15/16
ANNUAL REPORT
Quiet Determination
II
CHAIRMAN’S REVIEW
OPERATIONAL AND FINANCIAL REVIEW
OPERATIONAL
FINANCIAL
BUSINESS STRATEGY
RISK MANAGEMENT
CORPORATE RESPONSIBILITY
SAFETY
PEOPLE
ENVIRONMENT
THE BOARD
THE EXECUTIVE TEAM
DIRECTORS’ REPORT
REMUNERATION REPORT
FINANCIAL REPORT
2
4
6
8
10
12
13
14
15
16
17
21
30
MACMAHON ANNUAL REPORT 2016 Demonstrating resilience
through the cycle
2016 has seen a continuation of the challenging market conditions
that have characterised the resources services sector for the past few
years. In this operating environment we have continued to pursue our
goals with tenacity and determination whilst at the same time adjusting
our business model to meet the challenges before us and to best
position the Company for the future.
MACMAHON ANNUAL REPORT 2016 2
MACMAHON ANNUAL REPORT 2016
Chairman’s
Review
2016 has seen a continuation of the
challenging market conditions that have
characterised the resources services
sector for the past few years. In this difficult
operating environment we have continued
to pursue our goals with tenacity and
determination whilst at the same time
adjusting our business model to meet the
challenges before us and to best position the
Company for the future.
Whilst in recent months we have observed a small uplift in
some commodity prices, confidence levels across the broader
market remained subdued throughout most of the year,
resulting in a limited number of greenfield tender opportunities
for Macmahon. In regards to brownfield projects, the Company
did participate in numerous tender opportunities as mining
companies continued to pursue further cost savings and
productivity gains.
Pleasingly, prior to Christmas, Macmahon was successful in
securing two new projects in Australia and another new project
in Indonesia (in joint venture with a local partner). These surface
mining contract awards clearly demonstrated our ability to
provide value added solutions to our clients at a time when they
are needed most. Importantly, the Company’s ongoing focus on
safety, and our commitment to working closely with our clients
to provide a safe and productive workplace, was a critical
component in securing this new work.
During the year the Board continued to focus on our core
objectives – being to constantly refine our business model,
further reduce our operating costs and maintain our healthy
balance sheet.
We also maintained a strong focus on capital management and
in October 2015 commenced a buy-back program of 10% of
the Company’s fully paid ordinary shares over a twelve month
period. The Board is of the view that the average share price
during the period did not reflect the fair value of the Company,
particularly in light of the Company’s current cash reserves
and therefore considered the share buy-back a sound use of
available capital.
FINANCIAL PERFORMANCE
Whilst our current financial position remains sound, the
Company recorded a net profit after tax of only $1.7 million
for the 2016 financial year. This result reflects performance
issues at our Nigerian operations, losses incurred at Telfer due
primarily to start-up costs, complicated site conditions and
additional maintenance rectification costs for client supplied
equipment, as well as a lack of new work in our underground
business following the completion of our development contract
at Olympic Dam in the first half. These issues have been a
core priority for the Board and Management Team and we are
working diligently to address them.
The Board has determined that no dividend will be declared for
the year ending 30 June 2016, as we believe the current share
buy-back is the most effective way to return capital to our
shareholders. This initiative expires in October 2016. The Board
remains committed to returning value to shareholders and will
continue to consider various capital management initiatives in
the year ahead.
MACMAHON ANNUAL REPORT 2016 3
CHAIRMAN’S REVIEW
PEOPLE
STRATEGY AND OUTLOOK
Whilst the past 12 months have been challenging for our people
we have worked hard to do ‘more with less’ and I have been
extremely impressed with the level of professionalism and
dedication shown by our workforce at large. I am very proud of
what we have been able to achieve, particularly in regards to the
safe start-up of our new projects over the Christmas and New
Year period and I think it reflects the determination of our people
to succeed and the pride they have in the work they do.
Moving forward, our focus will be on ensuring that we have the
right level of resourcing to successfully execute our current
workload. This will mean maintaining tight control over our
overheads whilst also ensuring that we have the appropriate
level of capability and expertise throughout the organisation to
deliver on our contractual obligations.
Our leadership team has a clear objective to deliver improved
returns to shareholders through enhanced operational
performance and I am confident that we will address the issues
currently impacting the business and successfully deliver on
this objective.
Nigerian kidnapping incident
On 22 June 2016, five Macmahon employees and two sub-
contractors were abducted by armed gunmen whilst travelling
to our project office near Calabar, Nigeria.
Thankfully, after a significant effort by the Macmahon Crisis
Management Team, Nigerian authorities as well as government
authorities in Australia, New Zealand and South Africa, we were
successful in achieving the safe release of all seven men.
I am incredibly proud of the professionalism shown by our team
who worked around the clock in locations around the world to
achieve this great result. I would also like to commend the men
involved for their bravery and particularly thank their families for
working so closely with us during what was an extremely difficult
and stressful time.
I would like to acknowledge the many companies, both here
in Australia and in Africa who called to offer their assistance.
The level of support from so many sources was humbling,
and demonstrates the mateship amongst Australia’s miners
operating around the globe.
Tragically during this incident one of our sub-contractors,
Matthew Odok, was fatally injured. Our thoughts and prayers are
with his family, work colleagues and friends.
As I said in my introduction market conditions remain
challenging, however the mining industry has started to show
signs of improvement and I would expect to see this trend flow
through to the mining services sector in the near future.
In relation to Macmahon in particular, over the near term we
expect our profitability to be impacted by the issues mentioned
above in Nigeria and at Telfer. However, on a positive note,
volumes at Tropicana are expected to expand and discussions
are currently underway with our client regarding a potential
future scope increase. Furthermore, there is continued upside
opportunity from the disposal of surplus assets and inventory
currently sitting on our balance sheet.
Our strategy during this period is to remain focused on our
existing projects and ensure that we deliver on our contractual
obligations in a safe and efficient manner. Revenue for FY17 is
expected to be in the range of $350 - $370 million with more
than $320 million already contracted. Importantly, our current
order book runs for another 5 years and as such, we are well
positioned financially, to see this downturn through to more
buoyant times.
Whilst successfully delivering our existing projects is
paramount, securing new work is still a priority, however we are
remaining disciplined in regards to the margins we are willing to
accept when tendering new work.
Pleasingly, the Company is currently tendering a number of
tenders, both in Australia and overseas. This work is spread
across a range of commodities including coal, copper, gold, and
lithium.
GOVERNANCE AND THE BOARD
The Board remains committed to maintaining the highest
standards of governance, compliance, business ethics
and safety performance. We believe that good corporate
governance is critical to the long term sustainability of any
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.
SHAREHOLDERS AND SUPPLIERS
Finally, I wish to acknowledge and thank our shareholders and our
suppliers for their ongoing support during the year. This has 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 Macmahon to
sustainable profitability and to achieving the returns that
our shareholders deserve.
Jim Walker
CHAIRMAN
MACMAHON ANNUAL REPORT 2016 4
Operational
Review
Macmahon offers the complete package
of mining services to clients in Australia,
New Zealand, South East Asia and Africa.
Headquartered in Perth, Western Australia,
the Company has extensive knowledge and
experience in both surface and underground
mining as well as engineering design and
fabrication, and maintenance services.
SURFACE MINING
Macmahon offers a full range of surface mining services,
including (but not limited to) mine planning, drill and blast,
bulk and selective mining, crushing and screening, materials
handling, resource infrastructure development 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
Anglo Gold Ashanti and Independence Group. Operations
continued to perform well during the year with the
introduction of new operating methodologies which resulted
in the achievement of industry best productivity and
efficiency benchmarks and record production levels towards
the end of the reporting period. Excitingly, there are further
opportunities to improve performance and the collective
site teams are focused on materialising these opportunities.
Importantly, the Company’s unique relationship remains very
strong and is highly valued by Macmahon. This relationship
has been a key factor in identifying and unlocking the
improvements required to continually reduce base operating
costs and extend the mine life. The contract is based on a
Life of Mine principle and discussions are currently underway
regarding the transition to a significant increase in scope
should the Long Island study achieve a positive outcome
early next year.
In November 2015 the Company was awarded a contract by
St Ives Gold Mining Company Pty Ltd, to provide plant and
personnel for large scale open cut mining operations to the
St Ives Gold Mine near Kambalda in Western Australia. The
fleet has been sourced from Macmahon’s idle equipment
inventory, and is being used to deliver additional capacity
to the St Ives Gold Mine. Since the original contract
announcement, Macmahon has been awarded an extension
for a further 24 months, highlighting the Company’s ongoing
performance and relationship with the client. The extension
has included adjustments to the original contract structure
based on learnings during the initial phase and appropriate
incentives to enhance production on site.
∆
∆ Also in November 2015 the Company was awarded a
contract by Newcrest Mining Limited to undertake contract
mining services at its Telfer operation. Under this contract,
Macmahon is providing the full scope of open pit mining and
bulk earthworks related services, including drill and blast,
mining of waste materials, equipment hire and subcontractor
management.
∆ During the period Macmahon continued to fulfil its 3 year
contract with Rio Tinto to manage its tailings dam operations
at the Argyle Diamond Mine in Western Australia.
MACMAHON ANNUAL REPORT 2016
5
OPERATIONAL REVIEW
UNDERGROUND MINING
INTERNATIONAL OPERATIONS
Macmahon has a 25+ year track record of successfully
operating overseas.
The Company’s operations span a number of locations including
Indonesia, Malaysia and Nigeria. Macmahon provides a range of
mining services in these locations.
Due to heightened security concerns, Macmahon is currently
reviewing whether it should continue its business in Nigeria.
If Macmahon decides to withdraw from Nigeria, possible
Foreign Currency Translation Reserve (FCTR) losses will be
reclassified to the Profit and Loss statement. The current
FCTR loss is $6.4 million.
Project activity – South East Asia
∆
In November 2015 the Company was awarded a contract
by PT Agincourt Resources to provide mining services at
the Martabe gold mine, in the North Sumatran province of
Indonesia. The contact is being delivered by Macmahon in
a 50:50 joint venture with a leading Indonesian contractor
with the award being made following a competitive tendering
process involving several mining contractors from Australia
and Indonesia. Since its start up over the Christmas period,
this project has exceeded production targets and the
relationship with the client and the community has continued
to strengthen.
∆ Separately, Macmahon continues to provide a range of
mining services for LafargeHolcim at operations in Malaysia
and Indonesia and these operations have performed as
expected.
Project activity – Africa
Ewekoro
∆
In April 2016, Macmahon concluded its contract
with LafargeHolcim at the Ewekoro mine in Nigeria.
Disappointingly, in the lead up to the cessation of activities,
the Company endured a period of industrial action, which
in turn had a negative impact on performance towards the
end of this project. The project also incurred higher than
expected demobilisation costs.
Calabar
∆ Operations at Calabar incurred losses during the year due
to low volumes and high equipment rental and maintenance
costs. Financial performance in FY17 is at risk if these issues
persist.
Macmahon has a strong track record of providing high quality
underground development and production services. The
Company’s underground capability also includes the full suite
of ground support services (rock bolting, cable bolting and
shotcreting) as well as ventilation and access services including
shaft sinking, raise drilling and shaft lining.
Project activity
∆ Macmahon’s Mining Services business is currently providing
a range of services (including drilling, shotcreting, raise
drilling, shaft sinking and engineering design) to a number of
projects including the Mount Wright Gold Mine in Queensland
for Carpentaria Gold and the Ballarat Gold Project in Victoria
for Castlemaine Gold Fields.
∆ Macmahon is also providing raise drilling services at BHP
Billiton’s Olympic Dam Mine in South Australia. Macmahon
has been active at this site for more than 10 years with the
current scope of works contracted to 2018.
∆ Separately, the Company is also undertaking cablebolting
activities at Newcrest Mining’s Cadia Project in New South
Wales where it has maintained a presence since 2008.
∆ During the period Macmahon continued to provide care and
maintenance services at the Ranger Mine in the Northern
Territory for Energy Resources of Australia.
Projects completed
∆
In September 2015, Macmahon successfully completed its
underground development contract at BHP Billiton’s Olympic
Dam Mine in South Australia.
∆
∆
In March 2016, Macmahon also completed its underground
mining service contract at Olympic Dam.
In April 2016 the Company’s ‘Big-Rig’ Herrenknecht RBR900
raisedrill also completed its project at Olympic Dam. It has
now been mobilised to a new project in Western Australia
where it will commence operations early in the new financial
year.
∆ Macmahon’s Mining Services business successfully
completed operations at the Lanfranchi and Savannah Mines
in Western Australia for Panoramic Resources.
∆ During the period the Company also completed its drilling
contract at George Fisher utilising a new Canadian designed
drill rig. This rig was the first of its kind in Macmahon’s
underground fleet and was able to deliver greater flexibility in
relation to mobility, drill length and drill diameter.
Other achievements
Almost two years to the day since setting a world record for
underground production drilling, Macmahon has again set a new
record with the same machine at the same mine – this time for
the highest number of metres drilled in a single shift.
The new record of 564m drilled in a single shift was set at
Carpentaria Gold’s Mount Wright mine at Ravenswood, the same
mine where Macmahon set the June 2014 record for production
drilling by a single rig – recording a staggering 20,272m in just
one month.
MACMAHON ANNUAL REPORT 2016
6
6
MACMAHON ANNUAL REPORT 2016
Financial
Review
PROFIT AND LOSS
Income
The Company reported total revenue of $347.4 million.
Revenue was lower than the 2015 financial year, largely due
to the completion of the Waihi, Eaglefield, Tavan Tolgoi and
the Christmas Creek 2 projects. Additionally the underground
development contract at Olympic Dam ended in October 2015,
and the Olympic Dam mining service contract ended in March
2016, however, this was partially offset by revenues from
new contracts that commenced during the year at St Ives in
December 2015 and Telfer in February 2016.
The Company reported a consolidated profit after tax of $1.7
million for the 2016 financial year. This compares favourably
to the loss after income tax for 2015 of $217.9 million. This
year’s net profit includes a significant one off item, being
an additional provision against onerous lease of $1.4 million
after tax. Excluding the significant one off item, the Company
reported an underlying Net Profit After Tax of $3.1 which is lower
than the $10 million underlying profit in 2015 and is mainly
attributable to the lower volume of work, the conclusion of a
major underground contract, ongoing performance issues in
Nigeria and issues at Telfer. Significant items in the prior year
represented impairment of property, plant and equipment and
goodwill, and a write–down of inventory.
MACMAHON ANNUAL REPORT 2016 Expenditure
Recurring expenditure from continuing operations (consisting
of materials, sub-contractors, operating leases and personnel
costs) was $305.9 million. This was lower than the prior year and
was mainly as a result of the lower revenue.
Depreciation of property, plant and equipment from continuing
operations for the 2016 financial year was $33.1 million
and decreased in line with revenue. The vast majority of the
Company’s plant and equipment is depreciated on cumulative
hours worked.
Net finance costs of $2.4 million, was lower than the 2015
financial year. The decrease was as a result of the repayment of
the Company’s Syndicated Debt Facility and lower debt levels
during the year.
Tax Expense
The Group reported a tax expense of $0.4 million for continuing
operations. The effective tax rate for continuing operations is
slightly lower than 30% primarily due to profit being earned in
foreign jurisdictions.
