Annual
Report
2019
Corporate
Directory
Glossary
of Terms
EBIT
Earnings before net interest
expense and tax expense
EBITDA
Earnings before net interest expense, tax
expense, depreciation and amortisation
EV
Enterprise value, being market
capitalisation plus net debt
Gearing Net debt or (Net cash) / Equity
LTIFR
Lost time injury frequency rate
TRIFR
Total recordable injury frequency rate
NPAT
Net profit after tax
NTA
Net tangible assets
ROC
Return on capital – EBIT/Average Capital
employed, where capital employed is total
tangible assets less payables less bank overdraft
ROE
Return on equity – NPAT/Average net assets
ROA
Return on assets – NPAT/Average assets
Note: Refer to Summary of Consolidated Reports (page 118) for
reconciliation to underlying results.
DIRECTORS
E Skira (Non-Executive Chair)
V Vella (Non-Executive Director)
A Ramlie (Non-Executive Director)
A Sidarto (Non-Executive Director)
COMPANY SECRETARIES
G Gettingby
K Nadebaum
PRINCIPAL REGISTERED OFFICE
15 Hudswell Road
Perth Airport
Western Australia 6105
Phone: +61 (08) 9232 1000
Fax: +61 (08) 9232 1001
LOCATION OF SHARE REGISTRY
Computershare Investor Services
Pty Ltd
Level 11, 172 St Georges Terrace
Perth
Western Australia 6000
SECURITIES EXCHANGE
Macmahon is listed on the Australia
Securities Exchange with an ASX
code of “MAH”.
AUDITOR
KPMG
235 St Georges Terrace
Perth
Western Australia 6000
OTHER INFORMATION
Macmahon Holdings Limited
ACN 007 634 406, incorporated
and domiciled in Australia, is a
publicly listed company limited
by shares.
Contents
2
4
6
8
About Macmahon
Macmahon Capabilities
Letter from the Chair
CEO’s Report
10 Operational and Financial Review
36 Directors’ Report
44 Auditor’s Independence Declaration
46 Remuneration Report
58
111
112
118
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Summary of Consolidated Reports
120 ASX Additional Information
MACMAHON ANNUAL REPORT 2019
1
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,
performance enhancement,
mine site maintenance and
rehabilitation services, has
established Macmahon as a
trusted partner on resources
projects throughout Australia
and internationally.
MACMAHON ANNUAL REPORT 2019
About
Macmahon
Macmahon is an ASX
listed company that
has been offering
mining and construction
services to clients for
more than 50 years.
2
MACMAHON ANNUAL REPORT 2019
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Botswana
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Mozambique
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•
Johannesburg
South Africa
• Durban
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Our
Operations
Offices
1 Perth
2 Brisbane
3 Jakarta
4 Kalgoorlie
Workshops
1 Perth
5 Coppabella
6 Lonsdale
Performance
Enhancement
7 Mogalakwena
Surface Mining
8 Argyle
9 Batu Hijau
10 Byerwen
11 Kanthan
12 Langkawi
13 Lhoknga
14 Martabe
15 Mt Morgans
16 Telfer
17 Tropicana
Underground
Mining
18 Ballarat
19 Boston Shaker
20 Fosterville
21 Granny Smith
22 Leinster
23 Mt Wright
24 Nifty
25 Olympic Dam
26 Tujuh Bukit
TMM Group
27 Norwich Park
28 Peak Downs
29 Poitrel
30 Rolleston
31 Saraji
GBF Underground
32 Bartons
33 Comet Vale
34 Daisy Milano
35 Deflector
36 Maxwells
37 Nicolsons
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MACMAHON ANNUAL REPORT 2019
Macmahon
Capabilities
Macmahon has more than 50 years’ experience
in surface mining, more than 20 years’
experience in underground mining and has the
ability to offer a broad suite of mining services.
EQUIPMENT MAINTENANCE
& MANAGEMENT
Macmahon offers a complete
equipment maintenance and
management support service for
a wide range of modern mining
equipment. Our facilities in Perth,
Adelaide, and the Bowen Basin
provide Macmahon 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
PERFORMANCE ENHANCEMENT
Macmahon offers an advisory and
operational improvement service
which can provide mine owners
with the benefit of our contracting
skills and experience at owner-miner
operations. This service can include:
• Operator coaching and training;
• Cultural change programs for
employees; and
• Advice and assistance with
mine planning, maintenance and
employee engagement.
SURFACE MINING
Our surface mining division operates
in Australia and overseas, offering a
broad suite of services including:
• Mine planning and analysis
• Drill and blast
• Bulk and selective mining
• Crushing and screening
• Fixed plant maintenance
• Water management
• Equipment operation and
maintenance
UNDERGROUND MINING
Macmahon has a growing and highly
experienced underground division
which specialises 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
CIVIL & REHABILITATION
Macmahon, via its wholly-owned
subsidiary TMM Group, offers a wide
range of design, civil earthworks,
mine rehabilitation and closure
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
• Revegetation
• Rehabilitation monitoring
and maintenance
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MACMAHON ANNUAL REPORT 2019
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MACMAHON ANNUAL REPORT 2019
Letter from the Chair
Dear Shareholders,
Financial year 2019 represented another positive year
of progress for Macmahon, with the Company growing
revenue and underlying earnings as we delivered on
our pipeline of work and enhanced our service offering.
Our financial results were in line with
guidance, with revenue of $1.1 billion,
up 55% on FY18, and underlying
EBIT of $75.1 million, up 81% on FY18.
As always, our safety performance
continues to be a critical focus area
for the Board and management
team. It was therefore deeply
upsetting that one of our employees
in Indonesia was fatally injured in an
incident at the Batu Hijau project
in March. Our thoughts are with
the family, friends and colleagues
impacted by this tragedy.
The past year has seen significant
change in the Macmahon Board.
In June this year, Non-Executive
Chairman, Mr Jim Walker, and
Non-Executive Director, Mr Kim
Horne, unexpectedly resigned from
the Macmahon Board. I would like
to take this opportunity to thank
both Mr Walker and Mr Horne for
their contributions to the Company.
Macmahon’s underlying business
remains strong and our strategy,
which has delivered strong growth
in recent years, remains the same.
As a result Macmahon is well
positioned for growth heading
into FY20.
We are in the process of recruiting
new Independent Directors as a key
priority. To assist us in this process I’m
pleased to acknowledge the recent
reappointment of Mr Vyril Vella as
an Independent Non-Executive
Director. Mr Vella has a long history
with Macmahon and brings a wealth
of knowledge and experience to
the Company’s Board. We intend to
make further appointments and will
announce them in due course.
Subsequent to year end we
completed our acquisition of the
GBF Group, which has an enviable
track record in Western Australia
as a leading underground mining
company. I would like to welcome
GBF Group founders Michael Foulds
and Ross Graham and their broader
team to Macmahon, and we look
forward to realising value through
enhanced scale and capability in
underground mining.
As we are now in a solid financial
position with good medium term
revenue visibility, the Board has
adopted a new capital allocation
policy. This policy is designed to
balance the priorities of retaining
balance sheet strength, having the
flexibility to fund new and existing
projects, and returning cash to
shareholders. Accordingly, I am
pleased to report the Board has
elected to reinstate dividends to
shareholders by approving the
payment of a final dividend of 0.5
cents per share for FY19.
Finally, on behalf of the Board and
senior management, I would like
to extend our appreciation to all
employees, shareholders, clients and
suppliers for their ongoing support.
EVA SKIRA
Independent Non-Executive Chair
6
I would like to extend
our appreciation to all
employees, shareholders,
clients and suppliers for
their ongoing support.
MACMAHON ANNUAL REPORT 2019
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7
MACMAHON ANNUAL REPORT 2019
CEO’s Report
2019 was a successful year for Macmahon.
We delivered another outstanding financial result,
with underlying earnings within guidance due to
the ongoing delivery of our significant order book.
KEY ACHIEVEMENTS
Highlights of the 2019 result compared with 2018:
Revenue of $1.1 billion, up 55%;
Underlying EBITDA of $181.4 million, up 52%;
Underling EBIT of $75.1 million, up 81%;
Underlying EBIT margins increased to 6.8%, from 5.8%;
Operating cash flow before interest, tax and settlement
for the class action improved to $125.9 million, up 23.6%;
Net tangible assets per share increased
to 20.3 cents per share, up 8%; and
The reinstatement of dividends,
declaring a final dividend of 0.5cps.
During the period we:
Joined the benchmark S&P/ASX300 index;
Settled a legacy class action relating to events in 2012;
Achieved record monthly volumes for our largest
contracts, including Batu Hijau, Byerwen and Tropicana;
Secured the new Boston Shaker underground
contract at the Tropicana gold mine; and
Bolstered our underground division, announcing
the acquisition of GBF Group.
This was supported by our robust balance sheet
and the exceptional work of our people.
Further details on our Company’s performance are contained
in the Operational and Financial Review section.
8
MACMAHON ANNUAL REPORT 2019
PEOPLE, CULTURE AND SAFETY
Operating in the mining services
industry presents significant
safety challenges. It goes without
saying that we take creating
a safe working environment
seriously, and that looking after our
employees is our utmost priority.
The Company’s total recordable
injury frequency rate decreased to
3.98, an improvement of 37% over
the year. However, this result was
overshadowed by the fatality at our
Batu Hijau operations. We express
our sincere condolences to the family,
friends and colleagues of late Pak
Agustiman. We remain determined to
continuously improve our processes
to ensure every team member can go
home safely every day.
In addition to our commitment to
safety, we also invested heavily
in providing opportunities for our
workforce to grow and develop
professionally throughout the year.
We continue to focus on the health
and wellbeing of our people. Our
leading mental health program,
Strong Minds, Strong Mines, has
improved mental health awareness
across the whole business.
I’m pleased to report that we
have increased both Indigenous
and female representation in our
workforce over the course of
the year. Indigenous employees
increased from 2.9% to 5.4%,
whilst female representation
increased from 12.1% to 13.8%. The
management team and I continue
to strive for an inclusive workplace
environment that provides value for
our employees, our customers and
importantly, our shareholders.
UNDERGROUND BUSINESS
GROWTH AND STRATEGIC
ACQUISITION OF GBF GROUP
Our underground division has seen
substantial change and growth
during the year.
In March, we were delighted
to secure the Boston Shaker
underground contract at the
Tropicana gold mine in Western
Australia, where we have been
operating the surface mining
contract successfully since 2012.
This alliance style contract with
AngloGold Ashanti Ltd and
Independence Group NL has
already exceeded our operational
expectations and reinforces the
synergistic benefits of having one
mining contractor providing both
surface and underground services
concurrently. We are proud to be
associated with this project and
look forward to its safe and efficient
development over the years to come.
Subsequent to the year end,
consistent with our strategy of
growing our underground business
we completed the acquisition of
specialist underground contractor
GBF Group.
GBF is a well-regarded brand with
more than 450 employees. It has
a solid track record particularly
with Western Australian gold
clients. It is a strategically aligned,
value accretive acquisition that
immediately adds scale and
capability to our complementary
underground business.
The underground division is now
well resourced to take advantage
of future growth opportunities.
TELFER
In June Macmahon entered into
facilitated negotiations with
Newcrest regarding pricing for
mine plan and work programme
changes at the Telfer gold project.
Subsequently following further
discussions with Newcrest, we have
now assessed that an acceptable
agreement for increased revenue
is likely to be reached in the
near future. As a result we have
determined that the contract is not
considered onerous based on a
positive cash flow forecast over the
remaining contract term.
OUTLOOK
Macmahon’s business remains in a
strong position and is well placed
heading into FY20 with a strong
balance sheet, a $4.5 billion order
book, a significant pipeline of project
opportunities, and a compelling
strategic focus with a suite of
services that differentiates us from
our industry peers.
I would like to thank everyone
in the Macmahon team for
their commitment and strong
contributions during the year.
I would also like to extend my
appreciation to the Board and my
senior management team for their
support as we continue to deliver
value for shareholders.
MICHAEL FINNEGAN
Chief Executive Officer
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MACMAHON ANNUAL REPORT 2019
Operational and
Financial Review
Macmahon provides mining
and infrastructure services to
miners throughout Australia
and internationally.
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,
performance enhancement, design and
fabrication of mining infrastructure, and mine
site maintenance and rehabilitation services.
Operational Review
Surface Mining
Underground Mining
Civil & Rehabilitation Services
Equipment Maintenance & Management
Sustainability and
Corporate Social Responsibility
People
Financial Review
Vision and Strategy
Statement of Values
Risk Management
Our Board
Executive Management Team
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1010
Our approach to doing
business has established
us as a trusted partner
on resources projects
throughout Australia
and internationally.
MACMAHON ANNUAL REPORT 2019
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MACMAHON ANNUAL REPORT 2019
Operational Review
Surface Mining
Macmahon’s surface mining division offers a broad range
of services including mine planning, drill and blast, bulk and
selective mining, crushing and screening, water management,
as well as equipment operation and maintenance.
PROJECT ACTIVITY
During the year, Macmahon provided
services to the following projects:
Tropicana Gold Mine
Macmahon is currently fulfilling a life
of mine contract at the Tropicana
project in Western Australia which is
a joint venture between AngloGold
Ashanti and Independence Group. In
December 2017, the project owners
approved phase 1 of the Long Island
program of works, which extends
our works to December 2023.
Telfer Gold Mine
Macmahon is fulfilling a life of mine
contract (forecast to January 2023)
at the Telfer project in Western
Australia for Newcrest.
Byerwen Coal Mine
In November 2017, Macmahon
executed a contract for the
establishment and operation of
the new Byerwen Coal Mine near
Glenden in Queensland’s Bowen
Basin for QCoal and JFE (forecast
to November 2020).
Mt Morgans Gold Mine
Macmahon is performing a mining
services contract for the provision of
open pit mining services including
drilling and blasting, loading, hauling
and technical services for Dacian
Gold in Western Australia (forecast
to December 2022).
Argyle Diamond Mine
Through its Indigenous employment
subsidiary, Doorn-Djil Yoordaning,
Macmahon is currently operating at
the Argyle Diamond Mine in Western
Australia, where it provides tailings
dam earthworks, hauling of coarse
tailings to the TSF, and associated
services. Macmahon has recently
signed a further project extension
with works to be completed by the
end of December 2020.
Batu Hijau Copper/Gold Mine
Macmahon is performing its life of
mine contract to provide all mining
services at the Batu Hijau mine in
Indonesia for PT Amman Mineral
Nusa Tenggara (“AMNT”). Batu Hijau
is a well established, world class
copper gold deposit, and one of the
largest mines of its kind in the world.
(forecast to April 2032).
Martabe Gold Mine
Macmahon is part of a 50:50 joint
venture which is contracted by PT
Agincourt Resources to provide
mining services at the Martabe Gold
Mine in the North Sumatra province
of Indonesia (forecast to March 2021).
Kanthan, Langkawi
and Lhoknga Quarries
Macmahon was awarded a seven
year mining services quarry contract
on Langkawi Island during the year
(forecast to December 2025). This
contract complements the two
other quarry operations at Kanthan
(Malaysia) (forecast to February
2020) and Lhoknga (Indonesia)
(forecast to June 2020).
Mogalakwena Platinum Mine
Macmahon is providing advisory
services to Anglo American Platinum
in South Africa for an operational
transformation program.
As part of this project, Macmahon
personnel provide coaching and
expertise across load and haul,
and drill and blast operations to
deliver performance enhancements
(forecast to March 2020).
12
Batu Hijau is a well
established, world class
copper gold deposit, and
one of the largest mines
of its kind in the world.
MACMAHON ANNUAL REPORT 2019
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MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
Macmahon secured the new Boston
Shaker underground contract at the
Tropicana gold mine and bolstered
our underground division, announcing
the acquisition of GBF Group.
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14
MACMAHON ANNUAL REPORT 2019
Underground Mining
Macmahon’s underground mining division offers
underground development and production services,
a broad range of ground support services, as well as
services to facilitate ventilation and access to underground
mines including shaft sinking, raise drilling and shaft lining.
PROJECT ACTIVITY
During the year, Macmahon provided
services to the following projects:
Pajingo Gold Mine
Macmahon provided box hole
drilling to Minjar Gold in Queensland.
Mount Wright Gold Mine
Macmahon provides production
drilling services at the Mount
Wright Gold Mine in Queensland for
Carpentaria Gold. Macmahon has
been working at this project
for several years.
Ballarat Gold Mine
Macmahon provides production
drilling and cable bolting for
Castlemaine Gold Fields in Victoria.
Macmahon signed a three year
contract extension during the year.
Granny Smith Gold Mine
Macmahon provided cable bolting
services to Goldfields near Laverton
in Western Australia.
Fosterville Gold Mine
Macmahon commenced a contract
in December 2018 to provide cable
bolting services to Kirkland Lake
Gold in Victoria.
Leinster Nickel Mine
Macmahon provides cable bolting
services to BHP.
Cadia-Ridgeway Gold Mine
Macmahon provided cable bolting
services for Newcrest during the year
with works completed in early 2019.
Nifty Copper Mine
Macmahon provides production
drilling, cable bolting, box hole
drilling and shotcreting to Metals X
in Western Australia.
Tujuh Bukit Copper/Gold Mine
Macmahon through its 50:50 joint
venture is contracted to construct
an underground exploration decline
for PT Merdeka Copper Gold in East
Java, Indonesia.
Boston Shaker Gold Mine
Macmahon commenced a five year
contract in May 2019 to develop
a new underground mine at the
Tropicana site, which is a joint
venture between AngloGold Ashanti
and Independence Group.
Ranger Uranium Mine
Macmahon continued to provide
care and maintenance services at
the Ranger Mine in the Northern
Territory for Energy Resources
of Australia with the contract
completed in June 2019.
Olympic Dam Copper/Gold Mine
Macmahon continues to provide
raise drilling services at the Olympic
Dam Mine in South Australia for
BHP. Macmahon has been active
at Olympic Dam for more than 10
years, and is contracted to continue
underground raise drilling work at
this site until June 2023.
Other Projects
A number of raise drilling contracts
were completed including at the
Endeavor Mine for Endeavor
Operations, Thalanga for Red River
Resources, Dargues Gold Mine
for Big Island Mining and the Halls
Creek Mine for Pantoro.
Engineering
Macmahon’s engineering division
also provided service crew
personnel to BHP at Leinster
Nickel Operations, borehole pipe
installation at Prominent Hill for
Oz Minerals and shaft sinking at
Fosterville for Kirkland Lake Gold.
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MACMAHON ANNUAL REPORT 2019
Civil & Rehabilitation Services
Following the successful acquisition of
TMM Group (TMM) in February 2018,
Macmahon’s presence continues to
grow on the east coast of Australia.
PROJECT ACTIVITY
TMM projects during
the year included:
Peak Downs
TMM has been operating at
BMA’s Peak Downs mine in the
Bowen Basin for many years. In
2019, TMM was contracted to
perform rehabilitation, tailings
dam remediation and haul road
construction works.
Saraji
TMM is providing equipment to
the Saraji mine, also operated by
BMA, including a full workshop and
maintenance services along with
dozers, graders, loaders, excavators
and water carts. The current scope
is contracted until June 2020. TMM
is also performing a number of
smaller civil infrastructure design
and construction projects.
Rolleston
TMM recently completed works
at Glencore’s Rolleston mine in
March 2019. The scope of works
included a creek diversion, and the
construction of a new flood levee
dragline walk road and a large water
storage facility including extended
controlled release infrastructure.
Poitrel Levee
TMM’s initial scope of work at
the Poitrel Coal Mine, operated
by BHP Mitsui Coal, included the
construction of a flood protection
levee for a pit expansion. TMM is
now performing works to deliver
a significant dam expansion and
subsequent to year end was
awarded a mud removal contract.
South Walker Creek
TMM completed a number of
projects at South Walker Creek
including the design and construction
of a dragline shutdown pad, 20 Ha
of rehabilitation works and regulated
structured repairs. Works are
currently underway to upgrade and
expand the ROM pad and to design
and construct the extension to the
light vehicle road network.
Consulting
TMM’s business also provides
consulting services to the mining
industry. In 2019, TMM completed
civil infrastructure and design
services for BHP’s Isaac Downs
along with a number of smaller
projects including roads, drainage
and concrete works. Preliminary
design services are currently
underway for all non-process
infrastructure for the Dingo
West Mine.
Rehabilitation
Various rehabilitation and reshaping
contracts were completed during
the year including BHP’s Norwich
Park, Peak Downs and South
Walker Creek.
16
Macmahon’s presence
continues to grow on the
east coast of Australia.
MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
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MACMAHON ANNUAL REPORT 2019
18
MACMAHON ANNUAL REPORT 2019
Equipment Maintenance
& Management
Macmahon owns and operates
world class equipment maintenance
facilities, giving it the ability to support
frontline contracting services with
plant maintenance services.
Macmahon’s primary workshop, located in Perth, Western Australia,
is a key operational asset with the ability to rebuild both plant and
components. This facility allows Macmahon to keep maintenance
activities in-house and to rapidly and efficiently deploy supplies to
client locations and conduct essential maintenance work.
KEY PLANT AND EQUIPMENT
Macmahon’s Surface Mining fleet currently includes a broad range
of excavators, dump trucks, front end loaders, dozers, and drill rigs.
Macmahon’s fleet is sourced from a range of providers including
Caterpillar, Hitachi, Liebherr and Epiroc.
Macmahon’s Underground Mining fleet is comprised of trucks,
loaders, and drills. This equipment is predominantly sourced from
Sandvik, Epiroc and Caterpillar.
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MACMAHON ANNUAL REPORT 2019
Sustainability and
Corporate Social Responsibility
During the year, we continued
to implement environmental
management strategies and plans to
ensure compliance. No prosecutions
or any infringements or other
penalties from the operations at
which we operate were received.
