mix of existing and desired competencies across members.
In conducting the review, the Board Skills Matrix referred to in
section 1.2 is used to enable the Committee to assess the skills
and experience of each director and the combined capabilities
of the Board.
In considering overall Board balance, the Committee will give
due consideration to the value of a diversity of backgrounds and
experiences among the members. With the exception of the
Managing Director, Directors appointed by the Board are subject
to Shareholder election at the next AGM.
Macmahon undertakes appropriate background and
screening checks prior to nominating a director for election
by shareholders, and provides to shareholders all material
information in its possession concerning the director
standing for election or re-election in the explanatory notes
accompanying the notice of meeting.
The Board recognises the importance of rejuvenation via
changes in Board membership. The main driver of change
during FY2015 has been the Company’s restructure initiatives.
The past year has seen the resignation of Mr Ross Carroll (the
former Managing Director and CEO), retirement of Mr Barry
Cusack (the long-standing Deputy Chairman) and subsequent
to FY2015 year-end, the appointment of Mr Sybrandt van Dyk as
the new Managing Director and CEO. The size of the Board has
reduced from six to five members.
The Board undertakes an annual evaluation of its size,
composition, diversity and effectiveness against a broad
range of good practice criteria and where deemed appropriate
engages the services of an external facilitator to assist with this
process. The Chairman reviews the performance of individual
Board members and meets individually with each director to
discuss the findings of their report, including performance of
the Chairman. The Board reviews the performance of individual
Board members seeking re-election prior to any Board
recommendation being given to Shareholders.
An evaluation of the performance of the Board and its
Committees is currently being undertaken by the Board in
accordance with the processes outlined above.
Any director whose performance is consistently unsatisfactory
will be asked to retire.
1.7 Director retirement and re-election
Non-executive directors must retire and stand for re-election at
the third AGM following their election or most recent re-election.
At least one non-executive director must stand for election
at each AGM. Any director appointed to fill a casual vacancy
since the date of the previous AGM must submit themselves for
election at the next AGM.
Board support for a director’s re-election is not automatic and
is subject to satisfactory director performance (in accordance
with the evaluation process described above).
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 1.8 Directors’ appointment, induction training and
continuing education
All new directors are provided with a formal letter of
appointment setting out the key terms and conditions of the
appointment, including duties, rights and responsibilities, the
time commitment envisaged and the Board’s expectations
regarding their involvement with committee work.
Induction training is provided to all new directors. It includes
comprehensive meetings with the CEO, key executives and
management, information on key corporate and Board policies,
and the opportunity to visit the Company’s primary operations.
All directors are expected to maintain the skills required to
discharge their obligations to the Company. Directors are
encouraged to undertake continuing professional education and
where this involves industry seminars and approved education
courses, this is paid for by the Company where appropriate.
1.9 Board access to information and independent advice
Directors may, in carrying out their Company related duties,
seek external professional advice. If external professional
advice is sought, a director is entitled to reimbursement of all
reasonable costs where such a request for advice is approved
by the Chairman. In the case of a request made by the Chairman,
approval is required by the Chair of the Audit & Risk Committee.
1.10 Directors’ remuneration
Details of remuneration paid to directors (executive and
non-executive) are set out in the Remuneration Report.
The Remuneration Report also contains information on the
Company’s policy for determining the nature and amount of
remuneration for directors and executives and the relationship
between the policy and Company performance.
Shareholders will be invited to consider and approve the
Remuneration Report at each Annual General Meeting.
1.11 Board meetings
During FY 2015, the Board held nine scheduled Board meetings
and 19 unscheduled Board meetings on short notice. There
were only three occasions of absence at meetings called on
short notice, and no absence otherwise. Details of directors’
attendance at Board and committee meetings are set out in the
Directors’ Report.
The Chairman sets the agenda for each meeting in conjunction
with the CEO and the company secretary. Any director may
request additional matters be added to the agenda. The Chief
Financial Officer (“CFO”) attends the Board meetings by
standing invitation. Other members of senior management
attend meetings of the Board by invitation.
At each scheduled Board meeting there is a session for non-
executive directors to meet without management present. This
session is presided over by the Chairman.
Copies of Board papers are circulated in advance of the
meetings predominantly in electronic form. Directors are
entitled to request additional information where they consider
further information is necessary to support informed decision
making.
41
1.12 Company Secretaries
Details of the company secretaries are set out in the Directors’
Report. The appointment and removal of a company secretary
is a matter for decision by the Board. The position of Company
Secretary is responsible for providing advice to directors and
executives on corporate governance and regulatory matters,
ensuring that Board procedures are complied with and that
governance matters are addressed, recording minutes of Board
and committee meetings, developing the Company’s corporate
governance framework and giving effect to the Board’s
decisions. All directors have access to advice from the Company
Secretary (or secretaries when there is more than one) who is
accountable directly to the Board, through the Chairman, on all
matters to do with the proper functioning of the Board.
2. BOARD COMMITTEES
2.1 Board committees, membership and charters
The Board delegates its powers and responsibilities to
committees of the Board in order to allow the directors to
spend additional and more focused time on specific issues. The
areas of risk management and safety remain items of elevated
strategic importance to the Company and hence remain
standing Board agenda items. All committees operate under
individual charters approved by the Board which are disclosed
on the Company’s website.
In December 2014, the Board determined that while it would
retain ultimate responsibility for the management of the
Company’s key risks, the oversight of the Company’s risk
management framework would be allocated the responsibility of
a newly constituted Audit & Risk Committee.
The Board currently has the following standing committees to
assist in discharging its responsibilities:
BOARD OF
DIRECTORS
COMMITTEE
DESCRIPTION
MEMBERS
Audit & Risk
Committee
Remuneration
& Nomination
Committee
Ms Eva Skira
(Chairman)
Mr Giles Everist
Mr Vyril Vella
Mr Jim Walker
Mr Vyril Vella
(Chairman)
Mr Giles Everist
Ms Eva Skira
Mr Jim Walker
Monitors the financial
reporting process,
the risk management
framework, and
external and internal
audit functions.
Assists the
Board with Board
appointments,
and in considering
remuneration
policies, practices
and decisions.
Ensures the Board
and the CEO have the
necessary range of
skills, expertise and
experience to further
corporate objectives.
Given the Company’s restructure initiatives in FY2015 the number
of non-executive directors reduced to four. Consequently, all non-
executive directors have been appointed to all committees. The
relevant executive management attend committee meetings by
invitation. Details of the attendance of directors at meetings held
during the year are set out in the Directors’ Report.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 42
Minutes of all committee meetings are available to all directors
and a company secretary provides secretarial services for each
committee.
2.2 Audit & Risk Committee
The role of the Audit & Risk Committee is to assist the Board to
meet its oversight responsibilities in relation to the Company’s
financial reporting, the risk management framework and
procedures, compliance with related legal and regulatory
requirements, and the internal and external audit functions. In
doing so, it is the Committee’s responsibility to maintain free
and open communication between the Committee and the
external auditors and the management of Macmahon.
The Audit & Risk Committee is required to have a minimum of
three members and be composed of all non-executive directors,
a majority of whom should be independent. The Chair of the
Audit & Risk Committee must not be the Chair of the Board and
must be an independent director.
Now that Mr Walker is considered by the Board to be a non-
independent director (for the time being), there is an equal
number of independent and non-independent directors on
this Committee. However, the chair of the Committee is an
independent director, and would have a casting vote in the event
of any deadlock.
The external auditor, the internal auditor, the directors who are
not members of the Audit & Risk Committee, the Chief Executive
Officer, the Chief Financial Officer and the Group Financial
Controller are all invited to attend Audit & Risk Committee
meetings at the discretion of the Audit & Risk Committee.
Key activities undertaken by the Audit & Risk Committee during
the year included:
∆ approval of the scope, plan and fees for the 2015 external
audit;
∆
∆
∆
review of the independence and performance of the external
auditor;
review of significant accounting policies and practices;
review of tax compliance and developments in taxation
matters;
∆ monitoring developments in accounting and financial
reporting relevant to Macmahon;
∆
review of internal audit reports and approval of the 2015
Internal Audit program;
∆ assessment of the impact of material commercial disputes
on the Company’s financial performance;
∆
reviewing the Group’s key risks and risk management
framework and confirming that the framework was sound;
∆ monitoring matters arising under the Code of Conduct and
the Whistleblower Policy;
∆
∆
reviewing and making recommendations to the Board on
amendments to the Committee’s charter; and
review and recommendation to the Board for the adoption of
the Group’s half-year and annual financial statements.
The number of Audit & Risk Committee meetings that were
held during the reporting period and the attendance of the
Committee members at those meetings are set out in the
Directors’ Report.
2.3 Remuneration & Nomination Committee
The role of the Remuneration & Nomination Committee is to
assist the Board in reviewing its composition, performance
and succession planning, and by reviewing and approving the
Company’s remuneration policies and practices for directors
and executives. The Committee’s responsibilities include:
∆ assessing the necessary and desirable competencies of
Board members against the Board Skills Matrix;
∆
∆
∆
reviewing the size and composition of the Board and Board
succession planning;
reviewing the Company’s remuneration framework, which is
used to attract, retain and motivate directors and employees
to achieve operational excellence and create value for
Shareholders;
reviewing the remuneration packages and incentive
schemes for the CEO and executives, to establish rewards,
which are fair and responsible, having regard to the
Company’s strategic goals, individual performance and
general remuneration conditions; and
∆
reviewing the performance and succession planning for the
CEO and executives.
The Remuneration & Nomination Committee is required to have
a minimum of three members and should be composed of a
majority of independent non-executive directors. Despite the
ASX Principles, the Committee currently has an equal number of
independent and non-independent directors now that Mr Walker
is considered to be a non-independent director. Mr Vella is also
the non-independent Chair of this Committee. However, the
Board has determined that given its current size, the Committee
is currently structured in the optimal way. Further, the Board
considers that given Mr Vella’s experience and strong working
understanding of relevant employment terms and conditions, he
is best placed to discharge this function in accordance with the
Committee Charter.
The Company’s Non-executive Directors’ Remuneration Policy
is available on the Company’s website. The Company’s non-
executive directors receive fees as remuneration for acting
as a director of the Company and a standard fee for acting
as a member of all standing Committees of the Board. Non-
executive directors are not entitled to participate in equity
schemes of the Company and are not entitled to receive
performance based bonuses. The Company has not established
any schemes for the provision of retirement benefits, other than
statutory superannuation, for non-executive directors.
Further details regarding non-executive directors’
remuneration are set out in the Remuneration Report.
The Company’s Senior Executives Remuneration Policy is
available on the Company’s website. The Company’s senior
executives are remunerated in accordance with the principles
described in that policy, which provides that senior executive
remuneration is to consist of elements of fixed salary, short-
term incentives based on performance, participation in long-
term incentive equity schemes and other benefits including
superannuation. It is the Company’s policy to prohibit employees
from entering into transactions or arrangements which limit the
economic risk of participating in unvested entitlements under
any equity-based remuneration scheme.
Further details regarding executive remuneration are set out in
the Remuneration Report.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 43
Key activities undertaken by the Remuneration & Nomination
Committee during the year included:
∆
the Company’s market announcements to be maintained on
Macmahon’s website for at least three years; and
∆ monitoring legislative and corporate governance
developments in relation to employment and remuneration
matters relevant to Macmahon;
∆ all disclosures, including notices of meetings and other
Shareholder communications, are drafted clearly and
concisely using plain English.
∆
∆
∆
reviewing the Company’s remuneration policies and practices;
reviewing the Company’s recruitment and retention
strategies;
recommendation of the appointment and remuneration
packages of executives reporting directly to the CEO;
∆ monitoring progress against measurable objectives in
respect of gender diversity; and
∆
reviewing and making recommendations to the Board on
remuneration for non-executive directors and the CEO and
the criteria for the evaluation of the performance of the CEO.
Any director who is not a member of the Remuneration &
Nomination Committee, the CEO and the General Manager of
Human Resources are invited to attend Committee meetings at
the discretion of the Remuneration & Nomination Committee.
The CEO is not present where decisions are being made in
respect to their own remuneration.
The number of Committee meetings that were held during
the reporting period and the attendance of the Committee
members at those meetings are set out in the Directors’ Report.
3. SHAREHOLDERS AND CORPORATE RESPONSIBILITY
Macmahon aims to produce positive outcomes for all
stakeholders in managing its business and to maximise
financial, social and environmental value from its activities. In
practice, this means having a commitment to transparency, fair
dealing, responsible treatment of employees and customers
and positive links into the community.
Sustainable and responsible business practices within
Macmahon are viewed as an important long-term driver of
performance and Shareholder value. Through such practices
Macmahon seeks to reduce operational and reputation risk and
enhance operational efficiency while contributing to a more
sustainable society. Macmahon accepts that the responsibilities
of the Board and management, which flow from this approach,
go beyond strict legal and financial obligations. In particular,
the Board seeks to take a practical and broad view of directors’
fiduciary duties, in line with stakeholders’ expectations.
3.1 Shareholder communications
Directors recognise that Shareholders, as the ultimate owners
of the Company, are entitled to receive timely and relevant high
quality information about their investment. Similarly, prospective
new investors are entitled to be able to make informed
investment decisions when considering the purchase of shares.
The Company’s Continuous Disclosure Policy (which is
available on the Company’s website) encourages effective
communication with its Shareholders by requiring:
∆
the disclosure of full and timely information about
Macmahon’s activities in accordance with the disclosure
requirements contained in the ASX Listing Rules and the
Corporations Act;
∆ all information released to the market to be placed on
Macmahon’s website promptly following release;
Macmahon endeavours to communicate all major activities
affecting operations to investors through the Annual Report, half
year and full year results announcements, formal disclosures to
the ASX (i.e. company announcements), letters to Shareholders
when appropriate, the Company website and at the AGM. The
AGM also provides an important opportunity for investors to ask
questions, express views and respond to Board proposals.
Periodic reviews of communication systems to take advantage
of new technologies may further enhance the Company’s ability
to communicate effectively with its investors. Macmahon
endeavours to provide advance notification of public briefings
and make them widely accessible, including through the use of
webcasting or conference calls where possible. The Company
also keeps a summary record for internal use of the issues
discussed at briefings as well as a record of those present, and
the time and place of the briefing.
Macmahon encourages direct electronic contact from
shareholders. The Company’s website has a Contacts page
within its Investors and Media section which allows shareholders
to email the Company directly with queries or to provide
feedback, as well as a direct link into the Company’s share
registry, Computershare, so that Computershare can be
contacted directly.
The Company recognises the importance of shareholder
participation in general meetings and supports and encourages
that participation. The Company provides facilities for online
voting through Computershare, allowing shareholders unable
to attend the AGM to direct voting on resolutions through the
appointment of a proxy. Shareholders are also able to register
their voting instructions electronically.
The outcome of voting on the items of business are disclosed to
the market and posted to the Company’s website after the AGM
or any other Shareholder meeting.
All Macmahon directors attended the Company’s 2014 AGM and
are expected to attend the 2015 AGM.
The Company’s external auditor attends the Company’s AGM to
answer shareholder questions about the conduct of the audit,
the preparation and content of the audit report, the accounting
policies adopted by the Company and the independence of the
auditor in relation to the conduct of the audit.
3.2 Continuous disclosure
Macmahon is committed to maintaining a level of disclosure
that meets the highest standards and provides all investors
with timely and equal access to information.
Macmahon’s Continuous Disclosure Policy reinforces the
Company’s commitment to ASX continuous disclosure
requirements and outlines management’s accountabilities
and the processes to be followed for ensuring compliance. The
policy also describes Macmahon’s guiding principles for market
communications.
The Continuous Disclosure Policy is available on the Company’s
website.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 44
4. PROMOTING ETHICAL AND RESPONSIBLE BEHAVIOUR
4.1 Code of conduct and whistleblower policy
Macmahon has a Code of Conduct which outlines its
commitment to appropriate and ethical corporate practices
and reflects the high ethical standards of conduct necessary to
maintain confidence in the Company’s integrity.
The Code of Conduct describes Macmahon’s mission, vision
and values together with the business principles approved by
the Board. It sets out the principles, practices and standards
of personal and corporate behaviour Macmahon expects in
daily business activities. The Code of Conduct covers matters
such as compliance with laws and regulations, responsibilities
to Shareholders and the community, sound employment
practices, confidentiality, privacy, conflicts of interest, giving
and accepting business courtesies and the protection and
proper use of Macmahon’s assets. Compliance with the Code
of Conduct also assists Macmahon in effectively managing
its operating risks and meeting its legal and compliance
obligations, as well as enhancing Macmahon’s corporate
reputation.
The Company’s Code of Conduct is issued to every new
employee and an online refresher is issued to all staff and
Officers each year. The Code of Conduct is available on the
Company’s intranet and website. The Company’s Whistleblower
Policy highlights Macmahon’s commitment to maintaining an
open working environment in which employees and contractors
are able to report instances of unethical, unlawful or
undesirable conduct without fear of intimidation or reprisal. The
Whistleblower Policy is available on the Company’s website.
In addition to the above, all executives and key finance
managers complete a questionnaire from the directors on a
half-yearly basis which includes questions on compliance by the
managers and all employees within their area of responsibility
with the Code of Conduct and other Company policies. The
responses to the questionnaire, together with a report on any
breaches of the Code of Conduct and matters that might be
raised through the Whistleblower Policy, are considered by the
Audit & Risk Committee.
4.2 Trading in shares policy
Macmahon’s Trading in Shares Policy provides a brief
summary of the law on insider trading and the ASX Listing
Rule requirements, and sets out the restrictions on dealing
in securities by directors and Officers. The Policy is intended
to assist in maintaining market confidence in the integrity of
dealings in the Company’s securities.
Directors and Officers are encouraged to follow a long-term
investment strategy and are prohibited from any trading of
a short-term or speculative nature in the securities of the
Company. Directors and Officers may not deal in securities of
the Company (other than the exercise of employee options and
performance rights, dividend reinvestment and rights issues
and transfers to related parties) in the four week period leading
up to the profit announcement in respect of each June and
December half year, or immediately prior to announcements
in relation to any material changes in the Company’s financial
performance or changes to major contracts.
Any director wishing to deal in the Company’s securities may
only do so after first having obtained the prior approval of the
Chairman (who will consult with the CEO and CFO). Any dealings
by the Chairman require prior approval of the Chair of the Audit
Committee (who will consult with the CEO and CFO). An Officer
may only deal in the Company’s securities after first having
obtained the prior approval of the CFO (who will consult with
the CEO). Confirmation of any dealing must also be given to the
Company by the director or executive within two business days
after the dealing.
All Officers and employees are prohibited from entering into
transactions or arrangements which limit the economic risk of
participating in unvested entitlements under any equity-based
remuneration scheme. Any hedging of unvested equity will
result in immediate forfeiture.
The Company’s Trading in Shares Policy is available on the
Company’s website.
5. RISK MANAGEMENT AND INTERNAL CONTROLS
5.1 Approach to risk management
Macmahon recognises that risk is inherent to its business
and effective management of risk is vital to delivering on
its objectives, success and continued growth. Macmahon’s
approach to risk enhances opportunities, reduces threats and
sustains Macmahon’s competitive advantage. Macmahon is
committed to managing all risk in a proactive and effective
manner.
The Company’s aim is to ensure that risk management is
embedded in all aspects of the Company’s operations, by
aligning strategy, processes, people, technology and knowledge
with the purpose of evaluating and managing uncertainties.
Particular focus is given to activities in key stages of the project
life cycle including project selection, tendering, project start-up
and project execution. The Company’s Risk Management Policy
can be viewed on the Company’s website.
5.2 Risk management roles and responsibilities
The Board is responsible for reviewing and approving the
Company’s risk management strategy, policy and key risk
parameters, including determining the appetite for country risk
and major investment decisions. The Board is also responsible
for satisfying itself that management has developed and
implemented a sound system of risk management and
internal control. The Board has delegated oversight of the Risk
Management Policy, including oversight of the risk management
framework and procedures to the Audit & Risk Committee.