Other Comprehensive Income
Included in Other Comprehensive Income is an amount of
$9.3 million being a foreign currency translation loss that is
currently reflected as part of Reserves on the balance sheet.
A substantial portion of this loss relates to the Nigerian
operations and reflects the material devaluation of the Nigerian
Naira in June 2016. The portion of foreign currency translation
reserve loss ($6.4 million at 30 June 2016) applicable to Nigeria
will be reclassified to the profit and loss at the time of cessation
of operations in Nigeria.
Dividend and Capital Management
The Board has determined that a dividend will not be declared
for the year ending 30 June 2016, as it believes the current
share buy-back is the most effective way to return capital to
shareholders.
The initiative, which commenced in October 2015, will see
the Company buy back, on market, up to 10% of its fully paid
ordinary shares. The share buy-back falls within the “10/12”
limit permitted under the Corporations Act and forms part of
the Company’s ongoing capital management, at times when the
Company’s shares trade at a significant discount to their net
tangible asset value. The Board remains committed to returning
value to shareholders and will continue to consider various
capital management initiatives in the year ahead.
7
FINANCIAL REVIEW
BALANCE SHEET
Financing
The Company’s balance sheet is in a strong position, with a cash
balance of $56.7 million at year end against a total debt of $0.2
million. This resulted in a net cash position of $56.5 million.
On 31 July 2015, the Company repaid the Syndicated Debt
Facility in full. The Company has a general purpose corporate
facility of $30 million which expires in November 2016. This
facility has no drawn debt and is currently used for bank
guarantees. The Company is in the process of renegotiating the
facility to extend it by at least another one year on improved
terms.
Working Capital
Current trade and other receivables were $59.6 million at
30 June 2016 ($66.8 million in 2015) while current trade and
other payables were $61.4 million at 30 June 2016 ($89.1
million in 2015). The reduction in payables was largely due to a
lower level of creditors from reduced volume of work. Inventory
reduced from $50.9 million in 2015 to $37.3 million in line with
the reduced volume of work.
Non-current Assets
As at 30 June 2016, the value of the Company’s property, plant
and equipment totalled $124.6 million, compared to $141.5
million in the prior year. The reduction in property plant and
equipment was driven largely by depreciation and asset sales.
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.
During the year the Company established a joint venture in
Indonesia for the Martabe Project and accordingly invested
$5.6 million in that business.
Cash Flow
Net operating cash during the year totalled $9.1 million
compared to $53.8 million in 2015. EBITDA cash conversion
was negatively impacted by a reduction in provisions relating
to project closures during the year as well as the higher net
working capital in 2016.
The Company realised $17.6 million from sales of surplus and
idle assets. Offsetting this inflow the Company incurred capital
expenditure of $23.5 million, mainly on existing projects, and
invested $5.6 million in the Martabe joint venture.
Net cash outflows from financing activities in the 2016 financial
year totalled $177.0 million comprising repayment of borrowings
and associated costs of $171.6 million and share buy back of
$5.4 million.
MACMAHON ANNUAL REPORT 2016 8
Business
Strategy
Macmahon’s core objective is to secure
and deliver work safely, profitably and
consistently in order to deliver sustainable
returns to shareholders.
To achieve this objective the Company remains focused on
securing new work by capitalising on its reputation as a highly
experienced contractor with proven mining capabilities.
Additionally, in an effort to achieve a greater competitive
advantage in what has become a highly congested mining
services market, Macmahon is currently investigating a range of
options to:
1) broaden its current capability through developing enhanced
technology solutions,
2)
improve existing systems and processes to drive
productivity and efficiency gains,
3) develop a culture of innovation and flexibility by investing
further in human capital.
These initiatives, combined with the current business unit
strategies outlined below, are currently in the process of being
developed to ensure that Macmahon can continue to offer
differentiated, value driven solutions to clients well into the
future.
Business Unit Strategic Areas of Focus
The safety of our people is our number one priority and is at the
core of the following areas of focus:
∆ Macmahon’s core domestic Surface Mining business
strategy revolves primarily around operational excellence,
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 bolstering its client engagement activities
and developing a competitive advantage through the
implementation of a range of new technologies and cost
effective mining techniques, and
Internationally, Macmahon’s strategy is to capitalise on its
foothold in South East Asia, whilst continuing to assess
opportunities with blue chip clients in locations where the
Company deems there is an acceptable level of risk.
The Macmahon Way
The Macmahon Business System is the cornerstone for how
we undertake our work and ensure that we achieve strategic
business objectives. Our systems are an essential element of
our business and serves to meet customer requirements, keep
our people safe, reduce business risk, improve profitability and
demonstrate responsible management to our stakeholders. 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, we recognised the need to
ensure that our systems are updated to reflect these changes.
During the year we reviewed our business processes to ensure
they are effective and deliver efficient outcomes for the
business. We realise that further work is needed to continually
improve our systems to meet a changing environment, to
ensure the capture and retention of our specialised corporate
and operational knowledge and to embed efficiencies in the way
we work.
Our health and safety, environment and quality systems
continue to be independently certified by the BSI Group (British
Standards Institution) as meeting the requirements of: ISO
14001, (Environment); OHSAS 18001 and AS/NZS 4801 (Health
and Safety); and ISO 9001 (Quality). Our systems have also
been developed to meet the requirements of ISO 31000 (Risk
Management).
MACMAHON ANNUAL REPORT 2016 MACMAHON ANNUAL REPORT 2016
OUR SERVICES
SURFACE MINING
UNDERGROUND MINING
■ 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
AT A GLANCE
9
BUSINESS STRATEGY
PLANT, MAINTENANCE
AND ENGINEERING
■ 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
■ FABRICATION, INSTALLATION AND
MAINTENANCE OF STRUCTURAL,
MECHANICAL, MINING AND
ELECTRICAL PLANT AND EQUIPMENT
FOR SURFACE AND UNDERGROUND
CLIENTS
■ SPECIALISED ENGINEERING - ORE
FLOW SYSTEM MANAGEMENT
■ 3D SCANNING AND MODELLING
■ SPECIALISED SERVICE TEAM
WORLD’S MOST
POWERFUL
RAISEDRILL
OPERATING
ACROSS
THREE
CONTINENTS
WORLD
CLASS
MAINTENANCE FACILITIES
Over
50
DRILL
RIGS
10
Risk Management
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 and Environment (“HSE”) Risk
The mining industry involves a high degree of operational risk
and whilst Macmahon believes it takes reasonable precautions
to manage safety and environmental risks, 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 Risk Management processes and Lifesaving Rules which
are well embedded and embraced across our business.
Security Risk
Some of Macmahon’s projects are in areas where there is a
heightened security risk.
For overseas projects Macmahon has in place a number of
security risk processes, including specialist travel and in-
country risk advisory systems to ensure all travellers and
expatriate workers are kept updated on security and travel
risks for any country they may be travelling to. In country risk is
managed via site security and journey management plans.
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 derives revenue predominately from the mining
and resources market. In this market, the timing of or failure to
obtain contracts, delays in awards of contracts, cancellations,
delays in completion, changes in economic conditions,
volatile cyclical nature of commodity prices and demand for
our customers’ goods and services means that the demand
for Macmahon’s goods and services can be cyclical and
may sometimes vary markedly over relatively short periods.
Accordingly, any change to these markets or key customers
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. In Macmahon’s business, this risk is increased by
the high percentage of its revenue that is derived from a single
project. 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 of 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 2016 MACMAHON ANNUAL REPORT 2016
11
RISK MANAGEMENT
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, amongst others things, compensation
for alleged personal injury, workers compensation, breach of
work place practices, breach of contract or statutory duty,
property damage, liquidated damages and contractual claims.
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. 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 a
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 17 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, security
breaches 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;
∆ Foreign exchange rates and interest rates in the ordinary
course of business; and
∆ Loss of key Board, management or operational personnel.
MACMAHON ANNUAL REPORT 2016 12
MACMAHON ANNUAL REPORT 2016
Safety
Macmahon’s commitment to health, safety,
the environment, quality and the community
is unwavering and our improved health and
safety record for 2016 demonstrates that
the Company’s strategy and site based
actions are working effectively to achieve the
Company’s overall objective of Zero Harm.
This comes from a strong belief that workplace injuries and
illnesses are preventable and every job can be done safely. It
also comes from a commitment to make health and safety an
essential element to the successful delivery of all our projects.
Macmahon Values
We recognise that our people are our greatest asset and
accordingly, the safety of our people is always our number one
priority. To ensure that our people return home safe and well at
the end of every working day, Macmahon empowers its people
to live the company’s values. These values set the guiding
principles for our behaviour and actions in the work place.
SAFETY
TEAMWORK
Look after yourself,
your team and others
around you
Work smart, work
hard, work together
OUR VALUES
ENVIRONMENT
Reduce, recycle,
and rejuvenate
INTEGRITY
Do what you say
you are going
to do
PROSPERITY
Create value for
shareholders,
employees, clients
and partners
Working safely
Macmahon’s health and safety is achieved through three vital
elements:
∆ A culture of accountability for one’s own health and safety
and that of others;
∆ Leaders who are passionate about safety and believe that
workplace injuries and illnesses are preventable; and
∆ Robust health and safety systems and practices that
workers understand and believe in.
When delivering projects, Macmahon seeks to work closely with
its clients in order to establish and manage safe systems of
work. During the 2016 financial year the Company was pleased
to successfully complete the start-up of the Telfer, St Ives and
Martabe operations with no lost time injuries. As part of the
successful commencement programs associated with each
of these projects, Macmahon worked collaboratively with each
of its respective clients, to ensure that safety remained our
number one priority across all sites.
Measuring safety performance is also a fundamental part of
the Macmahon safety management system. The Macmahon
performance evaluation process enables us to measure,
evaluate and communicate performance using indicators which
are based on accurate, relevant, reliable, measureable and
verifiable information.
In the 2016 financial year, Macmahon recorded a total of five Lost
Time Injuries, for the second consecutive year, with the Lost Time
Injury Frequency Rate (LTIFR) remaining relatively unchanged and
continued improvement to the Total Recordable Injury Frequency
Rate (TRIFR) compared to 2015. In addition to the improved
TRIFR, the incident severity rate also improved during the year,
with the severity of injuries dropping considerably.
The key health and safety achievements over the last 12
months include:
∆ The lowest TRIFR in the last five years;
∆ Successful start-up of three major projects without a lost
time injury;
∆ Kanthan operating 11 years LTI free;
∆ Shotcreting Division operating 9 years LTI free;
∆ WAC Workshop operating 8 years LTI free;
∆ Underground Drilling Division operating 7 years LTI free;
∆ Lhok Nga operating 7 years LTI free; and
∆ Maintenance of ISO Certification to ISO18001 and AS/NZS 4801.
In 2017, our strategic focus will remain on leadership and
culture, whilst ensuring that our safe systems of work are
maintained across all of our international and local operations,
in an ever changing work environment.
We are committed to continuous improvement and believe
through the following initiatives and the maintenance of current
practices, that we will meet this commitment. To achieve our
strategy, Macmahon have allocated resources to a number of
areas and key projects.
- Focus on risk: to ensure risks are effectively identified and
managed at every level of the organisation;
- Focus on safe acts: targeting the quality use of our key
safety processes and tools;
- Enhanced communication: ensuring our employees and
contractors are well informed on key health and safety
topics and issues;
- Reward and recognition: building a culture of positive safety
performance;
- Leadership training: coaching and training our leaders to
build critical safety, risk management and engagement
skills; and
- Streamlined systems: simplified key information and access
to key policies, procedures and HSEQ documentation.
MACMAHON ANNUAL REPORT 2016 13
Training and development
Macmahon seeks to provide rewarding employment, training
and development opportunities to all its employees. The aim of
training and development is to provide the workforce with the
necessary skills and knowledge to maximise their potential and
to perform work safely in accordance with specified industry
and Company standards for all divisions of the Macmahon
business.
Macmahon training and assessment resources have been
contextualised and reflect Macmahon’s policies and procedures,
equipment and regulatory requirements. The training activities
encompass training and assessing competent operations of
mobile plant through to Macmahon’s safety systems such
as Take 5s and JSEA’s, and are compliant with all safety and
environmental standards and requirements on site.
With a focus on personal development as well as on safety,
Macmahon’s training programs successfully integrate
Macmahon’s core values of Safety, Teamwork, Prosperity,
Integrity and Environment.
Macmahon’s Enterprise Registered Training Organisation
(ERTO) is embedded within Macmahon’s group training team
and as a result Macmahon’s learning outcomes are nationally
recognised. The Company’s training programs successfully align
components of day-to-day mining operations with the national
unit criteria to enable the Macmahon employees to be trained
within a nationally accredited qualification framework.
People
Macmahon maintains that its people are
the core to building a better business. This
year the focus has been on maximising
the potential of our existing workforce;
working closely with our clients to keep their
operations efficient and productive; and
ensuring we are able to compete effectively
for new work. This has been enabled by
simpler human resource systems, quality
training and development programs and
strong support for our line managers in
people management and engagement.
New Projects
This year has seen Macmahon win three projects in close
succession which resulted in a rapid ramp up of recruitment,
mobilisation and induction activities.
Prior to being awarded these projects there was much
preparatory work that went into ensuring Macmahon was
the right contractor for the job and could deliver on its
commitments, including:
- Martabe - Indonesian appropriate HR policies, procedures,
position descriptions and processes for recruitment and
training were drafted in both Bahasa and English.
- Telfer - Macmahon sought approval for a section 318
exemption under the Fair Work Act which meant we were
able to employ any transitioning Newcrest employees under
our own Enterprise Agreement terms and conditions.
Upon being awarded the contracts Macmahon successfully
recruited 85 employees for St Ives, 487 for Martabe and 208 for
Telfer in time for commencement of those projects.
Working with our clients
During the year Macmahon continued to work closely with Anglo
Gold Ashanti at its Tropicana Gold Mine to further leverage
synergies between the two organisations. As a result, improved
structures now exist within HSEQ, Administration, Mine Planning
and Engineering and these functions are now integrated
between the two companies.
MACMAHON ANNUAL REPORT 2016 14
MACMAHON ANNUAL REPORT 2016
Environment
Our environmental policy, values and
commitment reflects the integrated way
in which we work at each of our locations.
These support and advance our strategic
agenda and ensure that we maintain a
shared sense of purpose and alignment to
how we operate.
We continue to improve our understanding of the sources, scope
and extent of our resource use, environmental emissions and
impacts. Our overarching goal for environmental management
is to avoid or, where this is not possible minimise our impacts,
while contributing to lasting benefits across the areas where we
operate.
During the year, we continued to implement environmental
management strategies and plans to ensure the very highest
levels of compliance, to minimise environmental impacts and to
reduce energy consumption and greenhouse gas emissions. We
were able to maintain our industry leading level of compliance
across all the areas where we operate. We had no environmental
fines, breaches or major environmental incidents during
this period which contributes to our unblemished record of
compliance within the mining sector.
Traineeships
The Macmahon Traineeship Program offers site-based
employees the opportunity to gain the nationally recognised
RII30113 Certificate III in Surface Extraction Operations. 21
employees successfully completed the traineeship this year
with an additional 40 employees currently enrolled. The training
team is currently focussing on extending this training initiative
to our most recently awarded projects.
