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DowANNUAL
REPORT
2020
MACMAHON ANNUAL REPORT 2020
TABLE OF
CONTENTS
2 Year at a Glance
4 Our Business
6 Our Capabilities
8 Vision and Strategy
10 Letter from the Chair
12 CEO and MD Report
14 Operational and Financial Review
36 Sustainability Report
52 Directors’ Report
58 Remuneration Report
70 Financial Statements
125 Directors’ Declaration
132 Summary of Consolidated Reports
134 ASX Additional Information
136 Corporate Directory and Glossary
1
MACMAHON ANNUAL REPORT 2020
YEAR AT
A GLANCE
7,059
Group Workforce
$1.38bn
Revenue
$239m
$91.6m
Underlying EBITDA
Underlying EBIT(A)
$218m
Operating Cash Flow
$4.5bn
Order Book
$64.9m
3.1cps
Reported NPAT
Reported EPS
Refer to Summary of Consolidated Reports for a reconciliation to non-IFRS measures. These measures have not been audited.
2
YEAR AT
A GLANCE
1,380
1,103
710
FY18
FY19
FY20
Revenue ($m)
10.9%
Gearing
13.7%
Reported ROE
239
181
14.8%
Underlying ROACE
119
FY18
FY19
FY20
0.60cps
Underlying EBITDA ($m)
Total FY20 Dividend
5,050
5,572
7,059
TRIFR
3.77
LTIFR
0.12
FY18
FY19
FY20
3.77
TRIFR
0.12
Workforce and Safety
LTIFR
MACMAHON ANNUAL REPORT 2020
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3
MACMAHON ANNUAL REPORT 2020
OUR
BUSINESS
Macmahon is an ASX listed company that
has been offering mining and construction
services to clients for more than 55 years.
We seek to develop strong relationships with our
clients in which both parties can work together
in an open, flexible and transparent way.
Our approach to doing business, together with
our capabilities in surface and underground
mining, civil design and construction, performance
enhancement, and mine site maintenance and
rehabilitation services, has established Macmahon
as a trusted partner on resources projects
throughout Australia and internationally.
4
MACMAHON ANNUAL REPORT 2020
13
12
11
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3
30
8
Zimbabwe
17
Botswana
Mozambique
22
10
•
Johannesburg
• Durban
South
Africa
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27
15
16
26
18
24
32
44
33
31
37
35
7
36
29
9
20
5
19
21
28
6
25
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OUR
OPERATIONS
Offices
1 Perth
Surface Mining
7 Argyle
2 Brisbane
8 Batu Hijau
TMM Group
19 Peak Downs
20 Poitrel Levee
Underground
Mining / Services
23 Ballarat
GBF
Underground
31 Cock-eyed Bob
3 Jakarta
9 Byerwen
21 Saraji
Performance
Enhancement
22 Mogalakwena
4 Kalgoorlie
10 Coburn
Workshops
1 Perth
4 Boulder
5 Coppabella
6 Lonsdale
11 Kanthan
12 Langkawi
13 Lhoknga
14 Martabe
15 Mt Marven
16 Mt Morgans
17 Telfer
18 Tropicana
24 Boston Shaker
25 Fosterville
26 Granny Smith
27 Leinster
28 Olympic Dam
29 Tanami
30 Tujuh Bukit
32 Comet Vale
33 Daisy Milano
34 Deflector
35 Maxwells
36 Nicolsons
37 Santa
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MACMAHON ANNUAL REPORT 2020
OUR
CAPABILITIES
EQUIPMENT MAINTENANCE
AND 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 operational
improvement service which can provide mine
owners with the benefit of our contracting
experience at owner miner operations. This
service can include:
• Operator coaching and training
• Cultural change programs for employees
• 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 AND 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
6
MACMAHON ANNUAL REPORT 2020
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7
MACMAHON ANNUAL REPORT 2020
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.
OPERATIONAL EXCELLENCE
Focusing on ensuring our current projects
perform at or above expectations. Macmahon is
also committed to fostering strong relationships
with our customers through alliance style contract
management.
COMPETITIVE ADVANTAGE
Investing in people, plant, operating technology
and sustainability propositions to ensure
that Macmahon’s service offering has a clear
competitive advantage in all of our markets.
NEW WORK
Macmahon remains focused on winning new
work in our existing markets, while diversifying its
business across a range of commodities, clients
and geographies.
DIVERSIFICATION
Growing our core mining business while remaining
aligned to the mining production cycle; a focus on
underground, rehabilitation, consulting and new
geographies; we will continue to explore M&A
opportunities.
8
MACMAHON ANNUAL REPORT 2020
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9
MACMAHON ANNUAL REPORT 2020
LETTER
FROM THE
CHAIR
10
MACMAHON ANNUAL REPORT 2020
LETTER
FROM THE
CHAIR
Dear Shareholders,
On behalf of the Macmahon Board of Directors, I am pleased
to report that Macmahon’s business continued to perform
well and delivered record earnings in financial year 2020.
The Group delivered both increased earnings
and an improved safety performance, reporting
revenue growth of 25.1% to $1.38 billion and
record statutory profit up 40.9% to $64.9 million.
Importantly, Macmahon achieved this in a period
of increased market uncertainty, demonstrating
the resilience of the strategy
and business offering.
As I present this report to you, much of the
global economy has been significantly impacted
by the COVID-19 pandemic, which in addition
to the ongoing health and safety consequences
for society, has closed borders, disrupted trade,
and created enormous uncertainty. Therefore,
delivering on expectations and providing certainty
for our clients, our employees and our shareholders
has been a commendable performance.
Macmahon remains committed to creating a
sustainable business and one that is mindful of
broader stakeholder requirements in relation
to our environmental, community and social
performance. The Group is proud of the
contribution it makes to the Australian and
Southeast Asian communities, including a
commitment to employing and training local
and Indigenous people.
In addition to operational and financial efficiency,
our business is increasingly focused on minimising
environmental impacts. We see significant
opportunity in the rehabilitation of existing mines
and expanding our rehabilitation offering is
therefore a key strategic focus.
Changes to the Board that commenced last year
continued with the appointment of three new
independent Directors. We welcomed Mr Vyril Vella
back to the Board in June 2019 and in October
2019 we were pleased to appoint Mr Bruce Munro
and Mr Hamish Tyrwhitt, two highly credentialled,
independent Non-Executive Directors.
After a successful period as Chief Executive
Officer, Michael Finnegan was appointed to the
Board as Managing Director in October 2019.
I am pleased to advise that the Board has
declared a final dividend for the 2020 financial
year of 0.35 cents per share, bringing the full
year payout to 0.60 cents per share. This was
supported by our good cash conversion and solid
underlying financial position.
In line with the capital allocation policy we
implemented last year, Macmahon is committed
to paying a sustainable dividend, whilst preserving
our strong balance sheet to provide the Group
with the financial flexibility to pursue suitable
opportunities and execute on its long-term
growth strategy.
In closing, on behalf of the Board, I would like
to thank our CEO Michael Finnegan, the senior
executive management team and all of our
people for the significant progress that has been
achieved over this unprecedented period, and
our shareholders, clients and suppliers for their
ongoing support.
EVA SKIRA
Independent Non-Executive Chair
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11
MACMAHON ANNUAL REPORT 2020
CEO
AND MD
REPORT
The 2020 financial year had
significant challenges for all
businesses, but a disciplined
execution of our strategy
allowed Macmahon to again
deliver on targets with
continued growth in revenue,
earnings and dividends.
KEY ACHIEVEMENTS
The business reported revenue of $1.38 billion and
an underlying EBIT(A) of $91.6 million, which was
in line with the increased earnings guidance range
provided with our half year result. I am proud of
the fact that Macmahon has now delivered on
earnings guidance for three consecutive years and
delivered record earnings.
Importantly, Macmahon has maintained a strong
balance sheet and liquidity position, supported by
high cash conversion. At 30 June 2020, net debt
was $60.9 million, representing a low gearing
of 10.9%, along with $197.9 million of cash
and unutilised working capital facilities.
COVID-19, PEOPLE AND CULTURE
Our record results were achieved despite the
additional challenges and uncertainty generated
by COVID-19. Our workforce, clients and suppliers
acted quickly to mitigate the impact of the virus.
These actions included social distancing, screening
and testing protocols, extending rosters to reduce
the frequency of workforce changeover at sites,
and relocating interstate fly-in-fly-out workers and
their families. At our overseas projects additional
controls such as the mandatory use of face masks
were also implemented.
Our award-winning mental health program, Strong
Minds, Strong Mines, has been very valuable for
our workforce over this period, especially for those
who have temporarily moved to extended rosters.
To date, we have experienced minimal impact to
our productivity levels, supply chain or margins.
However, we are not taking our fortunate
position for granted and continue to carefully
and proactively implement risk management
measures across our business to protect our
workforce and stakeholders, and also safeguard
business continuity.
A positive outcome of this uncertain period has
been the reinforcement of the “can-do” culture
we have been building over the past few years.
I am grateful to the Macmahon team who have
extended themselves over the year to contribute
to our results.
12
MACMAHON ANNUAL REPORT 2020
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BUSINESS HIGHLIGHTS
Key operational achievements during the 2020
financial year included:
• Resolving the Telfer dispute, which is now
operating on a cash flow positive basis
• Completing the acquisition of GBF
• Securing $200m of additional work with Silver
Lake Resources
• Ramping up of the Boston Shaker underground
project
• Achieving record volumes at Batu Hijau and
Byerwen
• Securing a $700m extension and expansion of
the Byerwen project
• Improving our Total Recordable Injury
Frequency Rate (TRIFR) to 3.77 and our Lost
Time Injury Frequency Rate (LTIFR) to 0.12
• Winning the 2019 WA Mental Health Award for
our Strong Minds, Strong Mines program
Further details on our performance are contained
in the Operational and Financial Review section.
STRATEGY
Operational efficiency and enhancing our margins
remain an ongoing priority. We have recently initiated
an operational excellence program to increase
performance at all sites and benchmark outcomes.
Our aim is to be an advanced mining contractor
and as such we are investing in our systems and
technology. We are building a platform to connect
our people, processes, equipment, and production
plans to identify and eliminate waste, improve
safety and increase production for our clients.
In addition, we remain focused on expanding our
service offering across the mining value chain,
with specific focus on the civil, underground and
rehabilitation sectors.
POSITIVE OUTLOOK
Notwithstanding the recent global disruptions, these
are exciting times for our business and our people.
The outlook for Macmahon remains positive for
the 2021 financial year, underpinned by an order
book of $4.5 billion, a significant tender pipeline
of $7 billion and a solid balance sheet.
I would like to thank everyone in the Macmahon
team for their commitment and strong
contributions during the year. I would also like
to thank Macmahon’s clients for their continued
support and shared approach to protecting the
health and wellbeing of our people.
I also take this opportunity to extend my
appreciation to the Board and my senior
management team for their guidance as we
continue to deliver value for shareholders.
MICHAEL FINNEGAN
Chief Executive Officer and Managing Director
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13
MACMAHON ANNUAL REPORT 2020
OPERATIONAL
AND FINANCIAL
REVIEW
Macmahon provides mining
and infrastructure services to
miners throughout Australia
and internationally.
Headquartered in Perth, Western Australia, the
Group derives revenue from activities including
surface and underground mining, civil design and
construction (primarily on mine sites), equipment
repair and maintenance, advisory services, design
and fabrication of mining infrastructure, and mine
site maintenance and rehabilitation services.
14
OPERATIONAL
AND FINANCIAL
REVIEW
MACMAHON ANNUAL REPORT 2020
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15
MACMAHON ANNUAL REPORT 2020
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 for AngloGold Ashanti
and Independence Group. During the period,
Macmahon invested in its first autonomous drill
fleet to increase production and improve safety
(forecast to December 2023).
Telfer Gold Mine
Macmahon is fulfilling a life of mine contract at the
Telfer project in Western Australia for Newcrest.
Macmahon concluded the contractual dispute
over rates with Newcrest in November 2019
(forecast to January 2023).
Byerwen Coking 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. In June 2020,
Macmahon was awarded a $700 million contract
expansion and extension for another three years
which increases production to 10 million tonnes
per annum (forecast to November 2023). The
extension includes a further two year option.
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. In July 2020, Macmahon
finalised a variation for additional work at the
Mt Marven pit (forecast to December 2022).
Argyle Diamond Mine
Through its Indigenous employment subsidiary,
Doorn-Djil Yoordaning, Macmahon is operating
at the Argyle Diamond Mine in Western Australia,
where it provides tailings dam earthworks, hauling
of coarse tailings to the tailings storage facility, and
associated services (forecast to 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 (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. In November 2019,
Macmahon secured a two year extension of
the contract (forecast to March 2023).
Kanthan, Langkawi and Lhoknga Quarries
Macmahon is currently fulfilling a mining
services quarry contract on Langkawi Island
(Malaysia) (forecast to December 2025).
Macmahon completed two other quarry
contracts at Kanthan (Malaysia) (February
2020) and Lhoknga (Indonesia) (June 2020).
Mogalakwena Platinum Mine
Macmahon is providing advisory services to the
Anglo American Platinum mine in South Africa
for an operational transformation program
(forecast to April 2021).
16
MACMAHON ANNUAL REPORT 2020
In June 2020, Macmahon
was awarded a $700 million
contract expansion and
extension at the Byerwen Coal
Mine for another three years.
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MACMAHON ANNUAL REPORT 2020
In February 2020, GBF was
awarded a three year contract
extension worth $200 million
from Silver Lake Resources at
its Mount Monger operations.
18
MACMAHON ANNUAL REPORT 2020
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
underground services to several mines including:
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.
Ballarat Gold Mine
Macmahon provides production drilling and
cablebolting for Castlemaine Gold Fields in Victoria.
Granny Smith Gold Mine
Macmahon provides cablebolting services to
Goldfields near Laverton in Western Australia.
Fosterville Gold Mine
Macmahon provides cablebolting services to
Kirkland Lake Gold in Victoria.
Leinster Nickel Mine
Macmahon provides cablebolting services to BHP
in the eastern Goldfields in Western Australia.
Nifty Copper Mine
Macmahon provided production drilling,
cablebolting, box hole drilling and shotcreting to
Metals X at Nifty Copper Mine in Western Australia
with works completed in December 2019.
Mount Wright Gold Mine
Macmahon provided production drilling services
to Carpentaria Gold at Mount Wright Gold Mine in
Queensland with works completed in October 2019.
Tujuh Bukit Copper / Gold Mine
Macmahon through its 50:50 joint venture
was contracted to construct an underground
exploration decline at the PT Bukit Suksesindo
Mine in East Java, Indonesia. The works have been
completed with the project going into a care and
maintenance phase from June 2020.
Macmahon continues to provide raise drilling
services at Olympic Dam in South Australia for
BHP. Macmahon has been active at Olympic Dam
for over 10 years and is contracted to continue
underground raise drilling work until June 2023.
Macmahon’s engineering division also provided service
crew personnel to BHP at Leinster Nickel Operations,
fan installation at Prominent Hill for Oz Minerals, shaft
sinking at Fosterville for Kirkland Lake Gold and shaft
rehabilitation services at Olympic Dam for BHP.
GBF GROUP
Macmahon acquired GBF Underground Mining
Group (GBF) in August 2019. GBF is a specialist
underground mining contractor with a focus on the
Goldfields region in Western Australia. Through the
acquisition of GBF, Macmahon provided services
to the following underground projects including:
Daisy Milano, Maxwells, Cock-eyed Bob
and Deflector Gold Mines
GBF provides underground mining and development
services for Silver Lake Resources at both its Mount
Monger and Deflector operations. In February 2020,
GBF was awarded a three year contract extension worth
$200 million from Silver Lake Resources at its Mount
Monger operations, which included the development of
its new Santa mine which commenced in March 2020.
Comet Vale Gold Mine
GBF provided mining services for Mineral
Ventures at the Comet Vale Project owned by
Orminex and Sand Queen.
Nicolsons Gold Mine
GBF provides fleet rental and equipment
maintenance support at Pantoro’s flagship project.
In addition to a wide range of underground mining
services, GBF also designs and develops mine support
infrastructure, such as underground refuge chambers,
refuelling stations, escape ladderways, underground
loader buckets, and trays and ute bodies.
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MACMAHON ANNUAL REPORT 2020
CIVIL AND
REHABILITATION
SERVICES
Macmahon provides consulting, design, civil
construction, equipment hire, maintenance and site
rehabilitation services through the TMM Group.
PROJECT ACTIVITY
TMM projects during the year included:
Peak Downs Coking Coal Mine
TMM provides mine services works, top soil
stripping, rehabilitation, tailings dam remediation
and multiple civil works for the BHP Mitsubishi
Alliance (BMA).
Saraji Coking Coal Mine
TMM provides 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 and performs a number of smaller
civil infrastructure design and construction
projects and mine rehabilitation works.
Poitrel Coking Coal Mine
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 delivered a significant dam
expansion and a successful mud removal project
to allow the mine to progress after a ten year
hiatus. TMM also constructed a sediment dam
excavating waste material to increase capacity.
South Walker Creek Coking Coal Mine
TMM completed several projects at South Walker
Creek including the design and construction
of Stage 2 of the light vehicle / heavy vehicle
separation project, mine rehabilitation works, train
loadout pad extension, shutdown pad and timber
clearing works.
Consulting
TMM’s business activities also include
consulting services to the mining industry.
In 2020, TMM provided preliminary design
and budget construction cost estimates for
all non-process infrastructure at the Jervois
Base Metal Project for KGL Resources. The
consulting group provided ongoing design
and engineering services to a number of long-
term clients including Stanmore, BHP, Nyrstar,
Carabella Resources and JT Boyd across several
civil, structural and infrastructure projects.
Rehabilitation
TMM rehabilitated a total of 70 hectares
across the Saraji, South Walker Creek
and Peak Downs projects.
20
MACMAHON ANNUAL REPORT 2020
Macmahon’s presence
continues to grow on the
east coast of Australia.
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21
MACMAHON ANNUAL REPORT 2020
Macmahon’s primary
workshop, located in Perth,
Western Australia, is a key
operational asset with the
ability to rebuild both plant
and components.
22
MACMAHON ANNUAL REPORT 2020
EQUIPMENT
MAINTENANCE
AND
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 2020
FINANCIAL
REVIEW
FINANCIAL PERFORMANCE
From operations before significant items
Revenue
Australia
Indonesia
Other International
Group Revenue
EBITDA (underlying)
EBIT(A) (underlying)
NPAT (underlying)
EBITDA (reported)
EBIT (reported)
NPAT (reported)
1H20
2H20
2020
2019
442.1
230.8
13.8
686.7
114.0
43.9
31.3
111.4
41.3
28.7
459.8
223.2
10.7
693.7
124.7
47.7
37.9
123.4
46.0
36.2
901.9
454.0
24.5
1,380.4
238.7
91.6
69.2
234.8
87.3
64.9
700.2
388.9
13.9
1,103.0
181.4
75.1
56.7
170.8
64.5
46.1
Note: With the exception of revenue and NPAT (reported) the other measures above are not defined by IFRS and are unaudited.
Refer to Summary of Consolidated Reports section for reconciliation of underlying results.
Revenue
$M
710
1,380
1,103
Underlying EBIT(A)
$M
100
80
60
40
20
42
92
75
FY18
FY19
FY20
FY18
FY19
FY20
Underlying EBITDA
$M
Underlying EBIT(A) Margin
239
181
119
8%
7%
6%
5%
4%
3%
2%
1%
6.8%
6.6%
5.8%
1,400
1,200
1,000
800
600
400
200
250
200
150
100
50
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FY18
FY19
FY20
FY18
FY19
FY20
MACMAHON ANNUAL REPORT 2020
PROFIT AND LOSS
Macmahon delivered revenue and earnings
growth in line with its publicly stated guidance.
Revenue for the Group increased by 25.1% from
the prior period to $1.38 billion. This was largely
due to the generation of positive returns from
the execution of projects, and the acquisition
of GBF, net of dividends paid to shareholders.
The increase in overall revenue was also due to
inclusion of income related to the GBF Group
acquisition from 1 August 2019. Statutory profit
increased by 40.9% to $64.9 million.
Underlying earnings before interest, tax and
customer contracts amortisation (EBIT(A)) for
FY20 was $91.6 million, reflecting 21.9% growth
compared to $75.1 million underlying EBIT(A)
in FY19. Similarly, underlying earnings before
interest, tax, depreciation and amortisation
(EBITDA) increased by 31.6% over the year to
$238.7 million.
Depreciation, Amortisation and Net Finance Costs
Depreciation, amortisation and net finance costs
for the year increased from $106.2 million and
$10.7 million respectively to $147.4 million and
$14.8 million. This was consistent with the growth
in property, plant and equipment over the period,
as well as the inclusion of GBF’s assets.