Management is responsible for designing, implementing,
reviewing and providing assurance as to the effectiveness
of the Risk Management Policy. This responsibility includes
developing business risk identification processes, implementing
appropriate risk treatment, strategies and controls, monitoring
effectiveness of controls and reporting on risk management
capability and performance.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 45
The Board has a number of mechanisms in place to ensure that
management’s objectives and activities are aligned with the
risks identified by the Board. These include:
∆
regular updates to the Board at monthly meetings on key
risks associated with the business’ operations;
∆ Board approved annual operating budgets and plans, with
ongoing monitoring of progress against budget;
∆
internal audit reports to the Audit & Risk Committee on areas
of material business risk; and
∆ ensuring that executives are responsible for developing
policies, processes and procedures to identify risks in the
Company’s activities and to implement mitigation strategies.
More information on the Company’s risks are set out on pages
12 and 13 of the Company’s 2015 Annual Report. In FY2015,
the Audit & Risk Committee reviewed the company’s risk
management framework and confirmed that the framework was
sound.
5.3 Internal Audit
The Company’s internal audit function is managed by Deloitte
Touche Tohmatsu, who was appointed the internal auditor
following a competitive tender process in September 2012. The
internal audit function is independent of management and the
external auditor and operates under the direction of the Audit &
Risk Committee. In accordance with the Audit & Risk Committee
Charter the internal auditor’s appointment or removal is a
matter for that Committee.
The Internal Audit function provides independent and objective
assurance on the adequacy and effectiveness of the Group’s
systems for risk management, internal control and governance,
along with recommendations to improve the efficiency and
effectiveness of these systems and processes.
The Audit & Risk Committee agrees an Internal Audit Plan at the
commencement of each new financial year.
5.4 CEO and CFO assurance on corporate reporting
The Board receives monthly reports about the financial
condition and operational results of the Company and its
controlled entities.
At the end of each six monthly period, the CEO and CFO
provide a formal declaration to the Board confirming that the
Company’s financial reports present a true and fair view, in all
material respects, of the Company’s financial condition and the
operational results have been prepared in accordance with the
relevant accounting standards. The statement also confirms
that the integrity of the Company’s financial statements and
notes to the financial statements, are founded on a sound
system of risk management and controls.
In addition, all executives and key business managers complete
a questionnaire from the directors on a half-yearly basis. The
questions relate to the financial position of the Company,
market disclosure, the application of Company policies and
procedures (including the Risk Management Policy), compliance
with external obligations and other governance matters. This
process assists the CEO and the CFO in making the declarations
to the Board referred to above.
6. EXTERNAL AUDITOR RELATIONSHIP
The Board has a policy requiring rotation of the audit partner at
least every five years, prohibits the re-involvement of a previous
audit partner in the audit service for two years following their
rotation, and provides that a former partner of the audit firm, or
member of the audit team, may only be recruited into a position
as a director or senior employee of Macmahon after the expiry
of at least two years. External audit services are the subject of
market tender from time to time.
Furthermore, the Audit & Risk Committee oversees the
terms of engagement of the Company’s external auditor.
Guidelines referenced to in the Code of Ethics published by the
International Federation of Accountants (“IFAC”) are utilised
to assist the Board in maintaining the independence of the
external auditor and in assessing whether the provision of any
non-audit services by the external auditor that may be proposed
are appropriate.
The guidelines contain a set of controls which address
threats to the independence of the external auditor including,
in particular, any threat which may arise by reason of self-
interest, self-review, advocacy, familiarity or intimidation (all
terms defined by the IFAC’s Code of Ethics). The guidelines
classify a range of non-audit services which are considered not
acceptable for provision by the external auditor.
As the current external auditor, KPMG attends the Company’s
AGM and the lead partner, Mr Trevor Hart is available to answer
questions from shareholders relevant to the audit at, or ahead
of, the AGM. KMPG’s independence declaration is contained in
the Directors’ Report of the Annual Report.
7. DIVERSITY
Macmahon recognises and appreciates the value inherent
in a diverse workforce. As part of its focus on rebuilding the
company, diversity will be a core focus of the Company to ensure
it has a competitive advantage within the industry and supports
the broader community goals of diversity across age, race,
culture, faith and gender.
The objectives of the Company’s Diversity Policy include:
∆ enhancing the employee talent pool - to foster recruitment,
retention and promotion practices that take account of
the diversity within the communities in which Macmahon
operates;
∆ supportive environment - to ensure a supportive workplace
in which employee differences are treated fairly and with
respect and dignity within a safe working environment;
∆ work/life balance - to promote workplace structures,
systems and procedures that assist employees balance their
work, family and other responsibilities effectively; and
∆ social responsibility - to ensure Macmahon contributes
positively to the social wellbeing of the communities it serves.
During the past 12 months there has been considerable
downsizing of the Company, which has had an impact on
diversity numbers, particularly amongst Indigenous Australians
and female employees. This was primarily due to the loss of the
Christmas Creek contract where the majority of our Indigenous
employees were engaged, and the downsizing of our corporate
functions where there is strong female representation.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 46
Positively, the Company successfully achieved it's Australian Employment Covenant target of 500 new jobs in five years, which was
achieved six months ahead of schedule. Macmahon was also able to assist a significant number of our Indigenous employees at
Christmas Creek to attain work with the new contractor at that project, and to retain a good representation of females within our senior
management group during the downsizing, which actually lifted the representative percentages across the Group.
Internationally, Macmahon continued to employ and develop local nationals into various roles, including senior leadership. This is a
strong focus of the Company, as it builds its capability to operate overseas using local national workforces.
Indigenous employees
Macmahon was a signatory to the Australian Employment Covenant in August 2010, pledging to create 500 new jobs for Indigenous
people over five years. This milestone was achieved on 15 January 2015, six months ahead of the pledged date.
Prior to the loss of the Christmas Creek project, Macmahon's Indigenous employment was approximately 18% of the total Christmas
Creek employee workforce of around 600. This was a great achievement and a credit to the team who assisted to recruit, train and
support this group.
Subsequent to the loss of the Christmas Creek project, Indigenous representation dropped to 3.6% of the Company’s domestic
workforce at 30 June 2015. However, the Company’s target for Indigenous representation remains at 7.5% of its total Australian
workforce.
Female employees
Female leadership remains a key objective of the business with one female Board member and five females within the Senior
Leadership Group, which lifts the senior leadership to 10.8%. We were also successful in achieving our target of 14% female
employment earlier in the financial year. However, with the significant downsizing in the latter half of the year the overall participation
has declined to 8.6%. This compares with 12.9% last year.
7.2 Targets
The following table outlines the Company’s measurable objectives in relation to diversity, as disclosed in the 2014 Annual Report, and
the progress made towards achieving those objectives at 30 June:
GROUP
Indigenous Australians
Female Directors
Senior female leadership
All female employees
TARGET
7.5%
1
20.0%
14.0%
7.3 Diversity strategies
ACTUAL
2015
3.6%
1
10.8%
8.6%
ACTUAL
2014
6%
1
2.5%
12.9%
The Company continues to pursue the following initiatives which have been successful in building diversity.
INITIATIVE
DESCRIPTION
Enhancing the employee talent pool
Facilitate work / life balance
Pursue social responsibility
Targeted strategies to attract and retain Indigenous and female employees continue as
objectives for current and ongoing operations.
Macmahon continues to provide flexible working arrangements to enable employees to achieve
work/life balance, particularly where they have family support requirements.
The Company has put in place a cadetship for one of our young Indigenous workers to enable
them to achieve a Mining Engineering qualification.
The Company has continued to participate in events for women such as CME Women in
Resources Awards.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 47
8. CHECKLIST AGAINST ASXCGC RECOMMENDATIONS
ASX CORPORATE GOVERNANCE COUNCIL’S CORPORATE GOVERNANCE PRINCIPLES AND
RECOMMENDATIONS
REFERENCE
COMPLIANCE
Principle 1 – Lay solid foundations for management and oversight
1.1
A listed entity should disclose:
a) the respective roles and responsibilities of its board and management; and
b) those matters expressly reserved to the board and those delegated to
management.
1.2
A listed entity should:
a) undertake appropriate checks before appointing a person, or putting forward to
security holders a candidate for election, as a director; and
b) provide security holders with all material information in its possession relevant to
a decision on whether or not to elect or re-elect a director.
1.6
1.1,
Remuneration Report
1.3
1.4
A listed entity should have a written agreement with each director and senior
executive setting out the terms of their appointment.
1.8,
Remuneration Report
The company secretary of a listed entity should be accountable directly to the board,
through the chair, on all matters to do with the proper functioning of the board.
1.12
1.5
A listed entity should:
7
a) have a diversity policy which includes requirements for the board or a relevant
committee of the board to set measurable objectives for achieving gender
diversity and to assess annually both the objectives and the entity’s progress in
achieving them;
b) disclose that policy or a summary of it; and
c) disclose as at the end of each reporting period the measurable objectives for
achieving gender diversity set by the board or a relevant committee of the board
in accordance with the entity’s diversity policy and its progress towards achieving
them, and either:
1. the respective proportions of men and women on the board, in senior executive
positions and across the whole organisation (including how the entity has defined
“senior executive” for these purposes); or
2. if the entity is a “relevant employer” under the Workplace Gender Equality Act,
the entity’s most recent “Gender Equality Indicators”, as defined in and published
under that Act.
1.6
A listed entity should:
1.6
a) have and disclose a process for periodically evaluating the performance of the
board, its committees and individual directors; and
b) disclose, in relation to each reporting period, whether a performance evaluation
was undertaken in the reporting period in accordance with that process.
1.7
A listed entity should:
Remuneration Report
a) have and disclose a process for periodically evaluating the performance of its
senior executives; and
b) disclose, in relation to each reporting period, whether a performance evaluation
was undertaken in the reporting period in accordance with that process.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 48
Principle 2 - Structure the Board to add value
2.1
The Board of a listed entity should:
a) have a nomination committee which:
2.1, 2.3
Partial compliance
1. has at least three members, a majority of whom are independent directors; and
2. is chaired by an independent director, and disclose:
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
b) if it does not have a nomination committee, disclose that fact and the processes
it employs to address board succession issues and to ensure that the board
has the appropriate balance of skills, knowledge, experience, independence and
diversity to enable it to discharge its duties and responsibilities effectively.
2.2
A listed entity should have and disclose a board skills matrix setting out the mix
of skills and diversity that the board currently has or is looking to achieve in its
membership.
1.2
2.3
A listed entity should disclose:
1.4, Directors’ Report
a) the names of the directors considered by the board to be independent directors;
b) if a director has an interest, position, association or relationship of the type
described in Box 2.3 (which appears on page 16 of the ASXCGC Recommendations
and is entitled “Factors relevant to assessing the independence of a director”),
but the board is of the opinion that it does not compromise the independence of
the director, the nature of the interest, position, association or relationship in
question and an explanation of why the board is of that opinion; and
c) the length of service of each director.
2.4
2.5
2.6
A majority of the board of a listed entity should be independent directors.
The chair of the board of a listed entity should be an independent director and, in
particular, should not be the same person as the CEO of the entity.
A listed entity should have a program for inducting new directors and provide
appropriate professional development opportunities for directors to develop
and maintain the skills and knowledge needed to perform their role as directors
effectively.
Principle 3 – Act ethically and responsibly
3.1
A listed entity should:
1.4
1.3
1.8
4.1
a) have a code of conduct for its directors, senior executives and employees; and
Partial compliance
b) disclose that code or a summary of it.
Principle 4 – Safeguard integrity in corporate reporting
4.1
The Board of a listed entity should:
a) have an audit committee which:
2.1, 2.2,
Directors’ Report
Partial compliance
1. has at least three members, all of whom are non-executive directors and a
majority of whom are independent directors; and
2. is chaired by an independent director, who is not the chair of the board, and
disclose:
3. the charter of the committee;
4. the relevant qualifications and experience of the members of the committee; and
5. in relation to each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
b) if it does not have an audit committee, disclose that fact and the processes it
employs that independently verify and safeguard the integrity of its corporate
reporting, including the processes for the appointment and removal of the
external auditor and the rotation of the audit engagement partner.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 49
4.2
The Board of a listed entity should, before it approves the entity’s financial
statements for a financial period, receive from its CEO and CFO a declaration that, in
their opinion, the financial records of the entity have been properly maintained and
that the financial statements comply with the appropriate accounting standards
and give a true and fair view of the financial position and performance of the
entity and that the opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
5.4
4.3
A listed entity that has an AGM should ensure that its external auditor attends its
AGM and is available to answer questions from security holders relevant to the audit.
3.1
Principle 5 – Make timely and balanced disclosure
5.1
A listed entity should:
a) have a written policy for complying with its continuous disclosure obligations
under the Listing Rules; and
b) disclose that policy or a summary of it.
Principle 6 – Respect the rights of security holders
6.1
6.2
6.3
6.4
A listed entity should provide information about itself and its governance to
investors via its website.
A listed entity should design and implement an investor relations program to
facilitate effective two-way communication with investors.
A listed entity should disclose the policies and processes it has in place to facilitate
and encourage participation at meetings of security holders.
A listed entity should give security holders the option to receive communications
from, and send communications to, the entity and its security registry electronically.
3.2
4.1
4.1
4.1
4.1
Principle 7 – Recognise and manage risk
7.1
The board of a listed entity should:
2.1, 2.2
Partial compliance
a) have a committee or committees to oversee risk, each of which:
1. has at least three members, a majority of whom are independent directors; and
2. is chaired by an independent director, and disclose:
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
b) if it does not have a risk committee or committees that satisfy a) above,
disclose that fact and the processes it employs for overseeing the entity’s risk
management framework.
7.2
The board or a committee of the board should:
2.2, 5.1, 5.2
a) review the entity’s risk management framework at least annually to satisfy itself
that it continues to be sound; and
b) disclose, in relation to each reporting period, whether such a review has taken
place.
7.3
A listed entity should disclose:
a) if it has an internal audit function, how the function is structured and what role it
performs; or
b) if it does not have an internal audit function, that fact and the processes it
employs for evaluating and continually improving the effectiveness of its risk
management and internal control processes.
5.3
7.4
A listed entity should disclose whether it has any material exposure to economic,
environmental and social sustainability risks and, if it does, how it manages or
intends to manage those risks.
5.1, 5.2, Annual Report
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT 50
Principle 8 – Remunerate fairly and responsibly
8.1
The board of a listed entity should:
a) have a remuneration committee which:
2.1, 2.3
Partial compliance
1. has at least three members, a majority of whom are independent directors; and
2. is chaired by an independent director, and disclose:
3. the charter of the committee;
4. the members of the committee; and
5. as at the end of each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
b) if it does not have a remuneration committee, disclose that fact and the
processes it employs for setting the level and composition of remuneration
for directors and senior executives and ensuring that such remuneration is
appropriate and not excessive.
8.2
A listed entity should separately disclose its policies and practices regarding
the remuneration of non-executive directors and the remuneration of executive
directors and other senior executives.
Remuneration Report
8.3
A listed entity which has an equity-based remuneration scheme should:
4.2
a) have a policy on whether participants are permitted to enter into transactions
(whether through the use of derivatives or otherwise) which limit the economic
risk of participating in the scheme; and
b) disclose that policy or a summary of it.
MACMAHON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT LEAD AUDITOR'S
INDEPENDENCE DECLARATION
51
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Macmahon Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2015 there have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
KPMG
Trevor Hart
Partner
Perth
27 August 2015
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
MACMAHON ANNUAL REPORT 2015
52
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2015
Revenue from continuing operations
Other income
Expenses
Materials and consumables used
Employee benefits expense
Subcontractor expense
Depreciation and amortisation expense
Equipment and office expenses under operating leases
Other expenses
Net finance costs
Impairment of property, plant and equipment and goodwill
Writedown of inventory
Onerous provisions raised
(Loss) / profit before income tax expense from continuing operations
Income tax expense
(Loss) / profit after income tax expense from continuing operations
Profit after income tax expense from discontinued operations
(Loss) / profit after income tax expense for the year attributable to the owners of
Macmahon Holdings Limited
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity, net of tax
Foreign currency translation
Reclassification of foreign currency reserve on sale of foreign operation
Cash flow hedges - reclassified to profit or loss
Other comprehensive (loss)/income for the year, net of tax
NOTE
5
6
7
7
7
7
7
7
7
7
7
8
7
15
$’000
660,194
40,376
(217,617)
(288,559)
(24,211)
(59,620)
(23,967)
(49,155)
(23,726)
13,715
(201,998)
(27,328)
(4,493)
(220,104)
(463)
(220,567)
2,647
CONSOLIDATED
14
$’000
1,015,917
2,004
(282,842)
(444,414)
(51,342)
(101,663)
(26,353)
(41,989)
(18,773)
50,545
(2,044)
-
-
48,501
(19,563)
28,938
1,491
(217,920)
30,429
(3,888)
4,330
(1,047)
8,206
7,601
(667)
604
-
-
(63)
Total comprehensive (loss)/income for the year attributable to the owners of Macmahon
Holdings Limited
(210,319)
30,366
Total comprehensive (loss)/income for the year is attributable to:
Continuing operations
Discontinued operations
Earnings per share for (loss) / profit from continuing operations attributable to the
owners of Macmahon Holdings Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit from discontinued operations attributable to the owners of
Macmahon Holdings Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for (loss) / profit attributable to the owners of Macmahon Holdings
Limited
Basic earnings per share
Diluted earnings per share
44
44
44
44
44
44
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
(212,966)
2,647
(210,319)
CENTS
(17.55)
(17.55)
0.21
0.21
(17.34)
(17.34)
28,875
1,491
30,366
CENTS
2.30
2.24
0.12
0.12
2.42
2.36
MACMAHON ANNUAL REPORT 2015
STATEMENT OF
FINANCIAL POSITION
As at 30 June 2015
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Income tax
Assets classified as held for sale
Total current assets
Non current assets
Receivables
Investments accounted for using the equity method
Property, plant and equipment
Intangibles
Deferred tax
Total non current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Income tax
Employee benefits
Provisions
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Non current liabilities
Borrowings
Derivative financial instruments
Employee benefits
Deferred tax
Total non current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
(Accumulated losses)/Retained profits
Total equity
The above statement of financial position should be read in conjunction with the accompanying notes
53
15
$’000
CONSOLIDATED
14
$’000
NOTE
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
21
18
28
29
236,892
66,842
50,908
359
14,671
369,672
12,900
382,572
-
171
141,479
21
66
141,737
524,309
89,056
162,405
8,206
1,854
16,804
19,830
298,155
3,163
301,318
280
-
901
-
1,181
302,499
221,810
391,390
(1,468)
(168,112)
221,810
109,424
138,980
87,485
-
14,801
350,690
3,895
354,585
6,056
220
442,875
18,368
1,644
469,163
823,748
120,473
141,344
1,053
1,651
34,313
43,176
342,010
15,190
357,200
23,959
4,757
1,619
4,046
34,381
391,581
432,167
391,390
(9,069)
49,846
432,167
MACMAHON ANNUAL REPORT 2015 54
STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2015
CONSOLIDATED
Balance at 1 July 2014
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income/(loss) for the year
Transactions with owners in their capacity as owners:
Share-based payments (note 45)
ISSUED CAPITAL
$’000
RESERVES
$’000
(ACCUMULATED
LOSSES) /RETAINED
PROFITS
$’000
TOTAL EQUITY
$’000
391,390
(9,069)
49,846
432,167
-
-
-
-
-
7,601
7,601
(217,920)
-
(217,920)
7,601
(217,920)
(210,319)
-
(38)
(38)
Balance at 30 June 2015
391,390
(1,468)
(168,112)
221,810
CONSOLIDATED
Balance at 1 July 2013
Profit after income tax expense for the year
Other comprehensive loss for the year, net of tax
Total comprehensive (loss)/income for the year
Transactions with owners in their capacity as owners:
Share-based payments (note 45)
Treasury shares purchased net of tax
ISSUED CAPITAL
$’000
RESERVES
$’000
RETAINED PROFITS
$’000
TOTAL EQUITY
$’000
391,390
(8,304)
-
-
-
-
-
-
(63)
(63)
-
(702)
(9,069)
18,115
30,429
-
30,429
1,302
-
49,846
401,201
30,429
(63)
30,366
1,302
(702)
432,167
Balance at 30 June 2014
391,390
The above statement of changes in equity should be read in conjunction with the accompanying note for the year ended 30 June 2015
MACMAHON ANNUAL REPORT 2015 STATEMENT OF
CASH FLOWS
For the year ended 30 June 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers
Net receipts from joint venture entities
Interest received and settlement of foreign exchange contracts
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from sale of subsidiaries
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Purchase of own shares
Repayment of borrowings
Repayment of hire purchase and finance lease liabilities
Payment of transaction costs related to loans and borrowings
Net cash used in financing activities
Net increase /(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
NOTE
43
16
Cash and cash equivalents at the end of the financial year
9
The above statement of cash flows should be read in conjunction with the accompanying notes
55
15
$’000
CONSOLIDATED
14
$’000
819,120
(753,760)
1,131
4,231
(15,063)
(1,908)
53,751
(19,668)
13,996
84,635
78,963
-
-
(3,431)
(4,897)
(8,328)
124,386
109,424
3,082
236,892
1,173,963
(1,043,186)
(28,273)
2,681
(18,603)
(8,676)
77,906
(99,018)
31,616
-
(67,402)
(1,003)
(50,000)
(3,859)
-
(54,862)
(44,358)
153,450
332
109,424
MACMAHON ANNUAL REPORT 2015 56
NOTES TO THE
FINANCIAL STATEMENTS
NOTE 1. GENERAL INFORMATION
The financial statements cover Macmahon Holdings Limited
("the Company") as a consolidated entity (referred to hereafter
as "the Group" or "the consolidated entity" consisting of
Macmahon Holdings Limited and the entities it controlled at
the end of, or during, the year. The financial statements are
presented in Australian dollars, which is Macmahon Holdings
Limited's functional and presentation currency.