Apprenticeships
Macmahon’s Apprenticeship Program continued its success
with 17 apprentices completing their tradesmen certification
in a range of trades including HD fitter, boilermaker, auto
electrician and electricians. A further 22 apprentices are still
on the program, ensuring Macmahon continues to be one of
Western Australia’s largest employers of apprentices.
Pilot leadership program
In partnership with South Metropolitan TAFE, Macmahon
has implemented a pilot training program which is aimed
at the current and future leaders of our business. Upon
successful completion candidates will be awarded with the
nationally recognised RII50113 Diploma of Surface Operations
Management, opening the pathway towards the Western
Australian Quarry Manager’s Certificate of Competency.
MacTrain
MacTrain is the online training portal used throughout
Macmahon that allows employees and contractors to complete
online inductions and training programs that are specific to
their site and job role. It covers topics such as Macmahon
Underground Induction, Macmahon Corporate Induction, Code
of Conduct, EEO Awareness, Personal Protective Equipment
(PPE), Manual Handling Awareness, Fire Awareness, Fatigue
Awareness, Environmental and Heritage Awareness and
Extreme Working Conditions.
During the year the Group Training Team created two new
learning modules in-house. These are the Telfer Online Induction
and Mac 5 training.
Key People achievements over the last 12 months include:
∆ Successful start-up of three projects, including 780 new
employees recruited and mobilised;
∆ Successful s318 Order application for Telfer operations;
∆ 1350 employees and contractors undertook online training,
completing a total of 9400 learning modules;
∆ Macmahon ERTO issued 690 Units of Competency to 138
staff members. 17 apprentices completed their trades
certification.
MACMAHON ANNUAL REPORT 2016 MACMAHON ANNUAL REPORT 2016
15
The Board
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 2016 16
MACMAHON ANNUAL REPORT 2016
The Executive Team
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.
José Martins
CHIEF FINANCIAL OFFICER
Mr Martins was appointed as Chief Financial Officer in December 2015. He has more than 30 years
finance experience primarily within the resources sector. He holds a Bachelor of Accountancy (with
Distinction) and is a Chartered Accountant.
Prior to joining Macmahon, Mr Martins held the position of Chief Financial Officer for the Ausdrill Group.
Michael Finnegan
GENERAL MANAGER
SURFACE WEST AND
SOUTH EAST ASIA
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.
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.
Greg Miller
GENERAL MANAGER
UNDERGROUND
Mr Miller holds a Bachelor of Engineering (Mining) and has over 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.
Mark Hatfield
GENERAL MANAGER
PLANT AND MAINTENANCE
SERVICES
Mr Hatfield has more than 16 years’ experience within the mining and heavy equipment industry and has
fulfilled numerous operational and senior leadership roles.
Mr Hatfield has a strong technical background and has spent time in operations on the west coast of
Australia as well as a number of countries throughout Asia.
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.
Greg Gettingby
GENERAL COUNSEL
Mr Gettingby holds a Bachelor of Arts and a Bachelor of Laws and has more than 15 years’ experience in
the contracting industry.
Mr Gettingby joined Macmahon in 2002 and was appointed to the position of Group General Counsel/
Company Secretary in 2011. He previously held commercial management and legal roles with the
Company.
Prior to joining Macmahon Mr Gettingby worked as a lawyer in private practice.
David van den Berg
CHIEF TECHNOLOGY AND
INNOVATION OFFICER
Mr van den Berg was appointed as Chief Technology and Innovation Officer in August 2016. He brings an
extensive technology and commercial background to Macmahon through his 23 years’ experience across
the mining, management consulting and technology sectors.
Mr van den Berg commenced with Macmahon in 2008, as Chief Information Officer. Prior to Macmahon,
Mr van den Berg held senior management and technology positions in both Australia and the UK, including
BHPBilliton, PriceWaterhouseCoopers and CitiGroup.
Roger Hughes
GENERAL MANAGER
HSEQ AND
HUMAN RESOURCES
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 2016 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 2016.
DIRECTORS
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)
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 profit for the consolidated entity after providing for income
tax amounted to $1.7 million (June 2015: loss of $217.9 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 4 to 7, which forms part
of this Directors' report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs of the
consolidated entity during the financial year except for the
company repaying all its outstanding debt under the Syndicated
Facility Agreement on 31 July 2015.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Due to heightened security concerns, Macmahon is currently
reviewing whether it should continue its business in Nigeria.
If Macmahon decides to withdraw from Nigeria, possible
Foreign Currency Translation Reserve (FCTR) losses will be
reclassified to the Profit and Loss statement. The FCTR loss
at 30 June 2016 was $6.4 million.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF
OPERATIONS
17
operations have been included generally within the financial
report and on pages 1 to 14.
ENVIRONMENTAL REGULATION
The consolidated entity is not subject to any significant
environmental regulation under Australian Commonwealth or
State law.
Information on Directors
Mr. James Walker
Title:
Independent Non-executive Chairman (since 14 July 2015),
Executive Chairman (22 January 2015 to 13 July 2015)
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 Austin
Engineering Limited (appointed May 2016), Programmed
Group Limited (appointed November 2013), Seeing Machines
(appointed May 2014) and RACWA Holdings Pty Ltd (appointed
November 2013).
Former directorships (last 3 years):
Mr Walker was a director of Seven Group Holdings Ltd, National
Hire Group Limited, Skilled Group Limited and Coates Group
Holdings Pty Ltd.
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
Likely developments in the operations of the consolidated entity
in future financial years and the expected results of those
Interests in options/performance rights:
None
MACMAHON ANNUAL REPORT 2016 18
Mr. Sy van Dyk
Title:
Other current directorships:
Mr Everist is a director of Decmil Group and Austal Group Ltd and
Norwood Systems Limited
Chief Executive Officer and Managing Director
Former directorships (last 3 years):
Qualifications:
BComm (Hons), CA
Experience and expertise:
Mr van Dyk joined the Board as Managing Director in July 2015.
Mr van Dyk has a strong commercial background and with more
than 25 years’ finance experience primarily within the resources
sector.
Mr van Dyk holds a Bachelor of Commerce (Honors) from the
University of South Africa and is also a Chartered Accountant.
Prior to his appointment as Chief Executive Officer, he held the
position of Chief Financial Officer. Prior to joining Macmahon,
Mr van Dyk held a number of senior operational roles, including
Chief Operating Officer Western Australia at WesTrac.
Other current directorships:
None
Former directorships (last 3 years):
None
Interests in shares:
1,400,000
Interests in options/performance rights:
2,500,000
Mr. Giles Everist
Title:
Independent Non-executive Director
Qualifications:
BSc (Hons), CA, GAICD
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.
LogiCamms Ltd
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:
100,000
Interests in options/performance rights:
None
Ms. Eva Skira
Title:
Independent Non-executive Director
Qualifications:
BA (Hons), MBA, SF Fin (Life Member), FAICD, FAID, FGIA, FCIS
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 the IMD business school, Switzerland.
Other current directorships:
Ms. Skira is currently the Chairman of both the Water
Corporation WA and Trustees of St John of God Health Care Inc.,
and a director of RCR Tomlinson.
Former directorships (last 3 years):
None
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.
Interests in shares:
None
Interests in options/performance rights:
None
MACMAHON ANNUAL REPORT 2016DIRECTORS’ REPORT 19
Mr. Vyril Vella
Title:
Non-independent Non-executive Director
Qualifications:
BSc, BE (Hons), M.Eng.Sc, FIEAust, FAICD
Experience and expertise:
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:
None
Former directorships (last 3 years):
Mr Vella was a Non-executive Director of Devine Limited from
April 2007 until April 2014.
Special responsibilities:
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:
1,357,842
Interests in options/performance rights:
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 Secretary
Mr Gettingby holds a Bachelor of Arts and a Bachelor of Laws and
has more than 15 years’ experience in the contracting industry.
Mr Gettingby joined Macmahon in 2002 and was appointed to
the position of Group General Counsel/Company Secretary in
2011. He previously held commercial management and legal
roles with the Company.
Prior to joining Macmahon Mr Gettingby worked as a lawyer in
private practice.
CORPORATE GOVERNANCE
Macmahon’s Corporate Governance Statement can be viewed
in the Corporate Governance section of the Macmahon website
at:http://www.macmahon.com.au/corporate-governance.html
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 2016, and the number of meeting attended by each Director were:
FULL BOARD
MEETINGS
SPECIAL BOARD
MEETINGS 4
AUDIT & RISK
COMMITTEE MEETINGS
REMUNERATION &
NOMINATION COMMITTEE
MEETINGS
OTHER COMMITTEE
MEETINGS
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
10
10
9
10
10
10
10
10
10
10
11
13
12
9
12
13
13
13
13
13
2
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
1
1
1
1
1
1
1
1
1
1
J A Walker 1
C R G Everist 2
E Skira 2
V A Vella 3
S J van Dyk'
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.
1. James Walker was appointed Executive Chairman on 22 January 2015
2. Giles Everist and Eva Skira joined the Remuneration & Nomination Committee 1 May 2015
3. Vyril Vella Joined the Audit and Risk Committee 22 January 2015
4. Special meetings were held on short notice during the financial year to deal with business matters.
MACMAHON ANNUAL REPORT 2016DIRECTORS’ REPORT 20
REMUNERATION REPORT (AUDITED)
NON-AUDIT SERVICES
The audited remuneration report is set out on pages 22 to 28
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. The contract of insurance prohibits
disclosure of the nature of liability and the amount of the
premium.
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.
PROCEEDINGS ON BEHALF OF THE PARENT 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.
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 29 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.
The Directors are of the opinion that the services as disclosed
in note 29 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 consolidated entity is of a kind referred to in ASIC
Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191, 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.
SECURITIES PURCHASED ON MARKET
The following securities were purchased on market during the
financial year for the share buy back.
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 29.
NUMBER OF SHARES PURCHASED
AVERAGE PRICE PAID PER SHARE
AUDITOR
51,212,092
10.7c
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
Sy van Dyk
Chief Executive Officer
22 August 2016
Perth
MACMAHON ANNUAL REPORT 2016DIRECTORS’ REPORT
REMUNERATION REPORT
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 2016 (“FY16”). Following
the structural changes to the Company and Executive Team
last year, the Board and Management have been focusing on
reducing costs and rebuilding the order book.
With this in mind the Board has taken a conservative approach
to remuneration, choosing to support Management’s proposal
to not issue any short or long term incentives for the FY16
period. Labour costs across our operations has also been
a critical focus area, including restructuring of existing
operations, reviews of employee entitlements and the
successful implementation and re-negotiation of industrial
agreements that are designed to keep our Company competitive
in the current market.
With these initiatives underway, our efforts are now on the long
term strategy to rebuild Macmahon. To achieve this, we will
reinstate both a short-term and long-term incentive in the FY17
period. These incentives are designed to encourage positive
performance in key measures of the Company’s success
including safety, innovation, business growth, and profitability.
FY 16 REMUNERATION OUTCOMES
With cost reduction as the focus for FY16, the key remuneration
outcomes in FY16 were:
1. The Chairman of the Board, who had held the role of
Executive Chairman from 22 January 2015 with no
additional remuneration, ceased these duties as of 13 July
2015 with the appointment of the new CEO.
2. The Board welcomed the appointment of Mr Sybrandt
van Dyk as the CEO and Managing Director as of 13 July
2015. The salary package negotiated with Mr van Dyk was
significantly less than that applicable to the former CEO.
3. The remuneration for the Executive KMP was significantly
reduced in FY16 in comparison to FY15, with reduced fixed
remuneration contracts for both the new CEO and CFO
roles and a much smaller Executive KMP group as a result
of the organisational changes made in March 2015.
4. While it was proposed in the last Annual Report, the
Company did not issue either a short-term incentive (“STI”)
or Long Term Incentive (“LTI”) plan for the FY16 period.
5. The only performance rights to vest under the Company’s
previous LTI plans were time based performance rights
issued in 2012. This resulted in 404,997 performance
rights vesting for twenty two senior personnel. No member
of the current Executive KMP were participants.
6. A nine day fortnight was applied to the Executive KMP
with a consequential 10% reduction in their total fixed
remuneration. This will remain in place until business
conditions improve.
21
REMUNERATION STRATEGY
The Board’s remuneration strategy for FY17 is to use the
STI to focus on key short-term objectives including safety,
project optimisation, order book and profitability and use the
LTI to focus on absolute shareholder returns. This strategy
has resulted in a slight change in the STI plan structure, which
is designed to provide clear links to the Company’s strategic
objectives and a strengthening of hurdles to ensure reward is
only for above budget performance.
The LTI Plan has also been simplified to create a direct link
for both participants and shareholders between Executive
remuneration and shareholder returns over the longer term. This
has been achieved by making the Company’s total returns to
shareholders over a three year period the only performance hurdle
for vesting of the LTI. This is seen as a far more effective strategy
to reward the Executive Team in the current economic climate,
and appropriate for a company that sits outside the ASX300.
The Board believes the Company’s revised remuneration
framework will ensure that the Executive Team and key senior
personnel are incentivised to grow the business and achieve
positive capital returns for shareholders over the short and
medium term.
RESPONSE TO VOTE AGAINST 2015 REMUNERATION
REPORT
At the 2015 Annual General Meeting, Macmahon received votes
against the Remuneration Report representing greater than
25% of the votes cast by persons entitled to vote. In accordance
with the Corporations Act 2001, this resulted in Macmahon
receiving a “First Strike” against its 2015 Remuneration
Report. In these circumstances, the Act requires Macmahon
to include in this year’s Remuneration Report, an explanation
of the Board’s proposed action in response to that First Strike
or, alternatively, if the Board does not propose any action, the
Board’s reason for such inaction.
Macmahon’s response to the First Strike was to arrange for the
Chairman and Senior Management to meet with investors (who
collectively hold approximately 50% of the Company’s share
register) to discuss and to understand the main reasons why
Macmahon received the vote against the 2015 Remuneration
Report. In summary, no common theme emerged from
these discussions.
Subsequent to the 2015 Annual General Meeting, the Macmahon
Board and the Macmahon Remuneration Committee engaged
Ernst & Young to advise on the remuneration structure of its
Executive remuneration. Macmahon Management also engaged
with key investors to discuss the remuneration strategy.
Macmahon has not made any material amendments to its
overall remuneration structure, with the only change being to
the performance hurdle used in the LTI Plan. The Macmahon
Board remains confident that the Macmahon remuneration
policy and the level and structure of its Executive remuneration
are suitable for the company and its shareholders. We therefore
seek your support for this Report at the Company’s Annual
General Meeting in November 2016.
Vyril Vella
Chairman of the Remuneration & Nomination Committee
Note: References to years relate to financial years (eg. ‘2016’ means the year ended 30
June 2016).
MACMAHON ANNUAL REPORT 2016 22
REMUNERATION REPORT - AUDITED
1. REMUNERATION OVERVIEW
This Remuneration Report forms part of the Directors’
Report for 2016 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.
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. The KMP are listed below.
