A N N U A L
R E P O R T
CONTENTS
04
ABOUT MACMAHON
06
MACMAHON CAPABILITIES
08
CHAIRMAN’S & CHIEF EXECUTIVE
OFFICER’S LETTER
10
OPERATIONAL & FINANCIAL REVIEW
36
DIRECTORS’ REPORT
126
DIRECTOR’S DECLARATION
45
AUDITOR’S INDEPENDENCE
DECLARATION
128
INDEPENDENT AUDITOR’S REPORT
46
134
REMUNERATION REPORT
SUMMARY OF CONSOLIDATED RESULTS
60
136
FINANCIAL STATEMENTS
ASX ADDITIONAL INFORMATION
ABOUT
MACMAHON
MACMAHON IS AN ASX LISTED COMPANY
THAT HAS BEEN OFFERING MINING AND
CONSTRUCTION SERVICES TO CLIENTS
FOR MORE THAN 50 YEARS.
We seek to develop strong relationships with our
clients in which both parties can work together in
an open, flexible and transparent way.
Our approach to doing business, together with our
capabilities in surface and underground mining, civil
design and construction, and mine site maintenance
and rehabilitation services, has established Macmahon
as a trusted partner on resources projects throughout
Australia and Southeast Asia.
4 | MACMAHON ANNUAL REPORT 2018
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MAP LEGEND
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MACMAHON ANNUAL REPORT 2018 | 5
MACMAHON
CAPABILITIES
6 | MACMAHON ANNUAL REPORT 2018
SURFACE MINING
Our surface mining division operates in Australia and
REHABILITATION
TMM Group offers a range of mine rehabilitation
overseas, offering a full suite of services including:
and closure services including:
• Mine planning and analysis
• Mine management
•
•
•
•
Drill and blast
Bulk and selective mining
Crushing and screening
Fixed plant maintenance
• Water management
•
Equipment operation and maintenance
•
•
•
Design
Bulk earthworks
Revegetation
• Monitoring
• Maintenance
EQUIPMENT MAINTENANCE & MANAGEMENT
Macmahon offers a complete equipment maintenance
and management support service for a wide range of
UNDERGROUND MINING
Macmahon has a well-established and highly
modern mining equipment. Our facilities in Perth,
Adelaide and the Bowen Basin provide Macmahon
experienced underground division which specialises
with the ability to:
•
•
•
Service and maintain equipment, rebuild components
and complete repairs in-house and on demand
Rapidly and efficiently deploy supplies to
customer locations
Train and employ a range of experienced
tradespeople for rapid deployment to remote sites
in high quality underground mining and engineering
services. These services include:
• Mine development
• Mine production
•
•
•
•
•
•
Raise drilling
Cablebolting
Shotcreting
Remote shaft lining
Production drilling
Shaft sinking
MINING INFRASTRUCTURE
Macmahon, via its wholly-owned subsidiary TMM Group,
offers a wide range of civil design and construction
services to mine owners including:
•
•
•
•
Topsoil and overburden stripping
Bulk earthworks
Road design and construction
Train loading facilities
• Water infrastructure - dams, creek diversions,
flood levies, and drainage structures.
MACMAHON ANNUAL REPORT 2018 | 7
CHAIRMAN’S & CHIEF
EXECUTIVE OFFICER’S LETTER
Dear Shareholders,
PEOPLE
During the year, our employee base increased to
We are delighted to report that Macmahon performed
3,913 employees and 1,137 contractors working under
strongly during the 2018 Financial Year, generating
Macmahon’s supervision or management, with these
revenue of $710.3 million and earnings before interest
figures set to increase further during the 2019
and tax (EBIT) from continuing operations of $41.2 million.
Financial Year.
Total reported EBIT for the year was $43.2 million.
This increased need for people, together with the higher
This performance is a significant turnaround on recent
demand for mining personnel in many of our markets,
years and positions Macmahon to continue delivering on
has required Macmahon to reinvigorate its recruitment,
its substantial order book of existing contracts, and to
training and retention efforts. We are very proud of the
capture new opportunities in a resurgent mining sector
initiatives that have now been implemented or expanded
in Australia and Southeast Asia.
in these areas including our apprentice and graduate
programs, an industry leading mental and physical health
Key achievements during the year included:
initiative, and a new trainee program to provide entry
level equipment operator jobs for new entrants to the
•
the completion in August 2017 of our transformational
mining industry. We are also working to place ex
AMNT Transaction, and the subsequent ramp up of
Australian Defence Force personnel in operator
operations at the Batu Hijau mine in Indonesia;
roles across our operations.
•
the commencement of new open cut mining
operations at the Byerwen Coal Mine in
Among our senior team, we were disappointed to
Queensland and the Mount Morgans Gold Mine
announce the resignation of José Martins as Chief
in Western Australia;
Financial Officer in October 2017. During his time with us,
•
the commencement of an underground development
José played a key role in responding to many of the issues
project at the Endeavor lead zinc mine in New South
then facing the business. However, we were also fortunate
Wales, and an exploration decline at the Tujuh Bukit
that Giles Everist, who at the time was one of our non-
copper gold deposit in Indonesia;
executive directors, was willing to step down from the
•
the acquisition of TMM Group, which provides a
board and take on the CFO role. Mr Everist’s experience
range of civil construction, maintence, consulting
and knowledge of Macmahon made him the ideal
and rehabilitation services to mine sites in
candidate for the role, and he is now helping to steer
Queensland; and
the future growth of Macmahon in that capacity.
•
an order book of approximately $5 billion.
Consistent with this performance, Macmahon’s balance
a key risk for our business as the industry continues to
sheet remains robust, with net assets at 30 June 2018 of
recover, so we expect to continue our efforts in this area
$409.8 million and net cash of $3.4 million.
in the 2019 Financial Year.
The attraction and retention of personnel is emerging as
It is very satisfying to see Macmahon return to such
a healthy position, and we would like to thank all
employees for their work over a long period to help
achieve these results.
8 | MACMAHON ANNUAL REPORT 2018
CAPITAL MANAGEMENT
Despite the company’s return to profitability, there are
OUTLOOK
For the 2019 Financial Year, we expect to see continued
many opportunities to make further investments in the
growth in our revenue and earnings, and we will provide
continued growth of the business. These opportunities
detailed guidance to the market on these metrics in our
include using earnings to fund the equipment and
investor presentations throughout the year.
working capital needed for the expansion of our existing
projects, the start-up of new projects, investments in
Our optimism is supported by both the general
new technology and software systems, and potentially
improvement in the mining industry and the company’s
acquisitions of other companies. Given these opportunities,
significant order book of existing contracts. These contracts
the Board has decided not to pay a dividend for the
put Macmahon in the fortunate position of having a
year ending 30 June 2018. However, the Board remains
relatively high base load of work over the medium term,
absolutely committed to delivering shareholder value
which should allow the business to maintain a disciplined
and continues to assess all capital management options
approach to tendering, and provide a platform from
against this objective.
which to invest in people, new technologies,
and continual improvement.
GOVERNANCE AND THE BOARD
During the year, the Board appointed Mr Kim Horne
as an independent non-executive director to fill the
SHAREHOLDERS, CLIENTS & SUPPLIERS
On behalf of the Board and senior management we
vacancy created by Mr Everist’s move to an executive role.
would like to thank our shareholders, clients and
suppliers for their ongoing support. Returning
Mr Horne has had extensive executive experience with
Macmahon to profitability has been a long journey
Alcoa, where he was involved in mine development and
involving contributions from many people, but we
management, human resources, corporate affairs, strategy
acknowledge that success will always depend greatly
and government relations. Mr Horne’s appointment will
upon continued backing from our investors and other
help ensure the Board retains an appropriate mix of
business partners.
skills and experience to fulfil its very important
governance function.
With the opportunities now ahead of us it is a very
exciting time to be a part of Macmahon and we look
We believe that good corporate governance is critical to
forward to rewarding the support that has been
the long term sustainability of any organisation. With this
extended to us by our shareholders and others as
in mind we have continued to monitor our governance
we continue to build on our turnaround.
and reporting practices to ensure they remain appropriate.
Our corporate governance statement for the year can be
found on our website, and we encourage all shareholders
to read it.
JIM WALKER
Chairman
MICHAEL FINNEGAN
Chief Executive Officer
MACMAHON ANNUAL REPORT 2018 | 9
OPERATIONAL
& FINANCIAL
REVIEW
Macmahon provides mining and infrastructure services
to miners throughout Australia and in Southeast Asia.
Headquartered in Perth, Western Australia, the company
derives revenue from activities including surface and
underground mining, civil design and construction
(primarily on mine sites), equipment repair and
maintenance, consulting, design and fabrication
of mining infrastructure, and mine site maintenance
and rehabilitation services.
10 | MACMAHON ANNUAL REPORT 2018
MACMAHON ANNUAL REPORT 2018 | 11
OPERATIONAL
REVIEW
12 | MACMAHON ANNUAL REPORT 2018
SURFACE MINING
Macmahon’s surface mining division offers a broad range
hauling and technical services at the Mt Morgans Mine
which is located 37km west southwest of Laverton in
of services including mine planning, drill and blast, bulk
Western Australia.
and selective mining, crushing and screening, water
•
Argyle Diamond Mine – Through its Indigenous
management, as well as equipment operation
employment subsidiary, Doorn-Djil Yoordaning,
and maintenance.
Project activity
Macmahon is currently operating at the Argyle
Diamond Mine in Western Australia, where it provides
tailings dam earthworks, hauling of coarse tailings to
During the year, Macmahon provided services to the
TSF, and associated services.
following projects:
•
St Ives Gold Mine – In May 2018, Macmahon
•
Tropicana Gold Mine – Macmahon is currently fulfilling
completed its contract at the St Ives project in
a life of mine contract at the Tropicana project
Western Australia, where it was supplying equipment
in Western Australia for Anglo Gold Ashanti and
and labour to Goldfields.
Independence Group. In December 2017, the project
•
Batu Hijau – Since August 2017, Macmahon has been
owners approved phase 1 of the Long Island program
performing its life of mine contract to provide all
of works, which will likely extend the life of the mine
mining services at the Batu Hijau mine in Indonesia
for several years.
for PT Amman Mineral Nusa Tenggara (“AMNT”). Batu
•
Telfer Gold Mine – Macmahon is also fulfilling a life
Hijau is a well-established, world class copper gold
of mine contract at the Telfer project in Western
deposit, and one of the largest mines of its kind in the
Australia for Newcrest. As previously disclosed, this
world. In April 2018, Macmahon commenced Phase 2
has been a very challenging project that has resulted
of the Batu Hijau contract.
in Macmahon incurring significant losses. The project
• Martabe Gold Mine – Macmahon is part of a 50:50
is now producing small monthly operating profits
joint venture which is contracted by PT Agincourt
however risks and difficulties remain.
Resources to provide mining services at the
•
Byerwen Coal Mine – In November 2017, Macmahon
Martabe Gold Mine, in the North Sumatra
executed a contract for the establishment and
province of Indonesia.
operation of the new Byerwen Coal Mine near Glenden
•
Kanthan and Lhoknga Quarries – Macmahon is
in Queensland’s Bowen Basin. The three-year contract
currently undertaking a range of mining activities for
is worth approximately $350 million in revenue to
Lafarge Holcim in Malaysia and Indonesia. Macmahon
Macmahon and includes the provision of all open cut
has been operating at these sites for several years and
mining and bulk earthworks.
has been successful in securing a number of contract
• Mt Morgans Gold Mine – In December 2017,
extensions over this time.
Macmahon was awarded a five-year mining services
contract by a subsidiary of Dacian Gold Limited. The
contract includes the provision of open pit mining
services including drilling and blasting, loading,
MACMAHON ANNUAL REPORT 2018 | 13
OPERATIONAL REVIEW CONTINUED
UNDERGROUND MINING
Macmahon’s underground mining division offers
Macmahon is also continuing to perform its contract
with Energy Resources of Australia to provide care and
underground development and production services, the
maintenance services at the Ranger Mine in the Northern
full suite of ground support services (rock bolting, cable
Territory, and is assisting several clients with short to
bolting and shotcreting), as well as services to facilitate
medium term equipment hire.
ventilation and access to underground mines including
shaft sinking, raise drilling and shaft lining.
During the year, Macmahon continued to pursue
Project activity
opportunities to grow its underground mine
development work. This effort resulted in two new
During the year, Macmahon provided a range of ground
contracts during the period. In January 2018, Macmahon’s
support and production drilling services to several
joint venture entity in Indonesia with NKE commenced
mines including:
work to develop an exploration decline at the Tujuh Bukit
• Mount Wright Gold Mine – Macmahon provides
copper gold project in east Java, and in March 2018,
production drilling services at the Mount Wright Gold
Macmahon commenced a decline extension project
Mine in Queensland for Carpentaria Gold. Macmahon
for CBH Resources at the Endeavor Mine near Cobar in
has now been working at this project for several years.
New South Wales.
•
Ballarat Gold Mine – Macmahon provides production
drilling and cable bolting at this mine in Victoria
Macmahon continues to provide raise drilling
for Castlemaine Gold Fields. Macmahon expects its
services at the Leinster Mine in Western Australia
current works at this project will extend until
as a subcontractor to Thiess and at the Olympic
April 2019.
Dam Mine in South Australia for BHP. Macmahon
•
Cadia-Ridgeway Mine – Macmahon has been
has been active at Olympic Dam for more than
providing cable bolting services at this mine for
10 years, and is contracted to continue with
Newcrest. Macmahon’s work at this mine is likely to
underground raise drilling work at this site
conclude early in the 2019 Financial Year.
until June 2023. In addition, a number of raise
•
Nifty Mine – Macmahon provides production drilling,
drilling contracts were completed including
•
•
cable bolting and shotcreting to Metals X at this mine
at the Cockeyed Bob Mine for Silverlake
in Western Australia.
Resources and the Halls Creek Mine for
Pajingo Mine – Macmahon provided box hole drilling
Pantoro Limited.
to Minjar Gold at this mine in Queensland.
Granny Smith Gold Mine – Macmahon provided
cable bolting services to Goldfields at this mine
near Laverton in Western Australia.
14 | MACMAHON ANNUAL REPORT 2018
MACMAHON ANNUAL REPORT 2018 | 15
OPERATIONAL REVIEW CONTINUED
16 | MACMAHON ANNUAL REPORT 2018
CIVIL CONSTRUCTION, MINING
INFRASTRUCTURE & REHABILITATION
In February 2018, Macmahon purchased TMM Group,
EQUIPMENT MAINTENANCE & MANAGEMENT
Macmahon owns and operates world-class equipment
maintenance facilities, giving it a unique ability to support
a Brisbane based business which provides consulting,
frontline contracting services with plant maintenance
design, civil construction, equipment hire, maintenance
services. Macmahon’s primary workshop, located in Perth,
and site rehabilitation services to coal mines in
Western Australia, is a key operational asset with the
Queensland. This acquisition provided Macmahon with
ability to rebuild components and complete maintenance
additional capabilities that are being offered to existing
activities in-house.
clients, and which should assist in the identification of
new core mining opportunities.
This facility also provides Macmahon with the ability to
Project activity
rapidly and efficiently deploy supplies to key customer
locations, conduct essential maintenance work and
Current TMM projects include:
allow for fleet and personnel flexibility depending on
•
Peak Downs – TMM has been operating at BMA’s Peak
customer demand.
Downs mine in the Bowen Basin for many years. In
2018 TMM was contracted to perform rehabilitation
Key Plant and Equipment
and haul road construction works. The crews
Macmahon’s Surface Mining fleet currently includes a
performing this work are expected to be utilised to
broad range of excavators, dump trucks, front end loaders,
perform future projects on site including dam
dozers, and drill rigs. Additional fleet is also utilised by way
wall raises.
of client provision or short-term hire. Macmahon’s fleet
•
Saraji – TMM is hiring several items of equipment to
is sourced from a range of providers including Caterpillar
the Saraji mine, also operated by BMA, including D11
(approximately 90% of all fleet), Hitachi, Liebherr and
dozers, 24M graders, scrapers, excavators and water
Atlas Copco.
carts. This contract is expected to run until 2020.
TMM provides a workshop and fitters on site to
Macmahon’s Underground Mining fleet is comprised of
service the equipment.
trucks, loaders, and drills. This equipment is predominantly
•
Rolleston – TMM commenced work at Glencore’s
sourced from Sandvik, Atlas Copco, and Caterpillar.
Rolleston mine in March 2018. The scope of works
Additional fleet is also utilised by way of client provision
includes a creek diversion, and the construction of
or short-term hire.
a new flood levee and water storage facility.
•
Poitrel Levee – TMM’s scope of work at the Poitrel
Coal Mine, operated by BHP Mitsui Coal, includes
the construction of a flood protection levee for a
pit expansion. This will eventually involve multiple
scrapers and associated compaction equipment.
MACMAHON ANNUAL REPORT 2018 | 17
OPERATIONAL REVIEW CONTINUED
SAFETY PERFORMANCE
With multiple project start-ups during the year, Macmahon
at return to work and safety tool box meetings,
committed significant resources to protecting the health
and a complementary physical health program;
and safety of its workforce. Despite these efforts, injury
•
improvement plans have been developed as part
frequency rates increased compared to the prior year.
of the FY19 HSEQT Strategic Plan, which if executed
For the 2018 Financial Year, Macmahon’s Total Recordable
industry average;
Injury Frequency Rate (TRIFR) was 6.17, and the Lost Time
•
successful transition to the 2015 Quality standard
Injury Frequency Rate (LTIFR) was 0.46.
with no major non-conformances raised during the
as intended, will see the TRIFR drop below
A total of four Lost Time Injuries (LTI) were recorded in the
year, with none of these being permanent or disabling
injuries. Overall, there was a reduction in the severity of
incidents recorded, and most importantly, there were no
fatalities across the company’s operations.
•
•
•
transition and recertification assessments;
internal audits conducted in line with the FY18
audit schedule;
internal HSEQ systems audits were completed
across all domestic and international operations;
quality audits were completed across business
functions including Procurement, Human Resources,
Examples of good safety outcomes during the
Tendering, Payroll, Training, Workers Compensation
year included:
and Injury Management; and
•
•
•
•
the Martabe, Tujuh Bukit and Mt Morgans projects
•
improvements in environmental performance,
remained LTI free since commencement;
including:
the Kanthan project passed the point of more than
• extended tyre life leading to a reduction in
5,000 days LTI free;
the number of tyres for disposal through the
85% of the company’s projects were LTI free; and
introduction of a dedicated tyre manager and
67% of the company’s projects were Recordable
tyre program;
Injury Free.
•
reduction in the incidence fuel spillage from
plant refuelling activities through dedicated
Key safety initiatives and achievements for the period
servicing vehicles;
included:
• a drill consumables bit resharpening program to
•
the implementation of a mental health program,
maximise the life of consumable products; and
Strong Minds Strong Mines across the company’s
•
topsoil stockpiling programs on green fields
Australian operations. The program includes a series
projects such as Mt Morgans to ensure successful
of mental health videos that are presented
rehabilitation and restoration can be achieved
on project completion.
18 | MACMAHON ANNUAL REPORT 2018
MACMAHON ANNUAL REPORT 2018 | 19
OPERATIONAL REVIEW CONTINUED
PEOPLE
At 30 June 2018, Macmahon’s employee base consisted of
•
the development and rollout of a trainee program to
3,913 employees (includes full-time equivalent contractors)
provide entry level equipment operator jobs for new
with a further 1,137 contractors working under Macmahon’s
entrants to the mining industry. This program has now
supervision or management. These numbers are a
placed more than 50 people in our projects, including
significant increase from 30 June 2017, and reflect the
Indigenous candidates and Defence Force veterans;
new work won in Australia and Indonesia, as well as the
•
the roll out of a short-term incentive plan for all
acquisition of TMM Group.
Australian based staff employees, and a long-term
incentive plan for key leaders within the business;
With Macmahon’s increased need for people and a
•
initiatives to raise Macmahon’s profile as an employer
tightening labour market in the mining industry,
in the Indonesian mining sector, including cross
employee recruitment and retention remains a
cultural exchange programs and offering several of our
significant challenge for the business.
Indonesian employees opportunities to visit Australia
to undertake training and development;
During the year Macmahon’s activities to attract, recruit
•
the continuation of the Macmahon Traineeship
and retain people included:
Program, which offers site-based employees the
•
the introduction of the Macmahon Talent Community,
opportunity to gain the nationally recognised RII30113
an online system for people to register their interest
Certificate III in Surface Extraction Operations; and
in potential employment with Macmahon. More than
•
the expansion of the Macmahon Apprenticeship
17,000 people are now registered with this system;
Program to include an entry level intake of
•
a recruitment campaign in Australia, the Philippines,
apprentices into a four-year program, and a
Indonesia and New Zealand under the branding
mid-year intake of apprentices into an
“We’re Growing, Grow with Us”. This campaign
accelerated two-year program.
utilises digital advertising and online media
to maximise reach;
20 | MACMAHON ANNUAL REPORT 2018
EMPLOYEES BY BUSINESS UNIT
GROUP EMPLOYEE NUMBERS
MACMAHON ANNUAL REPORT 2018 | 21
FINANCIAL
REVIEW
FINANCIAL PERFORMANCE
From continuing operations before significant items
Revenue
EBITDA
EBIT
1H16
156.7
29.4
16.6
2H16
155.5
13.1
-2.8
2016
312.2
42.5
13.8
1H17
168.3
10.4
-4.5
EBIT Margin
10.6%
-1.89%
4.4%
-2.7%
2H17
191.3
21.4
2.8
1.5%
2017
359.6
31.8
-1.7
1H18
270.0
46.1
9.9
-0.5%
3.7%
2H18
440.3
72.8
31.3
7.1%
2018
710.3
118.9
41.2
5.8%
REVENUE $M
UNDERLYING EBIT $M
s
n
o
i
l
l
i
M
s
n
o
i
l
l
i
M
800
700
600
500
400
300
200
100
0
312.2
156.7
155.5
168.3
191.3
440.3
359.6
270.0
1H16
2H16
FY16
1H17
2H17
FY17
1H18
2H18
FY18
Year
UNDERLYING EBITDA $M
118.9
72.8
120
100
80
60
40
20
0
42.5
46.1
29.4
13.1
10.4
31.8
21.4
s
n
o
i
l
l
i
M
s
n
o
i
l
l
i
M
710.3
50
40
30
41.2
31.3
9.9
2.8
20
16.6
13.8
10
0
-10
-2.8
-4.5
-1.7
1H16
2H16
FY16
1H17
2H17
FY17
1H18
2H18
FY18
Year
EBIT MARGIN
10.6%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
7.1%
5.8%
4.4%
3.7%
1.5%
-1.9%
-2.7%
-0.5%
1H16
2H16
FY16
1H17
2H17
FY17
1H18
2H18
FY18
1H16
2H16
FY16
1H17
2H17
FY17
1H18
2H18
FY18
Year
Year
22 | MACMAHON ANNUAL REPORT 2018
PROFIT AND LOSS
Total revenue for the group increased by 97.5% from the
Financing
The company had cash of $109.6 million at year end
prior period to $710.3 million. This growth was driven
against total debt of $106.2 million. This resulted in a net
by the award and commencement of five new projects
cash position of $3.4 million. The increase in debt to
including Batu Hijau, Byerwen, Mount Morgans,
$106.2 million is attributable solely to increased finance
Endeavor and Tujuh Bukit.
leases relating to plant and equipment secured by the
Group for the new projects which commenced as
Earnings before interest, tax, depreciation and
noted above.
amortisation (EBITDA) from continuing operations
increased from $31.8 million to $118.9 million (EBITDA
In addition Macmahon has a general purpose corporate
margin of 16.7%), while earnings before interest and tax
debt facility of $25 million with the Commonwealth
(EBIT) from continuing operations increased to $41.2
Bank of Australia which expires in October 2018. This
million (EBIT margin of 5.8%). This result was a significant
facility is currently drawn for bank guarantees for
improvement on the FY17 EBIT loss.