Macmahon Holdings Limited is a listed public company limited
by shares, incorporated and domiciled in Australia. The Group
is a for-profit entity. Its registered office and principal place of
business are:
Registered office & Principal place of business
15 Hudswell Road
PERTH AIRPORT
Western Australia, 6105
A description of the nature of the consolidated entity's
operations and its principal activities are included in the
Directors' report, which is not part of the financial statements.
The financial statements were authorised for issue, in
accordance with a resolution of Directors, on 27 August 2015.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
New, revised or amending Accounting Standards and
Interpretations adopted
The consolidated entity has adopted all of the new, revised or
amending Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board ('AASB') that are
mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been early
adopted.
Changes in accounting policy
The Consolidated Entity applied for the first time AASB 2013-3
Recoverable amount disclosures for non-financial assets, AASB
1031 Materiality and AASB 2014-1 Annual improvements to
IFRS’s 2010-2012 Cycle. Several other amendments apply for
the first time in 2015 however they do not impact the annual
consolidated financial statements of the Consolidated Entity.
The nature and the impact of certain new standards and
amendments are described below:
(i) AASB 2013-3 Recoverable amount disclosures for non-
financial assets: adopted on 1 July 2014.
AASB 2013-3 Recoverable amount disclosures for non-
financial assets make amendments to the disclosures
required by AASB 136 Impairment of assets which:
∆ Remove the requirement to disclose the recoverable
amount of all cash generating units (CGU) that contain
goodwill or identifiable assets with indefinite lives if
there has been no impairment. This disclosure was
introduced with AASB 13 Fair Value Measurement;
∆ Require disclosure of the recoverable amount of
an asset or CGU when an impairment loss has been
recognised or reversed;
∆ Requires detailed disclosure of how the fair value
less costs of disposal has been measured when an
impairment loss has been recognised or reversed.
As a result of adopting AASB 2013-3 Recoverable amount
disclosures for non-financial assets, the Consolidated Entity has
amended its impairment and written down value disclosures
in Note 11 and Note 16 to reflect the updated disclosure
requirements.
(ii) AASB 1031 Materiality: adopted on 1 July 2014.
The revised AASB 1031 Materiality is an interim standard
that cross-references to other Standards and the
Framework (issued December 2013) that contain guidance
on materiality. AASB 1031 Materiality will be withdrawn
when references to AASB 1031 Materiality in all Standards
and Interpretations have been removed. AASB 2014-1
Part C issued in June 2014 makes amendments to eight
Australian Accounting Standards to delete their references
to AASB 1031 Materiality.
Application of AASB 1031 Materiality has not impacted the
financial statements of the Consolidated Entity.
(iii) AASB 2013-9 Amendments to Australian Accounting
Standards – Conceptual Framework, Materiality and
Financial instruments contains three main parts which
make amendments to a number of standards and
interpretations.
∆ Part A of the amendment makes consequential
amendments arising from the issuance of AASB CF
2013-1, which was adopted in the previous reporting
period.
∆ Part B makes amendments to particular Australian
Accounting Standards to delete references to AASB
1031 and also minor editorial amendments to various
other standards adopted on 1 July 2014.
∆ Part C makes amendments to a number of Australian
Accounting Standards, incorporating Chapter 6 Hedge
Accounting into AASB 9 Financial Instruments applicable
to annual reporting periods beginning on or after 1 July
2015.
Parts A and B of this amendment have been adopted by
Macmahon and have not materially impacted the financial
statements of the Consolidated Entity. Macmahon will
continue to prepare financial statements and apply
materiality in accordance with AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors and
AASB 101 Presentation of Financial Statements.
Part C of this amendment relates to incorporation of hedge
accounting into AASB 9. Macmahon has not elected to early
adopt this section. Adoption of this part of the amendment
is not expected to have a significant impact on the
Consolidated Entity.
MACMAHON ANNUAL REPORT 2015
NOTES TO THE
FINANCIAL STATEMENTS
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Basis of preparation
57
Changes in accounting policy continued
(iv) AASB 2014-1 Annual improvements to IFRS’s 2010-2012
Cycle: adopted on 1 July 2014.
This standard sets out amendments to Australian
Accounting Standards arising from the issuance by the
International Accounting Standards Board (IASB) of
International Financial Reporting Standards (IFRSs) Annual
Improvements process. The following items are addressed
by this standard:
∆ AASB 2 Share-Based Payments - Clarifies the definition
of 'vesting conditions' and 'market condition' and
introduces the definition of 'performance condition' and
'service condition'.
∆ AASB 3 Business Combinations - Clarifies the
classification requirements for contingent
consideration in a business combination by removing
all references to AASB 137 Provisions, Contingent
Liabilities and Contingent Assets.
∆ AASB 8 Operating Segments - Requires entities to
disclose factors used to identify the entity's reportable
segments when operating segments have been
aggregated. An entity is also required to provide a
reconciliation of total reportable segment assets to the
entity's total assets.
∆ AASB 116 Property, Plant and Equipment and AASB
138 Intangibles - Clarifies that the determination of
accumulated depreciation does not depend on the
selection of the valuation technique and that it is
calculated as the difference between the gross and net
carrying amounts.
∆
AASB 124 Related Party Disclosures - Defines a
management entity providing KMP services as a related
party of the reporting entity. The amendments added an
exemption from the detailed disclosure requirements
in paragraph 17 of AASB 124 Related Party Disclosures
for KMP services provided by a management entity.
Payments made to a management entity in respect of
KMP services should be separately disclosed.
Adoption of these standards has impacted recognition of
share based payment expense for the current year as the
requirements of the improvements are prospective application.
The impact of this change is noted further in these accounting
policies and at Note 45 of these financial statements.
The change in definition under AASB 2 Share-Based Payments
to 'performance condition' does not impact the valuation or
share-based payment expense as the conditions included within
these plans meet the definition of a 'performance condition'.
Application of other amendments of AASB 2014-1 Annual
improvements to IFRS’s 2010-2012 Cycle has not materially
impacted the financial statements of the Consolidated Entity,
however, additional disclosures may be required in future
periods, if applicable.
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards
Board ('AASB') and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements
also comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board
('IASB').
Historical cost convention
The financial statements have been prepared under the
historical cost convention, except for, defined benefit plan
assets and liabilities and derivative financial instruments
which are stated at their fair value, certain property, plant and
equipment and inventory is recognised at fair value less costs to
sell and net realisable value respectively.
Critical accounting estimates
The preparation of the financial statements requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of
applying the consolidated entity's accounting policies. The
areas involving a higher degree of judgment or complexity, or
areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed
in note 38.
Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Macmahon Holdings Limited
('parent entity' or 'the Company') as at 30 June 2015 and the
results of all subsidiaries for the year then ended. Macmahon
Holdings Limited and its subsidiaries together are referred to in
these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated
entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to,
variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the consolidated
entity. They are de-consolidated from the date that control
ceases.
Interest in equity accounted investees
The consolidated entity's interests in equity accounted
investees comprise interests in associates and joint ventures.
Associates are those entities in which the consolidated entity
has significant influence, but not control or joint control,
over the financial and operating policies. A joint venture is
an arrangement in which the consolidated entity has joint
control, whereby the consolidated entity has rights to the net
assets of the arrangement, rather than rights to its assets and
obligations for its liabilities.
MACMAHON ANNUAL REPORT 2015
58
NOTES TO THE
FINANCIAL STATEMENTS
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Foreign operations
Principles of consolidation continued
Interest in equity accounted investees continued
Interest in associates and the joint ventures are accounted
for using the equity method. They are recognised initially at
cost, which includes transaction costs. Subsequent to initial
recognition, the consolidated financial statements include
the consolidated entity's share of the profit or loss and other
comprehensive income of equity accounted investees, until the
date on which significant influence or joint control ceases.
Transactions eliminated on consolidation
Intercompany transactions, balances and unrealised gains
on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of the
asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
Operating segments
An operating segment is a component of the consolidated entity
that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses
that relate to transactions with any of the consolidated
entity's other components. All operating segments' operating
results are regularly reviewed by the consolidated entity's
Chief Executive Officer (CEO) and Managing Director to make
decisions about resources to be allocated to the segment
and assess its performance, and for which discrete financial
information is available.
Segment results that are reported to the CEO and Managing
Director include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly corporate assets, head
office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during
the year to acquire property, plant and equipment, and
intangible assets other than goodwill.
Foreign currency translation
The financial statements are presented in Australian dollars,
which is Macmahon Holdings Limited's functional and
presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian
dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation
at the reporting date exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
profit or loss.
The assets and liabilities of foreign operations are translated
into Australian dollars using the exchange rates at the reporting
date. Monetary assets and liabilities denominated in foreign
currency at the reporting date are translated to the functional
currency at the exchange rate at that date. The income and
expenses of foreign operations are translated into Australian
dollars at the average exchange rates for the period. Foreign
currency differences are recognised in other comprehensive
income, and presented in the foreign currency translation
reserve in equity.
When the settlement of a monetary item receivable from or
payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign exchange gains and losses arising
from such a monetary item are recognised to form part of a
net investment in a foreign operation and are recognised in
other comprehensive income, and are presented in the foreign
currency translation reserve in equity.
Revenue recognition
Revenue (including maintenance services) is recognised when
the services are provided and is based on surveys of work
performed where applicable.
Revenue is recognised at the fair value of the consideration
received or receivable, to the extent that it is probable that the
economic benefits will flow to the entity and the revenue can be
reliably measured.
Other income
Other income is recognised when it is received or when the right
to receive payment is established.
Income tax
Income tax expense comprises current and deferred tax.
Current tax and deferred tax are recognised in profit or loss
except to the extent that it relates to items recognised directly
in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment
to tax payable in respect of previous years. Current tax payable
also includes any tax liability arising from the declaration of
dividends.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those
tax rates that are enacted or substantively enacted, except for:
∆ When the deferred income tax asset or liability arises from
the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at
the time of the transaction, affects neither the accounting
nor taxable profits; or
∆ When the taxable temporary difference is associated with
interests in subsidiaries, associates or joint ventures,
and the timing of the reversal can be controlled and it is
probable that the temporary difference will not reverse in the
foreseeable future.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Income tax continued
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, based
on laws that have been enacted or substantively enacted at the
reporting date.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they
intend to settle current tax assets and liabilities on a net basis
or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax
credits and deductible temporary differences, to the extent that
it is probable that future taxable profits will be available against
which they can be utilised. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
Additional income tax expenses that arise from the distribution
of cash dividends are recognised at the same time that
the liability to pay the related dividend is recognised. The
consolidated entity does not distribute non-cash assets as
dividends to its Shareholders.
Tax consolidation
The Company and its wholly-owned Australian resident entities
have formed a tax-consolidated group with effect from 1 July
2003 and are therefore taxed as a single entity from that date.
The head entity within the tax-consolidated group is Macmahon
Holdings Limited.
Current income tax expense / benefit, deferred tax liabilities
and deferred tax assets arising from temporary differences of
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 of assets and
liabilities in the separate financial statements of each entity and
the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets
arising from unused tax losses of the subsidiaries are assumed
by the head entity in the tax-consolidated group and are
recognised as amounts payable to / (receivable from) other
entities in the tax consolidated group in conjunction with any
tax funding arrangement amounts (refer below). Any difference
between these amounts is recognised by the consolidated
entity as an equity contribution or distribution.
The consolidated entity recognises deferred tax assets arising
from unused tax losses of the tax-consolidated group to the
extent that it is probable that future taxable profits of the tax-
consolidated group will be available against which the unused
tax losses can be utilised. Any subsequent period adjustments
to deferred tax assets arising from unused tax losses as a result
of revised assessments of the probability of recoverability is
recognised by the head entity only.
59
Nature of tax funding arrangements and tax sharing
arrangements
The head entity, in conjunction with other members of the tax-
consolidated group, has entered into a tax funding arrangement
which sets out the funding obligations of members of the
tax-consolidated group in respect of tax amounts. The tax
funding arrangements require payments to / (from) the head
entity equal to the current tax asset / (liability) assumed by the
head entity and any deferred tax loss asset assumed by the
head entity, resulting in the head entity recognising an inter-
entity payable / (receivable) equal in amount to the tax asset /
(liability) assumed. The inter-entity payables / (receivables) are
at call.
Contributions to fund the current tax liabilities are payable as
per the tax funding arrangement and reflect the timing of the
head entity’s obligation to make payments for tax liabilities to
the relevant tax authorities.
The head entity in conjunction with other members of the
tax-consolidated group has also entered into a tax sharing
agreement. The tax sharing agreement provides for the
determination of the allocation of income tax liabilities between
the entities should the head entity default on its tax payment
obligations. No amounts have been recognised in the financial
statements in respect of this agreement as payment of any
amounts under the tax sharing agreement is considered
remote.
Discontinued operations
A discontinued operation is a component of the consolidated
entity that has been disposed of or is classified as held for
sale and that represents a separate major line of business or
geographical area of operations, is part of a single coordinated
plan to dispose of such a line of business or area of operations,
or is a subsidiary acquired exclusively with a view to resale. The
results of discontinued operations are presented separately
on the face of the statement of profit or loss and other
comprehensive income.
Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is classified as current when: it is either expected
to be realised or intended to be sold or consumed in normal
operating cycle; it is held primarily for the purpose of trading; it
is expected to be realised within 12 months after the reporting
period; or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least 12
months after the reporting period. All other assets are classified
as non-current.
A liability is classified as current when: it is either expected to
be settled in normal operating cycle; it is held primarily for the
purpose of trading; it is due to be settled within 12 months
after the reporting period; or there is no unconditional right to
defer the settlement of the liability for at least 12 months after
the reporting period. All other liabilities are classified as non-
current.
Deferred tax assets and liabilities are always classified as non-
current.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 60
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Derivative financial instruments
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
TRADE AND OTHER RECEIVABLES
Trade and other receivables
Trade and other receivables are stated at cost less impairment
losses. Due to the short-term nature of trade and other
receivables, their carrying value is assumed to approximate
their fair value.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision
for impairment of trade receivables is raised when there is
objective evidence that the consolidated entity will not be able
to collect all amounts due according to the original terms of
the receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more
than 60 days overdue) are considered indicators that the trade
receivable may be impaired. The amount of the impairment
allowance is the difference between the asset’s carrying
amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the
effect of discounting is immaterial.
Accrued revenue
The consolidated entity uses derivative financial instruments,
such as forward currency contracts and interest rate swaps
to hedge its foreign currency risk and interest rate exposures,
respectively. Derivatives are initially recognised at fair value
on the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each reporting
date. The accounting for subsequent changes in fair value
depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending
on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the consolidated entity's
exposure to variability in cash flows that is attributable to
particular risk associated with a recognised asset or liability or
a firm commitment which could affect income or expenses. The
effective portion of the gain or loss on the hedging instrument
is recognised directly in equity, whilst the ineffective portion
is recognised in profit or loss. Amounts taken to equity are
transferred out of equity and included in the measurement of
the hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular
basis both retrospectively and prospectively to ensure that
each hedge is highly effective and continues to be designated
as a cash flow hedge. If the forecast transaction is no longer
expected to occur, the amounts recognised in equity are
transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised
without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts
previously recognised in equity remain in equity until the
forecast transaction occurs.
Accrued revenue represents the unbilled amount at year end in
respect of mining services provided.
Hedges of a net investment
Construction work in progress
Construction work in progress represents the gross unbilled
amount expected to be collected from customers for
construction work performed to date. It is measured at cost
plus profit recognised to date (see revenue accounting policy)
less an allowance for foreseeable losses and progress billings.
Costs include all expenditure related directly to specific projects
and an allocation of fixed and variable overheads incurred in
the consolidated entity’s contract activities based on normal
operating capacity.
Inventories
Inventories are measured at the lower of cost and net realisable
value.
The cost of inventories is based on the weighted average
principle and includes expenditure incurred in acquiring the
inventories and other costs incurred in bringing them to their
existing location and condition.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
Hedges of a net investment in a foreign operation include
monetary items that are considered part of the net investment.
Gains or losses on the hedging instrument relating to the
effective portion of the hedge are recognised directly in equity
whilst gains or losses relating to the ineffective portion are
recognised in profit or loss. On disposal of the foreign operation,
the cumulative value of any such gains or losses recognised
directly in equity is transferred to profit or loss.
Non-current assets or disposal groups classified as held for
sale
Non-current assets and assets of disposal groups are classified
as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through
continued use. They are measured at the lower of their carrying
amount and fair value less costs of disposal. For non-current
assets or assets of disposal groups to be classified as held for
sale, they must be available for immediate sale in their present
condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent
write down of the non-current assets and assets of disposal
groups to fair value less costs of disposal. A gain is recognised
for any subsequent increases in fair value less costs of disposal
of a non-current assets and assets of disposal groups, but not in
excess of any cumulative impairment loss previously recognised.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 61
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Non-current assets or disposal groups classified as held for
sale continued
Non-current assets are not depreciated or amortised while
they are classified as held for sale. Interest and other expenses
attributable to the liabilities of assets held for sale continue to
be recognised.
Non-current assets classified as held for sale and the assets
of disposal groups classified as held for sale are presented
separately on the face of the statement of financial position,
in current assets. The liabilities of disposal groups classified
as held for sale are presented separately on the face of the
statement of financial position, in current liabilities.
Joint ventures
A joint venture is a contractual arrangement whereby two or
more parties undertake an economic activity that is subject to
joint control. Investments in joint ventures are accounted for
using the equity method. Under the equity method, the share of
the profits or losses of the joint venture is recognised in profit or
loss and the share of the movements in equity is recognised in
other comprehensive income.
Investments and other financial assets
Investments and other financial assets are initially measured
at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value
through profit or loss. They are subsequently measured at either
amortised cost or fair value depending on their classification.
Classification is determined based on the purpose of the
acquisition and subsequent reclassification to other categories
is restricted.
For unlisted investments, the consolidated entity establishes
fair value by using valuation techniques. These include the
use of recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash
flow analysis, and option pricing models.
Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have
been transferred and the consolidated entity has transferred
substantially all the risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are carried at amortised cost using the effective
interest rate method. Gains and losses are recognised in profit
or loss when the asset is derecognised or impaired.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting
period whether there is any objective evidence that a financial
asset or group of financial assets is impaired. Objective
evidence includes significant financial difficulty of the issuer or
obligor; a breach of contract such as default or delinquency in
payments; the lender granting to a borrower concessions due to
economic or legal reasons that the lender would not otherwise
do; it becomes probable that the borrower will enter bankruptcy
or other financial reorganisation; the disappearance of an active
market for the financial asset; or observable data indicating that
there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for loans and
receivables carried at amortised cost is the difference between
the asset's carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest
rate. If there is a reversal of impairment, the reversal cannot
exceed the amortised cost that would have been recognised
had the impairment not been made and is reversed to profit or
loss.