As part of this, we will undertake
due diligence activities to identify,
address, mitigate and prevent any
adverse human rights impacts from
our operations and supply chain
through our procurement practices
and contractual arrangements.
We also acknowledge that
climate change poses a threat to
our environment and will have
implications for the industries we
service. During the year the Company
developed a Climate Change Position
Statement which is published on our
website and includes a commitment
to continual improvement in energy
efficiency across our business.
Macmahon mines a range of
commodities that will support the
transition to a lower carbon economy.
AUDITING AND
ISO CERTIFICATION
External audits were performed
by both Macmahon’s clients and
an independent third party for
certification purposes.
The Macmahon HSEQ Management
Systems are audited annually against
ISO 9001:2015, ISO 14001:2015, BS
OHSAS 18001:2007 and AS/NZS
4801:2001 respectively.
Macmahon successfully transitioned
to the new ISO 2015 standards
and is pleased to report no major
non-conformances were raised
against the business during the
recertification and transition audits.
HUMAN RIGHTS
Macmahon is committed to
eliminating all forms of modern
slavery in our operations and supply
chains. We support human rights
and fair employment practices by
ensuring the work environment is
safe for all employees.
ANTI-BRIBERY AND CORRUPTION
Macmahon expects all employees to
act lawfully, ethically and responsibly.
Our expectations on anti-bribery
and corruption are detailed in our
Code of Conduct. We recognise
that in some countries generally
accepted business practices are
different from those in Australia.
We commit to conducting
our practices in line with local
community standards of integrity
and propriety. Notwithstanding,
as a responsible corporate citizen
Macmahon requires all employees to
comply with the Code of Conduct no
matter what local practices may be.
Employees are required to complete
Code of Conduct training through
our induction program. This training
program provides practical guidance
and is supported by a theory
assessment at the completion of
training. To ensure completion,
training is tracked within our learning
management system. To further
reinforce the importance of this,
annual refresher training is required.
We have established a whistle-
blower hotline for employees to call
if they feel unable to raise an issue
where the matter relates to actual
or suspected unlawful, unethical
or irresponsible behaviour. Where
issues are raised through the hotline,
we have established a protocol
where a Board-level committee
will be notified of these concerns.
Further, we will take all reasonable
steps to protect the identity of the
employee making the disclosure.
SAFETY AND COMMUNITY
In March 2019, Macmahon appointed
a General Manager, People and
Health, Safety, Environment, Quality
and Training (“HSEQT”) to lead
the team responsible for building
employee capability and ensuring
that Macmahon plays a sustainable
role in the local communities in
which we operate.
Preserving the physical and mental
health of our people is a key priority
for Macmahon. Accordingly, we
have developed and delivered
unique physical and mental health
programs across our business which
are strongly supported by our senior
management team.
Our safety performance improved
over the year, with a recorded Lost
Time Injury Frequency Rate (LTIFR)
of 0.36 and a Total Recordable
Injury Frequency Rate (TRIFR)
of 3.98 at the end of FY19.
LTIFR
TRIFR
FY19
0.36
3.98
FY18
0.46
6.28*
* Updated for reclassifications subsequent
to FY18 Annual Report release.
Regrettably, whilst the overall
performance improved in FY19, a
single fatality occurred on a project in
Indonesia. In response, a number of
actions were implemented across our
business to minimise the potential
re-occurrence of this type of event.
ENVIRONMENT
Macmahon is committed to
the effective management of
environmental impacts associated
with our operations. A key
component of our approach to
environmental management is the
implementation of our ISO AS/
NZS 14001 certified environmental
management system which includes
a range of measures to plan, monitor
and audit our operations.
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MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
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MACMAHON ANNUAL REPORT 2019
People
During the year, our employee base stabilised
to 4,072 employees and 1,500 contractors working
under Macmahon’s supervision or management.
Macmahon has continued to
deliver new initiatives to invigorate
its recruitment, training and
retention efforts. A new Leadership
Pathways program was designed
and implemented, with leaders
throughout the group participating
in training and coaching programs.
The success of the Strong Minds,
Strong Mines program across our
business has resulted in significant
improvement in mental health
awareness. We also rolled out a new
communication platform and reward
and recognition program called
Team MAC. The purpose of this is to
motivate our employees and reward
good behaviours amongst our teams.
Our apprenticeship numbers
have increased (from 22 to 37
apprentices) and we expanded
our traineeship programs into
Queensland and offered a new Tyre
Fitter Traineeship (from 186 to 345
trainees). We have exceeded our
Indigenous workforce target with
participation from 2.9% to 5.4% of
our Australian workforce and also
increased female participation from
12.1% to 13.8%.
We are committed to creating an
open and inclusive workplace where
diverse experiences, perspectives
and backgrounds of our people are
valued and utilised. We believe that
developing a diverse workforce
that is representative of the broader
society will create diversity of
thought, providing increased
ways to approach challenges and
opportunities. Given our workforce
profile and the communities in which
we operate, we have focussed on
the training and development of
women and indigenous employees.
We set measurable targets in
relation to gender diversity at
all levels of the organisation and
monitor our progress towards
achieving these targets. As part of
this, we undertook a gender pay gap
analysis across our global business
to understand the state of gender
pay equity within the Company.
We support flexible working
arrangements where practical and
tailor our diversity initiatives to meet
the needs of our local employees.
At our Martabe project in Indonesia,
we have invested in a range of
initiatives to enable us to achieve
32% female employee participation.
We have trained female employees
in a wide range of roles including drill
and blast, production operations,
engineering, administration and
supervisory positions. Education
programs have been conducted with
local villages and families on working
in the mining industry to encourage
families to support women joining
as employees. Macmahon has
also conducted post-employment
education around shift work and
fatigue management due to the
expectation that women will do
housework when on nightshift.
During the year, we implemented a
number of Indigenous traineeship
initiatives through our Doorn-
Djil Yoordaning business. As our
business continues to grow, we
are in a strong position to provide
further entry level employment
to young Indigenous people that
will increase their skill levels via on
the job training, mentoring and
dedicated support programs to
improve retention rates. Initiatives
this year to support skills and
training with Indigenous youth
included collaborations with civil
contracting company Carey Mining
and our Tropicana Joint Venture
Partners, AngloGold Ashanti and
Independence Group, to develop
the highly successful Operator
Traineeship program “Get into
Mining”. From this program, eight
candidates graduated with a
Certificate II in Surface Extraction
Operations and are now working
in traineeships across the mining
and exploration departments at
the Tropicana Gold Mine.
Following the successful program
at Tropicana, Macmahon
continues to work with the local
Indigenous communities where
we have operations to identify and
create meaningful employment
opportunities. We will also continue
to focus on the development of all
our people to provide a positive
work environment where our
employees are challenged to achieve
their full potential.
22
MACMAHON ANNUAL REPORT 2019
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’
OPERATOR COMPETENCY
With dedicated management
systems in place to record and
monitor training compliance across
the business and to meet regulatory
reporting requirements, our on-
site training compliance over the
last financial year has continued to
improve with relatively consistent
growth displayed month on month.
With robust training programs
and supporting processes in place,
our future challenge is to transition
the existing systems and processes
into automated functionality.
Employees by location
Employees
and FTE
Contractors
Total
Workforce
– including
Contractors
Australia
Indonesia
Other
Total
1,782
2,217
73
4,072
2,401
3,089
82
5,572
Employees by Business Unit
3%
4%
30%
7%
56%
Corporate
Surface
Underground
International
Civil
TRAINING AND DEVELOPMENT
As a Registered Training
Organisation, Macmahon
continues to offer a number of
career pathways for employees,
providing opportunities and
career development.
Spanning multiple jurisdictions, our
apprentice and trainee programs
help to service the business
functions whilst providing entry
level and accelerated pathways
into the mining sector.
APPRENTICES AND TRAINEES
Macmahon’s long standing and
recognised apprenticeship program
continues to show our commitment
to the development of apprentices
and trainees.
Macmahon currently provides
a range of apprenticeships and
traineeships for heavy diesel
mechanics, auto electricians,
boilermakers, tyre trainees and
business trainees. This includes
accelerated apprenticeship options
and Certificate III in Surface
Extraction Operations.
23
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MACMAHON ANNUAL REPORT 2019
Financial Review
FINANCIAL PERFORMANCE
From continuing operations before significant items
Revenue
Australia
Indonesia
Other International
Group Revenue
EBITDA (underlying)
EBIT (underlying)
NPAT (underlying)
EBITDA (reported)
EBIT (reported)
NPAT (reported)
1H19
2H19
2019
2018
352.4
186.6
3.1
542.1
89.1
39.9
32.3
80.4
31.1
23.6
347.8
202.3
10.8
560.9
92.3
35.2
24.4
90.4
33.4
22.5
700.2
388.9
13.9
1,103.0
181.4
75.1
56.7
170.8
64.5
46.1
545.4
160.2
4.7
710.3
119.2
41.5
31.6
118.9
41.2
31.3
Note: Refer to Summary of Consolidated Reports (page 118) for reconciliation to underlying results.
Revenue
$M
Underlying EBIT
$M
710
360
1,103
80
70
60
50
40
30
20
10
-10
75
42
-2
FY17
FY18
FY19
FY17
FY18
FY19
Underlying EBITDA
$M
Underlying EBIT Margin
181
119
8%
7%
6%
5%
4%
3%
2%
1%
-1%
-0.5%
6.8%
5.8%
FY18
FY19
FY17
FY18
FY19
32
FY17
1,200
1,000
800
600
400
200
200
150
100
50
24
MACMAHON ANNUAL REPORT 2019
During the year Macmahon
increased the general purpose
corporate debt facility to $50.0
million with the Commonwealth
Bank of Australia which expires
in October 2020. This facility
is currently drawn for bank
guarantees for $20.4 million.
CASH FLOW
Operating cash flow (excluding
interest, tax and settlement for
the class action) for the 12 months
ended 30 June 2019 was $125.9
million (FY18: $101.9 million),
representing a conversion rate from
underlying EBITDA of 69.4%. The
cashflow conversion was impacted
by the increase in working capital
due to delayed receipts from trade
receivables, which were paid shortly
after financial year end. Including
receipts from customers in the
first week of July 19 the EBITDA
conversion would increase to 82.6%.
Capital Expenditure
Capital expenditure for the year
totalled $124.5 million, comprising
$67.8 million acquired through
finance leases and $56.7 million
funded in cash. This excludes the
lease receivable of $16.1 million.
DIVIDEND
The Board has elected to reinstate
dividends to shareholders
by approving the payment
of a final dividend of 0.5
cents per share for FY19.
PROFIT AND LOSS
Revenue for the Group increased
by 55.3% from the prior period
to $1.1 billion, primarily due to the
ramp up of several large contracts
that commenced in FY18, including
Batu Hijau (phase 2 commenced
April 2018), Byerwen (commenced
November 2017) and Mt Morgans
(commenced late December 2017).
In addition Macmahon commenced
new projects in FY19 including
Boston Shaker and Langkawi.
In line with guidance, underlying
earnings before interest and tax
(EBIT) for FY19 was $75.1 million,
reflecting a 81.0% growth compared
to $41.5 million underlying EBIT in
FY18. Similarly, underlying earnings
before interest, tax, depreciation and
amortisation (EBITDA) increased
by 52.2% to $181.4 million.
Depreciation and Finance costs
Following growth in capital
expenditure over the period,
depreciation of property, plant and
equipment and finance costs for
2019 increased from $77.7 million
and $2.4 million respectively to
$106.2 million and $10.7 million.
Tax
The Group reported a tax expense
of $7.7 million for continuing
operations. The effective tax rate
for continuing operations is 14.4%
due to the recognition of previously
unrecognised deferred tax assets.
Excluding these items the effective
tax rate would have been 26.5%.
BALANCE SHEET
Execution of existing projects
together with commencement of
new projects resulted in an increase
in Net Assets from $409.8 million
to $447.6 million at 30 June 2019.
The Company’s Net Tangible
Assets (NTA) increased by 8.3%
over the year from $404.0 million
to $437.4 million at 30 June
2019 resulting in NTA per share
increasing from 18.7 cents per
share to 20.3 cents per share.
Working Capital
Whilst current trade and other
receivables increased to $181.5
million at 30 June 2019 ($152.3
million in 2018) due to expansion of
operations and delays in expected
receipts of payments, the current
trade and other payables at 30 June
2019 of $168.6 million remained
consistent with the prior year of
$174.3 million. A strong focus on
inventory management resulted
in inventory marginally increasing
to $45.8 million compared to
$42.0 million in the prior year.
Net Debt
Cash on hand at 30 June 2019
of $113.2 million (FY18: $109.6
million) offset by total debt of
$165.8 million (FY18: 106.3 million)
resulted in net debt at year end of
$52.7 million. Debt increased by
$59.6 million with the purchase of
plant and equipment across the
group to support new projects
and maintain growth on existing
projects. Increase in cash of $3.5
million was lower than expected
due to customer receipts of $24.0
million expected to be received
prior to 30 June 19 being receipted
within the first week of July 19.
Including these receipts the net
debt would reduce to $28.7 million.
25
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MACMAHON ANNUAL REPORT 2019
Vision and Strategy
Macmahon’s vision is to be a premium provider of
contract mining services, delivering consistent returns
and stable employment. Our strategic pillars include:
Safety
Improving safety performance
across all operations remains
a core priority.
Execution and Relationships
Focussing on ensuring our
current projects perform on or
above expectations. Macmahon
is also committed to fostering
strong relationships with
our customers.
Technology
Investing in innovation and
technology to differentiate our
services and ensure they are
delivered in the most efficient
and productive manner.
People and Culture
Instilling a proactive, positive
culture where people are
empowered to make decisions,
are accountable for their actions
and rewarded appropriately
for success.
New Work
Macmahon remains focussed
on winning new work across a
diverse spread of commodities,
clients and geographies.
Diversification
Growing our core mining business
with a focus on underground and
rehabilitation, including exploring
M&A opportunities.
26
MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
Statement
of Values
In everything we do, we
think and act according
to our guiding principles.
Safety
Think Safe • Act Safe • Enforce Safety
Lead by example
Identify and report hazards
Promote a “Zero-harm Culture”
Do not accept unsafe acts and conditions
Teamwork
Work Smart • Work Hard • Work Together
Create a positive and enjoyable environment
Foster the potential of our people
Share a common vision of success
Prosperity
Find Value • Drive Value • Achieve Value
Continue to strive for ongoing efficiency,
productivity and quality
Integrity
Be Reliable • Be Direct • Be Honest
Act lawfully, ethically and responsibly
Acknowledge the views of employees,
stakeholders and communities
Recognise and promote diversity,
cultural heritage and ambitions
Be trustworthy and fair in all dealings
Pride, honesty and respect
Environment
Reduce • Recycle • Rejuvenate
Promote environment awareness
Minimise waste
Invest in the environment
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27
MACMAHON ANNUAL REPORT 2019
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, including during
FY20, is heavily dependent on
outcomes at the Batu Hijau project.
Any underperformance at the
Batu Hijau Mine will be particularly
material to Macmahon.
The mining services contract for
the Batu Hijau project requires
agreements to be reached
about certain matters on a
regular basis, including annual
performance targets. There is
no guarantee this will occur.
The Batu Hijau mine is located
in Indonesia, where the risk of
earthquake, volcanic eruption and
tsunami is higher than many other
parts of the world. Macmahon
notes there has been recent
volcanic activity and earthquakes
on the nearby island of Lombok,
which may impact on Batu Hijau.
PERFORMANCE OF
THE TELFER PROJECT
As previously disclosed, Macmahon
has been working to resolve several
issues on the Telfer project that have
resulted in it incurring significant
losses. This has included Macmahon
commencing a formal dispute
resolution process with Newcrest
regarding a variation claim. There is
no guarantee that the predictions or
forecasts made by Macmahon about
the future financial performance of
the Telfer project will be realised.
GUIDANCE
Macmahon provides forecasts
and predictions about its future
performance (“Guidance”) on
the basis of several assumptions
which may subsequently
prove to be incorrect.
Guidance is not a guarantee
of future performance, and is
subject to known and unknown
risks, many of which are beyond
the control of Macmahon.
Key identified risks that may result
in Macmahon not meeting its
Guidance include, but are not limited
to, termination of key contracts,
variability in cost and productivity
assumptions, and inability to recover
claims and variations from clients.
Macmahon’s actual results
may differ materially from its
Guidance and the assumptions
on which the Guidance is based.
CONTINGENT LIABILITIES
Macmahon is exposed to a
number of contingent liabilities,
including those described in the
notes to this Annual Report.
Performance at the Telfer mine is
subject to various operational and
contractual risks. While some of
these risks apply to all projects,
performance at Telfer may be
particularly material to Macmahon.
The Guidance provided by
Macmahon will be negatively
impacted if those contingent
liabilities that are currently
unquantified crystallise
into actual liabilities.
28
RELIANCE ON KEY CUSTOMERS
Macmahon’s business relies on a
number of individual contracts and
business alliances and Macmahon
derives a significant proportion of
its revenue from a small number
of key long term customers and
business relationships with a few
organisations. In the event that
any of these customers fails to
pay, 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.
INDUSTRY AND
COMMODITY CYCLES
Macmahon’s financial performance
is influenced by the level of activity
in the resources and mining industry,
which is impacted by a number
of factors beyond the control
of Macmahon. This includes:
• demand for mining production,
which may be influenced by
factors including (but not limited
to) prices of commodities,
exchange rates and the
competitiveness of Australian and
Indonesian mining operations;
• government policy on
infrastructure spending;
• the policies of mine owners
including their decisions to
undertake their own mining
operations or to outsource these
functions; and
• the availability and cost of key
resources including people, large
earth moving equipment and
critical consumables.
Macmahon is indirectly exposed
to movements in commodity
prices, which are volatile and
beyond Macmahon’s control.
Adverse movements in commodity
prices may reduce the pipeline of
work in the mining sector and the
level of demand for the services
of Macmahon’s mining 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 to win,
extend and complete new contracts.
Any failure by Macmahon to
continue to win new contracts
and work will impact its financial
performance and position.
Macmahon expects to continue to
have a broad range of competitors
across all of its operations, which
impacts the margins obtainable
on contracts. There is a risk that
existing and increased future
competition may limit the
ability to win new contracts or
achieve attractive margins.
EARLY CONTRACT TERMINATION
AND CONTRACT VARIATIONS
Guidance is partly based on current
contracts in hand and Macmahon
derives a significant proportion of
its 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.
Early termination or failure to renew
a contract by Macmahon’s clients
when that renewal is expected is
likely to have an adverse effect
on financial performance.
MACMAHON ANNUAL REPORT 2019
While Macmahon has no reason
to believe any existing or potential
contracts will be terminated,
there can be no assurance
that this will not occur.
Due to the nature of Macmahon’s
business, there is also a risk
that Macmahon’s claims for
contract variations are disputed
and not ultimately agreed, or
are insufficiently certain at a
point in time such that they
cannot be brought to account
in a given accounting period.
PROJECT DELIVERY RISK
Execution and delivery of projects
involves judgement regarding
the planning, development and
operation of complex operating
facilities and equipment. As a
result, Macmahon’s operations,
cash flows and liquidity could be
affected if the resources or time
needed to complete a project
are miscalculated, if it fails to
meet contractual obligations,
or if it encounters delays or
unspecified conditions.
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MACMAHON ANNUAL REPORT 2019
MARGINS, OPERATIONS,
SAFETY AND ENVIRONMENT
Cost overruns, unfavourable contract
outcomes, serious or continued
operational failure, adverse industrial
relations outcomes, disruption at key
facilities, disruptions to information
and communication systems or a
safety incident have the potential to
have an adverse financial impact.
Macmahon is also exposed to input
costs through its operations, such
as the cost of fuel and energy
sources, equipment and personnel.
To the extent that these costs
cannot be passed on to customers
in a timely manner, or at all,
Macmahon’s financial performance
could be adversely affected.
Macmahon’s operations involve
risk to personnel and 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 win new contracts.
CONTRACT PRICING RISK
If Macmahon materially
underestimates the cost of providing
services, equipment, or plant, there
is a risk of a negative impact on
Macmahon’s financial performance.
COMMODITY PRICE EXPOSURE
Gold and copper are the two
most important commodities
contributing to Macmahon’s order
book and tender pipeline. If the
gold and copper industries were
to suffer, it would have a material
adverse effect on Macmahon
revenues and profitability.
EQUIPMENT AND
CONSUMABLE AVAILABILITY
Macmahon has a significant
fleet of equipment and has a
substantial ongoing requirement
for consumables including tyres,
parts and lubricants. If Macmahon
cannot secure a reliable supply
of equipment and consumables,
there is a risk that its operational
and financial performance
may be adversely affected.
KEY PERSONNEL
Macmahon’s growth and profitability
may be limited by loss of key
operating personnel, inability to
recruit and retain skilled and
experienced employees or by
increases in compensation costs.
The growth of activity in the mining
sector has increased demand
for quality resources, creating a
tightening market and upward
pressure to secure skilled mining
leaders, professionals and personnel.
CURRENCY FLUCTUATION
Macmahon is exposed to
fluctuations in the value of the
Australian dollar versus other
currencies due to international
operations and as Macmahon’s
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
currencies, the translation into
Australian dollars for financial
reporting purposes could result in
a significant increase or decrease
in the amount of those sales or
earnings and net assets.
PARTNER AND CONTROL RISK
Macmahon may undertake
services through and participate
in joint ventures or partnering/
alliance arrangements.
The success of these partnering
activities depends on satisfactory
performance by Macmahon’s
partners. The failure of partners
to meet performance obligations
could impose additional financial
and performance obligations that
could cause significant impact on
Macmahon’s reputation and financial
results, including loss or termination
of the contract and loss of profits.