$7.5 million.
Similarly, net profit after tax (NPAT) from continuing
Commonweath Bank of Australia has provided Macmahon
operations increased to $31.3 million, which was a
with a credit approved term sheet to extend this facility for
significant improvement on the FY17 net loss.
a further term of two years with an increased facility limit
of $50M. The documentation of this extension is currently
The increase in earnings was a result of the income from
being finalised.
new projects as noted above, and improved performance
at the Telfer project.
Working Capital
Depreciation
Current trade and other receivables were $152.3 million
at 30 June 2018 ($53.4 million in 2017) while current
Depreciation of property, plant and equipment from
trade and other payables were $174.3 million at 30 June
continuing operations increased from $33.5 million to
2018 ($74.0 million in 2017). Inventory increased from
$77.7 million primarily as a result of the acquisition of
$32.1 million in 2017 to $42.0 million. Working capital has
Batu Hijau equipment which is being fully depreciated
increased during the financial year primarily due to the
over 5 years. The vast majority of remaining equipment
commencement of new projects named above.
is depreciated on cumulative hours worked.
Finance Costs
CASH FLOW
Net operating cash flow (excluding interest and
The increased use of finance leases to fund growth capital
tax) increased to $101.9 million (FY17: $30.3 million),
expenditure resulted in increased finance costs.
representing a conversion rate from EBITDA of 85.7%.
Tax
Operating cash flow improved significantly commensurate
with our earnings growth, but cash flow conversion was
The Group reported a tax expense of $7.5 million for
impacted due to build-up in working capital for the new
continuing operations. The effective tax rate for continuing
contracts won.
operations is 19.4% due to the recognition of previously
unrecognised deferred tax assets. Excluding these items
the effective tax rate would have been 28.2%.
CAPITAL EXPENDITURE
Capital expenditure for the year totalled $312.3 million,
comprising $182.5 million for equipment acquired as
BALANCE SHEET
Macmahon’s net assets increased to $409.8 million at 30
part of the AMNT transaction which was paid for in scrip.
Excluding this, capital expenditure was $129.8m, of which
June 2018 (2017: $185.0 million), resulting in net tangible
$85.7m was equipment finance leased and $44.1m was
assets increasing from 15 cents per share to 19 cents per
funded in cash.
share. The increase was largely due to the addition of
US$146 million of plant and equipment at Batu Hijau
following the AMNT Transaction.
DIVIDEND & CAPITAL MANAGEMENT
The Board has determined that a dividend will not
be declared for the year ended 30 June 2018.
MACMAHON ANNUAL REPORT 2018 | 23
STRATEGY
Macmahon’s vision is to become the leading multi-disciplinary mining
services contractor in Australia and Southeast Asia. The company’s goals
are to successfully capitalise on its broad expertise, world class facilities,
diverse geographic base, demonstrated relationship approach and
robust balance sheet.
In particular, Macmahon is focused on the following strategic priorities:
24 | MACMAHON ANNUAL REPORT 2018
01
SAFETY
Improving safety performance
across all operations remains a
core priority.
03
TECHNOLOGY
Macmahon is increasing its
investment in innovation and
technology to differentiate its
services and ensure they are
delivered in the most efficient
and productive manner.
05
NEW WORK
Macmahon remains focused
on securing new work across a
diverse spread of commodities,
clients and geographies.
02
EXECUTION &
RELATIONSHIPS
Macmahon is focused on ensuring
all its current projects perform on
or above expectations. Macmahon is
also committed to fostering strong
relationships with its customers,
including leveraging off its strategic
relationship with AMNT.
04
PEOPLE & CULTURE
Macmahon aims to instil a
proactive, positive culture where
people are empowered to make
decisions, are accountable for
their actions and rewarded
appropriately if successful.
06
DIVERSIFICATION
Macmahon is committed to
growing its core mining business
(in particular its underground
development business),
however it is also exploring
M&A opportunities to grow
and expand its offering.
MACMAHON ANNUAL REPORT 2018 | 25
RISK
MANAGEMENT
Macmahon defines risk management as the identification, assessment and management of risks that have the potential
to materially impact on its operations, people, reputation, and financial results.
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 impact on Macmahon. While Macmahon attempts to mitigate and manage risks where it is
efficient and practicable to do so, there is no guarantee these efforts will be successful.
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 considered and monitored by both existing
shareholders and potential shareholders in the company.
PERFORMANCE OF THE BATU HIJAU PROJECT
The future financial performance of Macmahon,
•
GUIDANCE
• Macmahon provides forecasts and predictions about
including during FY19, is heavily dependent on
its future performance (“Guidance”) on the basis of
outcomes at the Batu Hijau project.
several assumptions which may subsequently prove to
•
•
Any underperformance at the Batu Hijau Mine will be
be incorrect.
particularly material to Macmahon.
•
Guidance is not a guarantee of future performance,
The mining services contract for the Batu Hijau
and is subject to known and unknown risks, many of
project requires agreements to be reached about
which are beyond the control of Macmahon.
certain matters on a regular basis, including annual
•
Key identified risks that may result in Macmahon not
performance targets. There is no guarantee this
meeting its Guidance include, but are not limited to,
will occur.
termination of key contracts, variability in cost and
•
The Batu Hijau mine is located in Indonesia, where the
productivity assumptions, and inability to recover
risk of earthquake, volcanic eruption and tsunami is
claims and variations from clients.
higher than many other parts of the world. Macmahon
• Macmahon’s actual results may differ materially from
notes there has been recent volcanic activity and
its Guidance and the assumptions on which the
earthquakes on the nearby island of Lombok,
Guidance is based.
which may impact on Batu Hijau.
PERFORMANCE OF THE TELFER PROJECT
•
As previously disclosed, Macmahon has been working
CONTINGENT LIABILITIES
• Macmahon is exposed to a number of contingent
liabilities, including the shareholder class action
to resolve several issues on the Telfer project that have
described in the notes to this Annual Report.
resulted in it incurring significant losses. There is no
•
The Guidance provided by Macmahon will be
guarantee that the predictions or forecasts made by
negatively impacted if those contingent liabilities that
Macmahon about the future financial performance
are currently unquantified, including the shareholder
of the Telfer project will be realised and there is a
class action, crystallise into actual liabilities.
heightened prospect of dispute with the client if
this occurs.
•
Performance at the Telfer mine is subject to various
RELIANCE ON KEY CUSTOMERS
• Macmahon’s business relies on a number of individual
operational and contractual risks. While some of these
contracts and business alliances and Macmahon
risks apply to all projects, performance at Telfer may
derives a significant proportion of its revenue from
be particularly material to Macmahon.
a small number of key long term customers and
business relationships with a few organisations. In the
event that any of these customers reduces production
or scales back operations, terminates the relationship,
defaults on a contract or fails to renew their contract
with Macmahon, this may have an adverse impact on
the financial performance and/or financial position
of Macmahon.
26 | MACMAHON ANNUAL REPORT 2018
INDUSTRY AND COMMODITY CYCLES
• Macmahon’s financial performance is influenced
•
Early termination or failure to renew a contract
by Macmahon’s clients when that renewal is
by the level of activity in the resources and mining
expected is likely to have an adverse effect on
industry, which is impacted by a number of factors
financial performance.
beyond the control of Macmahon. This includes:
• While Macmahon has no reason to believe any existing
• demand for mining production, which may be
or potential contracts will be terminated, there can be
influenced by factors including (but not limited
no assurance that this will not occur.
to) prices of commodities, exchange rates and
•
Due to the nature of Macmahon’s business, there
the competitiveness of Australian and Indonesian
is also a risk that Macmahon’s claims for contract
mining operations;
variations are disputed and not ultimately agreed,
• government policy on infrastructure spending;
or are insufficiently certain at a point in time such
•
the policies of mine owners including their
that they cannot be brought to account in a given
decisions to undertake their own mining
accounting period.
operations or to outsource these functions; and
•
the availability and cost of key resources including
people, large earth moving equipment and critical
PROJECT DELIVERY RISK
•
Execution and delivery of projects involves judgment
consumables.
regarding the planning, development and operation
• Macmahon is indirectly exposed to movements in
of complex operating facilities and equipment. As
commodity prices, which are volatile and beyond
a result, Macmahon’s operations, cash flows and
Macmahon’s control.
liquidity could be affected if the resources or time
•
Adverse movements in commodity prices may reduce
needed to complete a project are miscalculated, if it
the pipeline of work in the mining sector and the level
fails to meet contractual obligations, or if it encounters
of demand for the services of Macmahon’s mining
delays or unspecified conditions.
business, which could have a material impact on
Macmahon’s operating and financial performance.
FAILURE TO WIN NEW CONTRACTS
• Macmahon’s performance is impacted by its ability
MARGINS, OPERATIONS,
SAFETY AND ENVIRONMENT
•
Cost overruns, unfavourable contract outcomes,
serious or continued operational failure, disruption at
to win, extend and complete new contracts. Any
key facilities, disruptions to communication systems or
failure by Macmahon to continue to win new
a safety incident have the potential to have an adverse
contracts and work will impact its financial
financial impact.
performance and position.
• Macmahon is also exposed to input costs through
• Macmahon expects to continue to have a broad range
its operations, such as the cost of fuel and energy
of competitors across all of its operations, which
sources, equipment and personnel. To the extent
impacts the margins obtainable on contracts. There is
that these costs cannot be passed on to customers
a risk that existing and increased future competition
in a timely manner, or at all, Macmahon’s financial
may limit the ability to win new contracts or achieve
performance could be adversely affected.
attractive margins.
• Macmahon’s operations involve risk to personnel and
EARLY CONTRACT TERMINATION AND
CONTRACT VARIATIONS
•
Guidance is partly based on current contracts in hand
property. An accident may occur that results in serious
injury or death, damage to property and environment,
which may have an adverse effect on Macmahon’s
financial performance, and reputation and ability to
and Macmahon derives a significant proportion of its
win new contracts.
revenue from providing services under large contracts.
A client could terminate services on short term notice
and as a result, there can be no assurance that work in
hand will be realised as revenue in any future period.
There could be future risks and costs arising from any
termination of contract.
MACMAHON ANNUAL REPORT 2018 | 27
RISK MANAGEMENT CONTINUED
CONTRACT PRICING RISK
•
If Macmahon materially underestimates the cost of
CURRENCY FLUCTUATION
• Macmahon is exposed to fluctuations in the value
providing services, equipment, or plant, there is a
of the Australian dollar versus other currencies due
risk of a negative impact on Macmahon’s
to international operations and as Macmahon’s
financial performance.
COMMODITY PRICE EXPOSURE
•
Gold and copper are the two most important
consolidated results are reported in Australian
dollars. Consolidated financial results are reported
in Australian dollars, if Macmahon generates sales
or earnings or has assets and liabilities in other
commodities contributing to Macmahon’s order book
currencies, the translation into Australian dollars
and tender pipeline. If the gold and copper industries
for financial reporting purposes could result in a
were to suffer, it would have a material adverse effect
significant increase or decrease in the amount of
on Macmahon revenues and profitability.
those sales or earnings and net assets.
EQUIPMENT AND CONSUMABLE AVAILABILITY
• Macmahon has a significant fleet of equipment
PARTNER AND CONTROL RISK
• Macmahon may undertake services through and
and has a substantial ongoing requirement for
participate in joint ventures or partnering/alliance
consumables including tyres, parts and lubricants.
arrangements. The success of these partnering
If Macmahon cannot secure a reliable supply of
activities depends on satisfactory performance by
equipment and consumables, there is a risk that
Macmahon’s partners. The failure of partners to meet
its operational and financial performance may be
performance obligations could impose additional
adversely affected.
KEY PERSONNEL
• Macmahon’s growth and profitability may be limited
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.
by loss of key operating personnel, inability to recruit
•
Following the completion of the AMNT transaction,
and retain skilled and experienced employees or by
AMC (which is a related party of AMNT) has become
increases in compensation costs.
the largest shareholder of Macmahon with a 44.3%
shareholding, giving AMC significant influence
over Macmahon, with the ability to block special
resolutions of shareholders and potentially to pass
or block ordinary resolutions. AMC’s interests as
a shareholder of Macmahon may differ from the
interests of other shareholders, and the existence
of this shareholding (together with other major
shareholdings) may reduce the prospects of persons
making takeover bids for Macmahon in the future.
28 | MACMAHON ANNUAL REPORT 2018
COUNTRY RISK
• While Macmahon has significant operations in
Australia, its largest project is in Indonesia and it may
OTHER MATERIAL RISKS THAT
COULD AFFECT MACMAHON INCLUDE:
•
A major operational failure or disruption at key
undertake new projects in mining regions such as
facilities or to communication systems which
West Africa, where sovereign risk may be higher than
interrupt Macmahon’s business;
is the case in Australia.
•
Changing government regulation including tax,
•
Operating in international markets can expose
occupational health and safety, and changes in policy
Macmahon to additional adverse economic
and spending;
conditions, civil unrest, conflicts, terrorism, security
•
Loss of reputation through poor project outcomes,
breaches and bribery and corrupt practices.
unsafe work practices, unethical business practices,
•
Some countries in which Macmahon operates, or may
and not meeting the market’s expectation of our
operate in future, have less developed legal, regulatory
financial performance;
or political systems than in Australia, which may be
subject to unexpected or sudden change or in which
it may be more difficult to enforce legal rights.
•
•
Foreign exchange rates and interest rates in the
ordinary course of business; and
Loss of key Board, management or
•
The financial performance and position of
operational personnel.
Macmahon’s foreign operations may be adversely
affected by changes in the fiscal or regulatory regimes
applying in the relevant jurisdictions, changes in, or
difficulties in interpreting and complying with local
laws and regulations of different countries (including
tax, labour, foreign investment law) and nullification,
modification or renegotiation of, or difficulties or
delays in enforcing contracts with clients or joint
venture partners that are subject to local law.
MACMAHON ANNUAL REPORT 2018 | 29
BOARD
JIM
WALKER
INDEPENDENT,
NON-EXECUTIVE CHAIRMAN
EVA
SKIRA
INDEPENDENT,
NON-EXECUTIVE DIRECTOR
Mr Walker has over 40 years of experience in the resources
Ms Skira has a background in banking, capital markets,
sector. Until 2013 he was the Managing Director and Chief
stockbroking and financial markets, previously holding
Executive Officer of WesTrac Group, where he led the rapid
executive positions at Commonwealth Bank in the
development of that business in industrial and mining
Corporate Banking/Capital Markets divisions and
services locally and in China.
later with stockbroker Barclays de Zoete Wedd.
Mr Walker has been a Director of Macmahon since 2013.
Ms Skira has served on a number of boards in business,
government and the not-for-profit sectors across a
range of industries.
VYRIL
VELLA
INDEPENDENT,
NON-EXECUTIVE DIRECTOR
KIM
HORNE
INDEPENDENT,
NON-EXECUTIVE DIRECTOR
Mr Vella has over 40 years’ experience in the civil
Mr Horne joined the Board as a Non-executive Director
engineering, building, property and construction
in March 2018. Mr Horne has close to 45 years’ experience
industries. During Mr Vella’s 34 years with the Leighton
as a senior executive in the mining industry working for
Group (now CIMIC) he held various positions including
Alcoa in Australia and overseas. During Mr Horne’s career,
General Manager NSW, Director of Leighton Contractors
he has also held non-executive roles for industry groups,
Pty Ltd, Founding Director of Welded Mesh Pty Ltd,
not-for-profit and government organisations. Mr Horne
Managing Director of Leighton Properties and Associate
is a graduate of the University of Western Australia’s
Director of Leighton Holdings. Mr Vella was also a
management education program and was appointed
consultant to Leighton Holdings, where he advised on
Member of the Order of Australia in January 2014 for
investment in the residential market, general property
his services to the mining industry.
issues and major construction and infrastructure projects.
30 | MACMAHON ANNUAL REPORT 2018
ALEX
RAMLIE
NON-INDEPENDENT,
NON-EXECUTIVE DIRECTOR
ARIEF
SIDARTO
NON-EXECUTIVE
DIRECTOR
Mr Ramlie is a Director of AMNT. Prior to joining AMNT, he
Mr Sidarto is the Chief Financial Officer of AMNT. His
was the President Director and Chief Executive Officer of
qualifications include an MBA from Harvard Business
PT Borneo Lumbung Energi & Metal Tbk, which operated
School and two bachelor degrees with summa cum laude
a hard coking coal mine in Central Kalimantan.
from The Wharton School of Finance and The Engineering
School of the University of Pennsylvania.
Between 2012 and 2015, Mr Ramlie was also a Director of
Bumi PLC, a Vice-President Commissioner/ Vice-Chairman
Prior to joining AMNT in April 2017, Mr Sidarto held the
of PT Berau Coal Energy Tbk and its subsidiary, PT Berau
position of Managing Director and Member of the Board
Coal, and held Commissioner positions in PT Bumi
of PT Rajawali Corpora. He was also Managing Partner of
Resources Tbk, PT Kaltim Prima Coal, and PT
Samuel Group from 2009 to 2015 and Managing Director
Arutmin Indonesia.
of Wellspring Capital Partners from 2010 to 2014.
Before entering the mining industry in 2011, Mr Ramlie was
Mr Sidarto was previously with Goldman Sachs New York
a private equity professional and was Managing Director
in 1991 in its Structured Finance Division; before relocating
of Ancora Capital Management Pte. Ltd., an Indonesia-
to Hong Kong and then Singapore to run investment
focused private equity fund.
banking and corporate finance as Chief Operating Officer.
MACMAHON ANNUAL REPORT 2018 | 31
EXECUTIVE
MANAGEMENT TEAM
MICHAEL
FINNEGAN
CHIEF
EXECUTIVE OFFICER
GILES
EVERIST
CHIEF
FINANCIAL OFFICER
Mr Finnegan holds a Bachelor of Science (Mining) with 20
Mr Everist was appointed as Chief Financial Officer in
years’ experience in the mining industry. The last 15 years
December 2017. He has more than 30 years’ finance
have primarily been spent in senior line management
experience primarily within the resources sector. He has a
positions. Mr Finnegan has a strong commercial and
Bachelor of Sciences (Honours) in Mechanical Engineering
technical background and has spent time in operations
from the University of Edinburgh and is also a Chartered
on the east and west coast of Australia as well as a
Accountant. Prior to joining Macmahon, Mr Everist held the
number of countries throughout Asia.
position of Chief Financial Officer and Company Secretary
at Monadelphous Group.
GREG
GETTINGBY
GENERAL COUNSEL AND
COMPANY SECRETARY
CARL
O’HEHIR
GENERAL MANAGER,
TMM GROUP
Mr Gettingby joined Macmahon in 2002 and was
Mr O’Hehir holds a Bachelor of Engineering (Mining) and
appointed to the position of Group General Counsel/
is a Site Senior Executive under the Queensland Coal
Company Secretary in 2011. He previously held
Mining Safety and Health Act. Mr O’Hehir has over 18 years’
commercial management and legal roles with the
experience in open cut mining in Queensland and in Africa
Company across all divisions of its business. Prior to
across technical, operational and managerial roles. Prior to
joining Macmahon, Mr Gettingby worked as a lawyer
joining TMM in July 2010, Mr O’Hehir held senior positions
in private practice and holds a Bachelor of Arts and
at Thiess and BHP.
a Bachelor of Laws.
32 | MACMAHON ANNUAL REPORT 2018
IAN
CRAWFORD
GENERAL MANAGER,
SURFACE MINING AUSTRALIA
Mr Crawford is a Chartered Mining Engineer with over 30
years’ mining industry experience in Australia, Southeast
Asia and the United Kingdom. Prior to joining Macmahon
in August 2017, Mr Crawford was the COO for Roy Hill.
He has held several senior operational management
positions with both mining contractors and owner
operator mining companies.
MICHAEL
FISHER
PRESIDENT DIRECTOR,
PT MACMAHON MINING SERVICES
MARK
HATFIELD
GENERAL MANAGER,
PLANT AND MAINTENANCE SERVICES
Mr Fisher has 19 years’ experience in the mining industry
Mr Hatfield has more than 16 years’ experience within the
and holds a Graduate Diploma of Mine Engineering.
mining and heavy equipment industry and has fulfilled
The last 8 years have primarily been spent in senior
numerous operational and senior leadership roles. Mr
management positions. Mr Fisher has a strong commercial
Hatfield has a strong technical background and has spent
and operational background, with experience in mineral
time in operations on the west coast of Australia as well as
and coal operations in the Northern Territory, on the east
a number of countries throughout Asia.
coast of Australia and several provinces across Indonesia.
MACMAHON ANNUAL REPORT 2018 | 33
34 | MACMAHON ANNUAL REPORT 2018
EXECUTIVE MANAGEMENT TEAM CONTINUED
DAVID
VAN DEN BERG
CHIEF TECHNOLOGY AND
INNOVATION OFFICER
KATHERINE
BLACKLOCK
MANAGER,
HUMAN RESOURCES
Mr van den Berg was appointed as Chief Technology and
Ms Blacklock was appointed Manager – Human Resources
Innovation Officer in August 2016. He brings an extensive
in November 2016. She holds a Bachelor of Science
technology and commercial background to Macmahon
(Psychology and Anatomy) and Grad. Dip. Bus (HRM) with
through his 23 years’ experience across the mining,
25 years in Human Resource management in the resources
management consulting and technology sectors. Mr
sectors. Prior to joining Macmahon, Mrs Blacklock was the
van den Berg commenced with Macmahon in 2008, as
Human Resources Manager – International Projects at Bis
Chief Information Officer. Prior to Macmahon, Mr van den
Industries and was the founding Director of HRwise, a HR
Berg held senior management and technology positions
consultancy providing hands-on HR support to resource
in both Australia and the UK, including BHP Billiton,
sector clients both in Australia and internationally for
PriceWaterhouseCoopers and CitiGroup.
10 years.
KALE
ROSS
MANAGER,
HSEQT
Mr Ross has more than 16 years’ experience working across
construction, underground and surface mining operations
in numerous operational and senior leadership roles.
Mr Ross has a strong operational and technical, safety
and training background and has worked across multiple
jurisdictions within Australia and more recently
in Nigeria and Southeast Asia.
MACMAHON ANNUAL REPORT 2018 | 35
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 2018.
36 | MACMAHON ANNUAL REPORT 2018
MACMAHON ANNUAL REPORT 2018 | 37
DIRECTORS’
REPORT
DIRECTORS
The following persons were Directors of Macmahon Holdings Limited during the financial year and up to the date of this
report, unless otherwise stated:
MR JIM WALKER
Position:
Special responsibilities:
Mr Walker is currently a member of the Board’s Audit
Independent Non-executive Chairman (since 14 July 2015)
& Risk Committee and the Board’s Remuneration &
Executive Chairman (22 January 2015 to 13 July 2015)
Nomination Committee.
