ANNUAL
REPORT
2023
Mitchell Services is Australia’s most diverse drilling company.
Our world class fleet is located in key exploration and mining
centres throughout Australia, providing a range of drilling
services and innovations.
MITCHELL SERVICES LTD
ACN 149 206 333
Chairman’s Report
Chief Executive Officer’s Report
Current Business Summary
Directors’ Report
Corporate Governance Statement
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Australian Stock Exchange Information
Corporate Directory
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1
Mitchell Services LtdAnnual Report 2023 CHAIRMAN’S
REPORT
For the year ended 30 June 2023
Nathan Andrew Mitchell
Executive Chairman
2
Dear Fellow Shareholders
On behalf of the Board of Mitchell Services Limited, I
am delighted to present the FY23 Annual Report and to
reflect on another positive and successful year.
VISION
The success of the organisation and our FY23
achievements were underpinned by our vision of
finding a better way to unlock resources for our
customers, for the benefit of our shareholders, our
people and the community.
A key aspect of this year’s financial and operational
success was the completion of the organic growth
strategy. In late 2021 we foresaw the resources upcycle
and invested to expand our fleet in advance of supply
constraints and before those constraints impacted on
supply costs, lead times and funding costs.
The organic growth strategy has positioned the
business to capitalise on increased demand for specialist
drilling services across a range of different commodities.
The success of this initiative has ensured that our fleet
remains world class and that we retain our position as
Australia’s leading provider of drilling services across a
broad range of drilling types and commodities.
SAFETY PERFORMANCE
From an already industry leading position, pleasingly,
the overall safety performance of the Group continued
to improve year-on-year with traditional/custom
safety measures and ratios all significantly improved
in FY23 vs FY22.
We are continually reminded of the safety risks
associated with our business and the importance of
robust systems and controls to manage and mitigate
those risks. The Board and Management remain proud of
the safety performance and culture within the business
that is driven by an industry leading critical risk control
verification program.
Mitchell Services LtdAnnual Report 2023 A key aspect of this year’s success
was the vision to undertake an organic
growth strategy
We remain committed to our strategy
with a focus to deliver strong shareholder
returns whilst reducing net debt to $15m
FINANCIAL PERFORMANCE
FY23 benefited from the hard work and heavy lifting that
was undertaken in FY22 in the execution of the organic
growth strategy. The strategy is now complete and has
delivered a substantial and expanding contract base
which has translated into significant improvements in
financial performance when comparing FY23 to FY22.
Profit and Loss
The Group generated post tax profits and earnings per
share in FY23 of $7.6m and 3.4c respectively which
represents a significant and fundamental improvement on
the FY22 break-even position.
Cash flow
The Company’s cash balance increased from $3.8m
on 30 June 2022 to $11.1m on 30 June 2023 with the
material improvement driven by a combination of
strong EBITDA performance and increasing operating
cash conversion rates.
Balance Sheet
The Group’s net assets increased by nearly 9% from
$61.7m at 30 June 2022 to $67.1m at 30 June 2023.
Given the significant improvement in profitability and
cashflow, Group net debt decreased by over 50% to
$17.6m at 30 June 2023 whilst the Group’s net current
ratio improved by approximately 25% to 1.2 times.
CAPITAL MANAGEMENT
We intend to continue to return surplus cash to
shareholders under the Capital Management Policy
announced in June 2022. Below is a summary of the
implementation of the capital management strategy
measured against our previously stated objectives.
Shareholder returns
I am delighted to confirm that the Board has declared
a partially franked final FY23 dividend of 2.08cps which
represents a payout ratio of approximately 61%. The
payment date for the dividend is 15 September 2023 and
the total estimated dividend is $4.5m.
The Company will continue to explore opportunities
to dispose of non-core or surplus equipment, and
apply proceeds towards the on market share buyback
that is currently active. To date the Company has
purchased approximately 10.6m shares at a total cost
of approximately $4.0m ($0.38 per share). On the
basis that there were 224.9m ordinary shares on issue
at the time the buyback was implemented, the 10.0m
shares bought back represents a capital reduction of
approximately 4.3%.
The aggregate of the share buy back payments to
date and the FY23 dividend payment represents
funds returned to shareholders of $8.5m which, when
considering the current MSV market capitalisation, is an
outstanding result.
Leverage
Net debt peaked at $39.2m on 30 June 2022 following
the completion of the FY22 capital investment program.
After the substantial reduction in net debt during FY23,
and allowing for the continuation of shareholder returns,
the Company remains on track to meet its net debt target
of $15.0m by June 2024.
FY24 STRATEGY
Given the broader economic environment in which we
currently operate, with rising interest costs and a level
of geopolitical uncertainty, our short-term strategy
heading into FY24 is to remain committed to the current
capital management strategy with a focus on operational
excellence to deliver strong shareholder returns and
achieve our net debt target of $15.0m. We believe the
targeted reduction in leverage will position us to take
advantage of potential growth opportunities should they
arise during the coming uncertain economic conditions.
In closing, I would once again like to thank all staff,
customers, suppliers and shareholders for your
continued support.
On behalf of the Board, thank you.
Nathan Andrew Mitchell
Executive Chairman
3
Mitchell Services LtdAnnual Report 2023 CHIEF EXECUTIVE
OFFICER’S REPORT
For the year ended 30 June 2023
Dear Shareholders
I am pleased to provide the following CEO report for
Mitchell Services Limited (the Company) for the financial
year ended 30 June 2023 (FY23). Operationally, whilst
not without its challenges, FY23 represented another
extremely successful year for the Company.
The first quarter of FY23 saw the finalisation of the
organic growth strategy, with all 12 state of the art LF160
drill rigs operational for the first time across a diverse
range of projects with global mining majors. This strategy
resulted in record revenue and strong EBITDA generation
whilst ensuring that the Company’s fleet remained world
class and industry leading across a range on commodities
and drilling types.
Whilst revenue continued to grow on a year-on-year basis
in the second and third quarters of FY23 (underpinned by
an expanded and substantial contract book), the business
had to navigate a series of unexpected challenges that
temporarily restricted operating margins and further
revenue growth. These challenges included unplanned
variations to several contracts as well as significant wet
weather events that impacted operations and led to
longer than anticipated seasonal shutdowns in some
locations. Demobilisation and ramp up costs associated
with re-locating rigs temporarily diluted earnings after
unplanned contract changes.
II could not be prouder of our operational teams for the
manner in which they responded to these challenges.
I remain very proud of our culture and in particular our
safety culture and performance which is industry leading.
Our safety function is comprised of passionate industry
professionals who possess some of the most innovative
minds with regard to all aspects of operational health and
safety. The team is a finalist in the HSE Team of the Year
award at the prestigious Australian Workplace Health &
Safety awards.
Andrew Michael Elf
Chief Executive Officer
4
Mitchell Services LtdAnnual Report 2023 I could not be prouder of our teams for
the manner in which they responded to
these challenges
FY23 saw the company record its
highest ever revenue and EBITDA
In closing, I would like to again thank our employees for
their hard work and dedication and shareholders for their
continued support. As I reflect on what a challenging but
successful year FY23 has been, I am extremely excited
to enter the new financial year. Underpinned by a highly
skilled workforce of over 750 valued employees and
boasting one of Australia’s largest, most diverse and
highest quality fleets, the Company is extremely well
placed to increase earnings year on year.
Thank you
Andrew Michael Elf
Chief Executive Officer
It was wonderful to end the financial year in a safe and
productive manner. The fourth quarter performance was
outstanding. It was a quarter that saw the Company deliver
several financial and operational records. EBITDA of $15.0m
was the highest ever quarterly result for the Company, as
were revenue, cashflow and debt reduction. The fourth
quarter result was driven by various factors including:
• The absence of unplanned contract variations and
associated mobilisations and demobilisations.
• The absence of significant wet weather events
• The favourable shift in the mix of revenue by drilling
type with a larger portion of the fleet providing highly
technical specialist drilling services
• The successful way operational teams responded to the
unplanned challenges in the second and third quarters.
Stepping back and looking at the full year’s results it
is pleasing to note FY23 saw the Company record its
highest ever annual revenue and EBITDA. Revenue and
EBITDA for FY23 were $243.1m and $41.2m respectively
which represents increases of 14% and 28% when
compared to FY22 figures.
These increases were driven by a combination of
increased utilisation and pricing. The average operating
rig count in FY23 was 77.5 compared to 74.8 in FY22, with
the increase largely due to new or expanding contracts.
The material increase to revenue and earnings was also
driven by a favourable shift in the mix of revenue by
drilling type.
Acknowledging that the capital management strategy is
extensively addressed in the Chairman’s letter, it would
be remiss of me not to comment on the significant
FY23 highlights which included a record year on year
net debt reduction of $21.6m (or 55%) as well as a
record dividend of 2.08 cents per share. Total capital
expenditure for FY23 was $12.6m which represented
a reduction of 71% when compared to the FY22 figure
of $44.0m. Maintenance capex continues to support
high levels of availability across all equipment with
breakdown rates remaining negligible.
5
Mitchell Services LtdAnnual Report 2023 CURRENT
BUSINESS
SUMMARY
VISION
“Finding a better
way to unlock
resources for
our customers,
for the benefit of
our shareholders,
our people and the
community.”
RECORD REVENUE
$243.1m
14%
FROM FY22
OPERATING CASHFLOW
$35.6m
60%
FROM FY22
6
Mitchell Services Ltd
Annual Report 2023
RECORD EBITDA
$41.2m
PROFIT AFTER TAX
$7.6m
28%
FROM FY22
100%
FROM FY22
SAFETY PERFORMANCE
INDUSTRY LEADING
DRIVEN BY CRITICAL
RISK CONTROL
VERIFICATION PROGRAM
RETURN ON INVESTED
CAPITAL 12.5%
941%
FROM FY22
Annual Report 2023
Mitchell Services Ltd
7
The Directors of Mitchell Services Limited submit
herewith the financial report of Mitchell Services Limited
(Company) and its subsidiaries (Group) for the year
ended 30 June 2023 (FY23). In order to comply with the
provisions of the Corporations Act 2001, the Directors’
report as follows.
DIRECTORS
The names and particulars of the Directors of the
Company during or since the end of the financial
year are:
Nathan Andrew Mitchell
(Executive Chairman)
Mr Mitchell was appointed to the Board on
29 November 2013 and appointed as Executive
Chairman on 19 March 2014.
Mr Mitchell has been involved in the drilling industry
for virtually his entire life. With a career spanning over
30 years, he has a proven track record as an industry
leader in technical development and business growth.
As CEO of Mitchell Drilling Contractors prior to its sale in
2008, Mr Mitchell led that business through a period of
rapid local growth and directed an international expansion
into India, China, Indonesia, the United States of America
and southern Africa. Other current directorships include
Mitchell Drilling International Pty Ltd.
At the date of this report, Mr Mitchell has relevant
interests in 41,858,408 shares.
Scott David Tumbridge
(Executive/Non-Executive Director)
Mr Tumbridge was appointed as Executive Director
on 29 November 2019 following the acquisition of
Deepcore Drilling by the Company. He remained an
Executive Director until 31 January 2023 and became
a Non-Executive Director on 1 February 2023.
Mr Tumbridge (the founder of Deepcore Drilling) has
over 25 years’ experience in the Australasian mining
and drilling industries and a proven track record in
business development, innovation and operational
excellence. Mr Tumbridge brings a wealth of specialist
industry knowledge to the Mitchell Services board.
At the date of this report, Mr Tumbridge has relevant
interests in 16,184,612 shares.
Peter Richard Miller
(Non-Executive Director)
Mr Miller was appointed as Director on 8 February 2011.
Mr Miller has been involved in all aspects of the drilling
industry for the past 30 years and founded Drill Torque in
1992. His experience encompasses working with all types of
drilling rigs, building rigs and managing drilling companies.
Having worked in most exploration areas in Australia, he
is intimately familiar with drilling conditions, equipment
requirements and pricing structures to maximise fleet
productivity. Mr Miller is widely known and well regarded in
the industry.
At the date of this report, Mr Miller has relevant interests in
2,412,505 shares.
Robert Barry Douglas BCom, LLB
(Non-Executive Director)
Mr Douglas was appointed as Non-Executive Director
on 29 November 2013. Mr Douglas has over 20 years’
experience in finance and investment banking and is
currently an Executive Director of Morgans Financial.
Mr Douglas has experience in all aspects of corporate
advisory and equity capital raising for listed public
companies and companies seeking to list, including
offer structure, prospectus preparation, due diligence,
accounts and forecasting, risk management, sales and
marketing, logistics and legal requirements. During
his career, Mr Douglas has worked extensively with
energy and resource companies. Mr Douglas has
served on both the Audit and Risk Committee and the
Remuneration and Nomination Committee since 20
March 2014 and was Chairman of both Committees
between 21 November 2014 and 20 October 2015.
At the date of this report, Mr Douglas has relevant
interests in 248,686 shares.
Neal Macrossan O’Connor LLB, GAICD
(Non-Executive Director)
Mr O’Connor was appointed as Non-Executive Director
on 21 October 2015 and is also Chairman of the
Remuneration and Nomination Committee. Mr O’Connor
also previously served as Chairman of the Audit and Risk
Committee from 21 October 2015 to 18 August 2020.
Mr O’Connor was formerly General Counsel and
Company Secretary and an Executive Committee
member of global Xstrata Copper. He has extensive
experience in the resource industry and brings an
added focus on corporate governance and risk
management to the Board.
Mr O’Connor previously served on the Boards of
Stanmore Coal Limited (ASX: SMR) from September
2017 until May 2020, and Maas Group Holdings Limited
(ASX:MGH) from November 2020 to August 2022.
At the date of this report, Mr O’Connor has relevant
interests in 131,499 shares.
8
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Peter Geoffrey Hudson BA (Acc), GAICD, CA
(Non-Executive Director)
Mr Hudson was appointed as Non-Executive Director on
20 July 2020 and is also a member of the Remuneration
and Nomination Committee and the Chairman of the Audit
and Risk Committee.
Mr Hudson is an experienced corporate transaction
specialist with over 25 years’ experience in mergers,
acquisitions, capital raisings, financial analysis, and project
management in Australia and overseas. Previously a
partner at global financial services firm KPMG, he brings
a wealth of financial, risk management and corporate
governance experience to the Board.
At the date of this report, Mr Hudson does not have any
relevant interests in the Company’s shares.
Grant Eric Moyle
(Alternate Director)
Mr Moyle was appointed as Alternate Director for
Mr Nathan Mitchell on 30 May 2014.
Mr Moyle brings to the Group his management and board
experience in international mining services, governance
and strategic business growth.
At the date of this report, Mr Moyle has relevant interests
in 283,532 shares.
CHIEF EXECUTIVE OFFICER
Andrew Michael Elf BCom, FCPA, MBA, GAICD
Andrew has over 20 years of finance, commercial and
operational experience working in various senior roles
both in Australia and overseas and was a financial director
in Indonesia for a top 100 ASX listed Company before
transitioning into the drilling industry in early 2004. Andrew
held several senior roles with Boart Longyear before joining
Mitchell Group in March 2010, where he spearheaded the
growth of the African business.
Andrew has extensive experience in managing drilling
companies in various regions around the world which
have worked for global Tier 1 mining and energy houses.
CHIEF FINANCIAL OFFICER &
COMPANY SECRETARY
Gregory Michael Switala BCom (Hons), CA
Greg joined Mitchell Services in 2014 and has over
16 years’ experience in audit and commercial finance roles.
Over the past eight years, Greg has led the finance team
through a period of substantial growth that has included
significant corporate activity including substantial
acquisitions and capital (both debt and equity) raisings.
PRINCIPAL ACTIVITIES
The Group provides exploration and mine site drilling
services to the exploration and mining industries within
Australia and is currently headquartered in Seventeen Mile
Rocks, Queensland.
The Group provides drilling solutions at all stages of the
mining lifecycle, in both the energy and minerals sectors.
The diversity in operations allows for better management
of the cyclical nature of commodity prices, as well as
giving employees exposure to various forms of drilling as
part of their career development.
The various stages of the mining lifecycle for which the
Group provides drilling services includes:
• Greenfield exploration;
• Project feasibility;
• Mine site exploration and resource definition;
• Development; and
• Production.