Following the completion of the
AMNT transaction, AMC (which is a
related party of AMNT) has become
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.
COUNTRY RISK
While Macmahon has significant
operations in Australia, its largest
project is in Indonesia. During the
current year Macmahon commenced
providing consulting services in
South Africa. Sovereign risk in these
countries is higher than in Australia.
Operating in international
markets can expose Macmahon
to additional adverse economic
conditions, civil unrest, conflicts,
terrorism, security breaches and
bribery and corrupt practices.
Some countries in which Macmahon
operates, or may operate in the
future, have less developed legal,
regulatory 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.
30
MACMAHON ANNUAL REPORT 2019
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The financial performance and
position of 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.
FINANCING RISK
Macmahon has financing facilities
with external financiers. A default
under any of these facilities
could result in withdrawal of
financial support or an increase
in the cost of financing.
ACQUISITION RISK
In August 2019 Macmahon
announced the completion of its
acquisition of the GBF Group.
There is a risk this business will not
perform as expected or that the
integration of the business will be
more difficult or costly than planned.
OTHER MATERIAL RISKS
THAT COULD AFFECT
MACMAHON INCLUDE:
• A major operational failure or
disruption at key facilities or to
communication systems which
interrupt Macmahon’s business;
• Changing government regulation
including tax, occupational health
and safety, and changes in policy
and spending;
• Loss of reputation through poor
project outcomes, unsafe work
practices, unethical business
practices, and not meeting the
market’s expectation of our
financial performance;
• Foreign exchange rates and
interest rates in the ordinary
course of business; and
• Loss of key Board, management
or operational personnel.
MACMAHON ANNUAL REPORT 2019
Our Board
EVA SKIRA
Independent,
Non-Executive Chair
Ms Skira has a background
in banking, capital markets,
stockbroking and financial markets,
previously holding executive
positions at Commonwealth Bank
in the Corporate Banking/Capital
Markets divisions and later with
stockbroker Barclays de Zoete Wedd.
Ms Skira has served on a number
of Boards in business, government
and the not-for-profit sectors across
a range of industries including
engineering, infrastructure, health
and finance.
VYRIL VELLA
Independent,
Non-Executive Director
Mr Vella has over 40 years’
experience in the civil engineering,
building, property and construction
industries. During Mr Vella’s 34
years with the Leighton Group (now
CIMIC) he held various positions
including General Manager NSW,
Director of Leighton Contractors Pty
Ltd, Founding Director of Welded
Mesh Pty Ltd, Managing Director of
Leighton Properties and Associate
Director of Leighton Holdings.
Mr Vella was also a consultant
to Leighton Holdings, where he
advised on investment in the
residential market, general property
issues and major construction and
infrastructure projects.
3232
MACMAHON ANNUAL REPORT 2019
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ALEX RAMLIE
Non-Independent,
Non-Executive Director
Mr Ramlie is a Director of AMNT.
Prior to joining AMNT, he was
the President Director and Chief
Executive Officer of PT Borneo
Lumbung Energi & Metal Tbk, which
operated a hard coking coal mine in
Central Kalimantan.
Between 2012 and 2015, Mr Ramlie
was also a Director of Bumi PLC,
a Vice-President Commissioner/
Vice-Chairman of PT Berau Coal
Energy Tbk and its subsidiary, PT
Berau Coal, and held Commissioner
positions in PT Bumi Resources
Tbk, PT Kaltim Prima Coal, and PT
Arutmin Indonesia.
He is currently Director of
Operations and Corporate
Secretary of PT Amman Mineral
Nusa Tenggara and played an
instrumental role in the acquisition
of PT Newmont Nusa Tenggara
(now PT Amman Mineral Nusa
Tenggara). Mr Ramlie began
his career as an investment
banker at Lazard Frères & Co.
ARIEF SIDARTO
Non-Independent,
Non-Executive Director
Mr Sidarto is the Chief Financial
Officer of AMNT. His qualifications
include an MBA from Harvard
Business School and two bachelor
degrees with summa cum laude
from The Wharton School of
Finance and The Engineering School
of the University of Pennsylvania.
Prior to joining AMNT in April 2017,
Mr Sidarto held the position of
Managing Director and Member of
the Board of PT Rajawali Corpora.
He was also Managing Partner of
Samuel Group from 2009 to 2015
and Managing Director of Wellspring
Capital Partners from 2010 to 2014.
Mr Sidarto was previously with
Goldman Sachs New York in 1991
in its Structured Finance Division;
before relocating to Hong Kong and
then Singapore to run investment
banking and corporate finance as
Chief Operating Officer.
MACMAHON ANNUAL REPORT 2019
Executive Management Team
MICHAEL FINNEGAN
Chief Executive Officer
Mr Finnegan holds a Bachelor of
Science (Mining) with 20 years’
experience in the mining industry.
The last 15 years have primarily been
spent in senior line management
positions. Mr Finnegan has a
strong commercial and technical
background and has spent time in
operations on the east and west
coast of Australia as well as a number
of countries throughout Asia.
GILES EVERIST
Chief Financial Officer
Mr Everist was appointed as Chief
Financial Officer in December 2017.
He has more than 30 years’ finance
experience primarily within the
resources sector. He has a Bachelor
of Sciences (Honours) in Mechanical
Engineering from the University
of Edinburgh and is also a
Chartered Accountant.
Prior to joining Macmahon, Mr
Everist held the position of Chief
Financial Officer and Company
Secretary at Monadelphous Group.
GREG GETTINGBY
Chief Development Officer
Mr Gettingby joined Macmahon
in 2002 and was appointed to the
position of Chief Development
Officer in December 2018. He
previously held commercial
management and legal roles with
the Company across all divisions
of its business. Prior to joining
Macmahon, Mr Gettingby worked
as a lawyer in private practice and
holds a Bachelor of Arts and a
Bachelor of Laws.
CARL O’HEHIR
General Manager,
Civil and Surface Australia
Mr O’Hehir holds a Bachelor of
Engineering (Mining) and is a
Site Senior Executive under the
Queensland Coal Mining Safety and
Health Act. Mr O’Hehir has over
18 years’ experience in open cut
mining in Queensland and in Africa
across technical, operational and
managerial roles. Prior to joining
TMM in July 2010, Mr O’Hehir held
senior positions at Thiess and BHP.
ANDREW DOE
General Manager, Underground
Mr Doe holds a Bachelor of
Engineering (Mining) with 25 years’
industry experience. Mr Doe has a
predominantly underground hard
rock background across a range of
commodities, working for Australian
and global producers. Prior to
joining Macmahon, Mr Doe worked
in a corporate role with a global
mining house.
MARK HATFIELD
General Manager,
Plant & Maintenance Services
Mr Hatfield has more than 16 years’
experience within the mining and
heavy equipment industry and has
fulfilled numerous operational and
senior leadership roles. Mr Hatfield
has a strong technical background
and has spent time in operations
on the west coast of Australia
as well as a number of countries
throughout Asia.
KATHERINE MARTIN
General Manager,
People and HSEQT
Ms Martin joined Macmahon as
General Manager, People and HSEQT
in 2019. She brings more than two
decades’ experience in senior roles
in human resources, workforce
planning, organisational development
and change management. Prior
to Macmahon, Ms Martin held
management positions with Mineral
Resources Limited, Newmont,
BC Iron, HWE Mining and Barrick
Gold. Ms Martin is a member of the
Australian HR Institute.
MICHAEL FISHER
General Manager, South Africa
Mr Fisher has 20 years’ experience
in the mining industry and holds
a Graduate Diploma of Mine
Engineering. The last 8 years have
primarily been spent in senior
management positions. Mr Fisher
has a strong commercial and
operational background, with
experience in mineral and coal
operations in the Northern Territory,
on the east coast of Australia and
several provinces across Indonesia.
PETER BINSTED
General Manager, Asia
Mr Binsted is a Civil Engineer with
more than 30 years’ experience
in hard rock mining and the civil
construction business. Since joining
Macmahon in 1985, he has held
various operational and managerial
positions in Australia, with the last
23 years spent in Southeast Asia.
Mr Binsted has a strong commercial
and operational background gained
from managing successful business
units in Asia.
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MICHAEL FINNEGAN
Chief Executive Officer
GILES EVERIST
Chief Financial Officer
GREG GETTINGBY
Chief Development Officer
CARL O’HEHIR
General Manager,
Civil and Surface Australia
ANDREW DOE
General Manager,
Underground
MARK HATFIELD
General Manager,
Plant & Maintenance Services
KATHERINE MARTIN
General Manager,
People and HSEQT
MICHAEL FISHER
General Manager, South Africa
PETER BINSTED
General Manager, Asia
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MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
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 2019.
36
36
The following persons were Directors
of Macmahon Holdings Limited during
the financial year and up to the date of
this report, unless otherwise stated:
MS EVA SKIRA AM, 65
Position:
Independent Non-Executive Director
Appointed as Non-Executive
Director in September 2011;
appointed Chair on 27 June 2019
She also has deep understanding
of sustainability and environmental
practices, having been the Chair
of the Water Corporation of
Western Australia and Forest
Products Commission.
Qualifications:
BA (Hons), MBA, SF Fin
(Life Member Fin), FAICD,
FAID, FGIA, FCIS
Experience and expertise:
Ms Skira has a background
in banking, capital markets,
stockbroking and financial markets,
previously holding executive
positions at the Commonwealth
Bank of Australia in the Corporate
Banking/Capital Markets divisions
and later with stockbroker
Barclays de Zoete Wedd.
Ms Skira has served on a number
of Boards in business, government
and the not-for-profit sectors across
a range of industries including
engineering, infrastructure, health
and finance. She was Deputy Chair
at Metrobus, Non-Executive Director
of Doric Construction Group,
Deputy Chancellor of Murdoch
University and Board Member
of MDA National Insurance.
She is currently Chair of Trustees
at St John of God Health Care Inc
and Board member at Western
Power, WA Parks Foundation
and the Western Australia
Cricket Association. Ms Skira was
recognised in the 2019 Australia
Day honours list and awarded a
Member of the Order of Australia
for her significant service to
business in Western Australia.
Current listed directorships:
None
Former directorships (last 3 years):
RCR Tomlinson Limited
(resigned October 2018)
Committee memberships:
• Chair of the Remuneration
and Nomination Committee
• Member of the Audit and Risk
Committee
Interests in ordinary shares:
61,953
Interests in share rights:
267,538
MACMAHON ANNUAL REPORT 2019
MR VYRIL VELLA, 70
Position:
Independent Non-Executive Director
Appointed November 2007;
resigned 31 October 2018;
reappointed 29 June 2019
Qualifications:
BSc, BE (Hons), M.Eng.
Sc, FIEAust, FAICD
Experience and expertise:
Mr Vella has over 40 years’
experience in the civil engineering,
building, property and construction
industries. During Mr Vella’s 34 years
with the Leighton Group, he held
various positions including General
Manager NSW, Director of Leighton
Contractors Pty Ltd (now CIMIC),
Founding Director of Welded Mesh
Pty Ltd, Managing Director of
Leighton Properties and Associate
Director of Leighton Holdings.
Mr Vella was a consultant to
Leighton Holdings, where he
advised on investment in the
residential market, general property
issues and major construction
and infrastructure projects.
He also was Non-Executive
Director at Devine Limited.
Current listed directorships:
None
Former directorships (last 3 years):
No listed entities
Committee memberships:
• Chairman of the Audit
and Risk Committee
• Member of the Remuneration
and Nomination Committee
Interests in ordinary shares:
1,857,842
Interests in share rights:
None
37
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MACMAHON ANNUAL REPORT 2019
MR ALEXANDER RAMLIE, 46
Position:
(AMNT Nominee) Non-Independent,
Non-Executive Director
Appointed 8 August 2017
Qualifications:
BA, MA (Economics)
Experience and expertise:
Mr Ramlie joined the Board as
a Non-Executive Director and
nominee of AMNT in August 2017
after the successful completion
of the AMNT transaction. Prior to
becoming a Director of AMNT, he
was the President Director and Chief
Executive Officer of PT Borneo
Lumbung Energi & Metal Tbk from
2011 to 2015. Borneo operates a
hard coking coal mine in Tuhup,
Central Kalimantan, which is held
by its wholly-owned subsidiary,
PT Asmin Koalindo Tuhup.
Between 2012 and 2015, Mr Ramlie
was also a Director of Bumi PLC,
Vice-President Commissioner/
Vice-Chairman of PT Berau Coal
Energy Tbk and its subsidiary, PT
Berau Coal, and held Commissioner
positions in PT Bumi Resources
Tbk, PT Kaltim Prima Coal,
and PT Arutmin Indonesia.
He is currently Director of
Operations and Corporate
Secretary of PT Amman Mineral
Nusa Tenggara and played an
instrumental role in the acquisition
of PT Newmont Nusa Tenggara
(now PT Amman Mineral Nusa
Tenggara). Mr Ramlie began
his career as an investment
banker at Lazard Frères & Co.
Current listed directorships:
None
Former directorships (last 3 years):
No listed entities
Committee memberships:
• Member of the Audit and Risk
Committee
• Member of the Remuneration and
Nomination Committee
Interests in ordinary shares:
215,489
Interests in share rights:
676,960
His vast banking and finance
experience extends to his career
at Goldman Sachs in New York,
working in its Structured Finance
Division in 1991; he then relocated
to Hong Kong and subsequently
to Singapore to run investment
banking and corporate finance as
Chief Operating Officer. During
his time, he was responsible for
deal execution (M&As, LBOs,
restructuring, debt and equity
capital raisings), select client
relationships and cross selling
(commodities, asset-liability
management products) and was
a Member of Goldman Sachs’
Commitments Committee.
MR ARIEF WIDYAWAN SIDARTO, 50
Position:
(AMNT Nominee) Non-Independent,
Non-Executive Director
Appointed 8 August 2017
He also held directorships
in Singapore entities, In-
Sing Minerals Pte. Ltd. and
Goodearth Universal Pte. Ltd.
Qualifications:
MBA
Experience and expertise:
Mr Sidarto brings his vast
management experience from
mining and infrastructure companies
to the Board of Macmahon. He was
Managing Director and Member
of the Board of PT Rajawali
Corporation, the holding company
of a diversified business group in
palm oil plantation, gold and other
mining properties, transportation,
infrastructure and media.
His management experience
extends to the hospitality sector, in
companies such as St Regis, Four
Seasons Hotel and Sheraton Hotels.
He was also Managing Partner of
Samuel Group, a brokerage and
investment banking firm, from
2009 to 2015 and concurrently,
Managing Director of Wellspring
Capital Partners, a private equity
firm, between 2010 to 2014.
He currently serves as Director of
PT Amman Mineral Nusa Tenggara
where he is a member of the
Finance and Investment Committee,
the Ethics Committee and the Audit
and Risk Management Committee.
Current listed directorships:
None
Former directorships (last 3 years):
Director of In-Sing Minerals Pte.
Ltd. (a Singapore entity) and
Goodearth Universal Pte. Ltd. (a
Singapore entity) and Managing
Director and Member of the Board
of PT Rajawali Corporation.
Committee memberships:
None
Interests in ordinary shares:
215,489
Interests in share rights:
676,960
38
MACMAHON ANNUAL REPORT 2019
MR KIM HORNE AM, 64
Position:
Independent Non-Executive Director
Appointed March 2018;
resigned 26 June 2019
In 2014, Mr Horne was appointed
as a Member of the Order
of Australia for his services
to the mining industry.
Qualifications:
Dip (Frontline Supervision), WA
Restricted Quarry Managers
Certificate, graduate of the
University of WA Management
Education Programme
Experience and expertise:
Mr Horne had an extensive career at
Alcoa, holding the role of Manager
of Mining in Western Australia,
Location Manager of Pinjarra
Refinery and Executive Director
of Alcoa Australia, responsible for
health, safety and environment,
community and government
relations and human resources; he
also held the role of Vice President
of Human Relations for Global
Primary Products in New York.
His final role was as President
of Alcoa’s Global Mining Centre.
During his time, he also completed
the Alcoa Executive Program.
He previously held Board positions
at the Western Australian
Chamber of Mines and Energy,
Peel Development Commission,
was Non-Executive Chairman of
Mitchell Logistics Company and
Director of Toll Mining Services.
He is Deputy Chair of Synergy, the
State electricity generator and
retailer in Western Australia, and
is a life member of the Chamber
of Minerals and Energy. He is
also Deputy Chair of Fremantle
Ports in Western Australia, and
is an Independent Director at
Rainbow Bee Eater, a technology
development company playing
a role in shifting fossil fuel
based energy to renewable
and sustainable energy.
Current listed directorships:
None
Former directorships (last 3 years):
No listed entities
Committee Memberships:
None
Interests in ordinary shares:
107,744
Interests in share rights:
None
MR JIM WALKER, 67
Position:
Non-Executive Chairman
Appointed October 2013
as Non-Executive Director;
appointed Chairman in March
2014; resigned 27 June 2019
Qualifications:
GAICD, FCA, FAIM
Experience and expertise:
Mr Walker has over 40 years of
experience in the resources and
mining sector. Until 2013, he was
the Managing Director and Chief
Executive Officer of WesTrac Pty
Ltd, where he led the company’s
rapid development in industrial
and mining services locally and
in China. Prior to this, Mr Walker
held various roles with other
Australian Caterpillar dealers. He
was a member of the Australian
Institute of Management, holding the
position of President WA between
2008–2010 and National President
– Australia between 2010–2013.
He was recently Non-Executive
Director at Programmed
Maintenance Services Limited
and Deputy Chairman of Seeing
Machines Limited. He also served as
a Director at Seven Group Holdings
Limited, National Hire Group Limited,
Skilled Group Limited and Coates
Group Holdings Pty Limited.
He is currently Chairman of
Mader Group Limited, Austin
Engineering Limited, Wesley
College, Australian Potash Limited,
the WA Motor Museum and the
State Training Board WA. He is
also Deputy Chairman of Royal
Automobile Club of Western
Australia and Non-Executive
Director of MG Kailis Group.
Current listed directorships:
• Chairman of Austin Engineering
Limited (appointed November
2016)
• Chairman of Australian Potash
Limited (appointed August 2018)
Former directorships (last 3 years):
• Non-Executive Director of
Programmed Maintenance
Services Limited (resigned
October 2017)
• Deputy Chairman of Seeing
Machines Limited (resigned
December 2018)
Special responsibilities:
None
Interests in ordinary shares:
521,000
Interests in share rights:
None
39
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MACMAHON ANNUAL REPORT 2019
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 2019, and the number of meetings attended by each Director were:
Full Board
Meetings
Special Board
Meetings (C)
Audit and Risk
Committee Meetings
Remuneration
and 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)
E Skira
V A Vella
A Ramlie
A W Sidarto
K A Horne
J A Walker
8
2
8
8
8
8
8
2
5
8
7
8
6
*
6
6
6
6
5
*
3
6
6
6
3
1
*
*
2
3
3
1
*
*
2
3
3
1
*
*
3
3
2
1
*
*
3
3
1
*
*
*
2
2
1
*
*
*
2
2
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
40
COMPANY SECRETARIES
Gregory Gettingby BA/LLB
Mr Gettingby holds a Bachelor of
Arts and a Bachelor of Laws.
Mr Gettingby joined Macmahon
in 2002 and was appointed to the
position of Chief Development
Officer in 2018. He previously held
commercial management and legal
roles with the Company.
Prior to joining Macmahon,
Mr Gettingby worked as a
lawyer in private practice.
Katina Nadebaum B.Com, CA
Ms Nadebaum joined the Company
in November 2018 as Joint
Company Secretary. Previously,
Ms Nadebaum was the Company
Secretary of Macmahon Holdings
Limited in May 2008 to February
2011. Ms Nadebaum is also the
Company Secretary of Programmed
Maintenance Services Limited.
Prior to that she has held the role of
Company Secretary for various public
companies and has also worked as an
Accountant in public practice where
she provided corporate and company
secretarial advice.
PRINCIPAL ACTIVITIES
The principal activities of the
consolidated entity consisted of
providing mining and consulting
services to mining companies
throughout Australia, Southeast
Asia and South Africa.
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.
DIVIDENDS
The Board has elected to reinstate
dividends to shareholders by
approving the payment of a final
dividend of 0.5 cents per share
for FY19.
As the final dividend was declared
after the balance sheet date, the
financial effect of these dividends
has not been brought to account in
the consolidated financial statements
for the year ended 30 June 2019.
REVIEW OF OPERATIONS
For the 12 months ended 30 June
2019, the Group reported increases
in total revenue, underlying earnings
before interest and tax (EBIT) and
underlying net profit after tax from
continuing operations which was
driven by the inclusion of 12 months
operating results from contracts
that commenced mid to late 2018,
commencement of new contracts
and 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 31, which
form part of this Director’s report.
SIGNIFICANT CHANGES
IN THE STATE OF AFFAIRS
In the opinion of the Directors there
were no significant changes in the
state of affairs of the Group that
occurred during the financial year
under review.
MATTERS SUBSEQUENT TO THE
END OF THE FINANCIAL YEAR
In June 2019, Macmahon signed
an agreement to acquire 100%
of GF Holdings (WA) Pty Ltd
and its subsidiaries.
MACMAHON ANNUAL REPORT 2019
The acquisition is consistent
with Macmahon’s strategy of
growing capability and scale in its
underground division to capitalise on
the significant level of underground
opportunities that the Company is
seeing with its current and potential
clients. The acquisition completed
on 2 August 2019.
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For details of the acquisition please
refer to ASX announcements dated
18 June 2019 and 2 August 2019.
R
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Subsequent to the year end the
Board approved a final dividend
on ordinary shares in respect of
the 2019 financial year of 0.5
cents per share.
LIKELY DEVELOPMENTS
AND EXPECTED RESULTS
OF OPERATIONS
Likely developments in the
operations of the consolidated
entity in future financial years
and the expected results of those
operations have been included
generally within the annual report.