Tax
The Group reported a tax expense of $7.5 million.
The effective tax rate was 10.4% primarily due
to the recognition of previously unrecognised
deferred tax assets. Excluding these items, the
effective tax rate would have been 34.0%.
BALANCE SHEET
Net assets increased from $447.6 million to $497.8
million at 30 June 2020. This was largely due to
the net effect of the execution of existing projects,
commencement of new projects, inclusion of GBF
from acquisition, and the dividends paid.
The Group’s net tangible assets (NTA) increased
by 8.9% over the year from $437.4 million to
$476.5 million at 30 June 2020. As a result, NTA
per share increased from 20.3 cents per share to
22.1 cents per share.
Working Capital
Investment in net working capital increased by
approximately $47.3 million during the period
primarily due to an increase in receivables and
inventory as a result of the expansion of existing
projects, commencement of new projects and
addition of GBF working capital.
Current trade and other receivables and inventory
increased from $181.5 million and $45.8 million
respectively to $202.6 million and $57.3 million
at 30 June 2020. The current trade and other
payables at 30 June 2020 of $153.9 million
reduced from prior year of $168.6 million,
following the early payment to smaller suppliers
and reclassification of a contract liability following
an amendment of the contract.
Net Debt
Macmahon had net debt at financial year end of
$60.9 million, representing a low gearing of 10.9%.
This comprised cash on hand at 30 June 2020 of
$141.8 million (FY19: $113.2 million), and total debt
of $202.7 million (FY19: $165.8 million).
The increase in debt of $36.9 million was primarily
due to the purchase of plant and equipment to
support new and existing projects, inclusion of
GBF debt, and application of the AASB 16 Leases
accounting standard ($16.7 million) which was
offset with debt repayments during the year.
Over the period, Macmahon increased its
syndicated multi-option debt facility to $75.0
million (from $50.0 million) which expires in July
2021. This facility is currently drawn for bank
guarantees for $18.5 million and credit card
guarantees of $0.5 million .
As at 30 June 2020, cash and unutilised working
capital facilities totalled $197.9 million.
CASH FLOW
Operating cash flow (excluding interest, tax and
GBF acquisition costs) for the year ended 30 June
2020 was $218.4 million (FY19: $125.9 million),
representing a conversion rate from underlying
EBITDA of 91.5%. This compared favourably to
the 69.4% EBITDA conversion rate for the prior
financial year.
Capital Expenditure
Capital expenditure for property, plant and
equipment for the year totalled $141.6 million,
comprising $63.9 million acquired through finance
leases, $2.3 million deferred other payables
and $75.4 million funded in cash. This was
approximately $10 million below the $155.0 million
capital expenditure guidance, primarily due to the
timing of new equipment purchases.
DIVIDEND
The Board has approved the payment of a
final dividend of 0.35 cents per share for FY20.
This equates to a total dividend declared for FY20
of 0.60 cents per share.
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MACMAHON ANNUAL REPORT 2020
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 Group
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.
COVID-19 RISK
The global economy has been significantly
impacted by the COVID-19 pandemic which has
resulted in closure of borders, disrupted trade and
various industries including mining, interrupted
supply chains and created significant uncertainty
in the global economy.
Outlined 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.
The health pandemic continues to affect many
countries and is causing severe economic shocks
in equity and credit markets. This includes, but is
not limited to, financial market volatility, liquidity
concerns, increases in government intervention,
increasing unemployment, broad declines in
consumer discretionary spending, and other
restructuring activities.
Although the pandemic has had minimal financial
impact to the Group during the year ended 30 June
2020, there is a risk that the prolonged continuation
of these circumstances across the globe could have
a material impact on the Group in the future.
26
MACMAHON ANNUAL REPORT 2020
PERFORMANCE OF THE BATU HIJAU PROJECT
The future financial performance of Macmahon,
including during FY21, is partly dependent on
outcomes at the Batu Hijau project.
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.
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.
GUIDANCE
Macmahon provides forecasts and predictions
about its future performance (Guidance) on
the basis of several assumptions which may
subsequently prove to be incorrect.
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:
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.
• 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
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.
• government policy on infrastructure spending
• the policies of mine owners including their
decisions to undertake their own mining
operations or to outsource these functions
• the availability and cost of key resources
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.
The Guidance provided by Macmahon will be
negatively impacted if those contingent liabilities
that are currently unquantified crystallise into
actual liabilities.
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.
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27
MACMAHON ANNUAL REPORT 2020
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.
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.
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.
28
MACMAHON ANNUAL REPORT 2020
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 pressures 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 operating and
financial 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.
AMC (which is a related party of AMNT) is 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.
Macmahon also has projects in South Africa and
Malaysia. The 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.
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 AND INTEGRATION RISK
In August 2019, Macmahon announced the
completion of its acquisition of GBF. 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
• Loss of key Board, management or operational
personnel
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29
MACMAHON ANNUAL REPORT 2020
OUR
BOARD
EVA SKIRA
Independent, Non-Executive Chair
Appointed as Non-Executive Director on 26
September 2011; appointed Chair on 27 June 2019
MICHAEL FINNEGAN
Managing Director and Chief Executive Officer
Appointed as Managing Director
on 1 October 2019
Qualifications: BA (Hons), MBA, SF Fin (Life
Member Fin), FAICD, FAIM, FGIA, FCIS
Qualifications: BSc
Experience and expertise: 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.
Experience and expertise: Mr Finnegan has
more than 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.
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.
Current listed directorships: None
Former Australian listed directorships
(last 3 years): None
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 also has deep understanding of sustainability
and environmental practices, having been the
Chair of the Water Corporation of Western
Australia and Forest Products Commission.
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 Australian listed directorships
(last 3 years): RCR Tomlinson Limited (resigned
October 2018)
Committee memberships:
• Chair of the Nomination Committee
• Member of the Remuneration Committee
• Member of the Audit and Risk Committee
Committee memberships:
• Member of the Tender Review Committee
Interests in ordinary shares: 5,019,941
Interests in performance rights: 14,546,154
BRUCE MUNRO
Independent, Non-Executive Director
Appointed 1 October 2019
Qualifications: BE (Hons), FIEAust
Experience and expertise: Mr Munro has more
than 40 years’ experience as an engineer and
manager with major construction and mining
contractors in a number of countries including
Australia, Asia, India and southern Africa. From
2011 until his retirement in 2015, Mr Munro was the
Managing Director of Thiess Pty Ltd, which during
this period had approximately 20,000 employees
and annual revenues up to approximately $7
billion. He has been involved as a contractor in the
development and operation of numerous mines
for clients including BHP, Glencore, Rio Tinto, BP,
Peabody, Bumi Resources, Inco, Wesfarmers, Vale
and Fortescue. Whilst Mr Munro held the role of
CEO, Thiess was mining in excess of approximately
50 million tonnes per annum of coal.
Interests in ordinary shares: 226,698
Interests in share rights: 277,809
Mr Munro was recently a Non-Executive Director
of Australian Pacific Coal Ltd.
30
MACMAHON ANNUAL REPORT 2020
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EVA SKIRA
Independent, Non-Executive Chair
MICHAEL FINNEGAN
Managing Director and Chief Executive Officer
BRUCE MUNRO
Independent, Non-Executive Director
ALEX RAMLIE
Non-Independent, Non-Executive Director
ARIEF SIDARTO
Non-Independent, Non-Executive Director
HAMISH TYRWHITT
Independent, Non-Executive Director
VYRIL VELLA
Independent, Non-Executive Director
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MACMAHON ANNUAL REPORT 2020
Mr Munro is an Honours graduate from the University
of New South Wales School of Civil Engineering and
a Fellow of the Institution of Engineers Australia. Mr
Munro was previously a Non-Executive Director of
then ASX listed Sedgman Ltd. During his career, he
served as a Director on a number of industry bodies,
international business councils and diversity groups.
Current listed directorships: None
Former directorships (last 3 years): Australian
Pacific Coal Ltd (resigned March 2020)
Committee memberships:
• Chair of the Tender Review Committee
• Member of the Audit and Risk Committee
• Member of the Nomination Committee
Interests in ordinary shares: 500,000
Interests in share rights: 312,117
ALEX RAMLIE
Non-Independent, Non-Executive Director
(AMNT Nominee) Appointed 8 August 2017
Qualifications: BA, MA (Economics)
ARIEF SIDARTO
Non-Independent, Non-Executive Director
(AMNT Nominee) Appointed 8 August 2017
Qualifications: MBA
Experience and expertise: Mr Sidarto brings his
management experience from financial, mining
and diversified business groups to the Board of
Macmahon. He currently serves as Director of PT
Amman Mineral Nusa Tenggara.
Previously, he was Managing Director and Member
of the Board of PT Rajawali Corpora (RC), the
holding company of a diversified business group
in palm oil plantation, gold and other mining
assets, transportation, infrastructure, hotels (St.
Regis, Four Seasons, Sheraton Hotels), property
and media. At RC, he was member of the Finance
and Investment Committee, the Ethics Committee
and the Audit and Risk Management Committee.
Prior to that, he was Managing Partner of Samuel
Group, a brokerage and investment banking firm
with holdings in plantation, mining and real estate,
and concurrently, Managing Director of Wellspring
Capital Partners, a private equity firm.
Experience and expertise: Mr Ramlie is currently
Director of Operations and Corporate Secretary
of PT Amman Mineral Nusa Tenggara (AMNT)
and played an instrumental role in the acquisition
of PT Newmont Nusa Tenggara (now PT Amman
Mineral Nusa Tenggara).
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 is listed on the IDX and 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 Non-Executive Director of LSE listed Bumi
PLC, Vice-President Commissioner/Vice-Chairman
of IDX listed PT Berau Coal Energy Tbk and its
subsidiary, PT Berau Coal, and held Commissioner
positions in IDX listed PT Bumi Resources Tbk,
PT Kaltim Prima Coal, and PT Arutmin Indonesia.
Mr Ramlie began his career as an investment
banker at Lazard Frères & Co.
Current listed directorships: None
His vast banking and financial 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 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’ Asia Commitments Committee.
He also holds directorships in Singapore entities
Slate Alt Pte Ltd and SM Investments Pte Ltd,
among others, and is a President of PT Medco
Daya Lestari.
Current listed directorships: None
Former directorships of Australian listed entities
(last 3 years): None
Committee memberships:
• Member of the Nomination Committee
Former Australian listed directorships
(last 3 years): None
Interests in ordinary shares: 661,713
Interests in share rights: 633,275
Committee memberships:
• Member of the Nomination Committee
Interests in ordinary shares: 661,713
Interests in share rights: 633,275
32
HAMISH TYRWHITT
Independent, Non-Executive Director
Appointed 1 October 2019
Qualifications: MIE Aust CPEng APEC Engineer
(Fellow), ATSE (fellow), HKIE
Experience and expertise: Mr Tyrwhitt has three
decades of senior leadership experience in the
global engineering and construction sectors.
Mr Tyrwhitt was the Group CEO of Dubai Financial
Market (DFM) listed construction firm Arabtec
Holdings from 2016 to 2019. In addition to his
position as CEO of Arabtec Holding, he also held
the position of Group CEO of Nasdaq Dubai-
listed, interior solutions firm Depa Group, from
2016 to 2019.
Mr Tyrwhitt has served on the Board as an
Executive Director of Depa Limited; as a Non-
Executive Director of Design Studio Group
Limited, a Singapore based subsidiary of Depa
Group listed on the Singapore Stock Exchange;
and as a Non-Executive Director of Jordan Wood
Industries PSC, a listed Jordanian company which
manufactures office and household furniture.
Prior to his roles at Depa Group and Arabtec
Holdings, he held the position of CEO at Asia
Resource Minerals Plc, an Indonesian coal mining
company listed in London.
Earlier in his career, Mr Tyrwhitt worked for more
than 25 years with Leighton Group (now CIMIC),
where he served as Group CEO from 2011 to
2014. From 2007 to 2011, Mr Tyrwhitt oversaw
Leighton’s Asian operations as the Managing
Director for Leighton Asia, from Leighton’s Asian
headquarters in Hong Kong.
Mr Tyrwhitt is a fellow of the Australian Academy
of Technological Sciences and Engineering, a fellow
of the Institution of Engineers Australia, a member
of the Hong Kong Institute of Engineers and a
member of the College of Civil Engineers, Australia.
Current listed directorships: None
Former Australian listed directorships
(last 3 years): None
Committee memberships:
• Member of the Nomination Committee
• Member of the Audit and Risk Committee
• Member of the Remuneration Committee
• Member of the Tender Review Committee
Interests in ordinary shares: None
Interests in share rights: 146,503
MACMAHON ANNUAL REPORT 2020
VYRIL VELLA
Independent, Non-Executive Director
Appointed 21 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 (now
CIMIC) he held various positions including General
Manager NSW, Director of Leighton Contractors
Pty Ltd (now CPB Contractors), 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. He also was Non-
Executive Director at Devine Limited.
Current listed directorships: None
Former Australian listed directorships
(last 3 years): None
Committee memberships:
• Chair of the Audit and Risk Committee
• Chair of the Remuneration Committee
• Member of the Nomination Committee
Interests in ordinary shares: 1,857,842
Interests in share rights: None
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MACMAHON ANNUAL REPORT 2020
EXECUTIVE
MANAGEMENT
TEAM
MICHAEL FINNEGAN
Managing Director and Chief Executive Officer
Mr Finnegan was appointed as Managing Director
in October 2019. He holds a Bachelor of Science
(Mining) with more than 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 holds a Bachelor of Science
(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 20 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
more than 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.
MICHAEL FOULDS
GBF Executive
Mr Foulds holds a Bachelor of Engineering
(Mining), First Class Mine Managers Certificates
in both Western Australia and the Republic of Fiji.
Mr Foulds has more than 35 years’ experience
in the underground mining industry and was a
major shareholder and managing director of GBF
prior to the acquisition of GBF by Macmahon.
MARK HATFIELD
General Manager, Plant & Maintenance Services
Mr Hatfield has more than 17 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.
ELIZABETH GRAY
General Manager, HSEQ
Ms Gray joined Macmahon as General Manager, HSEQ
in 2020 and holds a Graduate Diploma in Occupational
Health and Safety and a Bachelor of Nursing. Ms Gray
has more than 20 years’ experience in senior roles in
health, safety and environment. Prior to Macmahon,
Ms Gray held management positions with Peabody,
Sandvik, BHP and AngloCoal.
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 24 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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MACMAHON ANNUAL REPORT 2020
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MICHAEL FINNEGAN
Managing Director and
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
MICHAEL FOULDS
GBF Executive
MARK HATFIELD
General Manager, Plant &
Maintenance Services
ELIZABETH GRAY
General Manager,
HSEQ
PETER BINSTED
General Manager,
Asia
MACMAHON ANNUAL REPORT 2020
SUSTAINABILITY
REPORT
We believe that being
sensitive to the impact we
have on the environment and
communities in which we
operate is critical to creating
long-term sustainable value
for our shareholders.
As part of our commitment to sustainability,
we have recently appointed Elizabeth Gray to
the newly formed role of General Manager,
Health, Safety, Environment and Quality (HSEQ),
which is responsible for the health and wellbeing
of our people and managing our environmental
and social footprint.
We measure our sustainability with regards to:
• People
• Environment
• Community involvement
• Business conduct and ethics
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MACMAHON ANNUAL REPORT 2020
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MACMAHON ANNUAL REPORT 2020
ENVIRONMENT,
SOCIAL AND
GOVERNANCE
HIGHLIGHTS
Safety, Health and Wellbeing
New role of GM, HSEQ
Health, Safety, Environment
and Quality
People development
Increased apprentice and
graduate numbers
Employee engagement
Employee active engagement
score – 77%
COVID-19 Response
Workforce support and assistance
People turnover
9.7%
Diversity Policy
Indigenous – 4.5% (Aus)
Female – 11.5%
Code of Conduct Policy
Anti-bribery and
Corruption and Conflicts
Whistleblower
Policy Updated
Strong Minds, Strong Mines
2019 WAAMH Award for
‘Mentally Healthy Workplace’
Safety improvement
LTIFR – 0.12 (record low)
TRIFR – 3.77 (second lowest)
Governance
Board of Directors
7 board members,
4 independent including Chair
38
Social and Community Involvement
MACMAHON ANNUAL REPORT 2020
CME DETECT
Sponsor of COVID-19
project ($25k)
The Perkins Institute
Cancer 200: Ride for
Research (raised $235k)
Environment
Renewable energy
Solar panels installed at
head office expected to
produce 650,000kWh pa
QCoal Ca$hEdUp
Financial education in regional QLD
Carey Mining
‘Get Into Mining’ Indigenous program
Sponsorships
Regional and local sports clubs
Indigenous workforce
Jangga Aboriginal trainee
program developed with QCoal
Doorn-Djil Yoordaning
Macmahon subsidiary supporting
Indigenous regional employment
Rehabilitation
Completed 107 hectares
across multiple sites
GHG emissions
(tonnes per CO2-e)
Scope 1: 6,119 / Scope 2: 1,803
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MACMAHON ANNUAL REPORT 2020
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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MACMAHON ANNUAL REPORT 2020
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MACMAHON ANNUAL REPORT 2020
PEOPLE
People are essential to Macmahon’s long term success.
Our workforce at the end of June 2020 was 7,059 people,
up 27% due to ongoing organic growth and the addition
of 452 GBF employees.
Workforce by location
Employees Contractors Total Workforce
Australia
Southeast Asia
South Africa
Total
2,351
2,855
23
5,229
822
1,008
0
1,830
3,173
3,863
23
7,059
SAFETY, HEALTH AND WELLBEING
The safety and health of our employees,
contractors and stakeholders is of primary
importance and integral to the way we work. It is
a core vale of Macmahon. Our aim is to provide
an environment free of injury and physical and
mental illness.
Macmahon measures safety performance
using a range of benchmarks including Lost
Time Injury Frequency Rate (LTIFR) and Total
Recordable Injury Frequency Rate (TRIFR).
We also measure various leading indicators
and introduced a new Hazard Reporting
Frequency measure in the period, which has
led to a doubling in hazard reporting.
During the period safety performance measures
continued to improve notwithstanding a
significant increase in our workforce. Importantly,
we had no fatalities or permanent disabling
serious injuries.
Macmahon achieved a LTIFR of 0.12, which is well
below industry average, and represents a 66.7%
improvement from FY19 and is a new record low
for the Group.
Similarly, the TRIFR for the period was 3.77,
representing an improvement of 5.3% from FY19
and the Group’s second best TRIFR in its history.
The Board and management are targeting further
improvement in these performance measures
over the coming year.
Workforce by Business Unit
3%
31%
11%
55%
Surface & Civil
Underground
International
Corporate
Workforce over the last three years
7,059
1,830
5,229
5,050
1,137
3,913
5,572
1,500
4,072
FY18
FY19
FY20
Employees
Contractors
42
CASE STUDY
STRONG MINDS, STRONG MINES
Macmahon’s in house wellness program
combines physical and mental health
initiatives for our people and their families.
Additional online services have been
provided to keep everyone connected
including fitness classes and a monthly
concert series.
MACMAHON ANNUAL REPORT 2020
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Injury Frequency Rates and Workforce
7,059
5,572
3.98
3.77
0.36
FY19
0.12
FY20
5,050
6.28
0.46
FY18
Workforce
TRIFR
LTIFR
Lost time injuries (LTIs) are defined as injuries that cause
the injured person (employee or contractor) to be unfit to
perform any work duties for one whole day or shift, or more,
after the shift on which the injury occurred, and any injury
that results, directly or indirectly, in the death of the person.
The Lost Time Injury Frequency Rate (LTIFR) is the number
of LTIs per million hours worked. Total Recordable Injuries
(TRIs) are the number of LTIs + restricted work injuries
(RWIs) + medically treated injuries (MTIs) for employees
and contractors. Total Recordable Injury Frequency Rate
(TRIFR) is the number of TRIs per million hours worked.
Macmahon aims to create a positive safety culture
across the Group and the physical and mental
wellbeing of our people remains an important
focus. The success of our physical health and
mental health program, Strong Minds, Strong
Mines, was recognised in November 2019, when
we won the 2019 Mentally Healthy Workplace
award from the Western Australian Association
for Mental Health. This program has been of great
value during the COVID-19 pandemic, particularly
for our site based workforce and their families.
Macmahon is now offering this program as a
service to other participants of the mining sector.
AUDITING AND ISO CERTIFICATION
Macmahon’s Occupational Health and Safety
Management Systems are accredited to the
applicable Australian and International Standards
including ISO 9001:2015, ISO 14001:2015, BS
OHSAS 18001:2007 and AS/NZS 4801:2001.