There were no significant changes in the Group’s nature
of activities during the year.
CHANGES IN STATE OF AFFAIRS
There was no significant change in the state of affairs of
the Group during the financial year.
LIKELY DEVELOPMENTS
The Group will continue to pursue its principal activities
during the next financial year.
Further information about likely developments in the
operations of the Group and the expected results of those
operations in future financial years has not been included
in this report because disclosure of the information would
be likely to result in unreasonable prejudice to the Group.
ENVIRONMENTAL REGULATIONS
The Group’s operations are not subject to any particular
and significant environmental regulation under a law of
the Commonwealth or a State or Territory.
However, the Group does provide services to entities
that are licensed or otherwise subject to conditions for
the purposes of environmental legislation or regulation.
In these instances, the Group undertakes its compliance
duties in accordance with the contractor regime
implemented by the licensed or regulated entity.
9
Mitchell Services LtdAnnual Report 2023 REVIEW OF OPERATIONS
Safety
Finishing each day without harm is a core Mitchell
Services value and the Group is committed to the safety
of its most important asset – its people. The Group is
particularly focused (amid high demand for drilling
services) on training to attract, retain and further develop
its crews to ensure that service levels and the quality of
the Mitchell brand remain high.
As part of this commitment to finishing each day without
harm, the Group has implemented an industry leading
critical risk management program across the organisation.
This infield program is designed to verify the existence
and effectiveness of critical control measures to prevent
life changing injuries and fatalities.
The Board is proud of the Group’s safety performance
and culture which remains industry leading despite the
continued growth across the business.
Completion of organic growth strategy
The organic growth strategy of pre-ordering 12 new,
state of the art drill rigs was completed early during the
financial year ended 30 June 2023. This was delivered by
the Group ahead of global supply constraints and was
also debt funded at fixed rates which were substantially
locked in before the appreciation in interest rates
over the last 18 months. The strategy has delivered
a substantial and expanding contract base with the
investment returning a substantial increase in earnings
relative to the previous financial year.
Activity levels
General market conditions remained strong throughout
FY23 and the Group has been able to capitalise on this
especially in the second half of the year. The average
operating rig count in FY23 was 77.5 compared to 74.8 in
FY22 with a corresponding increase in shifts to 45,569,
up 1,483 (3.4%) on FY22. These increases in activity levels
as well as favourable pricing, productivity and revenue
mix has seen reported revenue increase by approximately
13.9% from $213.4m in FY22 to $243.1m in FY23.
Monthly Number of Rigs Operating
(over the past 24 months)
90
80
70
60
50
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Year to 30 June 2022
Year to 30 June 2023
Monthly Number of Shifts Worked
(over the past 24 months)
4,500
4,000
3,500
3,000
2,500
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Year to 30 June 2022
Year to 30 June 2023
10
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 The table below illustrates the revenue impact of the increased utilisation, productivity, pricing and revenue mix over the
past 24 months.
Average operating rigs
Number of shifts
Revenue ($’000s)
FY23
77.5
45,569
243,144
FY22
74.8
44,086
213,369
MOVEMENT
MOVEMENT %
2.7
1,483
29,775
3.6%
3.4%
14.0%
Customer base and revenue break-down
As the chart to the right demonstrates, the
Group’s revenue continues to be derived
from large, multinational mining clients
(Tier 1 clients). The drilling services that were
provided to these Tier 1 clients were generally
at producing mine sites and were linked to
the resource definition, development and
production stages within the mine life cycle
as opposed to greenfield exploration.
The Board and management remain
mindful of the importance of diversification
in revenue streams including the mix between
surface and underground drilling and the
mix between different commodity types.
The relevant proportions of revenue derived
from underground drilling and surface drilling
(of 50.2% and 49.7% respectively) remained
well balanced in FY23. The increased
weighting of revenue towards surface
operations during FY23 is due mainly to a full
year’s revenue being earned on the twelve
LF160 drill rigs acquired on a progressive
basis over FY22.
From a commodity perspective, the revenue
mix in FY23 remains well balanced with
the increased weighting towards coking
coal consistent with the increased level of
highly technical specialist drilling services
that were delivered in that sector in FY23.
Revenue from gold, coking coal and other
base metals comprises 41.1%, 39.1% and 19.8%
respectively (FY22 55.8%, 32.1% and 12.1%).
The geographical diversity of revenue
generated in FY23 is more weighted
towards Queensland in FY23, consistent
with the utilisation of the LF160 drill rigs
acquired in FY22 and utilised during the
whole of FY23. Revenue from Queensland,
Victoria and New South Wales comprised
56.4%, 23.4% and 11.1% respectively (FY22
49.0%, 28.4% and 14.1%).
Revenue by Client Type
FY23
FY22
FY21
Tier 1 clients
Other clients
Revenue by Drilling Type
FY23
FY22
FY21
%
2
0
5
.
%
5
6
4
.
%
8
3
4
.
Surface
Underground
Other
Revenue by Commodity
FY23
FY22
FY21
%
1
.
9
3
%
1
.
2
3
%
6
0
3
.
Coking coal
Lead/zinc/silver
Gold
Other
Copper
%
0
8
8
.
%
7
6
8
.
%
2
.
1
8
%
0
2
1
.
%
3
3
1
.
%
8
8
1
.
%
7
9
4
.
%
4
3
5
.
%
1
.
6
5
%
1
.
1
4
%
1
.
0
1
%
2
8
.
%
8
5
5
.
%
7
8
.
%
1
.
3
%
9
2
5
.
%
0
0
1
.
%
6
3
.
11
Mitchell Services LtdAnnual Report 2023
Revenue by Geography
FY23
FY22
FY21
QLD
WA
NSW
VIC
%
0
9
4
.
%
1
.
6
4
%
4
6
5
.
%
1
.
1
1
%
2
3
.
%
1
.
4
1
%
9
5
.
%
6
5
.
%
8
6
1
.
SA
NT
TAS
%
4
3
2
.
%
5
5
.
%
4
8
2
.
%
6
2
.
%
9
9
2
.
Profitability
The table below summarises the key profitability metrics for FY23 versus the prior corresponding period (FY22).
Revenue 1
Operating expenses
EBITDA 2
Depreciation and amortisation 3
EBIT
Finance costs 4
EBT
Taxation (expense)/benefit
Profit after tax
FY23
$M
243.1
(201.9)
41.2
(28.6)
12.6
(2.3)
10.3
(2.7)
7.6
FY22
$M
213.4
(181.2)
32.2
(30.8)
1.4
(1.9)
(0.6)
0.6
0.0
MOVEMENT
$M
MOVEMENT
%
29.7
(20.7)
9.0
2.2
11.2
(0.4)
10.9
(3.3)
7.6
13.9%
(11.4%)
28.0%
7.1%
800.0%
(21.1%)
n.m
(550%)
100.0%
1 As reflected earlier in this Directors’ Report, revenue increased by approximately 13.9% from $213.4m in FY22 to $243.1m in FY23 and was
driven by a combination of increased productivity and pricing as well as the continuation of a favourable shift in the mix of revenue by drilling
type, complemented by the benefit of having a fleet which has a number of rigs able to provide highly technical specialist drilling services.
The average operating rig count in FY23 was 77.5 compared to 74.8 in FY22
2 FY23 has seen the Group achieve a materially increased EBITDA of $41.2m, up 28.0% on FY22 which recorded $32.2m. Driven by the
substantially increased revenues, the final third of FY23 delivered outstanding earnings, underpinned by favourable operating conditions and
a lack of material mobilisations, demobilisations and excessive adverse weather events
3 Depreciation and amortisation in FY23 of $28.6m was 7.1% lower than the FY22 figure of $30.8m with the decrease largely attributable
to lower amortisation of $1.1m (FY22: $3.2m) on the now fully amortised customer contract intangible assets acquired per the Deepcore
acquisition in FY20. Depreciation in FY23 is relatively flat, down $0.2m on FY22, with additional FY23 depreciation on the LF160 fleet
delivered on a staggered basis throughout FY22, partially offset by lower depreciation on certain assets which were depreciated down
to nil in the current year
4 Finance costs in FY23 of $2.3m were 21.1% greater than the FY22 figure of $0.4m with the increase mainly attributable to a full-year’s interest
expense being recognised on debt incurred in FY22 pertaining to the Group’s organic growth strategy, noting that debt associated with
capital acquisitions in FY22 was drawn down on a staggered basis and weighted towards the second half of FY22
12
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Cash flow
The table below summarises the key cashflow metrics for FY23 versus the prior corresponding period (FY22).
Cash flows from operating activities1
Payments for PPE (net of proceeds from sales)3
Deepcore earnout payment
Proceeds from issue of shares (net of costs)2
Payments for shares bought back3
Net repayment of borrowings3
Increase/(decrease) in cash and
cash equivalents
FY23
$M
35.6
(7.8)
(0.2)
–
(2.5)
(17.7)
7.4
FY22
$M
22.2
(17.3)
(2.1)
9.8
–
(13.1)
(0.5)
MOVEMENT
$
MOVEMENT
%
13.4
9.5
1.9
(9.8)
(2.5)
(4.6)
7.9
60.4%
54.9%
90.5%
(100.0%)
100.0%
(35.1%)
n.m
1
2
Cash flows from operating activities in FY23 of $35.6m was 60.4% greater than the FY22 figure of $22.2m, benefiting from the materially
increased earnings reported by the Group. On a full-year basis and relative to EBITDA, this equates to a pleasing cash conversion ratio of
86.4%, or 100.2% for the second half of the financial year
To support the funding of the FY22 organic growth strategy, the Group completed a fully underwritten accelerated non-renounceable
entitlement offer, raising approximately $9.8m in FY22
3 Payments for PPE are materially lower than FY22 which was focused on implementing the Group’s organic growth strategy. Capital expenditure
in FY23 was reduced and in line with the Group’s focus of leveraging off the substantial operating cashflow generation to fund debt reductions
coupled with the emphasis on shareholder returns through dividends and share buy backs (refer discussion on Capital Management on page 14)
Financial position
The following table summarises the Group’s financial position at 30 June 2023 and 2022.
2023
$M
2022
$M
MOVEMENT
$
MOVEMENT
%
Current assets
Non-current assets
Total assets
Current liabilities
56,782,037
49,207,524
7,574,513
77,822,718
94,077,586
(16,254,868)
134,604,755
143,285,110
(8,680,355)
47,453,836
51,005,641
3,551,805
Non-current liabilities
20,050,517
30,532,818
10,482,301
Total liabilities
Net assets
67,504,353
81,538,459
14,034,106
67,100,402
61,746,651
5,353,751
15.4%
(17.3%)
(6.1%)
7.0%
34.3%
17.2%
8.7%
The Group’s current ratio improved significantly to 1.20
from 0.96 at 30 June 2022, in particular attributable to
a much greater cash balance of $11.1m at 30 June 2023
(2022: $3.7m) driven by the substantial EBITDA generation
in particular during the final quarter of the financial year.
Strong operating cashflow generation (refer cash flow
commentary) has also assisted in funding a significant
reduction in Gross Debt. At 30 June 2023 this sits at
$28.8m (comprising $24.2m equipment hire purchase
facilities and a term loan of $4.6m), down $14.2m
(33.1%) on the balance at 30 June 2022 of $42.9m
(which comprised $35.2m equipment hire purchase
facilities and a term loan of $7.7m). This latter balance
represented an expected peak in gross debt and was
largely attributable to new equipment hire purchase
facilities settled in FY22 to assist in the funding of the
material capital investment program pursuant to the
Group’s organic growth strategy.
Taking into account the improved cash balance at 30 June
2023, Net Debt (defined as Gross debt less cash and cash
equivalents) has reduced by approximately 55% to $17.6m at
30 June 2023 from $39.2m at 30 June 2022.
13
Mitchell Services LtdAnnual Report 2023
Capital management
Following the success of the organic growth strategy, the
Group has implemented a formal capital management
policy. As it delivers on its organic growth strategy, the
Group will emphasise a measured and structured approach
to capital deployment whilst ensuring prioritisation of capital
to the Group’s financial position and shareholder returns
through dividends and buy-backs.
Shareholder returns
The Board’s position on shareholder returns is that a
portion of free cashflows generated from earnings/profits
should be returned to shareholders via a dividend. The
current dividend policy allows dividends of up to 75% of
post-tax profits.
The Company will continue to apply proceeds from any
equipment sales towards the on market buy back that is
active as at the date of this report. As at 30 June 2023
the Company had purchased approximately 6.8m shares
at a total cost of approximately $2.5m ($0.37 per share).
EVENTS AFTER THE REPORTING DATE
On-market share buy back
As referred above, the Group is undergoing an on-market
share buy back with 6.8m shares having been bought back
for a combined consideration of $2.5m, net of transaction
costs, by 30 June 2023.
Subsequent to 30 June 2023, the Group has bought back
an additional 3.8m shares for a combined consideration of
$1.6m meaning, to date, the number of shares bought back
total 10.6m shares for a combined consideration of $4.0m
net of transaction costs.
Dividends
On 23 August 2023, the Board declared a partially franked
dividend of 2.08 cents per share to holders of fully paid
ordinary shares on 30 August 2023 (Record Date). The
payment date for the dividend is 15 September 2023 and
the total estimated dividend is $4.5m.
DIVIDENDS
No dividends were paid during the year ended
30 June 2023 (2022: nil). Refer details in note directly
above with respect to the declaration of a dividend
post reporting date.
SHARES UNDER OPTION
Details of unissued shares or interests under option as at
the date of this report are:
GRANT DATE
EXPIRY DATE
EXERCISE
PRICE
NUMBER
UNDER
OPTION
23 May 2016
7 years after vesting
$0.395
1,367,898
4 August 2017 7 years after vesting
$0.539
841,360
14 June 2018
7 years after vesting
$0.703
811,312
14 June 2019
7 years after vesting
$1.100
617,489
1 June 2020
7 years after vesting
$0.910
812,462
31 May 2021
7 years after vesting
$0.690
1,048,870
23 June 2022
7 years after vesting
$0.630
1,549,788
31 May 2023
7 years after vesting
$0.620
1,606,007
8,655,186
Options per the above table were offered under the
Company’s Executive Share and Option Plan (ESOP).
Further details in relation to the ESOP are provided as
part of the Remuneration Report on pages 16 to 25.
During the year ended 30 June 2023, there were no
shares in Mitchell Services Limited issued on the exercise
of options (2022: nil).
INDEMNIFICATION OF OFFICERS
AND AUDITORS
During the financial year, the Company has given an
indemnity or entered into an agreement to indemnify, or
paid or agreed to pay insurance premiums as follows:
The Company has paid premiums to insure each of the
Directors and Company Officers against liabilities for
costs and expenses incurred by them in defending legal
proceedings arising from their conduct while acting in
the capacity of Director or Officer of the Company other
than conduct involving a wilful breach of duty in relation
to the Company. The total premiums paid in this regard
amounted to $270,515.
The Company has not otherwise, during or since the
end of the financial year, except to the extent permitted
by law, indemnified or agreed to indemnify an officer or
auditor of the Company against a liability incurred as such
an officer or auditor.
14
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 PROCEEDINGS ON BEHALF OF
THE COMPANY
No person has applied for leave of court to bring
proceedings on behalf of the Company or 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 any part of those proceedings.
The Company was not a party to any such proceedings
during the year.
DIRECTORS’ MEETINGS
The following table sets out the number of Directors’
meetings (including meetings of Committees of Directors)
held during the financial year and the number of meetings
attended by each Director (while they were a Director or
Committee Member). During the financial year, 12 Board
meetings, 3 Remuneration and Nomination Committee
meetings and 2 Audit and Risk Committee meetings
were held.
DIRECTORS
BOARD OF DIRECTORS
REMUNERATION AND
NOMINATION COMMITTEE
AUDIT AND
RISK COMMITTEE
N. Mitchell
P. Miller
R. Douglas
N. O’Connor
S. Tumbridge
P. Hudson
Entitled to
Attend
Attended
Entitled to
Attend
Attended
Entitled to
Attend
Attended
11
11
11
11
11
11
11
9
10
10
11
11
–
–
2
2
–
2
–
–
2
2
–
2
–
–
3
3
–
3
–
–
3
3
–
3
NON-AUDIT SERVICES
There were no amounts paid or payable to the auditor
for non-audit services provided during the year by the
auditor. Refer to Note 23 to the Financial Statements.