Qualifications:
GAICD, FCA, FAIM
Experience and expertise:
Interests in shares: 425,000
Interests in options: None
Mr Walker joined the Board as a Non-executive Director in
MS EVA SKIRA
October 2013 and was appointed Chairman in March 2014.
Position:
From January 2015 until July 2015 Mr Walker assumed the
Independent Non-executive Director
role of Executive Chairman while the Board sought
a replacement Chief Executive Officer.
Qualifications:
BA (Hons), MBA, SF Fin (Life Member Fin),
Mr Walker has over 40 years of experience in the resources
FAICD, FAID, FGIA, FCIS
sector. Until 2013 he was the Managing Director and Chief
Executive Officer of WesTrac Pty Ltd, where he led that
Experience and expertise:
company’s rapid development in industrial and mining
Ms Skira joined the Board as a Non-executive Director
services locally and in China. Prior to this, Mr Walker held
in September 2011. Ms Skira has a background in
various roles with other Australian Caterpillar dealers.
banking, capital markets, stockbroking and financial
Mr Walker is a graduate member of the Australian Institute
markets, previously holding executive positions at the
of Company Directors (AICD) and a member of the
Commonwealth Bank in the Corporate Banking/Capital
Australian Institute of Management (AIM WA), holding
Markets divisions and later with stockbroker Barclays de
the position of President WA (2008–2010) and National
Zoete Wedd.
President – Australia (2010–2013).
Other current directorships:
Ms Skira has served on a number of boards in business,
government and the not–for–profit sectors across a range
Mr Walker is currently Chairman of Austin Engineering
of industries. Ms Skira completed her BA (1st Class Honors,
Limited (appointed November 2016), Deputy Chairman of
Economic History) at the University of New South Wales,
Seeing Machines Limited (appointed May 2017), Chairman
and obtained her Masters of Business Administration (Dux
of Australian Potash Limited and Deputy Chair of RACWA
and Distinction) at the IMD business school, Switzerland.
Holdings (appointed April 2018). He also chairs the State
Training Board WA and Wesley College WA, and is a
Other current directorships:
trustee of the WA Motor Museum.
Ms Skira is currently a Non-executive Director of RCR
Former directorships (last 3 years):
Former directorships (last 3 years): No listed entities
Non-executive Director of Programmed Group Limited.
Tomlinson and Western Power.
Mr Walker was a director of Seven Group Holdings Ltd,
Ms Skira is currently the Chair of the Board’s Audit & Risk
National Hire Group Limited, Skilled Group Limited, and
Committee and a member of the Board’s Remuneration &
Coates Group Holdings Pty Ltd.
Nomination Committee.
Special responsibilities:
Interests in shares: None
Interests in options: None
38 | MACMAHON ANNUAL REPORT 2018
MR VYRIL VELLA
Position:
MR KIM HORNE
Position:
Independent Non-executive Director
Independent Non-executive Director
Qualifications:
Qualifications:
BSc, BE (Hons), M.Eng.Sc, FIEAust, FAICD
Mr Horne holds a Diploma in Frontline Supervision,
Experience and expertise:
a WA Restricted Quarry Managers Certificate, and is
a graduate of the University of WA Management
Mr Vella joined the Board as a Non-independent Non-
Education Programme.
executive Director in November 2007. Mr Vella has over
40 years’ experience in the civil engineering, building,
He has completed the Australian Institute of Company
property and construction industries. During Mr Vella’s 34
Directors Training Course and is a graduate of the
years with the Leighton Group he held various positions
Alcoa Executive programme.
including General Manager NSW, Director of Leighton
Contractors Pty Ltd, Founding Director of Welded Mesh
Experience and expertise:
Pty Ltd, Managing Director of Leighton Properties and
Mr Horne joined the Board as a Non-executive Director
Associate Director of Leighton Holdings. Mr Vella was a
in March 2018. Mr Horne has had extensive executive
consultant to Leighton Holdings, where he advised on
experience with Alcoa, where he was involved in mine
investment in the residential market, general property
development and management, human resources,
issues and major construction and infrastructure projects.
corporate affairs, strategy and government relations.
Other current directorships: No listed entities
Australia and President of Alcoa’s Global Mining Centre.
Former directorships (last 3 years): No listed entities
His most recent roles were as Executive Director of Alcoa
Special responsibilities:
Mr Horne is currently the Deputy Chair of Synergy
(the State electricity generator and retailer in Western
Mr Vella is currently Chair of the Board’s Remuneration
Australia), a non-executive director of the Fremantle Port
& Nomination Committee and a member of the Board’s
Authority and Rainbow Bee Eater (a private company
Audit & Risk Committee.
specialising in low cost renewable energy from biomass)
Interests in shares: 1,857,842
Interests in options: None
and a life member of the Chamber of Minerals and Energy.
In 2014, Mr Horne was appointed as a Member of the Order
of Australia for his services to the mining industry.
Other current directorships: No listed entities
Former directorships (last 3 years): Alcoa Australia
Special responsibilities:
Mr Horne is currently a member of the Board’s
Remuneration & Nomination Committee.
Interests in shares: None
Interests in options: None
MACMAHON ANNUAL REPORT 2018 | 39
DIRECTORS CONTINUED
MR ALEXANDER RAMLIE
Position:
Mr Ramlie began his career as an investment banker at
Lazard Frères & Co and has a Bachelor of Arts and a Master
(AMNT Nominee) Non-independent, Non-executive
of Arts in Economics from Boston University.
Director (appointed 8 August 2017)
Other current directorships:
Qualifications:
Mr Ramlie is currently President Director of PT Cakrawala
Bachelor of Arts and a Master of Arts in Economics from
Langit Sejahtera (an Indonesian entity) and a director
Boston University.
Experience and expertise:
of PT Amman Mineral Nusa Tenggara (an Indonesian
entity), Amman Mineral Contractors (Singapore) Pte Ltd
(a Singapore entity), Shwegen Asia Pte Ltd (a Singapore
Mr Ramlie joined the Board as a Non-executive Director
entity), Nusa Tenggara Mining Services Contractors Pte.
and nominee of AMNT in August 2017 after the successful
Ltd (a Singapore entity), Amman Mineral Singapore Pte.
completion of the AMNT Transaction. Prior to becoming
Ltd. (a Singapore entity), Phase Seven Contractors Pte. Ltd.
a director of AMNT, Mr Ramlie was the President Director
(a Singapore entity), Benete Mining Pte. Ltd. (a Singapore
and Chief Executive Officer of PT Borneo Lumbung Energi
entity) and Benete International Trading FZE (a Dubai,
& Metal Tbk from 2011 to 2015. Borneo operates a hard
UAE entity).
coking coal mine in Tuhup, Central Kalimantan, which
is held by its wholly-owned subsidiary, PT Asmin
Former directorships (last 3 years):
Koalindo Tuhup.
– President Director PT Borneo Lumbung Energi & Metal
Tbk from 2011 to 2015
Between 2012 and 2015, Mr Ramlie was also a Director of
– Director Bumi PLC, a Vice-President Commissioner/ Vice-
Bumi PLC, a Vice-President Commissioner/Vice-Chairman
Chairman of PT Berau Coal Energy Tbk and its subsidiary,
of PT Berau Coal Energy Tbk and its subsidiary, PT Berau
PT Berau Coal between 2012 and 2015
Coal, and held Commissioner positions in PT Bumi
Resources Tbk, PT Kaltim Prima Coal, and PT
Special responsibilities: None
Arutmin Indonesia.
Interests in shares: None
Interests in options: None
Before entering the mining industry in 2011, Mr Ramlie was
a private equity professional and was Managing Director of
Ancora Capital Management Pte. Ltd, an Indonesia focused
private equity fund.
40 | MACMAHON ANNUAL REPORT 2018
MR ARIEF WIDYAWAN SIDARTO
corporate finance as Chief Operating Officer. Responsible
Position:
for deal execution (M&As, LBOs, restructuring, debt and
(AMNT Nominee) Non-independent, Non-executive
equity capital raisings), select client relationships and
Director (appointed 8 August 2017)
cross selling (commodities, asset-liability management
Qualifications:
Mr Sidarto qualifications include an MBA from Harvard
products). Member of Goldman Sach’s
Commitments Committee.
Business School and two bachelor degrees with summa
Other current directorships:
cum laude from The Wharton School of Finance and The
Mr Sidarto is currently Director of Amman Mineral
Engineering School of the University of Pennsylvania.
Contractors (Singapore) Pte Ltd (a Singapore entity),
Experience and expertise:
Amman Mineral Singapore Pte. Ltd. (a Singapore entity),
Medco Pacific Resources Pte. Ltd. (a Singapore entity),
Prior to joining AMNT in April 2017, Mr Sidarto has had the
Medco Resource International Pte. Ltd. (a Singapore
following roles:
entity), Nusa Tenggara Mining Services Contractors Pte.
Ltd. (a Singapore entity), Phase Seven Contractors Pte. Ltd.
Managing Director and Member of the Board of PT
(a Singapore entity), Benete Mining Pte. Ltd. (a Singapore
Rajawali Corporation, the holding company of a diversified
entity), Slate Alt (a Singapore Entity) and PT Amman
business group with businesses, among others, palm
Mineral Nusa Tenggara (an Indonesian entity).
plantation (IDX-listed), gold mining, coal mining (IDX-
listed) and other mining assets, properties (St Regis,
Former directorships (last 3 years):
Four Seasons, Sheraton, etc.), transportation (IDX-listed),
Director of In-Sing Minerals Pte. Ltd. (a Singapore entity)
infrastructure (IDX-listed), and ad agency (IDX-listed);
and Goodearth Universal Pte. Ltd. (a Singapore entity)
member of Finance and Investment Committee, Ethics
and Managing Director and Member of the Board of PT
Committee and Audit & Risk Management Committee.
Rajawali Corporation
Managing Partner of Samuel Group from 2009 to 2015.
Concurrently, Managing Director of Wellspring Capital
Special responsibilities: None
Partners from 2010 to 2014.
Interests in shares: None
Interests in options: None
Previously with Goldman Sachs New York in 1991 in its
Structured Finance Division; relocated to Hong Kong and
subsequently to Singapore to run investment banking and
MACMAHON ANNUAL REPORT 2018 | 41
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 2018, and the number of meetings attended by each Director were:
FULL BOARD
MEETINGS
SPECIAL BOARD
MEETINGS
( C )
AUDIT & RISK
COMMITTEE
MEETINGS
REMUNERATION
& NOMINATION
COMMITTEE MEETINGS
OTHER COMMITTEE
MEETINGS
( D )
Eligible
to Attend
( A )
Attended
( B )
Eligible
to Attend
( A )
Attended
( B )
Eligible
to Attend
( A )
Attended
( B )
Eligible
to Attend
( A )
Attended
( B )
Eligible
to Attend
( A )
Attended
( B )
J A Walker
C R G Everist
E Skira
V A Vella
A Ramlie
A W Sidarto
K A Horne
11
4
11
11
11
11
4
11
4
10
11
10
10
4
2
2
2
2
2
2
*
1
2
2
1
1
1
*
4
2
4
4
*
*
*
4
2
3
4
*
*
*
3
1
3
3
*
*
1
3
1
2
3
*
*
1
*
1
1
*
*
*
*
*
1
1
*
*
*
*
A. Number of meetings held during the time the director held office or was a member of the committee during the year.
B. Number of meetings attended.
C. Special Board meetings, unscheduled meetings called at short notice.
D. Other committees include sub-committees of the board.
* Not a member of the relevant committee or board.
COMPANY SECRETARY
Mr Gettingby holds a Bachelor of Arts and a Bachelor
DIVIDENDS
There were no dividends paid, recommended or declared
of Laws.
during the current or previous financial year.
Mr Gettingby joined Macmahon in 2002 and was
appointed to the position of Group General Counsel/
REVIEW OF OPERATIONS
For the 12 months ended 30 June 2018, the Group reported
Company Secretary in 2011. He previously held
increases in total revenue, earnings before interest and tax
commercial management and legal roles with
(EBIT) and net profit after tax from continuing operations
which was driven by the commencement of new contracts
including scope modifications on existing contracts.
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 10 to 29,
that forms part of this Director’s report.
the Company.
Prior to joining Macmahon, Mr Gettingby worked as a
lawyer in private practice.
PRINCIPAL ACTIVITIES
The principal activities of the consolidated entity consisted
of providing mining services to mining companies
throughout Australia and Southeast Asia.
Apart from the above, or as noted elsewhere in this report,
there were no significant changes in the nature of the
activities of the consolidated entity during the financial
year under review.
42 | MACMAHON ANNUAL REPORT 2018
SIGNIFICANT CHANGES IN
THE STATE OF AFFAIRS
Significant changes in the state of affairs of the Group
MATTERS SUBSEQUENT TO
THE END OF THE FINANCIAL YEAR
Subsequent to year end the Board put in place a new
during the financial year were as follows:
Non-executive Director salary sacrifice plan. For details
refer to the ASX announcement dated 5 July 2018.
Significant asset acquisition - AMNT
Macmahon shareholders approved its transaction with
PT Amman Mineral Nusa Tenggara (“AMNT”) at a General
Meeting on 12 July 2017. Completion of the Transaction
LIKELY DEVELOPMENTS &
EXPECTED RESULTS OF OPERATIONS
Likely developments in the operations of the consolidated
occurred on 8 August 2017.
entity in future financial years and the expected results of
those operations have been included generally within the
The transaction resulted in:
financial report.
• Macmahon Indonesia acquiring US$145.6m mobile
mining equipment in exchange for the issue of
954,064,924 new Macmahon shares to related parties
of AMNT;
ENVIRONMENTAL REGULATION
The consolidated entity is not subject to any
significant environmental regulation under
•
•
the life of mine mining services contract with AMNT
Australian Commonwealth or State law.
becoming effective; and
two new Directors joining the Macmahon Board, Mr
Alex Ramlie and Mr Arief Sidarto.
Following completion of the transaction AMNT’s related
party has an interest in 44.3% of Macmahon’s total shares
on issue.
For details of the AMNT Transaction please refer to the
Notice of Meeting for the AMNT Transaction published on
the ASX website on 13 June 2017, and the company’s ASX
announcement dated 19 April 2018.
Acquisition of a 100% subsidiary - TMM Group
In February 2018, Macmahon signed an agreement
to purchase TMM Group, a Brisbane-based group
of companies which provide civil construction and
operations and maintenance services to the Queensland
coal mining industry.
The acquisition of TMM will provide Macmahon with
additional civil capability that is expected to be an
enabler to core mining work through contracts for
initial site earthworks.
For details of the acquisition please refer to ASX
announcement dated 13 February 2018.
MACMAHON ANNUAL REPORT 2018 | 43
REMUNERATION REPORT (AUDITED)
The audited remuneration report is set out on pages
47 to 59 and forms part of this Directors’ report.
requirements of the Corporations Act 2001 for the
following reasons:
INDEMNITY AND INSURANCE OF OFFICERS
The Company has indemnified the Directors and
Executives of the Company for costs incurred, in their
– all non-audit services have been reviewed and approved
to ensure that they do not impact the integrity and
objectivity of the auditor; and
capacity as a Director or Executive, for which they may
– none of the services undermine the general principles
be held personally liable, except where there is a lack
relating to auditor independence as set out in APES 110
of good faith.
Code of Ethics for Professional Accountants issued by the
Accounting Professional and Ethical Standards Board,
During the financial year, the Company paid a premium in
including reviewing or auditing the auditor’s own work,
respect of a contract to insure the Directors and Executives
acting in a management or decision–making capacity for
of the company against a liability to the extent permitted
the parent entity, acting as advocate for the parent entity
by the Corporations Act 2001. The contract of insurance
or jointly sharing economic risks and rewards.
prohibits disclosure of the nature of liability and the
amount of the premium.
ROUNDING OF AMOUNTS
The consolidated entity is of a kind referred to in ASIC
INDEMNITY AND INSURANCE OF AUDITOR
The Company has not, during or since the financial year,
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, issued by the Australian Securities
indemnified or agreed to indemnify the auditor of the
and Investments Commission, relating to “rounding– off”.
Company or any related entity against a liability incurred
Amounts in this report have been rounded off in
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
accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as
required under section 307C of the Corporations Act
2001 is set out on page 45.
AUDITOR
KPMG continues in office in accordance with section 327
on behalf of the parent entity, or to intervene in any
of the Corporations Act 2001.
proceedings to which the parent entity is a party for the
purpose of taking responsibility on behalf of the parent
This report is made in accordance with a resolution
entity for all or part of those proceedings.
of Directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor
for non-audit services provided during the financial
year by the auditor are outlined in note 28 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 28 to the financial statements do
not compromise the external auditor’s independence
JA WALKER
Director
24 August 2018
Perth
44 | MACMAHON ANNUAL REPORT 2018
AUDITOR’S INDEPENDENCE DECLARATION
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 of Macmahon Holdings
Limited for the financial year ended 30 June 2018 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Trevor Hart
Partner
Perth
24 August 2018
KPMG, an Australian partnership and a member firm of the KPMG
Liability limited by a scheme approved under
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Professional Standards Legislation.
MACMAHON ANNUAL REPORT 2018 | 45
REMUNERATION
REPORT
INTRODUCTION FROM THE CHAIR OF THE
REMUNERATION AND NOMINATION COMMITTEE
FY18 which will vest into shares after three years1 if
the company achieves significant increases in total
Dear Shareholders,
shareholder returns over this time period.
The Board also took steps to increase the alignment
On behalf of the Board, I am pleased to present the
between the interests of directors and shareholders by
Remuneration Report for the financial year ended 30
adopting a Share Ownership Policy and Salary Sacrifice
June 2018 (“FY18”).
Plan. The Policy requests that non-executive directors
maintain a shareholding in the company that meets or
FY18 saw a significant turnaround in the profitability of
exceeds certain minimum values that increase over time,
Macmahon, with the completion of the transformational
while the Plan enables directors to salary sacrifice part
AMNT Transaction and the commencement of substantial
or all of their remuneration into rights to acquire shares
new work in both Indonesia and Australia. As a result, the
in Macmahon. These arrangements are a cost effective
size of the company’s business and its need for employees
way to increase directors’ personal financial stake in the
has grown significantly.
performance of Macmahon.
This turnaround by Macmahon has coincided with
Outlook
increased activity in many sectors of the mining industry.
For FY18, the Board considered that the remuneration
Macmahon has observed a distinct tightening of demand
settings described above were appropriate to strike
in key labour markets and experienced upward pressure
the right balance between cost control, incentivising
on employee turnover. These competitive forces have
employees to outperform, and aligning employee and
required the company to remain closely focused on the
shareholder interests. However, the Board also recognises
attraction, retention and engagement of its workforce,
that the increased size and complexity of Macmahon,
with remuneration practices being an important
together with the increased competition for employees
component of this effort.
(particularly skilled and experienced personnel), are
FY18 Remuneration Settings
changes to which the company must adapt. In short, the
Board believes Macmahon is now at the point where it is
During FY18 a primary objective of Macmahon’s
prudent to implement additional measures to attract and
remuneration strategy was to focus staff on delivering
retain the people needed for the future of the business.
positive returns for shareholders over the short and
medium term, while also minimizing increases to the
In this context, Macmahon has recently made changes
company’s fixed cost base. To this end:
to the remuneration settings that will apply during FY19,
including general adjustments to staff salaries, and the
1.
the salaries of existing Australian based staff
introduction of a new long term incentive plan to retain
employees were not subject to a general inflationary
and incentivise key senior staff. Detailed information
increase in FY18. However, the company did
about these changes will be provided in the company’s
implement a simplified, short term incentive plan
Remuneration Report for FY19, or where a new initiative
for the year by which those staff members, and
involves shareholder approval (as the new long term
key managers overseas, were provided with the
incentive plan does), full details will be provided in
opportunity to receive a cash bonus based on
advance of a shareholder meeting.
Macmahon’s overall EBIT performance. Given the
company’s actual EBIT result for FY18, an amount
In closing, I would like to thank the company’s employees
will become payable under this plan in the near
for their work during FY18, and trust that shareholders
future; and
will find the remuneration outcomes described in this
Report to be appropriate for the strong performance of
2.
as foreshadowed in last year’s Report, Macmahon
Macmahon during that period.
issued performance rights to senior managers in
VYRIL VELLA
Chairman of the Remuneration & Nomination Committee
1 A grant of performance rights was made to one employee
during FY18 which had a 2.5 year performance period.
46 | MACMAHON ANNUAL REPORT 2018
REMUNERATION REPORT - AUDITED
This Remuneration Report forms part of the Directors’ Report for FY18 and has been audited by the company’s
external auditor.
1. EXECUTIVE REMUNERATION
1.1 Overview
The company’s approach to remuneration is to compensate employees in a way that is cost effective and appropriate
for current industry conditions, but also sufficient to attract, retain and incentivise the calibre of personnel needed to
effectively manage the company’s business. To this end the remuneration packages offered to senior executives have
three components:
• market competitive fixed remuneration;
•
•
a short term incentive opportunity, or the opportunity to earn a cash bonus dependent on performance over an
annual period; and
a long term incentive opportunity, or the opportunity to earn Macmahon shares dependent on performance over
multiple years.
The table below represents the mix of these remuneration components during FY18 for those members of current KMP
(or key management personnel as defined by the Corporations Act 2001) who hold executive positions. The short term
incentive is provided at the amount payable at the “Target” performance level2, and the long term incentive amount
is provided based on the valued granted in the current year (where the value of the performance rights issued under
the long term incentive plan is assumed to be the same as the volume weighted average share price at the start of the
performance period):
Michael Finnegan
Giles Everist
Greg Gettingby
AT RISK
FIXED
REMUNERATION
SHORT TERM
INCENTIVE
LONG
TERM INCENTIVE
33.3%
50%
50%
33.3%
25%
25%
33.3%
25%
25%
1.2 Fixed remuneration
The fixed remuneration paid to senior executives is based on the size and scope of their role, knowledge and experience,
market benchmarks for that role, and to some extent the company’s financial circumstances. Fixed remuneration
comprises base salary, any applicable role specific allowances, and superannuation.
Macmahon regularly reviews and benchmarks fixed remuneration to monitor how that remuneration compares to the
market and industry peers. Benchmarking was completed during FY18 using industry surveys and reports, however, as it
did last year, the Board determined that there should not be a general, inflationary increase to the fixed remuneration of
Australian based staff employees during that period.
2 During FY18 this performance level required 125% achievement of the company’s EBIT target.
MACMAHON ANNUAL REPORT 2018 | 47
REMUNERATION REPORT CONTINUED
1.3 Short term incentive
In previous years, the short term incentive opportunity provided to senior executives has been linked to a range of
performance criteria set each year according to the company’s priorities at the start of each annual period.
For FY18 the company took a different approach and implemented simplified short term incentive plan (STI Plan) under
which a much wider group of employees than in prior years were provided with the opportunity to receive a cash bonus
based on Macmahon’s overall EBIT performance.
This bonus was structured to commence upon achievement of the annual EBIT target, and then increase in line with
any EBIT outperformance, up to a cap. This performance condition was chosen to simplify administration of the plan, to
ensure unity of purpose for all staff, to make the plan easier for employees to understand and monitor, and to focus staff
attention on a key metric for investors in the company.
Further details of the FY18 STI plan are set out below.
Participants
The participants in the plan were all Australian based staff employees and key managers overseas who are not already
covered by a project-specific incentive program, provided such individuals have been employed for more than 6 months
during the plan period.