We conduct quarterly risk reviews and regular
training. External audits are performed annually
by both our clients and an independent third
party for certification purposes.
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43
MACMAHON ANNUAL REPORT 2020
STRESS MANAGEMENT AND COVID-19
During the year we implemented a range of
measures to continue to deliver mining services
for our clients and at the same time to support
and protect the health and wellbeing of our
people in response to the COVID-19 pandemic.
These measures included:
Importantly, Macmahon’s turnover rate has
improved significantly over the period. The
following table sets out the Group’s turnover
rates over a 12 month rolling average basis.
Turnover
FY20
9.7%
9.7%
FY19
12.5%
12.4%
• Providing financial support to those directly
impacted and quarantine assistance
Staff turnover
Wages turnover
• Securing accommodation for more than 150
interstate fly-in-fly-out (FIFO) workers required
to temporarily relocate to the state in which
they work
• Identifying high-risk members of our workforce
and providing health plans managed by our
Group Doctor
• Focusing on fatigue management including
providing additional break times
PEOPLE DEVELOPMENT
Macmahon is committed to investing in the ongoing
development of our people and retaining core
organisational skills and knowledge. We continued
to invest in our apprenticeship, graduate and
leadership programs throughout the year. In FY20:
• Continuing access to our 24 hour 7 day a week
• Our apprenticeship numbers increased from
Employee Assistance Program
33 to 51
• Accommodating our Batu Hijau workforce
• Over 300 people participated in a range
on Lombok Island for a two-week quarantine
period before transferring to the mine site on
Sumbawa Island
of traineeship programs
• We hired 10 graduates
• 115 of our leaders participated in structured
• Requiring the use of face masks while on site at
leadership programs and coaching
Batu Hijau
The COVID-19 situation across world and in
the regions we operate remains dynamic. We
continue to closely monitor the situation and will
respond accordingly.
LABOUR RELATIONS AND
EMPLOYEE ENGAGEMENT
Macmahon believes in providing flexible working
conditions, leave and allowances to support
overall wellbeing and a positive work-life balance
for our people.
In Australia, at various sites we offer our FIFO
workforce the flexibility to choose their preferred
roster pattern for example either 2 weeks on /
1 week off or 2 weeks on / 2 weeks off. We also
provide our Perth head office employees free
access to on-site gym facilities and classes.
In Indonesia, we hold quarterly consultative
committee meetings with representatives of
the workforce to communicate and promote
positive labour relations. We also offer production
bonuses and health insurance for employees and
their family members.
Macmahon conducted its third consecutive annual
employee engagement survey during the year
to gain further insights on vision and strategy,
leadership, engagement and communication.
Our active engagement score was 77%, which
represents a slight improvement on the FY19 score.
We also remain committed to several entry level
development programs enabling newcomers to the
industry to build a career with Macmahon. We held
five assessment days during the year, and expanded
this approach to our underground operations.
Additionally, we expanded several training
initiatives including:
• Registered Training Organisation services
to include Underground Metalliferous
Mining, Certificate II in Air-conditioning and
implemented an Open Cut Examiner (OCE)
program at the Byerwen project
• Post-trade technical training program,
which is focused on developing trade skills
to match the range and technological
advancements of our equipment
Following the acquisition of GBF, we have
increased the number of employees and
continued to invest in the business, ensuring
a positive integration into the Group.
HUMAN RESOURCE SYSTEM
Over the year, Macmahon embarked on improving
our people processes by implementing the cloud-
based software, SuccessFactors. The first phase
was completed in February 2020, which resulted
in the standardisation of processes across the
Group. The second phase of the project will be
rolled out during FY21 and is designed to build on
our talent management capabilities including the
development of career pathways and online training.
44
MACMAHON ANNUAL REPORT 2020
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Macmahon continues to support improvements
in the industry’s gender ratio by actively
encouraging female applicants and has set a
target of 25% female appointments for entry level
programs. The Group produced a separate report
on its Gender Equality Indicators in accordance
with the Workplace Gender Equality Act 2012. A
copy of this report is available on our website.
In addition, Macmahon actively encourages the
employment of Indigenous Australians and we
continue to work with our clients in other areas to
provide opportunities for Indigenous participation
in our projects. In FY20:
• We had a 28% increase in Indigenous
employees compared to last year
• 24 individuals from the Jangga people, the
local Indigenous group from the Queensland
Central Highlands completed our Jangga Job
Readiness Program and commenced work at
the Byerwen project
• Eight Indigenous employees participated
in a traineeship at Tropicana
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CASE STUDY
JANGGA INDIGENOUS
TRAINEE PROGRAM
Macmahon provides a training and
development program at the Byerwen
coking coal mine in Queensland for the
local traditional land owners (the Jangga
people). Formal traineeships result in a
Certificate III in Surface Extraction and a
career in mining with Macmahon.
WORKPLACE DIVERSITY
Macmahon recognises the benefits of having a
diverse workforce and seeks to create an inclusive
workplace environment where the diverse
experiences, perspectives and backgrounds of
people are valued and utilised.
The Group’s Diversity Policy is available on the
Macmahon website, and requires the Board to set
and report against measurable diversity targets. The
following table outlines our measurable objectives in
relation to diversity and the progress made towards
achieving those objectives at 30 June 2020:
Diversity Targets
FY20
Target
FY20
Actual
FY21
Target
Indigenous Australian2
Female Directors
5.5%
30%
4.6%
14%
5.5%
30%
Percentage of females in
senior management positions1,2
20%
12%
20%
Percentage of female
employees across the
whole organisation
15%
11.5%
15%
1
For the purpose of this target, senior executive
positions are defined as those with senior managerial
responsibilities in either corporate or operational areas,
and includes project managers
2 Australia only
MACMAHON ANNUAL REPORT 2020
ENVIRONMENT
Macmahon’s Environmental Policy is to minimise
the adverse impact on the environment as
a result of our business activities.
ENVIRONMENTAL STRATEGY
The Group recognises the importance of integrating
environmental management into how we do
business. Macmahon’s ISO AS/NZS 14001 certified
Environmental Management System provides the
framework to enhance the Group’s environmental
performance. We continued to implement
environmental management strategies and plans
to ensure compliance with all legal requirements
regarding important issues such as biodiversity,
waste, hazardous substances, water, noise and
cultural heritage management. We are pleased
to report that there were no major environmental
incidents, prosecutions or infringements.
Increasing our market share in rehabilitation work
is a key part of our business strategy and there are
a number of rehabilitation projects in our tender
pipeline. This work typically includes completing
earthworks and revegetation on land disturbed
by mining activities to ensure it is stable, safe and
suitable for post-closure use. During the year, we
rehabilitated a total of 107 hectares for our clients.
CLIMATE CHANGE
Macmahon’s Climate Change Position Statement,
which is available on our website, acknowledges
that climate change poses a threat to our
environment. Macmahon had minimal exposure to
thermal coal mining over the year and continues
to mine commodities such as copper which will
support the transition to a lower carbon economy.
The Group’s primary source of direct greenhouse
gas (GHG) emissions is through the use of fuel in
our mobile mining equipment. Fuel consumption
will vary depending on factors such as the
hardness of the rock being extracted and the
depth of the mine.
Macmahon measures and reports its GHG
emissions yearly via an independent consultant,
in accordance with the National Greenhouse
and Energy Reporting Scheme (NGERS 2007).
During FY20, our scope 1 (direct) GHG emissions
was 6,119 tonnes per CO2-e, while our scope 2
(indirect) GHG emissions was 1,803 tonnes per
CO2-e. The increase in scope 1 GHG emissions
is primarily due to the acquisition of GBF Group
which predominantly sources its own fuel.
GHG Emissions
Total Tonnes
CO2-e
FY20
FY19
FY18
FY17
FY16
Scope 1
Scope 2
6,119
1,803
795
1,761
569
156
127
1,538
1,583
1,465
To reduce our GHG emissions, we have installed
solar panels at our head office which are expected
to produce 650,000kWh of electricity per year
and decrease our consumption from the grid.
During FY21, we will engage an environmental
specialist to target further reductions in our
GHG emissions, strengthen our environmental
management systems and oversee other measures
to improve our environmental performance.
WASTE AND RECYCLING
Macmahon remains committed to ensuring that
all waste materials are disposed of in an approved
and environmentally responsible manner. This
includes materials such as tyres, oils and lubricants
and office waste. We often repair tyres to extend
life but once they have reached a worn out
state, they are disposed through Environmental
Protection Authority approved channels and the
use of certified waste disposal companies.
46
MACMAHON ANNUAL REPORT 2020
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CASE STUDY
ENVIRONMENTAL SAMPLING
Macmahon is committed to reducing the
impacts on water quality associated with
its mining operations. Regular sampling
and reporting takes place at the Sejorong
River in Sumbawa, near Batu Hijau’s
copper-gold mine in Indonesia.
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MACMAHON ANNUAL REPORT 2020
In October 2019, Team
Macmahon’s 49 riders
participated in the Cancer
200: Ride for Research to raise
funds for The Harry Perkins
Institute of Medical Research.
48
MACMAHON ANNUAL REPORT 2020
COMMUNITY
INVOLVEMENT
Macmahon’s approach to
community relations is to
treat our host communities
with respect, to be sensitive
regarding the impacts of
our mining operations,
and to deliver tangible
and ongoing benefits.
During the year, Macmahon continued its
partnership with The Harry Perkins Institute of
Medical Research (the Institute), participating in
its annual ride from Perth to Mandurah in Western
Australia. Our team of riders has increased each
year as has the amount of funds raised. In October
2019, Macmahon participated with 49 riders,
including people from our Indonesian operations,
and raised $234,729. The ride provides an
opportunity for our people to participate in the
important and rewarding act of charitable giving.
Money raised is used by the Institute to continue
its efforts to find cures for hard to treat cancers.
Macmahon understands that sport plays an
important role in rural, regional and remote
Australia by bringing communities together and
supporting mental and physical health. During
the year, Macmahon proudly sponsored the
Amateur Kambalda Football Team who play in the
Goldfields Football League in Western Australia.
In addition, Macmahon has partnered with the
Perth Football Club to enable school children in
Western Australia to participate in a program to
help promote healthy lifestyle choices leading to
happier, healthier and more motivated students.
Macmahon is also a supporter of the QCoal
Foundation and has a signed a three year
commitment with the Foundation’s Ca$hED Up
program. This program is designed to improve
the financial knowledge of young Australians, with
a particular focus on those living in regional and
remote communities in Queensland.
As part of our COVID-19 response we have
provided protective masks and industrial cleaning
products to the Institute and also donated laptop
computers to various charitable organisations to
enable their employees to work from home.
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49
MACMAHON ANNUAL REPORT 2020
BUSINESS
CONDUCT
AND ETHICS
HUMAN RIGHTS
Macmahon respects internationally recognised
human rights principles. We support the
overarching proposition that all businesses have
a role to play in eliminating modern slavery in
our operations and supply chains. Our Human
Rights Policy includes a commitment that
our employees, contractors and suppliers are
entitled to work in an environment and under
conditions that respect their rights and dignity.
We also have human rights commitments in our
Code of Conduct and policies on issues such as
employment and diversity.
ETHICAL SOURCING
Macmahon is undertaking due diligence activities
to identify, address, mitigate and prevent human
rights impacts from our operations and supply
chain through our procurement practices
and contractual arrangements. This includes
conducting supplier questionnaires and training
employees in charge of procurement. We will
publish a Modern Slavery Statement in FY21 in
accordance with the Modern Slavery Act 2018.
ANTI-BRIBERY AND CORRUPTION
Integrity is one of Macmahon’s five core
values and we expect all employees to
act lawfully, ethically and responsibly. Our
expectations on anti-bribery and corruption
are detailed in our Code of Conduct
which is available on our website.
Macmahon’s approach to bribery and corruption
is supported by our Whistleblower Policy. We
have a number of channels for making a report,
including a whistleblower hotline for employees to
call if they feel unable to raise actual or suspected
unlawful, unethical or irresponsible behaviour.
Where potential issues are reported, we have
protocols in place where a Board-level committee
will be confidentially alerted to these concerns.
All employees are required to complete training
on our Code of Conduct in their induction
program and annually thereafter.
There were no instances of fines or prosecutions
for non-compliance with applicable Australian
and international laws during the year.
50
MACMAHON ANNUAL REPORT 2020
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51
MACMAHON ANNUAL REPORT 2020
DIRECTORS’
REPORT
The Directors present their report, together with
the financial statements, on the consolidated entity
(referred to hereafter as “the Group”) consisting of
Macmahon Holdings Limited (referred to hereafter
as the “Parent” or “the Company”) and the entities
it controlled at the end of, or during, the year ended
30 June 2020.
52
DIRECTORS’
REPORT
MACMAHON ANNUAL REPORT 2020
Particulars of their qualifications, experience,
special responsibilities and any directorships of
other listed Australian companies held within the
last three years are set out in this Annual Report
under the “Our Board” heading on pages 30 to 33
and form part of this report.
DIRECTORS
The following persons were Directors of
Macmahon Holdings Limited during the financial
year and up to the date of this report, unless
otherwise stated:
• Eva Skira, 66 (Chair)
• Michael Finnegan, 45
(Chief Executive Officer and appointed
Managing Director since October 2019)
• Vyril Vella, 71
• Hamish Tyrwhitt, 57 (appointed October 2019)
• Bruce Munro, 67 (appointed October 2019)
• Alexander Ramlie, 47
• Arief Widyawan Sidarto, 51
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 2020, and the number of meetings attended by each Director were:
Regular
Special (A)
Audit and Risk
Committee
Remuneration
and
Nomination
Committee1
Remuneration
Committee1
Nomination
Committee1
Other
Committee (B)
Attendance
Eligible Attended Eligible Attended Eligible Attended Eligible Attended Eligible Attended Eligible Attended Eligible Attended
E Skira
M J Finnegan5
V A Vella
A Ramlie4
A W Sidarto
H G Tyrwhitt2
B A Munro3
8
6
8
8
8
6
6
8
6
8
8
8
6
6
9
5
9
9
9
5
5
9
5
8
7
7
5
5
4
*
4
1
*
3
3
4
*
4
1
*
3
3
1
*
1
1
*
*
*
1
*
1
1
*
*
*
2
*
2
*
*
2
*
2
*
2
*
*
2
*
1
*
1
1
1
1
1
1
*
1
1
1
1
1
3
2
2
*
*
1
1
3
2
2
*
*
1
1
A
B
*
1
2
3
4
5
Special Board meetings, unscheduled meetings called at short notice
Other committees include sub-committees of the Board
Not a member of the relevant committee
From 12 November 2019, the responsibilities of the Remuneration and Nomination Committee were split between a separate Nomination
Committee and a separate Remuneration Committee each operating under their own charter approved by the Board
Mr Tyrwhitt was appointed as a Director of the Company on 1 October 2019 and a member of the Audit and Risk Committee,
Remuneration Committee and the Nomination Committee on 12 November 2019
Mr Munro was appointed as a Director of the Company on 1 October 2019 and a member of the Audit and Risk Committee and the
Nomination Committee on 12 November 2019
Mr Ramlie retired as a member of the Audit and Risk Committee and the Remuneration and Nomination Committee
on 12 November 2019
Mr Finnegan was appointed as a Director of the Company on 1 October 2019
53
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MACMAHON ANNUAL REPORT 2020
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 and recently 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 Group 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 Group during the
financial year under review.
DIVIDENDS
Dividends paid or declared by the Company to
members since the end of the previous financial
year were:
Declared and paid during FY20
Interim 2020 ordinary
Final 2019 ordinary
Cents
0.25
0.50
Date of
payment
$
5,237,996
2 Apr 20
10,474,974
29 Oct 19
Declared after year end
After the balance sheet date, the following
dividends were proposed by the Directors:
Cents
$
Date of
payment
Final 2020 ordinary
0.35
7,350,514
29 Oct 20
As the final dividend was declared after the
30 June 2020, the financial effect of these
dividends has not been brought to account in the
consolidated financial statements for the year
ended 30 June 2020.
REVIEW OF OPERATIONS
For the year ended 30 June 2020, the Group
reported increases in revenue, EBIT and NPAT.
This was driven by organic growth, including
the commencement of the Boston Shaker
Underground Project in May 2019 and increases
in production volumes at the Batu Hijau Mine. The
increases were also driven by the inclusion of the
GBF Group from August 2019.
A review of and information about the operations
of the Group during FY20 is contained on pages
14 to 25, which form part of this Directors’ Report.
SIGNIFICANT CHANGES
IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the
Group during the financial year were as follows:
Acquisition of 100% subsidiary - GBF Group
On 2 August 2019, the Group acquired 100% of
GF Holdings (WA) Pty Ltd and its subsidiaries
(GBF), a Perth based underground contractor.
The acquisition of GBF is consistent with
Macmahon’s strategy of growing capability and
scale in its underground division to capitalise on
the significant level of underground opportunities.
For details of the acquisition please refer to note
32 of the consolidated financial statements and
ASX announcements dated 18 June 2019 and 2
August 2019.
MATTERS SUBSEQUENT TO THE
END OF THE FINANCIAL YEAR
Subsequent to 30 June 2020, the Board approved
a final dividend on ordinary shares of 0.35 cents
per ordinary share in respect of FY20.
54
MACMAHON ANNUAL REPORT 2020
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS OF OPERATIONS
Likely developments in the operations of the
Group in future financial years and the expected
results of those operations have been included
generally within the annual report.
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.
ENVIRONMENTAL REGULATION
The Group 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 58 to 68 and forms part of this Directors’
report.
INDEMNITY AND INSURANCE OF OFFICERS
The Company has indemnified the Directors and
Executives of the Company for costs incurred, in
their capacity as a Director or Executive, for which
they may be held personally liable, except where
there is a lack of good faith.
For the year ended 30 June 2020, 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 FY20, 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
Company, or to intervene in any proceedings
to which the Company is a party for the
purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
NON-AUDIT SERVICES
Details of the amounts paid or payable to
the auditor for non-audit services provided
during the financial year by the auditor are
outlined in note 29 to the consolidated
financial statements.
The Directors are of the opinion that the services as
disclosed in note 29 to the consolidated 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, acting as advocate or
jointly sharing economic risks and rewards.
ROUNDING OF AMOUNTS
The Group 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 56.
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
Chair
26 August 2020
Perth
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MACMAHON ANNUAL REPORT 2020
56
Liability limited by a scheme approved under Professional Standards Legislation. 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. 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 2020 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 R Gambitta Partner Perth 26 August 2020 MACMAHON ANNUAL REPORT 2020
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57
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
REMUNERATION
REPORT
This Remuneration Report for the year ended 30 June 2020
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 Group’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
• a long term incentive opportunity, or the opportunity to earn Macmahon shares dependent
on performance over multiple years
The targeted remuneration mix for executive KMP for the year ended 30 June 2020 is outlined below:
Michael Finnegan
Chief Executive Officer and Managing Director
Giles Everist
Chief Financial Officer
Greg Gettingby
Chief Development Officer
At risk
Fixed
remuneration
Short term
incentive
Long term
incentive
33%
43%
42%
33%
21%
21%
34%
36%
37%
The percentage of the long-term incentive in this table reflects the accounting standard value as noted in the remuneration
table and includes FY20 expense for performance rights granted in previous years.
1.2 Fixed remuneration
The fixed remuneration paid to executive KMP is based on the size and scope of their role, knowledge
and experience, market benchmarks for that role, and to some extent the Group’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 in late FY19 using
industry surveys for executive KMP and a report for the CEO from Mercer Consulting (Australia) Pty
Ltd (Mercer). Based on the results of the market benchmarking review, a 3% base salary increase was
provided to executive KMP during the year.
58
58
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
1.3 FY20 Short term incentive (STI)
During FY20, the STI opportunity provided to executive KMP had the following features:
Purpose of
the plan
Incentivise employees to achieve the Group’s annual targets for EBIT(A) and ROE. These targets were
derived from the Company’s initial publicly stated EBIT(A) guidance range of $80 million to $90 million,
which was provided with the release of the FY19 result. The STI was structured to commence upon
achievement of the mid-point of the Company’s publicly stated EBIT(A) guidance and ROE targets, and
to increase in line with any additional EBIT(A) or ROE, up to a cap.
Reasons for using
these targets
EBIT(A) and ROE were chosen as the targets for the STI to simplify administration of the plan, and to
focus executive KMP on two key metrics used by shareholders of the Company.
Weighting of
performance
targets
Performance
period
Any STI payment is to be calculated 75% based on EBIT(A) performance, and 25% based on ROE.
Performance against the STI targets relate to the period from 1 July 2019 to 30 June 2020.