AUDITOR’S INDEPENDENCE
DECLARATION
The Auditor’s Independence Declaration is included
on page 33 of the Annual Report.
15
Mitchell Services LtdAnnual Report 2023 REMUNERATION REPORT – AUDITED
This Remuneration Report, which forms part of the
Directors’ Report, sets out information about the
remuneration of the Group’s Key Management Personnel
(KMP) for the financial year ended 30 June 2023. The
term Key Management Personnel refers to those persons
having authority and responsibility for planning, directing
and controlling the activities of the Group, directly or
indirectly, including any Director (whether executive or
otherwise) of the Group.
Key Management Personnel
The Directors and other KMP of the Group during
or since the end of the financial year were:
• Nathan Andrew Mitchell (Executive Chairman)
• Scott David Tumbridge (Executive Director until
31 January 2023; Non-executive Director from
1 February 2023)
• Peter Richard Miller (Non-Executive Director)
• Robert Barry Douglas (Non-Executive Director)
• Neal Macrossan O’Connor (Non-Executive Director)
• Peter Geoffrey Hudson (Non-Executive Director)
• Andrew Michael Elf (Chief Executive Officer)
• Gregory Michael Switala (Chief Financial Officer
and Company Secretary)
Remuneration Policy
The Remuneration Policy of the Group has been designed
to align KMP objectives with shareholder and business
objectives by providing a fixed remuneration component
and offering specific short-term and long-term incentives
to key employees based on key performance areas
affecting the Group’s financial, operational and safety
results. The Board believes the Remuneration Policy to be
appropriate and effective in its ability to attract and retain
high quality KMP to run and manage the Group.
The Board’s policy for determining the nature and amount
of remuneration for KMP of the Group is as follows:
• The Remuneration Policy is developed by the
Remuneration and Nomination Committee and
approved by the Board;
• All KMP receive a base salary (which is based on
factors such as length of service and experience) and
superannuation. They may also receive fringe benefits
and performance incentives (both short term and
long term);
• The extent to which KMP receive performance
incentives will depend on the performance
of the Group with reference to specific key
performance indicators;
• The performance indicators relating to incentives are
aligned with the interests of the Group and therefore
shareholders; and
• The Remuneration and Nomination Committee
reviews KMP packages annually by reference to the
Group’s performance, executive performance and
comparable information from industry sectors.
Executive remuneration components
Under the Group’s remuneration framework for the
year ended 30 June 2023, the following remuneration
components were available to executive KMP:
• Fixed remuneration that comprises salary and other
benefits including superannuation;
• Short term incentives that comprise a cash-based
performance bonus, the extent of which will depend
on the Group’s financial and safety performance
and is designed to attract the highest calibre
of executives and senior managers and reward
them for performance results leading to growth in
shareholder value; and
• Long term incentives that comprise an equity
only component whereby equity instruments are
issued (subject to financial, operational and safety
performance-based vesting conditions) to executives
and senior managers under the Group’s Executive
Share and Option Plan (ESOP) designed to reward
those executives and managers for long term growth
in shareholder value.
The above structure is designed to provide an appropriate
mix of variable and fixed remuneration and to provide an
appropriate mix of short-term and long-term incentives
to attract and retain high quality KMP and to align
incentives with the short-term and long-term objectives
of the Group.
Fixed Remuneration
The level of fixed remuneration is determined based on
various factors including length of service, experience,
qualifications and with reference to remuneration paid
by similar sized companies in similar industries and is
designed to attract and retain high quality executive KMP.
KMP receive a superannuation guarantee contribution
required by the government, which was 10.5% of the
individual’s ordinary earnings, and do not receive any
other retirement benefits. Some individuals have chosen
to sacrifice part of their salary to increase payments
towards superannuation. Accrued entitlements are paid
to KMP upon cessation of employment. KMP will receive
redundancy benefits if applicable.
16
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 The fixed remuneration paid to executive KMP during the 2023 and 2022 financial years is set out below:
EXECUTIVE KMP
SHORT TERM
EMPLOYEE
BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG-TERM
MONETARY
BENEFITS
NON-
MONETARY
BENEFITS
TOTAL FIXED
REMUNERATION
Salary
$
Superannuation
$
Long Service Leave2
$
Motor Vehicles3
$
Nathan Andrew Mitchell 2023
2022
Executive Chairman
200,000
200,000
Scott David Tumbridge1 2023
2022
Executive Director
Andrew Michael Elf
Chief Executive Officer
2023
2022
Gregory Michael Switala 2023
Chief Financial Officer
and Company Secretary
2022
112,154
180,000
430,961
433,333
324,167
300,000
21,000
20,000
11,776
18,000
45,251
43,333
31,786
30,000
–
–
–
–
9,213
19,994
11,926
6,478
–
–
–
–
14,438
14,438
9,934
9,934
Total
$
221,000
220,000
123,930
198,000
499,863
511,048
377,813
346,412
1
2
3
Effective 1 February 2023, Scott Tumbridge’s directorship appointment was amended from being executive to non-executive in nature with
his salary being revised to $70,000 from the previous $180,000 (both exclusive of superannuation). The amounts disclosed above relate
solely to earnings in his executive capacity
These amounts were not actually provided to KMP during the financial year. This is the change in accrued long service leave and is measured
in accordance with AASB 119 Employee benefits
The figures in this column relate to use of a Company motor vehicle to carry out duties as well as reasonable personal use. The amount
included in the above remuneration table is the value attributable to such personal use calculated in accordance with the statutory
requirements of the Fringe Benefits Tax Act 1986
Short term incentives
During the 2023 and 2022 financial years, the following cash-based, short-term performance bonuses were paid
to executive KMP.
EXECUTIVE KMP
Andrew Michael Elf
Chief Executive Officer
Gregory Michael Switala
Chief Financial Officer and
Company Secretary
2023
2022
2023
2022
PERFORMANCE BONUS
$
PERCENTAGE OF FIXED REMUNERATION
%
168,750
200,000
112,500
150,000
34.39%
40.72%
30.75%
44.13%
The performance bonuses paid during the 2023 and 2022 financial year were based on the financial results and safety
performance of the Group during the 2022 and 2021 financial years respectively. The extent of the bonus paid is at the
discretion of the Board. To demonstrate the relationship between the short-term performance bonus payments and
Group performance, the table below sets out summary information about the Group’s revenue, EBITDA, earnings per
share, share price and safety performance between 30 June 2019 and 30 June 2023.
Revenue ($000’s)
EBITDA ($000’s)
Earnings per share (cents per share)
Share price (closing)*
Lost Time Injury Frequency Rate (LTIFR)
30 JUN 19
30 JUN 20
30 JUN 21
30 JUN 22
30 JUN 23
120,205
175,555
191,384
213,369
243,144
24,112
10.0
$0.57
1.08
34,951
25,875
32,153
41,167
3.8
$0.54
2.44
(3.0)
0.0
3.4
$0.40
0.66
$0.32
$0.39
1.23
1.18
*
Where applicable share prices adjusted retrospectively to take into account the one for ten capital consolidation that took place on 7 Feb 2020.
17
Mitchell Services LtdAnnual Report 2023
Long-term employee benefits
Mitchell Services Limited operates an Executive Share and
Option Plan (ESOP) for executives and senior employees
of the Group. In accordance with the provisions of the
plan, as approved by shareholders at a previous annual
general meeting, the Board may designate a Director or
employee of the Company as an eligible participant of the
ESOP (Eligible Participant). The Board may offer rights,
options or shares to an Eligible Participant under the
ESOP. A participant is not required to pay for the grant of
any rights or options or for the issue of shares.
In the case of the shares:
(a)
(b)
Shares issued under the ESOP are held by a
designated Corporate Trustee subject to the
satisfaction of vesting conditions.
Upon satisfaction of vesting conditions, shares
will be issued for nil consideration.
Offers made under the ESOP in 2023 and 2022
The table below summarises the shares and options
offered to KMP pursuant to the ESOP during the 2023
and 2022 financial years.
The objectives of the ESOP are to:
• Attract and retain a high standard of managerial and
technical personnel for the benefit of the Group;
• Establish a method by which Eligible Participants can
participate in future growth and profitability of the
Group; and
• Provide an incentive and reward for Eligible
Participants for their contributions to the Group.
Equity instruments issued under the ESOP are subject
to satisfaction of certain vesting conditions (tested two
years after the offer date).
These performance conditions are detailed on page 20.
The Board may, at its absolute discretion, vary, add,
remove or alter the vesting conditions and indicative
proportional allocation for respective Eligible Participant
roles in circumstances in which the Board considers
that such a change is appropriate to ensure that the
vesting conditions and proportional allocation of them
continue to represent a fair measure of performance. The
vesting conditions are tested two years after the relevant
securities are offered to an Eligible Participant.
The ESOP instruments are offered under the following
major terms:
In the case of the options:
Using a Black-Scholes pricing model for the options and
closing market price for the shares, the table also sets
out the estimated fair value of the ESOP instruments at
grant date (or estimated grant date) and the percentage
that value represents with reference to the KMP’s
fixed remuneration. The table also demonstrates that
a significant majority of equity instruments granted in
each year under the ESOP were in the form of options
(as opposed to shares) and that the exercise prices (or
“strike prices”) of those options were between 70% and
80% greater than the 30-day VWAP of MSV shares at the
date of the offer. This means that for an option granted
under the ESOP to be “in the money”, shareholder value
(in the form of the share price) would need to increase
significantly between the offer date and the exercise date.
All instruments offered under the ESOP in 2023 and
2022 and shown in the table below are subject to vesting
conditions which will be tested two years after the offer
date. That is, vesting conditions will be tested on 23 June
2024 for offers made in 2022 and on 31 May 2025 for
offers made in 2023.
(a)
(b)
Subject to the satisfaction of vesting conditions,
each option entitles the holder to purchase one
fully paid ordinary share at an agreed purchase
price (exercise price) as outlined in the offer.
The options will expire on a date that is the earlier of:
(i)
the date upon which it is deemed that the
vesting conditions have not been met
the date upon which the employee ceases
employment
(ii)
(iii) seven years after vesting date.
(c)
Options granted do not carry dividend or
voting rights.
18
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 KMP
Andrew Michael Elf
Gregory Michael Switala
Andrew Michael Elf
Gregory Michael Switala
AWARD
Options
Shares
Options
Shares
Options
Shares
Options
Shares
GRANT
DATE1
NUMBER OF
INSTRUMENTS
FAIR
VALUE PER
INSTRUMENT
AT GRANT
DATE*
FAIR VALUE OF
INSTRUMENTS
AT GRANT
DATE*
OPTION
STRIKE
PRICE
31 May
2023
31 May
2023
31 May
2023
31 May
2023
23 June
2022
23 June
2022
23 June
2022
23 June
2022
414,552
$0.0723
$29,951
$0.62
124,528
$0.3850
$47,943
na
304,047
$0.0723
$21,967
$0.62
91,333
$0.3850
$35,163
na
425,566
$0.0668
$28,422
$0.63
127,836
$0.0315
$40,268
na
284,285
$0.0668
$18,990
$0.63
85,397
$0.0315
$26,900
na
DATE
AWARD
MAY
VEST
31 May
2025
31 May
2025
31 May
2025
31 May
2025
23 June
2024
23 June
2024
23 June
2024
23 June
2024
*
1
For purposes of the above table, the fair value of the shares was determined with reference to the closing market price of a fully paid ordinary
MSV share. In the case of the options, fair value was determined using a Black-Scholes pricing model with the following key assumptions and
inputs in the measurement: Due to the deferral of the grant date (for purposes of AASB 2 Share-Based Payment expense recognition) until
the date upon which vesting is determined, the grant date fair value has been updated and provisionally estimated at the year-end date.
Reflects date these options were initially offered. These options will only become exercisable on the vesting date (the extent to which will
be subject to the achievement of vesting conditions) and, as such, the grant date for purposes of AASB 2 Share-Based Payment expense
recognition is deferred until such time. The grant date fair value is estimated at the reporting date
With respect to the 2022 comparatives above, the fair values attributed reflect the valuations disclosed in the
2022 Remuneration Report based on valuations at that time and have not been updated to reflect the change in
market values as at 30 June 2023.
PROVISIONALLY GRANTED
DURING YEAR ENDED
30 JUNE 2023
PROVISIONALLY GRANTED
DURING YEAR ENDED
30 JUNE 2022
Share price
Exercise price
Expected volatility
Expected life (after vesting)
Risk-free interest rate
Dividend yield
Fair value per option
$0.3850
$0.62
47%
3.5 years
4.01%
3.24%
$0.0723
$0.3150
$0.63
56%
3.5 years
3.21%
0%
$0.0668
19
Mitchell Services LtdAnnual Report 2023 The vesting conditions in relation to the 2022 and 2023 offers are as follows:
(a)
(b)
(c)
(d)
Reported profit after tax performance of the Company having regard to respective prior years profit
performance and performance against budget over the vesting period.
The Company’s share price performance between the date of the offer and vesting date
The Company’s safety performance across all operations as determined on a financial year annual LTIFR (Lost
Time Injury Frequency Rate) basis having regard to the respective prior year’s LTIFR performance, and
EBITDA performance of the Company having regard to respective prior years EBITDA performance and
performance against budget over the vesting period.
The proportion of the vesting conditions listed above varies according to each Eligible Participant’s role, with the
following table providing indicative guidelines.
ROLE
Chief Executive Officer
Corporate Management
Operational Management
(A)
30%
40%
–
(B)
30%
40%
–
(C)
30%
20%
50%
(D)
10%
–
50%
Vesting of 2021 and 2020 ESOP instruments in 2023 and 2022
The table below summarises the equity instruments offered to KMP pursuant to the ESOP during the 2021 and 2020
financial years and the extent of vesting of those instruments in 2023 and 2022. The number of instruments, fair value of
instruments and option strike price have been adjusted on a retrospective basis to reflect the impact of the one for ten
capital consolidation that took place on 7 February 2020.
KMP
AWARD
GRANT
DATE2
NUMBER OF
INSTRUMENTS
VESTED IN
FY2023
VESTED IN
FY2022
FAIR
VALUE PER
INSTRUMENT
AT VESTING
DATE*
EXERCISABLE
AT 30 JUNE
2023
OPTION
STRIKE
PRICE
Andrew
Michael Elf
Gregory
Michael
Switala
Andrew
Michael Elf
Gregory
Michael
Switala
Options
31 May 2021
258,366
180,856
Shares
31 May 2021
103,481
72,437
Options
31 May 2021
167,710
117,397
Shares
31 May 2021
77,610
54,327
–
–
–
–
$0.0530
180,856
$0.69
$0.35
na
na
$0.0530
117,397
$0.69
$0.35
na
na
Options
1 June 2020
Shares
1 June 2020
Options
1 June 2020
Shares
1 June 2020
241,681
75,598
150,170
45,109
–
–
–
–
194,553
$0.0408
194,553
$0.91
60,856
$0.30
na
na
111,126
$0.0408
111,126
$0.91
33,381
$0.30
na
na
*
For purposes of the above table, the fair value of the shares was determined with reference to the closing price of the Company’s fully paid
ordinary shares on vesting date. In the case of the options, fair value was determined using a Black-Scholes pricing model with the following
key assumptions and inputs in the measurement:
2 Reflects date these options were initially offered. These options will only become exercisable on the vesting date (the extent to which will
be subject to the achievement of vesting conditions) and, as such, the grant date for purposes of AASB 2 Share-Based Payment expense
recognition is deferred until such time. The grant date fair value is estimated at the reporting date
20
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Share price
Exercise price
Expected volatility
Expected life (after vesting)
Risk-free interest rate
Dividend yield
Fair value per option
VESTED DURING
YEAR ENDED
30 JUNE 2023
VESTED DURING
YEAR ENDED
30 JUNE 2022
$0.3475
$0.69
50%
3.5 years
3.37%
3.60%
$0.30
$0.91
55%
3.5 years
2.97%
0%
$0.0530
$0.0408
In making a determination as to the extent of vesting of the 2020 and 2019 ESOP instruments (in 2022 and 2021
respectively), Directors considered the Group’s performance against the following applicable vesting conditions:
(a)
(b)
(c)
(d)
EBITDA performance of the Group having regard to respective prior years’ EBITDA performance, performance
against budgets and general market conditions between the date of the offer and the vesting date
share price performance between the date of the offer and the vesting date
safety performance across all operations as determined on a financial year annual TRIFR basis, having regard to
respective prior years’ TRIFR performance
operational performance, having particular, regard to key operational metrics.