Property, plant and equipment
Items of property, plant and equipment are measured at cost
less accumulated depreciation and accumulated impairment
losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other
costs directly attributable to bringing the assets to a working
condition for their intended use, the costs of dismantling and
removing the items and restoring the site on which they are
located, and capitalised borrowing costs. Cost may also include
transfers from equity of any gain or loss on qualifying cash flow
hedges from foreign currency purchases of property, plant
and equipment. Purchased software that is integral to the
functionality of the related equipment is capitalised as part of
that equipment.
The fair value of property, plant and equipment recognised as a
result of a business combination is based on market values. The
market value of property is the estimated amount for which a
property could be exchanged, on the date of valuation between
a willing buyer and a willing seller in an arm’s length transaction
after proper marketing, wherein the parties had each acted
knowledgeably, prudently and without compulsion. The market
value of items of plant, equipment, fixtures and fittings is based
on the quoted market prices for similar items.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
The gain or loss on disposal of an item of property, plant and
equipment is determined by comparing the proceeds from
disposal with the carrying amount of property, plant and
equipment, and is recognised within other income / other
expenses in profit or loss.
Depreciation and amortisation
Depreciation is based on the cost of an asset less its residual
value. Significant components of individual assets are assessed
and if a component has a useful life that is different from
the remainder of that asset, that component is depreciated
separately.
Depreciation on buildings, leasehold improvements and minor
plant and equipment is calculated on a straight-line basis.
Depreciation on major plant and equipment and components is
calculated on machine hours worked over their estimated useful
life. Leased assets are depreciated over the shorter of the lease
term and their useful lives unless it is reasonably certain that
the consolidated entity will obtain ownership by the end of the
lease term. Land is not depreciated.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 62
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Property, plant and equipment continued
Depreciation and amortisation continued
Depreciation methods, useful lives and residual values are
reviewed on regular basis with annual reassessments for major
items and adjusted if appropriate.
The expected useful lives for the current and comparative years
are as follows:
∆ Buildings: 40 Years;
∆ Leasehold improvements: Period of the lease; and
∆ Plant and equipment: 3-12 years.
The carrying amounts of the consolidated entity’s assets, other
than inventories (see inventory accounting policy) and deferred
tax assets (see income tax accounting policy), are reviewed
at each balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the
asset’s recoverable amount is estimated (see impairment of
non financial assets).
For goodwill, the recoverable amount is estimated annually or
more frequently if events or changes in circumstances indicate
that goodwill might be impaired.
An impairment loss is recognised whenever the carrying amount
of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in profit or loss.
Leasehold improvements and plant and equipment under lease
are depreciated over the unexpired period of the lease or the
estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon
disposal or when there is no future economic benefit to the
consolidated entity. Gains and losses between the carrying
amount and the disposal proceeds are taken to profit or loss.
Any revaluation surplus reserve relating to the item disposed of
is transferred directly to retained profits.
Subsequent costs
The cost of replacing a component of an item of property, plant
and equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied
within the component will flow to the consolidated entity, and
its cost can be measured reliably. The carrying amount of the
replaced part is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are recognised in
profit or loss as incurred.
Leases
The determination of whether an arrangement is or contains
a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the
arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively
transfer from the lessor to the lessee substantially all the risks
and benefits incidental to the ownership of leased assets, and
operating leases, under which the lessor effectively retains
substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are
established at the fair value of the leased assets, or if lower, the
present value of minimum lease payments. Lease payments
are allocated between the principal component of the lease
liability and the finance costs, so as to achieve a constant rate
of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated
over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty
that the consolidated entity will obtain ownership at the end of
the lease term.
Operating lease payments, net of any incentives received from
the lessor, are charged to profit or loss on a straight-line basis
over the term of the lease.
Major component expenditure on operating leased equipment
is capitalised to plant and equipment and amortised over the
shorter of the remaining lease term or the useful life of the
component.
Intangible assets
Intangible assets acquired as part of a business combination,
other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired
separately are initially recognised at cost. Indefinite life
intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible
assets are subsequently measured at cost less amortisation
and any impairment. The gains or losses recognised in profit
or loss arising from the derecognition of intangible assets are
measured as the difference between net disposal proceeds and
the carrying amount of the intangible asset. The method and
useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life
are accounted for prospectively by changing the amortisation
method or period.
Goodwill
Goodwill that arises upon the acquisition of subsidiaries is
included in intangible assets. Goodwill is measured at cost less
accumulated impairment losses. Goodwill is allocated to cash-
generating units and is not amortised but is tested annually for
impairment.
Software
Development expenditure is capitalised only if development
costs can be measured reliably or the process is technically and
commercially feasible, future economic benefits are probable,
and the consolidated entity intends to and has sufficient
resources to complete development and to use the asset. The
software expenditure capitalised includes the cost of materials,
direct labour and overhead costs that are directly attributable
to preparing the asset for its intended use. Other development
expenditure is recognised in profit or loss as incurred.
Capitalised software development expenditure is measured
at cost less accumulated amortisation and accumulated
impairment losses.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS
63
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Employee benefits
Impairment of non-financial assets
Wages and salaries, annual leave and sick leave
Goodwill and other intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes
in circumstances indicate that they might be impaired. Other
non-financial assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less
costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to
the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do
not have independent cash flows are grouped together to form a
cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term
nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid
within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of
the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective
interest method.
Where there is an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date, the loans
or borrowings are classified as non-current.
Finance costs
Finance costs attributable to qualifying assets are capitalised
as part of the asset. All other finance costs are expensed in the
period in which they are incurred, including;
∆
∆
interest on short-term and long-term borrowings; and
interest on finance leases.
Provisions
Provisions are recognised when the consolidated entity has a
present (legal or constructive) obligation as a result of a past
event, it is probable the consolidated entity will be required to
settle the obligation, and a reliable estimate can be made of the
amount of the obligation. The amount recognised as a provision
is the best estimate of the consideration required to settle the
present obligation at the reporting date, taking into account the
risks and uncertainties surrounding the obligation. If the time
value of money is material, provisions are discounted using a
current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a
finance cost.
Liabilities for wages and salaries, including non-monetary
benefits, annual leave, long service leave and accumulating sick
leave expected to be settled within 12 months of the reporting
date are recognised in current liabilities in respect of employees'
services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
Non-accumulating sick leave is expensed to profit or loss when
incurred.
Long service leave
The liability for long service leave is recognised in current and
non-current liabilities, depending on the unconditional right
to defer settlement of the liability for at least 12 months after
the reporting date. The liability is measured as the present
value of expected future payments to be made in respect of
services provided by employees up to the reporting date using
the projected unit credit method. Consideration is given to
expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments
are discounted using market yields on national government
bonds at the reporting date with terms to maturity and currency
that match, as closely as possible, the estimated future cash
outflows.
Defined contribution superannuation expense
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution plans are recognised as an employee benefit
expense in profit or loss in the periods during which services are
rendered by employees. Prepaid contributions are recognised as
an asset to the extent that a cash refund or reduction in future
payments is available. Contributions to a defined contribution
plan which are due more than 12 months after the end of the
period in which the employees render the service are discounted
to their present value.
Defined benefit plans
The consolidated entity's net obligation in respect of defined
benefit plans is calculated separately for each plan by
estimating the amount of future benefit that employees have
earned in the current and prior periods, discounting that amount
and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed
annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset for
the consolidated entity, the recognised asset is limited to the
present value of the economic benefits available in the form
of any future refunds from the plan or reductions in future
contributions to the plan. To calculate the present value of
economic benefits, consideration is given to any applicable
minimum funding requirements.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS
64
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Employee benefits continued
Termination benefits
Termination benefits are recognised as an expense when
the consolidated entity is committed demonstrably, without
realistic possibility of withdrawal, to a formal detailed plan to
either terminate employment before the normal retirement
date, or to provide termination benefits as a result of an offer
made to encourage voluntary redundancy. Termination benefits
for voluntary redundancies are recognised as an expense if the
consolidated entity has made an offer encouraging voluntary
redundancy, it is probable that the offer will be accepted, and
the number of acceptances can be estimated reliably. If benefits
are payable more than 12 months after the reporting date, then
they are discounted to their present value.
Share-based payments
Equity-settled transactions are awards of shares, or options
over shares, that are provided to employees in exchange for the
rendering of services. Cash-settled transactions are awards of
cash for the exchange of services, where the amount of cash is
determined by reference to the share price.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing model
that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and
expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of
the option, together with non-vesting conditions that do not
determine whether the consolidated entity receives the services
that entitle the employees to receive payment. No account is
taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as
an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is
calculated based on the grant date fair value of the award,
the best estimate of the number of awards that are likely to
vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative
amount calculated at each reporting date less amounts already
recognised in previous periods.
The cost of cash-settled transactions is initially, and at each
reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into
consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement
of the liability is calculated as follows:
∆ during the vesting period, the liability at each reporting date
is the fair value of the award at that date multiplied by the
expired portion of the vesting period; and
∆
from the end of the vesting period until settlement of the
award, the liability is the full fair value of the liability at the
reporting date.
All changes in the liability are recognised in profit or loss. The
ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining
fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that
market condition has been met, provided all other conditions
are satisfied.
If equity-settled awards are modified, as a minimum an expense
is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting
period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of
modification.
If the non-vesting condition is within the control of the
consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not
within the control of the consolidated entity or employee and is
not satisfied during the vesting period, any remaining expense
for the award is recognised over the remaining vesting period,
unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has
vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is
substituted for the cancelled award, the cancelled and new
award is treated as if they were a modification.
During the current period, the entity has adopted the
amendments introduced by the annual improvements to
IFRS 2010-2012 cycle, to determine the accounting for any
performance rights which have been forfeited for failure to
complete a service period. Any performance rights issued
post 1 July 2014 or earlier, have accordingly been treated as a
forfeiture and the costs of the performance rights are trued up
i.e., amounts previously expensed are no longer incurred and
accordingly reversed in the current year. This policy is applied
irrespective of whether the employee resigns voluntarily or is
dismissed by the Company.
Fair value measurement
When an asset or liability, financial or non-financial, is measured
at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date; and assumes
that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-
financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate
in the circumstances and for which sufficient data are available
to measure fair value, are used, maximising the use of relevant
observable inputs and minimising the use of unobservable
inputs.
Assets and liabilities measured at fair value are classified,
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are reviewed at each reporting date and
transfers between levels are determined based on a
reassessment of the lowest level of input that is significant to
the fair value measurement.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 65
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Fair value measurement continued
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant.
External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value
of an asset or liability from one period to another, an analysis
is undertaken, which includes a verification of the major
inputs applied in the latest valuation and a comparison, where
applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Dividends
Dividends are recognised when declared during the financial
year and no longer at the discretion of the Company.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of Macmahon Holdings Limited,
excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares and
the weighted average number of shares assumed to have been
issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the
amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised
as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of
GST receivable or payable. The net amount of GST recoverable
from, or payable to, the tax authority is included in other
receivables or other payables in the statement of financial
position.
Cash flows are presented on a gross basis. The GST components
of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are
presented as operating cash flows.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the tax
authority.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100,
issued by the Australian Securities and Investments
Commission, relating to 'rounding-off'. Amounts in this report
have been rounded off in accordance with that Class Order to
the nearest thousand dollars, or in certain cases, the nearest
dollar.
New Accounting Standards and Interpretations not yet
mandatory or early adopted
Australian Accounting Standards and Interpretations that have
recently been issued or amended but are not yet mandatory,
have not been early adopted by the consolidated entity for the
annual reporting period ended 30 June 2015. The consolidated
entity has not yet assessed the impact of these new or
amended Accounting Standards and Interpretations.
NOTE 3. CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES
AND ASSUMPTIONS
The preparation of the financial statements requires
management to make judgments, estimates and assumptions
that affect the reported amounts in the financial statements.
Management continually evaluates its judgments and estimates
in relation to assets, liabilities, contingent liabilities, revenue
and expenses. Management bases its judgments, estimates
and assumptions on historical experience and on other various
factors, including expectations of future events, management
believes to be reasonable under the circumstances. The
resulting accounting judgments and estimates will seldom
equal the related actual results. The judgments, estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
(refer to the respective notes) within the next financial year are
discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled
transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The
fair value is determined by using either the Binomial or Black-
Scholes model taking into account the terms and conditions
upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-
based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period
but may impact profit or loss and equity.
Provision for impairment of receivables
The provision for impairment of receivables assessment
requires a degree of estimation and judgment. The level of
provision is assessed by taking into account the recent sales
experience, the ageing of receivables, historical collection
rates and specific knowledge of the individual debtors financial
position.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS
66
NOTE 3. CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES
AND ASSUMPTIONS CONTINUED
Impairment of non-financial assets other than goodwill and
other indefinite life intangible assets
Allowance for impairment of inventories
The Allowance for impairment of inventories assessment
requires a degree of estimation and judgment. The level of the
Allowance is assessed by taking into account the recent sales
experience, the ageing of inventories and other factors that
affect inventory obsolescence.
Fair value measurement hierarchy
The consolidated entity is required to classify all assets and
liabilities, measured at fair value, using a three level hierarchy,
based on the lowest level of input that is significant to the entire
fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
Level 2: Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly or
indirectly; and
Level 3: Unobservable inputs for the asset or liability.
Considerable judgment is required to determine what is
significant to fair value and therefore which category the asset
or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is
determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs
that require significant adjustments based on unobservable
inputs.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful
lives and related depreciation and amortisation charges for
its property, plant and equipment and finite life intangible
assets. The useful lives could change significantly as a result
of technical innovations or some other event. The depreciation
and amortisation charge will increase where the useful lives are
less than previously estimated lives, or technically obsolete or
non-strategic assets that have been abandoned or sold will be
written off or written down.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently
if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have
suffered any impairment, in accordance with the accounting
policy stated in note 2. The recoverable amounts of cash-
generating units have been determined based on value-in-use
calculations. These calculations require the use of assumptions,
including estimated discount rates based on the current cost of
capital and growth rates of the estimated future cash flows.
The consolidated entity assesses impairment of non-financial
assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific
to the consolidated entity and to the particular asset that
may lead to impairment. If an impairment trigger exists, the
recoverable amount of the asset is determined. This involves
fair value less costs of disposal or value-in-use calculations,
which incorporate a number of key estimates and assumptions;
including the continued performance of contracted work,
growth rates of the estimated future cash flows and discount
rates based on the current cost of capital.
Income tax
The consolidated entity is subject to income taxes in the
jurisdictions in which it operates. Significant judgment is
required in determining the provision for income tax. There
are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax
determination is uncertain. The consolidated entity recognises
liabilities for anticipated tax audit issues based on the
consolidated entity's current understanding of the tax law.
Where the final tax outcome of these matters is different
from the carrying amounts, such differences will impact the
current and deferred tax provisions in the period in which such
determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to utilise
those temporary differences and losses.
Long service leave provision
As discussed in note 2, the liability for employee benefits
expected to be settled more than 12 months from the reporting
date are recognised and measured at the present value of
the estimated future cash flows to be made in respect of all
employees at the reporting date. In determining the present value
of the liability, estimates of attrition rates and pay increases
through promotion and inflation have been taken into account.
Provision for project closure
The provision for project closure requires a degree of estimation
and judgement around contractual terms, expected redundancy
and demobilisation costs and reimbursement from customers.
The provision is assessed by taking into account past history of
contract closures and the likelihood of contract extensions.
Client plant maintenance provision
The provision for client plant maintenance requires a degree of
estimation and judgment. The level of provision is assessed by
taking into account actual and forecast utilisation of the fleet
and current consumption rate and maintenance cost.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 67
NOTE 4. OPERATING SEGMENTS
Identification of reportable operating segments
The consolidated entity has identified its reportable segments based on the internal reports that are reviewed and used by the CEO and
Managing Director (the chief operating decision maker) in assessing performance and in determining the allocation of resources.
Management have identified three operating segments; Surface Mining, Underground Mining and International Mining. These segments
have been aggregated into "Mining" due to all segments exhibiting similar characteristics in terms of; the nature of the products and
services, production processes, type or class of customers, methods used to provide their services and regulatory environment.
The following describes the operations of each reportable segment.
Mining
Provides a complete mining service for surface and underground operations - from mine development to materials delivery, and
including the full range of engineering services, including design, construction and on site services to deliver on client needs from the
design phase right through to completion.
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.
Joint Ventures
Revenue from joint venture entities is not recognised in the financial statements as these entities are equity accounted. For such
entities, the share of net profits is recognised.
The consolidated entity’s share of revenue from joint venture entities is excluded from the income statement in accordance
with Accounting Standards. Details of the consolidated entity’s share of joint venture entities’ revenue are provided as additional
information in these financial statements.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit
before income tax as included in the internal management reports that are reviewed by the consolidated entity’s CEO and Managing
Director. Segment profit is used to measure performance as management believes that such information is the most relevant in
evaluating the results of certain segments relative to other entities that operate within these industries.
Operating segment information
CONSOLIDATED - 2015
Revenue
Total reportable segment revenue
Total revenue
Earnings before interest, tax, depreciation, amortisation, asset write-downs
and onerous lease provision
Interest income
Finance costs
Depreciation and amortisation
Impairment of property, plant and equipment and goodwill
Writedown of inventory and onerous lease provision
Profit/(loss) before income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Capital Expenditure
MINING
$’000
UNALLOCATED
$’000
TOTAL
$’000
660,194
660,194
100,254
251
(9,596)
(56,932)
(199,691)
(27,328)
(193,042)
5,328
5,328
589
1,860
(16,241)
(2,688)
(2,307)
(4493)
(23,280)
273,296
251,013
665,522
665,522
100,843
2,111
(25,837)
(59,620)
(201,998)
(31,821)
(216,322)
(1,598)
(217,920)
524,309
524,309
123,133
17,465
179,366
2,203
302,499
19,668
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS
68
NOTE 4. OPERATING SEGMENTS CONTINUED
Operating segment information continued
CONSOLIDATED - 2014
Revenue
Total reportable segment revenue
Elimination of joint venture revenue
Elimination of joint venture recoveries
Total revenue
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation
Impairment of assets
Interest revenue
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Capital Expenditure
Geographical information
Australia
Mongolia
Other
MINING
$’000
UNALLOCATED
$’000
TOTAL
$’000
1,017,419
(1,502)
-
1,015,917
182,997
(94,313)
(2,044)
414
(19,545)
67,509
26,887
(24,397)
3,467
5,957
(10,142)
(8,238)
-
2,267
(2,939)
(19,052)
686,152
137,596
180,780
210,801
97,866
1,152
1,044,306
(25,899)
3,467
1,021,874
172,855
(102,551)
(2,044)
2,681
(22,484)
48,457
(18,028)
30,429
823,748
823,748
391,581
391,581
99,018
SALES TO EXTERNAL CUSTOMERS
GEOGRAPHICAL NON-CURRENT ASSETS
CONSOLIDATED
CONSOLIDATED
15
$’000
569,412
11,786
84,324
14
$’000
893,938
47,925
80,011
15
$’000
141,348
-
323
665,522
1,021,874
141,671
14
$’000
384,417
46,884
36,218
467,519
The Mining segment operated in three principal geographical areas - Australia, Mongolia and Other. In presenting information on the
basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on
the geographical location of the assets.
Major customer
Approximately 33% (2014: 26%) of the consolidated entities revenue is attributable to sale transactions with one customer.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 5. REVENUE
Revenue from mining services
69
15
$’000
CONSOLIDATED
14
$’000
660,194
1,015,917
The consolidated entity's revenue excludes its share of revenue from joint ventures accounted for as equity accounted joint ventures,
in accordance with Accounting Standards.