Deferral and clawback
The FY18 STI Plan included a deferral arrangement for Executive Team members. Under this arrangement, the payment
of 25% of any bonus due to an Executive Team member will be deferred for two years. If one of these individuals ceases
to be an employee during this period, payment will be at the Board’s discretion. The Plan also includes a ‘clawback’
provision by which up to 30% of any bonus awarded to an Executive Team member may be claimed back by the
company at any time up to two years after the award if there is a restatement of the company’s financial results (other
than a restatement caused by a change in applicable accounting rules or interpretations), the result of which is that any
bonus awarded would have been a lower amount had it been calculated based on such restated results.
Potential bonus amounts
The table below shows the potential bonus amounts (as a percentage of total fixed remuneration) available to the
executive members of KMP under the FY18 STI Plan.
EMPLOYEE
M Finnegan
G Everist
G Gettingby
PERFORMANCE LEVEL
THRESHOLD
(100% achievement
of EBIT target)
TARGET
(125% achievement
of EBIT target)
STRETCH
(144% achievement
of EBIT target)
35% of TFR
17.5% of TFR
17.5% of TFR
100% of TFR
50% of TFR
50% of TFR
150% of TFR
75% of TFR
75% of TFR
48 | MACMAHON ANNUAL REPORT 2018
1.4 Long term incentive
During FY18 the long term incentive opportunity provided to senior executives involved the grant of performance
rights which can vest into fully paid ordinary shares in Macmahon after three years for no consideration, dependent on
performance over that three year period3.
The only performance condition that applies to the company’s long term incentive plan (LTI Plan) is absolute shareholder
returns. The reasons for selecting this performance condition include that (a) it provides a straightforward measure of
company performance that is simple to communicate to employees and for them to continuously monitor; and (b) it is
an important metric for investors in a company of Macmahon’s size and risk profile, many of whom have indicated that
they seek absolute returns, rather than returns relative to an index.
Further details of the FY18 LTI Plan framework are set out below.
Performance condition - targets
The vesting of performance rights is dependent on the company’s absolute level of total shareholder returns (TSR) over
the performance period (generally three years). The portion of performance rights eligible to vest at various levels of
increase in the company’s TSR (expressed as a compound annual growth rate or CAGR) is:
Macmahon’s TSR performance over the
performance period
Proportion of performance rights that are eligible to vest at the end of the
performance period
Less than 17 % CAGR TSR growth
17% CAGR TSR growth
0%
50%
Between 17% and < 25% CAGR TSR growth
50% plus a straight line increase in % award until 25% TSR is achieved
At 25% CAGR TSR growth and above
100%
Continued employment condition
Performance rights are immediately cancelled if a holder ceases employment before the rights vest, unless the Board
in its absolute discretion determines otherwise. There is no vesting of performance rights based solely on continued
employment.
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 then on issue will vest, notwithstanding that time restrictions
or performance conditions applicable to the performance rights have not been satisfied.
Testing of the performance condition
Performance rights are tested for vesting only once, at the end of the performance period. That is, there is no re-testing
of performance rights.
Dividends and voting rights
Performance rights do not have dividend or voting rights. However, the shares allocated upon vesting of performance
rights rank equally with other ordinary shares on issue.
Restriction on disposal of shares
The shares allocated to performance rights holders upon the vesting of those rights are initially held in a trust, and are
subject to disposal restrictions in line with the company’s Trading in Shares Policy.
3 A grant of performance rights was made to one employee during FY18 which had a 2.5 year performance period.
MACMAHON ANNUAL REPORT 2018 | 49
REMUNERATION REPORT CONTINUED
Number of performance rights granted to Plan participants
The number of performance rights granted to participants in the LTI Plan is sometimes specified by an individual’s
employment contract, but is generally at the discretion of the Board.
For FY18 the executive members of KMP were awarded the number of performance rights needed to provide a value
consistent with their target remuneration mix for that period, where the value of each performance right was assumed
to be the same as the 30 day volume weighted average share price at the start of the performance period.
1.5 Relationship between remuneration policy and company performance
As required by the Corporations Act 2001, the company’s financial performance across various indices over the past five
years is set out below:
Profit/(loss) after income tax expense from
continuing operations ($m)
Reported basic earnings per share from
continuing operations (EPS) (cents)
Dividends paid (cents)
Share price at 30 June (cents)
Total Shareholder Return (TSR) (%)
FY18
31.3
1.53
-
21.5
30.3
FY17
(5.5)
FY16
10.8
FY15
(220.6)
(0.47)
0.87
(17.55)
-
16.5
87.5
-
8.8
33.3
-
6.6
(34.0)
(20.6)
FY14
28.9
2.30
-
10.0
Given the company’s profit performance in recent years the FY18 STI Plan was designed to incentivise the achievement
of a much improved EBIT target in that year. Similarly, the FY18 LTI Plan is intended to drive growth in TSR, which will
benefit shareholders through increases in the price of their shares and / or the payment of dividends.
50 | MACMAHON ANNUAL REPORT 2018
1.6 Employment contracts
The company’s senior executives are engaged under employment contracts that are ongoing and have no fixed end date.
However, these contracts may be terminated by notice from either party.
Key details of the employment contracts of the current executive members of KMP are set out below
ANNUAL FIXED
REMUNERATION
OTHER
REMUNERATION
NOTICE PERIODS TO
TERMINATE
TERMINATION
PAYMENTS
Michael Finnegan
$530,000 (including
Short term and long term
3 months’ notice
Statutory entitlements;
superannuation)
incentive opportunities as
by either party or
described above.
payment in lieu,
plus
except in certain
if the executive is made
In addition, a one off
circumstances such as
redundant prior to 15 October
retention bonus of 20% of
misconduct where no
2018, or resigns prior to this
the executive’s annual fixed
notice period applies
time in certain circumstances
remuneration is due on 15
October 2018 provided the
individual has not resigned
from employment with
Macmahon prior to that
time.
following a change of control
or delisting of Macmahon,
payment of the retention bonus;
plus
if the executive is terminated or
resigns in certain circumstances
following a change of control
or delisting of Macmahon, a
payment equal to 6 months of
annual fixed remuneration.
Greg Gettingby
$383,250 (including
superannuation)
Giles Everist
$458,000 (including
Short term and long term
3 months’ notice
Statutory entitlements;
superannuation)
incentive opportunities as
by either party or
described above.
payment in lieu,
plus
except in certain
if the executive is terminated or
In addition, the company
circumstances such as
resigns in certain circumstances
provided Mr Everist a
misconduct where no
following a change of control
relocation allowance of
notice period applies
or delisting of Macmahon, a
$20,000 for his relocation
from London to Perth.
payment equal to 6 months of
annual fixed remuneration.
MACMAHON ANNUAL REPORT 2018 | 51
REMUNERATION REPORT CONTINUED
2. NON-EXECUTIVE DIRECTOR REMUNERATION
The structure of the remuneration provided to non-
remuneration legislation. These protocols ensure that
any remuneration recommendation from an external
executive directors is distinct from that applicable to
consultant is free from undue influence by any member
executives. Non-executive directors receive only fixed
of the company’s KMP to whom it relates.
remuneration which is not linked to the financial
performance of the company.
The protocols for any external consultant providing
The remuneration provided to non-executive directors in
providing advice or recommendations to employees
remuneration recommendations prohibit them from
FY18 is set out below:
Chairman (full year)
Vyril Vella (full year)
Eva Skira (full year)
Giles Everist (part year)
Alexander Ramlie (part year)
Arief Sidarto (part year)
Kim Horne (part year)
Remuneration during FY18
178,200
97,605
97,605
48,249
79,335
79,335
21,685
or directors before recommendations are given to the
Committee. These arrangements were implemented to
ensure that any external party will be able to carry out
its work, including information capture and formation of
its recommendations, free from undue influence by the
individuals to whom they relate.
During FY18, the Committee engaged Godfrey
Remuneration Group Pty Ltd (GRG) as a remuneration
consultant to provide data and recommendations about
non-executive director remuneration arising from a
benchmarking of Macmahon’s director remuneration
The maximum aggregate amount that can be paid to non-
arrangements against the practices of a selected group
executive directors (the fee pool) is currently $1,100,000
of comparable ASX listed companies.
per annum, including superannuation. There has been
no increase in the fee pool amount since its approval by
In addition to the remuneration recommendations, GRG
shareholders at the 2008 Annual General Meeting.
provided information and commentary to the company
during FY18 about potential long term incentive
3. REMUNERATION GOVERNANCE
The Board oversees the remuneration arrangements of the
plan structures.
company. In performing this function the Board is assisted
GRG was paid $13,200 for the remuneration
by input and recommendations from the Remuneration &
recommendations in relation to non-executive director
Nomination Committee (Committee), external consultants
remuneration. GRG was paid $13,200 for all other services.
and internal advice. The Committee is responsible for
the overview, and recommendation to the full Board, of
The Board is satisfied that the remuneration
remuneration arrangements for Directors, the CEO, and
recommendations made by GRG were free from undue
Executive Team members. The CEO, in consultation with
influence by members of the KMP about whom the
the Board, sets remuneration arrangements for other
recommendations related. The circumstances relied
executives. No employee is directly involved in deciding
upon by the Board to reach this view include that
their own remuneration (including the CEO).
GRG’s engagement was managed by an executive of
the company, and there was no direct contact with any
Further details of the role and function of the Committee
members of the KMP about whom the recommendations
are set out in the Charter for the Remuneration &
related until the final report was provided to the
Nomination Committee on the company’s website
Committee. GRG also provided a declaration for the
at www.macmahon.com.au
purposes of section 206M of the Corporations Act
The Committee obtains advice and market remuneration
recommendations were made free from undue influence
data from external remuneration advisors as required.
by any KMP about whom the recommendations related.
2001 that to the best of its knowledge and belief, its
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
52 | MACMAHON ANNUAL REPORT 2018
MACMAHON ANNUAL REPORT 2018 | 53
REMUNERATION REPORT CONTINUED
4. VALUE PROVIDED TO KMP
Details of the nature and value of each major element of remuneration provided to KMP of the company during FY18
are set out in the table below. In this table the value of share based payments has been calculated in accordance with
accounting standards.
SHORT-TERM
POST EMPLOYMENT
SALARY
COMMITTEE
FEES
ONE OFF
DISCRETIONARY
PAYMENTS
DIRECTORS NON-EXECUTIVE
YEAR
$
J A Walker (Chairman)
2018
162,740
C R G Everist1
K A Horne
A Ramlie
A W Sidarto
E D R Skira
V A Vella
Total compensation for
Non-executive directors
2017
162,740
2018
40,145
2017
84,196
2018
21,685
2017
-
2018
72,452
2017
-
2018
72,452
2017
-
2018
80,632
2017
80,632
2018
72,605
2017
80,632
2018
522,711
2017
408,200
$
-
-
3,938
8,505
-
-
-
-
-
-
8,505
8,505
-
8,505
12,443
25,515
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
STI
BONUS
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
NON-
MONETARY
BENEFITS
TOTAL
SHORT-
TERM
LEAVE
PAYOUT
PAYMENTS
OTHER
LONG-TERM
BENEFITS
ANNUATION
PAYMENTS
RIGHTS
RELATED
RELATED
RIGHTS
COMPENSATION
SUPER-
TERMINATION
AND
PERFORMANCE
PERFORMANCE
OPTIONS AND
TOTAL
COMPENSATION
NON-
CONSISTING OF
$
-
-
$
162,740
162,740
268
44,351
-
-
-
-
-
-
-
-
-
-
-
92,701
21,685
-
72,452
-
72,452
-
89,137
89,137
72,605
89,137
268
535,422
-
433,715
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
SHORT-TERM
POST EMPLOYMENT
SALARY
COMMITTEE
FEES
ONE OFF
DISCRETIONARY
PAYMENTS3
STI
BONUS
NON-
MONETARY
BENEFITS
TOTAL
SHORT-
TERM
LEAVE
PAYOUT
PAYMENTS
OTHER
LONG-TERM
BENEFITS
ANNUATION
PAYMENTS
RIGHTS
RELATED
RELATED
RIGHTS
COMPENSATION
SUPER-
TERMINATION
AND
PERFORMANCE
PERFORMANCE
OPTIONS AND
TOTAL
COMPENSATION
NON-
CONSISTING OF
SHARE-
BASED
PAYMENT
OPTIONS
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
SHARE-
BASED
PAYMENT
OPTIONS
$
155,863
54,611
26,752
-
(61,165)
61,165
74,618
-
196,068
115,776
196,068
115,776
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
$
15,460
15,460
3,898
4,904
2,060
6,883
6,883
-
-
-
8,468
8,468
25,000
8,468
68,652
37,300
$
13,113
21,444
-
13,225
-
96,644
38,113
33,287
20,049
20,096
8,601
36,907
25,000
28,943
41,926
70,831
57,003
70,831
165,296
57,003
75,413
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
36
13
23
-
(21)
11
24
-
62
24
19
8
%
100
100
100
100
100
-
100
100
-
-
100
100
100
100
100
100
%
64
87
77
-
121
89
76
-
338
176
69
92
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
14
13
8
-
(21)
11
11
-
11
24
6
8
$
178,200
178,200
48,249
97,605
23,745
79,335
79,335
-
-
-
97,605
97,605
97,605
97,605
604,074
471,015
1,119,497
430,603
354,922
289,009
546,171
676,568
$
-
-
2,439,996
976,774
3,044,070
1,447,789
DIRECTORS NON-EXECUTIVE
YEAR
$
M J Finnegan
Chief Executive Officer
C R G Everist1
Chief Financial Officer
J E Martins2
Chief Financial Officer
G P Gettingby
Chief Counsel and
Company Secretary
Total compensation
executive personnel
Total compensation:
Directors and Executives
2018
509,949
2017
340,837
2018
244,182
2017
-
2018
233,000
2017
417,803
2018
350,000
2017
-
2018
1,337,131
2017
758,640
2018
1,859,842
2017
1,166,840
12,443
25,515
341,324
391,641
2,676
2,607,926
3,949
-
-
7,242
1,199,597
-
341,324
391,641
2,408
2,072,504
3,949
-
-
7,242
765,882
-
5,296
423,099
-
-
531,081
-
-
-
-
$
$
$
$
150,000
248,252
2,097
910,298
-
1,946
342,783
53,632
311
298,125
-
-
-
100,000
-
91,324
89,757
-
-
$
-
-
-
-
-
-
-
-
-
-
333,000
3,949
$
-
-
-
-
-
-
-
-
-
-
1 Mr. Everist resigned as a director of Macmahon and commenced in an executive role as CFO in December 2017
2 Mr. Martins ceased as the CFO of the company in December 2017
3 One-off discretionary payments made subsequent to the successful defence of a hostile takeover bid in March 2017
54 | MACMAHON ANNUAL REPORT 2018
DIRECTORS NON-EXECUTIVE
YEAR
$
J A Walker (Chairman)
2018
162,740
A Ramlie
2018
72,452
A W Sidarto
2018
72,452
C R G Everist1
K A Horne
E D R Skira
V A Vella
Total compensation for
Non-executive directors
M J Finnegan
Chief Executive Officer
C R G Everist1
Chief Financial Officer
J E Martins2
Chief Financial Officer
G P Gettingby
Chief Counsel and
Company Secretary
Total compensation
executive personnel
Total compensation:
Directors and Executives
3,938
8,505
8,505
8,505
8,505
12,443
25,515
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
2017
162,740
2018
40,145
2017
84,196
2018
21,685
2017
2017
2017
-
-
-
2018
80,632
2017
80,632
2018
72,605
2017
80,632
2018
522,711
2017
408,200
2018
509,949
2017
340,837
2018
244,182
2017
-
2018
233,000
2017
417,803
2018
350,000
2017
-
2018
1,337,131
2017
758,640
2018
1,859,842
2017
1,166,840
$
-
-
$
162,740
162,740
268
44,351
92,701
21,685
72,452
72,452
-
-
-
89,137
89,137
72,605
89,137
268
535,422
433,715
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
DIRECTORS NON-EXECUTIVE
YEAR
$
$
$
SHORT-TERM
POST EMPLOYMENT
SHARE-
BASED
PAYMENT
COMMITTEE
DISCRETIONARY
STI
MONETARY
ONE OFF
NON-
TOTAL
SHORT-
LEAVE
PAYOUT
SALARY
FEES
PAYMENTS
BONUS
BENEFITS
TERM
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
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
15,460
15,460
3,898
4,904
2,060
-
6,883
-
6,883
-
8,468
8,468
25,000
8,468
68,652
37,300
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
100
100
100
100
100
-
100
-
100
-
100
100
100
100
100
100
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
178,200
178,200
48,249
97,605
23,745
-
79,335
-
79,335
-
97,605
97,605
97,605
97,605
604,074
471,015
SHORT-TERM
POST EMPLOYMENT
SHARE-
BASED
PAYMENT
COMMITTEE
DISCRETIONARY
STI
MONETARY
ONE OFF
NON-
TOTAL
SHORT-
LEAVE
PAYOUT
SALARY
FEES
PAYMENTS3
BONUS
BENEFITS
TERM
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
150,000
248,252
2,097
910,298
1,946
342,783
53,632
311
298,125
100,000
333,000
3,949
91,324
89,757
531,081
5,296
423,099
-
-
341,324
391,641
2,408
2,072,504
3,949
341,324
391,641
2,676
2,607,926
3,949
7,242
765,882
7,242
1,199,597
12,443
25,515
$
$
33,287
20,049
20,096
8,601
-
-
13,113
21,444
-
13,225
36,907
25,000
28,943
41,926
-
70,831
57,003
-
96,644
38,113
70,831
165,296
57,003
75,413
$
-
-
-
-
-
-
-
-
-
-
-
-
$
155,863
54,611
26,752
-
(61,165)
61,165
74,618
-
196,068
115,776
196,068
115,776
%
36
13
23
-
(21)
11
24
-
62
24
19
8
%
64
87
77
-
121
89
76
-
338
176
69
92
%
14
13
8
-
(21)
11
11
-
11
24
6
8
$
1,119,497
430,603
354,922
-
289,009
546,171
676,568
-
2,439,996
976,774
3,044,070
1,447,789
MACMAHON ANNUAL REPORT 2018 | 55
REMUNERATION REPORT CONTINUED
5. ANALYSIS OF STI BONUSES INCLUDED IN REMUNERATION
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director
of the company, and other key management personnel are detailed below.
M Finnegan
G Everist
G Gettingby
Included in remuneration
% VESTED IN YEAR
% FORFEITED IN YEAR
248,252
53,632
89,757
46.84%
46.84%
46.84%
53.16%
53.16%
53.16%
The amounts forfeited are due to performance criteria not being met in relation to the current financial year.
6. EQUITY INSTRUMENTS
6.1 Rights over equity instruments granted as compensation
Details of the rights over ordinary shares in the company that were granted as compensation to KMP during the
reporting period are as follows:
Number of rights
granted during FY18
VESTING CONDITION
GRANT DATE
FAIR VALUE AT
GRANT DATE
EXPIRY DATE
M Finnegan
J Martins
G Gettingby
G Everist
3,333,333
1,440,252
1,205,189
Absolute TSR
25 Aug 17
283,333
See explanation below
Absolute TSR
25 Aug 17
122,421
See explanation below
Absolute TSR
25 Aug 17
102,441
See explanation below
1,070,093
Absolute TSR
02 Mar 18
133,672
See explanation below
Rights will expire on the earlier of the termination of the individual’s employment, or the date after 1 July 2020 that
they are tested by the Board against the vesting condition and found not to satisfy that condition. Rights are eligible to
vest on 1 July 2020. In addition to a continuing performance condition, vesting is conditional on the extent to which the
company achieves increases in absolute TSR, as described on page 49.
56 | MACMAHON ANNUAL REPORT 2018
6.2 Details of equity incentives affecting current and future remuneration
Details of the vesting profiles of the rights over ordinary shares in the company held by KMP during FY18 are
detailed below:
Grant Date
NUMBER
GRANTED
NUMBER VESTED
IN FY18
NUMBER
FORFEITED IN FY18
HELD AT 30
JUNE 2018
FINANCIAL YEAR IN WHICH
THE GRANT VESTS, SUBJECT
TO PERFORMANCE
M Finnegan
J Martins
G Gettingby
G Everist
07 Aug 14
700,000
254,100
445,900
-
12 Aug 16
2,456,731
25 Aug 17
3,333,333
12 Aug 16
2,446,581
25 Aug 17
1,440,252
-
-
-
-
-
-
2,456,731
3,333,333
2,446,581
1,440,252
-
-
-
07 Aug 14
500,000
181,500
318,500
12 Aug 16
1,618,822
25 Aug 17
1,205,189
02 Mar 18
1,070,093
-
-
-
-
-
-
1,618,822
1,205,189
1,070,093
FY18
FY20
FY21
FY20
FY21
FY18
FY20
FY21
FY21
All performance rights held at 30 June 2018 have not vested and are neither exercisable or unexercisable.
MACMAHON ANNUAL REPORT 2018 | 57
REMUNERATION REPORT CONTINUED
6.3 Analysis of movements in equity instruments
The value of rights over ordinary shares in the company granted and exercised by KMP during FY18 is detailed below:
M Finnegan
J Martins
G Gettingby
G Everist
Value granted in year
VALUE OF RIGHTS EXERCISED IN YEAR
283,333
122,421
102,441
133,672
23,187
-
16,562
-
The value of rights granted in the year is the fair value of the rights calculated at grant date. The total value of rights
granted is included in the table above. This amount is allocated to remuneration over the performance period
(i.e. in years 1 July 2017 to 1 July 2020).
The movement during the reporting period, by number of rights over ordinary shares in the company held, directly,
indirectly or beneficially, by each KMP, including their related parties, is as follows:
Held at 1
July 2017
GRANTED AS
COMPENSATION
EXERCISED
LAPSED
FORFEITED
HELD AT 30
JUNE 2018
VESTED DURING
THE YEAR
M Finnegan
J Martins
G Gettingby
G Everist
3,156,731
2,446,581
2,118,822
3,333,333
254,100
445,900
-
5,790,064
254,100
1,440,252
-
-
3,886,833
-
1,205,189
181,500
318,500
-
1,070,093
-
-
-
-
2,824,011
1,070,093
-
181,500
-
58 | MACMAHON ANNUAL REPORT 2018
6.4 Movements in shareholdings
The movement during the reporting period in the number of ordinary shares in the company held directly, indirectly or beneficially, by
each KMP including their related parties, is as follows:
BALANCE AT THE
START OF THE YEAR
PURCHASES
SOLD
VESTED
PERFORMANCE RIGHTS
BALANCE AT END
OF THE YEAR
Directors
J Walker
E Skira
V Vella
A Sidarto
A Ramlie
K Horne
Executives
M Finnegan
J Martins2
G Gettingby
G Everist3
425,000
-
1,857,842
-
-
-
300,000
-
484,827
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
(sold 16/10/2017)
-
-
-
-
-
-
425,000
-
1,857,842
-
-
-
254,100
554,100
181,500
-
666,327
50,000
TOTAL
3,042,669
125,000
50,000
435,600
3,553,269
1 Mr. Everist resigned from the board of Macmahon in December 2017
2 Mr. Martins ceased as the CFO of Macmahon in December 2017
3 Mr. Everist was appointed as CFO of Macmahon in December 2017. He was previously a director of the company.
MACMAHON ANNUAL REPORT 2018 | 59
FINANCIAL
STATEMENTS
CONTENTS
Consolidated financial statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent audit report
60
61
63
64
65
66
126
128
GENERAL INFORMATION
The financial statements cover Macmahon Holdings
A description of the nature of the consolidated entity’s
Limited (“the company”) as a consolidated entity
operations and its principal activities are included in
(referred to hereafter as “the Group” or “the consolidated
the Directors’ report, which is not part of the
entity” consisting of Macmahon Holdings Limited and the
financial statements.
entities it controlled at the end of, or during, the year.