The proportion of the vesting conditions listed above varies according to each Eligible Participant’s role, with the
following table providing indicative guidelines.
ROLE
Chief Executive Officer
Corporate Management
Operational Management
(A)
30%
40%
–
(B)
30%
40%
–
(C)
30%
20%
50%
(D)
10%
–
50%
21
Mitchell Services LtdAnnual Report 2023 To demonstrate the relationship between the extent of vesting and the Group’s performance over the applicable vesting
periods, the table below sets out summary information about the EBITDA, share price (adjusted retrospectively to take
into account the one for ten capital consolidation that took place on 7 Feb 2020), safety and operational (revenue)
performance between 30 June 2019 and 30 June 2023.
30 JUN 2019
30 JUN 2020
30 JUN 2021
30 JUN 2022
30 JUN 2023
EBITDA ($000’s)
Share price (30-day VWAP)
Total Recordable Injury Frequency Rate
(TRIFR)
24,112
63.2c
14.09
34,951
48.5c
25,875
40.5c
11.62
7.34
32,153
29.8c
9.20
41,167
34.3c
4.30
Revenue ($000’s)
120,205
175,554
191,364
213,369
243,144
In addition to a cash-based fee (or salary), Non-Executive
Directors receive a superannuation guarantee contribution
required by the government, which during FY23 was
10.5% of the individual’s ordinary earnings, and do not
receive any other retirement benefits. Some individuals
have chosen to sacrifice part of their salary to increase
payments towards superannuation.
The aggregate cap on annual fees paid to Non-Executive
Directors is currently $450,000, as approved by
shareholders at the 2020 Annual General Meeting.
The remuneration levels for Non-Executive Directors
(including fees for the Chairman of the Audit & Risk
Committee and Remuneration and Nominations
Committee) is summarised below (exclusive of
superannuation).
FY23
$
FY22
$
Non-Executive Director Fees
70,000
70,000
Chairman of the Audit and Risk
Committee
10,000
10,000
Chairman of the Remuneration and
Nomination Committee
10,000
10,000
Committee member
5,000
5,000
Employment details of members of Key
Management Personnel
The employment terms and conditions of KMP are
formalised in contracts of employment. A contracted
person deemed employed on a permanent basis may
terminate their employment by providing the relevant
notice period as outlined below.
Andrew Michael Elf
Gregory Michael Switala
NOTICE PERIOD
3 months
3 months
The Remuneration and Nominations Committee
engaged Godfrey Remuneration Group (Godfrey) as
remuneration consultant to undertake a senior leadership
team remuneration review. Godfrey was paid $17,000 to
undertake the review.
Non-Executive Director Remuneration
Fees for Non-Executive Directors are set at a level to
attract and retain Directors with the necessary skills
and experience to allow the Board to have a proper
understanding of, and competence to deal with,
current and emerging issues. Remuneration for Non-
Executive Directors is reviewed by the Remuneration
and Nomination Committee and set by the Board, taking
into account external benchmarking when required. The
Non-Executive remuneration levels reflect the demands
and responsibilities of the Directors but also reflect the
historical financial position and performance of the Group
in recent years following prolonged periods of subdued
general market conditions in the broader resources and
mining services sectors.
22
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023
Remuneration of Key Management Personnel
The compensation of each member of the KMP of the Group is set out below.
FIXED
REMUNERATION
PAID
SHORT
TERM
EMPLOYEE
BENEFITS
SHORT
TERM
INCEN-
TIVES
NON-
MONETARY
BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
LONG-TERM
EMPLOYEE BENEFITS
PERFORMANCE
RELATED %
Salary
$
Bonus
$
Motor
Vehicles2
$
Super-
annuation
$
Long
Service
Leave4
$
Shares3
$
Options3
$
Nathan Andrew
Mitchell
2023
Executive Chairman 2022
200,000
200,000
Scott David
Tumbridge
Non-Executive
Director1
2023
2022
135,487
180,000
Peter Richard Miller 2023
2022
Non-Executive
Director
70,000
70,000
2023
2022
80,000
80,000
2023
2022
85,000
85,000
2023
2022
85,000
85,000
Robert Barry
Douglas
Non-Executive
Director
Neal Macrossan
O’Connor
Non-Executive
Director
Peter Geoffrey
Hudson
Non-Executive
Director
Andrew
Michael Elf
Chief Executive
Officer
Gregory Michael
Switala
Chief Financial
Officer and
Company Secretary
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,000
20,000
14,226
18,000
7,350
7,000
8,400
8,000
8,925
8,500
–
–
8,925
8,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30.5%
30.1%
28.1%
32.7%
2023
2022
430,961
168,750
433,333 200,000
14,438
14,438
45,251
43,333
9,213
19,944
34,449
19,814
16,395
8,381
2023
2022
324,167
112,500
300,000 150,000
9,934
9,934
31,786
30,000
11,926
6,478
23,991
13,442
10,993
5,052
1
2
3
Effective 1 February 2023, Scott Tumbridge’s directorship appointment was amended from being executive to non-executive in nature with
his salary being revised to $70,000 from the previous $180,000 (both exclusive of superannuation). The disclosures above combine his
amounts earned in both capacities over the year ended 30 June 2023.
The figures in this column relate to use of a Company motor vehicle to carry out duties as well as reasonable personal use. The amount
included in the above remuneration table is the value attributable to such personal use calculated in accordance with the statutory
requirements of the Fringe Benefits Tax Act 1986.
These amounts were not actually provided to KMP during the financial year. The figures are calculated in accordance with the Australian
Accounting Standards and are the amortised AASB fair values of equity instruments (whether vested or not) that have been granted to
KMP. Refer to pages 18-21 of this Remuneration Report for information on awards during the financial year and the vesting status of previous
year’s awards.
4
This is the change in accrued long service leave and is measured in accordance with AASB 119 Employee Benefits.
23
Mitchell Services LtdAnnual Report 2023
KMP Shareholding
The movement during the reporting period in the number of ordinary shares in Mitchell Services Limited held directly,
indirectly or beneficially, by each KMP, including their related parties, is as follows:
Executive KMP
Nathan Andrew Mitchell
Scott David Tumbridge
Andrew Michael Elf
Gregory Michael Switala
Non-Executive KMP
Peter Richard Miller
Robert Barry Douglas
Neal Macrossan O’Connor
HOLDING AT
1 JULY 2022
SHARES RECEIVED
PURSUANT TO ESOP
NET OTHER
CHANGES*
HOLDING AT
30 JUNE 2023
41,413,695
16,184,612
584,756
77,502
2,412,505
248,686
131,499
–
–
72,436
54,372
–
–
–
444,713
–
–
(77,502)
–
–
–
41,858,408
16,184,612
657,192
54,372
2,412,505
248,686
131,499
* Net other changes represent shares that were purchased or sold during the year
The movement during the reporting period in the number of options to purchase ordinary shares in Mitchell Services
Limited held directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:
Executive KMP
Nathan Andrew Mitchell
Scott David Tumbridge
Andrew Michael Elf
Gregory Michael Switala
Non-Executive KMP
Peter Richard Miller
Robert Barry Douglas
Neal Macrossan O’Connor
HOLDING AT
1 JULY 2022
OPTIONS
GRANTED
PURSUANT
TO ESOP
OPTIONS
THAT LAPSED
UPON VESTING
DETERMINATION
HOLDING AT
30 JUNE 2023
EXERCISABLE AT
30 JUNE 2023*
–
–
2,341,644
1,610,401
–
–
–
–
–
414,552
304,047
–
–
–
–
–
–
–
–
–
(77,510)
2,678,686
(50,313)
1,864,135
1,838,567
1,275,803
–
–
–
–
–
–
–
–
–
*
Options granted pursuant to the 2022 and 2023 ESOP offers remain subject to the determination of vesting conditions and as such are not
exercisable at 30 June 2023. The strike prices of options that are exercisable at 30 June 2023 vary between $0.395 and $1.10
24
DIRECTORS’ REPORTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Other transactions with KMP
A number of KMP, or their related parties, hold positions
in other entities that result in them having control, or
joint control, over the financial or operating policies of
those entities.
A number of these entities transacted with the Group
during the year. The terms and conditions of the
transactions with KMP and their related parties were
no more favourable than those available, or which
might reasonably be expected to be available, in similar
transactions to non-KMP related entities on an arm’s
length basis.
This Directors’ Report, incorporating the Remuneration
Report, is signed in accordance with a resolution of
Directors made pursuant to section 298(2) of the
Corporations Act 2001.
On behalf of the Directors
Nathan Andrew Mitchell
Executive Chairman
Dated at Brisbane this 23rd day of August 2023
25
Mitchell Services LtdAnnual Report 2023 The Board considers there to be a clear and positive
relationship between the creation and delivery of
long-term shareholder value and high-quality corporate
governance. Accordingly, in pursuing its objective,
the Board has committed to corporate governance
arrangements that strive to foster the values of integrity,
respect, trust and openness amongst and between the
Board members, management, employees, customers
and suppliers.
Unless stated otherwise in this document, the Board’s
corporate governance arrangements comply with the
recommendations of the ASX Corporate Governance
Council as outlined in the 4th edition of the Corporate
Governance Principles and Recommendations
(‘Recommendations’) for the financial year ended
30 June 2023.
1. BOARD OF DIRECTORS
1.1. Role of the Board
The Board’s primary role is the protection and
enhancement of long-term shareholder value. This,
together with the Board’s other roles and responsibilities,
is set out in the Board Charter, a copy of which can be
found on the Group’s website.
To fulfil this role, the Board is responsible for the overall
corporate governance of the Group including formulating
its strategic direction, approving and monitoring capital
expenditure, setting remuneration, appointing, removing
and creating succession policies for Directors and senior
executives, establishing and monitoring the achievement
of management’s goals and ensuring the integrity of
risk management, internal control, legal compliance and
management information systems. It is also responsible for
approving and monitoring financial and other reporting.
The Board has delegated responsibility for operation
and administration of the Group to the Chief Executive
Officer and Executive Management. Responsibilities are
delineated by formal authority delegations.
1.2. Board processes
To assist in the execution of its responsibilities, the
Board has established two board committees being
the Remuneration and Nominations Committee and
the Audit and Risk Committee. Both committees have
written charters which are reviewed on a regular basis.
The Board has also established a framework for the
management of the Group including a system of internal
control, a business risk management process and the
establishment of appropriate ethical standards.
The full Board currently holds not less than 10 scheduled
meetings each year, plus strategy meetings and any
extraordinary meetings at such other times as may be
necessary to address any specific significant matters
that may arise.
The agenda for meetings is prepared by the Company
Secretary in conjunction with the Chairman. Standing
items include the Chief Executive Officer report,
People and Risk report, Human Resources Report,
General Manager’s reports, Financial reports, Asset
reports and Commercial and Business Development
reports. The Board package is provided to Directors
and relevant management in advance of meetings.
Executives are regularly involved in Board discussions
and Directors have other opportunities, including visits
to business operations, for contact with a wider group
of employees.
The Company Secretary is accountable directly to the
Board, through the Chairman, on all matters associated
with the proper functioning of the Board.
1.3. Director and executive education
The Group has an informal induction process to
educate new Directors about the nature of the
business, current issues, the corporate strategy, the
culture and values of the Group, and the expectations
of the Group concerning performance of Directors.
In addition, Directors are also educated regarding
meeting arrangements and Director interaction with
each other, senior executives and other stakeholders.
Directors also have the opportunity to visit Group
facilities and meet with management to gain a better
understanding of business operations and operating
environment. Directors are given access to continuing
education opportunities to update and enhance their
skills and knowledge.
The Group also has an informal process to induct
new senior executives upon taking such positions.
This involves educating the executives on the Group’s
structure, strategy, operations, financial position and risk
management policies.
1.4. Independent professional advice and access to
Group information
Each Director has the right of access to all relevant
Group information and to the Group’s Executives and,
subject to prior consultation with the Chairman, may seek
independent professional advice from a suitably qualified
adviser at the Group’s expense. The Directors must consult
with an adviser suitably qualified in the relevant field and
obtain the Chairman’s approval of the fee payable for the
advice before proceeding with the consultation. A copy of
the advice received by the Directors is made available to
all other members of the Board.
26
CORPORATE GOVERNANCE STATEMENTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 1.5. Composition of the Board
The names of the Directors of the Company in office at
the date of this report together with their respective mix
of skills, experience and length of service are set out in the
Directors’ Report on page 8 and 9 of this report.
The Group believes, for efficiency of operations, it is
in its best interests to maintain a small but efficient
Board. During the 12 months ended 30 June 2023, the
Board consisted of 4 Non-executive Directors (being
Peter Miller, Robert Douglas, Neal O’Connor and Peter
Hudson), Scott Tumbridge (Executive Director from 1 July
2022 to 31 January 2023 and Non-executive Director
from 1 February 2023 to 30 June 2023) and Executive
Chairman, Nathan Mitchell. Throughout the 12 months
ended 30 June 2023, three of the six board members
were considered independent, being Robert Douglas,
Neal O’Connor and Peter Hudson.
The Executive Chairman is Mr Nathan Mitchell.
Under the guidelines, Mr Mitchell does not meet
the criteria for independence as he is a director of
a substantial shareholder. Peter Richard Miller was
previously employed by the Company in an executive
capacity and as such does not meet the criteria for
independence. Mr Scott Tumbridge does not meet
the criteria for independence as he was previously
employed by the Group in an executive capacity. He
is also a director of a substantial shareholder. Under
the guidelines, the majority of the Board should be
independent as should the Chair. All Directors are
committed to bringing their independent views and
judgment to the Board and, in accordance with the
Corporations Act 2001, must inform the Board if
they have any interest that could conflict with those
of the Group. Where the Board considers that a
conflict exists, the Director concerned will not be
present at the meeting while the item is considered.
For these reasons, the Board believes that each of
these Directors may be considered to be acting
independently in the execution of their duties.
Additionally, notwithstanding Mr Mitchell’s executive
capacity and non-independent status, it is the view of the
Board that Mr Mitchell brings a particular and unparalleled
skills set to the Group, having established the Company,
been involved in the drilling industry for his entire working
life and being a pioneer of this industry in Australia, is
uniquely placed to act as Chairman of the Group.
The Board considers the mix of skills and the diversity
of Board members when assessing the composition of
the Board. The Board assesses existing and potential
Directors’ skills to ensure they have appropriate
industry expertise in the Group’s business operations.
The Board undertakes appropriate checks before
appointing a person as a Director and provides security
holders with all material information relevant to a
decision on whether or not to elect a Director. The
Board’s policy is to seek a diverse range of Directors
who have a range of skills, ages, genders and ethnicity
that complements the environment in which the Group
operates and having due regard to the current size of
the Group (refer section 8 below on skills and diversity).
Directors each have a written agreement with the
Group setting out the terms of their appointment.
2.
REMUNERATION AND
NOMINATION COMMITTEE
The Remuneration and Nomination Committee has
a documented charter, approved by the Board. The
Remuneration and Nomination Committee comprises
three members — Neal O’Connor (Chair), Robert Douglas
and Peter Hudson — each of whom are Non-Executive
Directors. The Chairman of the Committee, Neal O’Connor,
is an independent Director. The Committee has two
distinct roles as follows:
• Remuneration related matters; and
• Nomination related matters.
All Directors are invited to Remuneration and Nomination
Committee meetings at the discretion of the Committee.
The Committee met twice during the year and Committee
members’ attendance record is disclosed in the table of
Directors’ meetings on page 15 of this report.
Remuneration related matters
The Committee assists the Board in the general
application of the remuneration policy. In doing so,
the Committee is responsible for:
• Developing remuneration policies for Directors and
Key Management Personnel;
• Reviewing Key Management Personnel packages
annually and, based on these reviews, making
recommendations to the Board on remuneration levels
for Key Management Personnel; and
• Assisting the Board in reviewing Key Management
Personnel performance annually.