NOTE 6. OTHER INCOME
Net gain on disposal of property, plant and equipment
Net foreign exchange gain
Gain on settlement of dispute
Other
Other income
15
$’000
-
11,934
16,347
12,095
40,376
CONSOLIDATED
14
$’000
1,334
-
-
670
2,004
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 70
NOTE 7. EXPENSES
(Loss) / Profit before income tax from continuing operations includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Plant and equipment under lease
Buildings
Total depreciation
Amortisation
Intangibles
Total depreciation and amortisation
Impairment
Plant and equipment (note 16)
Goodwill (note 17)
Writedown of inventory (note 11)
Cost of Sales
Materials and consumables used
Employee benefits expense
Subcontractor expense
Total cost of sales
Finance (income) and costs
Interest income on financial assets (bank deposits)
Interest expense on financial liabilities carried at amortised cost
Capitalised borrowing costs written off
Gain on settlement of foreign exchange contracts
Cash flow hedges reclassified from OCI
Net finance costs
Rental expense relating to operating leases
Onerous lease provision raised*
Minimum lease payments
Equipment and office expenses under operating leases
Superannuation expense
Defined contribution superannuation expense
Defined benefit superannuation expense
Total superannuation expense
Share-based payments expense
15
$’000
CONSOLIDATED
14
$’000
-
57,853
1,062
664
59,579
203
96,168
419
679
97,469
41
4,194
59,620
101,663
183,701
18,297
201,998
27,328
217,617
288,559
24,211
530,387
(2,111)
16,532
14,421
3,219
(2,120)
8,206
23,726
4,493
23,967
28,460
19,098
17
19,115
(38)
2,044
-
2,044
-
282,842
444,414
51,342
778,598
(2,681)
17,573
14,892
3,881
-
-
18,773
-
26,353
26,353
26,842
39
26,881
1,302
*Onerous lease provision raised
During the year, the Company consolidated offices and relocated all of the West Perth based employees to the Hudswell Road airport facilities. The Company is
endeavouring to sublet the West Perth office to save on rental expenses. An onerous contract provision of $4.5 million has been taken up which is based on the
present value of future outgoings (rental payments) net of estimated recoveries (from subletting).
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 8. INCOME TAX EXPENSE/(BENEFIT)
Income tax expense/(benefit)
Current tax
Adjustment recognised for prior periods
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense/(benefit)
Income tax expense/(benefit) is attributable to:
Profit / (Loss) from continuing operations
Profit / (Loss) from discontinued operations
Aggregate income tax expense/(benefit)
Numerical reconciliation of income tax expense and tax at the statutory rate
(Loss) / Profit before income tax expense from continuing operations
(Loss) / Profit before income tax benefit from discontinued operations
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
(Non-assessable income) / Non-deductible expenses
Distribution of partnership losses/ non assessable income
Foreign tax rate differential
Utilisation of foreign and domestic income tax losses not previously recognised
Other
Impairment for which no deferred tax asset was recognised
Current year temporary differences for which no deferred tax asset was recognised
Current year losses for which no deferred tax asset was recognised
Adjustment recognised for prior periods
Income tax expense
71
CONSOLIDATED
14
$’000
8,637
159
9,232
18,028
19,563
(1,535)
18,028
48,501
(44)
48,457
14,537
391
3,769
(1,522)
(465)
(351)
668
-
-
842
17,869
159
18,028
15
$’000
3,785
(329)
(1,858)
1,598
463
1,135
1,598
(220,104)
3,782
(216,322)
(64,897)
(4)
(3,107)
-
(567)
(528)
763
56,464
11,505
2,298
1,927
(329)
1,598
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 72
NOTE 9. CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
NOTE 10. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Trade receivables
Less: allowance for doubtful debts
Work in progress
Other receivables and prepayments
Accrued revenue
Impairment of receivables
The ageing of the impaired receivables allowance for above are as follows:
Over 6 months overdue
Current
Movements in the allowance for doubtful debts is:
Opening balance
Additional allowances recognised
Allowances recovered through sale of subsidiaries and CSA settlement
Unused amounts reversed
Closing balance
Past due but not impaired
Customers with balances past due but without any allowance for impairment of receivables amount
to $16.9 million as at 30 June 2015 ($12.3 million as at 30 June 2014).
After reviewing credit terms of customers based on recent collection practices, the consolidated
entity did not consider a credit risk on the aggregate balances.
The ageing of the past due but not impaired receivables are as follows:
Past due 0-30 days
Past due 31+ days
15
$’000
24
236,868
236,892
15
$’000
32,011
(1,512)
30,499
-
13,662
22,681
66,842
1,512
-
1,512
25,557
1,411
(25,456)
-
1,512
CONSOLIDATED
14
$’000
22
109,402
109,424
CONSOLIDATED
14
$’000
67,621
(25,557)
42,064
1,038
18,593
77,285
138,980
25,296
261
25,557
17,998
7,654
-
(95)
25,557
13,773
3,173
16,946
7,240
5,078
12,318
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS
NOTE 11. CURRENT ASSETS - INVENTORIES
Inventory at cost
Inventory at net realisable value
Less: Allowance for obsolescence
73
15
$’000
42,754
15,236
(7,082)
50,908
CONSOLIDATED
14
$’000
90,877
-
(3,392)
87,485
The company reviewed the value of items in inventory and reduced inventory to net realisable value based on an assessment of current
market conditions with the assistance of external valuations provided by an independent valuer and internal assessments.
At 31 December 2014, the Company recognised total write-offs of $10.8 million with the majority relating to surface mining tyres
and rim stock. At 30 June 2015 the net realisable value of these assets was $7.0 million. Additionally, at 30 June 2015, the Company
recognised a write-off of $16.5 million relating primarily to surplus inventory which had a net realisable value of $8.2 million. This was
measured using quoted prices for identical or similar assets in markets that are not active at 30 June 2015. An additional $3.9 million
allowance for stock obsolescence based on an internal assessment of slow moving items across the business has been recognised.
The allowances are included in 'materials'.
NOTE 12. CURRENT ASSETS - DERIVATIVE FINANCIAL INSTRUMENTS
Current derivative financial instruments
Forward foreign exchange contracts - cash flow hedges
Refer to note 31 for further information on financial instruments.
Refer to note 32 for further information on fair value measurement.
15
$’000
359
359
CONSOLIDATED
14
$’000
-
-
Foreign exchange forward contracts with a notional value of $1.9 million (2014: $28.6 million), measured at fair value through other
comprehensive income are designated as hedging instruments in cash flow hedges of committed forecast purchase transactions
in United States Dollars. The foreign exchange forward contract balances vary with the level of committed forecast purchases and
changes in foreign exchange forward rates.
The cash flow hedges of committed forecast transactions were assessed to be highly effective, and as at 30 June 2015 a net
unrealised gain of $0.4 million (2014: unrealised loss of $0.7 million) with related deferred tax liability of $0.1 million (2014: deferred tax
asset $0.2 million) related to foreign exchange forward contracts is included in hedging reserve.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 74
NOTE 13. CURRENT ASSETS - INCOME TAX REFUND DUE
Income tax refund due
15
$’000
CONSOLIDATED
14
$’000
14,671
14,801
The current tax receivable for the consolidated entity of $14.7 million (2014: $14.8 million) and current tax liability of $1.9 million
(2014: $1.7 million) represent the amounts of income tax receivable and payable in respect of current and prior periods for Australian
and overseas operations.
NOTE 14. CURRENT ASSETS - ASSETS CLASSIFIED AS HELD FOR SALE
Trade and other receivables
Investments accounted for using the equity method
Property, plant and equipment*
15
$’000
655
96
12,149
12,900
CONSOLIDATED
14
$’000
962
1,032
1,901
3,895
* Property, plant and equipment classified as held for sale has been measured at fair value less costs to sell as its carrying amount is expected to be recovered from sale rather than
continuing use.
NOTE 15. NON-CURRENT ASSETS - RECEIVABLES
Prepayments
15
$’000
-
CONSOLIDATED
14
$’000
6,056
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 16. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT
Buildings and freehold land - at cost
Less: Accumulated depreciation
Leasehold improvements - at cost
Less: Accumulated depreciation
Less: Impairment of Leasehold improvement
Plant and equipment - at cost
Less: Accumulated depreciation
Less: Impairment of property plant and equipment
Equipment under finance lease
Less: Accumulated depreciation
75
CONSOLIDATED
14
$’000
3,821
(2,529)
1,292
7,449
(4,775)
-
2,674
909,815
(479,882)
(2,044)
427,889
30,060
(19,040)
11,020
15
$’000
3,476
(3,044)
432
7,449
(4,775)
(2,307)
367
508,918
(196,478)
(181,394)
131,046
29,704
(20,070)
9,634
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
141,479
442,875
CONSOLIDATED
Balance at 1 July 2013
Additions
Classified as held for sale
Disposals
Exchange differences
Impairment of assets
Depreciation expense
Balance at 30 June 2014
Additions
Classified as held for sale
Disposals*
Exchange differences
Impairment of assets
Depreciation expense
Balance at 30 June 2015
* Includes sale of subsidiaries' assets.
BUILDINGS &
FREEHOLD LAND
$’000
LEASEHOLD
IMPROVEMENTS
$’000
PLANT & EQUIPMENT
$’000
EQUIPMENT UNDER
FINANCE LEASE
$’000
1,249
750
-
-
(28)
-
(679)
1,292
5
-
(216)
15
-
(664)
432
3,009
-
-
(132)
-
-
(203)
2,674
-
-
-
-
(2,307)
-
367
455,386
98,268
(1,901)
(23,857)
(863)
(2,044)
(97,100)
427,889
19,663
(12,131)
(73,593)
8,465
(181,394)
(57,853)
131,046
11,439
-
-
-
-
-
(419)
11,020
-
-
-
(324)
-
(1,062)
9,634
TOTAL
$’000
471,083
99,018
(1,901)
(23,989)
(891)
(2,044)
(98,401)
442,875
19,668
(12,131)
(73,809)
8,156
(183,701)
(59,579)
141,479
Loss on disposal of property, plant and equipment from continuing operations was $13.0 million (2014: $1.3 million gain).
The impairment of assets of $183.7 million (2014: $2.0 million) represents a reduction in the carrying amount of assets to reflect
the estimated fair value less costs to sell. Further, during the year the consolidated entity has reclassified $12.1 million of assets
identified as held for sale (2014: $2.0 million).
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 76
NOTE 16. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT CONTINUED
Property, plant and equipment secured under finance leases
Refer to note 25 for further information on property, plant and equipment secured under finance leases.
Security
Freehold land, buildings, leasehold improvements and plant and equipment are subject to a registered charge to secure banking
facilities (see note 25).
Impairment of plant & equipment
During the year a review of the consolidated entity's idle plant and equipment was carried out by independent valuers.
At 31 December 2014, the valuation indicated that the recoverable amounts (fair value less costs of disposal) were lower than the
carrying value of the assets. As a result, an impairment charge of $90.4 million was recognised in the consolidated profit and loss
for plant and equipment which had a recoverable amount of $97.7 million which was measured using quoted prices for identical or
similar assets in markets that are not active. $82.4 million was to write-down the carrying values of equipment within the surface and
underground mining business units. $8.0 million related to write-down of assets located internationally.
In addition to this, the company had also impaired $2.3 million of leasehold improvements (furniture & fittings) attached to its leased
office in respect of which an onerous provision has been raised.
At 30 June 2015, the idle fleet was reassessed following the loss of key contracts. This, together with further declining market
conditions, resulted in additional impairment. Valuations on idle assets indicated that the recoverable amounts (fair value less costs
of disposal) were lower than the carrying value of the assets. As a result, an impairment charge of $91.0 million was recognised in
the consolidated profit and loss for plant and equipment which had a recoverable amount of $66.6 million. This was measured using
quoted prices for identical or similar assets in markets that are not active. $72.0 million was to write-down the carrying values of
equipment primarily within the surface and underground mining business units. $19.0 million related to write-down of assets located
internationally.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 17. NON-CURRENT ASSETS - INTANGIBLES
Goodwill - at cost
Impairment of goodwill
Software - at cost
Less: Accumulated amortisation
Intangibles- at cost
Less: Accumulated amortisation
Reconciliations
77
15
$’000
18,297
(18,297)
-
19,905
(19,905)
-
3,203
(3,182)
21
21
CONSOLIDATED
14
$’000
18,297
-
18,297
19,905
(19,896)
9
3,203
(3,141)
62
18,368
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2013
Amortisation expense
Balance at 30 June 2014
Amortisation expense
Impairment of goodwill
Balance at 30 June 2015
Impairment at 31 December 2014
Goodwill
GOODWILL
$’000
18,297
-
18,297
-
(18,297)
-
SOFTWARE
DEVELOPMENT
COSTS
$’000
4,011
(4,002)
9
(9)
-
-
OTHER
INTANGIBLE
ASSETS
$’000
254
(192)
62
(41)
-
21
TOTAL
$’000
22,562
(4,194)
18,368
(50)
(18,297)
21
The Company has been carrying goodwill of $18.3 million recognised on acquisition of the underground mining and engineering
business within the mining reportable segment. At 31 December 2014, management reviewed the carrying value of the goodwill and
other intangible assets. Given the prolonged downturn in the resources sector, due largely to falling commodity prices, the Company
reviewed its assessment of goodwill. Based on the Company's operational forecast and outlook, the review indicated that the
recoverable amounts of the assets within the underground mining and engineering cash generating unit (CGU) were less than the
carrying amount. This assessment has resulted in the impairment of goodwill of $18.3 million at 31 December 2014.
The recoverable amount using a value in use methodology was assessed by determining the present value of the estimated future cash
flows of the CGU using a pre-tax discount rate of 8.92 percent (June 2014: 11.2 percent). Based on the cost of equity and debt. The
cash flows are for a five year period based on forecast extrapolated to financial year 2019 with nil growth. Thereafter a terminal value
using a 2.0 per cent growth rate has been utilised. Nil growth over the period reflects management's conservative estimate for the near
future after taking into account macro-economic factors.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 78
NOTE 18. NON-CURRENT ASSETS - DEFERRED TAX
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Inventories
Trade and other receivables
Property, plant and equipment
Unbilled work
Income in advance
Employee benefits
Other creditors and accruals
Other items
Tax loss carry forward
Amounts recognised in equity:
Other items
Deferred tax asset/(liability)
Comprising of:
Deferred tax asset
Deferred tax liability
Deferred tax asset/(liability)
Unrecognised temporary differences
Impairment
Provisions
Foreign deferred tax assets
Unrecognised temporary differences
Foreign tax losses
NOTE 19. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Other payables
Refer to note 31 for further information on financial instruments.
15
$’000
CONSOLIDATED
14
$’000
(22,540)
-
(7,469)
(5,932)
-
9,276
10,903
10,555
5,273
66
-
66
66
-
66
50,975
11,505
1,057
63,537
2,791
66,328
15
$’000
19,602
64,210
5,244
89,056
(24,824)
(76)
(11,558)
(21,731)
185
30,532
1,654
9,441
13,388
(2,989)
587
(2,402)
1,644
(4,046)
(2,402)
-
-
-
-
-
-
CONSOLIDATED
14
$’000
54,653
58,478
7,342
120,473
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 20. CURRENT LIABILITIES - BORROWINGS
Term facility
Lease liability
Refer to note 25 for further information on borrowings.
Refer to note 31 for further information on financial instruments.
NOTE 21. DERIVATIVE FINANCIAL INSTRUMENTS
Current derivative financial instruments
Interest rate swap contracts - cash flow hedges
Forward foreign exchange contracts - cash flow hedges
Non current derivative financial instruments
Interest rate swap contracts - cash flow hedges
79
15
$’000
159,000
3,405
162,405
CONSOLIDATED
14
$’000
137,500
3,844
141,344
15
$’000
8,206
-
8,206
-
-
CONSOLIDATED
14
$’000
354
699
1,053
4,757
4,757
Refer to note 31 for further information on financial instruments.
Refer to note 32 for further information on fair value measurement.
At 30 June 2015, the consolidated entity has interest rate swap agreements in place with a total notional amount of $155 million
(2014: $159 million), whereby the consolidated entity pays a weighted average fixed rate of interest of 4.11% (2014: 4.38%) and
receives variable rate of interest on the notional amount. The swaps were used to hedge the consolidated entity’s exposure to changes
in the fair value of its term facility (see note 33). On 31 July 2015 the Company repaid the term facility in full.
The cash flow hedges of interest rate exposures on the term facility were assessed to be ineffective at year end, resulting in a
recognition of loss in profit or loss of $8.2 million (2014: $5.1 million) with a related deferred tax asset of $2.5 million (2014:
$1.5 million).
NOTE 22. CURRENT LIABILITIES - EMPLOYEE BENEFITS
Annual leave
Long service leave
Sick leave
Other employee benefits
15
$’000
10,966
4,921
69
848
16,804
CONSOLIDATED
14
$’000
24,973
8,291
893
156
34,313
Accrued wages and salaries between the last pay date and 30 June 2015 of $2.0 million (2014: $5.0 million) are included within the
trade payables and accrued expenses balance as disclosed in note 19.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 80
NOTE 23. CURRENT LIABILITIES - PROVISIONS
Project closure
Warranties
Project bonus
Client plant maintenance
Onerous Contracts
Other
Movements in provisions
15
$’000
15,326
192
121
265
3,926
-
19,830
CONSOLIDATED
14
$’000
14,841
97
243
26,112
-
1,883
43,176
Movements in each class of provision during the current financial year, are set out below:
CONSOLIDATED
PROJECT
CLOSURE WARRANTIES
$’000
$’000
PROJECT
BONUS
$’000
CLIENT PLANT
MAINTENANCE
$’000
ONEROUS
CONTRACTS
$’000
Carrying amount at the start of the year
Additional provisions recognised
Provisions released during the year
Provisions utilised during the year
14,841
25,126
-
(24,642)
Carrying amount at the end of the year
15,326
97
134
-
(38)
192
OTHER
$’000
1,883
-
-
TOTAL
$’000
43,176
37,155
(500)
243
635
-
26,112
6,767
(500)
-
4,493
-
(757)
(32,114)
(567)
(1,883)
(60,001)
121
265
3,926
-
19,830
NOTE 24. CURRENT LIABILITIES - LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS CLASSIFIED AS HELD FOR SALE
Trade payables
Provisions - project closure
Provisions - onerous lease
15
$’000
2,024
1,139
-
3,163
CONSOLIDATED
14
$’000
6,185
7,474
1,531
15,190
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 25. NON-CURRENT LIABILITIES - BORROWINGS
Term facility
Lease liability
Refer to note 31 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Term facility net of borrowing costs
Lease liability
Details of currency, interest rate and year of maturity of borrowings are:
CONSOLIDATED
Term facility
Finance lease liabilities
Term facilities
CURRENCY
AUD
NGN
INTEREST
RATE
CALENDAR YEAR
OF MATURITY
5.10%
16.0%
2017
2016
81
15
$’000
-
280
280
CONSOLIDATED
14
$’000
20,157
3,802
23,959
15
$’000
159,000
3,685
162,685
2015
$’000
159,000
3,685
162,685
CONSOLIDATED
14
$’000
157,657
7,646
165,303
2014
$’000
159,000
7,646
166,646
On 4 September 2014, the consoidated entity executed a new $317.5 million Syndicated Facility Agreement ("SFA"). On 10 September
2014 this SFA refinanced and replaced the previous $475 million SFA.
The new SFA consisted of working capital, bank guarantee and capital expenditure tranches on broadly similar terms to the previous
Facility. In addition, the terms included the right for the lenders to review the Facility in the event that there was a significant decline or
termination of business from existing material contracts.
The termination of the Christmas Creek Expansion Project on 20 April 2015 was a Material Contract Review Event and lenders
undertook a review of the Facility. The review was concluded subsequent to the reporting date on 31 July 2015 when the Company
voluntarily repaid all outstanding drawings under the SFA. As per the conditions in the SFA, the Company did not have an unconditional
right to defer settlement of the debt at 30 June 2015 as it was under a Material Contract Review Event. Accordingly these amounts
have been classified as current. On 31 July 2015 the Company repaid the term facility in full.
As at 30 June 2015, the domestic operating lease facility was drawn by $41.3 million (2014: $52.6 million).
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 82
NOTE 25. NON-CURRENT LIABILITIES - BORROWINGS CONTINUED
Assets pledged as security
The consolidated entity’s hire purchase / finance lease liabilities are secured by the leased assets and in the event of default, the leased
assets revert to the lessor. All remaining assets of the Group are pledged as security under the SFA.