Form of payment Cash
Executive
claw back
The after-tax STI payment to executive KMP may be claimed back by the Company at any time up to two
years after payment in the event of:
(a) a restatement of the Group’s financial results (other than a restatement caused by a change in
applicable accounting standards or interpretations), the result of which is that any STI awarded to the
KMP would have been a lower amount had it been calculated based on such restated results; or,
(b) fraudulent, dishonest or other improper conduct of the executive KMP
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 awards
The table below shows the potential bonus awards, as a percentage of total fixed remuneration (TFR),
available to the executive KMPs under the FY20 STI Plan.
Threshold
(lower end of
initial guidance range)
0% of TFR
0% of TFR
0% of TFR
M Finnegan
G Everist
G Gettingby
Performance level
Target
(high end of
initial guidance range)
100% of TFR
50% of TFR
50% of TFR
Stretch
(capped at $95 million EBIT)
150% of TFR
75% of TFR
75% of TFR
1.4 Changes to the STI opportunity in FY21
For FY21, the Board has included two further targets related to safety and order book in the STI Plan.
These targets are in addition to the previous EBIT and ROE targets.
The Board will have the right to modify, reduce or remove the STI opportunity at any time.
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59
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
1.5 Long term incentive (LTI)
At the discretion of the Board, the Company provides a LTI opportunity to executive KMP through
the grant of performance rights. These performance rights can vest into fully paid ordinary shares
in the Company, for no consideration, subject to meeting a performance condition and a continued
employment condition. The purpose of this LTI opportunity is to incentivise executive KMP to deliver
sustained increases in shareholder wealth over the long term.
Performance condition
The vesting of performance rights is dependent on the Company’s absolute level of compound annual
growth rate (CAGR) 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 Group performance that is simple to communicate to employees and for them to
continuously monitor; (b) it is an important metric for shareholders 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 closely match the actual returns received by shareholders 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 on issue as of 30 June 2020, the portion of each grant of rights eligible
to vest at various levels of increase in CAGR TSR is:
Company’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, 22,627,351 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 an
employee of the Group 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 (at its absolute
discretion) determine that all or a portion of the performance rights 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.
60
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
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.
Performance rights granted in FY20
No performance rights were granted to executive KMP during FY20. However, the Company granted
performance rights to other employees of the Group during FY20. These performance rights have a
three-year performance period and continued employment requirement. Details of all performance
rights issued by the Company are set out in note 28 to the consolidated 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, these measures are not all consistent with the
measures used in determining the variable amounts of remuneration to be awarded to executive
KMP. Consequently, there may not always be a direct correlation between statutory key performance
measures and the variable remuneration awarded to executive KMP.
Statutory performance indicators
Profit / (loss) after income tax expense
from continuing operations ($m)
Reported basic earnings per share
from continuing operations (EPS) (cents)
Dividends declared (cents per share)
Dividends paid (cents per share)
Share price at 30 June (cents)
Total Shareholder Return (TSR) (%)
FY20
FY19
FY18
FY17
FY16
64.9
3.10
0.60
0.751
25.5
41.9
46.1
2.19
0.50
-
18.5
(14.0)
31.3
1.53
-
-
21.5
30.3
(5.5)
10.8
(0.47)
0.87
-
-
16.5
87.5
-
-
8.8
33.3
1
0.75 cents per share includes the final dividend for 2019 of 0.50 cents per share and the interim dividend for 2020 of 0.25
cents per share
The FY20 STI Plan was designed to incentivise the achievement of a significant growth of earnings
in line with the Group’s initial FY20 EBIT guidance of $80 to 90 million, while maintaining ROE. The
Company’s LTI Plans are intended to drive sustainable growth in TSR, which will benefit shareholders
through increases in the price of their ordinary shares and the payment of dividends.
1.7 Employment contracts
The Company’s executive KMP are engaged under employment contracts that are ongoing and have
no fixed termination date. However, these contracts may be terminated by notice from either party.
Key details of the employment contracts of the current executive KMP are set out below:
Annual fixed
remuneration,
including
superannuation
Other
remuneration
Notice periods to
terminate
M Finnegan
$643,750
G Everist
$515,000
G Gettingby
$463,500
Short term and
long term incentive
opportunities as
described above.
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, including superannuation.
Any unvested performance rights held by
the executive KMP lapses upon termination
or resignation, unless the Board in its
absolute discretion determines otherwise.
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61
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
NON-EXECUTIVE DIRECTOR REMUNERATION
2
The structure of the remuneration provided to Non-Executive Directors is distinct from that applicable
to executive KMP. Non-Executive Directors only receive fixed remuneration which is not linked to the
financial performance of the Group.
The remuneration provided to Non-Executive Directors in FY20 is set out below:
Eva Skira
Alexander Ramlie
Arief Sidarto
Vyril Vella
Bruce Munro
Hamish Tyrwhitt
Cash
remuneration1
$
Salary
sacrifice for
share rights
$
Total
$
152,048
40,685
192,733
18,676
18,676
126,667
91,324
110,000
91,324
110,000
-
126,667
62,032
27,968
90,000
71,872
13,128
85,000
1 Cash remuneration includes salary, committee fees and superannuation
The maximum aggregate amount that can be paid to Non-Executive Directors is $1,100,000 per annum,
including superannuation (the Fee Pool). There has been no increase to 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 FY19,
pursuant to which Non-Executive Directors may elect to sacrifice all or a portion 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 the Company as a
Non-Executive Director. Excluding Directors appointed during the year, share rights were granted in two
tranches on 2 August 2019 (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). For Directors appointed during the year,
share rights were granted on 16 December 2019 (vesting on the day after release of Macmahon’s full year
results). The share rights may 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 Australian Accounting Standards, as the share rights provide an option over equity,
they have been fair valued as of their grant dates. Details of the share rights are provided in section 6.
62
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
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 Committee (the
Committee), external consultants and internal advice. The Committee is responsible for the overview,
and recommendation to the Board, of remuneration arrangements for Non-Executive Directors and
executive KMP. The CEO and Managing Director, in consultation with the Board, sets remuneration
arrangements for other executive KMP. 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 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 executive
KMP to whom it relates.
The protocols for any external consultant providing remuneration recommendations prohibit them
from providing advice or recommendations to executive KMP or Non-Executive 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.
In late FY19, the Company engaged Mercer to provide benchmarking information about market
remuneration levels for the CEO 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
FY20 remuneration review process.
The Board is satisfied that the remuneration benchmarking data provided by Mercer was free from
undue influence by employees of Macmahon.
In November 2019, the Remuneration and Nomination Committee was separated into a Remuneration
Committee and a Nomination Committee, each operating under their own Board approved charter.
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63
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
4 VALUE PROVIDED TO KMP
4.1 Statutory remuneration for the year ended 30 June 2020
Details of the nature and value of each major element of remuneration provided to KMP of the Company
during FY20 are set out in the table below. In this table, the value of share based payments has been
calculated in accordance with Australian Accounting Standards.
Short-term
Committee
fees
One off
discretionary
payments
Cash
bonus /
STI
$
Non-
monetary
benefits
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
short-
term
$
176,012
105,023
100,457
91,324
100,457
91,324
115,677
33,486
82,192
-
77,626
-
652,420
321,157
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Directors
Non-Executive
E Skira
Chair
A Ramlie
A Sidarto
V Vella
B Munro1
H Tyrwhitt2
Total compensation
for Non-Executive
Directors8
Executives
M Finnegan
Chief Executive Officer
and Managing Director3
G Everist
Chief Financial Officer
G Gettingby
Chief Development
Officer
Total compensation
executive personnel
Total compensation
for Directors and
Executives8
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Salary
$
176,012
$
-
91,324
13,699
100,457
91,324
100,457
91,324
92,846
33,486
77,055
-
77,626
-
624,452
307,458
Salary
$
622,690
604,389
490,000
463,854
438,500
425,000
1,551,190
1,493,243
-
-
-
-
22,831
-
5,137
-
-
-
27,968
13,699
Committee
fees
$
-
-
-
-
-
-
-
Short-term
One off
discretionary
payments
$
STI
bonus4
$
Non-
monetary
benefits
$
Total
short-
term
$
735,714
1,021
1,359,425
Post
Share-based
employment
payment7
Other
long-term
benefits5
$
Super-
annuation
$
2,960
21,060
664,169
Options
Performance
performance
options and
Total
and rights
related
related
rights
compensation
Compensation
Non-
consisting of
106,000
132,550
1,142
844,081
20,611
725,587
294,286
53,020
40,000
264,857
60,609
47,718
2,255
2,506
793
890
786,541
519,380
744,150
534,217
40,000
1,294,857
4,069
2,890,116
166,609
233,288
4,538
1,897,678
2,175,642
27,968
40,000
1,294,857
4,069
3,542,536
1,800,701
13,699
166,609
233,288
4,538
2,218,835
133,040
1,516,383
108,052
1,621,370
Post
Share-based
employment
payment6
Other
long-term
benefits
$
Super-
annuation
$
Options
Performance
and rights
related
%
Compensation
Non-
consisting of
Performance
options and
Related
Total
compensation
rights
%
16,721
9,977
9,543
8,676
9,543
8,676
10,989
3,181
7,808
7,374
61,980
30,510
25,000
31,931
25,000
25,000
71,060
77,542
$
752
1,009
1,820
3,509
1,820
3,509
-
-
-
366
172
4,930
8,028
$
433,321
433,321
413,963
454,434
1,511,453
1,613,342
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,380
6,812
12,089
19,121
53,827
28,893
91,296
28,893
91,296
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
68
53
58
49
60
47
63
50
54
46
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
%
32
47
42
51
40
53
37
50
46
54
$
193,485
116,009
111,820
103,509
111,820
103,509
126,667
36,667
90,366
85,172
-
-
719,330
359,694
$
2,047,614
1,615,659
1,251,674
996,721
1,202,234
1,067,478
4,501,522
3,679,858
5,220,852
4,039,552
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
32
45
35
43
-
-
34
44
29
40
1
2
3
4
5
6
7
Mr Munro was appointed as a Non-Executive Director in October 2019
Mr Tyrwhitt was appointed as a Non-Executive Director in October 2019
Mr Finnegan was appointed as Managing Director in October 2019
2019 STI includes 25% for shares purchased on market held in escrow until 1 July 2021
Other long term benefits relates to the movement in leave liabilities for each Executive
Represents the the fair value at grant date of the share rights issued for salary sacrificed over the vesting period of the award
Represents the statutory remuneration expense based on the fair value at grant date of the performance rights over the
vesting period of the award
8 Total compensation for 2019 excludes KMP who resigned in June 2019
64
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Non-
Performance
Related
Compensation
consisting of
options and
rights
Total
compensation
Post
employment
Share-based
payment6
Options
and rights
Performance
related
Other
long-term
benefits
$
Super-
annuation
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,721
9,977
9,543
8,676
9,543
8,676
10,989
3,181
7,808
7,374
61,980
30,510
$
752
1,009
1,820
3,509
1,820
3,509
-
-
366
-
172
4,930
8,028
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
%
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
193,485
116,009
111,820
103,509
111,820
103,509
126,667
36,667
90,366
-
85,172
-
719,330
359,694
Directors
Non-Executive
E Skira
Chair
A Ramlie
A Sidarto
V Vella
B Munro1
H Tyrwhitt2
Total compensation
for Non-Executive
Directors8
Executives
M Finnegan
Chief Executive Officer
G Everist
Chief Financial Officer
G Gettingby
Chief Development
Officer
Total compensation
executive personnel
Total compensation
for Directors and
Executives8
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Year
2020
2020
2019
2020
2019
2020
2019
2020
2019
Salary
$
176,012
100,457
91,324
100,457
91,324
92,846
33,486
77,055
77,626
-
-
624,452
307,458
Salary
$
622,690
490,000
463,854
438,500
425,000
1,551,190
1,493,243
22,831
5,137
27,968
13,699
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Short-term
Committee
discretionary
bonus /
monetary
One off
Cash
Non-
fees
payments
STI
$
benefits
$
91,324
13,699
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
short-
term
$
176,012
105,023
100,457
91,324
100,457
91,324
115,677
33,486
82,192
77,626
-
-
652,420
321,157
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Short-term
One off
Non-
Committee
discretionary
STI
monetary
fees
$
payments
bonus4
benefits
$
$
$
Total
short-
term
$
294,286
53,020
40,000
264,857
60,609
47,718
2,255
2,506
793
890
786,541
519,380
744,150
534,217
40,000
1,294,857
4,069
2,890,116
166,609
233,288
4,538
1,897,678
2,175,642
27,968
40,000
1,294,857
4,069
3,542,536
1,800,701
13,699
166,609
233,288
4,538
2,218,835
and Managing Director3
2019
604,389
106,000
132,550
1,142
844,081
Post
employment
Share-based
payment7
Other
long-term
benefits5
$
Super-
annuation
$
$
Options
and rights
Performance
related
Non-
performance
related
Compensation
consisting of
options and
rights
Total
compensation
735,714
1,021
1,359,425
2,960
21,060
664,169
25,380
6,812
12,089
19,121
53,827
28,893
91,296
28,893
91,296
20,611
725,587
25,000
31,931
25,000
25,000
71,060
77,542
433,321
433,321
413,963
454,434
1,511,453
1,613,342
133,040
1,516,383
108,052
1,621,370
%
68
53
58
49
60
47
63
50
54
46
%
32
47
42
51
40
53
37
50
46
54
%
32
45
35
43
-
-
34
44
29
40
$
2,047,614
1,615,659
1,251,674
996,721
1,202,234
1,067,478
4,501,522
3,679,858
5,220,852
4,039,552
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y
65
65
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
4.2 Voluntary information – Remuneration received by executive KMP for the year ended 30 June 2020
The amounts disclosed below reflect the benefits actually received by each KMP during the reporting period:
Fixed
remuneration1
$
One-off
discretionary
bonus
$
Awarded
STI (cash)2
$
Awarded
STI (shares)2
$
Vested
LTI3
$
Realised
remuneration
Received
$
M Finnegan
G Everist
643,750
515,000
-
-
G Gettingby
463,500
40,000
99,633
39,853
35,868
33,211
479,063
1,255,657
13,284
11,956
-
568,137
315,670
866,994
Total
1,622,250
40,000
175,354
58,451
794,733
2,690,788
1
2
3
Fixed remuneration includes base salaries received and payments made to superannuation funds
The FY19 STI payment was settled in FY20 and represents 75% cash paid and 25% shares purchased on market during
the current financial year. The FY20 STI is not payable in FY20
On 1 July 2019, the performance rights granted to executive KMP on 1 July 2016 vested in full. The value of this LTI,
included above, has been calculated based on the Company’s share price on 1 July 2019
The amounts disclosed above are not the same as remuneration expensed in relation to each KMP in
accordance with Australian Accounting Standards (see Table 4.1).
Nevertheless, the Directors believe that remuneration received is relevant information
for the following reasons:
• the statutory remuneration expense for performance rights is based on fair value determined at
grant date for all unvested rights and does not reflect the fair value of the rights vested and actually
received by the KMPs during the year
• the statutory remuneration shows benefits before they are actually received by the KMPs (deferral
and claw back of STI payments)
• 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 FY20
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to
executive KMP are as follows:
M Finnegan
G Everist
G Gettingby
Included in statutory
remuneration
$
Vested in year
%
735,714
114.28%
294,286
114.28%
264,857
114.28%
The actual award of 114.28% is based on the FY20 EBIT(A) achieved being above the target hurdle as
referred to in section 1.3.
No amounts were forfeited during the year.
66
66
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
EQUITY INSTRUMENTS
6
6.1 Rights over equity instruments granted as compensation
Non-Executive Director share rights
Details of share rights over ordinary shares in the Company granted to Non-Executive Directors during
FY20 as part of the NED SSP were as follows:
E Skira
A Ramlie
A Sidarto
B Munro1
H Tyrwhitt1
Salary
sacrificed
$
Number
of rights
granted2
Fair value at
grant date3
$
Vesting date
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
Tranche 1
Tranche 2
20,342
20,343
45,662
45,662
45,662
45,662
–
27,986
–
13,128
102,792
102,793
230,736
230,736
230,736
230,736
–
97,722
–
45,689
206
441
461
461
461
461
–
366
–
172
Feb 20
Aug 20
Feb 20
Aug 20
Feb 20
Aug 20
Feb 20
Aug 20
Feb 20
Aug 20
1
2
3
Mr Munro and Mr Tyrwhitt were appointed as Non-Executive Directors on 1 October 2019
Share rights are issued under the NED SSP and are not in addition to their fixed remuneration
In accordance with Australian Accounting Standards, as the share rights granted includes an “option” over ordinary
shares, the option element is required to be fair valued at grant date
Executive KMP performance rights and ordinary shares
During FY20, no performance rights were granted to executive KMP. However, 25% of the FY19 STI
payment to executive KMP was deferred into shares purchased on-market as follows:
M Finnegan
G Everist
G Gettingby
These shares are subject to voluntary escrow until 1 July 2021.
25% of STI value
$
Number of
shares
33,211
13,284
11,956
134,511
53,563
48,153
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67
67
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
6.2 Details of equity rights affecting current and future remuneration
Details of the vesting profiles of the performance rights over ordinary shares in the Company held by
executive KMP during FY20 are as follows:
Grant date
Number
granted
Number
vested in
FY20
Number
forfeited in
FY20
M Finnegan
12 Aug 16
2,456,731
(2,456,731)
18 Aug 17
3,333,333
1 Jul 18
19,394,872
G Everist
2 Mar 18
1,070,093
1 Jul 18
12,929,915
–
–
–
–
G Gettingby
12 Aug 16
18 Aug 17
1,618,822
(1,618,822)
1,205,189
1 Jul 18
12,929,915
–
–
–
–
–
–
–
–
–
–
Held at 30
June 2020
–
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)
–
1,205,189
FY20
FY21
12,929,915
FY21–FY24 (25% per year)
6.3 Analysis of movements in performance rights
The movement during the reporting period, by number of performance rights over ordinary shares in the
Company held, directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:
M Finnegan
G Everist
G Gettingby
Held at 1 July
2019
Granted as
compensation
Vested during
the year
Held at 30
June 2020
25,184,936
14,000,008
15,753,926
-
-
-
(2,456,731)
22,728,205
-
14,000,008
(1,618,822)
14,135,104
6.4 Movements in ordinary shareholdings
The movement during FY20 in the number of ordinary shares in the Company held directly, indirectly or
beneficially, by Non-Executive Directors and executive KMP, including their related parties, is as follows:
Directors
E Skira
A Sidarto
A Ramlie
V Vella
B Munro1
H Tyrwhitt1
Executive KMP
M Finnegan
G Everist
G Gettingby
Total
Held at
1 July
2019
61,953
215,489
215,489
1,857,842
-
-
554,100
50,000
730,817
Deferral of
STI2
Other3
-
-
-
-
-
-
134,511
53,563
48,153
-
-
-
-
500,000
-
-
(50,000)
Vested
rights4
164,745
446,224
446,224
-
-
-
2,456,731
-
Held at
30 June
2020
226,698
661,713
661,713
1,857,842
500,000
-
3,145,342
53,563
2,397,792
3,685,690
236,227
450,000
5,132,746
9,504,663
-
1,618,822
1
2
3
4
Mr Munro and Mr Tyrwhitt were appointed as Non-Executive Directors on 1 October 2019
Represents 25% of the FY19 STI deferred into shares held in escrow until 1 July 2021
Other changes represents shares that were purchased or sold during the year
Rights refers to share rights for Non-Executive Directors and performance rights for executives
68
68
MACMAHON ANNUAL REPORT 2020
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G
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a
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y
69
MACMAHON ANNUAL REPORT 2020
FINANCIAL
STATEMENTS
GENERAL INFORMATION
The financial statements cover Macmahon
Holdings Limited (“the Company” or “the
Parent”) as a consolidated entity (referred
to hereafter as “the Group”) 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 the functional and
presentation currency of the Company.
Macmahon Holdings Limited is a public company
limited by shares, incorporated and domiciled
in Australia. The Group is a for-profit entity.
Consolidated Statement of Profit
or Loss and Other Comprehensive Income
72
Consolidated Statement of Financial Position 73
Consolidated Statement of Changes in Equity 74
Consolidated Statement of Cash Flows
75
Notes to the Consolidated
Financial Statements
Directors’ Declaration
76
125
A description of the nature of the Group’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 26 August 2020.