REMUNERATION REPORT CONTENTS
SECTION
SUBJECT
PAGE
1.0 Remuneration
1.1 Key Management Personnel
Overview
1.2 Remuneration Strategy
1.3 Remuneration Governance
1.4 Group Performance Affecting
FY16 Outcomes
2.0 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 Plan
2.5 Long Term Incentive Plan
3.0 Executive
3.1 Managing Director and CEO
Remuneration
Remuneration
3.2 Executive Remuneration
3.3 Executive KMP Contracts
4.0 Non-Executive
Director’s Fees
22
23
23
24
24
24
25
25
25
26
26
26
28
PERSON
POSITION
Non-Executive Directors
J A Walker
Non-Executive Chairman
PERIOD IN POSITION
DURING THE YEAR
Returned to the role of
Non-Executive Chairman
13 July 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
Executive Director
J A Walker
Executive Chairman
S J van Dyk
Managing Director and
Chief Executive Officer
Executives
S J van Dyk
Chief Financial Officer
J E Martins
Chief Financial Officer
Appointed to the role of
Executive Chairman on
23 January 2015 until
13 July 2015
Appointed as CEO and
Managing Director on
13 July 2015
Appointed as Chief
Financial Officer up until
13 July 2015
Appointed Chief Financial
Officer 7 December 2015
MACMAHON ANNUAL REPORT 2016REMUNERATION REPORT - AUDITED 23
1.2 Remuneration Strategy
1.3 Remuneration Governance
The Company’s overall remuneration objective is to compensate
employees in a way that is cost effective and appropriate for
current industry conditions, but also sufficient to attract and
retain the calibre of personnel needed to effectively execute the
Company’s strategy.
Business Strategy
Our overarching objective is to secure and deliver work safely,
profitably and consistently in order to deliver sustainable
returns to 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 Board’s remuneration strategy is based on three pillars:
∆ Attracting and retaining quality personnel through market
competitive fixed remuneration principles;
∆ Reward key senior personnel for delivering on the Company’s
key short-term objectives as a means of setting the
foundations for a stronger company; and
∆ Rewarding the Executive for delivering longer term absolute
shareholder returns.
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
∆ Performance
assessed over 3
years
∆ Value will only
be realised to
the extent that
Total Shareholder
Return targets
are achieved or
exceeded
∆ Grants of
performance
rights are
based on the
participants’
ability to influence
returns to
Shareholders
∆ Payment
gateway is 100%
of approved
budgeted net
profit
∆ Payment
based on
achievement of
Key Performance
Indicators
(KPI) linked to
business strategy
and project
objectives,
including:
- Safety
- Business
Growth
- Financial
- Innovation
∆ Two year deferral
of 25% of the STI
for Executives
with a clawback
provision
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 2016 financial year, the Remuneration Committee
engaged Ernst & Young to specifically review and make
recommendations on the elements of the Company’s LTI plan
and the performance conditions. EY was paid $12,618 for the
review and recommendations relating to the LTI plan.
EY also provided analysis and advice to management on LTI
options during the FY16 period. This advice did not include
remuneration recommendations as defined by Division 1 of
Part 1.2 of Chapter 1 of the Corporations Act 2011. EY was paid
$3,090 for this analysis and advice.
The protocols for EY providing the remuneration
recommendations prohibited EY from providing advice
or recommendations to members of the KMP before the
recommendations were given to the Remuneration Committee.
EY had permission to provide advice to KMP after subsequent
approval from the Remuneration Committee Chairman. These
arrangements were implemented to ensure that EY would be
able to carry out its work, including information capture and
formation of its recommendations, free from undue influence by
members of the Executive about whom they relate.
The Board is satisfied that the remuneration recommendations
were made by EY free from undue influence by members of
the Executive about whom they relate. The Board undertook
its own inquiries and review of the processes followed by EY
during the course of the engagement and is satisfied that its
remunerations recommendations were made free from undue
influence.
MACMAHON ANNUAL REPORT 2016REMUNERATION REPORT - AUDITED 24
REMUNERATION REPORT - AUDITED
1.4 Group Performance Affecting FY16 Outcomes
As required under the Corporations Act 2001, the five year performance of the Company has been set out in the table below. These
form the key Company performance measures that have been included in incentive plans for relevant Executives. Whilst there was
no STI or LTI issued for FY16, the Committee believes these KPIs are aligned to shareholder wealth and returns to investors, and will
continue to be used as guides for KMP performance.
Reported net profit/(loss) attributable to
equity holders of the parent ($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) (%)
FY16
1.7
0.8
0.14
1,507
624
2.59
-
8.8
33.3
FY15
(217.9)
(67.5)
(17.34)
1,150
68
5.44
-
6.6
(34.0)
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
2. EXECUTIVE REMUNERATION FRAMEWORK AND OUTCOMES
For the 2016 financial year, Macmahon continued the remuneration framework and structure that was established in FY13. However,
the STI and LTI were suspended for 2016.
2.1 Target remuneration mix
There has been no change to the remuneration mix proposed for the Managing Director and CEO as set out in the 2015 Annual Report.
Having being appointed in the FY16 period on significantly lower TFR, a strong focus on rewarding long term outcomes continues to be
the approach proposed by the Board. The remuneration mix for the Executive KMP 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 KMP’s remuneration packages. Each component is linked to the
remuneration mix and, in the case of the STI and LTI, is dependent of 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)
MACMAHON ANNUAL REPORT 2016 25
REMUNERATION REPORT - AUDITED
2.3 Total Fixed Remuneration (TFR)
2.4.3 Deferral
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 the KMP and Senior Management to ensure that the
remuneration is appropriate and competitive with its market
and industry peers. Benchmarking was completed during FY16
using industry surveys and reports.
Both the CEO and CFO roles were recruited in FY16 on
significantly lower TFR than the roles previously provided. This
was considered appropriate given the market conditions and the
size of the organisation.
The KMP’s TFR is outlined in the remuneration table on page 28
of this report.
2.4 Short-Term Incentive (STI) Plan
There was no STI plan issued for FY16 as part of the Company’s
focus on minimising costs. For FY17 the Company will issue a
STI to all Executive KMP and Senior Management. As outlined
in the remuneration strategy, this is designed to reward
performance against key performance indicators (KPIs) that are
considered to drive positive business outcomes.
The KPIs to be applied to the KMP for FY17 include:
∆ Net Profit After Tax (NPAT);
∆ Return on Equity (ROE);
∆ Value of Order Book; and
∆ Personal KPIs
Very specific financial and safety hurdles have been set to
ensure that the STI focusses on rewarding above budget
performance. The personal KPIs are set by the Board for the CEO
and by the CEO for the Executive.
The key features of the STI Plan for FY17 are outlined below.
2.4.1 Eligibility
Eligibility is extended to KMP and Senior Management
employees who have a significant influence on the business
performance of the Company.
2.4.2 Structure
The Committee approved a number of changes to ensure the
proposed FY17 STI focused the reward for performance on
exceeding budget and minimum safety expectations. Based on
the remuneration mix, the following payout levels against the
Executive KMP's TFR will be included in the FY17 STI Plan for the
Executive KMP:
% OF TFR EARNED
ON THRESHOLD
ACHIEVEMENT (100%
OF BUDGET)
% OF TFR EARNED
ONTARGET
ACHIEVEMENT
(112.5% OF BUDGET)
% OF TFR EARNED
ON STRETCH
ACHIEVEMENT (125%
OF BUDGET)
CEO
CFO
25%
25%
50%
50%
75%
75%
The FY17 STI Plan provides for deferral of 25% of the KMP and
participating Executive’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.
2.4.4 STI Gateway and Conditions
The FY17 plan has a requirement that 100% of the Company’s
budgeted NPAT is achieved before any STI payment can be made
and is still subject to absolute Board discretion. The Board may
exercise discretion to award an STI where the gateway has not
been met. This is restricted to individuals at project level and
only where there has been exceptional project performance.
If a fatality occurs, no STI will be paid, unless the Board, in its
sole discretion, determine there are extenuating circumstances
which warrant a payment.
STI is forfeited if an Executive resigns or is terminated before
the payment date. In exceptional circumstances this may be
reviewed by the Board.
2.5 Long Term Incentive Plan for Executives
There was no LTI Plan issued for FY16 given the Board wished
to carefully consider the appropriate performance measure for
Macmahon’s current circumstances.
The FY17 LTI Plan seeks to drive the right results for
shareholders over the longer term. Specifically, the Board
believes the LTI needs to focus on absolute shareholder
returns, in line with shareholders expectations of a company of
Macmahon’s size and the current industry challenges.
The FY17 Plan will offer performance rights with the opportunity
to receive fully paid ordinary shares in the Company for no
consideration. The number of performance rights granted will
be determined by the Executive remuneration mix and is at the
discretion of the Board. Performance rights will only vest if the
minimum hurdles have been met as listed in section 2.5.3.
2.5.1 Eligibility
The FY17 LTI Plan is restricted to a small group of senior
Executives as determined by the Board, including the CEO.
2.5.2 Structure
For the FY17 Plan, the performance rights will be tested against
an absolute Total Shareholder Return (TSR) performance
hurdle. The Board believes that having an absolute TSR measure
provides a simpler measure of company performance, is more
appropriate during a period of significant market volatility,
and aligns the participants’ incentives to absolute returns to
shareholders.
The performance conditions are measured over a three year
period. There is no time-based component of the Plan.
MACMAHON ANNUAL REPORT 2016 26
2.5.3 Performance Hurdles
3.0 EXECUTIVE REMUNERATION
The FY17 LTI Plan is based on the Company’s absolute TSR
performance. All of the performance rights will be eligible to
vest, subject to achieving the target increase in Macmahon’s
Total Shareholder Return (“TSR”) over the Performance Period,
as a compound annual growth rate (CAGR).
MACMAHON’S ABSOLUTE TSR
PERFORMANCE
Less than 17% CAGR in TSR.
17% CAGR in TSR
PROPORTION OF TSR SHARE
PERFORMANCE RIGHTS THAT ARE
ELIGIBLE TO VEST
0%
50%
Between 17% and 25% CAGR
in TSR
50% plus a straight line increase
in % award until Target TSR is
achieved.
At 25% CAGR in TSR
100%
2.5.4 Vesting schedule
The Plan provides for 100% of performance rights to vest
after three years if the Target performance hurdle is 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.
2.5.7 Dilution limits
Macmahon seeks to limit dilution of existing Shareholders. At 30
June 2016 the Company had 17,505,741, performance rights
on issue, which was less than 1.5% 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.
3.1 Summary
3.1.1 Managing Director and CEO Remuneration
In FY16, Mr Sybrant van Dyk’s remuneration package comprised
the following components:
1. Nominal Total Fixed Remuneration (TFR) of $650,000
per annum, inclusive of superannuation. As part of his
participation in the nine day fortnight initiative this was
reduced to $585,000 for FY16.
2. There was no STI or LTI plan issued to Mr van Dyk for FY16.
3. Under the terms of the 2014 LTI Plan to which Mr van
Dyk was invited, there were no rights due to vest in 2016.
They are still held until 2017 when they will be subject to
assessment against the performance hurdles.
3.1.2 CFO Remuneration
In FY16, Mr José Martins’ remuneration package comprised the
following components:
1. Nominal Total Fixed Remuneration (TFR) of $458,000
per annum, inclusive of superannuation. As part of his
participation in the nine day fortnight initiative this was
reduced to $412,200 per annum for FY16.
2. There was no STI or LTI plan issued to Mr Martins for FY16.
3.2 Executive Remuneration
3.2.1 Executive Salary Adjustments
The company continued to apply a 10% salary reduction to the
KMP and a number of the Executive as part of the introduction
of a nine day fortnight across the senior salaried workforce
within the Corporate support functions. The nine day fortnight
was introduced in June 2015 as an interim cost saving measure.
There were no pay increases during the year for the current KMP.
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 no performance rights to
Executives or Senior Management.
During the period relevant performance hurdles were tested for
previous LTI plans. The only performance rights to vest under
the Company’s previous LTI plans were time based performance
rights issued under in 2012. This resulted in 404,997
performance rights vesting for twenty two senior personnel. No
member of the current Executive KMP were participants. For all
performance based plans no hurdles were met and therefore no
associated performance rights vested.
As at 30 June 2016, Macmahon had 17,505,741 performance
rights outstanding from all grants under past LTI plans.
MACMAHON ANNUAL REPORT 2016REMUNERATION REPORT - AUDITED 3.2.4 Options and Rights
3.2.4.1 Rights over equity instruments granted as compensation
There were no rights granted during the financial year 2016
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 FY16
NUMBER
FORFEITED
IN FY16
HELD AT
30 JUNE 2016
27
FINANCIAL YEAR IN
WHICH THE GRANT
VESTS, SUBJECT
TO MEETING
PERFORMANCE
HURDLES
FY17
S J van Dyk
7-Aug-14
2,500,000
-
-
2,500,000
2,500,000
All performance rights held at 30 June 2016 have not vested and are neither exercisable or unexercisable.
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:
Directors
J A Walker
G Everist
E D R Skira
V A Vella
Executives
S J van Dyk
Total
3.3 Executive KMP contracts
3.3.1 Employment contract
BALANCE AT THE
START OF THE YEAR
PURCHASES
SOLD
BALANCE AT END OF
THE YEAR*
300,000
500,000
-
1,357,842
1,400,000
3,557,842
-
-
-
-
-
-
-
400,000
-
-
-
300,000
100,000
-
1,357,842
1,400,000
400,000
3,157,842
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
Regular performance reviews are undertaken with each member of the Executive, 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 and CFO are set out below.
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.
J E Martins
Appointed to KMP 7 December 2015 as CFO.
Chief Financial Officer
The contract is ongoing and has no fixed term.
The CEO contract can be terminated by either party with
6 months’ notice or payment in lieu.
The CFO contract can be terminated by either party with
3 months’ notice or payment in lieu.
All contracts contain retrenchment / severance benefits in accordance with applicable legislation.
MACMAHON ANNUAL REPORT 2016REMUNERATION REPORT - AUDITED
28
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.
Board fees are lower for 2016 than in 2015.
There are no additional fees paid to Chairpersons of Board subcommittees.
FEE APPLICABLE IN 2016
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. There has been no
increase in the fee pool amount since its approval lay shareholders at the 2008 Annual General Meeting. Actual Directors’ fees for the
reporting period were $471,015. No retirement benefits other than superannuation were paid to Non-Executive Directors.