ENVIRONMENTAL REGULATION
The consolidated entity is not subject
to any significant environmental
regulation under Australian
Commonwealth or State law.
REMUNERATION REPORT –
AUDITED
The audited remuneration report
is set out on pages 46 to 57 and
forms part of this Directors’ report.
41
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MACMAHON ANNUAL REPORT 2019
INDEMNITY AND
INSURANCE OF OFFICERS
The Company has indemnified
the Directors and Executives of
the Company for costs incurred,
in their capacity as a Director or
Executive, for which they may be
held personally liable, except where
there is a lack of good faith.
During the financial year, the
Company paid a premium in
respect of a contract to insure
the Directors and Executives of
the Company against a liability
to the extent permitted by the
Corporations Act 2001. The
contract of insurance prohibits
disclosure of the nature of liability
and the amount of the premium.
INDEMNITY AND
INSURANCE OF AUDITOR
The Company has not, during or
since the financial year, indemnified
or agreed to indemnify the auditor
of the Company or any related
entity against a liability incurred
by the auditor.
During the financial year, the
Company has not paid a premium
in respect of a contract to insure
the auditor of the Company or
any related entity.
PROCEEDINGS ON BEHALF
OF THE PARENT ENTITY
No person has applied to the
Court under section 237 of the
Corporations Act 2001 for leave to
bring proceedings on behalf of the
parent entity, or to intervene in any
proceedings to which the parent
entity is a party for the purpose
of taking responsibility on behalf
of the parent entity for all or part
of those proceedings.
42
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 29 to the financial statements.
The Directors are satisfied that the
provision of non-audit services
during the financial year, by the
auditor (or by another person
or firm on the auditor’s behalf),
is compatible with the general
standard of independence
for auditors imposed by the
Corporations Act 2001.
The Directors are of the opinion that
the services as disclosed in note 29
to the financial statements do not
compromise the external auditor’s
independence requirements of
the Corporations Act 2001 for the
following reasons:
• all non-audit services have been
reviewed and approved to ensure
that they do not impact the
integrity and objectivity of the
auditor; and
• none of the services undermine
the general principles relating to
auditor independence as set out
in APES 110 Code of Ethics for
Professional Accountants issued
by the Accounting Professional
and Ethical Standards Board,
including reviewing or auditing
the auditor’s own work, acting in a
management or decision–making
capacity for the parent entity,
acting as advocate for the parent
entity or jointly sharing economic
risks and rewards.
ROUNDING OF AMOUNTS
The consolidated entity is of a kind
referred to in ASIC Corporations
(Rounding in Financial/Directors’
Reports) Instrument 2016/191, issued
by the Australian Securities and
Investments Commission, relating
to “rounding– off”. Amounts in this
report have been rounded off in
accordance with that Class Order to
the nearest thousand dollars, or in
certain cases, the nearest dollar.
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 44.
AUDITOR
KPMG continues in office in
accordance with section 327
of the Corporations Act 2001.
This report is made in accordance
with a resolution of Directors,
pursuant to section 298(2)(a)
of the Corporations Act 2001.
EVA SKIRA
Director
30 August 2019
Perth
MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
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43
43
MACMAHON ANNUAL REPORT 2019
Auditor’s
Independence
Declaration
44
MACMAHON ANNUAL REPORT 2019
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45
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 ProfessionalStandards Legislation.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 2019 there have been: i.no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii.no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Trevor Hart Partner Perth 30 August 2019
MACMAHON ANNUAL REPORT 2019
Remuneration Report
Audited
This Remuneration Report for the year ended 30 June 2019
has been audited by the Company’s external auditor.
The remuneration report details the remuneration arrangements for key management personnel (KMP) as defined by
and in accordance with the requirement of the Corporations Act 2001 (the Act) and its regulations.
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 remuneration mix for Executive KMP for FY19 is outlined below:
Michael Finnegan
Chief Executive Officer
Giles Everist
Chief Financial Officer
Greg Gettingby
Chief Development Officer
Fixed remuneration
Short term incentive
Long term incentive
At risk
32%
42%
40%
32%
21%
20%
36%
37%
40%
The value of the long term incentive in this table reflects the accounting standard value as noted in the remuneration table and includes the
current year expense for performance rights granted in previous years.
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 relevant industry peers. Benchmarking was completed during FY19 using industry surveys and reports
from Mercer Consulting (Australia) Pty Ltd (Mercer). Based on the results of the market benchmarking review, salary
increases were provided to employees during the year. For Executive KMP these increases in fixed remuneration
ranged between 9.2% and 17.9%.
These increases were appropriate to bring the Executives into line with relevant comparator companies after
significant growth in the size and complexity of the Company, and growth in the responsibilities and scope of the
Executives’ roles. For example, the Company’s FY19 revenue was 55.3 % higher than its revenue in FY18 and 206.7%
higher than its revenue in FY17.
46
MACMAHON ANNUAL REPORT 2019
1.3 FY19 Short term incentive (STI)
During FY19 the STI opportunity provided to Executive KMP, with continued service of at least 6 months during the
period, had the following features.
Purpose of
the plan
Incentivise employees to achieve the Company’s annual targets for earnings before interest and tax (EBIT) and return on
equity (ROE). These targets were derived from the Company’s publicly stated EBIT guidance range of $70 million to $80
million, which was provided at the FY18 result.
The STI was structured to commence from zero upon achievement of the Company’s minimum EBIT and ROE targets, and
to increase in line with any additional EBIT or ROE, up to a cap.
Reasons for using
these targets
EBIT and ROE were chosen as the targets for the STI to simplify administration of the plan, and to focus employees on
two key metrics for investors in the Company.
Weighting of
performance
targets
Performance
period
Any STI payment is to be calculated 75% based on EBIT performance, and 25% based on ROE.
Performance against the STI targets will be measured during the period 1 July 2018 to 30 June 2019.
Form of payment Cash and shares.
Deferral of STI
25% of any STI payment for each Executive team member will be deferred into shares for two years after the
performance period ends and is payable in shares. These shares will only be released to the KMP if they remain an
employee at the end of this period.
Executive
claw back
Up to 30% of any STI payment to Executive team members may be claimed back by the Company at any time up to
two years after it is paid to the Executive in the event of 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 STI
awarded to an Executive would have been a lower amount had it been calculated based on such restated results.
Board discretion
The Board has the right to modify, reduce or remove the STI opportunity at any time, including if there is a fatality.
Potential bonus amounts
The table below shows the potential bonus amounts, as a percentage of total fixed remuneration (TFR), available to the
Executive KMP under the FY19 STI Plan.
Threshold
(lower end of guidance range)
Target
(midpoint of guidance range)
Stretch
(high end of guidance range)
Performance Level
M Finnegan
G Everist
G Gettingby
0% of TFR
0% of TFR
0% of TFR
100% of TFR
50% of TFR
50% of TFR
150% of TFR
75% of TFR
75% of TFR
1.4 Changes to the STI opportunity in FY20
For FY20, and following an external consultant review of the structure of the Company’s STI, the Board has resolved to
increase the EBIT target required for any STI payment, (based on the Company’s publicly stated FY20 EBIT guidance)
and to decrease the rate at which the STI increases where there is EBIT and ROE outperformance. For Executive KMP
to receive 100% of their STI entitlement, the Company must achieve the high end of its FY20 guidance range. The
Board will have the right to modify, reduce or remove the STI opportunity at any time, including if there is a fatality.
47
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MACMAHON ANNUAL REPORT 2019
1.5 Long term incentive (LTI)
At the discretion of the Board, the Company provides a LTI opportunity to Senior Executives through the grant
of performance rights. These performance rights can vest into fully paid ordinary shares in Macmahon, for no
consideration, subject to meeting a performance condition and a continued employment condition. The purpose of this
LTI opportunity is to incentivise Executives to deliver sustained increases in shareholder wealth over the longer term.
Performance condition
The vesting of performance rights is dependent on the Company’s absolute level of total shareholder returns (TSR)
over a defined performance period.
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; (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, and (c) it should very closely match the actual returns
received by investors in the Company.
For the purposes of calculating TSR, the starting share price is based on the volume weighted average price (VWAP)
over the 30 calendar days prior to the first day of the performance period, and the closing share price is based on the
VWAP over the 30 calendar days up to and including the final day of the performance period.
For all performance rights currently on issue, the portion of each grant of rights eligible to vest at various levels of
increase in TSR 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 lapse 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.
In addition, 50% of the “Tranche 3” performance rights issued to Executive KMP during FY19 were subject to a
condition of continued employment for one year after any vesting of those performance rights. Under this condition,
if any of the relevant performance rights vest into shares, the holder must remain a Macmahon employee for a further
year before the shares are transferred to that individual.
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.
48
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MACMAHON ANNUAL REPORT 2019
Performance rights granted in FY19
During FY19, a total of 45,254,702 performance rights were granted to Executive KMP. This grant of performance
rights was approved by shareholders at the Company’s 2018 AGM, with 99.29% votes in favour of the grant.
The performance rights granted to Executive KMP in FY19 were divided into the following tranches with the following
performance periods and continued employment requirements:
FY19 LTI grant
% of LTI
award
Performance
period
Tranche 1
Tranche 2
25%
25%
Tranche 3
50%
2 years
(July 18–June 20)
3 years
(July 18–June 21)
4 years
(July 18–June 22)
Continued employment required for
The performance period of 2 years
The performance period of 3 years
For 50% of this tranche: the performance period of 4 years;
For the remaining 50% of this tranche: the performance period of 4 years plus one extra year
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These performance rights were also subject to the performance condition described above. That is, for 100% of the
performance rights in each tranche to vest, the Company must achieve compound annual growth in total shareholder
returns of 25% or more over the performance period applicable to that tranche.
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In addition to the performance rights listed above, the Company also granted performance rights to other employees
of the group during FY19. Some of these performance rights had a three year performance period and continued
employment requirement.
Details of all current performance rights issued by the Company are set out in note 28 to the financial statements
included in this Annual Report.
1.6 Statutory performance indicators (including variable remuneration measures)
The table below shows measures of the Group’s financial performance over the past five years as required by the
Corporations Act 2001. However, as discussed above, these measures are not all consistent with the measures used in
determining the variable amounts of remuneration to be awarded to Executive members of KMP. As a consequence, there
may not always be a direct correlation between statutory key performance measures and variable remuneration awarded.
FY19
FY18
FY17
FY16
FY15
Statutory performance indicators
Profit/(loss) after income tax expense from
continuing operations ($m)
Reported basic earnings per share from
continuing operations (EPS) (cents)
Dividends paid/declared (cents per share)
Share price at 30 June (cents)
46.1
2.19
0.5
18.5
Total Shareholder Return (TSR) (%)
(14.0)
Performance indicators used in determining STI
Underlying EBIT1
Underlying Return on Equity (ROE)1
75.1
13.2
31.3
1.53
-
21.5
30.3
41.2
10.6
(5.5)
10.8
(220.6)
(0.47)
0.87
(17.55)
-
16.5
87.5
(1.7)
(1.1)
-
8.8
33.3
13.8
6.0
-
6.6
(34.0)
37.4
4.0
1 Underlying results are calculated before one off costs (mergers & acquisition, LTI and class action costs).
The FY19 STI Plan was designed to incentivise the achievement of significant growth of earnings in line with the
Company’s FY19 EBIT guidance of $70 to $80 million while maintaining ROE. The FY19 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.
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MACMAHON ANNUAL REPORT 2019
1.7 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.
M Finnegan
G Everist
G Gettingby
Annual fixed
remuneration
$625,000
(including
superannuation)
$500,000
(including
superannuation)
$450,000
(including
superannuation)
Other remuneration
Short term and
long term incentive
opportunities as
described above.
Notice periods
to terminate
3 months’ notice
by either party or
payment in lieu,
except in certain
circumstances such as
misconduct where no
notice period applies.
Termination payments
Statutory entitlements;
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. Any unvested performance
rights held by the Executive lapse upon
termination or resignation, unless the Board in
its absolute discretion determines otherwise.
NON-EXECUTIVE DIRECTOR REMUNERATION
2
The structure of the remuneration provided to Non-Executive Directors is distinct from that applicable to Executives. Non-
Executive Directors receive only fixed remuneration which is not linked to the financial performance of the Company.
The remuneration provided to Non-Executive Directors in FY19 is set out below:
Eva Skira
Alexander Ramlie
Arief Sidarto
Vyril Vella (part year)
Kim Horne
Jim Walker
Cash remuneration1
Salary sacrifice for share rights
Total remuneration during FY19
(including superannuation)
88,744
8,676
8,676
36,667
83,872
157,858
26,256
91,324
91,324
-
22,831
20,342
115,000
100,000
100,000
36,667
106,703
178,200
1 Cash remuneration includes salary, committee fees and superannuation.
The maximum aggregate amount that can be paid to Non-Executive Directors (the fee pool) is currently $1,100,000
per annum, including superannuation. There has been no increase in the fee pool amount since its approval by
shareholders at the 2008 Annual General Meeting.
Share rights
A Non-Executive Director salary sacrifice plan (NED SSP) was initiated by the Company during the year, pursuant to
which Non-Executive Directors may elect to sacrifice part/all of their annual pre-tax Directors’ fees and committee
fees (excluding superannuation) in the form of share rights. Vesting is contingent on the Non-Executive Director
remaining continuously engaged by Macmahon as a Non-Executive Director and was granted in two tranches on
1 July 2018 (50% vesting on the day after release of Macmahon’s half year results and 50% vesting on the day after
release of Macmahon’s full year results). The share rights can be cash settled at the request of the Non-Executive
Director prior to vesting.
For additional information on restrictions or failure to vest refer to the ASX announcement dated 5 July 2018.
In accordance with the accounting standards, as the share rights provide an option over equity, this option has been
fair valued on grant date (1 July 18). Details of the share rights are provided in section 6.
50
MACMAHON ANNUAL REPORT 2019
REMUNERATION GOVERNANCE
3
The Board oversees the remuneration arrangements of the Company. In performing this function the Board is
assisted by input and recommendations from the Remuneration and Nomination Committee (Committee), external
consultants and internal advice. The Committee is responsible for the overview, and recommendation to the full
Board, of remuneration arrangements for Directors, the CEO, and Executive Team members. The CEO, in consultation
with the Board, sets remuneration arrangements for other Executives. No employee is directly involved in deciding
their own remuneration (including the CEO).
Further details of the role and function of the Committee are set out in the Remuneration and Nomination Committee
Charter on the Company’s website at www.macmahon.com.au.
The Committee obtains advice and market remuneration data from external remuneration advisors as required.
When advice and market remuneration data is obtained, the Committee follows protocols regarding the
engagement and use of external remuneration consultants to ensure ongoing compliance with executive
remuneration legislation. These protocols ensure that any remuneration recommendation from an external
consultant is free from undue influence by any member of the Company’s KMP to whom it relates.
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The protocols for any external consultant providing remuneration recommendations prohibit them from providing
advice or recommendations to employees 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.
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The Committee engaged Mercer to provide benchmarking information about market remuneration levels for all
senior employees including KMPs in a peer group of ASX listed companies. This information was not a remuneration
recommendation as defined by the Act, however was considered by the Board in the FY19 salary review process.
The Board is satisfied that the remuneration benchmarking data provided by Mercer was free from undue influence
by employees of Macmahon.
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51
MACMAHON ANNUAL REPORT 2019
4 VALUE PROVIDED TO KMP
Details of the nature and value of each major element of remuneration provided to KMP of the Company during FY19
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
Directors
Non-Executive
E Skira
Chair
A Ramlie
A Sidarto
V Vella3
K Horne4
J Walker5
Total compensation
for Non-Executive
Directors
Executives
M Finnegan
Chief Executive Officer
G Everist8
Chief Financial Officer
G Gettingby
Chief Development
Officer
Total compensation
executive personnel
Total compensation
for Directors and
Executives
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Year
2019
2018
2019
2018
2019
2018
2019
2018
Salary2
$
91,324
80,632
91,324
72,452
91,324
72,452
33,486
72,605
91,324
21,685
162,740
162,740
561,522
482,566
Salary
$
604,389
509,949
463,854
244,182
425,000
350,000
1,493,243
1,104,131
Committee
fees
One off
discretionary
payments
Cash bonus
/ STI
Non-
monetary
benefits
$
13,699
8,505
–
–
–
–
–
–
6,121
–
–
–
19,820
8,505
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
short-
term
$
105,023
89,137
91,324
72,452
91,324
72,452
33,486
72,605
97,445
21,685
162,740
162,740
581,342
491,071
Short-term
One off
discretionary
payments6
$
STI
bonus
$
Non-
monetary
benefits
$
Total
short-
term
$
106,000
132,550
1,142
844,081
150,000
248,252
–
–
53,020
53,632
60,609
47,718
91,324
89,757
2,097
2,506
311
890
–
910,298
519,380
298,125
534,217
531,081
166,609
233,288
4,538
1,897,678
241,324
391,641
2,408
1,739,504
Committee
fees
$
–
–
–
–
–
–
–
–
2019
2,054,765
19,820
166,609
233,288
4,538
2,479,020
2018
1,586,697
8,505
241,324
391,641
2,408
2,230,575
Leave
payout
payments
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Leave
payout
payments
$
–
–
–
–
–
–
–
–
–
–
1
2
3
4
5
6
7
8
Represents the statutory remuneration expense based on fair value at grant date of the performance rights over the vesting period
of the award. During the FY19 year no performance rights granted to KMP vested (refer table 6.2).
Non-Executive salary includes salary sacrificed for share rights during the year (refer section 2).
Mr. Vella ceased as a Non-Executive Director in October 2018 and was reappointed as a Non-Executive Director in June 2019.
Mr. Horne ceased as a Non-Executive Director in June 2019.
Mr. Walker ceased as a Non-Executive Director in June 2019.
One off discretionary payments in FY19 relate to retention bonus paid in October 2018 as per the Executives employment contract.
Other long term benefits relates to the movement in leave liabilities for each Executive.
Mr. Everist resigned as a Director and commenced in an Executive role as CFO in December 2017.
52
Post employment
Share-based
payment
Other
long-term
benefits
Super-
Termination
Share
Performance
annuation
payments
related
%
Compensation
Non-
consisting of
Performance
options and
Related
Total
compensation
rights
%
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
Other
long-term
benefits7
25,380
33,287
12,089
8,601
53,827
28,943
91,296
70,831
91,296
70,831
$
9,977
8,468
8,676
6,883
8,676
6,883
3,181
25,000
9,257
2,060
15,460
15,460
55,227
64,754
$
20,611
20,049
31,931
21,444
25,000
41,926
77,542
83,419
132,769
148,173
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
rights
$
1,009
576
3,509
3,509
646
–
–
–
–
–
–
–
–
9,250
rights
$
725,587
155,863
433,321
26,752
454,434
74,618
1,613,342
257,233
1,622,592
257,233
–
–
–
–
–
–
–
–
–
–
–
–
–
–
%
53
36
49
23
47
24
50
30
43
24
%
100
100
100
100
–
–
100
100
100
100
100
100
100
100
%
47
64
51
77
47
76
46
59
53
67
$
116,009
97,605
100,576
79,335
103,509
79,335
40,176
97,605
107,349
23,745
178,200
178,200
645,820
555,825
$
1,615,659
1,119,497
996,721
354,922
1,067,478
676,568
3,679,858
2,150,987
4,325,677
2,706,812
–
–
–
–
–
–
–
–
–
–
–
–
–
–
%
45
14
44
8
–
11
44
12
38
10
Post employment
Share-based
payment1
Super-
Termination
Performance
Performance
performance
options and
Total
annuation
payments
related
related
rights
compensation
Compensation
Non-
consisting of
Short-term
One off
Non-
Committee
discretionary
Cash bonus
monetary
payments
/ STI
benefits
Total
short-
term
$
Leave
payout
payments
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
105,023
89,137
91,324
72,452
91,324
72,452
33,486
72,605
97,445
21,685
162,740
162,740
581,342
491,071
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
Directors
Non-Executive
E Skira
Chair
A Ramlie
A Sidarto
V Vella3
K Horne4
J Walker5
Total compensation
for Non-Executive
Directors
Executives
M Finnegan
Chief Executive Officer
G Everist8
Chief Financial Officer
G Gettingby
Chief Development
Officer
Total compensation
executive personnel
Total compensation
for Directors and
Executives
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Year
2019
2018
2019
2018
2019
2018
2019
2018
Salary2
$
91,324
80,632
91,324
72,452
91,324
72,452
33,486
72,605
91,324
21,685
162,740
162,740
561,522
482,566
Salary
$
604,389
509,949
463,854
244,182
425,000
350,000
1,493,243
1,104,131
fees
$
13,699
8,505
6,121
19,820
8,505
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
Short-term
One off
payments6
Committee
discretionary
fees
$
Non-
STI
monetary
bonus
benefits
Total
short-
term
$
Leave
payout
payments
106,000
132,550
1,142
844,081
150,000
248,252
53,020
53,632
60,609
47,718
91,324
89,757
2,097
2,506
311
890
–
910,298
519,380
298,125
534,217
531,081
166,609
233,288
4,538
1,897,678
241,324
391,641
2,408
1,739,504
2019
2,054,765
19,820
166,609
233,288
4,538
2,479,020
2018
1,586,697
8,505
241,324
391,641
2,408
2,230,575
1
Represents the statutory remuneration expense based on fair value at grant date of the performance rights over the vesting period
of the award. During the FY19 year no performance rights granted to KMP vested (refer table 6.2).
Non-Executive salary includes salary sacrificed for share rights during the year (refer section 2).
Mr. Vella ceased as a Non-Executive Director in October 2018 and was reappointed as a Non-Executive Director in June 2019.
Mr. Horne ceased as a Non-Executive Director in June 2019.