The financial statements are presented in Australian
The financial statements were authorised for issue,
dollars, which is Macmahon Holdings Limited’s
in accordance with a resolution of Directors, on 24
functional and presentation currency.
August 2018.
Macmahon Holdings Limited is a listed public company
An accounting policy, critical accounting estimate,
limited by shares, incorporated and domiciled in Australia.
assumption or judgement specific to a note is
The Group is a for-profit entity.
disclosed within the note itself.
Registered office & Principal place of business
15 Hudswell Road
PERTH AIRPORT
Western Australia, 6105
60 | MACMAHON ANNUAL REPORT 2018
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
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
Takeover defence costs
Other expenses
Net finance costs
Share of profit of equity-accounted investees, net of tax
Profit / (Loss) before income tax expense
from continuing operations
Income tax expense
Profit / (Loss) after income tax expense from continuing operations
Profit / (Loss) after income tax expense from discontinued operations
NOTE
2
3
3
24
4a
2018
$’000
710,263
4,621
(332,011)
(205,042)
(29,917)
(77,728)
(15,102)
-
(16,045)
(2,426)
2,207
2017
$’000
359,645
6,845
(174,795)
(134,212)
(5,866)
(33,476)
(14,266)
(3,408)
(8,061)
(150)
2,524
38,820
(5,220)
(7,519)
31,301
1,930
(322)
(5,542)
(17,264)
Profit / (Loss) after income tax expense for the year
33,231
(22,806)
Other comprehensive income / (loss)
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation
Reclassification of foreign currency reserve on closure
of foreign operation
Other comprehensive (loss) / income for the year, net of tax
13,028
-
13,028
(5,212)
6,982
1,770
Total comprehensive profit / (loss) for the year
46,259
(21,036)
Total comprehensive profit / (loss) for the year is attributable to:
Continuing operations
Discontinued operations
44,329
1,930
(3,772)
(17,264)
46,259
(21,036)
MACMAHON ANNUAL REPORT 2018 | 61
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
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 / (loss) from discontinued operations
attributable to the owners of Macmahon Holdings Limited
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
Earnings per share for profit / (loss) attributable to the
owners of Macmahon Holdings Limited
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
NOTE
2018
CENTS
2017
CENTS
5
5
5
5
5
5
1.53
1.52
0.09
0.09
1.62
1.61
(0.47)
(0.47)
(1.45)
(1.45)
(1.92)
(1.92)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
62 | MACMAHON ANNUAL REPORT 2018
STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Lease receivable
Income tax
Assets classified as held for sale
Total current assets
Non current assets
Investments accounted for using the equity method
Trade and other receivables
Property, plant and equipment
Intangible assets and goodwill
Lease receivable
Deferred tax
Total non current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Income tax
Employee benefits
Provisions
Total current liabilities
Non current liabilities
Trade and other payables
Borrowings
Employee benefits
Total non current liabilities
Total liabilities
NET ASSETS
Equity
Issued capital
Reserves
Net accumulated losses
TOTAL EQUITY
NOTE
2018
$’000
2017
$’000
7
8a
9
10
4b
14
24
8b
14
15
10
4c
11a
17
4b
12a
13
11b
17
12b
109,622
152,263
41,984
700
4,157
308,726
2,868
311,594
9,273
4,628
62,925
53,423
32,086
-
12,963
161,397
3,079
164,476
6,891
-
380,140
122,679
5,808
9,792
2,114
411,755
-
-
917
130,487
723,349
294,963
174,293
21,212
2,007
18,209
11,572
73,990
1,939
-
12,111
14,582
227,293
102,622
745
85,060
417
86,222
-
6,909
441
7,350
313,515
109,972
409,834
184,991
18
19
563,118
3,842
384,794
(9,873)
(157,126)
(189,930)
409,834
184,991
The above statement of financial position should be read in conjunction with the accompanying notes.
MACMAHON ANNUAL REPORT 2018 | 63
STATEMENT OF CHANGES IN EQUITY
Consolidated
ISSUED
CAPITAL
$’000
RESERVES
$’000
ACCUMULATED
LOSSES
$’000
RETAINED
PROFITS
$’000
TOTAL
EQUITY
$’000
Balance at 1 July 2017
384,794
(9,873)
(189,930)
-
184,991
Profit / (loss) after income
tax expense for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income / (loss)
for the year
Transactions with owners in their
capacity as owners:
Transfer of expired performance rights
Treasury shares allocated on
vesting of performance rights
Shares issued (note 18)
Share-based payments (note 27)
-
-
-
-
-
178,324
-
-
13,028
13,028
(168)
595
-
260
-
-
-
-
-
-
-
33,231
33,231
-
13,028
33,231
46,259
168
(595)
-
-
-
-
178,324
260
Balance at 30 June 2018
563,118
3,842
(189,930)
32,804
409,834
Consolidated
ISSUED
CAPITAL
$’000
RESERVES
$’000
ACCUMULATED
LOSSES
$’000
RETAINED
PROFITS
$’000
TOTAL
EQUITY
$’000
Balance at 1 July 2016
385,957
(11,914)
(166,668)
Profit / (loss) after income
tax expense for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income / (loss)
for the year
Transactions with owners in their
capacity as owners:
Transfer of expired performance rights
Treasury shares allocated on
vesting of performance rights
Share-based payments (note 27)
-
-
-
-
-
-
Share buy-back (note 18)
(1,163)
-
(22,806)
1,770
-
1,770
(22,806)
(286)
742
(185)
-
286
(742)
-
-
Balance at 30 June 2017
384,794
(9,873)
(189,930)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
-
-
-
-
-
-
-
-
-
207,375
(22,806)
1,770
(21,036)
-
-
(185)
(1,163)
184,991
64 | MACMAHON ANNUAL REPORT 2018
STATEMENT OF OF CASH FLOWS
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 received / (paid)
NOTE
2018
$’000
689,464
(590,950)
3,390
545
(2,969)
6,274
2017
$’000
402,438
(376,422)
4,319
402
(480)
(42)
Net cash from operating activities
6
105,754
30,215
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of subsidiary (net of cash acquired)
Investment in joint venture
(44,100)
3,095
(1,571)
-
(34,917)
12,579
-
1,859
Net cash used in investing activities
(42,576)
(20,479)
Cash flows from financing activities
Purchase of own shares
AMNT Transaction costs
Repayment of borrowings
Repayment of hire purchase and finance lease liabilities
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
-
(4,207)
(4,581)
(7,762)
(16,550)
46,628
62,925
69
(1,163)
-
-
(1,432)
(2,595)
7,141
56,699
(915)
Cash and cash equivalents at the end of the financial year
7
109,622
62,925
The above statement of cash flows should be read in conjunction with the accompanying notes.
MACMAHON ANNUAL REPORT 2018 | 65
CONTENTS
CONTENTS OF THE NOTES
TO THE CONSOLIDATED
FINANCIAL STATEMENTS
66 | MACMAHON ANNUAL REPORT 2018
PART A: Results
Note 1. Operating segments
Note 2. Other income
Note 3. Expenses
Note 4. Tax
Note 5. Earnings per share
PART B: Cash Flow Information
Note 6. Reconciliation of profit /(loss) after income tax to net cash from operating activities
PART C: Working Capital
Note 7. Cash and cash equivalents
Note 8. Trade and other receivables
Note 9. Inventories
Note 10. Lease receivable
Note 11. Trade and other payables
Note 12. Employee benefits
Note 13. Provisions
PART D: Fixed Assets
Note 14. Property, plant and equipment
Note 15. Intangible assets and goodwill
PART E: Risk
Note 16. Financial Risk Management
PART F: Debt and Equity
Note 17. Borrowings
Note 18. Equity - issued capital
Note 19. Equity - reserves
PART G: Unrecognised items
Note 20. Contingent liabilities
Note 21. Commitments
Note 22. Events after the reporting period
PART H: Other information/Group Structure
Note 23. Interests in subsidiaries
Note 24. Interests in joint ventures
Note 25. Related party transactions
Note 26. Key management personnel disclosures
Note 27. Share-based payments
Note 28. Remuneration of auditors
Note 29. Deed of cross guarantee
Note 30. Parent entity information
Note 31. Acquisition of subsidiary
Note 32. Other significant accounting policies
68
70
70
72
75
77
78
78
80
80
81
82
84
86
89
91
100
102
103
104
105
106
107
108
110
111
112
116
117
120
121
122
MACMAHON ANNUAL REPORT 2018 | 67
NOTES TO THE FINANCIAL STATEMENTS
PART A: RESULTS
Note 1. Operating segments
Identification of reportable operating segments
The consolidated entity has identified its reportable segments based on the internal reports that are reviewed and used
by the Chief Executive Officer (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.
Civil
Provides consulting, design, civil construction, equipment hire, maintenance and site rehabilitation services.
Joint Ventures
Revenue from joint venture entities is not recognised in the financial statements as these entities are equity accounted.
For such entities, in accordance with Accounting Standards, the share of net profits is recognised.
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. 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.
For clarity and reconciliation to the statement of profit and loss, discontinued operations are separately disclosed.
CONSOLIDATED - 2018
Revenue
External revenues
Total revenue
Earnings before interest, tax,
depreciation and amortisation
(and other significant items)
Interest income
Finance costs
Depreciation and amortisation
Profit/(loss) before
income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
MINING
$’000
CIVIL
$’000
DISCONTINUED
OPERATIONS
$’000
UNALLOCATED
$’000
TOTAL
$’000
684,244
684,244
26,019
26,019
113,260
288
(2,713)
(76,820)
34,015
2,187
4
(256)
(908)
1,027
-
-
1,928
2
-
-
-
-
3,527
251
-
-
710,263
710,263
120,902
545
(2,969)
(77,728)
1,930
3,778
40,750
571,788
26,893
132
124,536
(7,519)
33,231
723,349
723,349
313,515
313,515
CAPITAL EXPENDITURE
315,083
-
68 | MACMAHON ANNUAL REPORT 2018
292,449
15,380
5,570
116
-
-
315,083
Earnings before interest, tax, depreciation and
amortisation (and other significant items)
35,199
(16,459)
CONSOLIDATED - 2017
Revenue
External revenues
Total revenue
Interest income
Finance costs
Depreciation and amortisation
Impairment of property, plant and equipment
Takeover defence costs
Profit/(loss) before income tax expense
Income tax expense
Loss after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
MINING
$’000
DISCONTINUED
OPERATIONS
$’000
UNALLOCATED
$’000
TOTAL
$’000
359,645
359,645
6,595
6,595
51
(494)
(33,476)
-
-
1,280
68
-
(740)
(1,683)
-
(18,814)
303
303
(1,461)
297
-
-
-
(3,408)
(4,572)
217,774
150
77,039
101,713
1,368
6,891
366,543
366,543
17,279
416
(494)
(34,216)
(1,683)
(3,408)
(22,106)
(700)
(22,806)
294,963
294,963
109,972
109,972
CAPITAL EXPENDITURE
44,993
-
-
44,993
Australia
Indonesia
Nigeria
Other
SALES TO EXTERNAL
CUSTOMERS
GEOGRAPHICAL NON-CURRENT
ASSETS
2018
$’000
545,439
160,175
-
4,649
710,263
2017
$’000
348,458
7,333
6,595
4,157
366,543
2018
$’000
236,918
172,715
-
2,122
411,755
2017
$’000
120,248
8,378
-
1,861
130,487
The Mining segment operates in two principal geographical areas - Australia and Indonesia. 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 31% (2017: 55%) of the consolidated entity’s revenue is attributable to sale transactions with its largest customer.
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 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 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.
MACMAHON ANNUAL REPORT 2018 | 69
NOTES TO THE FINANCIAL STATEMENTS
PART A: RESULTS
Note 2. Other income
Net gain on disposal of property, plant and equipment
Net foreign exchange gain
Other
Other income
Other income
CONSOLIDATED
2018
$’000
2017
$’000
171
2,576
1,874
4,621
2,268
892
3,685
6,845
Other income includes management fees from joint venture partners of $0.8 million (June 2017: $3.4 million). Refer to
note 25. Gain / 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.
Note 3. Expenses
Profit / (Loss) before income tax from continuing
operations includes the following specific expenses:
Depreciation from continuing operations
Leasehold improvements
Plant and equipment
Total depreciation from continuing operations
Depreciation included in discontinued operations
Plant and equipment
Total depreciation from discontinued operations
CONSOLIDATED
2018
$’000
2017
$’000
26
77,702
80
33,396
77,728
33,476
-
-
740
740
Total depreciation expense
77,728
34,216
Finance (income) and costs
Interest income on financial assets (bank deposits)
Interest expense on financial liabilities
carried at amortised cost
(543)
2,969
2,426
(344)
494
150
70 | MACMAHON ANNUAL REPORT 2018
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
Equipment and office expenses under operating leases
Total rental expense
Superannuation expense
Defined contribution superannuation expense
Defined benefit superannuation expense
Total superannuation expense
Share-based payments (reversal) / expense
Share-based payments (reversal) / expense
CONSOLIDATED
2018
$’000
2017
$’000
15,102
15,102
12,400
35
12,435
14,266
14,266
9,248
17
9,265
260
(185)
MACMAHON ANNUAL REPORT 2018 | 71
NOTES TO THE FINANCIAL STATEMENTS
PART A: RESULTS
Note 4. Tax
a) Income tax expense
CONSOLIDATED
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
2018
$’000
8,780
(65)
(1,196)
7,519
7,519
-
7,519
2017
$’000
923
77
(300)
700
322
378
700
38,820
1,929
(5,220)
(16,886)
40,749
(22,106)
Numerical reconciliation of income tax expense and tax at the statutory rate
40,749
(22,106)
Tax at the statutory tax rate of 30%
12,225
(6,632)
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
Current year temporary differences for which no deferred tax asset was recognised
Net temporary difference previously unrecognised
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
72 | MACMAHON ANNUAL REPORT 2018
78
(219)
(838)
(949)
301
400
(3,418)
4
7,584
(65)
7,519
(55)
2,557
(450)
(21)
(13)
2,886
-
2,351
623
77
700
CONSOLIDATED
2018
$’000
2017
$’000
4,157
12,963
2,007
-
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
Amount recognised in equity during the year:
Treasury shares expense / (benefit)
Amount recognised in profit or loss during the year
Unrecognised deferred tax asset
Australian impairment and other deductible differences (excluding inventory)
Allowances for inventory
Foreign deductible differences (excluding inventory)
Unrecognised differences
Foreign tax losses
CONSOLIDATED
2018
$’000
2017
$’000
(458)
(17,919)
(17,017)
16,439
14,950
846
5,273
(301)
(19,288)
(10,760)
10,101
6,439
76
14,650
2,114
917
-
-
-
(300)
45,056
-
-
45,056
-
43,855
8,198
6,189
58,242
8,206
45,056
66,448
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 2018 | 73
NOTES TO THE FINANCIAL STATEMENTS
PART A: RESULTS
Note 4. Tax continued
Deferred tax assets and liabilities are offset if there is a
tax assets arising from unused tax losses as a result of
legally enforceable right to offset current tax liabilities and
revised assessments of the probability of recoverability is
assets, and they relate to income taxes levied by the same
recognised by the head entity only.
tax authority on the same taxable entity, or on different
tax entities, but they intend to settle current tax assets and
Nature of tax funding arrangements
liabilities on a net basis or their tax assets and liabilities
and tax sharing arrangements
will be realised simultaneously.
The head entity, in conjunction with other members of
the tax-consolidated group, has entered into a tax funding
A deferred tax asset is recognised for unused tax losses,
arrangement which sets out the funding obligations of
tax credits and deductible temporary differences, to the
members of the tax-consolidated group in respect of tax
extent that it is probable that future taxable profits will
amounts. The tax funding arrangements require payments
be available against which they can be utilised. Deferred
to/(from) the head entity equal to the current tax asset/
tax assets are reviewed at each reporting date and are
(liability) assumed by the head entity and any deferred
reduced to the extent that it is no longer probable that the
tax loss asset assumed by the head entity, resulting in the
related tax benefit will be realised.
head entity recognising an inter-entity payable/(receivable)
Additional income tax expenses that arise from the
inter-entity payables/(receivables) are at call.
distribution of cash dividends are recognised at the
same time that the liability to pay the related dividend is
Contributions to fund the current tax liabilities are payable
recognised. The consolidated entity does not distribute
as per the tax funding arrangement and reflect the timing
non-cash assets as dividends to its Shareholders.
of the head entity’s obligation to make payments for tax
equal in amount to the tax asset/(liability) assumed. The
liabilities to the relevant tax authorities.
Tax consolidation
The Company and its wholly-owned Australian resident
The head entity in conjunction with other members of
entities have formed a tax-consolidated group with effect
the tax-consolidated group has also entered into a tax
from 1 July 2003 and are therefore taxed as a single
sharing agreement. The tax sharing agreement provides
entity from that date. The head entity within the tax-
for the determination of the allocation of income tax
consolidated group is Macmahon Holdings Limited.
liabilities between the entities should the head entity
Current income tax expense/benefit, deferred tax liabilities
default on its tax payment obligations. No amounts have
and deferred tax assets arising from temporary differences
been recognised in the financial statements in respect of
of the members of the tax-consolidated group are
this agreement as payment of any amounts under the tax
recognised in the separate financial statements of the
sharing agreement is considered remote.
members of the tax-consolidated group using the
‘separate taxpayer within group’ approach by reference
Income tax
to the carrying amounts of assets and liabilities in the
The consolidated entity is subject to income taxes in the
separate financial statements of each entity and the tax
jurisdictions in which it operates. Significant judgment is
values applying under tax consolidation.
required in determining the provision for income tax. There
are many transactions and calculations undertaken during
Any current tax liabilities (or assets) and deferred tax
the ordinary course of business for which the ultimate
assets arising from unused tax losses of the subsidiaries are
tax determination is uncertain. The consolidated entity
assumed by the head entity in the tax-consolidated group
recognises liabilities for anticipated tax audit issues based
and are recognised as amounts payable to/(receivable
on the consolidated entity’s current understanding of the
from) other entities in the tax consolidated group in
tax law. Where the final tax outcome of these matters
conjunction with any tax funding arrangement amounts
is different from the carrying amounts, such differences
(refer below). Any difference between these amounts
will impact the current and deferred tax provisions in the
is recognised by the consolidated entity as an equity
period in which such determination is made.
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
74 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART A: RESULTS
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 MacmahonHoldings Limited
Weighted average number of ordinary shares used
in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue 1
Weighted average number of ordinary shares used
in calculating diluted earnings per share
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
Earnings per share for loss from discontinued operations
Profit / (loss) after income tax from discontinued operations
attributable to the owners of Macmahon Holdings Limited
Weighted average number of ordinary shares used
in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue 1
Weighted average number of ordinary shares used
in calculating diluted earnings per share
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
CONSOLIDATED
2018
$’000
2017
$’000
31,301
(5,542)
NUMBER
NUMBER
2,041,341,507
1,189,689,643
17,699,922
-
2,059,041,428
1,189,689,643
CENTS
CENTS
1.53
1.52
(0.47)
(0.47)
CONSOLIDATED
2018
$’000
2017
$’000
1,930
(17,264)
NUMBER
NUMBER
2,041,341,507
1,189,689,643
17,699,922
-
2,059,041,428
1,189,689,643
CENTS
CENTS
0.09
0.09
(1.45)
(1.45)
1 At 30 June 2017, performance rights were exluded from the calculation as their effect would have been anti-dilutive.
MACMAHON ANNUAL REPORT 2018 | 75
NOTES TO THE FINANCIAL STATEMENTS
PART A: RESULTS
Note 5. Earnings per share continued
Earnings per share for profit / (loss)
Profit / (Loss) after income tax attributable to the owners of
Macmahon Holdings Limited
Weighted average number of ordinary shares used
in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue 1
Weighted average number of ordinary shares used
in calculating diluted earnings per share
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
CONSOLIDATED
2018
$’000
2017
$’000
33,231
(22,806)
NUMBER
NUMBER
2,041,341,507
1,189,689,643
17,699,922
-
2,059,041,428
1,189,689,643
CENTS
CENTS
1.63
1.61
(1.92)
(1.92)
1. At 30 June 2017, performance rights were excluded from the diluted earnings per share calculation as their effect
would have been antidilutive.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit / (loss) 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 (if any)
and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive
potential ordinary shares.
76 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART B: CASH FLOW INFORMATION
Note 6. Reconciliation of profit / (loss) after income tax to net cash from operating activities
Profit / (Loss) after income tax expense for the year from continuing operations
Adjustments for:
Depreciation and amortisation
Net gain on disposal of property, plant and equipment and other
Share of profit - joint ventures
Share-based payments
Foreign exchange gains
Income tax expense / (benefit)
Change in operating assets and liabilities:
Net cash received from jointly controlled entities
Decrease / (increase) in trade and other receivables
Decrease / (increase) in inventories
Increase / (decrease) in trade and other payables
Increase / (decrease) in income tax balances
Increase / (decrease) in employee benefits
CONSOLIDATED
2018
$’000
2017
$’000
31,301
(5,542)
77,728
33,476
(171)
(2,207)
260
(2,576)
7,519
3,390
(93,765)
(9,898)
85,400
6,274
2,630
(2,268)
(2,524)
(185)
(1,239)
322
-
(5,302)
850
15,487
(3)
(2,062)
Net cash from operating activities - continuing operations
105,885
31,010
Net cash from operating activities - discontinued operations
(131)
(795)
Net cash from operating activities
105,754
30,215
MACMAHON ANNUAL REPORT 2018 | 77
NOTES TO THE FINANCIAL STATEMENTS
PART C: WORKING CAPITAL
Note 7. Cash and cash equivalents
Cash on hand
Cash at bank
Cash and cash equivalents
CONSOLIDATED
2018
$’000
16
109,606
2017
$’000
8
62,917
109,622
62,925
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 8. Trade and other receivables
a) Current trade and other receivables
Trade receivables
Less: allowance for doubtful debts
Other receivables and prepayments 1
Accrued revenue
1 Other receivables includes VAT receivable of $18.2 million relating to the AMNT asset acquisition.
Allowance for doubtful debts
The ageing of the doubtful receivables allowance are as follows:
Over 3 months overdue
Movements in the allowance for doubtful debts is as follows:
Opening balance
Additional allowances (released) / recognised
Allowances recovered though sale of subsidiaries and settlement of dispute
CONSOLIDATED
2018
$’000
42,362
(126)
42,236
29,433
80,594
152,263
2017
$’000
8,506
(216)
8,290
9,163
35,970
53,423
CONSOLIDATED
2018
$’000
2017
$’000
126
126
216
216
CONSOLIDATED
2018
$’000
2017
$’000
216
(90)
-
126
1,260
(935)
(109)
216
Past due but not doubtful
There are 12 customers with balances past due but without any allowance for doubtful debts as at 30 June 2018 (2017: 5).