Please refer to Page 72 for KMP Remuneration
KMP Remuneration
Post employment
Share-
based
payment
Non-
monetary
benefits
$
Total
short-
term
$
Leave
Payout
Payments
$
Other
long-term
benefits
$
Super
annuation
$
Termination
payments
$
Options
and rights
$
Performance
related
%
Non-
performance
related
%
Compensation
consisting of
options and
rights
%
Total
compensation
$
Short-term
Committee
fees
$
-
-
Salary
$
162,740
178,153
-
162,740
-
178,153
89,100
8,505
-
97,605
97,350
9,293
-
106,643
80,632
8,505
-
89,137
88,904
15,884
-
104,788
80,632
8,505
-
89,137
88,904
13,000
-
101,904
413,104
25,515
-
438,619
453,311
38,177
-
491,488
-
-
-
-
15,460
16,924
8,468
9,955
8,468
9,681
32,396
36,560
4,668
561,438
51,971
30,417
5,878
520,107
26,481
29,931
1,770
204,633
18,783
18,290
-
-
-
-
-
-
-
-
556,770
514,229
202,863
-
627,083
759,633
-
-
-
-
-
-
-
-
2015
1,141,312
4,661
631,744
498,850 (554,004)
14,583
549,999
(539,934)
6,438
766,071
-
70,754
48,707
-
76,042
10,539 1,151,851
498,850
(527,523)
44,514
549,999
(463,892)
2016
1,172,737
25,515
6,438 1,204,690
-
70,754
81,103
-
76,042
2015
1,594,623
38,177
10,539 1,643,340
498,850
(527,523)
81,075
549,999
(463,892)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
76,042
76,042
-
-
-
-
-
-
-
-
-
-
-
-
11
12
-
-
(90)
8
(37)
5
(26)
100
100
100
100
100
100
100
100
100
100
89
88
100
190
92
137
95
126
-
-
-
-
-
-
-
-
-
-
178,200
195,078
97,605
106,643
97,605
114,743
97,605
111,585
471,015
528,049
11
12
719,868
652,562
-
241,706
-
-
(90)
601,238
8
961,574
(37)
1,253,800
5
1,432,589
(26)
1,781,849
Year
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
Directors Non-executive
J A Walker 1
(Chairman)
C R G Everist
E D R Skira
V A Vella
Total compensation for Non-
executive directors
Executives
S J van Dyk 2
Chief Executive Officer
J E Martins 3
Chief Financial Officer
R A Carroll 4
Chief Executive Officer
Total compensation executive
personnel
Total compensation: Directors
and Executives"
Total compensation:
Directors and Executives including
all previous KMP5
2015
3,058,625
38,177
29,217 3,126,020 1,187,793 (1,263,475)
206,160
1,220,998
(473,729)
(12)
112
(12)
4,003,767
1 J A Walker returned to Chairman role on 14 July 2015, was Executive Chairman from 22 January 2015 - 13 July 2015 with no increase in remuneration
2 S J Van Dyk was CFO throughout 2015 until appointed as CEO on 13 July 2015
3 J E Martins commenced as CFO on 07 December 2015
4 R A Carroll ceased employment on 22 January 2015
5 Significant reduction in KMP occurred in March 2015
MACMAHON ANNUAL REPORT 2016REMUNERATION REPORT - AUDITED
AUDITOR'S INDEPENDENCE DECLARATION
29
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 2016 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
Denise McComish
Partner
Perth
22 August 2016
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 2016 30
FINANCIAL
REPORT
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
31
32
33
34
35
84
85
87
89
91
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 22 August 2016.
Where an accounting policy, critical accounting estimate,
assumption or judgement, is specific to a note these are
described within the note to which they relate.
MACMAHON ANNUAL REPORT 2016 MACMAHON ANNUAL REPORT 2016
3131
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2016
Revenue from continuing operations
Other income
Expenses
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expense
Equipment and office expenses under operating leases
Other expenses
Net finance costs
Share of profit of equity-accounted investees, net of tax
Impairment of property, plant and equipment and goodwill
Writedown of inventory
Onerous lease provisions raised
Profit/(Loss) before income tax expense from continuing operations
Income tax expense
Profit/(Loss) after income tax expense from continuing operations
Profit after income tax expense from discontinued operations
Profit/(Loss) after income tax expense for the year
Other comprehensive loss
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
Total comprehensive loss for the year
Total comprehensive loss for the year is attributable to:
Continuing operations
Discontinued operations
Earnings per share for profit/(loss) from continuing operations attributable to the
owners of Macmahon Holdings Limited
Basic earnings/(loss) per share
Diluted earnings/(loss) 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 profit/(loss) profit attributable to the owners of Macmahon
Holdings Limited
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
16
$’000
347,400
10,925
(152,178)
(129,036)
(7,883)
(33,134)
(16,762)
(13,988)
(2,363)
609
CONSOLIDATED
15
$’000
660,194
40,230
(217,617)
(288,559)
(24,211)
(59,620)
(23,967)
(49,155)
(23,726)
146
3,590
13,715
-
-
(2,058)
1,532
(434)
1,098
628
1,726
-
(9,272)
-
(251)
(9,523)
(7,797)
(8,425)
628
(7,797)
CENTS
0.09
0.09
0.05
0.05
0.14
0.14
(201,998)
(27,328)
(4,493)
(220,104)
(463)
(220,567)
2,647
(217,920)
(3,888)
4,330
(1,047)
8,206
7,601
(210,319)
(212,966)
2,647
(210,319)
CENTS
(17.55)
(17.55)
0.21
0.21
(17.34)
(17.34)
NOTE
2
3
3
3
3
3
3
25
3
3
3
4
20
5
5
5
5
5
5
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
MACMAHON ANNUAL REPORT 2016
32
STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
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
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
Employee benefits
Total non current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
NOTE
6
7
9
15a
4b
13
25
13
14
4c
8
18
15b
4b
10a
11
18
10b
19
20
16
$’000
CONSOLIDATED
15
$’000
56,699
59,578
37,264
-
12,750
166,291
9,210
175,501
6,294
117,653
-
617
124,564
300,065
61,352
204
-
193
11,589
17,135
90,473
1,834
92,307
-
383
383
92,690
207,375
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
385,957
(12,933)
(165,649)
391,390
(1,468)
(168,112)
207,375
221,810
The above statement of financial position should be read in conjunction with the accompanying notes
MACMAHON ANNUAL REPORT 2016 STATEMENT OF CHANGES IN EQUITY
33
For the year ended 30 June 2016
CONSOLIDATED
Balance at 1 July 2015
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:
Derecognition of deferred tax asset (note 4)
Share-based payments (note 28)
Share buy-back (note 19)
ISSUED CAPITAL
$’000
RESERVES
$’000
391,390
-
-
-
-
-
(5,433)
(1,468)
-
(9,523)
(9,523)
(1,942)
-
-
(ACCUMULATED
LOSSES) /RETAINED
PROFITS
$’000
TOTAL EQUITY
$’000
(168,112)
221,810
1,726
-
1,726
-
737
-
1,726
(9,523)
(7,797)
(1,942)
737
(5,433)
Balance at 30 June 2016
385,957
(12,933)
(165,649)
207,375
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 (loss) / income for the year
Transactions with owners in their capacity as owners:
Share-based payments (note 28)
ISSUED CAPITAL
$’000
RESERVES
$’000
RETAINED PROFITS
$’000
TOTAL EQUITY
$’000
391,390
(9,069)
49,846
432,167
-
-
-
-
-
7,601
7,601
(217,920)
-
(217,920)
(217,920)
7,601
(210,319)
-
(38)
(38)
Balance at 30 June 2015
391,390
(1,468)
(168,112)
221,810
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 2016 34
STATEMENT OF CASH FLOWS
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers
Net receipts from joint venture entities
Interest received
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
Investment in joint venture
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
Settlement of derivatives
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
12
13
Cash and cash equivalents at the end of the financial year
6
The above statement of cash flows should be read in conjunction with the accompanying notes
16
$’000
CONSOLIDATED
15
$’000
394,331
(381,630)
175
1,263
(2,231)
(2,842)
9,066
(23,532)
17,568
-
(5,622)
(11,586)
(5,433)
(159,000)
(3,402)
(9,204)
(177,039)
(179,559)
236,892
(634)
56,699
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
MACMAHON ANNUAL REPORT 2016 CONTENTS OF THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PART A: Results
Note 1. Segment information
Note 2. Other income
Note 3. Expenses
Note 4. Tax
Note 5. Earnings per share
PART B: Working Capital
Note 6. Cash and cash equivalents
Note 7. Trade and other receivables
Note 8. Trade and other payables
Note 9. Inventories
Note 10. Employee benefits
Note 11. Provisions
PART C: Cash Flow Information
Note 12. Reconciliation of profit /(loss) after income
tax to net cash from operating activities
PART D: Fixed Assets
Note 13. Property, plant and equipment
Note 14. Intangibles
PART E: Risk
Note 15. Derivative financial instruments
Note 16. Fair value measurement
Note 17. Financial instruments
PART F: Debt and Equity
Note 18. Borrowings
Note 19. Equity - issued capital
Note 20. Equity - reserves
PART G: Unrecognised items
Note 21. Contingent liabilities
Note 22. Commitments
Note 23. Events after the reporting period
PART H: Other information/Group Structure
Note 24. Interests in subsidiaries
Note 25. Interests in joint ventures
Note 26. Related party transactions
Note 27. Key management personnel disclosures
Note 28. Share-based payments
Note 29. Remuneration of auditors
Note 30. Deed of cross guarantee
Note 31. Parent entity information
Note 32. Other significant accounting policies
35
36
38
39
41
44
45
45
47
47
48
49
50
51
54
55
56
58
63
64
66
67
68
69
69
70
72
72
73
77
77
80
81
MACMAHON ANNUAL REPORT 2016
36
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. SEGMENT INFORMATION
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 Chief
Executive Officer 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 economic 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
environments which these services are provided in.
The following describes the operations of each reportable segment.
Mining
Provides a complete set of mining services for surface and underground operations - from mine development to materials delivery,
including the full range of engineering services which include 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.
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 - 2016
Revenue
External revenues
Total revenue
Earnings before interest, tax, depreciation and amortisation (and other
significant items)
Interest income
Finance costs
Depreciation and amortisation
Onerous lease provision
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
MINING
$’000
UNALLOCATED
$’000
TOTAL
$’000
347,400
347,400
44,707
116
(7,291)
(31,254)
-
6,278
1,588
1,588
(4,721)
1,147
3,663
(1,880)
(2,058)
(3,849)
231,733
68,332
81,240
11,450
23,345
187
348,988
348,988
39,986
1,263
(3,628)
(33,134)
(2,058)
2,429
(703)
1,726
300,065
300,065
92,690
92,690
23,532
MACMAHON ANNUAL REPORT 2016 37
MINING
$’000
UNALLOCATED
$’000
TOTAL
$’000
660,194
660,194
100,254
251
(9,596)
(56,932)
(199,691)
(27,328)
(193,041)
5,328
5,328
589
1,860
(16,241)
(2,688)
(2,307)
(4,493)
(23,281)
273,296
251,013
123,133
179,366
17,465
2,203
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
302,499
302,499
19,668
NOTE 1. SEGMENT INFORMATION CONTINUED
Operating segment information continued
CONSOLIDATED - 2015
Revenue
External revenues
Total revenue
Earnings before interest, tax, depreciation and amortisation (and other
significant items)
Interest income
Finance costs
Depreciation and amortisation
Impairment of property, plant and equipment and goodwill
Writedown of inventory and onerous lease provision
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
Geographical information
Australia
Other
SALES TO EXTERNAL CUSTOMERS
GEOGRAPHICAL NON-CURRENT ASSETS
CONSOLIDATED
CONSOLIDATED
16
$’000
300,841
48,147
348,988
15
$’000
569,412
96,110
665,522
16
$’000
111,449
9,374
120,823
15
$’000
121,749
19,988
141,737
The Mining segment operates in two principal geographical areas - Australia and Overseas (2015: three areas, including Mongolia
which was significant in 2014). 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 48% (2015: 33%) of the consolidated entities revenue is attributable to sale transactions with its largest customer.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 38
NOTE 1. SEGMENT INFORMATION CONTINUED
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 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.
NOTE 2. OTHER INCOME
Net gain on disposal of property, plant and equipment
Net foreign exchange gain
Gain on settlement of dispute
Other
Other income
Other income
16
$’000
6,349
2,507
-
2,069
10,925
CONSOLIDATED
15
$’000
-
11,934
16,347
11,949
40,230
Other income is recognised when it is received or when the right to receive payment is established.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS NOTE 3. EXPENSES
Profit / (Loss) 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
Software
Total depreciation and amortisation
Impairment
Plant and equipment (note 13)
Goodwill (note 14)
Writedown of inventory (note 9)
Cost of Sales
Materials and consumables used
Employee benefits expense
Subcontractor costs
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 Other Comprehensive Income
Net finance costs
39
16
$’000
CONSOLIDATED
15
$’000
67
32,043
756
247
33,113
21
33,134
-
-
-
-
152,178
129,036
7,883
289,097
(1,263)
3,626
2,363
-
-
-
2,363
-
57,853
1,062
664
59,579
41
59,620
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
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 40
NOTE 3. EXPENSES CONTINUED
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
interest on finance leases
Rental expense relating to operating leases
Onerous lease provisions raised
Equipment and office expenses under operating leases
Total rental expense
16
$’000
2,058
16,762
18,820
CONSOLIDATED
15
$’000
4,493
23,967
28,460
During the previous year, the Company relocated all of the West Perth based employees to the Hudswell Road airport facilities.
The Company has partially sublet the West Perth office to save on rental expenses. An onerous contract provision of $2.1 million
(2015: $4.5 million) has been taken up which is based on lowest cost to exit being the present value of future outgoings net of
estimated recoveries (from sub-letting).
Superannuation expense
Defined contribution superannuation expense
Defined benefit superannuation expense
Total superannuation expense
Share-based payments expense / (reversal)
Share-based payments expense
8,611
17
8,628
19,115
17
19,132
737
(38)
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS NOTE 4. TAX
a) Income tax expense
Income tax expense
Current tax
Adjustment recognised for prior periods
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense
Income tax expense/(benefit) is attributable to:
Profit / (Loss) from continuing operations
Profit / (Loss) from discontinued operations
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit/(Loss) before income tax expense from continuing operations
Profit/(Loss) before income tax expense from discontinued operations
Total Profit / (Loss) before tax
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
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
b) Current assets and liabilities - income tax
Income tax refund due - Australian operations
Income tax payable - overseas
41
CONSOLIDATED
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
14,671
1,854
16
$’000
3,115
81
(2,492)
703
434
269
703
1,532
897
2,429
729
221
(178)
(555)
(121)
(24)
-
551
-
623
81
703
12,750
193
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 42
NOTE 4. TAX CONTINUED
c) Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Inventories
Property, plant and equipment
Unbilled work
Employee benefits
Other creditors and accruals
Other items
Tax loss carry forward
Comprising of:
Deferred tax asset
Deferred tax liability
Deferred tax asset/(liability)
Amount recognised in equity during the year:
Treasury shares derecognition expense/(benefit)
Cash flow hedge
16
$’000
CONSOLIDATED
15
$’000
(1,307)
(11,155)
(7,894)
11,096
4,206
398
5,273
617
617
-
617
1,942
-
1,942
(22,540)
(7,469)
(5,932)
9,276
10,903
10,555
5,273
66
66
-
66
-
(230)
(230)
Amount recognised in profit or loss during the year
(2,492)
(1,858)
Unrecognised deferred tax asset
Australian impairment and other deductible differences (excluding inventory)
Allowances for inventory
Foreign deductible differences (excluding inventory)
Unrecognised temporary differences
Foreign tax losses
40,681
10,140
4,248
55,069
5,855
60,924
45,020
11,505
1,057
57,582
2,791
60,373
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.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS
43
NOTE 4. TAX CONTINUED
Income tax continued
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.