27
Mitchell Services LtdAnnual Report 2023 Executive Directors and Senior Executives are
remunerated by way of salary, non-monetary benefits,
statutory superannuation, short-term incentive payments
and participation in the Mitchell Services Limited
Executive Share and Option Plan (ESOP) in accordance
with written agreements that set out the terms of their
appointments. Non-Executive Directors are remunerated
by way of salary and statutory superannuation. There
are no schemes for retirement benefits for Directors
other than statutory superannuation arrangements.
Further disclosure on the policies and practices regarding
remuneration is contained in the Remuneration Report of
this Annual Report.
Nomination related matters
The Committee assists the Board in ensuring that the
Board comprises Directors with a range and mix of
attributes appropriate for achieving its objective.
The Committee does this by:
• Overseeing the appointment and induction process
for Directors;
• Reviewing the skills and expertise of Directors and
identifying potential deficiencies;
• Identifying suitable candidates for the Board;
• Overseeing Board and Directors reviews on an annual
basis; and
• Establishing succession planning arrangements
for the Executive team.
AUDIT AND RISK COMMITTEE
3.
The Audit and Risk Committee has a documented charter,
approved by the Board. The Committee comprises three
members — Peter Hudson (Chair), Neal O’Connor and
Robert Douglas — each of whom are Non-Executive
Directors
The Chairman of the Committee, Peter Hudson, is an
independent Director and is not the Chairman of the
Board. The purpose of the Committee is to assist the
Board in the effective discharge of its responsibilities in
relation to the external audit function, accounting policies,
financial reporting, funding, financial risk management,
business risk monitoring and insurance.
The external auditors and the Chief Executive Officer
are invited to Audit and Risk Committee meetings at
the discretion of the Committee. The Committee met
three times during the year and Committee members’
attendance record is disclosed in the table of Directors’
meetings on page 15 of this report.
The Chief Executive Officer and the Chief Financial
Officer declared in writing to the Board that the financial
records of the Group for the financial year have been
properly maintained, the Group’s financial reports for
the financial year ended 30 June 2023 comply with
accounting standards and present a true and fair view of
the Group’s financial condition and operational results and
that the opinion has been formed on the basis of a sound
system of risk management and internal control which is
operating effectively. This statement is required annually.
The Group’s external auditor audits, or in the case of
the half-year, reviews the Group’s financial reports in
accordance with the accounting standards.
Management verifies other periodic corporate reports.
The verification processes involve a management and
operational review and include cross checking statements,
information and data to original source reports.
All documents released to the market are subject to final
sign off and approval by relevant senior executives and, as
required, the Board.
4. PERFORMANCE EVALUATION
The Remuneration and Nomination Committee is required
to annually review the effectiveness of the functioning of
the Board, its committees, individual Directors and Senior
Executives through internal peer review.
5. RISK MANAGEMENT
The Board considers identification and management of
key risks associated with the business as vital to creating
and delivering long-term shareholder value.
The main risks that could negatively impact on the
performance of the Group’s business activities include:
• Safety of employees and contractors;
• Seasonal conditions and business interruptions;
• Dependence on key personnel and labour shortages;
• Obsolescence to certain machinery due to technological
advancements or client requirements; and
• Customer demand and outlook for the resources
industry.
An assessment of the business’ risk profile and its risk
management framework is undertaken and reviewed by
the Board at least annually, covering all aspects of the
business from the operational level through to strategic
level risks to ensure that the Group is operating within the
risk appetite set by the Board.
28
CORPORATE GOVERNANCE STATEMENTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Executive management has been delegated the task of
implementing internal controls to identify and manage
risks for which the Board provides oversight. The
effectiveness of these controls is monitored and reviewed
regularly by management. Executive management
has reported on an ongoing basis (via monthly Board
meetings) to the Board as to whether the Group’s
business risks have been effectively managed.
• Financial reporting accuracy and compliance with
the financial reporting regulatory framework. Monthly
actual results are reported against budgets approved
by the Directors and revised forecasts for the year are
prepared regularly; and
• Regulation compliance. The Group’s health, safety,
environment and sustainability obligations are
monitored by all members of the Board.
In addition to their regular reporting on business risks,
risk management and internal control systems, the
Chief Executive Officer and Chief Financial Officer have
provided assurance, in writing to the Board:
• That the financial reporting risk management and
associated compliance and controls have been
assessed and found to be operating effectively; and
• The Group’s financial reports are founded on a sound
system of risk management and internal compliance
and control.
The Group’s operations are not subject to any particular
and significant environmental regulation under the law of
the Commonwealth or a State or Territory. However, the
Group does provide services to entities that are licensed
or otherwise subject to conditions for the purposes of
environmental legislation or regulation. In such cases, the
Group manages its risks and undertakes its compliance
duties in accordance with contractor regime implemented
by the licensed or regulated entity. Additionally, the Group
is not aware of any material exposure to any particular
social risks.
The Board is responsible for the overall internal
control framework but recognises that no cost-effective
internal control system will preclude all errors and
irregularities. Given the size of the Group, there is no
dedicated internal audit function. In the absence of an
internal audit function, comprehensive practices have
been established to ensure:
• Capital expenditure and revenue commitments above
a certain size obtain prior Board approval;
• Financial exposures are controlled;
• Health and safety standards and management
systems are monitored and reviewed to achieve
high standards of performance and compliance with
regulations;
• Business transactions are properly authorised
and executed;
• The quality and integrity of personnel;
6.
ETHICAL STANDARDS AND
GROUP VALUES
All Directors, managers and employees are expected to
act with the utmost integrity and objectivity, striving at
all times to enhance the reputation and performance of
the Group and to live the Group’s values. Every employee
has a nominated supervisor to whom they may refer any
issues arising from their employment. The Board reviews
its Code of Conduct and Ethics regularly and processes
are in place to promote and communicate these policies.
Conflict of interest
Directors must keep the Board advised, on an ongoing
basis, of any interest that could potentially conflict
with those of the Group. The Board has developed
procedures to assist Directors to disclose potential
conflicts of interest.
Where the Board believes that a conflict exists the
Director concerned will not be present at the meeting
while the item is considered. Details of Director related
entity transactions with the Group are set out in note 23
to the financial statements.
Code of Conduct
The Group has advised each Director, manager and
employee that they must comply with the Group’s Code
of Conduct and Ethics. The code requires all Directors,
management and employees to, at all times and with all
relevant stakeholders:
• Act honestly and in good faith;
• Exercise due care and diligence in fulfilling the
functions of office;
• Avoid conflicts and make full disclosure of any
possible conflict of interest;
• Comply with both the letter and spirit of the law;
• Encourage the reporting and investigation of unlawful
and unethical behaviour; and
• Comply with the security trading policy.
29
Mitchell Services LtdAnnual Report 2023 Whistleblower Policy
The Group is committed to encouraging and supporting
ethical and responsible behaviour. It is also committed to
creating and maintaining an open working environment
in which concerns regarding unethical, unlawful or
undesirable conduct are able to be raised and reported.
The policy sets out:
• The process by which concerns can be reported
without fear of reprisal;
• The investigation process to follow on receipt of
a whistleblower report;
• The Group’s commitment to rectify any
discovered wrongdoing; and
• The measures in place to protect the whistleblower.
Security Trading Policy
The Security Trading Policy restricts Directors and
employees from acting on price sensitive information
(which is not available to the public) until it has been
released to the market and adequate time has been given
for this to be reflected in the Company’s share price.
Directors and other Key Management Personnel are also
prohibited from trading during closed periods. Closed
periods are the following periods:
• The period from 1 July until the first trading day after
the release of the Company’s annual result to the ASX;
• The period from 1 January until the first trading day
after the release of the Company’s half yearly result to
the ASX;
• The period from 1 October until the first trading day
after the release of the Company’s 30 September
quarterly investor report; and
• The period from 1 April until the first trading day after
the release of the Company’s 30 March quarterly
investor report.
Anti Bribery and Corruption Policy
The Group is committed to protecting its assets and
reputation by reinforcing the Board and management’s
commitment to identify if there are any fraudulent and
corrupt activities, for establishing policies, controls and
procedures for the prevention and detection of any such
activities that may exist and to reinforce to all employees
to report any corrupt and fraudulent conduct that they
may be aware of. The policy sets out:
• Definitions of Bribery and Corruption;
• Examples of conduct which amounts to bribery
and /or corruption;
• Rules around the prohibition of bribes and
facilitation payments;
• Rules around gifts and hospitality and gift and
entertainment expenditure; and
• Rules around charitable contributions.
Sexual Harassment Policy
The Group is committed to providing a safe environment
for all. Pursuant to the Sexual Harassment Policy, all
complaints of sexual harassment will be taken seriously
and treated with respect and in confidence. No person
will be victimised for making such a complaint and any
person found to have sexually harassed another will face
disciplinary action. The policy sets out:
• Definition of Sexual Harassment;
• The complaints procedures;
• Sanctions and disciplinary measures; and
• Monitoring and evaluation.
Workplace Bullying Policy
The Group is committed to preventing workplace bullying.
Pursuant to the Workplace Bullying Policy, all staff have
the right to a workplace that is free from bullying. The
policy sets out:
• Behaviours that constitute bullying;
• The reporting procedures;
• The investigation procedures; and
• Outcomes of the reporting and investigation process.
Group Values
The Group has adopted and is committed to upholding
the following values:
• Finish each day without harm;
• Foster a culture of respect, support, trust and
recognition;
• Never openly criticise any team member. Blame is not
productive;
• Understand your role. Embrace your role. Execute
your role;
• Provide quality services through effective strategy,
structure and systems; and
• Continuously improve and find a better way.
The Group Values are published on the Group’s website.
7.
COMMUNICATION WITH
SHAREHOLDERS
The Board provides shareholders with information using a
comprehensive Continuous Disclosure Policy and investor
relations program which includes identifying matters that
may have a material effect on the price of the Company’s
shares and notifying them to the ASX.
In summary, the Continuous Disclosure Policy operates
as follows:
• The Company Secretary (also the Chief Financial
Officer) and the Chief Executive Officer are responsible
for interpreting the Group’s policy and where necessary
informing the Board. The Company Secretary is
responsible for all communications with the ASX;
30
CORPORATE GOVERNANCE STATEMENTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 • The full Annual Report is provided via the Company’s
website to all shareholders. It provides relevant
information about the operations of the Group during
the year, changes in the state of affairs and details of
future developments;
• The half-yearly report contains summarised financial
information and a review of the operations of the
Group during the period. The half-year reviewed
financial report is lodged with the ASX and sent to any
shareholder who requests it;
• Proposed major changes in the Group which may
impact on share ownership rights are submitted to a
vote of shareholders;
• All announcements made to the market can be
accessed via the Company’s website after they have
been released to the ASX; and
• The external auditor attends the Annual General
Meetings to answer questions concerning the conduct
of the audit, the preparation and content of the
auditor’s report, accounting policies adopted by the
Group and the independence of the auditor in relation
to the conduct of the audit.
Copies of all material market announcements are
provided to the Directors promptly after such
announcements have been made to the market. Any
new and substantive investor or analyst presentations
are released by the Group to the market ahead of any
presentation to investors and/or analysts.
Governance-related materials are available for review
by shareholders under the ‘Investors’ section of the
Group’s website and includes all key corporate policies.
In the event that shareholders have any queries as to
their holding or as regards the Group’s operations, an
investor email address (investors@mitchellservices.com.
au) is available, and all enquiries are promptly addressed.
Shareholders are welcome to attend investor briefings
and to ask questions at those briefings. Details of these
briefings are released to the market periodically by of the
ASX platform.
The Group strongly encourages shareholders to elect to
receive all communications via its registrar (Link Market
Services) electronically.
The Board encourages full participation of shareholders
at the Annual General Meeting (AGM), to ensure a high
level of accountability and identification with the Group’s
strategy and goals. Important issues are presented to
the shareholders as single resolutions. Shareholders are
encouraged to submit questions ahead of the AGM so
that these may be addressed at the AGM.
In determining whether resolutions put to a meeting of
shareholders are to be decided by a poll, the Group will
have regard to the requirements of the ASX as set out
in Guidance Note 35 (i.e. that all Listing Rule resolutions
be decided by a poll), as well as the obligation of the
Chair, being aware of the final proxy count, to ensure
that the will of the meeting is delivered in the final
result of the resolution.
8. SKILLS AND DIVERSITY
Diversity
The Company has an established Equity and Diversity
Policy relating to its Board Members, Senior Executives
and across the whole organisation with an objective to
recruit and manage on the basis of qualification for the
position and performance; regardless of gender, age,
nationality, race, religious beliefs, cultural background
or sexuality.
In summary, the Equity and Diversity Policy operates
as follows:
The Company has zero tolerance toward discrimination.
To achieve this, we are committed to:
• Ensuring a working environment that is free of all
forms of harassment;
• Valuing the diversity among our employees, and all
those with whom we do business;
• Conducting business activities such as the hiring,
promotion, and compensation of employees without
regard to race, colour, religion, gender, gender identity
or expression, sexual orientation, national origin,
genetics, disability, or age;
• The employment and development of Indigenous
employees in all the areas where we operate; and
• Complying with all applicable legislative requirements.
To achieve this, we will:
• Adhere to the Company Code of Conduct and be
guided by the Company’s Values;
• Recruit a diverse range of people with a diverse
range of talents to help us achieve our goals;
• Employ the best person for the job regardless
of race, colour, religion, gender, gender identity
or expression, sexual orientation, national origin,
genetics, disability, or age;
• Select on the principles of merit and fairness in all
employment practices;
31
Mitchell Services LtdAnnual Report 2023 Skills matrix
The Company aims to maintain a diverse, multi-skilled
Board with a range of different skills and expertise. At a
minimum, these skills and expertise include:
• Capital management and corporate finance
experience;
• Experience at both executive and non-executive levels
• An understanding of the drilling industry and mining
services sector;
• Exceptional leadership skills;
• Experience in workplace health and safety;
• An understanding of technological advances in the
mining services industry;
• Financial acumen and strategic capabilities;
• Environment and sustainability experience; and
• An understanding of risk management.
• Ensure that all reports of workplace discrimination are
treated seriously, promptly and fairly with due regard
to the principles of procedural fairness, natural justice
and confidentiality;
• Take appropriate action against individuals engaging
in discriminatory conduct;
• Build relationships and promote opportunities for
Indigenous peoples throughout all of our operations,
while encouraging cultural awareness and respect
amongst our staff; and
• Make confidential counselling and support available
to employees to assist with any workplace issues that
may arise.
The Group notes recommendation 1.5(b) of the
Recommendations in relation to the setting of measurable
objectives for achieving diversity. The Group currently has
a diverse workplace in terms of age, skillsets, ethnicity,
cultural background and gender and as such believes
that the objectives of its Equity and Diversity Policy are
currently being met. As such the Group has not set firm
gender (or other) diversity targets. This will continue to
be monitored on an annual basis.
The proportion of women employees in the whole
organisation is detailed below:
Number
2023
%
Number
2022
%
–
–
–
–
–
–
–
–
23
42.59
26
41.94
39
5.17
34
4.49
Women on the Board
Women in senior
management roles1
Women in head
office roles
Women employees
in the Group
1
The Company has defined senior management roles as those
roles which are responsible for a key business function and
that report directly to either the Chief Executive Officer or
Chief Financial Officer.
32
CORPORATE GOVERNANCE STATEMENTFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 33
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Mitchell Services Limited. I declare that, to the best of my knowledge and belief, in relation to the audit of Mitchell Services Limited for the financial year ended 30 June 2023 there have been: i.no contraventions of the auditor independence requirements as set out in theCorporations Act 2001 in relation to the audit; andii.no contraventions of any applicable code of professional conduct in relation to the audit.KPM_INI_01 KPMG M J Jeffery Partner Brisbane 23 August 2023 KPM PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 Mitchell Services LtdAnnual Report 2023 Revenue
Other income
Gain on sale of assets
Drilling consumables
Employee and contract labour expenses
Fuel and oil
Freight and couriers
Hire of plant and equipment
Insurances
Legal and consultant fees
Rent
Service and repairs
Travel expenses
(Impairment)/reversal of impairment of trade receivables
Fair value decrease to contingent consideration liability
Depreciation expense
Amortisation of intangibles
Finance costs
Other expenses
Profit/(loss) before tax
Income tax (expense)/benefit
Profit for the year
Other comprehensive income, net of income tax
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
Profit attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent
Earnings per share
Basic (cents per share)
Diluted (cents per share)
The accompanying notes are an integral part of these financial statements.