78 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART C: WORKING CAPITAL
Note 8. Trade and other receivables continued
The ageing of the past due but not doubtful debts are as follows:
Past due 0-30 days
Past due 31+ days
CONSOLIDATED
2018
$’000
2017
$’000
3,688
1,982
5,670
658
-
658
After reviewing credit terms of customers based on recent collection practices, the consolidated entity did not consider a
credit risk on the aggregate balances.
** For information on credit risk refer to note 16
b) Non-current trade and other receivables
Other receivables
Trade and other receivables
Trade and other receivables
CONSOLIDATED
2018
$’000
2017
$’000
4,628
-
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 doubtful receivables assessment requires a degree of estimation and judgment. The level of provision
is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and
specific knowledge of the individual debtors financial position.
MACMAHON ANNUAL REPORT 2018 | 79
NOTES TO THE FINANCIAL STATEMENTS
PART C: WORKING CAPITAL
Note 9. Inventories
Operating inventory at cost
Less: Allowance for obsolescence
Inventory at Net Realisable Value
CONSOLIDATED
2018
$’000
43,883
(2,454)
41,429
555
41,984
2017
$’000
30,630
(3,925)
26,705
5,381
32,086
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.
Allowance for obsolescence
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 the recent sales experience, current market conditions, the ageing of
inventories and other factors that affect inventory obsolescence.
Note 10. Lease receivable
Lease receivable - current
Lease receivable - non-current
CONSOLIDATED
2018
$’000
700
9,792
10,492
2017
$’000
-
-
-
During the year, the Group acquired new mining plant and equipment for the Byerwen project which is subject to a put
and call option with the client. The put and call feature results in the plant and equipment being recognised as a lease
receivable rather than plant and equipment.
The lease receivable is initially recognised at the amount equal to the net investment in the lease which equals the
present value of the minimum lease payments and any unguaranteed residual value. When payments are received,
the principal portion is recognised against the lease receivable and the interest portion is recognised in profit or loss as
lease income.
Minimum lease payments receivable at 30 June 2018 are:
MINIMUM LEASE
PAYMENTS
INTEREST
PRINCIPAL
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
Not later than one year
Later than one year not later
than 5 years
1,512
10,906
12,418
-
-
-
812
1,114
1,926
-
-
-
700
9,792
10,492
-
-
-
The finance lease receivable is neither past due or impaired.
80 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART C: WORKING CAPITAL
Note 11. Trade and other payables
a) Current trade and other payables
Trade payables
Accrued expenses
Other payables
CONSOLIDATED
2018
$’000
68,260
97,452
8,581
174,293
2017
$’000
28,313
40,306
5,371
73,990
Accrued wages and salaries between the last pay date and 30 June 2018 of $2.3 million (2017: $2.0 million) are included
within the accrued expenses balance.
Refer to note 16 for further information on financial instruments.
b) Non-current trade and other payables
Contingent consideration (refer to note 31)
Trade and other payables
CONSOLIDATED
2018
$’000
745
2017
$’000
-
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.
MACMAHON ANNUAL REPORT 2018 | 81
NOTES TO THE FINANCIAL STATEMENTS
PART C: WORKING CAPITAL
Note 12. Employee benefits
a) Current liabilities - employee benefits
Annual leave
Long service leave
Other employee benefits
b) Non-current liabilities - employee benefits
Long service leave
CONSOLIDATED
2018
$’000
11,466
3,632
3,111
18,209
2017
$’000
8,885
3,226
-
12,111
CONSOLIDATED
2018
$’000
2017
$’000
417
417
441
441
c) Non-current liabilities - retirement benefit obligations
Superannuation plan
The Trust Company Ltd is the Trustee of the Macmahon Employees Superannuation Fund (“the Fund”) and is responsible
for all areas of compliance with regard to the Fund. All members of the now closed defined benefit section were
previously invited to transfer their entitlement to the accumulation section of the Fund. At 30 June 2018, 1 member
(2017: 1 member) 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.
82 | MACMAHON ANNUAL REPORT 2018
Defined contribution superannuation expense
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to
defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which
services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund
or reduction in future payments is available. Contributions to a defined contribution plan which are due more than 12
months after the end of the period in which the employees render the service are discounted to their present value.
Defined benefit plans
The consolidated entity’s net obligation in respect of defined benefit plans is calculated separately for each plan by
estimating the amount of future benefit that employees have earned in the current and prior periods, discounting
that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed every three years and in intervening periods calculated on
actuarial estimates using the projected unit credit method. When the calculation results in a potential asset for the
consolidated entity, the recognised asset is limited to the present value of the economic benefits available in the form
of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of
economic benefits, consideration is given to any applicable minimum funding requirements.
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 liability for employee benefits expected to be settled more than 12 months from the reporting date is 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.
MACMAHON ANNUAL REPORT 2018 | 83
NOTES TO THE FINANCIAL STATEMENTS
PART C: WORKING CAPITAL
Note 13. Provisions
Project closure
Warranties
Project bonus
Client plant maintenance
Onerous Contracts
Other
CONSOLIDATED
2018
$’000
2017
$’000
6,561
450
236
225
650
3,450
11,572
6,916
429
141
1,206
1,018
4,872
14,582
Movements in provisions
Movements in each class of provision during the current financial year, are set out below:
PROJECT
CLOSURE
$’000
WARRANTIES
$’000
PROJECT
BONUS
$’000
CLIENT PLANT
MAINTENANCE
$’000
ONEROUS
CONTRACTS
$’000
OTHER
$’000
TOTAL
$’000
6,916
3,721
(2,753)
429
131
-
141
463
-
1,206
2,629
1,018
4,872
14,582
-
414
7,358
-
(292)
-
(3,045)
(1,323)
(110)
(368)
(3,610)
(76)
(1,836)
(7,323)
6,561
450
236
225
650
3,450
11,572
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
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.
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.
84 | MACMAHON ANNUAL REPORT 2018
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 judgement. 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.
Onerous Contracts
Leases
In 2015 the Group exited premises for which they have a
non-cancellable lease. The lease will expire in 2019. The
facilities have been sub-let at rates lower than the lease
rate. The obligation for the discounted future payments,
net of expected rental income as been provided for.
Other Operating Contracts
The Telfer Mining Services contract has incurred significant
losses to date.
At 30 June 2018 the Group has determined the contract
is not considered onerous based on a positive cash flow
forecast over the remaining contract term.
MACMAHON ANNUAL REPORT 2018 | 85
NOTES TO THE FINANCIAL STATEMENTS
PART D: FIXED ASSETS
Note 14. Property, plant & equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation and impairment losses
CONSOLIDATED
2018
$’000
3,183
(3,170)
13
2017
$’000
3,183
(3,144)
39
778,833
453,309
(398,706)
(330,669)
380,127
122,640
380,140
122,679
Reconciliations
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 2016
Additions
Disposals
Exchange differences
Reclassification to and from assets classified
as held for sale and transfers
Impairment of assets (discontinued operations)
Depreciation expense*
Balance at 30 June 2017
Additions
Acquisition through a business combination
Classified as held for sale
Disposals
Exchange differences
Reclassification to and from assets
classified as held for sale and transfers
Depreciation expense
Balance at 30 June 2018
LEASEHOLD
IMPROVEMENTS
$’000
PLANT &
EQUIPMENT
$’000
TOTAL
$’000
117,653
44,993
(3,356)
(4,002)
3,290
(1,683)
(34,216)
117,355
44,993
(3,356)
(3,341)
2,672
(1,577)
(34,106)
122,640
122,679
312,300
10,675
(801)
(603)
13,075
543
312,300
10,675
(801)
(603)
13,075
543
(77,702)
(77,728)
380,127
380,140
298
-
-
(661)
618
(106)
(110)
39
-
-
-
-
-
-
(26)
13
*Includes no depreciation from discontinued operations during 2018 (2017: $0.7 million).
Profit on disposal of property, plant and equipment from continuing operations was $0.2 million (2017: $2.3 million)
There was no impairment of assets in discontinued operations during the current financial year (2017: $1.7 million)
Included above is non-operating plant and equipment of $10.3 million (2017: $16.7 million) which is not allocated to
operating sites or contracts at 30 June 2018.
Included above is $48.7 million (2017: $8.1 million) of work in progress and $106.3 million (2017: $8.8 million) of assets
under finance lease.
86 | MACMAHON ANNUAL REPORT 2018
Significant Asset Acquisition
Assets classified as held for sale
Macmahon shareholders approved its transaction with
Assets classified as held for sale include surplus mining
PT Amman Mineral Nusa Tenggara (“AMNT”) at a General
plant and equipment which the company is actively
Meeting on 12 July 2017. Completion of the Transaction
marketing for sale amounting to $2.9 million
occurred on 8 August 2017.
The transaction resulted in:
(2017: $3.1 million).
•
Macmahon Indonesia acquiring US$145.6m
Property, plant and equipment
mobile mining equipment in exchange for the
Items of property, plant and equipment are measured
issue of 954,064,924 new Macmahon shares (“the
at cost less accumulated depreciation and accumulated
•
•
•
Consideration Shares”) to a related party of AMNT;
impairment losses.
the life of mine mining services contract with AMNT
becoming effective; and
Cost includes expenditure that is directly attributable to
two new Directors joining the Macmahon Board, Mr
the acquisition of the asset. The cost of self-constructed
Alex Ramlie and Mr Arief Sidarto.
assets includes the cost of materials and direct labour,
If the Mining Services Contract is terminated for any
any other costs directly attributable to bringing the assets
reason then AMNT will be required to pay a Cessation
to a working condition for their intended use, the costs
Amount to Macmahon Indonesia. This Cessation
of dismantling and removing the items and restoring the
Amount is the sum of:
site on which they are located, and capitalised borrowing
i) a fixed amount equivalent to approximately
gain or loss on qualifying cash flow hedges from foreign
US$145.6m, with this amount reducing to nil over a 5
currency purchases of property, plant and equipment.
costs. Cost may also include transfers from equity of any
year period; and
Purchased software that is integral to the functionality
of the related equipment is capitalised as part of
ii) the then written down value of any plant and
that equipment.
equipment assets that may have been acquired
by Macmahon Indonesia for the period after the
The fair value of property, plant and equipment recognised
commencement date of the Mining Services Contract.
as a result of a business combination is based on market
Upon receipt of the Cessation Amount, Macmahon
values. The market value of property is the estimated
Indonesia must transfer ownership of its plant and
amount for which a property could be exchanged,
equipment used at the site to AMNT. If Macmahon
on the date of valuation between a willing buyer and
Indonesia does not receive the Cessation Amount in
a willing seller in an arm’s length transaction after
cash following a termination of the Mining Services
proper marketing, wherein the parties had each acted
Contract, then in certain circumstances, this could
knowledgeably, prudently and without compulsion. The
lead to a selective buyback of the Consideration
market value of items of plant, equipment, fixtures and
Shares. These circumstances were described on page
fittings is based on the quoted market prices for
24 of the Notice of Meeting issued by Macmahon in
similar items.
relation to the AMNT Transaction.
Following completion of the transaction AMNT’s
When parts of an item of property, plant and equipment
related party has an interest in 44.3% of Macmahon’s
have different useful lives, they are accounted for as
total shares on issue.
separate items (major components) of property,
For details of the AMNT Transaction please refer to the
plant and equipment.
Notice of Meeting for the AMNT Transaction published
on the ASX website on 13 June 2017, and the
Depreciation and amortisation
company’s ASX announcement dated 19 April 2018.
Depreciation is based on the cost of an asset less its
residual value. Significant components of individual
Property, plant and equipment secured
assets are assessed and if a component has a useful life
under finance leases
that is different from the remainder of that asset, that
Refer to note 17 for further information on property, plant
component is depreciated separately.
and equipment secured under finance leases.
Security
Depreciation on buildings, leasehold improvements and
minor plant and equipment is calculated on a straight-line
Freehold land, buildings, leasehold improvements and
basis. Depreciation on major plant and equipment and
plant and equipment are subject to a registered charge
components is calculated on machine hours worked or
to secure banking facilities (refer to note 17).
straight-line over their estimated useful life. Leased assets
MACMAHON ANNUAL REPORT 2018 | 87
NOTES TO THE FINANCIAL STATEMENTS
PART D: FIXED ASSETS
Note 14. Property, plant & equipment continued
are depreciated over the shorter of the lease term and
Non-current assets or disposal groups
their useful lives unless it is reasonably certain that the
classified as held for sale
consolidated entity will obtain ownership by the end of
Non-current assets and assets of disposal groups are
the lease term. Land is not depreciated.
classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather
Depreciation methods, useful lives and residual values are
than through continued use. They are measured at the
reviewed on regular basis with annual reassessments for
lower of their carrying amount and fair value less costs
major items and adjusted if appropriate.
of disposal. For non-current assets or assets of disposal
The expected useful lives for the current and comparative
groups to be classified as held for sale, they must be
years are as follows:
available for immediate sale in their present condition
•
•
Leasehold improvements: period of the lease
and their sale must be highly probable.
Plant and equipment: 3-12 years
An impairment loss is recognised for any initial or
The carrying amounts of the consolidated entity’s assets,
subsequent write down of the non-current assets and
other than inventories (see inventory accounting policy)
assets of disposal groups to fair value less costs of disposal.
and deferred tax assets (see income tax accounting policy),
A gain is recognised for any subsequent increases in
are reviewed at each balance sheet date to determine
fair value less costs of disposal of a non-current assets
whether there is any indication of impairment. If any
and assets of disposal groups, but not in excess of any
such indication exists, the asset’s recoverable amount is
cumulative impairment loss previously recognised.
estimated (see impairment of non-financial assets below).
Non-current assets classified as held for sale are not
For goodwill, the recoverable amount is estimated
to the liabilities of assets held for sale continue
depreciated. Interest and other expenses attributable
annually or more frequently if events or changes in
to be recognised.
circumstances indicate that goodwill might be impaired.
Non-current assets classified as held for sale are presented
An impairment loss is recognised whenever the carrying
separately on the face of the statement of financial
amount of an asset or its cash-generating unit exceeds its
position, in current assets.
recoverable amount. Impairment losses are recognised in
profit or loss.
Estimation of useful lives of assets
Leasehold improvements and plant and equipment under
lives and related depreciation and amortisation charges for
lease are depreciated over the unexpired period of the
its property, plant and equipment and finite life intangible
lease or the estimated useful life of the assets, whichever
assets. The useful lives could change significantly as a
The consolidated entity determines the estimated useful
is shorter.
result of technical innovations or some other event. The
depreciation and amortisation charge will increase where
An item of property, plant and equipment is derecognised
the useful lives are less than previously estimated lives, or
upon disposal or when there is no future economic benefit
technically obsolete or non-strategic assets that have been
to the consolidated entity. Gains and losses between the
abandoned or sold will be written off or written down.
carrying amount and the disposal proceeds are taken to
Impairment of non-financial assets other than goodwill
profit or loss. Any revaluation surplus reserve relating to
and other indefinite life intangible assets
the item disposed of is transferred directly to
retained profits.
Subsequent costs
Impairment of non-financial assets other than goodwill
and indefinite life intangible asset
The consolidated entity assesses impairment of non-
The cost of replacing a component of an item of property,
financial assets other than goodwill and other indefinite
plant and equipment is recognised in the carrying amount
life intangible assets at each reporting date by evaluating
of the item if it is probable that the future economic
conditions specific to the consolidated entity and to
benefits embodied within the component will flow to the
the particular asset that may lead to impairment. If an
consolidated entity, and its cost can be measured reliably.
impairment trigger exists, the recoverable amount of the
The carrying amount of the replaced part is derecognised.
asset is determined. This involves fair value less costs of
The costs of the day-to-day servicing of property, plant and
disposal or value-in-use calculations, which incorporate a
equipment are recognised in profit or loss as incurred.
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.
88 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART D: FIXED ASSETS
Note 15. Intangible assets and goodwill
Goodwill - at cost
Impairment of goodwill
Software - at cost (in progress)
Less: Accumulated amortisation
CONSOLIDATED
2018
$’000
3,025
-
3,025
2,783
-
2,783
5,808
2017
$’000
-
-
-
-
-
-
-
Reconciliations
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 2017
Acquisition through a business combination
Additions
Balance at 30 June 2018
LEASEHOLD
IMPROVEMENTS
$’000
PLANT &
EQUIPMENT
$’000
-
3,025
-
3,025
-
-
2,783
2,783
TOTAL
$’000
-
3,025
2,783
5,808
Goodwill arose as a result of the acquisition of TMM Group. Refer to note 31 for further information.
MACMAHON ANNUAL REPORT 2018 | 89
NOTES TO THE FINANCIAL STATEMENTS
PART D: FIXED ASSETS
Note 15. Intangible assets and goodwill continued
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.
The expected useful life of software is 5 years.
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.
90 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART E: RISK
Note 16. Financial Risk Management
Financial Assets
Cash and cash equivalents
Trade and other receivables1
Lease receivables
Total financial assets
Financial liabilities
Trade and other payables2
Borrowings
Total financial liabilities
CONSOLIDATED
2018
$’000
109,622
134,576
10,492
254,690
172,904
106,272
279,176
2017
$’000
62,925
46,762
-
109,687
71,901
8,848
80,749
1 Trade and other receivables excludes prepayments of $3.2 million (2017: $3.8 million), contract closure reimbursement $3.4 million (2017: $2.9
million) and GST receivable of $15.7 million (2017: nil).
2 Trade and other payables excludes GST payable of $1.4 million (2017: $2.1 million).
Financial assets and liabilities are at amortised cost.
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
Financial Assets
Lease receivables
Financial liabilities
Lease liability
2018
2017
CARRYING
AMOUNT
$’000
FAIR
VALUE
$’000
CARRYING
AMOUNT
$’000
FAIR
VALUE
$’000
10,492
10,496
-
-
(106,272)
(106,088)
(8,848)
(8,968)
All other assets and liabilities carrying amount is the same as the fair value.
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 lease receivables, 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.
MACMAHON ANNUAL REPORT 2018 | 91
NOTES TO THE FINANCIAL STATEMENTS
PART E: RISK
Note 16. Financial Risk Management continued
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), Ghanaian Cedi (GHS), Indonesian Rupiah (IDR), Great British Pounds (GBP) and Mongolian Tugrik (MNT). The
consolidated entity is also exposed to foreign currency risk on plant and equipment purchases that are denominated
in a currency other than the AUD. The currencies giving rise to this risk are primarily US Dollar (USD) and European
Euro (EUR).
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 2018 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.
92 | MACMAHON ANNUAL REPORT 2018
The average exchange rates and reporting date exchange rates applied were as follows:
AUSTRALIAN DOLLARS
USD
NZD
MYR
NGN
MNT
IDR
GHS
GBP
SGD
AVERAGE EXCHANGE
RATES
REPORTING DATE EXCHANGE
RATES
2018
0.7749
1.0866
3.1589
282.40
1,879.84
10,540.17
3.4294
0.5748
1.0396
2017
0.7531
1.0573
3.2308
288.94
1,775.21
2018
0.7391
1.0903
2.9837
267.55
2017
0.7692
1.0500
3.3029
281.91
1,819.53
1,801.49
9,999.25
10,612.00
10,252.00
3.1237
0.5930
1.0505
3.3446
0.5634
1.0078
3.3576
0.5913
1.0598
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
SGD
MYR
IDR1
NGN
GBP
MNT
GHS
NZD
ASSETS
LIABILITIES
2018
$’000
3,241
59
2,463
46,626
-
-
-
154
117
2017
$’000
2018
$’000
2017
$’000
7,104
48
1,365
3,728
113
4,935
-
162
120
-
-
-
-
-
-
(36,902)
(685)
-
-
-
-
-
-
-
-
-
-
52,660
17,575
(36,902)
(685)
1 Macmahon is paid in IDR for services performed in Indonesia, however the amount of these IDR payments adjusted according to movements
in the IDR: USD exchange rate.
MACMAHON ANNUAL REPORT 2018 | 93
NOTES TO THE FINANCIAL STATEMENTS
PART E: RISK
Note 16. Financial Risk Management continued
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 2017.
CONSOLIDATED - 2018
% CHANGE
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ON EQUITY
$’000
% CHANGE
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ON EQUITY
$’000
AUD STRENGTHENED
AUD WEAKENED
USD
SGD
MYR
IDR
NGN
GBP
MNT
GHS
NZD
10%
10%
10%
10%
10%
10%
10%
10%
10%
(295)
(5)
(224)
(884)
-
-
-
(14)
(11)
(1,433)
-
-
-
-
-
-
-
-
-
-
10%
10%
10%
10%
10%
10%
10%
10%
10%
360
7
274
1,080
-
-
-
17
13
1,751
-
-
-
-
-
-
-
-
-
-
CONSOLIDATED - 2017
% CHANGE
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ONEQUITY
$’000
% CHANGE
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ONEQUITY
$’000
AUD STRENGTHENED
AUD WEAKENED
USD
SGD
MYR
IDR
NGN
GBP
MNT
GHS
NZD
10%
10%
10%
10%
10%
10%
10%
10%
10%
(646)
(4)
(124)
(277)
(10)
(449)
-
(15)
(11)
(1,536)
-
-
-
-
-
-
-
-
-
-
10%
10%
10%
10%
10%
10%
10%
10%
10%
789
5
152
338
13
548
-
18
13
1,876
-
-
-
-
-
-
-
-
-
-
Price risk
The consolidated entity is not exposed to any significant price risk.
94 | MACMAHON ANNUAL REPORT 2018
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:
CONSOLIDATED
Variable financial assets
2018
$’000
2017
$’000
109,622
62,925
Net exposure to cash flow interest rate risk (before hedging)
109,622
62,925
An analysis by remaining contractual maturities is shown in the ‘liquidity risk’ section.
Fair value sensitivity analysis for fixed rate instruments
There are no fixed rate instruments at 30 June 2018.
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 2017.
CONSOLIDATED - 2018
Variable rate instruments
CONSOLIDATED - 2017
Variable rate instruments
BASIS POINTS INCREASE
BASIS POINTS DECREASE
BASIS
POINTS
CHANGE
100
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ON EQUITY
$’000
BASIS
POINTS
CHANGE
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ON EQUITY
$’000
1,096
1,096
-
-
100
(1,096)
(1,096)
-
-
BASIS POINTS INCREASE
BASIS POINTS DECREASE
BASIS
POINTS
CHANGE
100
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ON EQUITY
$’000
629
629
-
-
BASIS
POINTS
CHANGE
100
EFFECT
ON PROFIT
BEFORE TAX
$’000
EFFECT
ON EQUITY
$’000
(629)
(629)
-
-
MACMAHON ANNUAL REPORT 2018 | 95
NOTES TO THE FINANCIAL STATEMENTS
PART E: RISK
Note 16. Financial Risk Management continued
Credit risk
Credit risk is the risk of financial loss to the consolidated entity if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the consolidated entity’s receivables from customers
and cash and cash equivalents.
Cash and cash equivalents
The consolidated entity limits its exposure to credit risk for cash and cash equivalents by only investing in liquid
securities and with counterparties that have an acceptable credit rating where possible.
Trade and other receivables
The consolidated entity’s exposure to credit risk is influenced mainly by the characteristics of each individual customer.
The demographics of the consolidated entity’s customer base, including the default risk of the industries and countries
in which customers operate, has less influence on credit risk. Approximately 31% (2017: 55%) 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 29% (2017: 61%) 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 2018 the consolidated entity’s collective impairment on
its trade receivables was $0.1 million (2017:$0.2 million).