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.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 44
NOTE 5. EARNINGS PER SHARE
Earnings per share for profit/(loss) from continuing operations
Profit/(loss) after income tax from continuing operations attributable to the owners of Macmahon
Holdings Limited
16
$’000
CONSOLIDATED
15
$’000
1,098
(220,567)
NUMBER
NUMBER
Weighted average number of ordinary shares used in calculating basic earnings per share
1,247,929,728
1,256,553,965
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue
2,383,265
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
1,250,312,993
1,256,553,965
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Earnings per share for profit from discontinued operations
Profit after income tax from discontinued operations attributable to the owners
of Macmahon Holdings Limited
CENTS
0.09
0.09
16
$’000
CENTS
(17.55)
(17.55)
CONSOLIDATED
15
$’000
628
2,647
NUMBER
NUMBER
Weighted average number of ordinary shares used in calculating basic earnings per share
1,247,929,728
1,256,553,965
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue
2,383,265
23,996,621
Weighted average number of ordinary shares used in calculating diluted earnings per share
1,250,312,993
1,280,550,586
Basic earnings per share
Diluted earnings per share
CENTS
0.05
0.05
16
$’000
CENTS
0.21
0.21
CONSOLIDATED
15
$’000
Earnings per share for profit / (loss)
Profit / (Loss) after income tax attributable to the owners of Macmahon Holdings Limited
1,726
(217,920)
Weighted average number of ordinary shares used in calculating basic earnings per share
1,247,929,728
1,256,553,965
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue
2,383,265
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
1,250,312,993
1,256,553,965
NUMBER
NUMBER
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
CENTS
0.14
0.14
CENTS
(17.34)
(17.34)
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS
45
NOTE 5. EARNINGS PER SHARE CONTINUED
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.
NOTE 6. CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
Cash and cash equivalents
16
$’000
16
56,683
56,699
CONSOLIDATED
15
$’000
24
236,868
236,892
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.
NOTE 7. TRADE AND OTHER RECEIVABLES
Current trade and other receivables
Trade receivables
Less: allowance for doubtful debts
Other receivables and prepayments
Accrued revenue
Allowance for doubtful debts
The ageing of the doubtful receivables allowance are as follows:
Over 3 months past due
16
$’000
22,835
(1,260)
21,575
9,020
28,983
59,578
1,260
1,260
CONSOLIDATED
15
$’000
32,011
(1,512)
30,499
13,662
22,681
66,842
1,512
1,512
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS
46
NOTE 7. TRADE AND OTHER RECEIVABLES CONTINUED
Current trade and other receivables continued
Opening balance
Additional allowances (released)/recognised
Allowances recovered through sale of subsidiaries and settlement of dispute
Closing balance
Past due but not doubtful
16
$’000
1,512
(252)
-
1,260
CONSOLIDATED
15
$’000
25,557
1,411
(25,456)
1,512
Customers with balances past due but without any allowance for doubtful debts amount to $5.1 million as at 30 June 2016 ($16.9 million as at 30
June 2015).
After reviewing credit terms of customers based on recent collection practices, the consolidated entity did not consider this to be a credit risk on
the aggregate balances.
The ageing of the past due but not doubtful debts are as follows:
Past due 0-30 days
Past due 31+ days
For information on credit risk refer to note 17.
Trade and other receivables
Trade and other receivables
1,496
3,589
5,085
13,773
3,173
16,946
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 doubtful 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 doubtful. The amount of the
doubtful 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
Accrued revenue represents the unbilled amount at year end in respect of mining services provided.
Provision for doubtful receivables
The provision for doubful receivables assessment requires a degree of estimation and judgment. The level of provision is assessed by
taking into account recent sales experience, ageing of receivables, historical collection rates and specific knowledge of the individual
debtors financial position.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Other payables
47
16
$’000
24,360
33,873
3,119
61,352
CONSOLIDATED
15
$’000
19,602
64,210
5,244
89,056
Refer to note 17 for further information on financial instruments.
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.
NOTE 9. INVENTORIES
Operating inventory at cost
Less: Allowance for obsolescence
Inventory at Net Realisable Value
16
$’000
30,846
(4,090)
26,756
10,508
37,264
CONSOLIDATED
15
$’000
42,754
(7,082)
35,672
15,236
50,908
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, where
necessary. This did not result in any inventory writedowns in the current year (2015: $27.3 million).
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.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgment. The level of the provision is
assessed by taking into account recent sales experience, ageing of inventories and other factors that affect inventory obsolescence.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 48
NOTE 10. EMPLOYEE BENEFITS
a) Current liabilities - employee benefits
Annual leave
Long service leave
Other employee benefits
16
$’000
8,275
3,314
-
11,589
CONSOLIDATED
15
$’000
10,966
4,921
917
16,804
Accrued wages and salaries between the last pay date and 30 June 2016 of $1.4 million (2015: $2.0 million) are included within the
accrued expenses balance as disclosed in note 8.
b) Non-current liabilities - employee benefits
Long service leave
c) Non-current liabilities - retirement benefit obligations
Superannuation plan
16
$’000
383
383
CONSOLIDATED
15
$’000
901
901
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 2016, 1 member (2015: 4 members) remained in the defined benefit
section.
Employee benefits
Wages and salaries, annual leave and sick leave
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 49
NOTE 10. EMPLOYEE BENEFITS 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.
Long service leave provision
The liabilities 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.
NOTE 11. PROVISIONS
Project closure
Warranties
Project bonus
Client plant maintenance
Onerous Contracts
Other
Movements in provisions
Movements in each class of provision during the current financial year, are set out below:
16
$’000
8,515
459
66
1,040
3,585
3,470
CONSOLIDATED
15
$’000
15,326
192
121
265
3,926
-
17,135
19,830
PROJECT
CLOSURE
$'000
15,326
-
(2,783)
(4,028)
8,515
CONSOLIDATED - 2016
Carrying amount at the
start of the year
Additional provisions
recognised
Provisions released
during the year
Provisions utilised
during the year
Carrying amount at the
end of the year
Provisions
WARRANTIES
BONUS
MAINTENANCE
CONTRACTS
PROJECT
CLIENT PLANT
ONEROUS
$'000
$'000
$'000
$'000
OTHER
$'000
TOTAL
$'000
121
324
-
192
324
-
(57)
459
265
3,926
-
19,830
1,631
2,058
3,470
7,806
-
-
(378)
(857)
(2,398)
-
-
(2,783)
(7,719)
66
1,040
3,585
3,470
17,135
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 50
NOTE 11. PROVISIONS CONTINUED
Provisions
The consolidated entity accrues for its contracted obligation to replace major components and tyres for client owned equipment, which
it operates under its mining service contracts. The provision represents the wear and tear of components and tyres up to the balance
date. As components and tyres are replaced, these items are charged against that provision. The provision is utilised completely by the
end of the contract term.
Provision for project closure
The provision for project closure requires a degree of estimation and judgement around contractual term, expected redundancy and
demobilisation costs, and reimbursement from customers. The provision is assessed by taking into account past history of contract
closures and 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.
Other
Other provisions reflect miscellaneous contract related claim provisions and require a degree of estimation and judgement.
NOTE 12. RECONCILIATION OF PROFIT /(LOSS) AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES
Profit / (Loss) 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 disposal of property, plant and equipment and other
Share of profit - joint ventures
Share-based payments
Foreign exchange gains
Transaction costs written off
Allowance 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
Decrease / (increase) in inventories
Decrease in trade and other payables
Decrease in income tax balances
Decrease in employee benefits and provisions
Net cash from operating activities
16
$’000
1,726
33,134
-
1,397
(6,349)
(609)
737
(2,485)
-
-
-
-
-
175
703
8,091
11,116
(27,507)
(2,842)
(8,221)
9,066
CONSOLIDATED
15
$’000
(217,920)
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
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS NOTE 13. PROPERTY, PLANT AND EQUIPMENT
Buildings and freehold land - at cost
Less: Accumulated depreciation
Leasehold improvements - at cost
Less: Accumulated depreciation
Less: Impairment of Leasehold improvements
Plant and equipment - at cost
Less: Accumulated depreciation and impairment losses
Equipment under finance lease
Less: Accumulated depreciation
Reconciliations
51
16
$’000
-
-
-
7,109
(6,811)
-
298
461,593
(350,709)
110,884
24,894
(18,423)
6,471
CONSOLIDATED
15
$’000
3,476
(3,044)
432
7,449
(4,775)
(2,307)
367
508,918
(377,872)
131,046
29,704
(20,070)
9,634
117,653
141,479
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 30 June 2014
Additions
Classified as held for sale
Disposals*
Exchange differences
Impairment of assets
Depreciation expense
Balance at 30 June 2015
Additions
Disposals
Exchange differences
Reclassification to and from
assets classified as held for
sale and transfers
Depreciation expense
Balance at 30 June 2016
*Includes sale of subsidiaries' assets.
BUILDINGS &
FREEHOLD LAND
LEASEHOLD
IMPROVEMENTS
PLANT &
EQUIPMENT
EQUIPMENT UNDER
FINANCE LEASE
$'000
1,292
5
-
(216)
15
-
(664)
432
4
(20)
(169)
-
(247)
-
$'000
2,674
-
-
-
-
(2,307)
-
367
-
-
-
(2)
(67)
298
$'000
427,889
19,663
(12,131)
(73,593)
8,465
(181,394)
(57,853)
131,046
23,528
(10,856)
(774)
(17)
(32,043)
110,884
$'000
11,020
-
-
-
(324)
-
(1,062)
9,634
-
(310)
(2,097)
-
(756)
6,471
TOTAL
$'000
442,875
19,668
(12,131)
(73,809)
8,156
(183,701)
(59,579)
141,479
23,532
(11,186)
(3,040)
(19)
(33,113)
117,653
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 52
NOTE 13. PROPERTY, PLANT AND EQUIPMENT CONTINUED
Reconciliations continued
Profit on disposal of property, plant and equipment from continuing operations was $6.3 million (2015: $13.0 million loss).
There was no impairment of assets during the current financial year (2015: $183.7 million).
Property, plant and equipment secured under finance leases
Refer to note 18 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 18).
Assets classified as held for sale
Assets classified as held for sale include surplus mining plant and equipment which the company is actively marketing for sale
amounting to $8.1 million (2015: $12.1 million). Discontinued operations comprise the remaining balance of the assets classified as
held for sale amounting to $1.1 million (2015: $0.8 million).
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.
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.
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
- 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 below).
For goodwill, the recoverable amount is estimated annually or more frequently if events or changes in circumstances indicate that
goodwill might be impaired.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 53
NOTE 13. PROPERTY, PLANT AND EQUIPMENT CONTINUED
Property, plant and equipment continued
Depreciation and amortisation continued
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.
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.
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.
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.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 54
NOTE 14. INTANGIBLES
Goodwill - at cost
Impairment of goodwill
Software - at cost
Less: Accumulated amortisation
Intangibles- at cost
Less: Accumulated amortisation
Reconciliations
16
$’000
-
-
-
19,905
(19,905)
-
3,203
(3,203)
-
-
CONSOLIDATED
15
$’000
18,297
(18,297)
-
19,905
(19,905)
-
3,203
(3,182)
21
21
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 2014
Amortisation expense
Impairment of goodwill
Balance at 30 June 2015
Amortisation expense
Balance at 30 June 2016
GOODWILL
$'000
18,297
-
(18,297)
-
-
-
SOFTWARE
DEVELOPMENT
COSTS
$'000
OTHER INTANGIBLE
ASSETS
$'000
9
(9)
-
-
-
-
62
(41)
-
21
(21)
-
TOTAL
$'000
18,368
(50)
(18,297)
21
(21)
-
In the prior year, goodwill was fully impaired as the carrying amount was determined not to be recoverable.
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 2016NOTES TO THE FINANCIAL STATEMENTS 55
Impairment of non-financial assets
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.
NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS
a) Current assets - derivative financial instruments
Current derivative financial instruments
Forward foreign exchange contracts - cash flow hedges
16
$’000
-
-
CONSOLIDATED
15
$’000
359
359
There are no foreign exchange forward contracts in place at 30 June 2016 (2015: Notional Value $1.9 million). Foreign exchange
forward contracts which are designated as hedging instruments in cash flow hedges of committed forecast purchase transactions are
measured at fair value through other comprehensive income. The foreign exchange forward contract balances vary with the level of
committed forecast purchases and changes in foreign exchange forward rates.
There are no cash flow hedges of committed forecast transactions in place at 30 June 2016. Therefore no unrealised gain or loss
position (2015: unrealised gain of $0.4 million) or related deferred tax position (2015: deferred tax liability $0.1 million) related to
foreign exchange forward contracts is included in hedging reserve.
b) Current liabilities - Derivative financial instruments
Current derivative financial instruments
Interest rate swap contracts - cash flow hedges
Refer to note 17 for further information on financial instruments.
Refer to note 16 for further information on fair value measurement.
-
-
8,206
8,206
At 30 June 2016, the consolidated entity has no interest rate swap agreements in place (2015: Notional Value $155 million). The swaps
were used to hedge the consolidated entity’s exposure to changes in the fair value of its term facility (see note 18). On 31 July 2015 the
Company repaid the term facility in full and closed out the interest rate swaps.
Derivative financial instruments
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 56
NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED
Derivative financial instruments continued
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.
NOTE 16. 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 - 2016
Financial Liabilities
Interest rate swaps
Foreign exchange forward contracts
Total liabilities
CONSOLIDATED - 2015
Financial Liabilities
Interest rate swaps
Foreign exchange forward contracts
Total liabilities
LEVEL 1
$'000
LEVEL 2
$'000
LEVEL 3
$'000
TOTAL
$'000
-
-
-
-
-
-
-
-
-
(8,206)
359
(7,847)
-
-
-
-
-
-
-
-
-
(8,206)
359
(7,847)
Assets and liabilities held for trading 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 market comparison technique. 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
Lease liability
16
CARRYING AMOUNT
$'000
FAIR VALUE
$'000
CARRYING AMOUNT
$'000
15
FAIR VALUE
$'000
(204)
(204)
(3,685)
(3,645)
All other assets and liabilities carrying amount is the same as the fair value.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 57
NOTE 16. FAIR VALUE MEASUREMENT CONTINUED
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.
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.
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.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 58
NOTE 17. 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
∆ 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) and Indonesian Rupiah (IDR). 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 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 2016 there are no foreign exchange forward
contracts in place.
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.
Australian dollars
USD
NZD
MYR
NGN
IDR
AVERAGE EXCHANGE RATES
REPORTING DATE EXCHANGE RATES
16
0.7283
1.0908
3.0031
145.76
9,953
15
0.8360
1.0778
2.8746
144.14
10,383
16
0.7426
1.0489
2.9905
209.78
9,790
15
0.7680
1.1294
2.9046
150.87
10,228
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 59
NOTE 17. 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:
CONSOLIDATED
USD
IDR
16
$’000
-
2,866
2,866
ASSETS
15
$’000
359
247
606
16
$’000
-
(502)
(502)
LIABILITIES
15
$’000
-
(1,344)
(1,344)
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 2015.
CONSOLIDATED - 2016
IDR
CONSOLIDATED - 2015
USD
IDR
Price risk
AUD STRENGTHENED
% CHANGE
EFFECT ON PROFIT
BEFORE TAX
EFFECT ON EQUITY
% CHANGE
AUD WEAKENED
EFFECT ON PROFIT
BEFORE TAX
10%
10%
10%
$'000
(263)
(263)
-
110
110
$'000
-
-
(210)
-
(210)
10%
10%
10%
$'000
215
215
-
(110)
(110)
EFFECT ON EQUITY
$'000
-
-
257
-
257
The consolidated entity is not exposed to any significant price risk.