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
70
MACMAHON ANNUAL REPORT 2020
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a
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71
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
Revenue
Other income
Expenses
Materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Equipment and other short-term 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
Profit before income tax expense
Note
2
3
4
4
28
4
4
25
2020
$’000
1,380,374
6,757
(529,032)
(467,085)
(147,445)
(43,797)
(43,894)
-
(2,591)
(69,312)
2019
$’000
1,102,984
11,797
(414,930)
(337,234)
(106,249)
(90,346)
(53,518)
(7,318)
(2,634)
(41,966)
83,975
60,586
(14,839)
3,351
(10,672)
3,905
72,487
53,819
Income tax expense
5
(7,539)
(7,727)
Profit after income tax expense for the year
64,948
46,092
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation
20
(1,583)
4,093
Other comprehensive (loss) / income for the year, net of tax
(1,583)
4,093
Total comprehensive profit for the year attributable to the owners of the Company
63,365
50,185
Earnings per share for profit attributable
to the owners of Macmahon Holdings Limited
Basic earnings per share
Diluted earnings per share
Note
6
6
2020
Cents
2019
Cents
3.10
2.99
2.19
2.12
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
72
72
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated Statement of Financial Position
Note
2020
$’000
2019
$’000
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
8
9
10
11
5
15
25
9
15
16
11
5
12
18
5
13
14
12
18
13
19
20
141,837
202,639
57,277
-
-
829
113,165
181,480
45,818
2,057
5,030
2,159
402,582
349,709
10,482
8,574
456,996
21,330
-
23,058
10,954
19,289
399,607
10,245
23,258
11,843
520,440
475,196
923,022
824,905
153,933
49,258
5,640
45,594
14,154
168,606
29,553
3,947
26,158
12,385
268,579
240,649
1,500
153,492
1,620
156,612
-
136,295
343
136,638
425,191
377,287
497,831
447,618
563,118
145
(65,432)
563,118
(2,004)
(113,496)
497,831
447,618
The above consolidated statement of financial position should be read in conjunction with the
accompanying notes.
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73
73
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated Statement of Changes in Equity
Consolidated
Issued
capital
$’000
Reserves
$’000
Accumulated
losses
$’000
Retained
profits
$’000
Total
equity
$’000
Balance at 1 July 2019
563,118
(2,004)
(192,396)
Profit after income tax expense for the year
Other comprehensive loss 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
Treasury shares purchased for
compensation plans (note 20)
Dividends (note 20)
Share-based payments expense (note 28)
-
-
-
-
-
-
-
-
(1,583)
(1,583)
1,388
(247)
-
2,591
-
-
-
-
-
-
-
78,900
64,948
447,618
64,948
-
(1,583)
64,948
63,365
(1,171)
217
-
(247)
(15,713)
(15,713)
-
2,591
Balance at 30 June 2020
563,118
145
(192,396)
126,964
497,831
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
-
-
-
-
(1,409)
(1,057)
Adjusted balance at 1 July 2018
563,118
3,842
(192,396)
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 expense (note 28)
Treasury shares purchased for
compensation plans (note 20)
-
-
-
-
-
-
-
-
4,093
4,093
(4)
148
2,634
(12,717)
-
-
-
-
-
-
-
-
-
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
The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes.
74
74
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated Statement of Cash Flows
Note
2020
$’000
2019
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Receipts from joint venture entities
Payments to joint venture entities
Payment for settlement of class action
Dividends received from equity-accounted investments
25
Interest received
Interest and other finance costs paid
Income taxes paid
1,359,737
(1,147,236)
1,016,435
(893,053)
2,771
(1,623)
-
3,403
546
(15,385)
(8,520)
1,004
-
(7,560)
1,518
698
(11,370)
(15,165)
Net cash from operating activities
7
193,693
92,507
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
Payment for property, plant and equipment
Payments for intangible assets
Acquisition of subsidiary, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Purchase of own shares
Proceeds from interest-bearing loans
Repayment of interest-bearing loans
Repayment of lease liabilities
Dividends paid
3,957
(75,392)
(6,071)
(18,907)
2,421
(51,830)
(4,836)
-
(96,413)
(54,245)
(247)
23,044
(21,790)
(54,547)
(15,713)
(12,717)
-
-
(22,891)
-
16
32
20
18
18
18
20
Net cash used in financing activities
(69,253)
(35,608)
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
28,027
113,165
645
2,654
109,622
889
Cash and cash equivalents at the end of the financial year
8
141,837
113,165
The above consolidated statement of cash flows should be read in conjunction with the accompanying
notes.
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75
75
MACMAHON ANNUAL REPORT 2020
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
A RESULTS
E RISK
17 Financial Risk Management
96
F DEBT AND EQUITY
18 Borrowings
19 Equity – Issued capital
20 Equity – Reserves
G UNRECOGNISED ITEMS
21 Contingent liabilities
22 Commitments
23 Events after the reporting period
86
87
88
88
89
90
91
92
94
H OTHER INFORMATION /
GROUP STRUCTURE
24 Interests in subsidiaries
25 Interests in joint ventures
26 Related party transactions
27 Compensation of
key management personnel
28 Share-based payments
29 Remuneration of auditors
30 Deed of cross guarantee
31 Parent entity information
32 Business combinations
33 Other significant accounting policies
103
104
105
106
106
106
107
108
110
111
111
115
115
118
119
120
1 Operating segments
2 Revenue
3 Other income
4 Expenses
5 Tax
6 Earnings per share
77
79
79
80
81
84
B CASH FLOW INFORMATION
7 Reconciliation of profit after income tax to
net cash from operating activities
85
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
76
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
A Results
1 Operating segments
Identification of reportable operating segments
The Group has identified its reportable segments based on the internal reporting which is reviewed and
used by the Chief Executive Officer (the Chief Operating Decision Maker) in assessing the performance
and in determining the allocation of resources between business units.
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 and methods used in rendering their services.
The following describes the operations of each reportable segment:
Mining
The Group provides a broad range of mining services, which includes surface and underground mining,
civil and rehabilitation services, equipment maintenance, rentals and management.
Financial performance is measured with reference to earnings before interest, tax and customer
contracts amortisation (EBIT(A)), adjusted for significant, non-recurring items, as included in internal
reporting reviewed by the Chief Executive Officer and is measured consistently with profit or loss in
the consolidated financial statements. Segment EBIT(A) is used to measure financial 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. The financial performance of
each reportable segment is set out below:
Consolidated – 2020
Revenue
Mining
$’000
Unallocated
$’000
Total
$’000
Revenue from contracts with customers
Revenue from contracts with customers - non-cash consideration
Total revenue
1,181,498
198,876
1,380,374
-
-
-
1,181,498
198,876
1,380,374
Earnings before interest, tax, depreciation and amortisation
(and significant, non-recurring items)
Depreciation and amortisation expense
(excluding customer contracts)
Earnings before interest and tax
(and significant, non-recurring items)
Finance income
Finance costs
Acquisition costs
Share based payments expense
Amortisation on customer contracts
Profit / (loss) before income tax expense
Segment assets
Segment liabilities
Capital expenditure
234,077
4,630
238,707
(145,151)
(1,948)
(147,099)
88,926
-
(14,763)
-
-
(346)
73,817
2,682
546
(622)
(1,345)
(2,591)
-
(1,330)
91,608
546
(15,385)
(1,345)
(2,591)
(346)
72,487
740,083
182,939
923,022
406,232
18,959
425,191
147,634
-
147,634
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77
77
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated – 2019
Revenue
Mining
$’000
Unallocated
$’000
Total
$’000
Revenue from contracts with customers
Revenue from contracts with customers - non-cash consideration
Total revenue
1,044,754
58,230
1,102,984
-
-
-
1,044,754
58,230
1,102,984
Earnings before interest, tax, depreciation and amortisation
(and significant, non-recurring items)
Depreciation and amortisation expense
174,659
(106,249)
6,722
-
181,381
(106,249)
Earnings before interest and tax
(and significant, non-recurring items)
Finance income
Finance costs
Acquisition costs
Litigation settlements and related legal fees
Share based payments expense
Profit / (loss) before income tax expense
Segment assets
Segment liabilities
Capital expenditure
Australia
Indonesia
South Africa
Malaysia
68,410
-
(11,370)
-
-
-
57,040
6,722
698
-
(689)
(7,318)
(2,634)
(3,221)
75,132
698
(11,370)
(689)
(7,318)
(2,634)
53,819
690,155
134,750
824,905
372,104
5,183
377,287
124,510
-
124,510
Geographical revenue from
contracts with customers
Geographical
non-current assets
2020
$’000
901,915
453,995
17,527
6,937
2019
$’000
700,159
388,926
-
13,899
2020
$’000
382,709
127,192
-
10,539
2019
$’000
297,753
165,330
-
12,113
1,380,374
1,102,984
520,440
475,196
Major customers
The revenue information above is based on the location of customers. Revenue from three customers,
individually greater than 10%, amounted to $846.516 million (2019: One customer for $382.271 million),
arising from the provision of mining services.
Operating segments
An operating segment is a component of the Group that engages in business activities from which it
may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the Group’s other components. All operating segments’ operating results are regularly
reviewed by the Chief Executive Officer in making decisions about resource allocation and performance
assessment, and for which discrete financial information is available.
Segment results that are reported to the Chief Executive Officer include items directly attributable to
a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise
corporate assets, net foreign exchange differences, finance income, income taxes, share-based
payments and acquisition costs. Segment capital expenditure is the total cost incurred during the year
to acquire property, plant and equipment, and intangible assets other than goodwill.
78
78
2 Revenue
Revenue from contracts with customers
Revenue from contracts with customers - non-cash consideration
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated
2020
$’000
2019
$’000
1,181,498
198,876
1,044,754
58,230
1,380,374
1,102,984
Services revenue
The Group generates revenue from the provision of mining services, which includes surface and
underground mining, civil and rehabilitation services, equipment maintenance, rentals and management.
The activities for each contract were assessed as highly inter-related and, as a result, the Group
determined that one performance obligation exists for each of its mining contracts.
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 discussed below.
Revenue for services is recognised over time on the basis of the work completed and billed to the
customer as the customer receives the benefit. Amounts billed to customers are not secured and are
typically due within 5 - 60 days from the invoice date.
Variable consideration
Certain contracts with customers include a variable element which is subject to the Group meeting
either certain cost targets or material movement KPIs. Variable consideration is recognised when it is
highly probable that a significant reversal of revenue will not occur in a subsequent period.
For the year ended 30 June 2020, variable consideration amounted to $54.385 million (2019: $51.332
million) of which $17.857 million (2019: $19.884 million) was carried as a contract asset (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 in the consolidated of statement of profit or loss and other comprehensive
income.
3 Other income
Net gain on disposal of plant and equipment
Net foreign exchange gain
Other
Consolidated
2020
$’000
-
4,630
2,127
6,757
2019
$’000
796
7,600
3,401
11,797
Other income
Other income includes management fees from joint venture partners of $1.078 million (2019: $1.550
million). Refer to note 26.
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79
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
4 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Right-of-use assets
Amortisation
Software
Customer contracts
Other expenses
Freight expenses
Consulting and other professional services
Recruitment, training and other employee incidentals
Travel and accommodation expenses
Insurance expenses
Expected credit loss (ECL) allowance
Administrative and facilities expenses
IT expenses
Acquisition costs
Legal costs in relation to client mediation
Net loss on disposal of plant and equipment
Other expenses
Lease expenses
2020 - Leases under AASB 16 Leases
Depreciation of right-of-use assets
Interest expense on lease liabilities
Expenses related to short-term leases and low-value assets
2019 - Leases under AASB 117 Leases
Depreciation of leased assets
Interest expense on lease liabilities
Lease expense on operating leases
Employee benefits expense
Employee benefits expense includes superannuation as follows:
Superannuation
Defined contribution superannuation expense
80
80
Consolidated
2020
$’000
2019
$’000
-
92,993
52,583
1,523
346
13
105,837
-
399
-
147,445
106,249
Consolidated
2020
$’000
2019
$’000
14,069
10,387
9,689
9,172
4,388
4,173
4,485
2,832
1,345
1,125
203
7,444
69,312
13,291
6,597
6,402
5,685
2,939
-
3,639
1,359
689
-
-
1,365
41,966
Consolidated
2020
$’000
2019
$’000
(52,583)
(13,699)
(43,797)
-
-
-
-
-
-
(27,098)
(9,777)
(90,346)
(110,079)
(127,221)
Consolidated
2020
$’000
2019
$’000
26,576
26,576
17,643
17,643
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Net finance costs
Finance costs include interest on lease liabilities and are expensed in the period in which they are
incurred. Borrowing costs capitalised are amortised over the term of the facility.
Interest income on term deposits
Interest expense on lease liabilities
Interest expense on interest-bearing loans
Amortisation of borrowing costs
5 Tax
a)
Income tax expense
Income tax expense
Current tax
Adjustment recognised for prior periods
Deferred tax - origination and reversal of temporary differences
Income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
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 previously unrecognised unused tax losses
Net temporary difference previously unrecognised
Current year losses for which no deferred tax asset was recognised
Deferred tax asset derecognised due to change in income tax rates
Other
Adjustment recognised for prior periods
Income tax expense
b) Current assets and liabilities – income tax
Income tax (payable) / receivable - Australian operations
Income tax payable - International operations
Consolidated
2020
$’000
(546)
13,699
414
1,272
14,839
Consolidated
2020
$’000
18,103
651
(11,215)
7,539
72,487
21,746
777
(1,406)
(1,725)
160
(17,116)
5
3,750
697
6,888
651
7,539
Consolidated
2020
$’000
(605)
(5,035)
(5,640)
2019
$’000
(698)
9,777
-
1,593
10,672
2019
$’000
18,937
(1,481)
(9,729)
7,727
53,819
16,146
790
321
(1,491)
(262)
(6,272)
(24)
-
-
9,208
(1,481)
7,727
2019
$’000
5,030
(3,947)
1,083
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81
81
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
c) Non-current assets – deferred tax
Deferred tax asset comprises temporary differences attributable to:
Inventories
Property, plant and equipment
Contract assets
Employee benefits
Other payables
Other
Unrecognised deferred tax asset
Australian impairment and other deductible temporary differences
Consolidated
2020
$’000
2019
$’000
(5,654)
12,179
(18,287)
18,831
15,625
364
23,058
28,227
28,227
(1,411)
(8,521)
(13,459)
16,320
18,381
533
11,843
42,887
42,887
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
• 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 Group does not distribute non-
cash assets as dividends to its shareholders.
82
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
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 Group as an equity contribution or distribution.
The Group 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 Group 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 Group recognises liabilities for anticipated tax audit issues based on the Group’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.
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83
83
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
6 Earnings per share
Consolidated
2020
$’000
2019
$’000
Profit after income tax attributable to the owners of Macmahon Holdings Limited
64,948
46,092
Weighted average number of ordinary shares used in calculating basic earnings per share
2,094,933,604
2,104,782,202
Adjustments for calculation of diluted earnings per share:
Effect of performance rights on issue
77,621,327
66,772,004
Number
Number
Weighted average number of ordinary shares used in calculating diluted earnings per share
2,172,554,931
2,171,554,206
Earnings per share for profit attributable to owners of Macmahon Holdings Limited
Basic earnings per share
Diluted earnings per share
Cents
Cents
3.10
2.99
2.19
2.12
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.
84
84
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
B Cash Flow Information
7 Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense
Adjustments for:
Depreciation and amortisation expense
Net loss / (gain) on disposal of plant and equipment
Share of profit of equity accounted investees, net of tax
Share based payments expense
Net foreign exchange gain
Remeasurement of ECL allowance
Other
Income tax expense
Income taxes paid
Dividends received from equity accounted investees
Net cash received from equity accounted investees
Change in operating assets and liabilities:
Decrease / (increase) in trade and other receivables
Increase in inventories
Decrease in trade and other payables
Increase in employee benefits
Increase in provisions
Consolidated
2020
$’000
2019
$’000
64,948
46,092
147,445
106,249
203
(3,351)
2,591
(4,630)
4,173
187
7,539
(8,520)
3,403
1,148
4,667
(4,430)
(36,402)
13,414
1,308
(796)
(3,905)
2,634
(7,600)
-
-
7,727
(15,165)
1,518
1,004
(41,519)
(3,834)
(8,536)
7,825
813
Net cash from operating activities
193,693
92,507
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85
85
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
C Working Capital
8 Cash and cash equivalents
Cash on hand
Cash at bank
Consolidated
2020
$’000
9
141,828
141,837
2019
$’000
10
113,155
113,165
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 subject to an insignificant risk of changes in value.
86
86
9 Trade and other receivables
Current
Trade receivables
Contract assets
Less: Provision for ECL
Other receivables
Prepayments
Non-current
Other receivables
Agency receivables
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated
2020
$’000
2019
$’000
42,684
117,107
(5,582)
60,672
109,549
(1,409)
154,209
168,812
43,095
5,335
8,256
4,412
202,639
181,480
4,326
4,248
8,574
18,341
948
19,289
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Trade and other receivables
Trade receivables are initially recognised at the fair value of the services provided to the customer and
subsequently at amortised cost less expected credit loss allowances. Other receivables are initially
recognised at cost and subsequently measured at amortised cost less expected credit loss allowances.
Due to the short term nature of these receivables their carrying amount approximates their fair value.
Other receivables include:
• Contracted reimbursements for project closure costs of $6.789 million (2019: $4.145 million)
relating to the costs recognised as part of the provision for contract closure. Refer to note 14
• VAT receivable of $27.173 million (2019: $13.886 million classified as non-current other receivables)
relating to the PT Amman Mineral Nusa Tenggara (AMNT) asset acquisition and input tax credits
collected on goods and services consumed. The VAT receivable has been reclassified as current, in
part, to the extent that the Group expects to receive this within the next 12 months. A VAT receivable
of $4.326 million continues to be classified as non-current as of 30 June 2020
Agency receivables
The Group entered into a tripartite agreement with a customer and financier regarding certain mining
equipment acquired for the mining contract. The tripartite agreement provides the financier with a
put option and the customer with a call option over the equipment, whilst the Group acts as an agent
between the financier and the customer, to source and maintain the equipment. The feature of the put / call
transaction results in control and risk or reward of the equipment not being with the Group. Lease costs paid
by the Group in relation to the equipment (including interest) in excess to the receipts from the customer is
recovered from the customer on exercise of the put / call, which is represented by a non-current receivable.
Contract assets
Contract assets relate to the Group’s right to consideration of mining services rendered but not billed as
of 30 June 2020. Contract assets are transferred to trade receivables when the Group issues an invoice
to the customer.
The balance of contract assets vary and is dependent on the scale of mining services rendered for the
claim period, which is ordinarily a calendar month, immediately preceding the end of the reporting period.
Receivables from related parties
For information on receivables from related parties refer to note 26.
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87
87
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
10 Inventories
Inventories at lower of cost and net realisable value
Less: Allowance for obsolescence
Consolidated
2020
$’000
62,343
(5,066)
2019
$’000
50,058
(4,240)
57,277
45,818
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 estimated costs to sell.
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
Current
Non-current
Consolidated
2020
$’000
-
-
-
2019
$’000
2,057
23,258
25,315
In prior periods, the Group acquired mining equipment which was subject to a put and call option with
the customer. Per the contract Macmahon had a put option and the customer had a call option over the
equipment which resulted in the mining equipment being recognised as a lease receivable rather than
plant and equipment.
During the year, the Group transferred their put option to a financier which resulted in control and risk
or reward of this equipment being removed from the Group. As a result the receivable and liability
previously recognised relating to the equipment has been derecognised and an agency receivable
recognised in non-current receivables. Refer to note 9.
Minimum lease payments receivable as at 30 June 2020 are as follows:
Within one year
After one year but not
more than five years
Minimum lease payments
Interest income
Principal repayments
2020
$’000
-
-
-
2019
$’000
3,755
24,619
28,374
2020
$’000
2019
$’000
2020
$’000
-
-
-
1,698
1,361
3,059
-
-
-
2019
$’000
2,057
23,258
25,315
88
88
12 Trade and other payables
Current
Trade payables
Accrued expenses
Other payables
Deferred consideration (note 32)
Non-current
Contingent consideration (note 32)
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated
2020
$’000
2019
$’000
64,882
71,879
15,172
2,000
57,920
87,494
23,192
-
153,933
168,606
1,500
1,500
-
-
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group 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 period and 30 June 2020 of $8.764 million (2019:
$3.910 million) are included within accrued expenses.
Refer to note 17 for further details on financial instruments.
Contingent consideration
The acquisition of GF Holdings (WA) Pty Ltd and its subsidiaries (GBF) included a potential contingent
consideration payment based on future earnings of GBF.
At acquisition date, the fair value of the contingent consideration was estimated to be $1.500 million
utilising a discounted cash flow method and future earnings assumptions for the years ended 30 June
2020 and 2021. The fair value of the contingent consideration was classified as Level 3 in the fair value
hierarchy. Contingent consideration is classified as a non-current payable within the consolidated
statement of financial position.