NOTE
2
6
8
4
14
25
25
2023
$
2022
$
243,144,281
213,368,663
149,679
3,213,495
(25,841,847)
(127,416,774)
(2,967,394)
(3,322,705)
(11,376,630)
(1,233,779)
(1,141,921)
(455,327)
(14,327,221)
(11,459,890)
(2,007,782)
1,652,235
15,545
1,239,728
(24,124,936)
(114,937,855)
(2,192,817)
(3,188,242)
(12,082,459)
(1,053,032)
(1,721,537)
(462,013)
(13,416,907)
(9,349,816)
2,420,445
2,413,817
(27,430,668)
(27,644,500)
(1,100,491)
(2,355,265)
(5,441,234)
10,280,762
(2,672,147)
7,608,615
–
7,608,615
7,608,615
7,608,615
3.4
3.4
(3,157,377)
(1,913,755)
(4,775,134)
(562,182)
577,739
15,557
–
15,557
15,557
15,557
0.0
0.0
34
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
For the year ended 30 June 2023
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventories
Total current assets
Non-current assets
Right-of-use assets
Property, plant, and equipment
Intangible assets
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Financial liabilities
Provisions
Total current liabilities
Non-current liabilities
Financial liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Issued capital
Retained earnings
Total equity
The accompanying notes are an integral part of these financial statements.
NOTE
30 JUNE 2023
$
30 JUNE 2022
$
3
4
5
6
8
12
7
5
9
10
11
10
14
11
11,107,630
34,545,642
2,283,570
8,845,195
3,742,395
36,002,961
2,224,676
7,237,492
56,782,037
49,207,524
1,460,979
70,606,167
5,755,572
–
77,822,718
134,604,755
1,772,390
85,424,134
6,856,063
24,999
94,077,586
143,285,110
19,004,911
16,960,996
11,487,929
22,130,522
18,537,821
10,337,298
47,453,836
51,005,641
15,323,901
3,460,752
1,265,864
20,050,517
67,504,353
67,100,402
77,772,294
(10,671,892)
67,100,402
28,742,314
788,605
1,001,899
30,532,818
81,538,459
61,746,651
80,241,766
(18,495,115)
61,746,651
35
Mitchell Services LtdAnnual Report 2023
BALANCE AT 1 JULY 2021
Comprehensive income/(loss)
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners of the Company
Issue of ordinary shares
Share issue costs, net of tax
Recognition of share-based payments
Total transactions with owners of the Company
BALANCE AT 30 JUNE 2022
Comprehensive income/(loss)
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners of the Company
Shares bought back on-market and transaction costs
Recognition of share-based payments
Total transactions with owners of the Company
BALANCE AT 30 JUNE 2023
The accompanying notes are an integral part of these financial statements.
NOTE
ISSUED
CAPITAL
$
RETAINED
EARNINGS
$
TOTAL
$
70,249,205
(18,638,363)
51,610,842
–
–
–
15,557
15,557
–
–
15,557
15,557
15
16
17
15
17
10,497,738
(505,177)
–
9,992,561
–
–
127,691
127,691
10,497,738
(505,177)
127,691
10,120,252
80,241,766
(18,495,115)
61,746,651
–
–
–
7,608,615
7,608,615
–
–
7,608,615
7,608,615
(2,469,472)
(2,469,472)
–
214,608
214,608
(2,469,472)
214,608
(2,254,864)
77,772,294
(10,671,892)
67,100,402
36
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year ended 30 June 2023
NOTE
2023
$
2022
$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest paid
Income tax refunded
266,840,854
(228,965,152)
(2,247,674)
–
Net cash provided by operating activities
18
35,628,028
232,494,902
(210,161,946)
(1,655,876)
1,538,898
22,215,978
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
Payment for property, plant and equipment
Earn out payment related to purchase of Deepcore
3,706,604
(11,517,355)
(247,377)
2,434,620
(19,740,612)
(2,123,697)
Net cash used in investing activities
(8,058,128)
(19,429,689)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Payments for share issue costs
Proceeds from borrowings
Repayment of borrowings
Share buy-back
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The accompanying notes are an integral part of these financial statements.
16
15
3
–
–
–
(17,735,193)
(2,469,472)
10,497,738
(721,682)
1,545,065
(14,601,234)
–
(20,204,665)
(3,280,113)
7,365,235
3,742,395
11,107,630
(493,824)
4,236,219
3,742,395
37
Mitchell Services LtdAnnual Report 2023
1. SIGNIFICANT ACCOUNTING POLICIES
(a) General information
Mitchell Services Ltd (Company) is a limited company
incorporated in Australia. The addresses of its registered
office and principal place of business are disclosed in the
Corporate Directory of this Annual Report. The principal
activities of the Company and its subsidiaries (Group)
are exploration and mine site drilling services to the
exploration, mining, and energy industries, primarily
in Australia.
(b) Basis of preparation
These general-purpose consolidated financial statements
have been prepared in accordance with the Corporations
Act 2001, Australian Accounting Standards and
Interpretations of the Australian Accounting Standards
Board and in compliance with International Financial
Reporting Standards as issued by the International
Accounting Standards Board. The Group is a for-profit
entity for financial reporting purposes under Australian
Accounting Standards. Material accounting policies
adopted in the preparation of these financial statements
are presented below and have been consistently applied
unless stated otherwise.
Except for cash flow information, the financial statements
have been prepared on an accrual basis and are based
on historical costs, modified, where applicable, by the
measurement at fair value of selected non-current assets,
financial assets and financial liabilities.
These consolidated financial statements are presented
in Australian Dollars which is the Company’s functional
currency.
The financial statements were authorised for issue by the
Directors on the date shown in the Directors’ Declaration.
(c) Principles of consolidation
The consolidated financial statements incorporate all of
the assets, liabilities and results of the Company and all of
the subsidiaries. Subsidiaries are entities that the Parent
controls. The Parent controls an entity when it 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 over the entity. A list of the subsidiaries
is provided in Note 19.
The assets, liabilities and results of all subsidiaries are
consolidated into the financial statements of the Group
from the date on which control is obtained by the
Group. The consolidation of a subsidiary is discontinued
from the date that control ceases. Intercompany
transactions, balances and unrealised gains or losses on
transactions between Group entities are fully eliminated
on consolidation. Accounting policies of subsidiaries have
been changed and adjustments made where necessary to
ensure uniformity of the accounting policies adopted
by the Group.
Equity interests in a subsidiary not attributable, directly
or indirectly, to the Group are presented as “non-
controlling interests”. The Group initially recognises non-
controlling interests that are present ownership interests
in subsidiaries and are entitled to a proportionate share
of the subsidiary’s net assets on liquidation at either fair
value or at the non-controlling interests’ proportionate
share of the subsidiary’s net assets. Subsequent to initial
recognition, non-controlling interests are attributed
their share of profit or loss and each component of
other comprehensive income. Non-controlling interests
are shown separately within the equity section of
the consolidated statement of financial position and
consolidated statement of comprehensive income.
(d) Business combinations
Business combinations occur where an acquirer obtains
control over one or more businesses.
A business combination is accounted for by applying the
acquisition method, unless it is a combination involving
entities or businesses under common control. The business
combination will be accounted for from the date that control
is obtained, whereby the fair value of the identifiable assets
acquired and liabilities (including contingent liabilities)
assumed is recognised.
When measuring the consideration transferred in the
business combination, any asset or liability resulting from
a contingent consideration arrangement is also included.
Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent
settlement is accounted for within equity. Contingent
consideration classified as an asset or liability is remeasured
in each reporting period to fair value, recognising any
change to fair value in profit or loss, unless the change in
value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business
combinations, other than those associated with the issue of
a financial instrument, are recognised as expenses in profit
or loss when incurred.
The acquisition of a business may result in the recognition of
goodwill or a gain from a bargain purchase.
(e) Intangibles
Goodwill and impairment
Goodwill is carried at cost less any accumulated
impairment losses. Goodwill is calculated as the excess of
the sum of:
(i)
the consideration transferred at fair value;
(ii) any non-controlling interest (determined under
either the fair value or proportionate interest
method); and
the acquisition date fair value of any previously
held equity interest;
(iii)
over the acquisition date fair value of any identifiable
assets acquired and liabilities assumed.
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 The acquisition date fair value of the consideration
transferred for a business combination plus the
acquisition date fair value of any previously held equity
interest shall form the cost of the investment in the
separate financial statements.
Changes in the Group’s ownership interests in subsidiaries
that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions.
The carrying amounts of the Group’s interests and the
non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries.
Any difference between the amount by which the non-
controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in
equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or
loss is recognised in profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and
any non-controlling interests. All amounts previously
recognised in other comprehensive income in relation
to that subsidiary are accounted for as if the Group had
directly disposed of the related assets or liabilities of the
subsidiary (i.e., reclassified to profit or loss or transferred
to another category of equity as specified/permitted by
applicable Accounting Standards). The fair value of any
investment retained in the former subsidiary at the date
when control is lost is regarded as the fair value on initial
recognition for subsequent accounting under AASB 139:
Financial Instruments: Recognition and Measurement, when
applicable, the cost on initial recognition of an investment
in an associate or a joint venture.
The amount of goodwill recognised on acquisition of
each subsidiary in which the Group holds less than 100%
interest will depend on the method adopted in measuring
the non-controlling interest. The Group can elect in most
circumstances to measure the non-controlling interest in
the acquiree either at fair value (full goodwill method) or
at the non-controlling interest’s proportionate share of the
subsidiary’s identifiable net assets (proportionate interest
method). In such circumstances, the Group determines
which method to adopt for each acquisition and this is
stated in the respective note to the financial statements
disclosing the business combination.
Under the full goodwill method, the fair value of the
non-controlling interest is determined using valuation
techniques which make the maximum use of market
information where available.
Goodwill on acquisition of subsidiaries is included in
intangible assets. Goodwill on acquisition of associates is
included in investments in associates.
Goodwill is tested for impairment annually and is
allocated to the Group’s cash-generating units or groups
of cash-generating units, representing the lowest level
at which goodwill is monitored and not larger than an
operating segment. Gains and losses on the disposal of an
entity include the carrying amount of goodwill related to
the entity disposed of.
Changes in the ownership interests in a subsidiary that
do not result in a loss of control are accounted for
as equity transactions and do not affect the carrying
amounts of goodwill.
Customer contracts
Customer contracts acquired are initially recognised at
fair value and are subsequently carried at fair value less
accumulated amortisation and accumulated impairment
losses. These costs are amortised to profit or loss using the
straight-line method over the contract period or estimated
useful life, whichever is shorter.
(f) Revenue recognition
Revenue is recognised, net of the amount of goods
and services tax (GST), for the major business activities
as follows:
Revenue from contracts with customers
The Group provides drilling services to the exploration,
mining and energy industries pursuant to service
contracts with a variety of clients in those sectors.
The revenue associated with these drilling contracts is
recognised in accordance with AASB15 Revenue from
Contracts with Customers, that is in a manner that depicts
the transfer of promised goods or services to customers
in an amount that reflects the consideration to which
the Group expects to be entitled in exchange for those
goods or services. Revenue from customer contracts is
recognised upon satisfaction of a performance obligation
under those contracts either over time in accordance with
specified units of production (for example metres drilled
or hours worked, invoiced throughout the month) or at a
point in time when control passes to the customer under
those contracts (for example the sale or hire of certain
items including consumables).
Invoices for drilling services are issued pursuant to
the terms of the contracts with customers. These are
generally issued on a monthly basis and payable within a
period of between 30 and 60 days. The timing of revenue
recognition may differ from the timing of invoicing and
may result in a contract asset or liability being presented
in the consolidated statement of financial position.
Interest income
Interest income from a financial asset is recognised when
it is probable that the economic benefits will flow to
the Group and the amount of revenue can be measured
reliably. Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net
carrying amount on initial recognition.
Other revenue is recognised when the right to receive
the revenue has been established.
39
Mitchell Services LtdAnnual Report 2023 (g) Leases
The Group as lessee
At inception of a contract, the Group assesses if the
contract contains or is a lease. If there is a lease present,
a right-of-use asset and a corresponding lease liability
are recognised by the Group where the Group is a
lessee. However, all contracts that are classified as short-
term leases (i.e., a lease with a remaining lease term of
12 months or less) and leases of low-value assets are
recognised as an operating expense on a straight-line
basis over the term of the lease.
Initially the lease liability is measured at the present value of
the lease payments still to be paid at the commencement
date. The lease payments are discounted at the interest
rate implicit in the lease. If this rate cannot be readily
determined, the Group uses the incremental borrowing rate.
Lease payments included in the measurement of the lease
liability are as follows:
• fixed lease payments less any lease incentives;
• variable lease payments that depend on an index or
rate, initially measured using the index or rate at the
commencement date;
• the amount expected to be payable by the lessee
under residual value guarantees;
• the exercise price of purchase options, if the lessee
is reasonably certain to exercise the options;
• lease payments under extension options, if the lessee
is reasonably certain to exercise the options; and
• payments of penalties for terminating the lease, if
the lease term reflects the exercise of an option to
terminate the lease.
The right-of-use assets comprise the initial measurement
of the corresponding lease liability, any lease payments
made at or before the commencement date and any initial
direct costs. The subsequent measurement of the right-
of-use assets is at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated over the lease term or
useful life of the underlying asset, whichever is the shortest.
Where a lease transfers ownership of the underlying
asset or the cost of the right-of-use asset reflects that
the Group anticipates to exercise a purchase option, the
specific asset is depreciated over the useful life of the
underlying asset.
(h) Employee benefits
Short-term employee benefits
Provision is made for the Group’s obligation for short-
term employee benefits. Short-term employee benefits
are benefits (other than termination benefits) that are
expected to be settled wholly before 12 months after the
end of the annual reporting period. Short-term employee
benefits are measured at the (undiscounted) amounts
expected to be paid when the obligation is settled.
The Group’s obligations for short-term employee
benefits such as wages and salaries are recognised
as part of current trade and other payables in the
consolidated statement of financial position. The Group’s
obligations for employees’ annual leave and long service
leave entitlements are recognised as provisions in the
consolidated statement of financial position
Other long-term employee benefits
Provision is made for employees’ long service leave and
annual leave entitlements not expected to be settled
wholly within 12 months after the end of the annual
reporting period. Other long-term employee benefits
are measured at the present value of the expected
future payments to be made to employees. Expected
future payments incorporate anticipated future wage
and salary levels, durations of service and employee
departures and are discounted at rates determined by
reference to market yields at the end of the reporting
period on corporate bonds that have maturity dates
that approximate the terms of the obligations. Any
remeasurements for changes in assumptions of
obligations for other long-term employee benefits are
recognised in profit or loss in the period in which the
changes occur.
The Group’s obligations for long-term employee benefits
are presented as non-current provisions in its statement
of financial position, except where the Group does not
have an unconditional right to defer settlement for at least
12 months after the end of the reporting period, in which
case the obligations are presented as current provisions.
Defined contribution superannuation benefits
All employees of the Group receive defined contribution
superannuation entitlements, for which the Group
pays the fixed superannuation guarantee contribution
to the employee’s superannuation fund of choice.
All contributions in respect of employees’ defined
contribution entitlements are recognised as an expense
when they become payable. The Group’s obligation with
respect to employees’ defined contribution entitlements
is limited to its obligation for any unpaid superannuation
guarantee contributions at the end of the reporting
period. All obligations for unpaid superannuation
guarantee contributions are measured at the
(undiscounted) amounts expected to be paid when the
obligation is settled and are presented as current liabilities
in the Group’s statement of financial position.
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Termination benefits
When applicable, the Group recognises a liability and
expense for termination benefits at the earlier of:
• the date when the Group can no longer withdraw the
offer for termination benefits; and
• when the Group recognises costs for restructuring
pursuant to AASB 137: Provisions, Contingent
Liabilities and Contingent Assets and the costs include
termination benefits.