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 can be hedged up to 75% (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:
Variable financial assets
Variable financial liabilities
Net exposure to cash flow interest rate risk (before hedging)
An analysis by remaining contractual maturities is shown in 'liquidity risk' section.
Fair value sensitivity analysis for fixed rate instruments
There are no fixed rate instruments at 30 June 2016.
16
$’000
56,699
-
56,699
CONSOLIDATED
15
$’000
236,892
(159,000)
77,892
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 60
NOTE 17. FINANCIAL INSTRUMENTS CONTINUED
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 2015.
BASIS POINTS INCREASE
BASIS POINTS DECREASE
CONSOLIDATED - 2016
BASIS POINTS
CHANGE
EFFECT ON PROFIT
BEFORE TAX
Variable rate instruments
100
CONSOLIDATED - 2015
Variable rate instruments
Interest rate swap
100
100
Credit risk
$'000
567
567
779
4,857
5,636
EFFECT ON EQUITY
$'000
-
-
-
-
-
BASIS POINTS
CHANGE
EFFECT ON PROFIT
BEFORE TAX
100
100
100
$'000
(567)
567
(779)
(5,065)
(5,844)
EFFECT ON EQUITY
$'000
-
-
-
-
-
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 48% (2015: 33%) 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 72% (2015: 70%) 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 establishes an allowance for impairment that represents its estimate of expected / incurred losses in respect
of trade and other receivables. At 30 June 2016 the consolidated entities collective impairment on its trade receivables was $1.3
million (2015: $1.5 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 21.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 61
NOTE 17. FINANCIAL INSTRUMENTS CONTINUED
Credit risk continued
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.
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
16
$’000
56,699
50,558
107,257
50,292
266
50,558
CONSOLIDATED
15
$’000
236,892
53,180
290,072
53,180
-
53,180
The consolidated entity’s most significant trade receivable, a mining customer, accounts for $16.1 million of the trade receivables
carrying amount at 30 June 2016 (2015: $16.0 million).
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 18. As at 30 June 2016, the undrawn amount on the
term facility was $23.7 million (2015: $150.8 million) of which $6.3 million is represented by bank guarantees (2015: $27.3 million).
Outstanding individual lease agreements drawn under past facilities remain in place until their expiry date. In addition, the consolidated
entity has a $71.3 million (2015: $107.6 million) insurance bond facility with $59.6 million (2015: $96.3 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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 62
NOTE 17. FINANCIAL INSTRUMENTS CONTINUED
Liquidity risk continued
CONSOLIDATED - 2016
Non-derivatives
Non-interest bearing
Trade payables and accrued
expenses
Other payables
Interest-bearing - variable
Lease liability
Total non-derivatives
CONSOLIDATED - 2015
Non-derivatives
Non-interest bearing
Trade payables and accrued
expense
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
$'000
BETWEEN 1 AND 2
YEARS
BETWEEN 2 AND 5
YEARS
$'000
$'000
OVER 5 YEARS
$'000
REMAINING
CONTRACTUAL
MATURITIES
$'000
(58,233)
(3,119)
(207)
(61,559)
(83,812)
(5,244)
(3,731)
(159,000)
(251,787)
(8,206)
359
(7,847)
-
-
-
-
-
-
(284)
-
(284)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(58,233)
(3,119)
(207)
(61,559)
(83,812)
(5,244)
(4,015)
(159,000)
(252,071)
(8,206)
359
(7,847)
The cash flows in the maturity analysis above are expected to occur in line with contractual terms.
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 contract 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 (operating segments). This responsibility is supported by the development of overall
consolidated entity’s standards for the management of operational risk.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS NOTE 18. BORROWINGS
a) Current borrowings
Term facility
Lease liability
Refer to note 17 for further information on financial instruments.
b) Non-current liabilities - borrowings
Lease liability
Refer to note 17 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:
CURRENCY
INTEREST RATE
RANGE
CALENDAR YEAR
OF MATURITY
Term facility
Finance lease liabilities
AUD
NGN
5.10%
16.0%
2017
2016
63
CONSOLIDATED
15
$’000
159,000
3,405
162,405
280
280
159,000
3,685
162,685
15
$’000
159,000
3,685
162,685
16
$’000
-
204
204
-
-
-
204
204
16
$’000
-
204
204
Term facilities
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 and closed out the corresponding interest rate swaps.
In November 2015 the Company executed a $30 million multi-option financing facility (including a $0.3 million credit card facility). The
twelve month facility which matures on 17 November 2016 can be used for general corporate purposes. $6.3 million of the facility is
drawn at 30 June 2016 for bank guarantees.
Operating lease facility
As at 30 June 2016, the domestic operating lease facility was drawn by $37.3 million (2015: $41.3 million).
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 multioption financing facility.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 64
NOTE 18. BORROWINGS CONTINUED
Finance lease liabilities are payable as follows:
MINIMUM LEASE PAYMENTS
16
$’000
207
-
-
207
15
$’000
3,731
284
-
4,015
16
$’000
3
-
-
3
INTEREST
15
$’000
326
4
-
330
16
$’000
204
-
-
204
PRINCIPAL
15
$’000
3,405
280
-
3,685
Finance lease liabilities
Less than one year
Between one and 5 years
More than 5 years
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.
NOTE 19. EQUITY - ISSUED CAPITAL
Ordinary shares - fully paid
1,210,487,874
1,261,699,966
385,957
391,390
16
SHARES
15
SHARES
16
$’000
CONSOLIDATED
15
$’000
On issue at 1 July
Repurchased and cancelled
On issue 30 June
Ordinary shares
THE COMPANY
ORDINARY SHARES
15
16
1,261,699,966
1,261,699,966
(51,212,092)
-
1,210,487,874
1,261,699,966
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
have authorised 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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 65
NOTE 19. EQUITY - ISSUED CAPITAL CONTINUED
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 2016 the consolidated entity was in a net cash position (Gearing ratio: nil).
Share buy-back
On 6 October 2015, the Company announced an on-market share buy-back of up to 10% over 12 months of its fully paid ordinary
shares as part of a capital management plan. During the financial year, the Company acquired 51,212,092 shares at an average price of
10.7 cents per share for a total of $5,432,691, taking the percentage of shares acquired to 4.06%.
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.
Shares purchased on market by the consolidated entity are recognised at fair value, less transaction costs and reduce issued capital.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 66
NOTE 20. EQUITY - RESERVES
Reserve for own shares
Foreign currency reserve (net of tax)
Hedging reserve - cash flow hedges (net of tax)
Reserve for own shares
16
$’000
(6,523)
(6,410)
-
(12,933)
CONSOLIDATED
15
$’000
(4,581)
2,862
251
(1,468)
The reserve for the Company's own shares comprises the cost 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 (2015: nil). As at 30 June 2016, there are 14,716,948 (2015:
15,122,476) 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 the net investments in foreign operations. The foreign currency
translation reserve will be reclassified to the profit and loss in the future either on sale or cessation of the underlying foreign operation.
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 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
Balance at 30 June 2015
Foreign currency translation
Derecognition of deferred tax asset (note 4)
Cash flow hedges - reclassified to profit or loss
Balance at 30 June 2016
Dividends
RESERVE FOR
OWN SHARES
$'000
(4,581)
-
-
-
-
(4,581)
-
(1,942)
-
(6,523)
FOREIGN CURRENCY
$'000
(421)
4,330
(1,047)
-
-
2,862
(9,272)
-
-
(6,410)
HEDGING
$'000
(4,067)
-
-
(3,888)
8,206
251
-
-
(251)
-
TOTAL
$'000
(9,069)
4,330
(1,047)
(3,888)
8,206
(1,468)
(9,272)
(1,942)
(251)
(12,933)
There were no dividends paid, recommended or declared during the current or previous financial year (2015: nil)
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS NOTE 21. CONTINGENT LIABILITIES
The following identifiable contingencies exist at 30 June 2016:
Bank guarantees
Insurance performance bonds
67
16
$’000
6,295
11,675
17,970
CONSOLIDATED
15
$’000
7,715
11,312
19,027
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.
On 9 November 2015, Macmahon was served with a shareholder class action filed in the Federal Court of Australia by ACA Lawyers.
The action was filed on behalf of shareholders who acquired Macmahon securities between 2 May 2012 and 19 September 2012, the
quantum of the claim has not been specified and relates to disclosures by Macmahon in 2012 regarding the now completed Hope
Downs 4 contract. The company denies any wrong doing and is defending the proceeding.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 68
NOTE 22. COMMITMENTS
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Operating lease - facilities
16
$’000
3,168
3,168
9,287
17,880
27,167
CONSOLIDATED
15
$’000
6,069
6,069
18,014
23,445
41,459
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.
Operating leases - equipment
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 3 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 October 2007. Outstanding individual lease agreements drawn under the $230 million facility remain in place until their expiry.
As at 30 June 2016, the total value of outstanding operating leases under both agreements was $37.3 million (2015: $41.3 million).
Finance leases - equipment
Finance lease commitments in Note 18 include contracted amounts for various plant and equipment with a written down value of $5.3
million (2015: $9.6 million) under finance leases expiring within 1 year. 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.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 69
NOTE 23. EVENTS AFTER THE REPORTING PERIOD
Due to heightened security concerns, Macmahon is currently reviewing whether it should continue its business in Nigeria. If Macmahon
decides to withdraw from Nigeria, possible Foreign Currency Translation Reserve (FCTR) losses will be reclassified to the Profit and
Loss statement. The current FCTR loss is $6.4 million.
NOTE 24. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy:
OWNERSHIP INTEREST
NAME
Incorporated subsidiaries
Macmahon Contractors Pty Ltd
Macmahon Contractors (WA) Pty Ltd
Macmahon (Southern) Pty Ltd
Macmahon Mining Services Pty Ltd
Doorn-Djil Yoordaning Mining and Construction Pty Ltd
Macmahon Underground Pty Ltd
Macmahon Africa 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
Macmahon Contracting International Pte Ltd
Macmahon Mongolia Holdings Pte Ltd
Macmahon Mongolia 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
Macmahon Holdings Limited Employee Share Ownership Plans Trust
Macmahon Underground Unit Trust
PRINCIPAL PLACE OF
BUSINESS / COUNTRY OF
INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Indonesia
Indonesia
Nigeria
Malaysia
Malaysia
Singapore
Singapore
Mongolia
Ghana
Australia
Australia
Australia
Australia
Australia
Australia
Botswana
Australia
Australia
16
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
50.00%
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%
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%
* PT Macmahon Mining Services was 100% owned at 30 June 2015. During the 2016 financial year the Company entered into a joint venture arrangement and sold 50% of the shares to the joint
venture partner. Consequently this entity is now disclosed in note 25 as a joint venture.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 70
NOTE 25. 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:
PRINCIPAL ACTIVITIES
Mining services
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
NAME
PT Macmahon Mining Services
Macmahon / Adasa JV*
Gooring Jimbila Contracting JV*
Malana JV*
Marapikurrinya JV*
Dhurawine 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*
* Joint Ventures that were deregistered or not active during the year.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Loans to PT Macmahon Mining Services
Investment in PT Macmahon Mining Services at cost
Other investments
Share of profit of equity-accounted investees, net of tax
16
%
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%
16
$’000
2,145
3,515
25
609
6,294
OWNERSHIP INTEREST
15
%
-
50.00%
50.00%
50.00%
45.00%
50.00%
50.00%
50.00%
50.00%
33.33%
50.00%
20.00%
25.00%
50.00%
CONSOLIDATED
15
$’000
-
-
25
146
171
PT Macmahon Mining Services is a joint venture in which the Group has joint control and a 50% ownership interest. The Company is
involved in contract mining services in Indonesia and is not publicly listed.
PT Macmahon Mining Services is structured as a separate vehicle and the Group has a residual interest in the net assets of the entity.
Accordingly, the Group has classified its interest in PT Macmahon Mining Services as a joint venture. In accordance with the agreement
between the shareholders of PT Macmahon Mining Services, the Group and the other investor in the joint venture have agreed to ensure
the joint venture has sufficient funds to perform its contract to provide mining services at the Martabe project. The commitment has
not been recognised in these consolidated financial statements.
The following table summarises the financial information of the Group's joint ventures as included in their own financial statements,
adjusted for fair value adjustments and differences in accounting policies. The table also reconciles the summarised financial
information to the carrying amount of the Group's interest in joint ventures.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 71
NOTE 25. INTERESTS IN JOINT VENTURES CONTINUED
Summary financial information for equity accounted investees, unadjusted for percentage ownership held by the consolidated entity
(100%):
Summarised statement of financial position
Cash
Other
Total current assets
Total non current assets
Total assets
Current payables
Current borrowings external
Total current liabilities
Non current borrowings - external
Other non current financial liabilities (shareholder loans)
Total non current liabilities
Total liabilities
Net assets (100%)
Group's share of net assets (50%)
Group's share of other non current financial liabilities (shareholder loans)
Summarised statement of profit or loss and other comprehensive income
Revenue
Interest expense
Depreciation
Other Expenses
Profit before income tax
Tax
Net profit after tax (100%)
Share of profit of equity-accounted investees, net of tax (50%)
Dividends received by the group
16
$’000
10,649
4,612
15,261
19,452
34,713
(1,698)
(3,819)
(5,517)
(13,652)
(13,981)
(27,633)
(33,150)
1,563
782
5,512
6,294
26,613
(728)
(4,249)
(20,015)
1,621
(403)
1,218
609
-
CONSOLIDATED
15
$’000
-
825
825
-
825
(483)
-
(483)
-
-
-
(483)
342
171
-
171
2,163
-
-
(1,870)
293
-
293
146
-
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 21.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 72
NOTE 26. RELATED PARTY TRANSACTIONS
Parent entity
Macmahon Holdings Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 24.
Joint ventures
Interests in joint ventures are set out in note 25.
Key management personnel
Disclosures relating to key management personnel are set out in note 27 and the remuneration report in the Directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Recharges
Management fee charged to Joint Venture
Receivable from and payable to related parties
Receivable from Joint Venture
Loans to/from related parties
Loan to Joint Venture
Terms and conditions
16
$’000
668
1,061
1,729
2,145
CONSOLIDATED
15
$’000
-
-
-
-
All transactions were made on normal commercial terms and conditions and at market rates.
NOTE 27. 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
16
$
1,204,690
70,754
81,103
-
76,042
CONSOLIDATED
15
$
4,313,814
(1,263,476)
206,160
1,220,999
(473,730)
1,432,589
4,003,767
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 73
NOTE 28. SHARE-BASED PAYMENTS
The consolidated entity has the following equity compensation plans in place to remunerate executives and employees of the Group:
∆ Macmahon Executive Equity Plan ("EEP" or "LTI Plan")
∆ Macmahon CEO LTI Plan - expired in 2015
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 the term of each plan.