Mr. Walker ceased as a Non-Executive Director in June 2019.
One off discretionary payments in FY19 relate to retention bonus paid in October 2018 as per the Executives employment contract.
Other long term benefits relates to the movement in leave liabilities for each Executive.
Mr. Everist resigned as a Director and commenced in an Executive role as CFO in December 2017.
2
3
4
5
6
7
8
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
MACMAHON ANNUAL REPORT 2019
Post employment
Share-based
payment
Other
long-term
benefits
Super-
annuation
Termination
payments
Share
rights
Performance
related
Non-
Performance
Related
Compensation
consisting of
options and
rights
Total
compensation
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
9,977
8,468
8,676
6,883
8,676
6,883
3,181
25,000
9,257
2,060
15,460
15,460
55,227
64,754
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
1,009
–
576
–
3,509
–
3,509
–
646
–
–
–
9,250
–
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
%
100
100
100
–
100
–
100
100
100
100
100
100
100
100
%
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
116,009
97,605
100,576
79,335
103,509
79,335
40,176
97,605
107,349
23,745
178,200
178,200
645,820
555,825
Post employment
Share-based
payment1
Super-
annuation
Termination
payments
$
20,611
20,049
31,931
21,444
25,000
41,926
77,542
83,419
132,769
148,173
$
–
–
–
–
–
–
–
–
–
–
Performance
rights
$
725,587
155,863
433,321
26,752
454,434
74,618
1,613,342
257,233
1,622,592
257,233
Performance
related
Non-
performance
related
Compensation
consisting of
options and
rights
Total
compensation
%
53
36
49
23
47
24
50
30
43
24
%
47
64
51
77
47
76
46
59
53
67
%
45
14
44
8
–
11
44
12
38
10
$
1,615,659
1,119,497
996,721
354,922
1,067,478
676,568
3,679,858
2,150,987
4,325,677
2,706,812
Other
long-term
benefits7
$
25,380
33,287
12,089
8,601
53,827
28,943
91,296
70,831
91,296
70,831
53
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MACMAHON ANNUAL REPORT 2019
4.1 Voluntary information – Realised remuneration received by Executives for the year ended 30 June 2019
The amounts disclosed below reflect the realised benefits actually received by each KMP during the reporting period.
M Finnegan
G Everist
G Gettingby
Total KMP
Fixed
remuneration1
Retention
bonus2
Awarded STI
(cash)3
Vested LTI4
625,000
106,000
186,189
495,785
-
450,000
60,609
42,759
67,318
1,570,785
166,609
296,266
-
-
-
-
Realised
remuneration
received
917,189
538,544
577,926
2,033,660
1
2
Fixed remuneration includes base salaries received and payments made to superannuation funds.
A retention bonus is not an ongoing feature of the Company’s employment contracts. The retention bonus payment listed in this table
reflects a one-off arrangement implement in November 2016 to retain these specific individuals at the Company for a two year period at
a time when the Company was under threat of a hostile takeover attempt, and following the resignation of the then CEO of the Company,
The cash STI benefit represents 75% of the FY18 STI paid during the current financial year. The FY19 STI is not payable in FY19.
3
4 No performance rights vested during FY19.
The amounts disclosed above are not the same as remuneration expensed in relation to each KMP in accordance
with the accounting standards (see Table 4.1 above).
Nevertheless, the Directors believe that remuneration received is relevant information for the following reasons:
• the statutory remuneration expensed for performance rights is based on fair value determined at grant date
and does not reflect the fair value of the equity instruments when they are actually received by the KMPs;
• the statutory remuneration shows benefits before they are actually received by the KMPs (deferral and claw
back of STI payments); and
• where performance rights do not vest because a market-based performance condition is not satisfied
(e.g. absolute TSR), the Company must still recognise the full amount of expenses even though the KMPs
will never receive any benefits.
The accuracy of information in this section has been audited together with the rest of the remuneration report.
5 ANALYSIS OF STI BONUSES INCLUDED IN STATUTORY REMUNERATION FOR FY19
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each Director
of the Company, and other KMP are detailed below.
M Finnegan
G Everist
G Gettingby
Included in statutory
remuneration
% vested
in year
% forfeited
in year
132,550
53,020
47,718
21.21%
21.21%
21.21%
78.79%
78.79%
78.79%
Based on underlying performance for the current year 53.02% of the bonus would have been eligible to vest.
However, given the fatality at the Batu Hijau project in March 2019, the Board decided to reduce the vesting
percentage for KMPs by 60%.
54
MACMAHON ANNUAL REPORT 2019
EQUITY INSTRUMENTS
6
6.1 Rights over equity instruments granted as compensation
Non-Executive share rights
Details of share rights over ordinary shares in the Company granted to Non-Executive KMPs during the reporting
period as part of the Company’s NED Salary Sacrifice Plan was as follows:
E Skira
A Ramlie
A Sidarto
K Horne
J Walker
V Vella3
Salary
sacrificed
$
Number
of rights
granted5
Fair value at
grant date4
$
Vesting date
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
–
13,128
13,127
45,662
45,662
45,662
45,662
22,831
-1
20,342
-2
–
61,953
61,953
215,489
215,489
215,489
215,489
107,744
107,744
96,000
96,000
–
372
743
1,293
2,586
1,293
2,586
647
-1
576
-2
–
Feb 19
Aug 19
Feb 19
Aug 19
Feb 19
Aug 19
Feb 19
Aug 19
Feb 19
Aug 19
–
1
2
3
4
5
Mr. Horne ceased as a Non-Executive Director on 26 June 2019 and in accordance with the NED SSP Rules tranche 2 of the share
rights have lapsed.
Mr. Walker ceased as a Non-Executive Director on 27 June 2019 and in accordance with the NED SSP Rules tranche 2 of the share
rights have lapsed.
Mr. Vella ceased as a Non-Executive Director in October 2018 and was re-appointed as a Non-Executive Director in June 2019.
In accordance with accounting standards, as the share rights granted includes an “option” over the ordinary shares, the option
element is required to be fair valued.
Non-Executive rights are due to the NED Salary Sacrifice plan and not in addition to their remuneration.
Executive performance rights
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 FY19
Vesting condition
Grant date
Fair value at
grant date
Expiry date
M Finnegan
G Everist
G Gettingby
19,394,872
Absolute TSR
1 July 2018
1,764,933
See explanation below
12,929,915
Absolute TSR
1 July 2018
1,176,622
See explanation below
12,929,915
Absolute TSR
1 July 2018
1,176,622
See explanation below
Rights will expire on the earlier of the termination of the individual’s employment, or the day after they are tested by
the Board against the vesting condition and found not to satisfy that condition. Rights are eligible to vest between
two and four years after issuance, depending on the tranche (see section 1.5). In addition to a continuing performance
condition, vesting is conditional on the extent to which the Company achieves increases in absolute TSR, as described
in section 1.5.
55
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MACMAHON ANNUAL REPORT 2019
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 FY19 are detailed
below:
Executive KMP
M Finnegan
G Everist
G Gettingby
Grant
date
12 Aug 16
18 Aug 17
1 July 18
02 Mar 18
1 July 18
12 Aug 16
18 Aug 17
1 July 18
Number granted
Number
vested
in FY19
Number
forfeited
in FY19
2,456,731
3,333,333
19,394,872
1,070,093
12,929,915
1,618,822
1,205,189
12,929,915
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Held at
30 June 2019
2,456,731
3,333,333
Financial year in
which the grant vests,
subject to performance
FY20
FY21
19,394,872
FY21–FY24 (25% per year)
1,070,093
FY21
12,929,915
FY21–FY24 (25% per year)
1,618,822
1,205,189
FY20
FY21
12,929,915
FY21–FY24 (25% per year)
6.3 Analysis of movements in equity instruments
The value of rights over ordinary shares granted to Non-Executive KMP is disclosed above in note 6.1.
The value of rights over ordinary shares in the Company granted to Executive KMP during FY19 is detailed below:
Executive KMP
M Finnegan
G Everist
G Gettingby
Value granted
in year
Value exercised
in the year
1,764,933
1,176,622
1,176,622
–
–
–
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 2018 to 30 June 2023).
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 2018
Granted as
compensation
Exercised /
lapsed /
forfeited
Held at
30 June 2019
Vested during
the year
5,790,064
19,394,872
1,070,093
12,929,915
2,824,011
12,929,915
-
-
-
25,184,936
14,000,008
15,753,926
-
-
-
Executive KMP
M Finnegan
G Everist
G Gettingby
56
MACMAHON ANNUAL REPORT 2019
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:
Directors
E Skira
A Sidarto
A Ramlie
V Vella1
K Horne2
J Walker3
Executives
M Finnegan
G Everist
G Gettingby
Total
Balance at
the start of
the year
-
-
-
1,857,842
-
425,000
554,100
50,000
730,817
3,617,759
Purchased
Sold
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Vested
rights4
61,953
215,489
215,489
-
107,744
96,000
-
-
-
Balance
at end of
the year
61,953
215,489
215,489
1,857,842
107,744
521,000
554,100
50,000
730,817
696,675
4,314,434
1 Mr. Vella ceased as a Non-Executive Director in October 2018 and was re-appointed as a Non-Executive Director in June 2019.
2 Mr. Horne ceased as a Non-Executive Director in June 2019. Closing details are at date of cessation as KMP.
3 Mr. Walker ceased as a Non-Executive Director in June 2019. Closing details are at date of cessation as KMP.
4 Rights refers to share rights for Non-Executive Directors and performance rights for Executives.
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57
MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
Financial
Statements
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
59
Consolidated Statement of Financial Position 61
Consolidated Statement of Changes In Equity 62
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
63
64
111
112
GENERAL INFORMATION
The financial statements cover Macmahon Holdings Limited
(“the Company”) as a consolidated entity (referred to hereafter
as “the Group” or “the consolidated entity”) consisting of
Macmahon Holdings Limited and the entities it controlled at
the end of, or during, the year. The financial statements are
presented in Australian dollars, which is Macmahon Holdings
Limited’s functional and presentation currency.
Macmahon Holdings Limited is a listed public company
limited by shares, incorporated and domiciled in Australia.
The Group is a for-profit entity.
A description of the nature of the consolidated entity’s
operations and its principal activities are included in the
Directors’ report, which is not part of the financial statements.
The financial statements were authorised for issue, in
accordance with a resolution of Directors, on 30 August 2019.
An accounting policy, critical accounting estimate, assumption or
judgement specific to a note is disclosed within the note itself.
REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS
15 Hudswell Road, Perth Airport, Western Australia 6105
58
58
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue from continuing operations
Other income
Expenses
Materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Equipment and other operating lease expenses
Subcontractor costs
Litigation settlements and related legal fees
Share based payments expense
Other expenses
Operating profit
Net finance costs
Share of profit of equity-accounted investees, net of tax
MACMAHON ANNUAL REPORT 2019
Note
2
3
4
21
28
4
4
25
2019
$’000
1,102,984
11,797
(414,930)
(337,234)
(106,249)
(90,346)
(53,518)
(7,318)
(2,634)
(41,952)
2018
$’000
710,263
4,621
(290,110)
(204,782)
(77,728)
(47,540)
(39,380)
-
(260)
(16,045)
60,600
39,039
(10,672)
3,905
(2,426)
2,207
Profit before income tax expense from continuing operations
53,833
38,820
Income tax expense
5
(7,727)
(7,519)
Profit after income tax expense from continuing operations
(Loss) / profit after income tax expense from discontinued operations
Profit after income tax expense for the year
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive profit for the year
Total comprehensive profit / (loss) for the year is attributable to:
Continuing operations
Discontinued operations
46,106
(14)
31,301
1,930
46,092
33,231
4,093
13,028
4,093
13,028
50,185
46,259
50,199
(14)
44,329
1,930
50,185
46,259
59
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MACMAHON ANNUAL REPORT 2019
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Earnings per share for profit from continuing operations
attributable to the owners of Macmahon Holdings Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for (loss) / profit from discontinued operations
attributable to the owners of Macmahon Holdings Limited
Basic (loss) / earnings per share
Diluted (loss) / earnings per share
Earnings per share for profit attributable to the owners of Macmahon Holdings Limited
Basic earnings per share
Diluted earnings per share
Note
2019
Cents
2018
Cents
6
6
6
6
6
6
2.19
2.12
(0.00)
(0.00)
2.19
2.12
1.53
1.52
0.09
0.09
1.62
1.61
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
60
STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Lease receivable
Income tax receivable
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 asset
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Income tax payable
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
MACMAHON ANNUAL REPORT 2019
Note
2019
$’000
2018
$’000
8
9
10
11
5
15
25
9
15
16
11
5
12
18
5
13
14
12
18
13
113,165
181,480
45,818
2,057
5,030
2,159
109,622
152,263
41,984
700
4,157
2,868
349,709
311,594
10,954
19,289
399,607
10,245
23,258
11,843
9,273
4,628
380,140
5,808
9,792
2,114
475,196
411,755
824,905
723,349
168,606
29,553
3,947
26,158
12,385
174,293
21,212
2,007
18,209
11,572
240,649
227,293
-
136,295
343
136,638
745
85,060
417
86,222
377,287
313,515
447,618
409,834
19
20
563,118
(2,004)
(113,496)
563,118
3,842
(157,126)
447,618
409,834
The above statement of financial position should be read in conjunction with the accompanying notes.
61
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MACMAHON ANNUAL REPORT 2019
STATEMENT OF CHANGES IN EQUITY
Consolidated
Balance at 1 July 2018
Adjustment on initial application
of AASB 9 (net of tax):
Issued
Capital
$’000
Reserves
$’000
Accumulated
Losses
$’000
Retained
Profits
$’000
Total
Equity
$’000
563,118
3,842
(189,930)
32,804
409,834
Loss allowance on the Group trade receivables
Loss allowance on the trade and other
receivables of the equity-accounted investment
-
-
Adjusted balance at 1 July 2018
563,118
Profit after income tax expense for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for the year
Transactions with owners
in their capacity as owners:
Treasury shares allocated on vesting
of performance rights
Reclassification of cash-settled share-
based payments to equity
Share-based payments (note 28)
Share buy-back (note 20)
-
-
-
-
-
-
-
-
-
3,842
-
4,093
4,093
(4)
148
2,634
(12,717)
(1,409)
(1,057)
(192,396)
-
-
-
-
-
-
-
-
-
32,804
46,092
(1,409)
(1,057)
407,368
46,092
-
4,093
46,092
50,185
4
-
-
-
-
148
2,634
(12,717)
Balance at 30 June 2019
563,118
(2,004)
(192,396)
78,900
447,618
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 after income tax expense for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income 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
Share-based payments (note 28)
-
-
-
-
-
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
The above statement of changes in equity should be read in conjunction with the accompanying notes.
62
STATEMENT OF CASH FLOWS
Cash flows from operating activities
Receipts from customers
Payments to suppliers
Net receipts from joint venture entities
Payment for settlement of class action
Dividends received from equity-accounted investments
Interest received
Interest and other finance costs paid
Income taxes (paid) / received
MACMAHON ANNUAL REPORT 2019
Note
2019
$’000
2018
$’000
21
25
1,016,435
(893,053)
1,004
(7,560)
1,518
698
(11,370)
(15,165)
689,464
(590,950)
3,390
-
-
545
(2,969)
6,274
Net cash from operating activities
7
92,507
105,754
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
Payments for property, plant and equipment
Payment for intangibles (software)
Acquisition of subsidiary (net of cash acquired)
Net cash used in investing activities
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 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
15
16
20
18
2,421
(51,830)
(4,836)
-
3,095
(41,317)
(2,783)
(1,571)
(54,245)
(42,576)
(12,717)
-
-
(22,891)
-
(4,207)
(4,581)
(7,762)
(35,608)
(16,550)
2,654
109,622
889
46,628
62,925
69
Cash and cash equivalents at the end of the financial year
8
113,165
109,622
The above statement of cash flows should be read in conjunction with the accompanying notes.
63
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MACMAHON ANNUAL REPORT 2019
MACMAHON ANNUAL REPORT 2019
Notes to the Consolidated
Financial Statements
A RESULTS
E RISK
1 Operating segments
2 Revenue
3 Other income
4 Expenses
5 Tax
6 Earnings per share
B CASH FLOW INFORMATION
65
67
67
68
69
72
17 Financial Risk Management
F DEBT AND EQUITY
18 Borrowings
19 Equity – issued capital
20 Equity – Reserves
G UNRECOGNISED ITEMS
83
90
91
92
93
94
94
21 Contingent liabilities
22 Commitments
23 Events after the reporting period
H
OTHER INFORMATION /
GROUP STRUCTURE
24 Interests in subsidiaries
95
25 Interests in joint ventures
96
26 Related party transactions
98
27 Key management personnel disclosures 99
28 Share-based payments
99
29 Remuneration of auditors
103
30 Deed of cross guarantee
103
31 Parent entity information
106
32 Other significant accounting policies
107
7
Reconciliation of profit after income tax
to net cash from operating activities
73
C WORKING CAPITAL
8 Cash and cash equivalents
9 Trade and other receivables
Inventories
10
11 Lease receivable
12 Trade and other payables
13 Employee benefits
14 Provisions
D FIXED ASSETS
15 Property, plant and equipment
Intangible assets and goodwill
16
74
74
75
75
76
77
78
79
82
64
64
MACMAHON ANNUAL REPORT 2019
Notes to the Financial Statements
A Results
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.
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 – 2019
Revenue
External revenues
Total revenue
Earnings before interest, tax, depreciation and
amortisation (and other significant items)
Interest income
Finance costs
Depreciation and amortisation
Acquisition costs
Litigation settlements and related legal fees
Share based payments expense
Mining
$’000
Discontinued
Operations
$’000
Unallocated
$’000
Total
$’000
1,102,984
1,102,984
174,659
-
(11,370)
(106,249)
-
-
-
-
-
(14)
-
-
-
-
-
-
-
-
1,102,984
1,102,984
6,736
698
-
-
(689)
(7,318)
(2,634)
181,381
698
(11,370)
(106,249)
(689)
(7,318)
(2,634)
Profit / (loss) before income tax expense
57,040
(14)
(3,207)
53,819
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
690,155
372,104
Capital expenditure (including intangible assets)
124,510
(7,727)
46,092
-
-
-
134,750
824,905
824,905
5,183
377,287
377,287
-
124,510
65
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MACMAHON ANNUAL REPORT 2019
1 Operating segments continued
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
Share based payments expense
Profit before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Mining
$’000
Discontinued
Operations
$’000
Unallocated
$’000
Total
$’000
710,263
710,263
115,447
292
(2,969)
(77,728)
-
35,042
-
-
1,928
2
-
-
-
1,930
-
-
710,263
710,263
3,787
251
-
-
(260)
3,778
121,162
545
(2,969)
(77,728)
(260)
40,750
(7,519)
33,231
598,681
132
124,536
723,349
307,829
116
5,570
723,349
313,515
313,515
CAPITAL EXPENDITURE
315,083
-
-
315,083
Australia
Indonesia
Other
Sales to
External Customers
Geographical
Non-Current Assets
2019
$’000
700,159
388,926
13,899
2018
$’000
545,439
160,175
4,649
2019
$’000
297,753
165,330
12,113
1,102,984
710,263
475,196
2018
$’000
236,918
172,715
2,122
411,755
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 35% (2018: 22%) of the consolidated entity’s revenue is attributable to sale transactions with the
largest customer (refer note 26).
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.
66
2 Revenue
Revenue from contracts with customers
Revenue from contracts with customers - non-cash
Total revenue
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
1,044,754
58,230
1,102,984
2018
$’000
710,263
-
710,263
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Services revenue
Macmahon Group generates revenue from the provision of mining services, civil construction & rehabilitation services
to mining companies in Australia and Indonesia. Revenue for services was recognised on the basis of the work
completed over time and billed to customers as the services were delivered to customers. On adoption of AASB
15, the activities for each contract were assessed and have been determined to be one performance obligation as
they are highly inter-related, fulfilled over time and the customer receives the benefit over time as the services are
performed resulting in no change to the way the Group recognises revenue.
The amounts billed to customers are not secured and are typically due within 30-60 days from an invoice date.
The transaction price for each contract is based on agreed contractual rates to which the Group is entitled and may
include a variable pricing element which is accounted for in accordance with the policy on variable consideration.
Variable consideration
Certain contracts with customers include a variable element which is subject to the Group meeting either certain cost
targets or material movement KPI’s. Variable consideration is recognised when it is highly probable that a significant
reversal of revenue will not occur in a subsequent period.
For 2019 total variable consideration amounted to $51.3 million of which at 30 June 2019 $19.8 million was included in
accrued revenue in note 9 and has subsequently been approved by customers.
Non-cash consideration
Where customers contribute materials to the Group to facilitate the fulfilment of the contract and the Group
obtains control of the contributed materials, the cost of these materials have been included in revenue as non-cash
consideration received from the customer and the expense is included in materials and consumables used.
3 Other income
Net gain on disposal of property, plant and equipment
Net foreign exchange gain
Other
Other income
Consolidated
2019
$’000
796
7,600
3,401
11,797
2018
$’000
171
2,576
1,874
4,621
Other income
Other income includes management fees from joint venture partners of $1.6 million (June 2018: $0.8 million). Refer to
note 26.
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.
67
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MACMAHON ANNUAL REPORT 2019
4 Expenses
Profit before income tax from continuing operations includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Amortisation
Software amortisation
Total depreciation and amortisation expense
Employee benefits expense
Employee benefits expenses include the following superannuation expenses:
Superannuation expense
Defined contribution superannuation expense
Total superannuation expense
Other expenses
Freight expenses
Travel costs
Consulting services
Insurance
Acquisitions costs
Other expenses
Consolidated
2019
$’000
2018
$’000
13
105,837
26
77,702
399
-
106,249
77,728
Consolidated
2019
$’000
2018
$’000
17,643
17,643
12,435
12,435
Consolidated
2019
$’000
2018
$’000
13,291
5,685
3,644
2,939
689
15,704
41,952
785
1,730
3,372
2,123
-
8,035
16,045
Net finance costs
Finance costs include interest on finance leases and are expensed in the period in which they are incurred.