In either case, unless the number of employees affected is
known, the obligation for termination benefits is measured
on the basis of the number of employees expected to be
affected. Termination benefits that are expected to be
settled wholly before 12 months after the annual reporting
period in which the benefits are recognised are measured
at the (undiscounted) amounts expected to be paid. All
other termination benefits are accounted for on the same
basis as other long-term employee benefits.
Equity-settled compensation
The Group operates an employee share and option plan.
Share-based payments to employees are measured at the
fair value of the instruments at grant date and amortised
over the vesting periods. Share-based payments to
non-employees are measured at the fair value of goods
or services received or the fair value of the equity
instruments issued, if it is determined the fair value of the
goods or services cannot be reliably measured, and are
recorded at the date the goods or services are received.
The corresponding amounts are recognised in profit or
loss. The fair value of options is determined using the
Black-Scholes pricing model. The number of shares and
options expected to vest is reviewed and adjusted at
the end of each reporting period such that the amount
recognised for services received as consideration for the
equity instruments granted is based on the number of
equity instruments that eventually vest.
Income taxes
(i)
The income tax expense (benefit) for the year comprises
current income tax expense (income) and deferred tax
expense (income).
Current income tax expense charged to profit or loss
is the tax payable on taxable income for the current
period. Current tax liabilities (assets) are measured at the
amounts expected to be paid to (recovered from) the
relevant taxation authority using tax rates (and tax laws)
that have been enacted or substantively enacted by the
end of the reporting period.
Deferred tax expense reflects movements in deferred tax
asset and deferred tax liability balances during the year as
well as unused tax losses.
Current and deferred income tax expense is charged or
credited outside profit or loss when the tax relates to
items that are recognised outside profit or loss or arising
from a business combination.
A deferred tax liability shall be recognised for all taxable
temporary differences, except to the extent that the
deferred tax liability arises from: (a) the initial recognition
of goodwill; or (b) the initial recognition of an asset
or liability in a transaction which: (i) is not a business
combination; and (ii) at the time of the transaction, affects
neither accounting profit nor taxable profit (tax loss).
Deferred tax assets and liabilities are calculated at
the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled and
their measurement also reflects the manner in which
management expects to recover or settle the carrying
amount of the related asset or liability. With respect to
non-depreciable items of property, plant and equipment
measured at fair value, the related deferred tax liability
or deferred tax asset is measured on the basis that the
carrying amount of the asset will be recovered entirely
through sale.
Deferred tax assets relating to temporary differences and
unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available
against which the benefits of the deferred tax asset
can be utilised, unless the deferred tax asset relating to
temporary differences arises from the initial recognition of
an asset or liability in a transaction that:
• is not a business combination; and
• at the time of the transaction, affects neither
accounting profit nor taxable profit (tax loss).
Where temporary differences exist in relation to investments
in subsidiaries, branches, associates, and joint ventures,
deferred tax assets and liabilities are not recognised where
the timing of the reversal of the temporary difference can
be controlled and it is not probable that the reversal will
occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally
enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement
of the respective asset and liability will occur. Deferred
tax assets and liabilities are offset where: (i) a legally
enforceable right of set-off exists; and (ii) the deferred tax
assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity
or different taxable entities where it is intended that net
settlement or simultaneous realisation and settlement of
the respective asset and liability will occur in future periods
in which significant amounts of deferred tax assets or
liabilities are expected to be recovered or settled.
Tax consolidation
The Company and its wholly-owned Australian resident
entities have formed a tax-consolidated group and are
therefore taxed as a single entity from that date. The
head entity within the tax-consolidated group is Mitchell
Services Ltd. The members of the tax-consolidated
Group are identified in Note 19. Tax expense/income,
deferred tax liabilities and deferred tax assets arising
from temporary differences of the members of the
41
Mitchell Services LtdAnnual Report 2023 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 in
the separate financial statements of each entity and the
tax values applying under tax consolidation. Current tax
liabilities and assets and deferred tax assets arising from
unused tax losses and relevant tax credits of the members
of the tax-consolidated group are recognised by the
Company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement
between the entities in the tax-consolidated group,
amounts are recognised as payable to or receivable by
the Company and each member of the Group in relation
to the tax contribution amounts paid or payable between
the parent entity and the other members of the tax-
consolidated group in accordance with the arrangement.
(j) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured
at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to
the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour and
any other costs directly attributable to bringing the assets
to a working condition for their intended use.
Where parts of an item of property, plant and equipment
have different useful lives, they are accounted for as
separate items (major components) of property, plant
and equipment.
Any gain or loss on disposal of an item of property, plant
and equipment (calculated as the difference between the
net proceeds from disposal and the carrying amount of
the item) is recognised in profit or loss.
Subsequent expenditure is capitalised only when it is
probable that future economic benefits associated with
the expenditure will flow to the Group. On-going repairs
and maintenance are expensed as incurred.
Depreciation
Items of property, plant and equipment are depreciated
from the date that they are installed and are ready for use,
or in respect of internally constructed assets, from the
date that the asset is completed and ready for use.
Depreciation is calculated to write off the cost of
property, plant and equipment using both the diminishing
value basis or straight-line basis over their estimated
useful lives. Depreciation is generally recognised in profit
or loss. 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.
The depreciation rates used for the current and
comparative years of significant items of property, plant
and equipment are as follows:
CLASSES OF FIXED ASSET
Leasehold improvements
Plant & Equipment
Motor Vehicles
Furniture & Fittings
20%
6.67% – 40%
12.50% – 50%
10% – 67.67%
Depreciation methods and useful lives are reviewed
at each reporting date and adjusted if appropriate.
Impairment of property, plant and equipment
At the end of each reporting period, the Group reviews
the carrying amounts of its tangible assets to determine
whether there is any indication that those assets are
impaired. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). When it is
not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset
belongs. When a reasonable and consistent basis of
allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-
generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted. If
the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit)
is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a re-valued amount,
in which case the impairment loss is treated as a
revaluation decrease.
When an impairment loss subsequently reverses, the
carrying amount of the asset (or cash-generating unit)
is increased to the revised estimate of its recoverable
amount, to the extent that the increased amount does
not exceed the carrying amount that would have been
determined had no impairment loss been recognised
for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately
in profit or loss, unless the relevant asset is carried at
a re-valued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 (k) Inventories
Inventories are stated at the lower of cost and net
realisable value. Costs of inventories are determined on
first-in-first-out basis. Net realisable value represents the
estimated selling price for inventories less all estimated
costs of completion and costs necessary to make the
sale. The cost of manufactured products includes direct
materials, direct labour and an appropriate portion of
variable and fixed overheads. Overheads are applied on
the basis of normal operating capacity. Costs are assigned
on the basis of weighted average costs.
(l) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past
event, it is probable that the Group will be required to
settle the obligation, and a reliable estimate of the amount
of the obligation can be made.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present
obligation at the end of the reporting period, taking
into account the risks and uncertainties surrounding
the obligation. When a provision is measured using the
cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows
(where the effect of the time value of money is material).
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is
virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.
(m) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions to
the instrument. For financial assets, this is the date that the
Group commits itself to either the purchase or sale of the
asset (i.e. trade date accounting is adopted).
Financial instruments (except for trade receivables) are
initially measured at fair value plus transaction costs,
except where the instrument is classified “at fair value
through profit or loss”, in which case transaction costs
are expensed to profit or loss immediately. Where
available, quoted prices in an active market are used to
determine fair value. In other circumstances, valuation
techniques are adopted.
Trade receivables are initially measured at the transaction
price if the trade receivables do not contain a significant
financing component or if the practical expedient was
applied as specified in AASB 15.63.
Financial assets
Financial assets are subsequently measured at:
• amortised cost;
• fair value through other comprehensive income; or
• fair value through profit or loss.
Measurement is on the basis of the two primary criteria:
• the contractual cash flow characteristics of the
financial asset; and
• the business model for managing the financial assets.
A financial asset is subsequently measured at amortised
cost if it meets the following conditions:
• the financial asset is managed solely to collect
contractual cash flows; and
• the contractual terms within the financial asset give
rise to cash flows that are solely payments of principal
and interest on the principal amount outstanding on
specified dates.
A financial asset is subsequently measured at fair value
through other comprehensive income if it meets the
following conditions:
• the contractual terms within the financial asset give
rise to cash flows that are solely payments of principal
and interest on the principal amount outstanding on
specified dates; and
• the business model for managing the financial asset
comprises both contractual cash flows collection and
the selling of the financial asset.
By default, all other financial assets that do not meet the
measurement conditions of amortised cost and fair value
through other comprehensive income are subsequently
measured at fair value through profit or loss.
The Group initially designates a financial instrument as
measured at fair value through profit or loss if:
• it eliminates or significantly reduces a measurement
or recognition inconsistency (often referred to as
“accounting mismatch”) that would otherwise arise
from measuring assets or liabilities or recognising the
gain or loss on them on different bases;
• it is in accordance with the documented risk
management or investment strategy and information
about the groupings was documented appropriately,
so that the performance of the financial liability that
was part of a group of financial liabilities or financial
assets can be managed and evaluated consistently on
a fair value basis; and
• it is a hybrid contract that contains an embedded
derivative that significantly modifies the cash flows
otherwise required by the contract.
The initial designation of the financial instruments to
measure at fair value through profit or loss is a one-time
option on initial classification and is irrevocable until the
financial asset is derecognised.
43
Mitchell Services LtdAnnual Report 2023 Equity instruments
At initial recognition, as long as the equity instrument is
not held for trading or not a contingent consideration
recognised by an acquirer in a business combination
to which AASB 3: Business Combinations applies, the
Group may make an irrevocable election to measure any
subsequent changes in fair value of the equity instrument
in other comprehensive income, while the dividend
revenue received on underlying equity instruments
investment will still be recognised in profit or loss.
Regular way purchases and sales of financial assets
are recognised and derecognised at settlement date
in accordance with the Group’s accounting policy.
Derecognition
Derecognition refers to the removal of a previously
recognised financial asset or financial liability from the
consolidated statement of financial position.
Derecognition of financial liabilities
A liability is derecognised when it is extinguished (i.e.
when the obligation in the contract is discharged,
cancelled or expires). An exchange of an existing financial
liability for a new financial liability with substantially
modified terms, or a substantial modification to the terms
of a financial liability is treated as an extinguishment of
the existing liability and recognition of a new financial
liability.
The difference between the carrying amount of the
financial liability derecognised and the consideration paid
and payable, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.
Derecognition of financial assets
A financial asset is derecognised when the holder’s
contractual rights to its cash flows expires, or the asset
is transferred in such a way that all the risks and rewards
of ownership are substantially transferred.
All of the following criteria need to be satisfied for
derecognition of financial assets:
• the right to receive cash flows from the asset has
expired or been transferred;
• all risk and rewards of ownership of the asset have
been substantially transferred; and
• the Group no longer controls the asset (i.e. the Group
has no practical ability to make a unilateral decision
to sell the asset to a third party).
On derecognition of a financial asset measured at
amortised cost, the difference between the asset’s
carrying amount and the sum of the consideration
received and receivable is recognised in profit or loss.
On derecognition of a debt instrument classified at fair
value through other comprehensive income, the cumulative
gain or loss previously accumulated in the investment
revaluation reserve is reclassified to profit or loss.
44
On derecognition of an investment in equity which was
elected to be classified as at fair value through other
comprehensive income, the cumulative gain or loss
previously accumulated in the investment’s revaluation
reserve is not reclassified to profit or loss, but is
transferred to retained earnings.
Impairment
The Group recognises a loss allowance for expected credit
losses on:
• financial assets that are measured at amortised cost
or fair value through other comprehensive income;
• lease receivables;
• contract assets;
• loan commitments that are not measured at fair value
through profit or loss; and
• financial guarantee contracts that are not measured
at fair value through profit or loss.
Loss allowance is not recognised for:
• financial assets measured at fair value through profit
or loss; or
• equity instruments measured at fair value through
other comprehensive income.
Expected credit losses are the probability-weighted
estimate of credit losses over the expected life of a
financial instrument. A credit loss is the difference
between all contractual cash flows that are due and all
cash flows expected to be received, all discounted at the
original effective interest rate of the financial instrument.
The Group uses the following approaches to impairment,
as applicable under AASB 9: Financial Instruments:
• the general approach; and
• the simplified approach;
General approach
Under the general approach, at each reporting period,
the Group assesses whether the financial instruments
are credit-impaired, and if:
• the credit risk of the financial instrument has
increased significantly since initial recognition, the
Group measures the loss allowance of the financial
instruments at an amount equal to the lifetime
expected credit losses; or
• there is no significant increase in credit risk since initial
recognition, the Group measures the loss allowance
for that financial instrument at an amount equal to
12-month expected credit losses.
Simplified approach
The simplified approach does not require tracking of
changes in credit risk at every reporting period, but
instead requires the recognition of lifetime expected
credit loss at all times.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Any gains or losses arising on changes in fair value are
recognised in profit or loss to the extent that they are not
part of a designated hedging relationship.
The change in fair value of the financial liability attributable
to changes in the issuer’s credit risk is taken to other
comprehensive income and are not subsequently
reclassified to profit or loss. Instead, they are transferred to
retained earnings upon derecognition of the financial liability.
If taking the change in credit risk in other comprehensive
income enlarges or creates an accounting mismatch, then
these gains or losses should be taken to profit or loss
rather than other comprehensive income.
A financial liability cannot be reclassified.
(n) Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
• where the amount of GST incurred is not recoverable
from the Australian Taxation Office (ATO), it is
recognised as part of the cost of acquisition of an
asset or as part of an item of expense; or
• for receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the ATO is included as part of receivables or payables.
Cash flows are included in the consolidated statement of
cash flows on a gross basis. The GST component of cash
flows arising from investing and financing activities which
is recoverable from, or payable to, the ATO is classified
within operating cash flows.
(o) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits
available on demand with banks, other short-term highly
liquid investments with ongoing maturities of 3 months or
less, and bank overdrafts.
(p) Fair value of Assets and Liabilities
The Group measures some of its assets and liabilities
at fair value on either a recurring or non-recurring
basis, depending on the requirements of the applicable
Accounting Standard.
Fair value is the price the Group would receive to sell
an asset or would have to pay to transfer a liability in an
orderly (i.e., unforced) transaction between independent,
knowledgeable, and willing market participants at the
measurement date.
This approach is applicable to:
• trade receivables or contract assets that result from
transactions within the scope of AASB 15 and that
contain a significant financing component; and
• lease receivables.
In measuring the expected credit loss, a provision matrix
for trade receivables was used, taking into consideration
various data to get to an expected credit loss (i.e.,
diversity of its customer base, appropriate groupings of
its historical loss experience etc).
Recognition of expected credit losses
At each reporting date, the Group recognises the
movement in the loss allowance as an impairment gain or
loss in profit or loss.
The carrying amount of financial assets measured at
amortised cost includes the loss allowance relating to
that asset.
Assets measured at fair value through other
comprehensive income are recognised at fair value, with
changes in fair value recognised in other comprehensive
income. Amounts in relation to change in credit risk are
transferred from other comprehensive income to profit
or loss at each reporting period.
Financial liabilities
Financial liabilities are subsequently measured at:
• amortised cost; or
• fair value through profit or loss.
A financial liability is measured at fair value through profit
or loss if the financial liability is:
• a contingent consideration of an acquirer in a business
combination to which AASB 3 applies;
• held for trading; or
• initially designated as at fair value through profit or loss.
All other financial liabilities are subsequently measured at
amortised cost using the effective interest method.
The effective interest method is a method of calculating
the amortised cost of a debt instrument and of allocating
interest expense in profit or loss over the relevant period.
The effective interest rate is the internal rate of return
of the financial asset or liability; that is, it is the rate that
exactly discounts the estimated future cash flows through
the expected life of the instrument to the net carrying
amount at initial recognition.
A financial liability is held for trading if:
• it is incurred for the purpose of repurchasing or
repaying in the near term;
• part of a portfolio where there is an actual pattern
of short-term profit taking; or
• a derivative financial instrument (except for a
derivative that is in a financial guarantee contract or a
derivative that is in an effective hedging relationship).
45
Mitchell Services LtdAnnual Report 2023 As fair value is a market-based measure, the closest
equivalent observable market pricing information is used
to determine fair value. Adjustments to market values
may be made having regard to the characteristics of
the specific asset or liability. The fair values of assets
and liabilities that are not traded in an active market are
determined using one or more valuation techniques.