PERFORMANCE RIGHTS GRANTED
ON 17 JUNE 2011
Tranche and number of Performance
Rights
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 2012
Tranche and number of Performance
Rights
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)
TIME-BASED
CONDITION
ENDING
17/06/2013
PERFORMANCE PERIOD
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
3,268,750
2,451,562
2,451,562
2,451,562
2,451,562
-
-
-
TIME-BASED
CONDITION
ENDING
1/07/2015
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
PERFORMANCE PERIOD
3 YEARS ENDING
1/07/2015
4 YEARS ENDING
1/07/2016
TRANCHE 1
TRANCHE 2
1,597,000
1,597,000
4,791,000
-
-
-
1,597,000
4,791,000
798,500 plus 2%
for each percentile
above 50%
2,395,500 plus 2%
for each percentile
above 50%
Nil
Nil
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 74
NOTE 28. SHARE-BASED PAYMENTS CONTINUED
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 and 27% 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 and 12% EPS
CAGR
TSR Ranking 75% or higher of the TSR
of two peer groups
TSR Ranking 50%-75% or higher of
the TSR of two peer groups (50%
weighting to each peer group)
TSR Ranking below 50% or higher
of the TSR of two peer groups (50%
weighting to each peer group)
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%
Nil
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 75
NOTE 28. 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 (now Cimic
Group 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 (now Cimic Group Limited), MACA Limited, Monadelphous Group Limited and NRW Holdings Limited.
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
previous 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
16
-
-
-
-
-
-
15*
6,225,310
9,500,000
-
-
(15,725,310)
16
23,996,625
-
(404,997)
(1,745,425)
(4,340,462)
15**
27,788,071
21,100,000
-
(3,185,473)
(21,705,973)
-
17,505,741
23,996,625
*
The 2015 CEO Performance Rights were approved by Shareholders at the 2014 Annual General Meeting and accepted by Mr. Carroll on 4 December 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
Share-based payment transactions
16
$’000
737
737
CONSOLIDATED
15
$’000
(38)
(38)
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 76
NOTE 28. SHARE-BASED PAYMENTS CONTINUED
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.
∆
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.
In the previous 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 on 1 July 2014 or earlier, have accordingly been treated as a forfeiture and the costs of the performance
rights costs 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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 77
NOTE 29. 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
Regulatory audit services
Restructuring services
Other
Other services - network firms
Tax services
NOTE 30. DEED OF CROSS GUARANTEE
16
$’000
CONSOLIDATED
15
$’000
359,300
379,500
34,750
-
-
7,038
41,788
82,521
6,000
597,881
98,299
784,701
401,088
1,164,201
52,425
47,162
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 ("Extended Closed
Group") 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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 78
NOTE 30. DEED OF CROSS GUARANTEE CONTINUED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expense
Impairment and inventory writedowns
Equipment and office expenses under operating leases
Net finance costs
Other income/(expenses)
Loss before income tax expense
Income tax benefit
Loss after income tax expense
Other comprehensive income
Cash flow hedges transferred to profit or loss, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Equity - retained profits
Accumulated losses at the beginning of the financial year
Loss after income tax expense
Transfer from share based payment reserve
Accumulated losses at the end of the financial year
16
$’000
247,540
(109,580)
(97,927)
(6,663)
(25,588)
-
(18,643)
70
28,591
17,800
112
17,912
(251)
(251)
CONSOLIDATED
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
17,661
(205,707)
(307,409)
17,661
737
(101,664)
(205,707)
(38)
(289,011)
(307,409)
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS NOTE 30. 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
Deferred tax liabilities
Employee benefits
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
79
16
$’000
45,083
44,707
22,316
12,750
9,210
CONSOLIDATED
15
$’000
211,547
31,527
37,521
14,670
769
134,066
296,034
49,446
33,402
97,242
-
86
180,176
314,242
47,105
-
-
10,201
16,242
1,834
75,382
147,040
-
342
147,382
222,764
91,478
113,821
38,736
101,762
21
-
254,340
550,374
50,601
159,000
7,847
10,465
8,737
3,163
239,813
222,838
6,601
416
229,855
469,668
80,706
385,957
(5,468)
(289,011)
391,390
(3,275)
(307,409)
91,478
80,706
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 80
NOTE 31. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(Loss) after income tax
Total comprehensive profit/(loss)
Statement of financial position
Total current assets
Total assets*
Total current liabilities
Total liabilities*
Equity
Issued capital
Hedging reserve - cash flow hedges
Reserve for own shares
Accumulated losses
Total equity
PARENT
16
$’000
17,148
16,897
18,330
138,788
15
$’000
(134,110)
(129,791)
138,443
293,238
(1,175)
(165,161)
(55,021)
(218,993)
385,957
-
(6,523)
(295,667)
391,390
251
(4,581)
(312,815)
83,768
74,245
*Prior year comparative figure includes a reclassification of a receivables provision of $89,566,000 from non current liabilities to non current assets.
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 30.
Contingent liabilities
Refer note 21 for information in relation to the shareholder class action.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 81
NOTE 32. OTHER SIGNIFICANT ACCOUNTING POLICIES
AASB 16 Leases
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 accounting policies applied in these financial statements
are the same as those applied in the consolidated entity’s
annual financial statements as at and for the year ended 30
June 2015, except for new and revised or amended Accounting
Standards below.
New, revised or amended Accounting Standards and
Interpretations adopted:
∆ AASB 2015-3: Withdrawal of AASB 1031 Materiality
∆ AASB 2015-4: Financial Reporting Requirements for
Australian Groups with a foreign parent
The above have had no significant impact on the financial
statements.
Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been early
adopted.
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 2016. The consolidated
entity has not yet assessed the impact of these new or
amended Accounting Standards and Interpretations.
Standards issued but not effective
AASB 15 Revenue fron Contracts with Customers
Summary of requirements
AASB 15 establishes a comprehensive framework for
determining whether, how much, and when revenue is
recognised. It replaces existing revenue recognition guidance,
including AASB 118 Revenue, AASB 111 Construction contracts,
and INT 13 Customer Loyalty Programmes.
AASB 15 is effective for annual reporting periods beginning on or
after 1 January 2018, with early adoption permitted.
Summary of requirements
AASB 16 removes the classification of leases as either operating
leases or finance leases for the lessee-effectively treating all
leases as finance leases. This replaces the current accounting
guidance in AASB 17 Leases and when applied, would result in
an increase in assets and liabilities for lease arrangements and
potential increase in depreciation and amortisation expenses
and a reduction in other operating expenses.
AASB 16 is effective for annual reporting periods beginning on or
after 1 January 2019 with early adoption permitted.
AASB 9 Financial Instruments
AASB 9 Financial Instruments - published in July 2014,
replaces the existing guidance in IAS 39 Financial Instruments:
Recognition and Measurement. AASB 9 includes revised
guidance on the classification and measurement of financial
instruments, including a new expected credit loss model
for calculating impairment on financial assets, and the new
general hedge accounting requirements. It also carries forward
the guidance on recognition and derecognition of financial
instruments from IAS 39. AASB 9 is effective for annual
reporting periods beginning on or after 1 January 2018, with
early adoption permitted. The Group is assessing the potential
impact on its consolidated financial statements resulting from
the application of AASB 9.
Basis of preparation
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 included in the respective notes to the
financial statements.
Parent entity information
Possible impact on consolidated financial statements
The Group is assessing the potential impact on its consolidated
financial statements resulting from the application of IFRS 15.
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 31.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 82
NOTE 32. OTHER SIGNIFICANT ACCOUNTING POLICIES
CONTIUNED
Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Macmahon Holdings Limited
('parent entity') as at 30 June 2016 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
Foreign operations
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 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.
When a foreign operation is disposed of the cumulative amount
in the translation reserve related to the foreign operation is
reclassified to profit and loss as part of gain or loss on disposal.
The consolidated entity's interests in equity accounted
investees comprise interests in associates and joint ventures.
Revenue recognition
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.
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.
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.
Revenue (including maintenance services) is recognised when
the services are provided and is based on surveys of work
performed where applicable. Revenues are based on volumes
of work performed on a monthly basis and in certain contracts
are performed throughout the first life of the underlying mine or
continuously throughtout the duration of the contract.
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.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 83
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 consolidated entity is of a kind referred to in ASIC
Corporations (Rounding in Financial / Directors' Reports)
Instrument 2016/191, 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.
NOTE 32. OTHER SIGNIFICANT ACCOUNTING POLICIES
CONTIUNED
Current and non-current classification continued
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.
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.
MACMAHON ANNUAL REPORT 2016NOTES TO THE FINANCIAL STATEMENTS 84
DIRECTORS' DECLARATION
In the Directors' opinion:
∆
∆
∆
∆
the attached financial statements and notes, and the remuneration report in section 21 to 28 in the Directors' report, are in
accordance 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 32 and throughout 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
2016 and of its performance for the financial year ended on that date and comply with Australian Accounting Standards and the
Corporations Regulations 2001;
there are reasonable grounds to believe that the Company 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 (pursuant to
ASIC Class Order 98/1418) described in note 30 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
Sy van Dyk
Chief Executive Officer
22 August 2016
Perth
MACMAHON ANNUAL REPORT 2016
INDEPENDENT AUDIT REPORT
85
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 2016,
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 32 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 32, 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 2016 86
INDEPENDENT AUDIT REPORT
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 2016 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 32.
Report on the remuneration report
We have audited the Remuneration Report included in pages 22- 28 of the directors’ report for
the year ended 30 June 2016. 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 2016, complies with Section 300A of the Corporations Act 2001.
KPMG
Denise McComish
Partner
Perth
22 August 2016
MACMAHON ANNUAL REPORT 2016 SUMMARY OF CONSOLIDATED RESULTS
87
Profit and Loss ($m)
Operating revenue - incl. construction
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)
Underlying EBITDA
Net interest paid
Income tax (paid) / refund
Working capital, provisions and other non cash items
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
1 Significant and non-recurring items in:
- 2016 relates to onerous lease provisions;
16
349.0
13.3
-
362.3
40.0
(33.1)
6.9
(2.1)
4.8
(2.4)
2.4
(0.7)
1.7
-
1.7
1.4
3.1
117.7
300.1
207.4
207.4
(56.5)
40.0
(1.0)
(2.8)
(27.1)
9.1
(188.4)
(0.6)
236.9
56.7
15
14
13
12
665.5
1,021.9
1,606.1
1,661.5
1.1
-
25.9
(3.5)
209.5
(60.5)
246.3
(37.0)
666.6
1,044.3
1,755.1
1,870.8
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
236.9
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
- 2015 relates to property, plant and equipment impairment, inventory write downs and onerous lease provisions; and
- 2013 includes the Construction Business represented as a discontinued operation.
MACMAHON ANNUAL REPORT 2016 88
SUMMARY OF CONSOLIDATED RESULTS
People and Safety
Number of employees
LTIFR
TRIFR
Order Book
Work in hand ($m)1
New contracts and extension ($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 ($)
Cash Flow Ratios
16
15
1,529
1,295
1.1
4.5
1,507
624
(45.6)
0.5
0.9
2.0
0.14
0.25
0.14
(27.2)
1.4
2.0
0.8
1.5
0.4
0.8
0.17
0.9
5.4
1,150
68
(35.0)
(32.7)
1.5
(8.1)
(17.34)
0.79
(17.34)
(33.5)
(34.4)
(28.7)
(66.6)
3.0
(32.3)
1.5
0.18
Operating cash flow per share (cents)
0.8
4.3
14
2,467
0.9
8.5
2,573
387
(40.5)
2.9
2.9
3.4
2.40
2.30
2.40
12.9
9.4
9.4
7.3
7.3
3.4
3.4
0.3
6.2
13
3,495
0.9
7.7
3,230
1,846
(6.2)
(1.7)
2.5
(1.8)
(3.00)
4.40
3.00
15.4
(5.4)
11.9
(7.8)
11.5
(3.0)
4.5
0.3
8.6
Shareholders
Shares on issue (m) @ 30 June
Share price @ 30 June (cents)
Dividend declared (cents)
Percentage franked (%)
Market capitalisation ($m)
Enterprise value (EV)
Price/NTA (x)
1,210.5
1,261.7
1,261.7
1,261.7
8.8
-
n/a
106.5
50.0
0.5
6.6
-
n/a
83.3
9.1
0.4
10.0
-
n/a
126.2
182.1
0.3
13.0
-
n/a
164.0
225.7
0.4
1 The order book for 2016 includes a proportional share of joint venture order books. Construction included in historical numbers.
2 Adjusted for significant and non-recurring items:
- 2016 relates to onerous lease provisions;
- 2015 relates to property, plant and equipment impairment, inventory write downs and onerous lease provisions; and
- 2013 includes the Construction Business represented as a discontinued operation.
12
4,791
1.4
7.7
3,139
2,997
49.1
3.0
3.0
6.2
7.70
7.70
7.50
23.1
16.5
16.5
16.5
16.5
6.7
6.7
0.4
11.7
738.6
57.5
4.0
100.0
424.7
507.3
1.3
MACMAHON ANNUAL REPORT 2016 ASX ADDITIONAL INFORMATION
89
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 19 August 2016.
a) The twenty largest Shareholders held 60.47% of the ordinary shares.
b) There were 8,550 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
724
2,265
1,316
3,382
863
8,550
The number of Shareholders holding less than a marketable parcel of ordinary shares is 3,226.
Twenty largest Shareholders as at 19 August 2016
NAME
Cimic Group Investments Pty Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
3rd Wave Investors Ltd
Bnp Paribas Noms Pty Ltd
Hsbc Custody Nominees
Mr Manishkumar Rasiklal Patel
Bond Street Custodians Limited
Cpu Share Plans Pty Limited
Abn Amro Clearing Sydney Nominees Pty Ltd
Mr Allan Douglas Christie + Mrs Patricia Marjorie Christie
Mr Robert Lee Petersen
Rbc Investor Services Australia Nominees Pty Limited
Bpm Commodities Limited
Ms Malaky Kazem
Alkat Pty Ltd
Chemco Superannuation Fund Pty Ltd
National Nominees Limited
Choice Investments Dubbo Pty Ltd
NUMBER OF ORDINARY
SHARES HELD
246,631,927
PERCENTAGE OF
CAPITAL HELD
20.37
92,918,457
86,207,263
76,876,280
63,425,000
26,309,139
17,888,585
16,686,072
16,011,164
14,697,183
9,067,149
8,628,690
8,007,089
7,796,676
7,500,000
7,217,253
7,000,000
6,666,667
6,663,000
5,819,200
7.68
7.12
6.35
5.24
2.17
1.48
1.38
1.32
1.21
0.75
0.71
0.66
0.64
0.62
0.60
0.58
0.55
0.55
0.48
732,016,794
60.47
MACMAHON ANNUAL REPORT 2016
90
ASX ADDITIONAL INFORMATION
SUBSTANTIAL SHAREHOLDERS
FEEDBACK
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
30 November 2016
Release of half year results
February 2017
Release of full year results
August 2017
As at 19 August 2015, 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
3rd Wave Investors Limited
Schroder Investment
Management Australia Limited
VOTING RIGHTS
246,631,927
92,024,493
63,425,000
62,545,555
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.
OFFICER
Company secretary
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 2016 GLOSSARY
91
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 / Average 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 / Average assets at year end
MACMAHON ANNUAL REPORT 2016 92
This page has been intentionally left blank
MACMAHON ANNUAL REPORT 2016 93
This page has been intentionally left blank
MACMAHON ANNUAL REPORT 2016 94
This page has been intentionally left blank
MACMAHON ANNUAL REPORT 2016 macmahon.com.au
MACMAHON ANNUAL REPORT 2016