Lease receivables
The credit risk associated with lease receivables is mitigated because the lease receivables are secured over the lease
plant and equipment.
Guarantees
The consolidated entity’s policy is to provide financial guarantees only to or for subsidiaries. Details of outstanding
guarantees are provided in note 20.
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 and accrued revenue*
Total credit risk exposure
* Receivables are shown excluding prepayments and GST receivable.
96 | MACMAHON ANNUAL REPORT 2018
CONSOLIDATED
2018
$’000
109,622
133,958
2017
$’000
62,925
44,260
243,580
107,185
The consolidated entity’s maximum exposure to credit risk for trade receivables at the reporting date by type of
customer was:
Mining customers
Other
CONSOLIDATED
2018
$’000
128,073
5,885
2017
$’000
44,092
168
Total credit risk exposure by customer
133,958
44,260
The consolidated entity’s most significant trade receivable, a mining customer, accounts for $25.9 million of the trade
receivables carrying amount at 30 June 2018 (2017: $20.8 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 17. As at 30 June 2018, the undrawn
amount on the term facility was $17.5 million (2017: $5.9 million). The facility was utilised for bank guarantees of $7.5
million (2017: $3.8 million). Outstanding individual lease agreements drawn under past facilities remain in place until
their expiry date. In addition, the consolidated entity has a $20.0 million (2017: $20.0 million) insurance bond facility
with $5.6 million (2017: $11.8 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 2018 | 97
NOTES TO THE FINANCIAL STATEMENTS
PART E: RISK
Note 16. Financial Risk Management continued
CONSOLIDATED - 2018
Non-derivatives
Non-interest bearing
Trade payables and
accrued expenses
Other payables
Interest-bearing - variable
1 YEAR
OR LESS
$’000
BETWEEN 1
AND 2 YEARS
$’000
BETWEEN
2 AND 5 YEARS
$’000
OVER
5 YEARS
$’000
REMAINING
CONTRACTUAL
MATURITIES
$’000
(165,712)
(8,581)
-
-
-
-
-
-
(165,712)
(8,581)
Lease liability
(27,421)
(20,543)
(60,242)
(19,614)
(127,820)
Total non-derivatives
(201,714)
(20,543)
(60,242)
(19,614)
(302,113)
CONSOLIDATED - 2017
Non-derivatives
Non-interest bearing
Trade payables and
accrued expenses
Other payables
Interest-bearing - variable
Lease liability
Total non-derivatives
1 YEAR
OR LESS
$’000
BETWEEN 1
AND 2 YEARS
$’000
BETWEEN
2 AND 5 YEARS
$’000
OVER
5 YEARS
$’000
REMAINING
CONTRACTUAL
MATURITIES
$’000
(68,619)
(5,371)
(2,365)
(76,355)
-
-
(7,135)
(7,135)
-
-
-
-
-
-
-
-
(68,619)
(5,371)
(9,500)
(83,490)
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
98 | MACMAHON ANNUAL REPORT 2018
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.
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.
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.
MACMAHON ANNUAL REPORT 2018 | 99
NOTES TO THE FINANCIAL STATEMENTS
PART F: DEBIT & EQUITY
Note 17. Borrowings
a) Current borrowings
Lease liability
b) Non-current liabilities - borrowings
Lease liability
CONSOLIDATED
2018
$’000
21,212
21,212
CONSOLIDATED
2018
$’000
85,060
85,060
Details of currency, interest rate and year of maturity of borrowing are:
Finance lease liabilities
AUD
4.3% - 7.6%
2019 - 2023
106,272
CURRENCY
INTEREST
RATE
RANGE
CALENDAR
YEAR OF
MATURITY
2018
$’000
106,272
Refer to note 16 for further information on financial instruments.
2017
$’000
1,939
1,939
2017
$’000
6,909
6,909
2017
$’000
8,848
8,848
100 | MACMAHON ANNUAL REPORT 2018
Term facilities
In October 2017, the Company entered into a $25 million multi-option financing facility, (including a $0.4 million credit
card facility) which can be used for general corporate purposes. The facility is drawn to $7.5 million at 30 June 2018 for
bank guarantees.
Operating lease facility
As at 30 June 2018, the domestic operating lease facility was drawn to $26.7 million (2017: $39.9 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 multi-
option financing facility.
Finance lease liabilities are payable as follows:
FINANCE LEASE LIABILITIES
Less than one year
Between one and 5 years
More than 5 years
MINIMUM LEASE
PAYMENTS
INTEREST
PRINCIPAL
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’000
27,421
80,786
19,613
2,365
7,135
-
6,209
15,098
241
127,820
9,500
21,548
426
226
-
652
21,212
65,688
19,372
1,939
6,909
-
106,272
8,848
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.
MACMAHON ANNUAL REPORT 2018 | 101
NOTES TO THE FINANCIAL STATEMENTS
PART F: DEBT & EQUITY
Note 18. Equity - issued capital
CONSOLIDATED
2018
SHARES
2017
SHARES
2018
$’000
2017
$’000
Ordinary shares - fully paid
Less: treasury shares
2,154,985,818
1,200,920,894
568,304
390,575
(11,699,448)
(13,042,548)
(5,186)
(5,781)
Ordinary shares
2,143,286,370
1,187,878,346
563,118
384,794
On issue at 1 July
Issued *
Repurchased and cancelled
THE COMPANY NO.
ORDINARY SHARES
2018
2017
1,200,920,894
1,210,487,874
954,064,924
-
-
(9,566,980)
On issue 30 June
2,154,985,818
1,200,920,894
* refer to note 14 for information on shares issued on acquisition of assets
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the parent entity in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and
the parent entity does not 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.
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 2018 the consolidated entity
was in a net cash position (Gearing ratio: nil).
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.
102 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART F: DEBT & EQUITY
Note 19. Equity - Reserves
Reserve for own shares (net of tax)
Foreign currency reserve (net of tax)
Share based payments
CONSOLIDATED
2018
$’000
(5,186)
8,388
640
2017
$’000
(5,781)
(4,640)
548
3,842
(9,873)
Reserve for own shares
The reserve for the Company’s own shares comprises the cost (net of tax) of the Company’s shares held by the trustee
of the consolidated entity’s equity compensation plans which were purchased on-market in anticipation of vesting of
share-based payment awards under the equity compensation plans. During the year no shares were purchased (2017:
nil). As at 30 June 2018, there are 11,699,448 (2017: 13,042,548) 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 is reclassified to the profit and loss either on sale or cessation of the underlying
foreign operation.
In 2018 nil (2017: $6,982,000) was reclassified to the profit and loss from the foreign currency translation reserve.
Share based payments reserve
The share based payments reserve is used to record the value of share-based payments and performance rights to
employees, including KMP, as part of their remuneration, as well as non-employees.
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 2016
Foreign currency translation
Treasury shares allocated on vesting
of performance rights
Share based payments expense
Transfer of expired performance rights
RESERVE FOR
OWN SHARES
$’000
FOREIGN
CURRENCY
$’000
SHARE BASED
PAYMENTS
$’000
(6,523)
-
742
-
-
(6,410)
1,770
-
-
-
Balance at 30 June 2017
(5,781)
(4,640)
Foreign currency translation
Treasury shares allocated on vesting
of performance rights
Share based payments expense
Transfer of expired performance rights
-
595
-
-
13,028
-
-
-
Balance at 30 June 2018
(5,186)
8,388
TOTAL
$’000
(11,914)
1,770
742
(185)
(286)
(9,873)
13,028
595
260
(168)
3,842
1,019
-
-
(185)
(286)
548
-
-
260
(168)
640
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year (2017: nil).
Dividends are recognised when declared during the financial year and are no longer at the discretion of the Company.
MACMAHON ANNUAL REPORT 2018 | 103
NOTES TO THE FINANCIAL STATEMENTS
PART G: UNRECOGNISED ITEMS
Note 20. Contingent liabilities
The following identifiable contingencies exist at 30 June 2018:
Bank guarantees
Insurance performance bonds
CONSOLIDATED
2018
$’000
7,545
14,355
2017
$’000
3,794
8,150
21,900
11,944
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
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. 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 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, as amended in April 2018, is filed on behalf of shareholders who acquired Macmahon securities
between 10 April 2012 and 19 September 2012 and relates to disclosures by Macmahon in 2012 regarding the now
completed Hope Downs 4 contract. Macmahon denies any wrong doing and is defending the proceeding.
Macmahon does not consider there is a reasonable basis on which to assess or estimate any potential liability and,
therefore, continues to treat the proceeding as an unquantified contingent liability.
104 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART G: UNRECOGNISED ITEMS
Note 21. 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
CONSOLIDATED
2018
$’000
2017
$’000
174,945
47,021
174,945
47,021
12,515
3,680
15,086
14,984
16,195
30,070
Operating lease facility
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 the ability 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. As at 30 June 2018, the total value of
outstanding operating leases was $26.7 million (2017: $39.9 million)
Finance leases - equipment
Finance lease commitments in Note 17 include contracted amounts for various plant and equipment with a written
down value of $106.3 million (2017: $8.8 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.
MACMAHON ANNUAL REPORT 2018 | 105
NOTES TO THE FINANCIAL STATEMENTS
PART G: UNRECOGNISED ITEMS
Note 21. Commitments continued
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.
Note 22. Events after the reporting period
No matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future
financial years.
106 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 23. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy:
NAME
Incorporated subsidiaries
Macmahon Contractors Pty Ltd
Macmahon Mining Services Pty Ltd
PRINCIPAL PLACE
OF BUSINESS /
COUNTRY OF
INCORPORATION
OWNERSHIP INTEREST
2018
%
2017
%
Australia
100.00%
100.00%
Australia
100.00%
100.00%
Doorn-Djil Yoordaning Mining and Construction Pty Ltd
Australia
100.00%
100.00%
Macmahon Underground Pty Ltd
Australia
100.00%
100.00%
Macmahon Contracting International Pte Ltd
Singapore
100.00%
100.00%
PT Macmahon Indonesia
PT Macmahon Mining Services
Macmahon Constructors Sdn Bhd
TMM Group Pty Ltd**
TMM Group (Consult) Pty Ltd**
TMM Group (IP) Pty Ltd**
TMM Group (Operations) Pty Ltd**
Windsor Earthmoving Contractors Pty Ltd**
Lycullin Equipment Hire Pty Ltd**
Macmahon Contractors (WA) Pty Ltd*
Macmahon (Southern) Pty Ltd*
Macmahon Africa Pty Ltd*
Macmahon Malaysia Pty Ltd*
Macmahon Contractors (NZ) Ltd*
Macmahon Sdn Bhd*
PT Macmahon Contractors Indonesia*
Macmahon Singapore Pte Ltd*
Macmahon Mongolia Holdings Pte Ltd*
Macmahon Mongolia LLC*
Macmahon Contractors Nigeria Ltd*
Macmahon Contracting Ghana Limited*
Macmahon Botswana (Pty) Ltd*
Macmahon Rail Pty Ltd*
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*
Interest in trusts
Macmahon Holdings Limited Employee
Share Ownership Plans Trust
Macmahon Underground Unit Trust
Indonesia
100.00%
100.00%
Indonesia
50.00%
50.00%
Malaysia
100.00%
100.00%
Australia
100.00%
Australia
100.00%
Australia
100.00%
Australia
100.00%
Australia
100.00%
Australia
100.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Australia
100.00%
100.00%
Australia
100.00%
100.00%
Australia
100.00%
100.00%
Australia
100.00%
100.00%
New Zealand
100.00%
100.00%
Malaysia
100.00%
100.00%
Indonesia
100.00%
Singapore
100.00%
0.00%
0.00%
Singapore
100.00%
100.00%
Mongolia
100.00%
100.00%
Nigeria
Ghana
100.00%
100.00%
100.00%
100.00%
Botswana
100.00%
100.00%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Australia
100.00%
100.00%
Australia
100.00%
100.00%
*Entities were deregistered or inactive during the year.
**Entities were acquired during the year, refer to note 31.
MACMAHON ANNUAL REPORT 2018 | 107
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 24. 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:
OWNERSHIP INTEREST
NAME
PT Macmahon Mining Services
Macmahon / Adasa JV*
Gooring Jimbila Contracting JV*
Malana JV*
Marapikurrinya JV*
Karara Yamatji JV*
Tonkin Highway JV*
Roe Highway JV*
Hale Street Link JV*
Ross River Dam JV*
Bell Bay Alliance JV*
Rail Link JV*
Eyre Peninsula JV*
* Joint Ventures that were deregistered or inactive during the year.
Investments accounted for using the equity method
Net investment in PT Macmahon Mining Services (quasi-equity loan)
Other investments
Share of profit of equity-accounted investees, net of tax
PRINCIPAL
ACTIVITIES
2018
%
Mining services
50.00%
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
Non-active
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
2017
%
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%
CONSOLIDATED
2018
$’000
2017
$’000
3,531
-
5,742
9,273
3,662
96
3,133
6,891
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. The Group does not
eliminate realised profit or loss transactions with equity investees.
108 | MACMAHON ANNUAL REPORT 2018
Summary financial information for equity accounted investees, unadjusted for percentage ownership held by the
consolidated entity (100%)
Summarised statement of financial position
Cash
Other current assets (excluding cash)
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
Total non-current liabilities
CONSOLIDATED
2018
$’000
2017
$’000
6,628
20,142
26,770
13,621
4,680
19,173
23,853
15,228
40,391
39,081
(11,574)
(1,431)
(13,005)
(7,480)
(1,361)
(8,841)
(11,165)
(1,268)
(12,433)
(10,801)
(2,066)
(12,867)
Total liabilities
(21,846)
(25,300)
Net assets (100%)
Group’s share of net assets (50%)
Summarised statement of profit or loss and other comprehensive income
Revenue
Finance Costs
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
18,545
9,273
13,781
6,891
59,079
(901)
(4,997)
57,387
(740)
(3,493)
(47,782)
(46,844)
5,399
(986)
4,413
2,207
-
6,310
(1,262)
5,048
2,524
-
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.
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 2018 | 109
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 25. Related party transactions
Parent entity
Macmahon Holdings Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 23.
Joint ventures
Interests in joint ventures are set out in note 24.
Key management personnel
Disclosures relating to key management personnel are set out in note 26 and the remuneration report in the
Directors’ report.
Transactions with related parties - Joint Venture
The following transactions occurred with related parties:
Recharges to Joint Venture
Management fee charged to Joint Venture
Receivable from and payable to related parties
Receivable from Joint Venture
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
CONSOLIDATED
2018
$’000
1,359
846
2017
$’000
713
3,381
CONSOLIDATED
2018
$’000
2017
$’000
196
1,381
Revenue recognised from shareholder
Purchases made from shareholder
CONSOLIDATED
2018
$’000
153,529
(70,622)
Receivable from and payable to shareholder (AMNT)
CONSOLIDATED
Receivable from shareholder
Payable to shareholder
Refer to note 14 for details of the AMNT transaction.
2018
$’000
25,637
(11,106)
2017
$’000
-
-
2017
$’000
-
-
During the year the 50% equity accounted PT Macmahon Mining Services Joint Venture received revenue of $1.0 million
from AMNT. There was no amount owing from AMNT to the Joint Venture as at 30 June 2018.
110 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 26. Key management personnel disclosures
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
The transactions with a shareholder relate to the mining services at the Batu Hijau mine owned by AMNT.
AMNT (including its related entities) is a significant shareholder in Macmahon.
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
Leave benefits
Share-based payments
CONSOLIDATED
2018
$
2017
$
2,607,926
1,404,747
70,831
165,296
3,949
196,068
5,310
88,274
59,582
(36,307)
3,044,070
1,521,606
MACMAHON ANNUAL REPORT 2018 | 111
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 27. 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 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.
PERFORMANCE RIGHTS EFFECTIVE ON 1 JULY 2014
(GRANTED 7 AUGUST 2014)
Tranche and number of Performance Rights
Fair value on grant date
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
1/07/2017
3 YEARS ENDING
1/07/2017
Tranche 1
10,550,000
$0.091
Tranche 2
10,550,000
$0.091
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
On 1 July 2017, 1,343,100 performance rights vested. There were no remaining 2014 performance rights at 30 June 2018.
112 | MACMAHON ANNUAL REPORT 2018
PERFORMANCE RIGHTS EFFECTIVE ON 1 JULY 2016
(GRANTED 12 AUGUST 2016
Tranche and number of Performance Rights
Fair value on grant date
Vesting performance condition
Less than 17% CAGR in TSR
17% CAGR in TSR
25% or more CAGR in TSR
Between 17% and 25% CAGR in TSR
PERFORMANCE PERIOD
3 YEARS ENDING
1/07/2019
12,659,501
$0.075
0%
50%
100%
Pro-rata
between 50%
and 100%
At 30 June 2018 the number of performance rights decreased to 5,971,921 as a result of redundancies and resignations.
PERFORMANCE RIGHTS EFFECTIVE ON 1 JULY 2017
(GRANTED FROM 1 JULY 2017)
PERFORMANCE
RIGHTS GRANTED ON
18 AUGUST 2017
PERFORMANCE
RIGHTS GRANTED ON
29 NOVEMBER 2017
PERFORMANCE*
RIGHTS GRANTED ON
3 MARCH 2018
Grant date
Tranche and number of Performance Rights
Fair value on grant date
Vesting performance condition
Less than 17% CAGR in TSR
17% CAGR in TSR
25% or more CAGR in TSR
Between 17% and 25% CAGR in TSR
* Performance rights effective 1 january
3 YEARS ENDING
1/07/2020
3 YEARS ENDING
1/07/2020
2.5 YEARS ENDING
1/07/2020
1/07/2017
13,669,315
$0.085
0%
50%
100%
1/07/2017
482,075
$0.130
0%
50%
100%
1/01/2018
1,070,093
$0.125
0%
50%
100%
Pro-rata
between 50%
and 100%
Pro-rata
between 50%
and 100%
Pro-rata
between 50%
and 100%
At 30 June 2018 the number of performance rights decreased to 11,908,218 as a result of redundancies and resignations.
MACMAHON ANNUAL REPORT 2018 | 113
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 27. Share-based payments continued
Information about performance rights and share options outstanding at year end
The following unvested unlisted Executive performance rights were outstanding at year end under the Macmahon EEP
LTI Plan:
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
EXECUTIVE PERFORMANCE RIGHTS
2018
12,118,502
15,221,483
(1,343,100)
(2,356,900)
(5,759,846)
17,880,139
2017
17,505,741
12,659,501
(1,674,400)
(4,481,341)
(11,890,999)
12,118,502
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 (income) / expense recognised in employee benefits expense
CONSOLIDATED
2018
$’000
260
260
2017
$’000
(185)
(185)
Measurement of grant date fair values
The following inputs were used in the measurement of the fair values at grant date of the 2018 share-based
payment plans:
Fair value at grant date
Share price at grant date
Expected volatility (weighted average volatility)
Option life (expected weighted average life)
Expected dividends
Risk-free interest rate (based on
government bonds)
PERFORMANCE RIGHTS
$0.130
$0.220
50.00%
2.6 years
0%
1.81%
$0.085
$0.175
50.00%
2.9 years
0%
1.90%
$0.125
$0.245
50.00%
2.3 years
0%
1.99%
Expected volatility is estimated taking into account historic average share price volatility.
114 | MACMAHON ANNUAL REPORT 2018
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial, Black-
Scholes or Monte Carlo 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.
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, Monte Carlo 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.
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.
If any performance rights have been forfeited for failure to complete a service period, 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 2018 | 115
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 28. 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:
GROUP AUDITORS
Audit services - KPMG
Audit or review of the financial statements - Australia
264,300
294,000
CONSOLIDATED
2018
$
2017
$
Audit or review of the financial statements - Network firms
Other services - KPMG
Tax services - Australia
Tax services - Network firms
Other assurance services
SUBSIDIARY AUDITORS
Audit services
Audit of the financial statements - PWC Indonesia
Other services
Tax services - PWC Indonesia
48,335
312,635
48,555
89,133
76,839
214,527
527,162
76,904
70,751
147,655
674,817
110,494
404,494
29,875
55,202
151,523
236,600
641,094
-
-
-
641,094
116 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 29. Deed of cross guarantee
Pursuant to ASIC Corporation Instrument 2016/785 dated 27 June 2018, the wholly-owned subsidiaries listed below are
relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial statements, and
Directors’ report.
It is a condition of the Instrument 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 Contractors Pty Ltd
Macmahon Underground Pty Ltd
Macmahon Mining Services Pty Ltd
TMM Group Pty Ltd
TMM Group Pty Ltd became a party to the deed on 28 June 2018. Macmahon Southern Pty Ltd and Macmahon Rail Pty
Ltd were released from their obligations under the deed by executing Revocation deeds on 28 June 2018.
MACMAHON ANNUAL REPORT 2018 | 117
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 29. Deed of cross guarantee continued
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial
position, comprising the Company and its controlled entities which are a party to the Deed, after eliminating all
transactions between parties to the Deed of Cross Guarantee, at the end of the financial year.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Other income
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expense
Equipment and office expenses under operating leases
Net finance costs
Other expenses
(Loss)/profit before income tax expense
Income tax benefit
CONSOLIDATED
2018
$’000
514,112
10,198
2017
$’000
328,078
4,343
(239,654)
(159,288)
(176,569)
(125,327)
(24,986)
(41,846)
(14,885)
1,364
(66,098)
(38,364)
25,745
(5,888)
(31,944)
(14,178)
(639)
(21,775)
(26,618)
159
(Loss)/profit after income tax expense
(12,619)
(26,459)
OTHER COMPREHENSIVE INCOME
Foreign currency translation
Other comprehensive income for the year, net of tax
CONSOLIDATED
2018
$’000
-
-
2017
$’000
(930)
(930)
Total comprehensive loss for the year
(12,619)
(27,389)
EQUITY - RETAINED PROFITS
Accumulated losses at the beginning of the financial year
Loss after income tax expense
Treasury shares purchased for compensation plans
Transfer of expired performance rights
Effect of removing Macmahon Rail Pty Ltd
Effect of removing Macmahon Southern Pty Ltd
Effect of adding Macmahon Underground Pty Ltd
Effect of adding TMM Group Pty Ltd
CONSOLIDATED
2018
$’000
2017
$’000
(316,945)
(290,030)
(12,619)
(26,459)
(595)
168
12,098
11,034
73,191
8,373
(742)
286
-
-
-
-
Accumulated losses at the end of the financial year
(225,295)
(316,945)
118 | MACMAHON ANNUAL REPORT 2018
STATEMENT OF FINANCIAL POSITION
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Lease receivable
Income tax
Assets of disposal groups classified as held for sale
NON-CURRENT ASSETS
Trade and other receivables
Other financial assets
Property, plant and equipment
Intangibles
Lease receivable
Deferred tax
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Income tax
Employee benefits
Provisions
NON-CURRENT LIABILITIES
Payables
Borrowings
Defered tax liabilities
Employee benefits
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
CONSOLIDATED
2018
$’000
83,207
91,441
41,861
700
6,682
2,868
2017
$’000
57,452
45,647
25,672
-
12,876
3,079
226,759
144,726
41,390
93,176
208,659
-
9,792
-
353,017
579,776
117,568
18,581
-
14,052
11,237
161,438
31,663
34,139
112,348
-
-
164
178,314
323,040
69,037
1,939
-
7,807
11,171
89,954
-
160,040
83,490
1,038
408
84,936
246,374
333,402
6,909
-
3,396
170,345
260,299
62,741
563,118
384,794
(4,421)
(5,108)
(225,295)
(316,945)
333,402
62,741
MACMAHON ANNUAL REPORT 2018 | 119
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 30. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Forgiveness of historic inter-group loans
Reversal of investment impairment provision
Other income / (expenses)
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
Share-based payments reserve
Reserve for own shares
Accumulated losses
Total equity
PARENT
2018
$’000
(249,517)
235,768
(6,840)
(20,589)
(20,589)
2017
$’000
-
-
8,110
8,110
8,110
PARENT
2018
$’000
2,373
2017
$’000
13,302
251,110
149,021
(1,418)
2,047
(2,569)
58,307
563,118
384,794
640
(5,186)
548
(5,781)
(310,031)
(288,847)
248,541
90,714
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 29.