There were no changes in the key judgments or estimates which informed the valuation of contingent
consideration between acquisition date and balance date. As a result, no gain or loss on remeasurement
to fair value was recognised to profit or loss for the year ended 30 June 2020.
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89
89
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
13 Employee benefits
Current
Annual leave
Long service leave
Other employee benefits
Non-current
Long-service leave
Consolidated
2020
$’000
2019
$’000
27,218
7,287
11,089
45,594
1,620
1,620
15,438
4,916
5,804
26,158
343
343
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 high quality corporate
bonds at the reporting date with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Defined contribution superannuation expense
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution plans are recognised as an employee
benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid
contributions are recognised as an asset to the extent that a cash refund or reduction in future payments
is available. Contributions to a defined contribution plan which are due more than 12 months after the
end of the period in which the employees render the service are discounted to their present value.
Termination benefits
Termination benefits are recognised as an expense when the Group 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 Group 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 2020, 1 member (2019: 1 member) remained in the defined benefit section.
Other employee benefits
Other employee benefits include short term incentive plans (prior years deferred entitlements and
current year estimates), site performance bonuses, sick leave accruals, religious holiday allowance for
certain international staff and other short term benefits.
90
90
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
14 Provisions
Movements in each class of provision during the current financial year are set out below:
At 1 July 2019
Arising during the year
Released during the year
Utilised during the year
At 30 June 2020
Project
closure
$’000
8,720
4,692
-
(319)
13,093
Client
plant
maintenance
$’000
1,083
-
-
(1,083)
-
Other
$’000
2,582
-
(1,521)
-
1,061
Total
$’000
12,385
4,692
(1,521)
(1,402)
14,154
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of
a past event, it is probable the Group 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 discount rate specific to the liability. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
Provision for project closure
The provision for project closure requires a degree of estimation and judgement around contractual
term and expected redundancy and demobilisation costs. The provision is assessed by taking into
account past history of contract closures and likelihood of contract extensions.
Provision for client plant maintenance
The Group provides 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.
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.
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91
91
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
D Fixed Assets
15 Property, plant and equipment
Set out below are the carrying amounts of property, plant and equipment and right-of-use assets
recognised and movements for the period:
Right-of-use assets
Buildings
$’000
Plant &
equipment
$’000
Leasehold
improvements
$’000
Plant &
equipment
$’000
Consolidated
At 30 June 2018
Additions
Transferred from held for sale
Disposals
Depreciation expense
Exchange differences
At 30 June 2019
Recognition of right-of-use asset
on initial recognition of AASB 16
Leases (note 33)
At 1 July 2019
Transfers on initial recognition of
AASB 16 Leases
Additions
Acquisitions through a business
combination (note 32)
Transferred from held for sale
Disposals
Depreciation expense
Exchange differences
Write-off at closed sites
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,740
13,740
-
454
2,703
2,703
149,772
63,402
1,346
23,150
-
-
-
-
(1,948)
(50,635)
-
-
(27)
-
Total
$’000
380,140
119,674
291
(2,998)
(105,850)
8,350
380,127
119,674
291
(2,998)
(105,837)
8,350
399,607
399,607
-
16,443
399,607
416,050
(149,772)
77,707
21,702
847
(5,851)
-
141,563
46,198
847
(5,851)
(92,993)
(145,576)
4,185
(393)
4,158
(393)
255,039
456,996
13
-
-
-
(13)
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2020
13,592
188,365
Cost
Accumulated depreciation and
impairment losses
Carrying amount at 30 June 2019
-
-
-
-
-
-
Cost
15,540
266,830
3,183
885,030
888,213
(3,183)
(485,423)
(488,606)
-
504
399,607
399,607
769,097
1,051,971
Accumulated depreciation and
impairment losses
(1,948)
(78,465)
(504)
(514,058)
(594,975)
Carrying amount at 30 June 2020
13,592
188,365
-
255,039
456,996
At 30 June 2020, plant and equipment includes work-in-progress of $22.774 million (2019: $32.202 million).
Security
Leasehold improvements and plant and equipment are subject to a registered charge to secure banking
facilities. Refer to note 18.
Property, plant and equipment
Property, plant and equipment is measured at cost, less accumulated depreciation and accumulated
impairment losses, if any.
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.
92
92
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
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 plant and equipment is the estimated amount for which
plant and equipment 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 plant and equipment is based
on external market appraisals from accredited, independent valuation specialists.
When parts of an item of plant and equipment have different useful lives, the items are accounted
for as separate items (i.e. major components) of 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 Group
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
• Right-of-use assets: period of the lease
The carrying amounts of the Group’s assets, other than inventories (see inventory accounting policy)
and deferred tax assets (see income tax accounting policy), are reviewed at each reporting 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 Group. 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 Group, 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.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation expenses
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
expense 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.
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93
93
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Impairment of non-financial assets other than goodwill and other indefinite life intangible asset
The Group 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 Group 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.
Non-current assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. They are measured at the lower of their
carrying amount and fair value less costs of disposal. Costs of disposal are the incremental costs directly
attributable to the disposal of an asset, excluding finance costs and income tax expense.
For non-current assets to be classified as held for sale, those assets must be available for immediate sale
in their present condition and their sale must be highly probable.
Non-current assets classified as held for sale are separately presented on the face of the consolidated
statement of financial position as a current assets.
16 Intangible assets and goodwill
Set out below are the carrying amounts of intangible assets recognised and movements for the period:
Consolidated
Cost
At 1 July 2018
Additions
At 30 June 2019
Additions
Acquisition through a business combination (note 32)
At 30 June 2020
Accumulated amortisation and impairment
At 1 July 2018
Amortisation
At 30 June 2019
Amortisation
At 30 June 2020
Net book value
At 30 June 2019
At 30 June 2020
Goodwill
$’000
Customer
contracts
$’000
Software
$’000
Total
$’000
3,025
-
3,025
-
5,783
8,808
-
-
-
-
-
3,025
8,808
-
-
-
-
1,100
1,100
-
-
-
(346)
(346)
-
754
2,783
4,836
7,619
6,071
-
13,690
-
(399)
(399)
(1,523)
5,808
4,836
10,644
6,071
6,883
23,598
-
(399)
(399)
(1,869)
(1,922)
(2,268)
7,220
11,768
10,245
21,330
94
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
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 is measured at cost, less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
the Group’s cash-generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units.
Customer contracts
Customer contracts are a separately identifiable intangible asset equal to the present value of future
post-tax cash flows attributed to the portfolio of incomplete underground mining services contracts
assumed at acquisition date through a business combination.
Customer contracts are carried at cost, less accumulated depreciation and impairment losses.
Amortisation of customer contracts is included in depreciation and amortisation expenses in the
consolidated statement of profit or loss and other comprehensive income. The expected useful life of
customer contracts is 3 years.
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 Group
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 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.
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95
95
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
E Risk
17 Financial Risk Management
Financial assets
Cash and cash equivalents
Trade and other receivables
Lease receivables
Financial liabilities
Trade and other payables
Borrowings
Consolidated
2020
$’000
2019
$’000
141,837
166,755
-
113,165
178,326
25,315
308,592
316,806
149,198
202,750
160,941
165,848
351,948
326,789
Trade and other receivables excludes prepayments of $5.335 million (2019: $4.412 million), contract
closure reimbursements of $6.789 million (2019: $4.145 million), VAT receivable of $31.499 million
(2019: $13.886 million) and other non-financial assets of $0.835 million (2019: nil).
Trade and other payables excludes GST and other taxes payable of $6.235 million (2019: $7.665 million).
With the exception of contingent consideration, which is measured at fair value through profit or loss,
financial assets and liabilities are otherwise 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.
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 Group, to ensure risks remain within appropriate limits.
Risk management policies and systems are reviewed regularly to reflect changes in market conditions
and the Group’s activities. The Group, 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 Group’s risk
management policies and procedures and reviews the adequacy of the risk management framework
in relation to the risks faced by the Group. The Board of Directors is assisted in its oversight role by the
Audit and Risk Committee, to which internal audit reports. Internal audit undertakes reviews of controls
and procedures, the results of which are reported to the Audit and Risk Committee.
The Group has exposure to the following risks from its use of financial instruments:
• Market risk
• Credit risk
• Liquidity risk
This note presents qualitative and quantitative information about the Group’s exposure to each of
the above risks, their objectives, policies and processes for measuring and managing risk, and the
management of capital.
96
96
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates
will affect the Group’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 Group 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 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 Group is also exposed to foreign currency risk on plant and equipment purchases that are
denonimated in a currency other than AUD. The currencies giving rise to this risk are primarily USD and IDR.
The contracts for mining services and purchases are primarily denominated in the functional currencies
of entities within the Group to minimise the foreign exchange currency risk.
In respect of other monetary assets and liabilities held in currencies other than the AUD, the Group
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
2020
0.6713
9,610
2.8234
0.5327
3.6825
0.9299
10.5081
2019
0.7161
10,345
2.9526
0.5527
3.5211
0.9771
10.1130
2020
0.6865
9,779
2.9417
0.5582
3.9748
0.9568
11.8642
2019
0.7013
9,917
2.9048
0.5533
3.6900
0.9492
9.9225
The carrying amount of foreign currency denominated financial assets and financial liabilities
at 30 June were as follow (AUD equivalent):
Consolidated
USD
IDR1
GBP
Other
Financial assets
Financial liabilities
2020
$’000
56,966
15,817
4,411
1,202
78,396
2019
$’000
51,490
24,149
4,713
210
2020
$’000
(342)
(18,344)
-
(46)
2019
$’000
-
(33,756)
-
-
80,562
(18,732)
(33,756)
1
The Group is paid in IDR for services performed in Indonesia; however, the amount of these IDR payments are adjusted
according to movements in the IDR:USD exchange rate on the last day of the month prior to the invoice.
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97
97
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
The following analysis demonstrates the increase / (decrease) to profit or loss and other comprehensive
income at the reporting date, assuming a 10 percent strengthening and a 10 percent weakening of
the following transaction currencies against the functional currencies of the Group companies where
the financial assets and liabilities are recorded. This analysis also assumes that all other variables, in
particular interest rates, remain constant. The analysis is performed on the same basis for 2019.
Consolidated – 2020
USD
IDR
GBP
Other
Consolidated – 2019
USD
IDR
GBP
Other
Weakened by 10%
Strengthened by 10%
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
(5,662)
253
(441)
(116)
(5,966)
-
-
-
-
-
5,662
(253)
441
116
5,966
-
-
-
-
-
Weakened by 10%
Strengthened by 10%
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
(5,149)
961
(471)
(21)
(4,680)
-
-
-
-
-
5,149
(961)
471
21
4,680
-
-
-
-
-
There were no financial instruments measured at fair value through other comprehensive income.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
Interest rate risk on variable rate borrowings is managed under the Group’s approved Treasury Policy.
Under this policy, interest rate exposures are managed by entering fixed rate finances for equipment
purchases.
At 30 June, the Group was exposed to variable interest rate risk on financial assets as follows:
Cash and cash equivalents
Net exposure to interest rate risk
Consolidated
2020
$’000
141,837
141,837
2019
$’000
113,165
113,165
98
98
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Cash flow sensitivity analysis for variable rate instruments
The following analysis demonstrates the increase / (decrease) to profit or loss and other comprehensive
income at 30 June, assuming a change in interest rates of 25 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 2019.
Consolidated – 2020
Cash and cash equivalents
Consolidated – 2019
Cash and cash equivalents
25 basis point increase
25 basis point decrease
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
355
355
-
-
(355)
(355)
-
-
25 basis point increase
25 basis point decrease
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
Effect
on profit
before tax
$’000
Effect on other
comprehensive
income
$’000
283
283
-
-
(283)
(283)
-
-
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group’s trade receivables and
contract assets from customers.
Cash and cash equivalents
The Group 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.
Guarantees
The Group’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 Group’s exposure to credit risk is influenced mainly by the characteristics of each individual
customer. The demographics of the Group’s customer base, including the default risk of the industries
and countries in which customers operate, has less influence on credit risk. For the year ended 30 June
2020, 61% (2019: 35% attributed to one customer) of the Group’s revenue is attributable to revenue
transactions with three customers. Geographically, the primary concentration of credit risk is in Australia
and Indonesia.
Under the Group’s systems and procedures, each new customer is analysed individually for
creditworthiness before the Group’s standard payment and delivery terms and conditions are offered.
The exposure to credit risk is monitored on an ongoing basis. The Group’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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99
99
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Exposure to credit risk
The carrying amount of the Group’s financial assets represents its maximum credit exposure as follows:
Cash and cash equivalents
Trade receivables
Contract assets
Other receivables
Agency receivables
Credit risk exposure
Consolidated
2020
$’000
2019
$’000
141,837
37,102
117,107
9,134
4,248
309,428
113,165
59,263
109,549
8,566
948
291,491
Other receivables excludes prepayments $5.335 million (2019: $4.412 million), contracted reimbursement
costs for project closure costs of $6.789 million (2019: $4.145 million) and VAT receivable of $31.499
million (2019: $13.886 million) related to input tax credits collected on goods and services consumed
and the AMNT asset acquisition.
The profile of trade and other receivables and contract assets by segment is as follows:
Mining customers
Other
Less: Provision for ECL
Credit risk exposure by customer
Consolidated
2020
$’000
168,762
4,411
173,173
(5,582)
2019
$’000
175,022
4,713
179,735
(1,409)
167,591
178,326
At 30 June, the exposure to credit risk for trade and other receivables and contract assets by
geographic region was as follows:
Consolidated
2020
$’000
118,963
46,922
7,288
173,173
2019
$’000
122,910
49,951
6,874
179,735
Country
Australia
Indonesia
Other
100
100
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Expected credit loss allowance
Consolidated
Current (not past due)
Past due 0-30 days
Past due 31-60 days
Over 90 days overdue
2020
2019
Gross
carrying
amount
$’000
150,486
8,426
2,911
11,350
173,173
Loss
allowance
$’000
(189)
(111)
(102)
(5,180)
(5,582)
Gross
carrying
amount
$’000
165,123
9,467
2,590
2,555
179,735
Loss
allowance
$’000
-
-
-
(1,409)
(1,409)
In determining the provision for ECLs, the Group allocates its exposure to a credit risk based on data
that is determined to be predictive of the risk of loss (including, but not limited to external credit
ratings, audited financial statements and available press information) and applying experienced credit
judgement. Loss rates applied to a credit risk ratings are sourced from external credit rating agencies.
The following table provides summarised information of the exposure to credit risk on trade receivables
and contract assets as at 30 June 2020:
Credit rating
A- to AAA
BBB- to BBB+
BB- to BB+
B+ to B-
C to CCC
D
Credit
impaired
No
No
No
No
Yes
Yes
Loss rate
0.008%
0.014%
0.038%
0.234%
4.196%
87.296%
The movement in the provision for ECLs is as follows:
Opening balance
Adjustment on initial application of AASB 9 Financial Instruments
Adjusted opening balance
Net remeasurement of provision for ECL
Receivables expensed as uncollectible during the year
Gross
carrying
amount
$'000
13,203
22,140
36,421
72,500
9,820
5,707
159,791
Loss
allowance
$'000
(1)
(3)
(14)
(170)
(412)
(4,982)
(5,582)
Consolidated
2020
$’000
1,409
-
1,409
4,173
-
5,582
2019
$’000
126
1,409
1,535
-
(126)
1,409
The Group recognises a provision for ECLs on financial assets measured at amortised cost and contract
assets at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial
asset has increased significantly since initial recognition and when estimating ECLs, the Group considers
reasonable and supportable information that is relevant and available without undue cost or effort.
This includes both quantitative and qualitative information and analysis, based on the Group’s historical
experience and informed credit assessment. The Group assumes a financial asset to be in default when
the debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to
actions such as realising security (if any is held) or the financial asset is more than 90 days past due.
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101
101
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group’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 Group’s reputation.
The Group 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.
Remaining contractual maturities
The following tables detail the Group’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.
Consolidated – 2020
Trade payables
Accrued expenses
Other payables
Borrowings
1 year
or less
$’000
Between
1 and 2 years
Between
2 and 5 years
$’000
$’000
Over
5 years
$’000
(64,882)
(71,879)
(15,172)
(59,114)
-
-
-
-
-
-
-
-
-
(56,990)
(104,009)
(6,868)
(226,981)
Remaining
contractual
maturities
$’000
(64,882)
(71,879)
(15,172)
Total non-derivatives
(211,047)
(56,990)
(104,009)
(6,868)
(378,914)
Consolidated – 2019
Trade payables
Accrued expenses
Other payables
Borrowings
1 year
or less
$’000
(57,920)
(87,494)
(23,192)
(39,645)
Between
1 and 2 years
Between
2 and 5 years
$’000
$’000
Over
5 years
$’000
-
-
-
-
-
-
(39,057)
(115,965)
Total non-derivatives
(208,251)
(39,057)
(115,965)
Remaining
contractual
maturities
$’000
(57,920)
(87,494)
(23,192)
(194,667)
(363,273)
-
-
-
-
-
The cash flows in the maturity analysis are not expected to occur significantly earlier than contractually
disclosed above.
102
102
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
F Debt and Equity
18 Borrowings
Currency
Interest
rate (%)
Calendar
year of
maturity
Consolidated
2020
$’000
2019
$’000
Current borrowings
Lease liabilities
Interest-bearing loans
Non-current borrowings
Lease liabilities
AUD, MYR
2.93-7.49%
2020-2029
AUD
3.67%
2020
AUD, MYR
2.93-7.49%
2020-2029
48,430
828
49,258
153,492
153,492
29,553
-
29,553
136,295
136,295
The movement in lease liabilities is set out below:
Consolidated
At 1 July
Recognition of right-of-use liabilities on initial
application of AASB 16 Leases (note 33)
New borrowings
Finance leases returned
Assumed as part of a business combination (note 32)
Interest expensed
Interest paid
Principal repayments
Transfers
Exchange differences
At 30 June
Interest-bearing loans
Lease liabilities
2020
$’000
2019
$’000
2020
$’000
2019
$’000
-
-
23,044
-
1,307
326
(326)
(21,790)
(1,733)
-
828
-
-
-
-
-
-
-
-
-
165,848
106,272
16,687
63,856
-
28,933
13,698
(13,698)
(54,547)
(18,774)
(81)
-
84,024
(1,546)
-
9,777
(9,777)
(22,891)
-
(11)
201,922
165,848
Refer to note 17 for further information on financial instruments.
Lease liabilities
The Group leases offices, plant and equipment, and vehicles across the countries in which it operates.
Lease contracts are for fixed periods between 6 months and 10 years, and may include extension options.
During the year $18.774 million (2019: Nil) was transferred to the agency receivable. Refer note 11.
Term facilities
During the year the Group’s multi-option facility was extended to July 2021 and the limit increased
to $75.000 million (2019: $50.000 million). At 30 June 2020, the facility was partially drawn for bank
guarantees of $18.467 million (2019: $19.902 million) and credit card guarantees of $0.500 million (2019:
$0.500 million). Refer to note 21.
Assets pledged as security
The Group’s 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 facility.
Borrowings
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, borrowings are classified as non-current.
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103
103
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
19 Equity – Issued capital
Ordinary shares - fully paid
Less: treasury shares
Consolidated
2020
Shares
2019
Shares
2,154,985,818
2,154,985,818
(60,365,895)
(66,455,927)
2020
$’000
563,118
(16,159)
2019
$’000
563,118
(17,755)
Ordinary shares
2,094,619,923
2,088,529,891
546,959
545,363
On issue at 1 July
On issue at 30 June
Number of ordinary shares
2020
2019
2,154,985,818
2,154,985,818
2,154,985,818
2,154,985,818
Ordinary shares
Ordinary shares are classified as equity and entitle the holder to participate in dividends and the
proceeds on the winding up of the Parent 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 does not have authorised
capital. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the capital proceeds.
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.
Treasury shares
Ordinary shares purchased on market by the Company are recognised at cost, less incremental costs
directly attributable to the ordinary shares purchased.
Capital risk management
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern
so that it may 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 Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen
as value adding relative to the Parent entity’s current share price at the time of the investment.
The Group 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 Group monitors capital on the basis of the enterprise gearing ratio. The ratio is calculated as net
debt divided by total equity and net debt. Net debt is calculated as ‘borrowings’ less ‘cash and cash
equivalents’ as shown in the consolidated statement of financial position. Total equity is as shown in the
consolidated statement of financial position. At 30 June 2020, the Group was in a net debt position.