Borrowing costs capitalised are amortised over the term of the facility.
Consolidated
2019
$’000
2018
$’000
(698)
9,777
1,593
10,672
(543)
1,885
1,084
2,426
Finance (income) and costs
Interest income on financial assets (bank deposits)
Interest expense on financial liabilities carried at amortised cost
Other finance costs
68
5 Tax
a)
Income tax expense
Income tax expense
Current tax
Adjustment recognised for prior periods
Deferred tax - origination and reversal of temporary differences
Aggregate income tax expense
Income tax expense is attributable to:
Profit from continuing operations
(Loss) / profit from discontinued operations
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense from continuing operations
(Loss) / profit before income tax expense from discontinued operations
Numerical reconciliation of income tax expense and tax at the statutory rate
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible / (taxable) in calculating taxable income:
Share-based payments
Non-deductible expenses / (non-assessable income)
Foreign tax rate differential
Utilisation of foreign and domestic income tax losses not previously recognised
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
Other
Adjustment recognised for prior periods
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
2018
$’000
18,937
(1,481)
(9,729)
8,780
(65)
(1,196)
7,727
7,519
7,727
-
7,727
7,519
-
7,519
53,833
(14)
38,820
1,929
53,819
40,749
53,819
16,146
790
321
(1,491)
(262)
-
(6,272)
(24)
-
9,208
(1,481)
40,749
12,225
78
(219)
(838)
(949)
400
(3,418)
4
301
7,584
(65)
Income tax expense
7,727
7,519
b) Current assets and liabilities – income tax
Income tax refund due - Australian Operations
Income tax payable due - overseas
Consolidated
2019
$’000
5,030
2018
$’000
4,157
(3,947)
(2,007)
69
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MACMAHON ANNUAL REPORT 2019
5 Tax continued
c) Non-current assets – deferred tax
Deferred tax asset comprises temporary differences attributable to:
Inventories
Property, plant and equipment
Unbilled work
Employee benefits
Other creditors and accruals
Other items
Tax loss carry forward
Unrecognised deferred tax asset
Australian impairment and other deductible differences
Consolidated
2019
$’000
2018
$’000
(1,411)
(8,521)
(18,732)
16,320
18,381
533
5,273
(458)
(17,919)
(17,017)
16,439
14,950
846
5,273
11,843
2,114
42,887
45,056
42,887
45,056
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.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities will be
realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
Additional income tax expenses that arise from the distribution of cash dividends are recognised at the same time
that the liability to pay the related dividend is recognised. The consolidated entity does not distribute non-cash assets
as dividends to its Shareholders.
70
MACMAHON ANNUAL REPORT 2019
5 Tax continued
Tax consolidation
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect
from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated
group is Macmahon Holdings Limited. Current income tax expense / benefit, deferred tax liabilities and deferred
tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the
separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within
group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of
each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are
assumed by the head entity in the tax-consolidated group and are recognised as amounts payable to / (receivable
from) other entities in the tax consolidated group in conjunction with any tax funding arrangement amounts (refer
below). Any difference between these amounts is recognised by the consolidated entity as an equity contribution or
distribution.
The consolidated entity recognises deferred tax assets arising from unused tax losses of the tax-consolidated group
to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against
which the unused tax losses can be utilised. Any subsequent period adjustments to deferred tax assets arising from
unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head
entity only.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding
arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax
amounts. The tax funding arrangements require payments to / (from) the head entity equal to the current tax asset /
(liability) assumed by the head entity and any deferred tax loss asset assumed by the head entity, resulting in the head
entity recognising an inter-entity payable / (receivable) equal in amount to the tax asset / (liability) assumed. The
inter-entity payables / (receivables) are at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing
of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The head entity in conjunction with other members of the tax-consolidated group has also entered into a tax sharing
agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities
between the entities should the head entity default on its tax payment obligations. No amounts have been recognised
in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement
is considered remote.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgment
is required in determining the provision for income tax. There are many transactions and calculations undertaken
during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity
recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the
tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will
impact the current and deferred tax provisions in the period in which such determination is made.
71
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MACMAHON ANNUAL REPORT 2019
6 Earnings per share
Profit after income tax from continuing operations attributable
to the owners of Macmahon Holdings Limited
(Loss) / profit after income tax from discontinued operations
attributable to the owners of Macmahon Holdings Limited
Profit after income tax attributable to the owners of Macmahon Holdings Limited
Consolidated
2019
$’000
2018
$’000
46,106
(14)
46,092
31,301
1,930
33,231
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
2,104,782,202
2,041,341,507
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue1
66,772,004
17,699,922
Weighted average number of ordinary shares used in calculating diluted earnings per share
2,171,554,206
2,059,041,429
Earnings per share for profit from continuing operations
Basic earnings per share
Diluted earnings per share
Earnings per share for (loss) / profit from discontinued operations
Basic (loss) / earnings per share
Diluted (loss) / earnings per share1
Earnings per share for profit attributable to owners of Macmahon Holdings Limited
Basic earnings per share
Diluted earnings per share
Cents
Cents
2.19
2.12
(0.00)
(0.00)
2.19
2.12
1.53
1.52
0.09
0.09
1.62
1.61
1
At 30 June 2019, performance rights were excluded from the diluted earnings per share from discontinued operations calculation as their
effect would have been anti-dilutive.
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.
72
Notes to the Financial Statements
B Cash Flow Information
7 Reconciliation of profit after income tax to net cash from operating activities
MACMAHON ANNUAL REPORT 2019
Profit 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 - equity-accounted investees
Share-based payments
Foreign exchange gains
Income tax expense
Change in operating assets and liabilities:
Net cash received from jointly controlled entities
Increase in trade and other receivables
Increase in inventories
(Decrease) / increase in trade and other payables
Increase in employee benefits
Income taxes (paid) / received
Dividends received from equity accounted investments
Net cash from operating activities - continuing operations
Net cash from operating activities - discontinued operations
Net cash from operating activities
Consolidated
2019
$’000
46,106
106,249
(796)
(3,905)
2,634
(7,600)
7,727
1,004
(41,519)
(3,834)
(8,536)
8,638
(15,165)
1,518
2018
$’000
31,301
77,728
(171)
(2,207)
260
(2,576)
7,519
3,390
(93,765)
(9,898)
85,400
2,630
6,274
-
92,521
105,885
(14)
(131)
92,507
105,754
73
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MACMAHON ANNUAL REPORT 2019
Notes to the Financial Statements
C Working Capital
8 Cash and cash equivalents
Cash on hand
Cash at bank
Consolidated
2019
$’000
10
113,155
113,165
2018
$’000
16
109,606
109,622
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.
9 Trade and other receivables
Current trade and other receivables
Trade receivables
Less: Expected credit loss allowance (ECL)
Accrued revenue
Other receivables
Prepayments
Non-current trade and other receivables
Other receivables
Consolidated
2019
$’000
2018
$’000
60,672
(1,409)
59,263
109,549
8,256
4,412
42,362
(126)
42,236
80,594
26,194
3,239
181,480
152,263
19,289
4,628
Trade and other receivables
Trade and other receivables are stated at cost less impairment losses. Due to the short-term nature of trade and other
receivables, their carrying value is assumed to approximate their fair value.
Current other receivables include the reimbursement for the projects closure of $4.1 million (2018: $3.4 million)
relating to the costs recognised as a part of the provision for project closure described in the note 14.
Non-current other receivables include VAT receivable of $13.9 million (2018: $15.7 million classified in current other
receivables) relating to the AMNT asset acquisition. VAT receivable balance was classified in non-current receivables
at 30 June 2019 as it is expected to be received in more than 12 months after the reporting period.
Accrued revenue
Accrued revenue represents the unbilled amount at year end in respect of mining services provided.
Receivables from related parties
For information on receivables from related parties refer to note 26.
Exposure to credit risk
Information about the Group’s exposure to credit and market risks, and impairment losses for trade receivables
is included in note 17.
The accounting policies and the effect of initial application of AASB 15 and AASB 9 is described in note 32.
74
10 Inventories
Inventory at cost
Less: Allowance for obsolescence
Inventory at Net Realisable Value
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
50,058
(4,240)
45,818
-
2018
$’000
43,883
(2,454)
41,429
555
45,818
41,984
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.
11 Lease receivable
Lease receivable - current
Lease receivable - non-current
Consolidated
2019
$’000
2,057
23,258
25,315
2018
$’000
700
9,792
10,492
During the year, the Group acquired $16.1 million of mining 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 2019 are:
Not later than one year
Later than one year not
later than 5 years
Minimum Lease Payments
Interest
Principal
2019
$’000
3,755
24,619
28,374
2018
$’000
1,512
10,906
12,418
2019
$’000
1,698
1,361
3,059
2018
$’000
812
1,114
1,926
2019
$’000
2,057
23,258
25,315
The finance lease receivable is neither past due or impaired.
2018
$’000
700
9,792
10,492
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MACMAHON ANNUAL REPORT 2019
12 Trade and other payables
Current trade and other payables
Trade payables
Accrued expenses
Other payables
Non-current other payables
Contingent consideration
Consolidated
2019
$’000
2018
$’000
57,920
87,494
23,192
68,260
97,452
8,581
168,606
174,293
-
745
168,606
175,038
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end
of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 to 60 days of recognition
based on the credit terms.
Accrued wages and salaries between the last pay date and 30 June 2019 of $3.9 million (2018: $2.3 million)
are included within the accrued expenses balance.
Refer to note 17 for further information on financial instruments.
76
13 Employee benefits
Current liabilities - employee benefits
Annual leave
Long service leave
Other employee benefits
Non-current liabilities - employee benefits
Long service leave
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
2018
$’000
15,438
4,916
5,804
11,466
3,632
3,111
26,158
18,209
343
343
417
417
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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.
Other employee benefits
Other employee benefits include short term incentive plan and other short term benefits.
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.
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.
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 2019,
1 member (2018: 1 member) remained in the defined benefit section.
77
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MACMAHON ANNUAL REPORT 2019
14 Provisions
Movements in each class of provision during the current financial year, are set out below:
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
Project
Closure
$’000
6,561
2,235
-
(76)
8,720
Client
Plant
Maintenance
$’000
225
858
-
-
Other
$’000
4,786
-
-
Total
$’000
11,572
3,093
-
(2,204)
(2,280)
1,083
2,582
12,385
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.
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
Operating Contracts
In June Macmahon entered into facilitated negotiations with Newcrest regarding mine plan and work programme
changes at the Telfer gold project. Although these discussions did not achieve an acceptable outcome for Macmahon
by 6 August 2019 (refer ASX announcement), the parties subsequently resumed discussions and have progressed
sufficiently for Macmahon to form the view that an acceptable agreement, increasing certain contract rates across the
life of the contract will be reached in the near future. As a result Macmahon has determined that the contract is not
considered onerous based on estimated positive cash flows forecast over the remaining contract term.
Whilst Directors are confident of finalising the above arrangements, in the event that agreement is not reached the
contract will likely make future losses and be onerous. Macmahon has previously announced to the ASX that should
the contract rates not be increased or some other form of contract amendment be achieved an estimated provision
for onerous contract in the range of $25 million to $35 million would be required.
78
Notes to the Financial Statements
D Fixed Assets
15 Property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation and impairment losses
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
3,183
(3,183)
-
2018
$’000
3,183
(3,170)
13
885,030
(485,423)
778,833
(398,706)
399,607
380,127
399,607
380,140
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 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
Additions
Transferred from held for sale
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2019
Leasehold
Improvements
$’000
Plant &
Equipment
$’000
Total
$’000
39
122,640
122,679
-
-
-
-
-
-
312,300
10,675
(801)
(603)
13,075
543
(26)
(77,702)
312,300
10,675
(801)
(603)
13,075
543
(77,728)
13
380,127
380,140
-
-
-
-
119,674
291
(2,998)
8,350
119,674
291
(2,998)
8,350
(13)
(105,837)
(105,850)
-
399,607
399,607
79
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MACMAHON ANNUAL REPORT 2019
15 Property, plant and equipment continued
Profit on disposal of property, plant and equipment from continuing operations was $0.8 million (2018: $0.2 million).
Included above is non-operating plant and equipment of $27.9 million (2018: $10.3 million) which is not allocated to
operating sites or contracts at 30 June 2019.
Included above is $32.2 million (2018: $48.7 million) of work in progress and $164.4 million (2018: $106.3 million) of
assets under finance lease.
Property, plant and equipment secured under finance leases
Refer to note 18 for further information on property, plant and equipment secured under finance leases.
Security
Freehold land, buildings, leasehold improvements and plant and equipment are subject to a registered charge to
secure banking facilities (refer to note 18).
Assets classified as held for sale
Assets classified as held for sale include surplus mining plant and equipment which the company is actively marketing
for sale amounting to $2.2 million (2018: $2.9 million).
Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to
a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on
which they are located, and capitalised borrowing costs. Cost may also include transfers from equity of any gain or
loss on qualifying cash flow hedges from foreign currency purchases of property, plant and equipment. Purchased
software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
The fair value of property, plant and equipment recognised as a result of a business combination is based on market
values. The market value of property is the estimated amount for which a property could be exchanged, on the date
of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein
the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant,
equipment, fixtures and fittings is based on the quoted market prices for similar items.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Depreciation and amortisation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are
assessed and if a component has a useful life that is different from the remainder of that asset, that component is
depreciated separately.
Depreciation on buildings, leasehold improvements and minor plant and equipment is calculated on a straight-
line basis. Depreciation on major plant and equipment and components is calculated on machine hours worked or
straight-line over their estimated useful life. Leased assets are depreciated over the shorter of the lease term and their
useful lives unless it is reasonably certain that the consolidated entity will obtain ownership by the end of the lease
term. Land is not depreciated.
Depreciation methods, useful lives and residual values are reviewed on regular basis with annual reassessments for
major items and adjusted if appropriate.
The expected useful lives for the current and comparative years are as follows:
• Leasehold improvements: period of the lease
• Plant and equipment: 3-12 years
80
MACMAHON ANNUAL REPORT 2019
15 Property, plant and equipment continued
The carrying amounts of the consolidated entity’s assets, other than inventories (see inventory accounting policy)
and deferred tax assets (see income tax accounting policy), are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is
estimated (see impairment of non-financial assets below).
For goodwill, the recoverable amount is estimated annually or more frequently if events or changes in circumstances
indicate that goodwill might be impaired.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in profit or loss.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the
lease or the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit
to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to
profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to profits reserve.
Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount
of the item if it is probable that the future economic benefits embodied within the component will flow to the
consolidated entity, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised.
The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Non-current assets or disposal groups classified as held for sale
Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continued use. They are measured at the lower of
their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be
classified as held for sale, they must be available for immediate sale in their present condition and their sale must be
highly probable.
An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of
disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less
costs of disposal of non-current assets and assets of disposal groups, but not in excess of any cumulative impairment
loss previously recognised. Non-current assets classified as held for sale are not depreciated. Interest and other
expenses attributable to the liabilities of assets held for sale continue to be recognised.
Non-current assets classified as held for sale are presented separately on the face of the statement of financial
position, in current assets.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for
its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result
of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful
lives are less than previously estimated lives, or technically obsolete or non-strategic assets
that have been abandoned or sold will be written off or written down.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life
intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the
particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is
determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number
of key estimates and assumptions; including the continued performance of contracted work, growth rates of the
estimated future cash flows and discount rates based on the current cost of capital.
81
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MACMAHON ANNUAL REPORT 2019
16 Intangible assets and goodwill
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Consolidated
Cost
Balance at 1 July 2017
Acquisition through a business combination
Additions
Balance at 30 June 2018
Additions
Balance at 30 June 2019
Accumulated amortisation
Balance at 1 July 2017
Amortisation
Balance at 30 June 2018
Amortisation
Balance at 30 June 2019
Carrying amount at 30 June 2018
Carrying amount at 30 June 2019
Goodwill
$’000
Software
$’000
Total
$’000
-
3,025
-
3,025
-
3,025
-
-
-
-
-
3,025
3,025
-
-
2,783
2,783
4,836
7,619
-
-
-
(399)
(399)
2,783
7,220
-
3,025
2,783
5,808
4,836
10,644
-
-
-
(399)
(399)
5,808
10,245
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 amortisation is included in depreciation and amortisation expenses. 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.
82
Notes to the Financial Statements
E Risk
17 Financial Risk Management
Financial Assets
Cash and cash equivalents
Trade and other receivables
Lease receivables
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
Total financial liabilities
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
2018
$’000
113,165
178,326
25,315
109,622
134,576
10,492
316,806
254,690
160,941
165,848
326,789
172,904
106,272
279,176
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Trade and other receivables excludes prepayments of $4.4 million (2018: $3.2 million), contract closure
reimbursement $4.1 million (2018: $3.4 million) and GST receivable of $13.9 million (2018: $15.7 million).
Trade and other payables excludes GST and other tax payable of $7.7 million (2018: $1.4 million).
Financial assets and liabilities are measured at amortised cost.
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 and lease liabilities are estimated by discounting future cash flows using rates currently
available for debt on similar terms, credit risk and remaining maturities, and are set out below:
Consolidated
Financial Assets
Lease receivables
Financial liabilities
Lease liability
2019
2018
Carrying
Amount
$’000
Fair
Value
$’000
Carrying
Amount
$’000
Fair
Value
$’000
25,315
25,130
10,492
10,496
(165,848)
(167,445)
(106,272)
(106,088)
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.
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17 Financial Risk Management continued
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), Indonesian Rupiah (IDR), Great British Pounds (GBP), Malaysian
Ringgit (MYR), South African Rand (ZAR), Singapore Dollar (SGD) and Ghanaian Cedi (GHS). 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 Indonesian Rupiah (IDR).
The contracts for mining services and purchases are primarily denominated in the functional currency of the Group
entities to minimise the foreign exchange currency risk.
In respect of other monetary assets and liabilities held in currencies other than the AUD, the consolidated entity
ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when
necessary to address short-term imbalances.
The average exchange rates and reporting date exchange rates applied were as follows:
Australian Dollars
USD
IDR
MYR
GBP
GHS
SGD
ZAR*
Average exchange rates
Reporting date exchange rates
2019
0.7161
10,345
2.9526
0.5527
3.5211
0.9771
10.1130
2018
0.7749
10,540
3.1589
0.5748
3.4294
1.0396
*
2019
0.7013
9,917
2.9048
0.5533
3.6900
0.9492
9.9225
2018
0.7391
10,612
2.9837
0.5634
3.3446
1.0078
*
* The Group commenced operations in South Africa in the second half of FY19.
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
IDR1
MYR
GBP
Other
Financial assets
Financial liabilities
2019
$’000
10,832
70,311
5,362
4,713
210
91,428
2018
$’000
3,241
46,626
2,463
5,885
330
58,545
2019
$’000
-
(33,756)
(3,084)
-
-
2018
$’000
-
(36,902)
-
-
-
(36,840)
(36,902)
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.
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17 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 2018.
Consolidated – 2019
USD
IDR
MYR
GBP
Other
Consolidated – 2018
USD
IDR
MYR
GBP
Other
AUD strengthened by 10%
AUD weakened by 10%
Effect
on profit
before tax
$’000
Effect on
equity
$’000
Effect
on profit
before tax
$’000
Effect on
equity
$’000
(985)
(3,323)
(207)
(428)
(19)
(4,962)
-
-
-
-
-
-
1,204
4,062
253
524
23
6,066
-
-
-
-
-
-
AUD strengthened by 10%
AUD weakened by 10%
Effect
on profit
before tax
$’000
Effect on
equity
$’000
Effect
on profit
before tax
$’000
Effect on
equity
$’000
(295)
(884)
(224)
(535)
(30)
(1,968)
-
-
-
-
-
-
360
1,080
274
654
37
2,405
-
-
-
-
-
-
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
Interest rate risk on variable rate borrowings is managed under the consolidated entity’s approved Treasury Policy.
Under this policy, interest rate exposures are managed through entering fixed rate finances for equipment purchases.
As at the reporting date, the consolidated entity had the following variable rate exposed financial assets:
Variable financial assets
Net exposure to cash flow interest rate risk
Consolidated
2019
$’000
113,165
113,165
2018
$’000
109,622
109,622
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17 Financial Risk Management continued
Cash flow sensitivity analysis for variable rate instruments
The following analysis demonstrates the increase / (decrease) to profit or loss and equity at the reporting date,
assuming a change in interest rates of 100 basis points. This analysis also assumes that all other variables, in particular
foreign currency rates, remain constant. The analysis is performed on the same basis for 2018.
Consolidated – 2019
Variable rate instruments
Consolidated – 2018
Variable rate instruments
100 basis points increase
100 basis points decrease
Effect
on profit
before tax
$’000
1,132
1,132
Effect on
equity
$’000
-
-
Effect
on profit
before tax
$’000
(1,132)
(1,132)
Effect on
equity
$’000
-
-
100 basis points increase
100 basis points decrease
Effect
on profit
before tax
$’000
1,096
1,096
Effect on
equity
$’000
-
-
Effect
on profit
before tax
$’000
(1,096)
(1,096)
Effect on
equity
$’000
-
-
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.
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.
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 21.
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 35% (2018: 31%) 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.
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MACMAHON ANNUAL REPORT 2019
17 Financial Risk Management continued
Exposure to credit risk
The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure.