Finance lease liabilities are payable as follows:
Finance lease liabilities
Less than one year
Between one and 5 years
More than 5 years
CONSOLIDATED
CONSOLIDATED
CONSOLIDATED
15
$’000
3,731
284
-
4,015
14
$’000
4,882
4,143
-
9,025
15
$’000
326
4
-
330
14
$’000
1,038
341
-
1,379
15
$’000
3,405
280
-
3,685
14
$’000
3,844
3,802
-
7,646
NOTE 26. NON-CURRENT LIABILITIES - EMPLOYEE BENEFITS
Long service leave
15
$’000
901
901
CONSOLIDATED
14
$’000
1,619
1,619
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 83
NOTE 27. NON-CURRENT LIABILITIES - RETIREMENT BENEFIT OBLIGATIONS
Superannuation plan
The Trust Company Ltd is the Trustee of the Macmahon Employees Superannuation Fund (“the Fund”) and is responsible for all areas
of compliance with regard to the Fund. All members of the now closed defined benefit section were previously invited to transfer their
entitlement to the accumulation section of the Fund. At 30 June 2015, 4 members (2014: 4 members) remained in the defined benefit
section.
Members of the old defined benefit section of the Fund who transferred to the accumulation section will continue to have their benefits
assessed against the defined benefit section of the Fund to ensure that at any time when a condition of release is satisfied a member
is not disadvantaged (as outlined in the Deed of Guarantee). The consolidated entity has entered into a Deed of Guarantee with each of
these members to ensure that they are not disadvantaged by the transfer and accordingly, provides for the liability of these members,
if any.
An actuarial assessment of the defined benefit section as at 30 June 2015 was undertaken by Dennis E. Barton F.I.A.A. of Barton
Consultancy. The accumulation section of the Fund has 3,071 members at 30 June 2015. Members can choose both death and total
and permanent disablement cover within the Fund. The Australian Superannuation Group (WA) Pty Ltd is the Funds administrator. TAL
and Hanover Re underwrite the insured benefits of the Fund.
All assets are invested with professional investment managers via Equitysuper Pooled Superannuation Trust. Atchison Consultants act
as asset consultant to the Fund. The Fund has equal representation of both employer and member representatives by way of the policy
committee which meets regularly to discuss any issues.
Based on the assessment by the Fund’s administrator, the defined benefit section of the Fund has net assets to meet vested benefits
as at 30 June 2015. The differences between the accrued benefits and the net market value of plan assets are recognised in the
financial statements in accordance with accounting policy.
The following sets out details in respect of the defined benefit section only. The expense recognised in relation to the defined
contribution plan is disclosed in note 7.
Statement of financial position amounts
The amounts recognised in the statement of financial position are determined as follows:
Present value of the defined benefit obligation
Fair value of defined benefit plan assets
15
$’000
1,191
(1,164)
27
CONSOLIDATED
14
$’000
1,202
(1,131)
71
The amount recognised as current service expense in respect of the defined benefit section of the Fund during the year was $16,766
(2014: $38,875).
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 84
NOTE 28. EQUITY - ISSUED CAPITAL
15
NUMBER
CONSOLIDATED
14
NUMBER
15
NUMBER
CONSOLIDATED
14
NUMBER
Ordinary shares - fully paid
1,261,699,966
1,261,699,966
391,390
391,390
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the parent entity in proportion to
the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the parent entity does not
haveauthorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have
one vote.
Share buy-back
There is no current on-market share buy-back plan.
Capital risk management
The consolidated entity's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current parent entity's share price at the time of the investment.
The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
The consolidated entity monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by total equity. Net
debt is calculated as 'total borrowings' less 'cash and cash equivalents' as shown in the statement of financial position. Total equity is
as shown in the statement of financial position. At 30 June 2015 the consolidated entity was in a net cash position (Gearing ratio: nil).
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 29. EQUITY - RESERVES
Reserve for own shares (net of tax)
Foreign currency reserve (net of tax)
Hedging reserve - cash flow hedges (net of tax)
Reserve for own shares
85
15
$’000
(4,581)
2,862
251
(1,468)
CONSOLIDATED
14
$’000
(4,581)
(421)
(4,067)
(9,069)
The reserve for the Company's own shares comprises the cost (net of tax) of the Company's shares held by the trustee of the
consolidated entity's equity compensation plans which were purchased on-market in anticipation of vesting of share-based payment
awards under the equity compensation plans. During the year no shares were purchased (2014: 7,222,018 shares for $1.0 million). As at
30 June 2015, there are 15,122,476 (2015: 15,102,177) unallocated Macmahon shares held in trust.
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to
Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.
Hedging reserve - cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to be an
effective hedge.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
CONSOLIDATED
Balance at 1 July 2013
Foreign currency translation
Cash flow hedge
Treasury shares allocated on vesting of performance rights
Balance at 30 June 2014
Foreign currency translation
Reclassification of foreign currency difference on sale of
foreign operation
Net change in the fair value of cash flow hedges taken to
equity, net of tax
Cash flow hedges - reclassified to profit or loss
RESERVE FOR
OWN SHARES
$’000
FOREIGN
CURRENCY
$’000
(3,879)
-
-
(702)
(4,581)
-
-
-
-
(1,025)
604
-
-
(421)
4,330
(1,047)
-
-
Balance at 30 June 2015
(4,581)
2,862
NOTE 30. EQUITY - DIVIDENDS
There were no dividends paid, recommended or declared during the current or previous financial year.
HEDGING
$’000
(3,400)
-
(667)
-
(4,067)
-
-
(3,888)
8,206
251
TOTAL
$’000
(8,304)
604
(667)
(702)
(9,069)
4,330
(1,047)
(3,888)
8,206
(1,468)
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 86
NOTE 31. FINANCIAL INSTRUMENTS
Financial risk management objectives
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. This
framework is designed to identify, monitor and manage the material risks throughout the consolidated entity, to ensure risks remain
within appropriate limits.
Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the consolidated entity’s
activities. The consolidated entity, through its training and management standards and procedures, aims to develop a disciplined and
constructive control environment in which all employees understand their roles and obligations.
The Board of Directors oversees how management monitors compliance with the consolidated entity’s risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the consolidated entity.
The Board of Directors is assisted in its oversight role by the Audit and Risk Committee, to which internal audit reports. Internal audit
undertakes reviews of controls and procedures, the results of which are reported to the Audit and Risk Committee.
The consolidated entity has exposure to the following risks from its use of financial instruments:
∆ Market risk;
∆ Credit risk;
∆ Liquidity risk; and
∆ Operational risk.
This note presents qualitative and quantitative information about the consolidated entity’s exposure to each of the above risks, their
objectives, policies and processes for measuring and managing risk, and the management of capital.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the consolidated
entity’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising returns.
Currency risk
The consolidated entity is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than
respective functional currencies of entities within the consolidated Group, which are primarily the Australian Dollar (AUD), but also the
US Dollar (USD), New Zealand Dollar (NZD), Malaysian Ringgit (MYR), Nigerian Naira (NGN), Ghanaian Cedi (GHS), Indonesian Rupiah
(IDR) and Mongolian Tugrik (MNT). The consolidated entity is also exposed to foreign currency risk on plant and equipment purchases
that are denominated in a currency other than the AUD. The currencies giving rise to this risk are primarily US Dollar (USD), European
Euro (EUR) and Japanese Yen (JPY).
The consolidated entity uses foreign exchange forward contracts to hedge its purchases of major items of plant and equipment
that are denominated in a foreign currency when a firm commitment is made. As at 30 June 2015, 100% of the notional value of the
foreign exchange forward contracts have maturities of less than one year after the balance sheet date. Where necessary, the forward
exchange contracts are rolled over at maturity and generally relate to changes in delivery date of major plant and equipment.
In respect of other monetary assets and liabilities held in currencies other than the AUD, the consolidated entity ensures that the net exposure
is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
The average exchange rates and reporting date exchange rates applied were as follows:
Australian dollars
EUR
USD
NZD
MYR
HKD
JPY
NGN
MNT
IDR
GHS
AVERAGE EXCHANGE RATES
REPORTING DATE EXCHANGE RATES
15
0.6957
0.8360
1.0778
2.8746
6.4824
95.39
144.14
1587.80
10383
2.83
14
0.6737
0.9142
1.1071
2.9729
7.0903
92.21
141.92
1554.48
10479
2.30
15
0.6866
0.7680
1.1294
2.9046
5.9536
93.92
150.87
1508.01
10228
3.33
14
0.6906
0.9420
1.0761
3.0235
7.3013
95.43
146.23
1719.85
11177
2.83
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 87
NOTE 31. FINANCIAL INSTRUMENTS CONTINUED
Currency risk continued
The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the reporting
date were as follows:
USD
JPY
MNT
IDR
15
$’000
359
-
-
247
606
ASSETS
14
$’000
260
-
1,229
366
1,855
15
$’000
-
-
-
(1,344)
(1,344)
LIABILITIES
14
$’000
-
(959)
(559)
(519)
(2,037)
The following analysis demonstrates the increase / (decrease) to profit or loss and equity at the reporting date, assuming a 10 percent
strengthening and a 10 percent weakening of the Australian dollar against the following currencies This analysis also assumes that all
other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2014.
AUD STRENGTHENED
EFFECT ON
PROFIT BEFORE
TAX
$’000
% CHANGE
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
-
-
-
-
-
110
110
-
-
-
-
(67)
15
(52)
AUD WEAKENED
EFFECT ON
PROFIT BEFORE
TAX
$’000
% CHANGE
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
-
-
-
-
-
(110)
(110)
-
-
-
-
(67)
15
(52)
EFFECT ON
EQUITY
$’000
257
-
-
-
-
-
257
3,096
-
487
-
-
-
3,583
EFFECT ON
EQUITY
$’000
(210)
-
-
-
-
-
(210)
(2,533)
-
(398)
-
-
-
(2,931)
CONSOLIDATED - 2015
USD
MYR
JPY
NGN
MNT
IDR
CONSOLIDATED - 2014
USD
MYR
JPY
NGN
MNT
IDR
Price risk
The consolidated entity is not exposed to any significant price risk.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 88
NOTE 31. FINANCIAL INSTRUMENTS CONTINUED
Interest rate risk
Interest rate risk on variable rate borrowings is managed under the consolidated entity’s approved Financial Risk Management Policy.
Under this policy, interest rate exposures on committed capital finance borrowings are hedged in order to attain 100% fixed rates (by
volume). The hedging instruments approved by the Board of Directors for this purpose, are interest rate swaps and interest rate caps
and floors.
As at the reporting date, the consolidated entity had the following variable rate exposed financial assets and liabilities:
CONSOLIDATED
Variable financial assets
Variable financial liabilities
15
$’000
236,892
(159,000)
14
$’000
109,424
(159,000)
Net exposure to cash flow interest rate risk (before hedging)
77,892
(49,576)
An analysis by remaining contractual maturities is shown in 'liquidity management' section.
Fair value sensitivity analysis for fixed rate instruments
The consolidated entity accounted for $8.2 million out of the money interest rate swaps at 30 June 2015. These swaps were ineffective
at 30 June 2015 due to management's decision to repay the SFA debt in July 2015. These swaps were previously hedge accounted.
Cash flow sensitivity analysis for variable rate instruments
The following analysis demonstrates the increase / (decrease) to profit or loss and equity at the reporting date, assuming a change
in interest rates of 100 basis points. This analysis also assumes that all other variables, in particular foreign currency rates, remain
constant. The analysis is performed on the same basis for 2014.
CONSOLIDATED - 2015
Variable rate instruments
Interest rate swap
CONSOLIDATED - 2014
Variable rate instruments
Interest rate swap
BASIS POINTS INCREASE
BASIS POINTS INCREASE
BASIS POINTS
CHANGE
EFFECT ON
PROFIT BEFORE
TAX
$’000
EFFECT ON
EQUITY
$’000
BASIS POINTS
CHANGE
EFFECT ON
PROFIT BEFORE
TAX
$’000
EFFECT ON
EQUITY
$’000
100
100
100
100
779
4,857
5,636
(496)
-
(496)
-
-
-
-
1,105
1,105
100
100
100
100
(779)
(5,065)
(5,844)
496
-
496
-
-
-
-
(1,139)
(1,139)
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 89
NOTE 31. FINANCIAL INSTRUMENTS CONTINUED
Credit risk
Credit risk is the risk of financial loss to the consolidated entity if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the consolidated entity’s receivables from customers and cash and cash
equivalents.
Cash and cash equivalents
The consolidated entity limits its exposure to credit risk for cash and cash equivalents by only investing in liquid securities and with
counterparties that have an acceptable credit rating where possible.
Trade and other receivables
The consolidated entity’s exposure to credit risk is influenced mainly by the characteristics of each individual customer. The
demographics of the consolidated entity’s customer base, including the default risk of the industries and countries in which customers
operate, has less influence on credit risk. Approximately 33% (2014: 26%) of the consolidated entity’s revenue is attributable to sale
transactions with a single customer. Geographically, the concentration of credit risk is in Australia.
Under the consolidated entity’s systems and procedures, each new customer is analysed individually for creditworthiness before the
consolidated entity’s standard payment and delivery terms and conditions are offered. The exposure to credit risk is monitored on an
ongoing basis. The consolidated entity’s analysis includes external ratings, when available, and in some cases bank references. Credit
risk is minimised by managing payment terms, receiving advance payments, receiving the benefit of a bank guarantee or by entering
into credit insurance for customers considered to be at risk.
More than 70% (2014: 19%) of the consolidated entity’s trade receivables exposed to credit risk are from customers who have been
transacting with the consolidated entity for over three years.
The consolidated entity has established a process to review for impairment that represents its estimate of expected / incurred losses
in respect of trade and other receivables. At 30 June 2015 the consolidated entities collective impairment on its trade receivables was
$1.5 million (2014: $25.6 million).
Guarantees
The consolidated entity’s policy is to provide financial guarantees only to or for subsidiaries. Details of outstanding guarantees are
provided in note 35.
Exposure to credit risk
The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The consolidated entity’s
maximum exposure to credit risk at the reporting date was:
Cash and cash equivalents
Receivables*
Total credit risk exposure
* Receivables are shown excluding work in progress and prepayments.
15
$’000
236,892
53,180
290,072
CONSOLIDATED
14
$’000
109,424
125,920
235,344
The consolidated entity’s maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
Mining customers
Other
Total credit risk exposure by customer
15
$’000
53,180
-
53,180
CONSOLIDATED
14
$’000
122,583
3,337
125,920
The consolidated entity’s most significant trade receivable, a mining customer, accounts for $16.0 million of the trade receivables
carrying amount at 30 June 2015 (2014: $38.8 million).
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 90
NOTE 31. FINANCIAL INSTRUMENTS CONTINUED
Liquidity risk
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The consolidated
entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due, without incurring unacceptable losses or risking damage to the consolidated entity’s reputation.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Information about changes in term facilities during the year is disclosed in note 25. As at 30 June 2015, the undrawn amount on the
term facility was $150.8 million (2014: $225.1 million) of which $27.3 million is represented by bank guarantees (2014: $34.1 million).
Outstanding individual lease agreements drawn under past facilities remain in place until their expiry date. In addition, the consolidated
entity has a $107.6 million (2014: $130 million) insurance bond facility with $96.3 million (2014: $73.5 million) available at year end.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial
liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
CONSOLIDATED 2015
Non-derivatives
Non-interest bearing
Trade payables and accrued expenses
Other payables
Interest-bearing - variable
Lease liability
Term facility*
Total non-derivatives
Derivatives
Interest rate swaps net settled*
Forward foreign exchange contracts
net settled
Total derivatives
CONSOLIDATED 2014
Non-derivatives
Non-interest bearing
Trade payables and accrued expenses
Other payables
Interest-bearing - variable
Lease liability
Term facility
Total non-derivatives
Derivatives
Interest rate swaps net settled*
Forward foreign exchange contracts
net settled
Total derivatives
1 YEAR OR LESS
BETWEEN 1 AND
2 YEARS
$’000
BETWEEN 2 AND
5 YEARS
$’000
OVER 5 YEARS
$’000
REMAINING
CONTRACTUAL
MATURITIES
$’000
(83,812)
(5,244)
(3,731)
(159,000)
(251,787)
(8,206)
359
(7,847)
(119,316)
(7,342)
(4,882)
(142,658)
(274,198)
(354)
(699)
(1,053)
-
-
(284)
-
(284)
-
-
-
-
-
(4,143)
(22,133)
(26,276)
(4,757)
-
(4,757)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(83,812)
(5,244)
(4,015)
(159,000)
(252,071)
(8,206)
359
(7,847)
(119,316)
(7,342)
(9,025)
(164,791)
(300,474)
(5,111)
(699)
(5,810)
*This disclosure is based on expected settlements which are earlier than contractual maturities.
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 91
NOTE 31. FINANCIAL INSTRUMENTS CONTINUED
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the consolidated entity’s
processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as
those arising from the unexpected termination of contracts by customers, legal and regulatory requirements and generally accepted
standards of corporate behaviour. This risk includes loss of major contracts or non extension of current contracts. Operational risks
arise from all of the consolidated entity’s operations.
The consolidated entity’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the
consolidated entity’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior
management within each business unit. This responsibility is supported by the development of overall consolidated entity’s standards
for the management of operational risk in the following areas:
∆ Requirements for appropriate segregation of duties, including the independent authorisation of transactions;
∆ Requirements for the reconciliation and monitoring of transactions;
∆ Compliance with regulatory and other legal requirements;
∆ Documentation of controls and procedures;
∆ Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the
risks identified;
∆ Requirements for the reporting of operational losses and proposed remedial action;
∆ Development of contingency plans;
∆ Training and professional development;
∆ Ethical and business standards;
∆ Risk mitigation, including insurance where this is effective;
∆ Reporting and review of operations and financial performance against budgeted/forecast outcomes; and
∆ Contractual risk is managed through integral customer relationships and management of performance on existing contracts, which
include measures to monitor costs and productivity.
Compliance with Company standards is supported by a program of periodic reviews undertaken by Internal Audit. The results of Internal
Audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit and
Risk Committee and senior management of the consolidated entity.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 92
NOTE 32. FAIR VALUE MEASUREMENT
Fair value hierarchy
The following tables detail the consolidated entity's financial assets and liabilities, measured or disclosed at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement
date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
CONSOLIDATED 2015
Financial Liabilities
Interest rate swaps
Foreign exchange forward contracts
Total liabilities
CONSOLIDATED - 2014
Liabilities
Interest rate swaps
Foreign exchange forward contracts
Total liabilities
LEVEL 1
-
-
-
-
-
-
LEVEL 2
$’000
(8,206)
359
(7,847)
(5,111)
(699)
(5,810)
LEVEL 3
$’000
-
-
-
-
-
-
TOTAL
$’000
(8,206)
359
(7,847)
(5,111)
(699)
(5,810)
Assets and liabilities held for sale are measured at fair value on a non-recurring basis.
There were no transfers between levels during the financial year.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use of
observable market data where it is available and relies as little as possible on entity specific estimates.
The fair values of financial assets and liabilities, together with their carrying amounts in the statement of financial position, for the
consolidated entity are as follows:
CONSOLIDATED
Assets
Cash at bank
Trade receivables
Derivative financial instruments
Liabilities
Trade payables
Other payables
Derivative financial instruments
Lease liability
Term facility
2015
CARRYING AMOUNT
2014
CARRYING AMOUNT
FAIR VALUE
$’000
236,892
53,180
359
290,431
(83,812)
(5,244)
(8,206)
(3,685)
236,892
53,180
359
290,431
(83,812)
(5,244)
(8,206)
(3,645)
FAIR VALUE
$’000
109,424
125,920
-
235,344
109,424
125,920
-
235,344
(119,316)
(119,316)
(7,342)
(5,810)
(7,646)
(7,342)
(5,810)
(7,168)
(159,000)
(159,000)
(159,000)
(152,809)
(259,947)
(259,907)
(299,114)
(292,445)
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 93
NOTE 32. FAIR VALUE MEASUREMENT CONTINUED
Fair value hierarchy continued
The fair values of financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used:
Financial instruments measured at fair value
∆ Fair value of derivative financial instruments are determined by applying valuation techniques such as forward pricing and swap
models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties,
foreign exchange spot and forward rates and interest rate curves.