Contingent liabilities
Refer to note 20 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.
120 | MACMAHON ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 31. Acquisition of subsidiary
On 1 January 2018, the Group acquired 100% of the shares and voting interests in TMM Group Pty Ltd and its wholly
owned subsidiaries (“TMM”).
The acquisition of TMM will provide the Group with additional civil capability that is expected to be an enabler to core
mining work through contracts for initial site earthworks and construction services, as well as the ability to target site
rehabilitation projects.
Consideration transferred
Total consideration on acquisition of $2.7 million included a cash payment ($1.0 million), cash provided to sellers for
which shares were purchased on market ($1.0 million) and potential contingent consideration ($0.7 million).
Contingent consideration
The Group has agreed to pay the selling shareholders additional consideration up to a maximum of $7.0 million over the
next three years if TMM’s EBITDA meets certain thresholds (after the consideration of changes in net debt) each financial
year. The Group has included $745,000 as contingent consideration related to the additional consideration, which
represents its fair value at the date of acquisition.
Acquisition related costs
The Group incurred acquisition costs of $0.2 million on legal fees and due diligence costs. These costs have been
included in “Other expenses”.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date
of acquisition.
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Trade and other payables
Borrowings
Income tax
Employee benefits
Total identifiable net assets acquired
$’000
416
11,809
10,675
(11,275)
(11,001)
154
(1,034)
(256)
The initial accounting for the acquisition of TMM Group has only been provisionally determined at the end of the
reporting period.
Goodwill
Goodwill arising from the acquisition of $3 million is attributable to the skills and talent of TMM’s workforce and the
synergies expected to arise after the acquisition. These benefits are not recognised separately from goodwill because
they do not meet the recognition criteria for identifiable intangible assets. The goodwill is not expected to be deductible
for tax.
MACMAHON ANNUAL REPORT 2018 | 121
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 32. Other significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
Application of new, revised or amending Accounting Standards and Interpretations
The Group 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. 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 2017, except for the new, revised or amended accounting
standards below.
•
•
Amendments to AASB 7 Disclosure Initiative
Amendments to AASB 12 Recognition of Deferred Tax Assets for Unrealised Losses
New Accounting Standards and Interpretations not effective for the Group at 30 June 2018 or early adopted
A number of new standards are effective for annual periods beginning after 1 January 2018 and earlier application is
permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated
financial statements.
AASB 15 Revenue from Contracts with Customers
The Group is required to adopt AASB 15 Revenue from Contracts with Customers from 1 July 2018. AASB 15 establishes
a single comprehensive framework for determining whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer
Loyalty Programmes. The core principles of AASB 15 is that an entity should recognise revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. Under AASB 15 an entity recognised revenue when (or as) a performance
obligation is satisfied, i.e. when control of the goods or service underlying the performance obligation is transferred to
the customer. The Group recognised revenue from the rendering of services.
Macmahon Group has operations primarily in mining services in Australia and Indonesia. Revenue for mining services
is predominantly recognised on the basis of the work completed over time. These services have been determined to be
one performance obligation as they are highly inter-related and performed over time with the customers receiving the
benefit over time or as the service is performed.
Apart from providing more extensive disclosures, the Group does not anticipate that the application of AASB 15 will
result in significant differences in the timing of revenue recognition for these services.
Transition
The Group plans to adopt IFRS 15 using the cumulative effect method, with the effect of initially applying this standard
recognised at the date of initial application (i.e. 1 July 2018). As a result, the Group will not apply the requirements of IFRS
15 to the comparative period presented.
AASB 9 Financial Instruments
The Group is required to adopt AASB 9 Financial Instruments from 1 July 2018. This standard replaces the existing
guidance in AASB 139 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.
•
Classification
Financial assets - AASB 9 contains a new classification and measurement approach for financial assets that reflects
the business model in which assets are managed and their cash flow characteristics. The standard contains three
principal classification categories for financial assets: measured at amortised cost, FVOCI and FVTPL and eliminates
the existing AASB 139 categories of held to maturity, loans and receivables and available for sale. Based on its
assessment, the Group does not believe that the new classification requirements will have a material impact on its
accounting for financial instruments.
122 | MACMAHON ANNUAL REPORT 2018
•
Impairment
AASB 9 requires an expected credit loss model, as opposed to an incurred credit loss model under AASB 139. The
expected credit loss model requires an entity to account for expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in credit risk since initial recognition.
The Group expects to apply the simplified approach to recognise lifetime expected credit losses for its trade receivables
and finance lease receivables.
The Group has determined that the application of AASB 9’s impairment requirements at 1 July 2018 will not have a
material increase to the current impairment recognised for financial assets.
AASB 16 Leases
AASB 16 replaces existing leases guidance, including AASB 17 Leases, IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the
Legal Form of a Lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities
that apply AASB 15 at or before the date of initial application of AASB 16. The Group has not early adopted AASB 16. The
standard introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use
asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease
payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting
remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases.
In addition, the nature of expenses related to those leases will now change as AASB 16 replaces the straight-line
operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities.
The actual impact of applying AASB 16 on the financial statements in the period of initial application will depend on
future economic conditions, including the Group’s borrowing rate at 1 January 2019, the composition of the Group’s lease
portfolio at that date, the Group’s latest assessment of whether it will exercise any lease renewal options and the extent
to which the Group chooses to use practical expedients and recognition exemptions.
The Group is in the process of completing its detailed assessment, however expect there to be an increase in “right to use
assets” and lease liabilities.
Other standards
The following amended standards and interpretations are not expected to have a significant impact on the Group’s
consolidated financial statements.
•
•
•
•
•
Annual Improvements to IFRSs 2014-2016 Cycle
Amendments to IFRS 1 and IAS 28
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRIC 23 Uncertainty over Income Tax Treatments
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.
MACMAHON ANNUAL REPORT 2018 | 123
NOTES TO THE FINANCIAL STATEMENTS
PART H: OTHER INFORMATION/GROUP STRUCTURE
Note 32. Other significant accounting policies continued
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in note 30.
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 2018 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’.
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net
assets/liabilities acquired. Any goodwill that arises is tested annually for impairment. Any gain or bargain purchase is
recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt
or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing
relationships. Such amounts are generally recognised in profit or loss.
Subsidiaries
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an
entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the
date that control ceases.
Interest in equity accounted investees
The consolidated entity’s interests in equity accounted investees comprise interests in associates and joint ventures.
Associates are those entities in which the consolidated entity has significant influence, but not control or joint control,
over the financial and operating policies. A joint venture is an arrangement in which the consolidated entity has joint
control, whereby the consolidated entity has rights to the net assets of the arrangement, rather than rights to its assets
and obligations for its liabilities.
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.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
124 | MACMAHON ANNUAL REPORT 2018
reporting date. Monetary assets and liabilities denominated in foreign currency at the reporting date are translated to
the functional currency at the exchange rate at that date. The income and expenses of foreign operations are translated
into Australian dollars at the average exchange rates for the period. Foreign currency differences are recognised in other
comprehensive income, and presented in the foreign currency translation reserve in equity.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely
in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are recognised to form
part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in
the foreign currency translation reserve in equity.
Revenue recognition
Revenue (including maintenance services) is recognised when the services are provided and is based on surveys of work
performed where applicable. 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 throughout 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.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in normal
operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a
liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in normal operating cycle; it is held primarily for
the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional
right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are
classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
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.
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.
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.
MACMAHON ANNUAL REPORT 2018 | 125
DIRECTORS’
DECLARATION
In the Directors’ opinion:
−
the attached financial statements and notes, and the remuneration report on pages 47 to 59 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 33 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 2018 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 29 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
JA WALKER
Director
24 August 2018
Perth
126 | MACMAHON ANNUAL REPORT 2018
MACMAHON ANNUAL REPORT 2018 | 127
INDEPENDENT
AUDITOR’S REPORT
Independent Auditor’s Report
To the shareholders of Macmahon Holdings Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Macmahon Holdings Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including:
giving a true and fair view of the Group’s
financial position as at 30 June 2018 and of
its financial performance for the year ended
on that date; and
The Financial Report comprises:
Consolidated statement of financial position as
at 30 June 2018
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 then ended
Notes including a summary of significant
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
accounting policies
Directors’ Declaration.
The Group consists of the Company and the
entities it controlled at the year-end or from time to
time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
Significant transaction – Batu Hijau Plant and
Equipment acquisition;
Recognition of Management fee revenue
Assessment of potential onerous contract –
Telfer.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance
in our audit of the Financial Report of the current
period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide
a separate opinion on these matters.
128 | MACMAHON ANNUAL REPORT 2018
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.
Significant transaction – Batu Hijau Plant and Equipment acquisition ($182.5 million)
Refer to Note 14 to the Financial Report
The key audit matter
How the matter was addressed in our audit
On 8 August 2017 Macmahon Holdings Limited’s
wholly owned subsidiary PT Macmahon
Indonesia (“Macmahon Indonesia”) completed a
transaction with PT Amman Mineral Nusa
Tenggara (“AMNT”) in which Macmahon
Indonesia acquired $182.5 million of mining
equipment. In consideration, 954 million shares
were issued to an AMNT subsidiary, giving
AMNT a 44.3% shareholding in Macmahon
Holdings Limited.
As part of the transaction, Macmahon Indonesia
secured a Mining and Leasing Services contract
to become the mining services contractor at
AMNT’s Batu Hijau Mine in Indonesia.
The transaction is considered a key audit matter
due to its size and accounting complexity.
Various aspects of the transaction needed to be
considered such as the potential for the
transaction to represent a lease, a business
combination or an asset acquisition. The Group
engaged an external expert to provide accounting
advice on this transaction. Significant audit effort
was required to assess the terms of the contract
to evaluate the recognition and measurement of
the transaction against the requirements of the
accounting standards.
Our procedures included:
Reading the Transaction Implementation Deed
and Mining and Leasing Services contract,
together with associated transaction
documents, to obtain a detailed understanding
of the contractual terms and conditions of the
transaction.
Reading the external expert accounting advice
received by the Group, including understanding
their scope and limitations, evaluating key
considerations in the advice on the various
aspects of the transaction against the terms of
the above agreements. In addition we
evaluated the competence, and objectivity of
the external expert.
Working together with our technical accounting
specialists, we critically assessed the Group’s
accounting treatment for the above agreements
against the recognition and measurement
requirements of the accounting standards. The
particular impacts we focused on were those
relating to leases, business combinations,
property, plant and equipment and share based
payments.
Evaluating the Group’s disclosures regarding the
transaction against the requirements of the
accounting standards.
Recognition of Management fee revenue
Refer to Note 25 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Included within Revenue is the Batu Hijau Project
management fee recognised by a wholly owned
subsidiary, PT Macmahon Indonesia. The
management fee represents a significant
proportion of the Group’s profit from continuing
operations for FY 2018.
The management fee is earned by achieving
specified tonnage movement measures within
the twelve months ended 31 December 2018 in
line with the terms of the Mining and Leasing
Services contract with AMNT.
Our procedures included:
Reading the Batu Hijau Mining and Leasing
Services contract, together with approved
variations to obtain a detailed understanding of
the terms and conditions, including performance
measures. We critically assessed the Group’s
accounting treatment against the requirements
of the accounting standards.
Assessing forecast tonnage movement through
inquiries with the Group to understand the
specific plans and risks to achieving future
operating performance measures.
MACMAHON ANNUAL REPORT 2018 | 129
INDEPENDENT AUDITOR’S REPORT CONTINUED
Achieving the management fee is dependent on
the Group implementing plans to achieve
forecast tonnage movement.
Assessing plans and assumptions underpinning
the forecast tonnage movement of the contract
to 31 December 2018 by:
This is a key audit matter due to the increased
audit effort in assessing estimation uncertainty
and its significance to profit from continuing
operations.
comparing actual tonnage movement since
commencement of the contract, to
management reports and customer
confirmation;
challenging assumptions of forecast
tonnage movement with actual tonnage
movement to date together with
incremental tonnage assumed through the
deployment of additional equipment and
resources.
reading the minutes of the Batu Hijau
Project leadership meeting which
comprises senior management of the
Group and AMNT where actual and forecast
tonnage performance is considered; and
checking the feasibility of the Group’s plans
with regards to this contract to the
customer’s mine plan.
Assessment of potential onerous contract – Telfer
Refer to Note 13 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The assessment of a potential onerous contract
for the Telfer Mining Services Contract (contract)
is considered a key audit matter due to the
contract incurring significant losses to date and
the estimation uncertainty in forecasting cash
flows, leading to increased audit risk.
Our procedures included:
In relation to significant losses incurred to date we
assessed the Group’s analysis of the actual costs
incurred, by:
Reading monthly management reports.
The Group’s assessment of the potential of the
contract to be onerous is based on forecast cash
flows over the remaining contract term.
Obtaining and reading correspondence between
the Group and customer for evidence of
performance issues and concerns.
We focused on evaluating the Group’s
assessment of forecast cash flows, in particular
the impact of various productivity initiatives
including replacement and deployment of
equipment.
Inquiring with operational management on
contract performance.
Testing a statistical sample of costs incurred on
the contract to underlying documentation.
In relation to the forecast cash flows over the
remaining contract term we challenged the forecast
for feasibility and consistency by:
Reading the terms of the contract including
performance conditions, contract variations and
comparing these to terms used in the forecast.
130 | MACMAHON ANNUAL REPORT 2018
Comparing forecast cash flows to past events
resulting in losses from our procedures outlined
above.
Comparing forecast cash flows to recent actual
performance.
Inspecting updated mine plans and production
schedules to check for consistency against the
forecast cash flows.
Reading the following for evidence of issues or
concerns relevant to the forecast period:
Correspondence between the Group and
customer.
Minutes of the quarterly management
meetings between the Group and
customer.
The Group’s monthly board minutes.
Other Information
Other Information is financial and non-financial information in Macmahon Holdings Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report
or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group and Company’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend to
liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so.
MACMAHON ANNUAL REPORT 2018 | 131
INDEPENDENT AUDITOR’S REPORT CONTINUED
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Macmahon Holdings Limited for the year ended 30
June 2018, complies with Section 300A of the
Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included
in pages 47 to 59 of the Directors’ report for the
year ended 30 June 2018.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
Trevor Hart
Partner
Perth
24 August 2018
132 | MACMAHON ANNUAL REPORT 2018
MACMAHON ANNUAL REPORT 2018 | 133
SUMMARY OF
CONSOLIDATED RESULTS
PROFIT AND LOSS ($M)
Revenue from continuing operations
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Significant and non-recurring items
and impairment
Reported EBIT
Net interest
Reported operating profit / (loss) before tax
Tax (expense) / benefit
Reported NPAT from continuing operations
Minority interest (“MI”)
Reported NPAT attributable to Macmahon
Add: significant and non-recurring
items (net of tax and MI)1
Underlying NPAT attributable to Macmahon
BALANCE SHEET ($M)
Plant and equipment
Total assets
Net assets
Equity attributable to Macmahon
2018
710.3
118.9
(77.7)
41.2
-
41.2
(2.4)
38.8
(7.5)
31.3
-
31.3
-
31.3
380.1
723.3
409.8
409.8
2017
359.6
31.8
(33.5)
(1.7)
(3.4)
(5.1)
(0.1)
(5.2)
(0.3)
(5.5)
-
(5.5)
3.4
(2.1)
122.7
295.0
185.0
185.0
CASH FLOW ($M)
Underlying EBITDA
Net interest paid
Income tax (paid) / refund
Working capital, provisions and other
non cash items decrease / (increase)
Net 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
118.9
(2.4)
6.3
(17.0)
105.8
(59.1)
0.0
62.9
109.6
31.8
(0.1)
-
(1.5)
30.2
(23.1)
(0.9)
56.7
62.9
2015
2014
2013
660.2
1,015.9
2016
312.2
42.5
(28.8)
13.8
97.0
(59.6)
37.4
(2.1)
(233.8)
11.7
(0.7)
11.0
(0.2)
10.8
-
10.8
2.1
12.9
117.7
300.1
207.4
207.4
(196.4)
(23.7)
(220.1)
(0.5)
(220.6)
-
(220.6)
233.8
13.2
141.5
524.3
221.8
221.8
42.5
(1.0)
(2.8)
(29.7)
9.0
(188.6)
(0.6)
236.9
100.8
(10.8)
(1.9)
(34.3)
53.8
70.6
3.1
109.4
171.0
(101.7)
69.3
(2.0)
67.3
(18.8)
48.5
(19.6)
28.9
-
28.9
2.0
30.9
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
1,165.5
172.0
(85.6)
86.4
(1.8)
84.6
(18.3)
66.3
(22.7)
43.6
-
43.6
1.3
44.9
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
56.7
236.9
109.4
153.4
Net debt / (net cash)
(3.4)
(54.1)
(56.5)
(74.2)
1 Significant and non-recurring items in:
- 2017 includes the takeover defence costs;
- 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.
134 | MACMAHON ANNUAL REPORT 2018
PEOPLE AND SAFETY
Number of employees
LTIFR
TRIFR
ORDER BOOK
Work in hand ($m)1
New contracts and extension ($m)2
Revenue growth (%)
Reported NPAT / Total revenue (%)
Underlying NPAT / Total revenue (%)3
EBIT interest cover (x)
Reported basic EPS from
continuing operations (cents)
Underlying basic EPS from
continuing operations (cents)3
BALANCE SHEET RATIOS
2018
3,913
0.5
6.2
5,437
1,174
97.5
4.4
4.4
17.1
1.53
1.53
2017
1,659
0.4
5.7
4,973
3,889
15.2
(1.5)
(0.6)
(33.8)
(0.47)
2016
1,529
1.1
4.5
1,507
624
(52.7)
3.5
4.1
18.0
0.87
2015
1,295
0.9
5.4
1,150
68
(35.0)
(33.4)
2.0
(8.3)
2014
2,467
0.9
8.5
2,573
387
(12.8)
2.8
3.0
3.6
(17.5)
2.30
(0.18)
1.03
1.05
2.46
Gearing (Net debt or (Net cash)) / Equity)
(0.8)
(29.2)
(27.2)
Reported ROC (%)
Underlying ROC (%)3
Reported ROE (%)
Underlying ROE (%)3
Reported ROA (%)
Underlying ROA (%)3
NTA per share ($)
CASH FLOW RATIOS ($M)
10.8
10.8
10.5
10.5
6.1
6.1
0.19
(2.2)
(0.7)
(2.8)
(1.1)
(1.9)
(0.7)
0.15
3.5
4.1
5.0
6.0
2.6
3.1
0.17
(33.5)
(35.7)
6.8
(67.5)
4.0
(32.7)
2.0
0.18
12.9
9.3
9.6
6.9
7.4
3.3
3.5
2013
3,495
0.9
7.7
3,230
1,846
(29.9)
(3.7)
(3.7)
(4.6 )
4.37
4.50
15.4
11.9
12.2
11.5
11.8
4.5
4.6
0.34
0.32
Net operating cash flow per share (cents)
4.9
2.5
0.7
4.3
6.2
8.6
SHAREHOLDERS
Shares on issue (m) @ 30 June
2,155.0
1,200.9
1,210.5
1,261.7
1,261.7
1,261.7
Share price @ 30 June (cents)
Dividend declared (cents)
Percentage franked (%)
Market capitalisation ($m)
Enterprise value (EV)
Price / NTA (x)
21.5
-
n/a
463.3
459.9
1.1
16.5
-
n/a
198.2
144.1
1.1
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 2017 includes the Batu Hijau contract. The order book for 2016 includes a proportional share of joint venture
order books. Construction included in historical numbers.
2 New contracts and extensions for 2017 includes the Batu Hijau contract.
3 Adjusted for significant and non-recurring items:
- 2017 includes the takeover defence costs;
- 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.
MACMAHON ANNUAL REPORT 2018 | 135
ASX ADDITIONAL
INFORMATION
As at 21 August 2018
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
20 August 2018.
a) The twenty largest Shareholders held 84.93% of the ordinary shares.
b) There were 7,189 ordinary Shareholders as follows:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
TOTAL
664
2,016
1,012
2,655
592
6,939
Twenty largest Shareholders as at 20 August 2018
RANK NAME
UNITS % UNITS
Perpetual Corporate Trust Limited
954,064,924
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
20
20
JP Morgan Nominees Australia Limited
HSBC Custody Nominees Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Zero Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
CCs Third Nominees Pty Limited
CPU Share Plans Pty Ltd
AMP Life Limited
BNP Paribas Noms (NZ) Ltd
CPU Share Plans Pty Limited
Bond Street Custodians Limited
HSBC Custody Nominees Limited-Gsco ECA
BNP Paribas Nominees Pty Ltd
National Nominees Limited
Bond Street Custodians Ltd
Mr Paulus Gerardus Brouwer + Mr Remy Paulus Brouwer
BNP Paribas Nominees Pty Ltd
Alkat Pty Ltd
BPM Capital Limited
Researched Investments Pty Ltd
TOTALS: TOP 22 HOLDERS OF ORDINARY SHARES (TOTAL)
TOTAL REMAINING HOLDERS BALANCE
327,323,769
152,709,446
122,795,393
55,484,494
45,000,000
34,306,266
20,958,140
20,000,003
13,915,816
11,910,230
11,679,683
11,315,749
8,995,518
8,588,938
7,461,369
5,600,000
4,910,050
4 , 1 1 8 , 7 1 4
4,000,000
4,000,000
4,000,000
44.27
15.19
7.09
5.70
2.57
2.09
1.59
0.97
0.93
0.65
0.55
0.54
0.53
0.42
0.40
0.35
0.26
0.23
0.19
0.19
0.19
0.19
1,833,138,502
321,847,316
85.06
14.94
136 | MACMAHON ANNUAL REPORT 2018
SUBSTANTIAL SHAREHOLDERS
As at 21 August 2018, the register of substantial shareholders disclosed the following information:
HOLDERS GIVING NOTICE
1. PERPETUAL CORPORATE TRUST LIMITED
Number of ordinary shares
in which interest is held
954,064,924
VOTING RIGHTS
The voting rights attaching to ordinary shares are set out below:
On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
VOLUNTARY ESCROW SHARES
958,175,972 shares are held in voluntary escrow of which 954,064,924 are due to be released on 8 February 2020
(assuming the shares are not cancelled prior to this time) and 4,111,048 are due to be released on approximately
22 September 2021.
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 NOVEMBER 2018
RELEASE OF HALF YEAR RESULTS FEBRUARY 2019
RELEASE OF FULL YEAR RESULTS AUGUST 2019
MACMAHON ANNUAL REPORT 2018 | 137
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