The consolidated entity’s maximum exposure to credit risk at the reporting date was:
Cash and cash equivalents
Receivables and accrued revenue
Total credit risk exposure
Consolidated
2019
$’000
113,165
178,326
291,491
2018
$’000
109,622
134,576
244,198
Trade and other receivables excludes prepayments of $4.4 million (2018: $3.2 million), contract closure
reimbursement $4.1 million (2018: $3.4 million) and GST receivable of $13.9 million (2018: $15.7 million).
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Mining customers
Other
Total trade and other receivables
Less: Expected credit loss allowance
Total credit risk exposure by customer
Consolidated
2019
$’000
2018
$’000
175,022
4,713
179,735
(1,409)
128,817
5,885
134,702
(126)
178,326
134,576
At 30 June 2019, the exposure to credit risk for trade receivables and contract assets by geographic region
was as follows:
Australia
Indonesia
Other
Consolidated
2019
$’000
122,910
49,951
6,874
179,735
2018
$’000
98,480
28,953
7,269
134,702
The consolidated entity’s most significant trade receivable, a mining customer, accounts for $47.6 million
of the trade receivables carrying amount at 30 June 2019 (2018: $25.9 million).
Expected credit loss allowance
Current (not past due)
Past due 0-30 days
Past due 31-60 days
Over 90 days overdue
Consolidated
Trade
Receivables
2019
$’000
Allowance
2019
$’000
46,060
9,467
2,590
2,555
60,672
-
-
-
(1,409)
(1,409)
Trade
Receivables
2018
$’000
35,524
4,730
841
1,267
42,362
Allowance
2018
$’000
-
-
-
(126)
(126)
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MACMAHON ANNUAL REPORT 2019
17 Financial Risk Management continued
The consolidated entity establishes an expected credit loss allowance that represents its estimate of expected losses
in respect of trade and other receivables. At 30 June 2019 the consolidated entity’s collective impairment on its trade
receivables was $1.4 million (2018: $0.1 million).
The Group considers a financial asset to be in default when the financial asset is more than 90 days past due of
the customer approval date except the balances recovered or confirmed to be paid after the reporting period.
ECLs are a probability weighted estimate (based on the Group’s historical experience) measured as the present value of all
cash shortfalls on default financial assets taking into account both quantitative and qualitative information and analysis.
Movements in the expected credit loss allowance is as follows:
Opening balance
Adjustment on initial application of AASB 9
Adjusted opening balance
Receivables expensed as uncollectable during the year
Impairment loss reversed in profit or loss
Consolidated
2019
$’000
126
1,409
1,535
(126)
-
1,409
2018
$’000
216
-
216
(76)
(14)
126
Liquidity risk
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due.
The consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking damage to the
consolidated entity’s reputation.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing
facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial
assets and liabilities.
Information about changes in term facilities during the year is disclosed in note 18.
As at 30 June 2019, the undrawn amount on the term facility was $29.6 million (2018: $17.5 million). The facility
was utilised for bank guarantees and credit cards of $20.4 million (2018: $7.5 million). Outstanding individual lease
agreements drawn under past facilities remain in place until their expiry date. In addition, the consolidated entity has
a $50 million (2018: $20.0 million) insurance bond facility with $35.9 million (2018: $5.6 million) available at year end.
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Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the 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.
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Non-derivatives
Trade payables and accrued expenses
Other payables
Lease liability
1 Year
or less
$’000
Between
1 and 2 years
Between
2 and 5 years
$’000
$’000
Over
5 years
$’000
(145,414)
(23,192)
(39,645)
-
-
-
-
(39,057)
(115,965)
Total non-derivatives
(208,251)
(39,057)
(115,965)
-
-
-
-
Remaining
contractual
maturities
$’000
(145,414)
(23,192)
(194,667)
(363,273)
Remaining
contractual
maturities
$’000
Consolidated – 2018
Non-derivatives
Trade payables and accrued expenses
Other payables
Lease liability
1 Year
or less
$’000
Between
1 and 2 years
Between
2 and 5 years
$’000
$’000
Over
5 years
$’000
(165,712)
(8,581)
(27,421)
-
-
-
-
-
-
(20,543)
(60,243)
(19,613)
(165,712)
(8,581)
(127,820)
Total non-derivatives
(201,714)
(20,543)
(60,243)
(19,613)
(302,113)
The cash flows in the maturity analysis are not expected to occur significantly earlier than contractually disclosed above.
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
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MACMAHON ANNUAL REPORT 2019
Notes to the Financial Statements
F Debt and Equity
18 Borrowings
Current lease liability
Non-current lease liability
Currency
Interest Rate
Range
Calendar
Year of
Maturity
AUD
AUD
4.1% - 7.7%
2020 - 2024
4.1% - 7.7%
2020 - 2024
The movement in lease liabilities is set out below:
Balance at 1 July 2018
New finance leases
Finance leases returned
Repayment of finance lease liabilities
Interest accrued
Interest paid
Exchange differences
Balance at 30 June 2019
Consolidated
2019
$’000
29,553
136,295
2018
$’000
21,212
85,060
165,848
106,272
Consolidated
2019
$’000
106,272
84,024
(1,546)
(22,891)
9,777
(9,777)
(11)
2018
$’000
8,848
105,186
-
(7,762)
1,885
(1,885)
-
165,848
106,272
Refer to note 17 for further information on financial instruments.
Term facilities
During the year the Group’s multi-option facility was extended to October 2020 and the limit increased from $25
million to $50 million. The facility was partially drawn at 30 June 2019 for bank guarantees amounting to $19.9 million
(2018: $7.5 million) and credit card guarantees of $0.5 million.
Operating lease facility
As at 30 June 2019, the undrawn amount of domestic lease facilities was $66.8 million (30 June 2018: $26.7 million
was undrawn).
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:
Minimum Lease Payments
Interest
Principal
2019
$’000
2018
$’000
2019
$’000
2018
$’000
2019
$’000
2018
$’000
Finance Lease Liabilities
Less than one year
Between one and 5 years
More than 5 years
39,645
155,022
-
27,421
80,786
19,613
194,667
127,820
10,092
18,727
-
28,819
6,209
15,098
241
21,548
29,553
136,295
-
21,212
65,688
19,372
165,848
106,272
The term facility and the operating lease facility are subject to covenants. A future breach of covenant may require
the Group to repay the loan earlier than indicated in the above table. Under the agreement, the covenant is monitored
on a regular basis by the treasury department and regularly reported to management to ensure compliance with the
agreement. No covenants are breached at 30 June 2019.
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.
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MACMAHON ANNUAL REPORT 2019
Consolidated
2019
Shares
2018
Shares
2,154,985,818
2,154,985,818
(66,455,927)
(11,699,448)
2019
$’000
563,118
(17,755)
2018
$’000
563,118
(5,186)
2,088,529,891
2,143,286,370
545,363
557,932
The Company No. Ordinary Shares
2019
2018
2,154,985,818
1,200,920,894
-
954,064,924
2,154,985,818
2,154,985,818
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19 Equity – issued capital
Ordinary shares – fully paid
Less: treasury shares
Ordinary shares
On issue at 1 July
Issued
On issue 30 June - fully paid
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 2019 the consolidated
entity was in a net debt position.
The consolidated entity’s policy is to keep the ratio below 30%. The consolidated entity’s gearing ratios are set out below:
Total borrowings
Less: cash and cash equivalents
Net debt / (cash)
Total equity
Gearing Ratio
Consolidated
2019
$’000
165,848
(113,165)
2018
$’000
106,272
(109,622)
52,683
(3,350)
447,618
409,834
11.77%
(0.82%)
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.
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MACMAHON ANNUAL REPORT 2019
20 Equity – Reserves
Reserve for own shares (net of tax)
Foreign currency reserve (net of tax)
Share based payments
Consolidated
2019
$’000
(17,755)
12,481
3,270
(2,004)
2018
$’000
(5,186)
8,388
640
3,842
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 55,453,154 shares
were purchased (2018: nil). As at 30 June 2019, there are 66,455,927 (2018: 11,699,448) 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.
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 2017
Reserve for
own shares
$’000
Foreign
currency
$’000
Share based
payments
$’000
(5,781)
(4,640)
548
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
Treasury shares purchased for compensation plans
(12,717)
Foreign currency translation
Treasury shares allocated on vesting of performance rights
Share based payments expense
Reclassification of cash-settled share-based payments to equity
-
148
-
-
-
4,093
-
-
-
-
-
260
(168)
640
-
-
(152)
2,634
148
Total
$’000
(9,873)
13,028
595
260
(168)
3,842
(12,717)
4,093
(4)
2,634
148
Balance at 30 June 2019
(17,755)
12,481
3,270
(2,004)
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year (2018: nil).
Dividends are recognised when declared during the financial year and are no longer at the discretion of the Company.
Subsequent to 30 June 2019 the Board has elected to reinstate dividends to shareholders by approving the payment
of a final dividend of 0.5 cents per share for FY19.
92
Notes to the Financial Statements
G Unrecognised Items
21 Contingent liabilities
The following identifiable contingencies exist at 30 June 2019:
Bank guarantees
Insurance performance bonds
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
20,488
14,125
34,613
2018
$’000
7,545
14,355
21,900
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.
Other contingent liabilities
Macmahon has the normal contractor’s liability in relation to its current and completed mining projects (for example,
liability relating to design, workmanship and damage), as well as liability for personal injury and property damage
during a project. Potential liability may arise from claims, disputes and/or litigation against Group companies and/or
joint venture arrangements in which the Group has an interest. Macmahon is currently managing a number of claims,
disputes and litigation processes in relation to its contracts, as well as in relation to personal injury and property
damage arising from project delivery.
On 9 November 2015, Macmahon was served with a shareholder class action filed in the Federal Court of Australia by
ACA Lawyers. The action was filed on behalf of shareholders who acquired Macmahon securities between 2 May 2012
and 19 September 2012 and relates to disclosures by Macmahon in 2012 regarding the previously completed Hope
Downs 4 contract. On 4 October 2018 Macmahon reached an agreement to settle the class action by paying $6.7
million in full and final settlement of the proceedings, inclusive of interest and the applicant’s legal costs. Macmahon
continues to deny any wrong doing and the settlement is not an admission of any liability, nor a finding against
the company or any individuals. The impact of the settlement and related legal fees (net of provision previously
recognised) is recognised as a one-off charge to the income statement.
93
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MACMAHON ANNUAL REPORT 2019
22 Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2019
$’000
2018
$’000
59,555
59,555
6,068
12,400
6,894
25,362
174,945
174,945
12,515
3,680
-
16,195
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
The consolidated entity entered into a number of lease and hire agreements for mining equipment.
The leases typically run for a term of 3 to 5 years.
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.
23 Events after the reporting period
GBF acquisition
On 2 August 2019 Macmahon acquired 100% of GF Holdings (WA) Pty Ltd and its subsidiaries (“GBF Group”),
an underground mining contractor based in Western Australia. On completion $14.9 million cash was paid to
the vendor, $5.9 million non-assumed debt repaid and $4 million cash retained in escrow.
Due to the complexity and recent date of the acquisition the purchase price allocation has not been completed and further
information will be disclosed in the 31 December 2019 half year report. Refer to ASX announcement dated 2 August 2019.
Subsequent to 30 June 2019 the Board has elected to reinstate dividends to shareholders by approving the payment
of a final dividend of 0.5 cents per share for FY19.
No other matter or circumstance has arisen since 30 June 2019 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.
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MACMAHON ANNUAL REPORT 2019
Notes to the Financial Statements
H Other Information / Group Structure
24 Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy:
Incorporated subsidiaries
Macmahon Contractors Pty Ltd
Macmahon Mining Services Pty Ltd
Doorn-Djil Yoordaning Mining and Construction Pty Ltd
Macmahon Underground Pty Ltd
Macmahon Contracting International Pte Ltd
PT Macmahon Indonesia
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*
Progressive Services Mongolia Pte Ltd*
Reactionary Services LLC*
Macmahon Contractors Nigeria Ltd*
Macmahon Contractors Ghana Limited*
Macmahon Botswana (Pty) Ltd*
Interest in trusts
Macmahon Holdings Limited Employee Share Ownership Plans Trust
Macmahon Underground Unit Trust
* Entities were deregistered or inactive during the year.
Principal place
of business
/ country of
incorporation
Ownership interest
2019
%
2018
%
Australia
Australia
Australia
Australia
Singapore
Indonesia
Malaysia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Malaysia
Indonesia
Singapore
Singapore
Mongolia
Nigeria
Ghana
Botswana
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
95
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MACMAHON ANNUAL REPORT 2019
25 Interests in joint ventures
Interests in joint ventures are accounted for using the equity method of accounting. Information relating to joint
ventures that are material to the consolidated entity are set out below:
Ownership Interest
Name
PT Macmahon Mining Services
Investments accounted for using the equity method
Principal Activities
Mining services
2019
%
50%
Net investment in PT Macmahon Mining Services (quasi-equity loan)
Share of profit of equity-accounted investees, net of tax
Balance at 1 July
Adjustment on initial application of AASB 9 (net of tax)
Adjusted Balance at 1 July
Share of profit of equity-accounted investees, net of tax
Dividends distributed
Exchange differences
Balance at 30 June 2019
Consolidated
2019
$’000
3,722
7,232
10,954
Consolidated
2019
$’000
9,273
(1,057)
8,216
3,905
(1,518)
351
10,954
2018
%
50%
2018
$’000
3,531
5,742
9,273
2018
$’000
6,891
-
6,891
2,207
-
175
9,273
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.
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MACMAHON ANNUAL REPORT 2019
25 Interests in joint ventures continued
Summary financial information for equity accounted investees, unadjusted for percentage ownership held by the
consolidated entity (100%):
Summarised statement of financial position
Cash
Other 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
Total liabilities
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
Consolidated
2019
$’000
2018
$’000
8,389
19,138
27,527
13,753
6,628
20,142
26,770
13,621
41,280
40,391
(11,722)
(3,624)
(11,574)
(1,431)
(15,346)
(13,005)
(2,347)
(1,680)
(4,027)
(7,480)
(1,361)
(8,841)
(19,373)
(21,846)
21,907
18,545
10,954
9,273
79,767
(750)
(6,635)
(61,892)
59,079
(901)
(4,997)
(47,782)
10,490
5,399
(2,681)
(986)
7,809
3,905
1,518
4,413
2,207
-
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.
97
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MACMAHON ANNUAL REPORT 2019
26 Related party transactions
Parent entity
Macmahon Holdings Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 24.
Joint ventures
Interests in joint ventures are set out in note 25.
Key management personnel
Disclosures relating to key management personnel are set out in note 27 and the remuneration report in the Directors’
report.
Transactions with related parties - joint venture
The following transactions occurred with related parties:
Transactions recognised in profit and loss
Recharges to joint venture
Recharges from joint venture
Management fee charged to joint venture
Purchases and sales of assets
Sales of equipment to joint venture
Purchases of equipment from joint venture
Receivable from and payable to related parties:
(Payable) / receivable from joint venture
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Revenue recognised from shareholder
Purchases made from shareholder
Receivable from and payable to shareholder (AMNT):
Receivable from shareholder
Payable to shareholder
Consolidated
2019
$’000
2018
$’000
1,436
(441)
1,550
1,007
(635)
1,359
-
846
-
-
Consolidated
2019
$’000
(124)
2018
$’000
196
Consolidated
2019
$’000
382,271
(165,236)
Consolidated
2019
$’000
47,539
-
2018
$’000
153,529
(70,622)
2018
$’000
25,637
(11,106)
During the year the 50% equity accounted PT Macmahon Mining Services Joint Venture received revenue of $2.2
million (2018: $1.0 million) from AMNT. The amount owing from AMNT to the Joint Venture as at 30 June 2019 was
$0.6 million (2018: nil).
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.
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MACMAHON ANNUAL REPORT 2019
27 Key management personnel disclosures
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the
consolidated entity is set out below:
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Leave benefits
Share-based payments
28 Share-based payments
Consolidated
2019
$
2018
$
2,479,020
2,607,926
91,296
132,769
-
1,622,592
70,831
165,296
3,949
196,068
4,325,677
3,044,070
The consolidated entity has the following equity compensation plans in place to remunerate non-executives,
executives and employees of the Group:
• Macmahon Executive Equity Plan (“EEP”),
• Senior Manager Long Term Incentive Plan (“LTIP”) and
• Non-Executive Director Salary Sacrifice Plan (“SSP”).
Executives and Senior Managers plans
Macmahon EEP and LTIP Plan
The LTIP and EEP provide 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 LTIP and EEP are 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 LTIP and EEP conditions being satisfied. The Board determines which Executives and other senior
personnel 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.
99
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MACMAHON ANNUAL REPORT 2019
28 Share-based payments continued
Performance rights granted under prior years EEP plans are set out below:
Performance rights effective on
Grant date
Service period
Tranche and number of Performance Rights
Remaining number of rights at 30 June 2019
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
EEP Performance
Rights 2017
EEP Performance Rights 2018
Tranche 11
Tranche 1
Tranche 2
Tranche 3
01/07/2016
12/08/2016
3 years
12,659,501
5,971,921
$0.075
1/7/17
18/8/17
3 years
13,669,315
8,440,499
$0.085
0%
50%
100%
0%
50%
100%
1/7/17
29/11/17
3 years
482,075
482,075
$0.130
0%
50%
100%
1/1/18
2/3/18
2.5 years
1,070,093
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%
Pro-rata between
50% and 100%
1 On 1 July 2019 100% of remaining FY17 performance rights vested.
Performance rights granted during the current reporting year are set out below:
LTIP Performance Rights 2019
EEP Performance
Rights 2019
Tranche 1
Tranche 2
Tranche 31
Tranche 31
Tranche 1
Performance rights effective on
Grant date
Service period
Tranche and number of Performance Rights
Remaining number of rights at 30 June 2019
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
1/7/18
1/7/18
2 years
16,162,394
16,162,394
$0.094
0%
50%
100%
1/7/18
1/7/18
3 years
16,162,394
16,162,394
$0.090
0%
50%
100%
1/7/18
1/7/18
4 years
16,162,394
16,162,394
$0.090
0%
50%
100%
1/7/18
1/7/18
5 years
16,162,392
16,162,392
$0.090
1/7/18
5/10/18
3 years
8,660,803
6,903,445
$0.138
0%
50%
100%
Pro-rata between
50% and 100%
Pro-rata between
50% and 100%
Pro-rata between
50% and 100%
Pro-rata between
50% and 100%
1
50% of shares that vest as a result of Tranche 3 LTIP Performance rights is subject to a further retention period of 1 year.
Measurement of grant date fair values
The following inputs were used in the measurement of the fair values at grant date of the 2019 LTIP and EEP using the
Monte Carlo simulation:
Fair value at grant date
Share price at grant date
Exercise Price
Expected volatility (weighted average volatility)
Option life (expected weighted average life)
Expected dividends
Risk-free interest rate (based on government bonds)
LTIP Performance Rights 2019
EEP Performance
Rights 2019
Tranche 1
Tranche 2
Tranche 3
Tranche 1
$0.094
$0.215
Nil
45.00%
2 years
0%
2.01%
$0.090
$0.215
Nil
45.00%
3 years
0%
2.08%
$0.090
$0.215
Nil
45.00%
4 years
0%
2.18%
$0.138
$0.265
Nil
45.00%
3 years
0%
2.03%
Expected volatility is estimated taking into account historic average share price volatility.
100
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MACMAHON ANNUAL REPORT 2019
28 Share-based payments continued
Non-Executive Director Salary Sacrifice Plan
During the reporting year rights were granted to Non-Executive Directors under the Salary Sacrifice Plan.
The SSP provides Non-Executive Directors an option to sacrifice a portion of their salary in return for a fixed number of
rights over ordinary but restricted shares which will vest equally at two dates approximately 8 months and 14 months
from the start of the financial year (NED share rights).
Once vested, the shares will be held on trust on behalf of the recipients but will be subject to certain restrictions which
limit the recipients’ ability to sell the shares. Trading restrictions will generally end on the earliest of ceasing to be a
Non-Executive Director, the date a change of control occurs or 15 years after the date the relevant NED share rights
were granted.
The following inputs were applied in the measurement of the fair values at grant date of NED share rights using the
Black-Scholes option pricing model:
l
R
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v
e
w
i
Grant date
Service period
Vesting date
Tranche and number of share rights
Remaining number of share rights at 30 June 2019
Share price at grant date
Discount for lack of marketability
Implied FV of restricted shares
Exercise price
Risk-free rate
Volatility factor
Dividend yield
Implied discount to share price at grant date
Fair value at grant date
NED Share Rights
Tranche 1
Tranche 2
1/7/18
1/7/18
8 months
14 months
1/3/19
696,675
-
$0.215
30.00%
$0.151
$0.213
1.93%
45.00%
0.00%
97.00%
$0.006
1/9/19
696,673
492,929
$0.215
30.00%
$0.151
$0.213
1.92%
45.00%
0.00%
97.00%
$0.012
Information about performance rights and share options outstanding at year end
The following unvested unlisted performance rights were outstanding at year end:
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
LTIP and EEP Performance Rights
NED Share Rights
2019
2018
17,880,139
73,310,377
-
-
(3,672,909)
12,118,502
15,221,483
(1,343,100)
(2,356,900)
(5,759,846)
2019
-
1,393,348
(696,675)
-
(203,744)
87,517,607
17,880,139
492,929
2018
-
-
-
-
-
-
Share-based payments recognised in profit or loss
The following amounts were recognised in profit or loss, in connection with the Company’s equity compensation
plans:
LTIP performance rights
EEP performance rights
NED share rights
Total expense
Consolidated
2019
$’000
1,899
726
9
2,634
2018
$’000
-
260
-
260
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MACMAHON ANNUAL REPORT 2019
28 Share-based payments continued
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.