Financial instruments not measured at fair value
∆ Fair value of cash and cash equivalents, receivables and trade payables approximate their carrying amounts largely due to the
short-term maturities of these instruments.
∆ Fair value of loans from banks and other financial liabilities, obligations under finance and hire purchase leases are estimated by
discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
NOTE 33. KEY MANAGEMENT PERSONNEL DISCLOSURES
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the consolidated entity is set out
below:
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
15
$
4,313,813
(1,263,475)
206,160
1,220,998
(473,729)
CONSOLIDATED
14
$
4,778,658
-
305,021
305,997
723,347
4,003,767
6,113,023
Individual Directors and Executives compensation disclosures
Information regarding individual Directors’ and Executives’ compensation and some equity instruments disclosures as required by
Corporations Regulation 2M.3.03 is provided in the Remuneration Report section of the Directors’ Report. Apart from the details
disclosed in this note or in the Remuneration Report, no Director or Executive has entered into a material contract with the Company
or the consolidated entity since the end of the previous financial year and there were no material contracts involving Directors’ or
Executives’ interests existing at year end.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 94
NOTE 34. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the parent entity, and its
international network firms:
Audit services - KPMG
Audit or review of the financial statements
Other services - KPMG
Tax services
Other regulatory audit services
Other - restructuring services
Other
Other services - network firms
Tax services
NOTE 35. CONTINGENT LIABILITIES
The following identifiable contingencies exist at 30 June 2015:
Bank guarantees
Insurance performance bonds
15
$
CONSOLIDATED
14
$
379,500
318,493
82,521
6,000
597,881
98,299
784,701
1,164,201
131,420
13,000
-
23,315
167,735
486,228
47,162
127,258
15
$’000
7,715
11,312
19,027
CONSOLIDATED
14
$’000
13,773
56,520
70,293
Bank guarantees and insurance bonds are issued to contract counterparties in the normal course of business as security for the
performance by Macmahon of various contractual obligations.
Other contingent liabilities
In the ordinary course of business, Macmahon is also called upon to give guarantees and indemnities direct to contract counterparties
in relation to the performance of contractual and financial obligations. The value of these guarantees and indemnities is
indeterminable.
Macmahon has entered into various joint venture arrangements under which it may be jointly and severally liable for the liabilities of the
joint arrangement. Macmahon has the normal contractor’s liability in relation to its current and completed mining and construction
projects (for example, liability relating to design, workmanship and damage), as well as liability for personal injury and property damage
during a project. Potential liability may arise from claims, disputes and/or litigation against Group companies and/or joint venture
arrangements in which the Group has an interest. Macmahon is currently managing a number of claims, disputes and litigation
processes in relation to its contracts, as well as in relation to personal injury and property damage arising from project delivery.
During the year Macmahon was approached about a proposal to commence proceedings relating to an alleged failure by the Company
to comply with its continuous disclosure obligations. The Company denies any failure and proceedings have not yet been commenced.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 36. COMMITMENTS
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
95
15
$’000
6,069
-
6,069
18,014
23,445
41,459
CONSOLIDATED
14
$’000
40,430
-
40,430
22,236
41,212
63,448
The consolidated entity leases a number of offices and industrial workshop facilities. The leases typically run for a period of 10 years,
with an option to renew the lease after that date. Some leases provide for additional payments that are based on changes in a local
price index or CPI. The consolidated entity does not have an option to purchase the leased assets at the expiry of their lease period.
On 31 July 2013, the consolidated entity entered into a Master Operating Lease Agreement for plant and equipment. The leases
typically run for a term of 3 to 5 years with an option to extend for up to 1 to 2 years after that date. The consolidated entity has an
option to purchase the assets at the expiry of their lease period. This agreement replaced the $230 million domestic operating lease
facility signed in October 2007. Outstanding individual lease agreements drawn under the $230 million facility remain in place until their
expiry. As at 30 June 2015, the total value of outstanding operating leases was $41.3 million (2014: $52.6 million).
Finance lease commitments in Note 25 include contracted amounts for various plant and equipment with a written down value of $9.6
million (2014: $11.0 million) under finance leases expiring within 3 to 4 years. Under the terms of the leases, the consolidated entity has
the option to acquire the leased assets for predetermined residual values on the expiry of the leases.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 96
NOTE 37. RELATED PARTY TRANSACTIONS
Parent entity
Macmahon Holdings Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 39.
Joint ventures
Interests in joint ventures are set out in note 40.
Key management personnel
Disclosures relating to key management personnel are set out in note 33 and the remuneration report in the Directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Other transactions:
Jointly controlled ventures- provision for contract services
Receivable from and payable to related parties
15
$
-
CONSOLIDATED
14
$
3,467
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 38. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive loss
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Hedging reserve - cash flow hedges
Share-based payments reserve
Reserve for own shares
Accumulated losses
Total equity
97
PARENT
14
$’000
(24,637)
(24,637)
PARENT
14
$’000
50,346
368,763
15
$’000
(134,110)
(129,791)
15
$’000
138,443
382,804
(165,161)
(144,053)
(308,559)
(165,575)
391,390
251
19,663
(4,581)
391,390
(4,067)
18,814
(4,581)
(332,478)
(198,368)
74,245
203,188
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of some of
its subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed in note 41.
Contingent liabilities
The parent entity does not have any contingent liabilities (2014: nil).
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 98
NOTE 39. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 2:
OWNERSHIP INTEREST
NAME
Incorporated subsidiaries
Macmahon Contractors Pty Ltd
Macmahon Contractors (WA) Pty Ltd
Macmahon Properties Pty Ltd
Macmahon (Southern) Pty Ltd
Macmahon Mining Services Pty Ltd
Macmahon Construction Pty Ltd
Macmahon Civil Construction Pty Ltd
Doorn-Djil Yoordaning Mining and Construction Pty Ltd
Macmahon Underground Pty Ltd
Macmahon Africa Pty Ltd
Macmahon Asia Pty Ltd
Macmahon Malaysia Pty Ltd
Macmahon Rail Pty Ltd
Macmahon Contractors (NZ) Ltd
PT Macmahon Indonesia
PT Macmahon - Mining Services
Macmahon Contractors Nigeria Ltd
Macmahon Sdn Bhd
Macmahon Constructors Sdn Bhd
MVM (Malaysia) Sdn Bhd
Macmahon Contracting International Pte Ltd
Macmahon Mongolia Holdings Pte Ltd
Five Hills Holdings Pte Ltd
Five Hills Leasing Pte Ltd
Macmahon Mongolia LLC
TT JV CO LLC
Macmahon Contracting Ghana Limited
Macmahon Rail Holdings Pty Ltd
Macmahon Rail Investments Pty Ltd
Macmahon Rail Operations Pty Ltd
Thomco (No. 2020) Pty Ltd
Thomco (No. 2021) Pty Ltd
Thomco (No. 2022) Pty Ltd
Macmahon Botswana (Pty) Ltd
Interest in trusts
PRINCIPAL PLACE OF BUSINESS /
COUNTRY OF INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Indonesia
Indonesia
Nigeria
Malaysia
Malaysia
Malaysia
Singapore
Singapore
Singapore
Singapore
Mongolia
Mongolia
Ghana
Australia
Australia
Australia
Australia
Australia
Australia
Botswana
Macmahon Holdings Limited Employee Share Ownership Plans Trust
Australia
Macmahon Underground Unit Trust
Australia
15
%
100.00%
100.00%
-
100.00%
100.00%
-
-
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
-
-
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
14
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 99
NOTE 40. INTERESTS IN JOINT VENTURES
Interests in joint ventures are accounted for using the equity method of accounting. Information relating to joint ventures that are
material to the consolidated entity are set out below:
NAME
PRINCIPAL ACTIVITIES
Macmahon / Adasa JV
Irrigation scheme design and construction
Gooring Jimbila Contracting JV*
Dhurawine JV
Triodia JV
Malana JV*
Marapikurrinya JV*
Karara Yamatji JV*
Tonkin Highway JV*
Roe Highway JV*
Hale Street Link JV*
Ross River Dam JV*
Bell Bay Alliance JV*
Rail Link JV*
Eyre Peninsula JV*
Non-active
Labour hire
Labour hire and workshop maintenance
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
15
%
50.00%
50.00%
50.00%
-
50.00%
45.00%
50.00%
50.00%
50.00%
33.33%
50.00%
20.00%
25.00%
50.00%
OWNERSHIP INTEREST
14
%
50.00%
50.00%
50.00%
50.00%
50.00%
45.00%
50.00%
50.00%
50.00%
33.33%
50.00%
20.00%
25.00%
50.00%
* Joint Ventures that were deregistered or not active during the year.
Summary financial information for equity accounted investees, unadjusted for percentage ownership held by the consolidated entity:
Summarised statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets/(liabilities)
Summarised statement of profit or loss and other comprehensive income
Revenue
Expenses
Profit before income tax
15
$'000
825
825
(495)
(495)
330
2,163
(1,870)
293
14
$'000
10,713
10,713
(9,221)
(9,221)
1,492
8,944
(6,931)
2,013
Revenue and recoveries from the jointly controlled entities are disclosed in note 4. To support the activities of the joint venture, the
consolidated entity and the other investors in the joint venture have agreed to make additional contribution in proportion to the interest
to make up any losses, if required. The jointly controlled entities do not have any capital commitments, other than performance bonds
and bank guarantees disclosed in note 35.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 100
NOTE 41. DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed below are relieved
from the Corporations Act 2001 requirements for preparation, audit and lodgment of financial statements, and Directors’ report.
It is a condition of the Class Order that Macmahon Holdings Limited (“the Company”) and each of the subsidiaries below enter into a
Deed of Cross Guarantee (“Deed”). The effect of the Deed is that the Company guarantees to each creditor, payment in full of any debt
in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under
other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The
subsidiaries have also given similar guarantees in the event that the Company is wound up.
The following entities are party to a Deed of Cross Guarantee under which each company guarantees the debts of the others:
Macmahon Southern Pty Ltd
Macmahon Mining Services Pty Ltd
Macmahon Underground Pty Ltd
Macmahon Contractors Pty Ltd
Macmahon Rail Pty Ltd
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial position,
comprising the Company and its controlled entities which are a party to the Deed, after eliminating all transactions between parties to
the Deed of Cross Guarantee, at the end of the financial year.
Statement of profit or loss and other comprehensive income
Revenue
Share of profits of joint ventures accounted for using the equity method
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expense
Impairment and inventory write-downs
Equipment and office expenses under operating leases
Finance costs
Other expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense
Other comprehensive income
Cash flow hedges transferred to profit or loss, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Equity - retained profits
Accumulated losses at the beginning of the financial year
Loss after income tax expense
Transfer from share premium reserve
Transfer from other reserves
Transfer to options reserve
15
$'000
451,937
-
(167,483)
(211,929)
(18,041)
(36,177)
(162,800)
(24,526)
(11,360)
(32,273)
(212,652)
2,627
(210,025)
4,318
-
4,318
14
$'000
664,121
3,975
(161,779)
(322,869)
(71,934)
(64,364)
-
(24,117)
(8,753)
(27,436)
(13,156)
(11,477)
(24,633)
(667)
783
116
(205,707)
(24,517)
(101,664)
(205,707)
(38)
-
-
(79,940)
(24,517)
1,302
708
783
Accumulated losses at the end of the financial year
(307,409)
(101,664)
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 41. DEED OF CROSS GUARANTEE CONTINUED
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax
Assets of disposal groups classified as held for sale
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Intangibles
Deferred tax
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Employee benefits
Provisions
Liabilities directly associated with assets classified as held for sale
Non-current liabilities
Payables
Borrowings
Derivative financial instruments
Deferred tax liabilities
Employee benefits
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
101
14
$'000
91,089
89,028
68,497
14,801
3,895
15
$'000
211,547
31,527
37,521
14,670
769
296,034
267,310
113,821
38,736
101,762
21
-
254,340
550,374
50,601
159,000
7,847
10,465
8,737
3,163
251,580
38,736
302,570
11,925
-
604,811
872,121
112,335
137,500
1,053
24,079
8,279
15,190
239,813
298,993
222,838
-
-
6,601
416
229,855
469,668
80,706
391,390
(3,275)
(307,409)
263,926
21,500
4,757
557
812
290,995
589,988
282,133
391,390
(7,593)
(101,664)
80,706
282,133
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 102
NOTE 42. EVENTS AFTER THE REPORTING PERIOD
Material contract review event
Following the sale of its Mongolian business in June 2015, the Company repaid all its outstanding debt under the Syndicated Facility
Agreement on 31 July 2015. The Company is currently in advanced negotiations regarding a new facility to provide greater financial
flexibility to capitalise on future work opportunities.
CEO appointment
Mr S J van Dyk was appointed as Chief Executive Officer and Managing Director on 13 July 2015.
Other than the matters noted above, no matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in
future financial years.
No other matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.
NOTE 43. RECONCILIATION OF PROFIT/(LOSS) AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES
(Loss) / Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Impairment of property, plant and equipment
Cash flow hedges - reclassified from reserve
Net gain on sales
Share of profit - joint ventures
Share-based payments
Foreign exchange differences
Transaction costs written off
Allowances for inventory
Provision for onerous contract
Write-down of inventory
Goodwill impairment
Net cash received from jointly controlled entities
Income tax expense/(benefit)
Change in operating assets and liabilities:
Decrease in trade and other receivables
Increase in inventories
Decrease in trade and other payables
Decrease in provision for income tax
Decrease in employee benefits and provisions
Net cash from operating activities
15
$’000
CONSOLIDATED
14
$’000
(217,920)
30,429
59,620
183,701
8,206
(7,308)
(146)
(38)
(11,934)
4,897
6,373
3,926
27,328
18,297
1,131
1,598
67,280
(1,581)
(44,554)
(1,908)
(43,948)
53,751
102,551
2,044
-
(1,334)
(4,121)
1,302
2,079
3,981
-
-
-
-
(28,273)
18,028
43,821
(9,796)
(36,653)
(8,676)
(37,476)
77,906
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 44. EARNINGS PER SHARE
103
15
$’000
CONSOLIDATED
14
$’000
Earnings per share for (loss)/profit from continuing operations
(Loss) / Profit after income tax attributable to the owners of Macmahon Holdings Limited
(220,567)
28,938
Weighted average number of ordinary shares used in calculating basic earnings per share
1,256,553,965
1,256,553,965
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue
-
34,013,380
Weighted average number of ordinary shares used in calculating diluted earnings per share
1,256,553,965
1,290,567,345
NUMBER
NUMBER
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
CENTS
(17.55)
(17.55)
15
$’000
CENTS
2.30
2.24
CONSOLIDATED
14
$’000
Earnings per share for profit from discontinued operations
Profit after income tax attributable to the owners of Macmahon Holdings Limited
2,647
1,491
Weighted average number of ordinary shares used in calculating basic earnings per share
1,256,553,965
1,256,553,965
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue
23,996,621
34,013,380
Weighted average number of ordinary shares used in calculating diluted earnings per share
1,280,550,586
1,290,567,345
NUMBER
NUMBER
Basic earnings per share
Diluted earnings per share
CENTS
0.21
0.21
15
$’000
CENTS
0.12
0.12
CONSOLIDATED
14
$’000
Earnings per share for (loss) / profit
(Loss) / Profit after income tax attributable to the owners of Macmahon Holdings Limited
(217,920)
30,429
Weighted average number of ordinary shares used in calculating basic earnings per share
1,256,553,965
1,256,553,965
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue
-
34,013,380
Weighted average number of ordinary shares used in calculating diluted earnings per share
1,256,553,965
1,290,567,345
NUMBER
NUMBER
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 104
NOTE 44. EARNINGS PER SHARE CONTINUED
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
NOTE 45. SHARE-BASED PAYMENTS
CENTS
(17.34)
(17.34)
CENTS
2.42
2.36
During the period the consolidated entity used the following equity compensation plans to remunerate executives and employees of
the Group:
∆ Macmahon Executive Equity Plan ("EEP" or "LTI Plan")
∆ Macmahon CEO LTI Plan
Macmahon EEP or LTI Plan
The LTI Plan provides Executives (including the CEO) and other senior personnel with the opportunity to receive fully paid shares in
Macmahon for no consideration, subject to specified time restrictions, continuous employment and performance conditions being met.
Each performance right will entitle participants to receive one fully paid ordinary share at the time of vesting. The LTI Plan is designed
to assist with employee retention, and to incentivise employees to maximise returns and earnings for shareholders.
Participants are granted Performance Rights, which are contractual rights to receive fully paid shares in Macmahon, subject to the LTI
Plan conditions being satisfied. The Board determines which Executives are eligible to participate and the number of rights granted.
Each right will entitle the participant to receive one fully paid ordinary Macmahon share on vesting.
Relative TSR was chosen by the Board as a suitable performance measure as it provides alignment between shareholder returns and
executive remuneration. The Performance Rights lapse if the employee ceases employment with Macmahon, or the TSR performance
condition has not been achieved within a 5½ year period.
PERFORMANCE RIGHTS GRANTED
ON 15 JANUARY 2010
PERFORMANCE PERIOD
TIME-BASED
CONDITION
ONLY ENDING
15/01/2012
2 YEARS ENDING
15/01/2012
3 YEARS ENDING
15/01/2013
4 YEARS ENDING
15/01/2014
5 YEARS ENDING
15/01/2015
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche and number of Performance Rights
3,843,750
2,882,812
2,882,812
2,882,812
2,882,812
Vesting performance condition
TSR Ranking 75% or higher of the TSR of two peer groups
(50% weighting to each peer group)
TSR Ranking 50%-75% of the TSR of two peer groups
(50% weighting to each peer group)
TSR Ranking below 50% of the TSR of two peer groups
(50% weighting to each peer group)
-
2,882,812
2,882,812
2,882,812
2,882,812
- 1,441,406 plus
2% for each
percentile
above 50%
1,441,406 plus
2% for each
percentile
above 50%
1,441,406 plus
2% for each
percentile
above 50%
1,441,406 plus
2% for each
percentile
above 50%
-
Nil
Nil
Nil
Nil
PERFORMANCE RIGHTS GRANTED ON 17 JUNE 2011
PERFORMANCE PERIOD
TIME-BASED
CONDITION
ONLY ENDING
17/06/2013
2 YEARS ENDING
17/06/2013
3 YEARS ENDING
17/06/2014
4 YEARS ENDING
17/06/2015
5 YEARS ENDING
17/06/2016
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche and number of Performance Rights
3,268,750
2,451,562
2,451,562
2,451,562
2,451,562
Vesting performance condition
TSR Ranking 75% or higher of the TSR of two peer groups
(50% weighting to each peer group)
TSR Ranking 50%-75% of the TSR of two peer groups
(50% weighting to each peer group)
TSR Ranking below 50% of the TSR of two peer groups
(50% weighting to each peer group)
-
2,451,562
2,451,562
2,451,562
2,451,562
- 1,225,781 plus
2% for each
percentile
above 50%
1,225,781 plus
2% for each
percentile
above 50%
1,225,781 plus
2% for each
percentile
above 50%
1,225,781 plus
2% for each
percentile
above 50%
-
Nil
Nil
Nil
Nil
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 45. SHARE-BASED PAYMENTS CONTINUED
PERFORMANCE RIGHTS GRANTED ON 1 JULY 2012
105
TIME-BASED
CONDITION
ONLY ENDING
01/07/2015
PERFORMANCE PERIOD
3 YEARS ENDING
1/07/2015
4 YEARS ENDING
1/07/2016
Tranche 1
Tranche 2
Tranche and number of Performance Rights
1,597,000
1,597,000
4,791,000
Vesting performance condition
TSR Ranking 75% or higher of the TSR of two peer groups (50% weighting to each peer group)
TSR Ranking 50%-75% of the TSR of two peer groups
(50% weighting to each peer group)
TSR Ranking below 50% of the TSR of two peer groups
(50% weighting to each peer group)
PERFORMANCE RIGHTS GRANTED ON 1 JULY 2013 (GRANTED 25 JULY 2013)
Tranche and number of Performance Rights
Vesting performance condition
At or above 27% EPS CAGR
EPS Between 6% EPS CAGR and 27% EPS CAGR
Less than 6% EPS CAGR
TSR Ranking 75% or higher of the TSR of two peer groups
TSR Ranking 50%-75% of the TSR of two peer groups (50% weighting to each peer group)
TSR Ranking below 50% of the TSR of two peer groups (50% weighting to each peer group)
PERFORMANCE RIGHTS GRANTED ON 1 JULY 2014 (GRANTED 7 AUGUST 2014)
Tranche and number of Performance Rights
Vesting performance condition
At or above 12% EPS CAGR
EPS Between 5% EPS CAGR and 12% EPS CAGR
Less than 5% EPS CAGR
TSR Ranking 75% or higher of the TSR of two peer groups
TSR Ranking 50%-75% of the TSR of two peer groups (50% weighting to each peer group)
-
-
-
1,597,000
4,791,000
798,500 plus
2% for each
percentile
above 50%
798,500 plus
2% for each
percentile
above 50%
Nil
Nil
PERFORMANCE PERIOD
3 YEARS ENDING
1/07/2016
3 YEARS ENDING
1/07/2016
Tranche 1
Tranche 2
8,000,000
8,000,000
8,000,000
4,000,000 plus
2.38% for each
additional EPS
CAGR % above
6% CAGR
Nil
8,000,000
4,000,000 plus
2% for each
percentile
above 50%
Nil
PERFORMANCE PERIOD
3 YEARS ENDING
1/07/2017
3 YEARS ENDING
1/07/2017
Tranche 1
Tranche 2
10,550,000
10,550,000
10,550,000
5,275,000 plus
7.14% for each
additional EPS
CAGR % above
5% CAGR
Nil
10,550,000
5,275,000 plus
2% for each
percentile
above 50%
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 106
TSR Ranking below 50% of the TSR of two peer groups (50% weighting to each peer group)
Nil
NOTE 45. SHARE-BASED PAYMENTS CONTINUED
The two comparator groups for the TSR calculation for plans up until and including 2012 are:
∆ ASX 200: the constituents of the ASX 200 index; and
∆ Peer group: a group of seven companies consisting of Ausdrill Limited, Downer EDI Limited, Leighton Holdings Limited,
Monadelphous Group Limited, NRW Holdings Limited, Transfield Services Limited and UGL Limited
The two comparator groups for the TSR calculation for the 2013 plan onwards are:
∆ All companies in the S&P ASX 200 that are ranked 101 to 200 and have Global Industry Classification Standard ("GICS")
classification of Materials and Industries as at the commencement of the performance period; and
∆ Peer group: a group of seven companies consisting of Ausdrill Limited, Decmil Group Limited, Downer EDI Limited, Leighton Holdings
Limited, MACA Limited, Monadelphous Group Limited and NRW Holdings Limited.