The Group’s policy is to keep the enterprise gearing ratio below 30%. The enterprise gearing ratio at 30
June is as below:
Borrowings
Less: Cash and cash equivalents
Net debt
Equity
Gearing ratio
Enterprise gearing ratio
104
104
Consolidated
2020
$’000
202,750
(141,837)
60,913
497,831
12.24%
10.90%
2019
$’000
165,848
(113,165)
52,683
447,618
11.77%
10.53%
20 Equity – Reserves
Reserve for own shares (net of tax)
Foreign currency reserve (net of tax)
Share based payments
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Consolidated
2020
$’000
(16,159)
10,898
5,406
145
2019
$’000
(17,755)
12,481
3,270
(2,004)
Reserve for own shares
The reserve for Company’s own shares comprises the cost (net of tax) of the Company’s shares held by
the trustee of the Group’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
939,083 shares were purchased by the Company (2019: 55,453,154 shares). At 30 June 2020, there
were 60,365,895 unallocated shares held in trust (2019: 66,455,927 shares).
Foreign currency reserve
The foreign currency 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. Refer to note 28.
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 2018
Treasury shares purchased for compensation plans
Foreign currency translation
Treasury shares allocated on vesting of performance rights
Share based payments expense
Reclassification of cash-settled share-based
payments to equity
Balance at 30 June 2019
Treasury shares purchased for compensation plans
Foreign currency translation
Treasury shares allocated on vesting of performance rights
Share based payments expense
Reserve for
own shares
$’000
Foreign
currency
$’000
(5,186)
(12,717)
-
148
-
-
(17,755)
(247)
-
1,843
-
8,388
-
4,093
-
-
-
12,481
-
(1,583)
-
-
Share based
payments
$’000
640
-
-
(152)
2,634
148
3,270
-
-
(455)
2,591
Balance at 30 June 2020
(16,159)
10,898
5,406
Dividends
The Parent has paid and proposed dividends as set out below:
Total
$’000
3,842
(12,717)
4,093
(4)
2,634
148
(2,004)
(247)
(1,583)
1,388
2,591
145
Cash dividends on ordinary shares declared and paid:
Final dividend for 2019: 0.50 cents per share (2018: Nil)
Interim dividend for 2020: 0.25 cents per share (2019: Nil)
Subsequent to year end - Proposed dividends on ordinary shares:
Final cash dividend for 2020: 0.35 cents per share (2019: 0.50 cents per share)
Dividend franking account
Amount of franking credits at 30 June 2020
available to shareholders of the Company for future years
2020
$’000
2019
$’000
10,475
5,238
15,713
7,351
7,351
-
-
-
10,475
10,475
1,556
150
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105
105
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
G Unrecognised Items
21 Contingent liabilities
The following contingent liabilities existed at 30 June 2020:
Bank guarantees
Insurance performance bonds
Consolidated
2020
$’000
18,467
11,424
29,891
2019
$’000
20,488
14,125
34,613
Bank guarantees and insurance bonds are issued to contract counterparties in the ordinary course
of business as security for the performance by the Group of its contractual obligations. The Group is
also called upon to provide guarantees and indemnities 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
The Group has the normal contractor’s liability in relation to its current and completed contracts (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. The
Group 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.
There were no contingent assets as of 30 June 2020 or 30 June 2019.
22 Commitments
At 30 June 2020, the Group has capital expenditure commitments contracted for, but not provided for
in the financial statements, of $4.478 million (2019: $59.555 million).
23 Events after the reporting period
Subsequent to 30 June 2020, the Directors declared a final dividend of 0.35 cents per share.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may
significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs
in future financial years.
106
106
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
H Other Information / Group Structure
24 Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries:
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
Macmahon Maintenance Masters Pty Ltd
(2019: Lycullin Equipment Hire Pty Ltd)
Macmahon Contractors (WA) Pty Ltd*
Macmahon (Southern) Pty Ltd
Macmahon Africa Pty Ltd*
Macmahon Malaysia Pty 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*
Strong Minds Strong Mines Pty Ltd
GF Holdings (WA) Pty Ltd**
GBF Mining and Industrial Services Pty Ltd**
GBF North Pty Ltd**
GBF Number 3 Pty Ltd**
GBF Number 4 Pty Ltd**
GBF Number 5 Pty Ltd**
GBF Number 6 Pty Ltd**
RAMEX Services Pty Ltd**
GBF Project Services S.R.O**
Interest in trusts
Macmahon Holdings Limited Employee Share Ownership Plans Trust
Macmahon Underground Unit Trust
Ownership interest
Country of
incorporation
2020
%
2019
%
Australia
Australia
Australia
Australia
Singapore
Indonesia
Malaysia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Malaysia
Indonesia
Singapore
Singapore
Mongolia
Nigeria
Ghana
Botswana
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Slovakia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
*
**
Entities were inactive for the financial year ended 30 June 2020.
On 2 August 2019, the Group acquired 100% of the voting shares of GF Holdings (WA) Pty Ltd and its subsidiaries. Refer
to note 32 for further details.
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107
107
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
25 Interests in joint ventures
Interest in joint ventures are accounted for using the equity method of accounting.
Information relating to joint ventures that are material to the Group are set out below:
Incorporated joint venture
Country of incorporation
PT Macmahon Mining Services
Indonesia
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
At 30 June
Ownership Interest
2020
%
50%
Consolidated
2020
$’000
10,954
-
10,954
3,351
(3,403)
(420)
10,482
2019
%
50%
2019
$’000
9,273
(1,057)
8,216
3,905
(1,518)
351
10,954
PT Macmahon Mining Services is a joint venture in which the Group has joint control and holds a 50%
ownership interest.
PT Macmahon Mining Services is structured as a separate vehicle and the Group has a residual interest
in the net assets of the joint venture. 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 financial statements.
The following tables summarises the financial information of the joint venture as included in their own
financial statements, adjusted for fair value adjustments and differences in accounting policies. The
table also reconciles the summarised financial information to the carrying amount of the Group’s interest
in joint ventures. The Group does not eliminate realised profit or loss transactions with equity investees.
108
108
Summary financial information of PT Macmahon Mining Services, unadjusted for the percentage
ownership held by the Group is:
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Summarised statement of financial position
Cash and cash equivalents
Other current assets
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
Share of net assets at 50% (2019: 50%)
Summarised statement of profit or loss and other comprehensive income
Revenue
Net finance costs
Depreciation and amortisation expense
Other expenses
Profit before income tax
Income tax expense
Profit after income tax expense
Share of profit of equity-accounted investees, net of tax at 50% (2019: 50%)
Dividends received by the Group
Consolidated
2020
$’000
10,914
14,739
25,653
10,345
2019
$’000
8,389
19,138
27,527
13,753
35,998
41,280
(10,898)
(30)
(11,722)
(3,624)
(10,928)
(15,346)
(2,396)
(1,711)
(4,107)
(2,347)
(1,680)
(4,027)
(15,035)
(19,373)
20,963
21,907
10,482
10,954
87,259
(96)
(6,150)
(72,414)
79,767
(750)
(6,635)
(61,892)
8,599
10,490
(1,897)
(2,681)
6,702
3,351
3,403
7,809
3,905
1,518
To support the activities of the joint venture, the joint venturers have agreed to make additional
contributions to the interest to make up any losses, if acquired.
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.
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109
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
26 Related party transactions
Parent entity
Macmahon Holdings Limited is the ultimate parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 24.
Joint ventures
Interests in joint venture arrangements 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.
Transaction with related parties - joint venture
The following transactions occurred with related parties:
Transactions recognised in profit or loss
Costs incurred by the Group on behalf of and recharged to the joint venture
Costs incurred by the joint venture on behalf of and recharged to the Group
Management fee charged to joint venture
Purchases and sales of assets
Sale of equipment to joint venture
Purchase of equipment from joint venture
Receivable from / (payable to) joint venture
Receivable from / (payable to) joint venture
Consolidated
2020
$’000
2019
$’000
2,715
(1,517)
1,078
-
-
1,436
(441)
1,550
1,007
(635)
347
(124)
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Transactions with significant shareholders - AMNT
AMNT (including its related entities) is a significant shareholder of the Company. The following
transactions occurred with AMNT in relation to the provision of mining services for the Batu Hijau mine,
which is wholly owned by AMNT:
Transaction recognised in profit or loss
Revenue recognised from shareholder
Purchases made from shareholder
Non-cash materials and consumables utilised from shareholder
Receivables from significant shareholders
Trade receivables and contract assets
Consolidated
2020
$’000
2019
$’000
446,012
-
(198,876)
382,271
(107,006)
(58,230)
44,544
47,539
During the year PT Macmahon Mining Services joint venture recognised revenue of $0.322 million
(2019: $2.200 million) from AMNT. The amount owing from AMNT to the joint venture at 30 June 2020
was $0.012 million (2019: $0.600 million).
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
110
110
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
27 Compensation of key management personnel
Compensation
Key management personnel compensation for the financial year was as follows:
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share-based payments
28 Share-based payments
Consolidated
2020
$
2019
$
3,542,536
2,479,020
28,893
133,040
91,296
132,769
1,516,383
1,622,592
5,220,852
4,325,677
The Group has the following equity compensation arrangements to remunerate non-executives,
executives and employees of the Group:
• Macmahon Executive Equity Plan (EEP)
• Senior Manager Long Term Incentive Plan (LTIP)
• Non-Executive Director Salary Sacrifice Plan (SSP)
Executives and Senior Management Plans
EEP and LTIP Plans
The LTIP and EEP provides Executive and senior management with the opportunity to receive fully paid
ordinary shares in the Company 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.
The Board of Directors determines which employees are eligible to participate and the number of
performance rights granted.
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111
111
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Performance rights granted under prior years EEP plans are set out below:
Performance rights effective on
Grant date
Vesting date
Service period
Tranche and number of performance rights
Remaining number of rights at 30 June 2020
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 1
Tranche 1
Tranche 2
Tranche 3
1 Jul 16
12 Aug 16
1 Jul 19
3 years
12,659,501
-
$0.075
0%
50%
100%
1 Jul 17
18 Aug 17
1 Jul 20
3 years
13,669,315
8,316,537
$0.085
0%
50%
100%
1 Jul 17
29 Nov 17
1 Jul 20
3 years
482,075
482,075
$0.130
0%
50%
100%
1 Jan 18
2 Mar 18
1 Jul 20
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%
LTIP performance rights 2019
EEP
performance
rights 2019
Tranche 1
Tranche 2
Tranche 31
Tranche 31
Tranche 1
1 Jul 18
1 Jul 18
1 Jul 20
2 years
1 Jul 18
1 Jul 18
1 Jul 21
3 years
1 Jul 18
1 Jul 18
1 Jul 22
4 years
1 Jul 18
1 Jul 18
1 Jul 23
5 years
1 Jul 18
5 Oct 18
1 Jul 21
3 years
16,162,394
16,162,394
16,162,394
16,162,392
8,660,803
16,162,394
16,162,394
16,162,394
16,162,392
6,058,825
$0.094
$0.090
$0.090
$0.090
$0.138
0%
50%
100%
0%
50%
100%
0%
50%
100%
0%
50%
100%
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%
Pro-rata between
50% and 100%
Performance rights effective on
Grant date
Vesting date
Service period
Tranche and number of
performance rights
Remaining number of
rights at 30 June 2020
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
50% of shares that vest as a result of Tranche 3 LTIP performance rights is subject to a further retention period of 1 year.
Performance rights granted during the current year are set out below:
EEP performance rights 2020
Performance rights effective on
Grant date
Vesting date
Service period
Tranche and number of Performance Rights
Remaining number of rights at 30 June 2020
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 Jul 19
6 Aug 19
1 Jul 22
3 years
10,197,059
8,486,853
$0.051
0%
50%
100%
Pro-rata between 50% and 100%
112
112
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Measurement of grant date fair values
The following inputs were used in the measurement of the fair values at grant date of the 2020 EEP
performance rights using the Monte Carlo simulation:
EEP performance rights 2020
Fair value at grant date
Share price at grant date
Exercise price
Volatility factor
Service period
Expected dividends
Risk-free interest rate (based on government bonds)
Expected volatility is estimated taking into account historic average share price volatility.
$0.051
$0.170
Nil
45.00%
2.9 years
4.00%
0.71%
Non-Executive Director Salary Sacrifice Plan
The SSP provides Non-Executive Directors (NED) with the 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 within
8 months and 14 months from grant date. 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 assumptions were applied in the measurement of the fair values of NED share rights using
the Black-Scholes option pricing model:
Share rights effective on
Grant date
Vesting date
Service period
Tranche and number of share
rights
Remaining number of share rights
at 30 June 2020
Share price at grant date
Discount for lack of marketability
Implied fair value of restricted
shares
Exercise price
Risk-free interest rate
Volatility factor
Dividend yield
Implied discount to share price at
grant date
Fair value at grant date
NED share rights 2020
NED share rights 2019
Tranche 1
Tranche 2
Tranche 2
Tranche 1
Tranche 2
1 Jul 19
2 Aug 19
21 Feb 20
8 months
1 Jul 19
2 Aug 19
25 Aug 20
14 months
1 Jan 20
16 Dec 19
25 Aug 20
8 months
1 Jul 18
1 Jul 18
1 Mar 19
1 Jul 18
1 Jul 18
1 Sep 19
8 months
14 months
564,264
564,265
143,591
696,675
696,673
-
$0.180
30.00%
$0.126
$0.198
0.94%
45.00%
0.00%
99.00%
$0.002
564,265
$0.180
30.00%
$0.126
$0.198
0.94%
45.00%
4.00%
97.00%
$0.005
143,591
$0.262
30.00%
$0.183
$0.286
0.77%
45.00%
4.00%
98.00%
$0.004
-
$0.215
30.00%
$0.151
$0.213
1.93%
45.00%
0.00%
97.00%
$0.006
-
$0.215
30.00%
$0.151
$0.213
1.92%
45.00%
0.00%
94.00%
$0.012
Information about performance rights and share rights outstanding at year end
The following unvested unlisted performance rights were outstanding at year end:
Balance at start of year
Granted during the year
Vested during the year
Forfeited during the year
LTIP and EEP performance rights
NED share rights
2020
2019
2020
87,517,607
10,197,059
(5,971,921)
17,880,139
73,310,377
492,929
1,272,120
-
(1,057,193)
(2,678,788)
(3,672,909)
-
2019
-
1,393,348
(696,675)
(203,744)
Balance at end of year
89,063,957
87,517,607
707,856
492,929
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113
113
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
The following share-based payment expenses were recognised to profit or loss, disaggregated by
equity-compensation arrangement:
LTIP performance rights
EEP performance rights
NED share rights
Consolidated
2020
$’000
1,899
687
5
2,591
2019
$’000
1,899
726
9
2,634
Share-based payment transactions
The Group 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 were granted. The fair value is determined by
using 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 with 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 Group 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 Group or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not within the control of the Group 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.
114
114
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
29 Remuneration of auditors
The auditor of Macmahon Holdings Limited is KPMG Australia. Amounts paid or payable for services
provided by KPMG and other non-KPMG audit firms are as follows:
Group auditors
Audit and review services - KPMG
Audit or review of the financial statements - Australia
Audit or review of the financial statements - Network firms
Other services - KPMG
Taxation services - Australia
Taxation services - Network firms
Other assurance services - Australia
Other assurance services - Network firms
Subsidiary auditors
Audit and review services
Consolidated
2020
$
2019
$
370,200
27,989
336,712
59,840
398,189
396,552
43,556
20,003
28,500
14,686
106,745
40,091
64,890
179,445
5,187
289,613
504,934
686,165
Audit of the financial statements - PWC Indonesia
108,220
92,798
Other services
Taxation services - PWC Indonesia
-
108,220
49,422
142,220
613,154
828,385
30 Deed of cross guarantee
Pursuant to ASIC Corporation (Wholly-owned Companies) Instrument 2016/785 (the Instrument),
the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 (the Act)
requirements for preparation, audit and lodgement of their financial statements and Directors’ Report.
It is a condition of the Instrument that the Parent and each of its subsidiaries (Extended Closed
Group) below enter into a Deed of Cross Guarantee (Deed). The effect of the Deed is that the Parent
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 Act. 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 the same guarantees in the event that the Company is wound up.
The following entities are party to the Deed under which each member 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
• GF Holdings (WA) Pty Ltd
• GBF North Pty Ltd
GF Holdings (WA) Pty Ltd and GBF North Pty Ltd became party to the Deed during the year ended 30
June 2020.
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115
115
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Set out below is a consolidated statement of profit or loss and other comprehensive income, summary
of movements in consolidated retained earnings and consolidated statement of financial position,
comprising the Company and its controlled entities which are a party to the Deed, after eliminating
transactions between parties to the Deed:
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
Profit / (loss) before income tax expense
Income tax benefit
Profit / (loss) after income tax expense
Other comprehensive income
Foreign currency translation
Other comprehensive income / (loss) for the year, net of tax
2020
$’000
727,516
26,794
(88,296)
(415,333)
(35,577)
(97,585)
(39,107)
(12,482)
(22,889)
43,041
7,406
50,447
-
-
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)
-
-
Total comprehensive income / (loss) for the year
50,447
(9,209)
EQUITY - ACCUMULATED LOSSES
Consolidated
Accumulated losses at the beginning of the financial year
Adjustment on initial application of AASB 9 Financial Instruments, net of tax
Adjusted accumulated losses at the beginning of the financial year
Profit / (loss) after income tax expense
Treasury shares allocated on vesting of performance rights
Dividends
Effect of adding TMM Group (Operations) Pty Ltd
2020
$’000
(220,544)
-
(220,544)
50,447
(1,171)
(15,713)
-
2019
$’000
(225,295)
(1,409)
(226,704)
(9,209)
4
-
15,365
Accumulated losses at the end of the financial year
(186,981)
(220,544)
116
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
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 of sale
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
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
Deferred tax liabilities
Employee benefits
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Net accumulated losses
TOTAL EQUITY
Consolidated
2020
$’000
2019
$’000
120,272
86,777
49,566
-
-
829
83,238
121,794
45,412
2,057
4,590
2,159
257,444
259,250
60,511
52,413
336,606
21,330
-
8,347
68,774
49,369
245,300
10,245
23,258
-
479,207
396,946
736,651
656,196
117,253
45,984
142
42,575
12,177
218,131
1,500
150,027
-
1,609
129,673
26,968
-
23,272
12,696
192,609
-
134,225
930
343
153,136
135,498
371,267
328,107
365,384
328,089
563,118
(10,753)
(186,981)
563,118
(14,485)
(220,544)
365,384
328,089
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
31 Parent entity information
Set out below is the supplementary financial information of the Parent as follows:
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Profit after income taxes of the Parent
Total comprehensive income of the Parent
STATEMENT OF FINANCIAL POSITION
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Reserve for own shares
Accumulated losses
Total equity
2020
$’000
13,665
13,665
2020
$’000
176,280
2019
$’000
11,753
11,753
2019
$’000
2,158
337,390
283,737
(83,018)
(33,367)
(86,518)
(33,378)
563,118
5,406
(16,159)
563,118
3,270
(17,755)
(301,493)
(298,274)
250,872
250,359
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The Parent has entered into a Deed with the effect that the Parent guarantees the debt of members of
the Extended Closed Group. Further details of the Deed and the Extended Closed Group are disclosed
in note 30.
Significant accounting policies
The accounting policies of the Parent are consistent with those of the Group.
118
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
32 Business combinations
On 2 August 2019, the Group acquired 100% of the voting shares of GF Holdings (WA) Pty Ltd and
its subsidiaries (GBF), a private company located in Western Australia that specialises in the provision
of underground mining services. The Group acquired GBF as it expands both its service portfolio and
customer base in underground mining services. The financial statements include the results of GBF for
the 11 month period from the acquisition date.
Consideration transferred
Purchase consideration is as follows:
Cash paid
Deferred cash consideration
Deferred cash consideration - current (note 12)
Contingent consideration - non-current (note 12)
Total consideration
$’000
21,203
2,000
2,000
1,500
26,703
Acquisition costs
The Group incurred acquisition costs of $1.345 million (2019: $0.689 million) in respect of external legal
and due diligence professional service fees. Acquisition costs are included in other expenses in the
consolidated statement of profit or loss and other comprehensive income. Refer to note 4.
Identifiable net assets
The assets and liabilities recognised as a result of the acquisition are as follows:
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Property, plant and equipment
Customer contracts
Liabilities
Trade and other payables
Employee benefits
Borrowings
Net identifiable assets acquired
Goodwill arising on acquisition
Purchase consideration transferred
$’000
2,296
23,781
7,029
569
46,198
1,100
80,973
(22,533)
(7,280)
(30,240)
(60,053)
20,920
5,783
26,703
Borrowings
The Group measures acquired lease liabilities using the present value of the remaining lease payments
from the date of acquisition. The ROU assets were measured at an amount equal to the lease liabilities
and adjusted to reflect favourable or unfavourable terms of the lease relative to market terms.