102
MACMAHON ANNUAL REPORT 2019
29 Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the
parent entity, and its international network firms:
Group auditors
Audit services – KPMG
Audit or review of the financial statements - Australia
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
Consolidated
2019
$
2018
$
336,712
59,840
264,300
48,335
396,552
312,635
40,091
64,890
184,632
289,613
686,165
48,555
89,133
76,839
214,527
527,162
Audit of the financial statements - PWC Indonesia
92,798
76,904
Other services
Tax services - PWC Indonesia
30 Deed of cross guarantee
49,422
70,751
142,220
828,385
147,655
674,817
Pursuant to ASIC Corporation (Wholly owned Companies) Instrument 2016/785 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 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 (Operations) Pty Ltd
TMM Group (Operations) Pty Ltd became a party to the deed during June 2019.
103
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MACMAHON ANNUAL REPORT 2019
30 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
Consolidated
Revenue
Other income
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expense
Equipment and other operating lease expenses
Net finance costs
Other expenses
Loss before income tax expense
Income tax benefit
Loss after income tax expense
Other comprehensive income
Foreign currency translation
Other comprehensive income / (loss) for the year, net of tax
2019
$’000
693,498
33,894
(150,436)
(300,010)
(45,551)
(62,117)
(90,723)
(7,526)
(83,008)
(11,979)
2,770
(9,209)
-
-
2018
$’000
514,112
10,198
(197,753)
(176,569)
(34,449)
(41,846)
(47,323)
1,364
(66,098)
(38,364)
25,745
(12,619)
-
-
Total comprehensive loss for the year
(9,209)
(12,619)
EQUITY - ACCUMULATED LOSSES
Consolidated
Accumulated losses at the beginning of the financial year
Adjustment on initial application of AASB 9 (net of tax)
Adjusted accumulated losses at the beginning of the financial year
Profit / (loss) after income tax expense
Treasury shares purchased for compensation plans
Transfer of expired performance rights
Effect of removing subsidiaries no longer included in Extended Closed Group
Effect of adding TMM Group (Operations) Pty Ltd
Effect of adding TMM Group Pty Ltd
2019
$’000
(225,295)
(1,409)
(226,704)
(9,209)
-
4
-
15,365
-
2018
$’000
(316,945)
-
(316,945)
(12,619)
(595)
168
96,323
-
8,373
Accumulated losses at the end of the financial year
(220,544)
(225,295)
104
30 Deed of cross guarantee continued
STATEMENT OF FINANCIAL POSITION
ASSETS
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
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Income tax
Employee benefits
Provisions
Non-current liabilities
Borrowings
Deferred tax liabilities
Employee benefits
Total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
MACMAHON ANNUAL REPORT 2019
Consolidated
2019
$’000
2018
$’000
83,238
121,794
45,412
2,057
4,590
2,159
83,207
91,441
41,861
700
6,682
2,868
259,250
226,759
68,774
49,369
245,300
10,245
23,258
41,390
93,176
208,659
-
9,792
396,946
353,017
656,196
579,776
129,673
26,968
-
23,272
12,696
117,568
18,581
-
14,052
11,237
192,609
161,438
134,225
930
343
135,498
83,490
1,038
408
84,936
328,107
246,374
328,089
333,402
563,118
(14,485)
563,118
(4,421)
(220,544)
(225,295)
328,089
333,402
105
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2018
$’000
(6,840)
(249,517)
235,768
(20,589)
(20,589)
2018
$’000
2,373
251,110
(1,418)
(2,569)
563,118
640
(5,186)
2019
$’000
2,158
283,737
(33,367)
(33,378)
563,118
3,270
(17,755)
(298,274)
(310,031)
250,359
248,541
MACMAHON ANNUAL REPORT 2019
31 Parent entity information
Set out below is the supplementary information about the parent entity.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Consolidated
Other income / (expenses)
Forgiveness of historic inter-group loans
Reversal of investment impairment provision
Profit / (loss) after income tax
Total comprehensive profit / (loss)
2019
$’000
2,265
-
9,488
11,753
11,753
STATEMENT OF FINANCIAL POSITION
Consolidated
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
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in
respect of some of its subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the
deed, are disclosed in note 30.
Contingent liabilities
Refer to note 21 for information in relation to the shareholder class action.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity.
106
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MACMAHON ANNUAL REPORT 2019
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 initially adopted AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers
from 1 July 2018. Due to the transition methods chosen by the Group in applying these standards, comparative
information throughout these financial statements has not been restated to reflect the requirements of the new
standards except for separately presenting impairment losses on trade receivables.
A number of other new standards are effective from 1 July 2018 but they do not have a material effect on the Group’s
financial statements.
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 2018, except for the new, revised or
amended accounting standards below:
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AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111 Construction
Contracts and IFRIC 13 Customer Loyalty Programmes.
The Group has adopted AASB 15 using the cumulative effect method. Accordingly comparative information has not
been restated, it is presented as previously reported under AASB 118 Revenue.
The application of AASB 15 has had no material impact on the Group’s Statement of financial position, statement of
profit and loss and OCI or statement of cash flows and therefore no adjustments were made in the financial statements.
The accounting policy has been updated in note 2 to be reflective of the new standard.
AASB 9 Financial Instruments
AASB 9 sets out requirements for recognising and measuring financial instruments, including a new expected credit
loss model for calculating impairment on financial assets and new general hedging accounting requirements.
Classification
AASB 9 largely retains the existing requirements in AASB 139 for the classification and measurement of financial
liabilities. However, it eliminates the previous AASB 139 categories for financial assets of held to maturity, loans and
receivables and available for sale.
The adoption of AASB 9 did not have a significant impact on the way the Group classifies or recognises its financial
liabilities.
The classification of financial assets under AASB 9 is generally based on the business model in which the financial
asset is managed and its contractual cash flow characteristics.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at
fair value through profit or loss:
• it is held within a business model whose objective is to hold assets to collect contractual cash flows and;
• its contractual terms give rise on specified dates to cashflows that are solely payments of principal and interest on
the principal amount outstanding.
Cash and cash equivalents and trade and other receivables that were classified as loans and receivables under AASB
139 are now classified as at amortised cost.
Subsequent to initial recognition cash and cash equivalents and trade and other receivables remain at amortised cost
using the effective interest method. The amortised cost is reduced by impairment losses.
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MACMAHON ANNUAL REPORT 2019
32 Other significant accounting policies continued
Impairment of financial assets
AASB 9 replaces the incurred loss model in AASB 139 with an expected credit loss (ECL) model. The Group has
elected to measure loss allowances for trade and other receivables including contract assets at an amount equal
to lifetime ECLs.
The Group considers a financial asset to be in default when the financial asset is more than 90 days past due of
the customer approval date.
ECLs are a probability weighted estimate (based on the Group’s historical experience) measured as the present
value of all cash shortfalls on default financial assets taking into account both quantitative and qualitative
information and analysis.
An increase of $1.4 million in the allowance for impairment over the Group trade and other receivables and $1.1 million
over the equity accounted investment trade and other receivables was recognised in the opening profits reserve at 1
July 2018 on transition to AASB 9.
New Accounting Standards and Interpretations not effective for the Group at 30 June 2019 or early adopted
A number of new standards are effective for annual periods beginning after 1 July 2019 and earlier application is
permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated
financial statements.
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 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.
On 1 July 2019 the Group will adopt AASB 16 using the modified retrospective approach. The cumulative effect of
adopting AASB 16 will be recognised as an adjustment to the opening balance of profits reserve at 1 July 2019 with no
restatement of comparative information. The Group estimates that it will recognise additional lease liabilities of $19.2
million on 1 July 2019 with a corresponding increase in right of use assets.
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, IFRS 9, IAS 19 and IAS 28
• 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’).
For consistency with the current year’s presentation, where required, comparative information has been reclassified.
The impact of this for the year ended 30 June 2018 has been to reclassify $32.4 million to equipment and office
expenses under operating leases and $9.5 million to subcontractors costs from materials and consumables used
and disaggregation of $0.3 million of share based payments expense from employee benefits expense.
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.
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MACMAHON ANNUAL REPORT 2019
32 Other significant accounting policies continued
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:
• Note 2. Revenue: estimate of variable consideration
• Note 5. Tax: recognition of deferred tax assets, availability of future taxable profit against which deductable
temporary differences and tax losses carried forward can be utilised
• Note 14. Provisions: estimate of onerous contract provision
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 31.
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 2019 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’
or the ‘Group’.
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.
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MACMAHON ANNUAL REPORT 2019
32 Other significant accounting policies continued
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 the profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. Monetary assets and liabilities denominated in foreign currency at the reporting date are translated
to the functional currency at the exchange rate at that date. The income and expenses of foreign operations are
translated into Australian dollars at the average exchange rates for the period. Foreign currency differences are
recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely
in the foreseeable future, foreign exchange gains and losses arising from such a monetary item 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.
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.
110
Directors’
Declaration
In the Directors’ opinion:
• the attached financial statements and notes, and
the remuneration report on pages 46 to 57 in
the Directors’ report, are in accordance with the
Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory
professional reporting requirements;
• the attached financial statements and notes comply
with International Financial Reporting Standards as
issued by the International Accounting Standards
Board as described in note 32 and throughout the
financial statements;
• the attached financial statements and notes give a
true and fair view of the consolidated entity’s financial
position as at 30 June 2019 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
Group will be able to pay its debts as and when they
become due and payable; and
MACMAHON ANNUAL REPORT 2019
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• 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 Corporations (Wholly owned Companies)
Instrument 2016/785) described in note 30 to the
financial statements.
The Directors have been given the declarations required
by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors
made pursuant to section 295(5)(a) of the Corporations
Act 2001.
MS E SKIRA
Independent Non-Executive Chair
30 August 2019
Perth
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111
MACMAHON ANNUAL REPORT 2019
Independent
Auditor’s Report
112
MACMAHON ANNUAL REPORT 2019
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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. 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 2019 and of its financial performance for the year ended on that date; and Complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: Consolidated statement of financial position as at 30 June 2019 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 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: Assessment of potential onerous contract – Telfer Revenue Recognition. 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.
MACMAHON ANNUAL REPORT 2019
114
Assessment of potential onerous contract – Telfer Refer to Note 14 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. This is due to the contract incurring losses to date and the estimation uncertainty in forecasting cash flows, leading to increased audit risk. The Group’s assessment of the potential of the contract to be onerous is based on forecast cash flows over the anticipated remaining contract term. We focused on evaluating the Group’s assessment of forecast cash flows, in particular contract operating costs and revenues, equipment expenditure and other potential costs associated with the contract. Our procedures included: In relation to losses incurred to date we assessed the Group’s analysis of the actual costs incurred, by: Reading monthly client reports. Obtaining and reading correspondence between the Group and customer for evidence of performance issues and concerns. Inquiring with operational team 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: Comparing the forecasts to performance conditions included in the contract and subsequent variations. Comparing estimates used in the cash flow to past events to assess its adequacy. Enquiring about the process for identifying and compiling the cash inflows and outflows included in the forecasts. Testing controls such as Group’s assessment and approval of the forecasts. Comparing forecast cash flows to recent actual performance. Inspecting updated mine plans and production schedules to check for consistency against the forecast cash flows. Inspecting latest contract variations and agreements with customer 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 client meetings between the Group and customer. The Group’s monthly board minutes. MACMAHON ANNUAL REPORT 2019
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Revenue recognition ($1.1 billion) Refer to Note 2 to the Financial Report The key audit matter How the matter was addressed in our audit The Group’s revenue arises from rendering of mining services based on contracts with customers. Revenue recognised is based on contractual rates or on a cost reimbursement basis as performance obligations are met. We focussed on this area as a key audit matter due to: Its significant value from a number of customers and related contracts; and The adoption of the new accounting standard AASB 15 Revenue from Contracts with Customers (AASB 15) and its resultant impact on the financial statements. Given the group has a number of customer contracts across a number of components, we were required to assess the consistency of application of AASB 15 across the group’s components. Our procedures included: Evaluating the Group’s process and controls over revenue across its different contracts and components. Evaluating the appropriateness of the Group’s accounting policies for revenue recognition against accounting standard requirements. Testing key controls such as the authorisation of monthly progress claims which involve assessment and approval from the Group and its customer. Substantive testing by examining a statistical sample of invoices to underlying progress claims, customer approvals, contract terms and subsequent payments received for these invoices. Substantive testing by examining of a statistical sample of unbilled revenue accruals to underlying progress claims, contract terms and where available, subsequent invoicing after customer approval and subsequent collections for these invoices. For variable consideration recognised, evaluating the Group’s evidence to meet the recognition requirements of highly probable and subsequent customer confirmation of these amounts. Obtaining and evaluating the Group’s assessment of the impact of AASB 15. Reading a sample of the Group’s contracts to perform our own assessment of the Group’s compliance with the requirements of AASB 15. Evaluating the Group’s disclosures against the requirements of the accounting standards including those relating to the adoption and transition to AASB 15. We assessed the Group’s disclosures of the quantitative and qualitative considerations in relation to the transitional adjustment, by comparing these disclosures to our understanding of the matter and the requirements of the accounting standards.
MACMAHON ANNUAL REPORT 2019
116
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. 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. MACMAHON ANNUAL REPORT 2019
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Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Macmahon Holdings Limited for the year ended 30 June 2019, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 46 to 57 of the Directors’ report for the year ended 30 June 2019. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. traH roverT GMPKPartner Perth 30 August 2019
MACMAHON ANNUAL REPORT 2019
Summary of
Consolidated Reports
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)1
Underlying NPAT attributable
to Macmahon
Balance sheet ($m)
Plant and equipment
Total assets
Net assets
Equity attributable to Macmahon
Net debt / (net cash)
Cash flow ($m)
Underlying EBITDA
Net interest paid
Income tax (paid) / refund
Working capital, provisions and other
non cash items decrease / (increase)
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
2019
1,103.0
181.4
(106.2)
75.1
(10.6)
64.5
(10.7)
53.8
(7.7)
46.1
-
46.1
10.6
56.7
399.6
824.9
447.6
447.6
52.7
181.4
(10.7)
(15.2)
(62.9)
92.5
(89.8)
0.9
109.6
113.2
2018
710.3
119.2
(77.7)
41.5
(0.3)
41.2
(2.4)
38.8
(7.5)
31.3
-
31.3
0.3
31.6
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
2015
2014
2013
660.2
1,015.9
1,165.5
2016
312.2
42.5
(28.8)
13.8
(2.1)
97.0
(59.6)
37.4
(233.8)
171.0
(101.7)
69.3
(2.0)
67.3
(18.8)
172.0
(85.6)
86.4
(1.8)
84.6
(18.3)
66.3
11.7
(0.7)
(196.4)
(23.7)
11.0
(220.1)
48.5
(0.2)
(0.5)
(19.6)
(22.7)
10.8
(220.6)
28.9
43.6
-
10.8
2.1
-
(220.6)
233.8
-
28.9
2.0
-
43.6
1.3
(2.1)
12.9
13.2
30.9
44.9
380.1
723.3
409.8
409.8
122.7
295.0
185.0
185.0
117.7
300.1
207.4
207.4
141.5
524.3
221.8
221.8
(3.4)
(54.1)
(56.5)
(74.2)
119.2
(2.4)
6.3
(17.3)
105.8
(59.1)
0.0
62.9
31.8
(0.1)
-
(1.5)
30.2
(23.1)
(0.9)
56.7
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
109.6
62.9
56.7
236.9
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
109.4
471.1
944.5
401.2
401.2
61.7
67.5
(18.8)
(9.6)
69.5
108.6
(91.6)
1.5
134.9
153.4
1
Significant and non-recurring items in:
2019 includes litigation settlements and related legal fees, acquisition costs and share based payments expense;
2018 includes share based payments expense;
2017 includes the takeover defence costs;
2016 relates to onerous lease provisions; and
2015 relates to property, plant and equipment impairment, inventory write downs and onerous lease provisions.
* Due to rounding, numbers presented may not add.
118
MACMAHON ANNUAL REPORT 2019
People and Safety
Number of employees
LTIFR
TRIFR
Order book
Work in hand ($bn)3
New contracts and extension ($bn)2
Revenue growth (%)
Reported NPAT / Total revenue (%)
Underlying NPAT / Total revenue (%)6
EBIT interest cover (x)
Reported basic EPS from continuing
operations (cents)
Underlying basic EPS from
continuing operations (cents)6
Balance sheet ratios
Gearing ratio
Enterprise gearing ratio 5
Reported ROC (%)
Underlying ROC (%)6
Reported ROE (%)
Underlying ROE (%)6
Reported ROA (%)
Underlying ROA (%) 6
NTA per share ($)
Cash flow ratios ($m)
2019
4,072
0.4
4.0
4.5
0.2
55.3
4.2
5.1
6.0
2.19
2.69
11.8
10.5
10.8
12.6
10.7
13.2
6.0
7.3
0.20
2018
3,913
0.5
6.3
5.4
1.2
97.5
4.4
4.4
17.0
1.53
1.55
(0.8)
(0.8)
10.8
10.9
10.5
10.6
6.1
6.2
0.19
2017
1,659
0.4
5.7
5.0
3.9
15.2
(1.5)
(0.6)
(33.8)
(0.47)
(0.18)
(29.2)
(41.3)
(2.2)
(0.7)
(2.8)
(1.1)
(1.9)
(0.7)
0.15
2016
1,529
1.1
4.5
1.5
0.6
(52.7)
3.5
4.1
18.0
0.87
1.03
(27.2)
(37.5)
3.5
4.1
5.0
6.0
2.6
3.1
0.17
2015
1,295
0.9
5.4
1.2
0.1
(35.0)
(33.4)
2.0
(8.3)
(17.5)
1.05
(33.5)
(50.3)
(35.7)
6.8
(67.5)
4.0
(32.7)
2.0
0.18
2014
2013
2,467
3,495
0.9
8.5
2.6
0.4
0.9
7.7
3.2
1.8
(12.8)
(29.9)
2.8
3.0
3.6
2.30
2.46
12.9
11.4
9.3
9.6
6.9
7.4
3.3
3.5
(3.7)
(3.7)
(4.6)
4.37
4.50
15.4
13.3
11.9
12.2
11.5
11.8
4.5
4.6
0.34
0.32
Net operating cash flow per share (cents)
4.3
4.9
2.5
0.7
4.3
6.2
8.6
Shareholders
Shares on issue (m) @ 30 June
Share price @ 30 June (cents)
Dividend declared (cents)4
Percentage franked (%)
Market capitalisation ($m)
Enterprise value (EV)
Price / NTA (x)
2,155.0
2,155.0
1,200.9
1,210.5
1,261.7
1,261.7
1,261.7
18.5
0.05
n/a
398.7
451.4
0.9
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
2 New contracts and extensions for 2017 includes the Batu Hijau contract.
3
4
The order book for 2017 includes the Batu Hijau contract. The order book for 2016 includes a proportional share of joint venture order books.
Subsequent to 30 June 2019 the Board has elected to reinstate dividends to shareholders by approving the payment of a final dividend
of 0.5 cents per share for FY19.
5 Enterprise gearing ratio: net debt or (net cash) / equity plus net debt.
6 Adjusted for significant and non-recurring items.
119
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MACMAHON ANNUAL REPORT 2019
ASX Additional Information
As at 16 August 2019
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 16 August 2019.
a) The twenty largest Shareholders
held 85.18% of the ordinary
shares.
b) There were 6,714 ordinary
Shareholders as follows:
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 Over
TOTAL
650
1,956
984
2,524
600
6,714
SUBSTANTIAL SHAREHOLDERS
As at 16 August 2019, the register of substantial shareholders disclosed the
following information:
Holders giving notice
Number of ordinary shares
in which interest is held
Perpetual Corporate Trust Limited
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:
Email
investors@macmahon.com.au
Mail
Investor Relations
PO Box 198
Cannington WA 6987
Visit
www.macmahon.com.au
CALENDAR OF EVENTS
• Annual General Meeting
November 2019
• Release of Half Year
Results – February 2020
• Release of Full Year
Results – August 2020
120
TWENTY LARGEST SHAREHOLDERS AS AT 16 AUGUST 2019
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Perpetual Corporate Trust Limited
J P Morgan Nominees Australia Pty Limited
HSBC Custody Nominees Limited
Citicorp Nominees Pty Limited
Zero Nominees Pty Ltd
CPU Share Plans Pty Ltd
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
BNP Paribas Noms (NZ) Ltd
HSBC Custody Nominees Limited - A/C 2
AMP Life Limited
CPU Share Plans Pty Limited
CS Third Nominees Pty Limited
Mr Christopher Ian Wallin + Ms Fiona Kay Mcloughlin + Mrs Sylvia Fay Bhatia
HSBC Custody Nominees Limited-Gsco ECA
HSBC Custody Nominees (Australia) Limited
BPM Capital Limited
Mr Amarjit Singh + Mrs Jaswant Kaur
20
Mr Paulus Gerardus Brouwer + Mr Remy Paulus Brouwer
5,600,000
Totals: Top 20 Holders Of Ordinary Shares (Total)
Total Remaining Holders Balance
1,835,417,149
319,568,669
85.18
14.82
MACMAHON ANNUAL REPORT 2019
Units
Percent
954,064,924
44.27
353,060,257
16.38
101,948,110
95,331,055
78,004,001
54,059,806
39,549,358
28,557,977
21,086,676
19,102,736
13,549,043
11,807,572
11,679,683
10,958,400
10,737,643
8,193,308
6,226,600
6,000,000
5,900,000
4.73
4.42
3.62
2.51
1.84
1.33
0.98
0.89
0.63
0.55
0.54
0.51
0.50
0.38
0.29
0.28
0.27
0.26
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Macmahon Holdings Limited
ACN 007 634 406
15 Hudswell Road
Perth Airport WA 6105
Australia
(+61) 08 9232 1000
info@macmahon.com.au
macmahon.com.au