Macmahon CEO LTI Plan
Following Shareholders approval at the Annual General Meeting on 15 November 2013, Mr. Carroll was granted 5.0 million and 1.23
million performance rights in relation to the 2013 CEO LTI Plan and the 2012 CEO LTI Plan respectively.
The rights may be exercised only to the extent that vesting conditions are met. On exercise, the Company will issue one ordinary share
per performance right to Mr. Carroll for nil cash consideration. Vesting of the rights is dependent on the conditions detailed in the tables
below. Provided Mr. Carroll remains as CEO of the Company, each class of Performance Rights will vest immediately following the end of
the relevant period, if the following criteria are met in respect of the period. Mr Carroll resigned from the Company 22 January 2015 and
his performance rights were forfeited.
TIME-BASED
19/9/2012 -
1/7/2015
PERFORMANCE PERIOD
19/9/2012 -
1/7/2015
19/9/2012-
1/7/2016
Tranche 1
Tranche 2
Tranche and number of Performance Rights
245,062
245,062
735,186
Vesting performance condition
TSR Ranking 75% or higher of the TSR of two peer groups (50% weighting to each peer group)
TSR Ranking 50%-75% of the TSR of two peer groups
(50% weighting to each peer group)
TSR Ranking below 50% of the TSR of two peer groups
(50% weighting to each peer group)
-
-
-
245,062
735,186
122,531 plus
2% for each
percentile
above 50%
367,593 plus
2% for each
percentile
above 50%
Nil
Nil
The two comparator groups for the TSR calculation for plans up until and including 2012 are:
∆ ASX 200: the constituents of the ASX 200 index; and
∆ Peer group: a group of seven companies consisting of Ausdrill Limited, Downer EDI Limited, Leighton Holdings Limited,
Monadelphous Group Limited, NRW Holdings Limited, Transfield Services Limited and UGL Limited.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS NOTE 45. SHARE-BASED PAYMENTS CONTINUED
2013 CEO PLAN GRANTED 13 DECEMBER 2013
Tranche and number of Performance Rights
Vesting performance condition
At or above 27% EPS CAGR
EPS Between 6% EPS CAGR and 27% EPS CAGR
Less than 6% EPS CAGR
TSR Ranking 75% or higher of the TSR of two peer groups
TSR Ranking 50%-75% of the TSR of two peer groups (50% weighting to each peer group)
TSR Ranking below 50% of the TSR of two peer groups (50% weighting to each peer group)
2014 CEO PLAN GRANTED 13 NOVEMBER 2014
Tranche and number of Performance Rights
Vesting performance condition
At or above 12% EPS CAGR
EPS Between 5% EPS CAGR and 12% EPS CAGR
Less than 5% EPS CAGR
TSR Ranking 75% or higher of the TSR of two peer groups
TSR Ranking 50%-75% of the TSR of two peer groups (50% weighting to each peer group)
TSR Ranking below 50% of the TSR of two peer groups (50% weighting to each peer group)
The two comparator groups for the TSR calculation for the 2013 plan onwards are:
107
PERFORMANCE PERIOD
3 YEARS ENDING
1/07/2016
3 YEARS ENDING
1/07/2016
Tranche 1
Tranche 2
2,500,000
2,500,000
2,500,000
1,250,000 plus
2.38% for each
additional EPS
CAGR % above
6% CAGR
Nil
2,500,000
1,250,000 plus
2% for each
percentile
above 50%
Nil
PERFORMANCE PERIOD
3 YEARS ENDING
1/07/2017
3 YEARS ENDING
1/07/2017
Tranche 1
Tranche 2
4,750,000
4,750,000
4,750,000
2,375,000 plus
7.14% for each
additional EPS
CAGR % above
5% CAGR
Nil
4,750,000
2,375,000 plus
2% for each
percentile
above 50%
Nil
∆ All companies in the S&P ASX 200 that are ranked 101 to 200 and have Global Industry Classification Standard ("GICS")
classification of Materials and Industries as at the commencement of the performance period; and
∆ Peer group: a group of seven companies consisting of Ausdrill Limited, Decmil Group Limited, Downer EDI Limited, Leighton Holdings
Limited, MACA Limited, Monadelphous Group Limited and NRW Holdings Limited.
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 108
NOTE 45. SHARE-BASED PAYMENTS CONTINUED
Information about performance rights and share options outstanding at year end
The following unvested unlisted CEO performance rights and Executive performance rights were outstanding at year end under the
Macmahon CEO LTI Plan and Macmahon EEP LTI Plan respectively:
Balance at start of the year
Granted during the year
Vested during the year
Expired during the year
Forfeited during the year
Balance at the end of year
CEO PERFORMANCE RIGHTS
EXECUTIVE PERFORMANCE RIGHTS
2015*
2014*
2015**
2014**
6,225,310
9,500,000
-
6,225,310
-
-
(15,725,310)
-
-
-
27,788,071
21,100,000
-
(3,185,473)
18,900,808
16,000,000
-
-
(21,705,973)
(7,112,737)
-
6,225,310
23,996,625
27,788,071
*The 2015 CEO Performance Rights were approved by Shareholders at the 2014 Annual General Meeting and accepted by Mr. Carroll on 13 November 2014
**Included in the Executive performance rights were performance rights issued to Mr. Carroll in his capacity as an Executive prior to being made CEO of the company.
Share-based payments recognised in employee benefits expense
The following amounts were recognised as employee benefits expense in profit or loss, in connection with the Company's equity
compensation plans:
Performance rights
Total expense recognised in employee benefits expense
15
$’000
(38)
(38)
CONSOLIDATED
14
$’000
1,302
1,302
MACMAHON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS 109
DIRECTORS'
DECLARATION
In the Directors' opinion:
∆
∆
∆
∆
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June
2015 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company entity will be able to pay its debts as and when they become due and
payable; and
∆ at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able
to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in
note 41 to the financial statements.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
J A Walker
Director
27 August 2015
Perth
MACMAHON ANNUAL REPORT 2015
110
INDEPENDENT
AUDIT REPORT
Independent auditor’s report to the members of Macmahon Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Macmahon Holdings Limited (the
company), which comprises the consolidated statement of financial position as at 30 June 2015,
and consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on
that date, notes 1 to 45 comprising a summary of significant accounting policies and other
explanatory information and the directors’ declaration of the Group comprising the company and
the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives
a true and fair view in accordance with Australian Accounting Standards and the Corporations
Act 2001 and for such internal control as the directors determine is necessary to enable the
preparation of the financial report that is free from material misstatement whether due to fraud or
error. In note 2, the directors also state, in accordance with Australian Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial statements of the Group
comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
MACMAHON ANNUAL REPORT 2015
INDEPENDENT
AUDIT REPORT
111
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the financial report of 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 2015 and of
its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in note 2.
Report on the remuneration report
We have audited the Remuneration Report included in pages 27 to 38 of the directors’ report for
Report to go here
the year ended 30 June 2015. The directors of the company are responsible for the preparation
and presentation of the remuneration report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Macmahon Holdings Limited for the year ended
30 June 2015, complies with Section 300A of the Corporations Act 2001.
KPMG
Trevor Hart
Partner
Perth
27 August 2015
MACMAHON ANNUAL REPORT 2015
112
SUMMARY OF
CONSOLIDATED RESULTS
Profit and Loss ($m)
Operating revenue - incl. construction
665.5
1,021.9
1,606.1
1,661.5
1,089.4
15
14
13
12
11
Joint venture revenue
Joint venture recoveries
Total revenue
Underlying EBITDA
Depreciation, amortisation and impairment
Underlying EBIT
Significant and non-recurring items
Reported EBIT
Net interest
Reported operating profit / (loss)
Tax (expense) / benefit
Reported NPAT
Minority interest ("MI")
Reported NPAT attibutable to Macmahon
Add: significant and non-recurring items
(net of tax and MI)1
Underlying NPAT attributable to Macmahon
Balance Sheet ($m)
Plant and equipment
Total assets
Net assets
Equity attributable to Macmahon
Net debt / (net cash)
Cash Flow ($m)
Reported EBITDA
Net interest paid
Income tax (paid) / refund
Working capital and provisions decrease/(increase)
Operating cash flow including JV
Investing and financing cash flows (net)
Effect of exchange rates on cash
Cash at beginning of financial year
Closing cash balance
-
-
25.9
(3.5)
209.5
(60.5)
246.3
(37.0)
221.4
(56.4)
665.5
1,044.3
1,755.1
1,870.8
1,254.4
100.8
(261.6)
(160.8)
(31.8)
(192.6)
(23.7)
(216.3)
(1.6)
(217.9)
-
(217.9)
227.9
10.0
141.5
524.3
221.8
221.8
(74.2)
100.8
(10.8)
(1.9)
(34.3)
53.8
70.6
3.1
109.4
236.90
172.9
(104.6)
68.3
-
68.3
(19.8)
48.5
(18.0)
30.5
-
30.5
-
30.5
442.9
823.7
432.2
432.2
55.9
172.9
(15.9)
(8.7)
(70.4)
77.9
(122.3)
0.3
153.5
109.4
172.0
(87.4)
84.6
(123.2)
(38.6)
(21.0)
(59.6)
30.2
(29.4)
-
(29.4)
73.1
43.7
471.1
944.5
401.2
401.2
61.7
67.5
(18.8)
(9.6)
69.5
108.6
(91.6)
1.5
134.9
153.4
167.8
(78.2)
89.6
-
89.6
(14.4)
75.2
(19.2)
56.0
-
56.0
-
56.0
417.8
989.0
356.8
356.8
82.6
167.8
(9.2)
(4.8)
(67.0)
86.8
(65.4)
(2.1)
115.6
134.9
123.2
(57.1)
66.1
(57.9)
8.2
(12.0)
(3.8)
1.1
(2.7)
3.8
1.1
37.8
38.9
311.2
685.7
323.1
323.2
(39.5)
65.3
(12.0)
(0.9)
40.0
92.4
(76.2)
(2.8)
102.2
115.6
1 Significant and non-recurring items in 2013 includes the Construction Business represented as a discontinued operation (2011: Write-down of equity accounted profit in RGP5 project and
wet weather impacts).
MACMAHON ANNUAL REPORT 2015
SUMMARY OF
CONSOLIDATED RESULTS
People and Safety
Number of employees
LTIFR
TRIFR
Order Book
Work in hand ($m) - incl. construction
New contracts and extension ($m)
Revenue growth (%)
Reported NPAT/Total revenue (%)
Underlying NPAT/Total revenue (%)2
EBIT interest cover (x)
Reported basic EPS (cents)
Underlying basic EPS (cents)2
Diluted EPS (cents)
Balance Sheet Ratios
Gearing (Net debt/Equity) (%)
Reported ROC (%)
Underlying ROC (%)2
Reported ROE (%)
Underlying ROE (%)2
Reported ROA (%)
Underlying ROA (%)2
NTA per share ($)
Cash Flow Ratios
Operating cash flow per share (cents)
Shareholders
Shares on issue (m) @ 30 June
Share price @ 30 June (cents)
Dividend declared (cents)
Percentage franked (%)
Market capitalisation ($m)
Enterprise value (EV)
Price/NTA (x)
113
11
3,536
0.2
3.5
2,013
1,052
-
0.1
3.1
0.7
0.1
5.3
0.1
(12.2)
1.9
11.8
0.3
10.7
0.2
5.2
0.4
13
3,495
0.9
7.7
3,230
1,846
(6.2)
(1.7)
2.5
(1.8)
(3.0)
4.4
3.0
15.4
(5.1)
11.0
(7.8)
11.5
(3.1)
4.6
0.3
12
4,791
1.4
7.7
3,139
2,997
49.1
3.0
3.0
6.2
7.7
7.7
7.5
23.1
13.8
13.8
16.5
16.5
5.7
5.7
0.4
8.6
11.7
12.6
15
1,295
0.9
5.4
1,150
68
(35.0)
(0.3)
-
(8.1)
(17.3)
0.8
(17.3)
(33.5)
(0.5)
(37.8)
(67.5)
4.1
(42.1)
2.5
0.2
4.3
14
2,467
0.9
8.5
2,573
387
(40.5)
2.9
2.9
3.4
2.4
2.3
2.4
12.9
10.0
10.0
7.3
7.3
3.7
3.7
0.3
6.2
1,261.7
1,261.7
1,261.7
6.6
-
n/a
83.3
9.1
0.4
10.0
-
n/a
126.2
182.0
0.3
13.0
-
n/a
164.0
225.7
0.4
738.6
57.5
4.0
100.0
424.7
507.3
1.3
733.7
56.0
-
n/a
410.9
371.4
1.4
1 Net of Construction contracts sold.
2 Adjusted for significant and non-recurring items. 2013: Construction Business represented as a discontinued operation (2011: Write-down of equity accounted profit in RGP5 project and wet
weather impacts).
MACMAHON ANNUAL REPORT 2015 114
ASX ADDITIONAL
INFORMATION
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report
is set out below.
SHAREHOLDING SUMMARY
The following details of Shareholders of Macmahon Holdings Limited have been taken from the share register on 25 August 2015.
a) The twenty largest Shareholders held 58.18% of the ordinary shares.
b) There were 9,117 ordinary Shareholders as follows:
SIZE OF HOLDINGS
1 - 1,000
1,000 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 and over
TOTAL HOLDERS
739
2,380
1,405
3,707
886
9,117
The number of Shareholders holding less than a marketable parcel of ordinary shares is 3,712.
Twenty largest Shareholders as at 25 August 2015
NAME
Leighton Holdings Investments Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
3rd Wave Investors Ltd
J P Morgan Nominees Australia Limited
HSBC Custody Nominees
Mr Manishkumar Rasiklal Patel
Bond Street Custodians Limited
Mr Allan Douglas Christie + Mrs Patricia Marjorie Christie
CPU Share Plans Pty Limited
Alkat Pty Ltd
ABN Amro Clearing Sydney Nominees Pty Ltd
Ms Malaky Kazem
Mr Robert Lee Petersen
Mr Mario Montanaro + Mrs Augusta Montanaro
Cannon Partners Fund
UBS Wealth Management Australia Nominees Pty Ltd
Chemco Superannuation Fund Pty Ltd
Choice Investments Dubbo Pty Ltd
Mr Paulus Gerardus Brouwer + Mr Remy Paulus Brouwer
NUMBER OF ORDINARY
SHARES HELD
246,631,927
118,844,094
76,117,308
57,200,000
51,903,468
35,039,841
19,560,949
17,254,733
16,128,690
14,697,183
13,000,000
10,701,965
9,697,253
8,007,089
7,107,520
7,000,000
6,976,844
6,666,667
5,819,200
5,600,000
PERCENTAGE OF
CAPITAL HELD
19.55
9.42
6.03
4.53
4.11
2.78
1.55
1.37
1.28
1.16
1.03
0.85
0.77
0.63
0.56
0.55
0.55
0.53
0.46
0.44
733954731
58.17
MACMAHON ANNUAL REPORT 2015
ASX ADDITIONAL
INFORMATION
SUBSTANTIAL SHAREHOLDERS
FEEDBACK
115
Macmahon would appreciate your feedback on this report. Your
input will assist us to improve as a business and develop our
report to further suit your needs. To respond, please either email
(investors@macmahon.com.au) or mail to:
Investor Relations
PO Box 198
Cannington WA 6987
www.macmahon.com.au
CALENDAR OF EVENTS
Annual General Meeting
4 November 2015
Release of half year results
February 2016
Release of full year results
August 2016
As at 18 August 2014, the register of substantial Shareholders
disclosed the following information:
HOLDERS GIVING NOTICE
NUMBER OF ORDINARY SHARES IN
WHICH INTEREST IS HELD
CIMIC Limited
Forager Funds Management
Pty Ltd
Commonwealth Bank
of Australia
246,631,927
78,903,599
66,338,957
VOTING RIGHTS
The voting rights attaching to ordinary shares are set out below:
On a show of hands every member present in person or by proxy
shall have one vote and upon a poll each share shall have one
vote.
OFFICERS
Company secretaries
G P Gettingby
PRINCIPAL REGISTERED OFFICE
15 Hudswell Road
Perth Airport
Western Australia, 6105
Telephone: +61 (08) 9232 1000
Facsimile: +61 (08) 9232 1001
LOCATION OF SHARE REGISTRIES
Computershare Investor Services Pty Ltd
Level 2, 45 St Georges Terrace
Perth WA 6000
SECURITIES EXCHANGE
The Company is listed on the Australian Securities Exchange.
The Company is listed as “Macmahon” with an ASX code of “MAH”
AUDITOR
KPMG
235 St. Georges Terrace Perth
Western Australia, 6000
OTHER INFORMATION
Macmahon Holdings Limited, incorporated and domiciled in
Australia, is a publicly listed company limited by shares.
ACN 007 634 406
MACMAHON ANNUAL REPORT 2015 116
GLOSSARY
EB IT
EBITDA
EV
LTIFR
TRIFR
NPAT
NTA
ROC
ROE
ROA
Earnings before net interest expense and tax expense/benefit
Earnings before net interest expense, tax expense/benefit, depreciation and amortisation
Enterprise value, being market capitalisation plus net debt
Lost time injury frequency rate
Total recordable injury frequency rate
Net profit after tax
Net tangible assets
Return on capital – EBIT / Capital employed, where capital employed is total tangible assets less payables less bank
overdraft.
Return on equity – NPAT / Average net assets
Return on assets – NPAT / Total assets at year end
MACMAHON ANNUAL REPORT 2015 macmahon.com.au
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MACMAHON ANNUAL REPORT 2015