Goodwill
The goodwill recognised is attributed to the expected synergies and other benefits from combining the
assets and activities of GBF with those of the Group.
Provisional accounting
The initial accounting of the acquisition of GBF has only been provisionally determined at the end of the
reporting period. If new information obtained within one year of the date of acquisition about facts and
circumstances that existed at the date of acquisition identifies adjustments to the above amounts, or
any additional provisions that existed at the time, then the accounting for the acquisition will be revised.
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 measured at fair value, as are the identifiable assets
acquired and liabilities assumed. Any gain or bargain purchase is recognised in profit or loss immediately.
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
33 Other significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set
out below. The accounting policies are consistent with those disclosed in the prior period financial
statements, except for the impact of new and amended standards and interpretations, effective 1 July
2019. The adoption of these standards and interpretations did not result in any significant changes to
the Group’s accounting policies, with the exception of AASB 16 Leases (AASB 16).
The Group has not elected to early adopt any new or amended standards or interpretations that are
issued but not yet effective.
Application of new and amended accounting standards and interpretations adopted
The Group has adopted AASB 16 Leases from 1 July 2019. Due to the transition method chosen by the
Group in applying this standard, comparative information throughout these financial statements has not
been restated.
AASB 16 Leases
AASB 16 provides a new lessee accounting model which requires a lessee to recognise assets and
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
Depreciation on a leased asset and interest on lease liabilities are recognised in the consolidated
statement of profit or loss and other comprehensive income.
Before the adoption of AASB 16, the Group classified each of its leases in its capacity as a lessee at
inception as either a finance lease or operating lease. For operating leases, the leased item was not
capitalised and the lease payments were recognised in the consolidated statement of profit or loss and
other comprehensive income on a straight-line basis.
Transition to AASB 16 Leases
The Group adopted AASB 16 on 1 July 2019 using the modified retrospective approach and applied the
following practical expedients:
• applied the exemption to not recognise right-of-use (ROU) assets and liabilities for leases with lease
than 12 months of lease term and low-value items
• a single discount rate used to a portfolio of leases with reasonably similar characteristics, and
• hindsight used when determining the lease term of the contract contains options to extend or
terminate the lease.
At transition, for leases classified as operating leases under AASB 117 Leases, lease liabilities were
measured at present value of the remaining lease payments, discounted at the Group’s incremental
borrowing rate as at 1 July 2019. ROU assets were measured at an amount equal to the lease liability,
adjusted by the amount of any prepaid or accrued lease payments and incentives received from the
lessor.
At 1 July 2019
Property, plant and equipment
Borrowings
Prepayments
Trade and other payables
$’000
16,443
(16,687)
(10)
254
There was no impact on opening retained earnings with the adoption of AASB 16.
120
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
When measuring lease liabilities for leases that were previously classified as operating leases, the Group
discounted future lease payments using its incremental borrowing rate at 1 July 2019. The weighted-
average borrowing rate applied was 4.81%. Operating lease commitments disclosed at the end of 30
June 2019 are reconciled to the opening balance of lease liabilities as follows:
Operating lease commitments disclosed at 30 June 2019
Present value of discounting lease liabilities
Less: Short-term and low value leases
Lease liabilities recognised on 1 July 2019
$’000
25,362
21,636
(4,949)
16,687
Lease accounting policy applied from 1 July 2019
When a contract is entered into, the Group assesses whether the contract contains a lease. A lease
arises when the Group has the right to direct the use of an identified asset where the lessor does not
have a substantive substitution right and to obtain substantially all economic benefits from the use of
the asset throughout the period of use.
The Group separates the lease and non-lease components of the contract and accounts for these
separately. The Group allocates the consideration in the contract of each component on the basis of
their relative stand-alone prices.
Leases as a lessee
Lease assets and lease liabilities are recognised at the lease commencement date, which is when the
assets are available for use. The assets are initially measured at cost, which is the present value of future
lease payments for any lease payments made at or before the commencement date, plus any make-
good obligations and initial direct costs incurred.
Lease assets are depreciated using the straight-line method over the shorter of their useful life and
the lease term. Periodic adjustments are made for any re-measurements of lease liabilities and for
impairment losses, assessed in accordance with the Group’s impairment policies disclosed at note 15.
Lease liabilities are initially measured at the present value of future minimum lease payments, discounted
using the Group’s incremental borrowing rate if the rate implicit in the lease cannot be readily determined,
and are subsequently measured at amortised cost using an effective interest rate. Minimum lease payments
are fixed payments or index-based variable payments incorporating the Group’s expectations of extension
options and do not include non-lease components of a contract. A portfolio approach was taken when
determining the implicit discount rate for leased assets with similar terms and conditions on transition.
The lease liability is remeasured when there are changes in future lease payments arising from a change
in rates, index or lease terms from exercising an extension or termination option. A corresponding
adjustment is made to the carrying amount of the lease assets, with any excess recognised in the
consolidated statement of profit or loss and other comprehensive income.
Short-term leases and leases of low value assets
Short-term leases (i.e. lease term of 12 months or less) and leases of low value assets are recognised as
incurred as an expense to the consolidated statement of profit or loss and other comprehensive income.
Low value assets comprise of plant and equipment.
Leases as a lessor
The Group leases mining equipment to customers, including ROU assets. The Group has classified these
leases as operating leases. The accounting policies applicable to the Group as a lessor are not different
from those under AASB 117 Leases. However, when the Group is an intermediate lessor, the sub-leases
are classified with reference to the ROU asset arising from the head lease, not with reference to the
underlying asset. Operating lease income is recognised in other revenue in the consolidated statement
of profit or loss and other comprehensive income.
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Lease accounting policy applied prior to 1 July 2019
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 transfers from the lessor to the lessee
substantially all of 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 the 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 lease term if there
is no reasonable certainty that the Group 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 lease
equipment is capitalised to plant and equipment and amortised over the shorter of the remaining lease
term or the useful life of the component.
New Accounting Standards and Interpretations not effective for the Group
at 30 June 2020 or early adopted
A number of new standards, amendments of standards and interpretations are effective for annual
periods beginning from 1 July 2020 and earlier application is permitted, however the Group has not
early adopted these standards in preparing these consolidated financial statements.
The Group has reviewed these standards and interpretations and has determined that none of these
new or amended standards and interpretations will significantly affect the Group’s accounting policies,
financial position or performance.
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 orientated entities. These financial
statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IASB).
The consolidated financial statements provide comparative information in respect of the previous
period. For consistency with the current year’s presentation, where required, comparative information
has been reclassified.
The financial statements have been prepared under the historical cost basis, except for contingent
consideration and certain other financial assets and financial liabilities, which are measured at fair value.
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 Group’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 recognition: estimate of variable consideration
• Note 5 – recognition of deferred tax assets: availability of future taxable profit against which
deductible temporary differences and tax losses carried forward can be utilised
• Note 17 – measurement of provision for ECL: key assumptions in determining the loss rate
122
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
Group 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 as of 30 June 2020 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 ‘Group’.
Subsidiaries
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when
the Group 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 Group. Entities are deconsolidated
from the date that control ceases.
Interest in equity accounted investees
The Group’s interests in equity-accounted investees comprise interests in joint ventures.
A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights
to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in joint ventures are accounted for using the equity method and are initially recognised at cost,
including transaction costs. Subsequent to initial recognition, the consolidated financial statements
include the Group’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 Group
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 Group.
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.
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123
MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
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), Value Added Tax (VAT) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the tax authority is included in other receivables or
other payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing
or financing activities which are recoverable from, or payable to the tax authority, are presented as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable
to, the tax authority.
Rounding of amounts
The Group 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.
124
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MACMAHON ANNUAL REPORT 2020
MACMAHON ANNUAL REPORT 2020
DIRECTORS’
DECLARATION
In the Directors’ opinion:
• the attached financial statements and notes,
and the remuneration report on pages 58 to
68 in the Directors’ report, are in accordance
with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001
and other mandatory professional reporting
requirements;
• the attached financial statements and notes
comply with International Financial Reporting
Standards as issued by the International
Accounting Standards Board as described
in note 33 and throughout the financial
statements;
• the attached financial statements and notes
give a true and fair view of the Group’s
financial position as at 30 June 2020 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
• 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.
On behalf of the Directors
MS E SKIRA
Independent Non-Executive Chair
26 August 2020
Perth
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125
MACMAHON ANNUAL REPORT 2020
126
Liability limited by a scheme approved under Professional Standards Legislation. 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. Independent Auditor’s Report To the shareholders of Macmahon Holdings Limited Report on the audit of the Financial ReportOpinion 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'sfinancial position as at 30 June 2020 and ofits financial performance for the year endedon that date; and•complying with Australian AccountingStandards and the Corporations Regulations2001.The Financial Report comprises: •Consolidated statement of financial position as at30 June 2020•Consolidated statement of profit or loss and othercomprehensive income, Consolidated statementof changes in equity, and Consolidated statementof cash flows for the year then ended•Notes including a summary of significantaccounting policies•Directors' Declaration.The Group consists of Macmahon Holdings Limited (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 (including Independence Standards) (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: •Acquisition of GF Holdings (WA) Pty Ltd andits subsidiaries•Revenue recognitionKey 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 2020
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127
Acquisition of GF Holdings (WA) Pty Ltd and its subsidiaries ($26.7 million) Refer to Note 32 Business combination The key audit matter How the matter was addressed in our audit During the year the Group acquired 100% of the shares of GF Holdings (WA) Pty Ltd and its subsidiaries (‘GBF’) for purchase consideration of $26.7 million. This was considered a key audit matter due to: •the financial significance of the transaction tothe Group;•significant judgements made by the Grouprelating to the purchase price allocation (PPA), inparticular determining the fair values of plantand equipment for which the Group engagedthe services of an external specialist anddetermining the fair value of intangibles; and•significant judgements made by the Group todetermine the fair value of the contingentconsideration. The contingent consideration isdependent on forecast future performance ofthe acquired business and tends to be prone togreater risk for potential bias.These conditions and the complexity of acquisition accounting required significant audit effort and involvement of senior audit team members in assessing this key audit matter. Our procedures included: •Reading the Share Purchase Agreement to obtain an understanding of the structure, key terms and nature of the consideration;•Involving senior audit team members to evaluate the Group’s acquisition accounting against the criteria of a business combination in the accounting standards.•Evaluating the Group’s external specialist’s valuation of assets acquired. This included:–evaluating the valuation methodology against our knowledge of the industry practice and accounting standards;–comparing the assumptions used by the Group’s external specialist in the valuation of plant and equipment acquired to the underlying accounting records of GBF.•Evaluating the Group’s valuation of intangible assets acquired. This included:–evaluating the valuation methodology against our knowledge of the industry practice and accounting standards;–assessing the key underlying GBF customer contracts to understand the quantum and likelihood of existing contracted and future cash flows. We used our knowledge of GBF, its business and customers; and•Evaluating the Group’s determination of the contingent consideration amount which involved:–Checking key inputs used in the contingent consideration estimation to the terms of the Share Purchase Agreement;–Assessing the feasibility of key assumptions used in the contingent consideration estimation and consistency of application to industry trends and expectations and considered differences for the Group’s operations. We used our knowledge of GBF, past performance, business and customers and our industry experience;–Considering the sensitivity of the contingent consideration by varying key assumptions within a reasonably possible range to identify those assumptions at higher risk of bias; and–Checking the mathematical accuracy of the contingent consideration estimation.
MACMAHON ANNUAL REPORT 2020
128
Acquisition of GF Holdings (WA) Pty Ltd and its subsidiaries ($26.7 million) (continued) Refer to Note 32 Business combination (continued) The key audit matter How the matter was addressed in our audit •Assessed the scope, competence and objectivityof external specialists engaged by the Group.•Assessing the Group’s business combinationdisclosures in the financial report against ourunderstanding obtained from our testing and therequirements in the accounting standards.Revenue recognition ($1,380.4 million) Refer to Note 2 Revenue The key audit matter How the matter was addressed in our audit The Group’s revenue arises from rendering mining and mining related 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 in the Group’s financial report and audit effort associated with a large number of customer contracts. Our procedures included: •Evaluating the Group’s revenue recognitionpolicies against the requirements of the relevantaccounting standards;•Understanding the Group’s process for accountingfor revenue across different contracts against theterms in the customer contracts;•Testing key controls in the revenue recognitionprocess such as approval of monthly progressclaims by the Group’s project manager andcustomers prior to billing;•Testing a statistical sample of invoices tounderlying progress claims, customer approval,contract terms and payments received for theseinvoices;•Testing a statistical sample of unbilled revenueaccruals to underlying progress claims, contractterms, subsequent invoicing after customerapproval and post year end payments received forthese invoices (where available);•Testing a sample of invoices recognised duringthe period under audit, and in subsequent periods,to the underlying progress claims to checkrevenue recognition in the correct period;•Obtaining significant credit notes recognised postyear end to check the Group’s recognition ofrevenue in the correct period;•For key contracts where variable consideration isrecognised, evaluating the Group’s evidence tomeet the recognition requirements of highlyprobable by checking to subsequent customerapproval of these amounts; and•Evaluating the Group’s disclosures against ourunderstanding obtained from our testing and therequirements of the accounting standards. MACMAHON ANNUAL REPORT 2020
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129
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 and our related assurance opinion. 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 AccountingStandards and the Corporations Act 2001;•implementing necessary internal control to enable the preparation of a Financial Report that gives a trueand fair view and is free from material misstatement, whether due to fraud or error; and•assessing the Group and Company's ability to continue as a going concern and whether the use of thegoing concern basis of accounting is appropriate. This includes disclosing, as applicable, matters relatedto going concern and using the going concern basis of accounting unless they either intend to liquidatethe 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 materialmisstatement, 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 2020
130
Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Macmahon Holdings Limited for the year ended 30 June 2020, 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 58 to 68 of the Directors’ report for the year ended 30 June 2020. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG R Gambitta Partner Perth 26 August 2020 MACMAHON ANNUAL REPORT 2020
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MACMAHON ANNUAL REPORT 2020
SUMMARY OF
CONSOLIDATED
REPORTS
Profit and loss ($m)
2020
2019
2018
2017
2016
Revenue from continuing operations
1,380.4
1,103.0
710.3
359.6
312.2
Underlying EBITDA
Depreciation and amortisation (excluding customer contracts)
238.7
(147.1)
181.4
(106.2)
Underlying EBIT(A)
Significant, non-recurring items and impairment1
Amortisation of customer contracts
Reported EBIT
Net interest
Profit / (loss) before income taxes
Income tax expense
Profit / (loss) after taxes from continuing operations
Profit / (loss) after taxes attributed to Macmahon
Add: Significant, non-recurring items and impairment (net of tax)
and amortisation of customer contracts1
91.6
(4.0)
(0.3)
87.3
(14.8)
72.5
(7.5)
64.9
64.9
4.3
75.1
(10.6)
-
64.5
(10.7)
53.8
(7.7)
46.1
46.1
10.6
119.2
(77.7)
41.5
(0.3)
-
41.2
(2.4)
38.8
(7.5)
31.3
31.3
0.3
31.8
(33.5)
42.5
(28.8)
(1.7)
(3.4)
-
(5.1)
(0.1)
(5.2)
(0.3)
(5.5)
(5.5)
3.4
13.7
(2.1)
-
11.6
(0.7)
11.0
(0.2)
10.8
10.8
2.1
Underlying net profit / (loss) after taxes attributed to Macmahon
69.2
56.7
31.6
(2.1)
12.9
Balance sheet ($m)
Plant and equipment
Total assets
Net assets
Equity attributable to the Group
Net debt / (net cash)
Cash flow ($m)
Underlying EBITDA
Net interest paid
Income tax (paid) / refund
Decrease / (increase) in working capital,
provisions and other non-cash items
Net operating cash flows, including joint venture
Investing and financing cash flows (net)
Effect of exchange rates on cash
Cash at beginning of financial year
457.0
923.0
497.8
497.8
60.9
238.7
(14.8)
(8.5)
(21.7)
193.7
(165.7)
0.6
113.2
399.6
824.9
447.6
447.6
52.7
181.4
(10.7)
(15.2)
(63.0)
92.5
(89.8)
0.9
109.6
380.1
723.3
409.8
409.8
122.7
295.0
185.0
185.0
117.7
300.1
207.4
207.4
(3.4)
(54.1)
(56.5)
119.2
(2.4)
6.3
(17.3)
105.8
(59.1)
-
62.9
31.8
(0.1)
-
42.5
(1.0)
(2.8)
(1.5)
(29.7)
30.2
(23.1)
(0.9)
56.7
9.0
(188.6)
(0.6)
236.9
Closing cash and cash equivalents
141.8
113.2
109.6
62.9
56.7
1
Significant and non-recurring items include:
2020 includes acquisition costs and share-based payment expenses
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 includes provision for onerous contracts
Due to rounding, numbers presented may not add
132
SUMMARY OF
CONSOLIDATED
REPORTS
MACMAHON ANNUAL REPORT 2020
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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 / Revenue (%)
Underlying NPAT / Revenue (%)5
EBIT interest cover (x)
Reported basic EPS from continuing
operations (cents)
Underlying basic EPS from
continuing operations (cents)
Balance sheet ratios
Gearing ratio
Enterprise gearing ratio
Reported return on average capital employed (ROACE) (%)
Underlying ROACE (%)5
Reported return on equity (ROE) (%)
Underlying ROE (%)5
Reported return on assets (ROA) (%)
Underlying ROA (%)5
Net tangible assets (NTA) per share ($)
Cash flow ratios ($'m)
Net operating cash flow per share (cents)
Shareholders
Shares on issue (m) at 30 June
Share price at 30 June (cents)
Dividends declared (cents)4
Percentage franked (%)
Market capitalisation ($m)
Enterprise value (EV)
Price / NTA (x)
2020
2019
2018
2017
2016
5,229
4,072
3,913
1,659
1,529
0.1
3.8
4.5
1.4
25.1
4.7
5.0
5.9
3.10
0.4
4.0
4.5
0.2
55.3
4.2
5.1
6.0
2.19
0.5
6.3
5.4
1.2
97.5
4.4
4.4
17.0
1.53
0.4
5.7
5.0
3.9
15.2
(1.5)
(0.6)
(33.8)
(0.47)
1.1
4.5
1.5
0.6
(52.7)
3.5
4.1
18.0
0.87
3.30
2.69
1.55
(0.18)
1.03
12.2
10.9
14.1
14.8
13.7
14.6
7.4
7.9
0.22
11.8
10.5
11.9
13.9
10.7
13.2
6.0
7.3
0.20
(0.8)
(0.8)
12.0
12.1
10.5
10.6
6.1
6.2
0.19
(29.2)
(41.3)
(2.5)
(0.8)
(2.8)
(1.1)
(1.9)
(0.7)
0.15
(27.2)
(37.5)
5.4
6.4
5.0
6.0
2.6
3.1
0.17
9.0
4.3
4.9
2.5
0.7
2,155.0
2,155.0
2,155.0
1,200.9
1,210.5
25.5
0.60
30
549.5
610.4
1.2
18.5
0.50
30
398.7
451.4
0.9
21.5
16.5
-
-
463.3
459.9
1.1
-
-
198.2
144.1
1.1
8.8
-
-
106.5
50.0
0.5
2 For 2017, new contracts and extensions includes the Batu Hijau contract
3
For 2017, the order-book includes the Batu Hijau contract. The order book for 2016 includes a proportional share of joint
venture order books
Subsequent to 30 June 2020, the Board approved the payment of a final dividend of 0.35 cents per share. For the year
ended 30 June 2020, the payment of an interim dividend of 0.25 cents per share was also approved by the Board
Adjusted for significant, non-recurring items and impairment
4
5
The Summary of Consolidated Reports uses non-IFRS financial information, such as underlying EBIT(A) and EBITDA,
to measure the financial performance of the Group. Non-IFRS measures of financial performance are unaudited.
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133
MACMAHON ANNUAL REPORT 2020
ASX
ADDITIONAL
INFORMATION
As at 19 August 2020
Additional information required by the Australian
Securities Exchange Limited Listing Rules and not
disclosed elsewhere in this report is set out below.
SHAREHOLDING SUMMARY
The following details of Shareholders of
Macmahon Holdings Limited have been taken
from the share register on 19 August 2020.
a) The twenty largest Shareholders held 87.23%
of the ordinary shares.
b) There were 6,370 ordinary Shareholders as
follows:
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
TOTAL
653
1,975
951
2,314
477
6,370
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
4,111,048 shares are held in voluntary escrow
and 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
SUBSTANTIAL SHAREHOLDERS
As at 19 August 2020, the register of substantial
shareholders disclosed the following information:
Mail
Investor Relations
PO Box 198
Cannington WA 6987
Holders giving notice
Perpetual Corporate Trust Limited
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