These valuation techniques maximise, to the extent
possible, the use of observable market data.
To the extent possible, market information is extracted
from either the principal market for the asset or liability
(i.e. the market with the greatest volume and level of
activity for the asset or liability) or, in the absence of such
a market, the most advantageous market available to the
entity at the end of the reporting period (i.e. the market
that maximises the receipts from the sale of the asset or
minimises the payments made to transfer the liability, after
taking into account transaction costs and transport costs).
For non-financial assets, the fair value measurement
also takes into account a market participant’s ability to
use the asset in its highest and best use or to sell it to
another market participant that would use the asset in its
highest and best use. The fair value of liabilities and the
entity’s own equity instruments (excluding those related
to share-based payment arrangements) may be valued,
where there is no observable market price in relation to
the transfer of such financial instruments, by reference to
observable market information where such instruments
are held as assets. Where this information is not available,
other valuation techniques are adopted and, where
significant, are detailed in the respective note to the
financial statements.
(q) Capital management
Management controls the capital of the Group in order
to maintain an appropriate debt to equity ratio, generate
long-term shareholder value and ensure that the Group
can fund its operations and continue as a going concern.
The Group’s debt and capital include ordinary
share capital, and financial liabilities, supported by
financial assets.
Management effectively manages the Group’s capital
by assessing the Group’s financial risks and adjusting
its capital structure in response to changes in these
risks and in the market. These responses include
the management of debt levels, distributions to
shareholders and share issues.
There have been no changes in the strategy adopted by
management to control the capital of the Group since the
prior year.
(r) Assets held for sale
The Group recognises assets as held for sale when the
sale of the asset is approved by the Board and is actively
marketed at a reasonable price for immediate sale that is
probable within 12 months.
After these conditions are met, the Group measures the
assets held for sale at the lower of carrying amount and
fair value less costs to sell and are not depreciated.
Any reduction in value on initial recognition or any
reduction in fair value less costs to sell after initial
recognition shall be recognised as impairment in profit
or loss. A gain for any subsequent increase in fair value
less costs to sell shall be recognised in the profit or loss
to the extent that it is not in excess of the cumulative
impairment loss.
(s)
Critical accounting judgements and key sources
of estimation uncertainty
In the application of the Group’s accounting policies,
management are required to make judgements, estimates
and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are
based on historical experience and other factors that are
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an on-going basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods.
Key estimates – Business combination related
In accordance with accounting policies Note 1(d), assets
and liabilities acquired in a business combination are
recognised at their fair value at the date of acquisition.
The Group acquired Deepcore Holdings Pty Ltd
(Deepcore) during the year ended 30 June 2020 with
accounting for the business combination finalised per
the reported financial statements for the year ended
30 June 2020. There continues to be key accounting
considerations related to the business combination,
primarily Goodwill. While the contingent consideration
liability related to the acquisition has now been
extinguished, discussion on the effect of this on income
during the year is shown below as well as its relationship
to an impaired trade receivable at 30 June 2023.
Impairment testing for CGUs containing goodwill
(i)
Pursuant to the acquisition of Deepcore during the year
ended 30 June 2020, the Group recognised goodwill
of $5,755,572 with goodwill requiring to be tested for
impairment on an annual basis.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Goodwill is monitored by management at the level of
the lowest cash-generating-unit (CGU) being the wider
Deepcore drilling business, while individual customer
contracts, being separable, are considered on an
individual basis.
The recoverable amount of this CGU was based on
value-in-use (VIU), estimated using discounted cash
flows, requires the use of certain assumptions. The key
assumptions used in the estimation of the recoverable
amount are set out below. The values assigned to the
key assumptions represent management’s assessment of
future trends in the relevant industry and have been based
on historical data from both external and internal sources.
Key assumptions utilised within the VIU model:
• Discount rate (post tax): 12.4% (2022: 12.4%)
• Terminal value growth rate: 2% (2022: 2%)
• Budgeted EBITDA growth rate (average of next five
years): 2% (2022: 2%)
The cashflow projections included specific estimates
for five years and a terminal growth rate thereafter.
The terminal growth rate was determined based on
management’s estimate of the long-term compound
annual EBITDA growth rate, consistent with the
assumptions that a market participant would make.
Budgeted EBITDA was estimated taking into account
past experience with respect to revenue generated,
adjusted for the existing contract book, change to
contract rates, drilling volume and price growth for
the next five years. This, in conjunction with forecasted
operating costs based on historical experience,
determined the budgeted EBITDA.
Management do not consider there to be a reasonably
possible change in key assumptions that cause the
carrying amount to exceed the recoverable amount.
(ii)
Fair valuation of contingent consideration liability/
Impairment of trade receivable
Under the terms of the acquisition, Deepcore operated
under an earnout arrangement applicable to the
first three calendar years post acquisition subject to
outperformance against pre-agreed Deepcore EBITDA
targets. This entitled the Deepcore vendors to an annual
earnout payment being 50% of that portion of calendar
year Deepcore EBITDA greater than $12,500,000. As
part of the finalised acquisition accounting at 30 June
2020, a $4,851,492 contingent consideration liability was
recognised, being the present value of the forecast annual
cash payments in relation to the three-year earnout.
As at 30 June 2023, all three of the earn-out years have
been completed with the third finalised on 31 December
2022. Throughout the duration of this earnout
arrangement, the Group assessed the completeness
and accuracy of the contingent consideration liability at
each reporting date and, to the extent that it deemed
it necessary, adjusted its fair value with any movements
recognised in profit or loss.
During the financial year ended 30 June 2022, the Group
had decreased the fair value by $2,413,817. During the year
ended 30 June 2023, the Group has reduced the fair value
by a further $1,652,235 resulting in a benefit of $1,652,235
being recognised in profit or loss (2022: benefit of
$2,413,817 recognised in profit or loss). This reduction
was necessary due to Deepcore’s EBITDA performance
over the second half of the 2022 calendar year which
was impacted by various operational challenges beyond
the Group’s expectations, including excessive adverse
weather events and unplanned contract variations. A final
payment of $247,377 was made in relation to the third
(and final) earn out year and subject to the following
impairment of trade receivables commentary, there is no
longer any fair valuation requirement at 30 June 2023.
Impairment of trade receivable and potential impact on
contingent consideration liability
Notwithstanding the above, reference should be made
to commentary in Note 4 which addresses the Group’s
recognition of a trade receivables impairment relating
to amounts invoiced to one of Deepcore’ long term
customers, Balmaine Gold Pty Ltd (Balmaine), which
entered voluntary administration in March 2023. With
the Group being uncertain as to the quantum and timing
of any potential recovery, an impairment loss has been
recognised of $2,007,782, net of GST, being the full
amount receivable from Balmaine at the date of entering
voluntary administration.
The impairment loss recognised includes a GST exclusive
amount of $754,373 relating to amounts invoiced up to
and including 31 December 2022 which falls within the
third earn out year and which was taken into account in
calculating the Deepcore EBITDA for purposes of the final
earn out payment. Under a mutual agreement between
the Group and the Deepcore vendors, if any amounts
are subsequently recovered as part of the administration
process and to the extent that such amounts are allocated
to any pre 31 December 2022 invoices, the Deepcore
vendors would be entitled to a 50 per cent share of any
such amount which could result in an additional earn
out payment. The quantum of any potential payment is
capped at approximately $377,187.
(t)
Standards issued by not yet effective
A number of new standards are effective for annual
periods beginning after 1 July 2022 and earlier application
is permitted; however, the Group has not early adopted
the new or amended standards in preparing these
consolidated financial statements.
47
Mitchell Services LtdAnnual Report 2023 The following new and amended standards are not
expected to have a significant impact on the Group’s
consolidated financial statements:
• Onerous Contracts – Cost of Fulfilling a Contract
(Amendments to AASB 137);
• Annual Improvements to IFRS Standards 2018–2020
• Property, Plant and Equipment: Proceeds before
Intended Use (Amendments to AASB 16);
• Reference to the Conceptual Framework
(Amendments to AASB 3); and
• Sale or contribution of Assets between an Investor
and its Associate or Joint Venture (Amendments to
AASB 10 and AASB 128).
(u) Comparative figures
When required by accounting standards, comparative
figures have been adjusted to conform to changes in
presentation for the current financial year.
2.
REVENUE
2(a) Revenue from continuing operations
Revenue from contracts with customers
2023
$
2022
$
243,144,281
243,144,281
213,368,663
213,368,663
2(b) Disaggregation of revenue from contracts with customers
The Group disaggregates revenue from contracts with customers by commodity, drilling type, client type and
geography, as this appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are
affected by economic factors.
Commodity
Coking Coal
Gold
Copper
Lead/zinc/silver
Other
Drilling type
Surface drilling
Underground drilling
Other revenue
Geography by state
Queensland
New South Wales
Western Australia
Victoria
Northern Territory
Tasmania
Timing of revenue recognition
Services transferred over time
Goods transferred at a point in time
48
2023
$
2022
$
94,951,195
99,925,713
24,441,739
19,968,887
3,856,747
243,144,281
122,006,081
120,886,426
251,774
243,144,281
137,047,916
27,036,923
7,734,311
56,963,019
13,290,669
1,071,443
243,144,281
207,003,474
36,140,807
243,144,281
68,418,691
119,025,962
18,608,323
6,670,630
645,057
213,368,663
99,213,720
113,937,625
217,318
213,368,663
104,479,073
30,154,011
12,683,586
60,534,590
5,517,403
–
213,368,663
180,044,822
33,323,841
213,368,663
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 3. CASH AND CASH EQUIVALENTS
For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents include cash on hand and in
banks, net of outstanding bank overdrafts (where applicable). Cash and cash equivalents at the end of the year shown
in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of
financial position as follows.
Bank balances
4. TRADE AND OTHER RECEIVABLES
Trade debtors
Accrued income
Bonds and deposits
2023
$
11,107,630
11,107,630
2023
$
19,244,542
15,255,111
45,989
34,545,642
2022
$
3,742,395
3,742,395
2022
$
21,115,464
14,849,173
38,324
36,002,961
Impairment of trade receivables
The Group establishes an allowance for impairment by utilising the simplified approach in AASB 9 which uses an
estimation of lifetime expected credit losses.
During the year ended 30 June 2023, the Group recognised a trade receivables impairment relating to one of its long-
term customers, Balmaine Gold Pty Ltd (Balmaine). The impairment was recognised due to Balmaine being placed into
voluntary administration in March 2023. With the quantum and timing of any potential recovery uncertain, the Group
has recognised an impairment loss of $2,007,782, net of GST, being the full amount receivable from Balmaine at the date
of entering voluntary administration.
The table below details gross and net receivables at 30 June 2023.
Gross trade debtors
Impairment loss allowance
Net trade debtors
2023
$
21,252,324
(2,007,782)
19,244,542
A reconciliation of the movement in the impairment loss allowance provision is shown below:
Balance at beginning of the year
Impairment loss recognised during the year
Impairment loss reversal due to settlement by debtor
Remeasurement of loss allowance during the year*
Balance at end of the year
* The remeasurement of loss allowance did not have an impact on the 2022 profit or loss.
2023
$
–
2,007,782
–
–
2,007,782
2022
$
21,115,464
–
21,115,464
2022
$
6,624,899
–
(2,420,445)
(4,204,454)
–
49
Mitchell Services LtdAnnual Report 2023 4(a) Credit risk and ageing of trade debtors
The class of assets described as “trade debtors” is considered to be the main source of credit risk related to the Group.
The Group does not hold any collateral over these balances. The ageing of trade debtors (financial assets) is as follows:
< 1 month
1 to 3 months
> 3 months*
2023
$
15,589,690
3,455,827
2,206,807
21,252,324
* All amounts in the >3 months category at 30 June 2023 related to Balmaine (Refer to discussion earlier in Note 4).
5. OTHER ASSETS
Current
Borrowing costs
Prepayments
Non-current
Borrowing costs
6.
INVENTORIES
Spare parts and consumables
2023
$
25,000
2,258,570
2,283,570
–
–
2023
$
8,845,195
8,845,195
2022
$
19,631,685
1,483,779
–
21,115,464
2022
$
77,690
2,146,986
2,224,676
24,999
24,999
2022
$
7,237,492
7,237,492
The cost of inventories recognised as an expense during the year in respect of continuing operations was $25,841,847
(2022: $24,124,936).
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 7.
INTANGIBLE ASSETS
At 1 July 2022
Cost or fair value
Accumulated amortisation
Net book amount
Year ended 30 June 2023
Opening net book amount
Amortisation
Closing net book amount
At 30 June 2023
Cost or fair value
Accumulated amortisation
Net book amount
At 1 July 2021
Cost or fair value
Accumulated amortisation
Net book amount
Year ended 30 June 2022
Opening net book amount
Amortisation
Closing net book amount
At 30 June 2022
Cost or fair value
Accumulated amortisation
Net book amount
GOODWILL
$
CUSTOMER
CONTRACTS
$
5,755,572
17,129,163
–
(16,028,672)
5,755,572
1,100,491
5,755,572
–
5,755,572
5,755,572
–
5,755,572
5,755,572
–
5,755,572
5,755,572
–
5,755,572
1,100,491
(1,100,491)
–
17,129,163
(17,129,163)
–
17,129,163
(12,871,295)
4,257,868
4,257,868
(3,157,377)
1,100,491
5,755,572
17,129,163
–
(16,028,672)
5,755,572
1,100,491
TOTAL
$
22,884,735
(16,028,672)
6,856,063
6,856,063
(1,100,491)
5,755,572
22,884,735
(17,129,163)
5,755,572
22,884,735
(12,871,295)
10,013,440
10,013,440
(3,157,377)
6,856,063
22,884,735
(16,028,672)
6,856,063
Refer Note 1(s) for discussion of the Group’s assessment of the Goodwill carrying value.
As at 30 June 2023, Customer Contract Intangible Assets were fully amortised, with the last contract having expired
in February 2023.
51
Mitchell Services LtdAnnual Report 2023
8. RIGHT-OF-USE ASSETS
The Group’s property lease portfolio relates to leased premises with the date of expiry ranging from May 2024 through to
December 2026. In certain instances, the Group’s property leases include extension options that allow the Group to extend
the lease term to beyond the original termination date. These options are exercisable at the sole discretion of the Group
and provide the Group with appropriate flexibility to manage leases to align with its strategies. The extension options
which management were reasonably certain to be exercised have been included in the calculation of the lease liability.
AASB 16 related amounts recognised in the statement of financial position
Right-of-use assets
Cost
Accumulated depreciation
Movements in carrying amounts
Opening net book amount
Adjustment to carrying value of right-of-use asset*
Depreciation expense for the year
Net book amount
2023
$
2022
$
3,583,066
(2,122,087)
1,460,979
1,772,390
218,053
(529,464)
1,460,979
3,414,313
(1,641,923)
1,772,390
2,703,752
(403,964)
(527,398)
1,772,390
* During the year ended 30 June 2023, the Group exercised an option to renew the property lease on premises in Toronto, New South Wales
for a further 12 months through to May 2024 with it being deemed probable this would also be extended for a further 12 months beyond that
date. This adjustment also saw an immaterial reversal of the previous cost base and accumulated depreciation on that asset of $49,300 each
which had nil impact on the net carrying value of the asset and profit or loss.
Amounts recognised in profit or loss relating to lease liabilities
Depreciation charge related to right-of-use assets
Interest expense on lease liabilities (under finance costs)
Short term leases expense
Amounts recognised in statement of cash flows relating to lease liabilities
Total cash outflows for leases including interest expense
2023
$
529,464
121,913
455,327
2023
$
640,119
2022
$
527,398
139,524
462,013
2022
$
478,763
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023
9. TRADE AND OTHER PAYABLES
Trade creditors
Accrued expenses
GST payable
9(a) Ageing of trade payables
The ageing of trade creditors (financial liabilities) is as follows:
< 1 month
1 to 3 months
> 3 months
10. OTHER FINANCIAL LIABILITIES
Current
Borrowings1
Equipment Hire Purchase Facilities2
Lease liability3
Insurance premium and vehicle registration funding
Contingent consideration liability4
Non-current
Borrowings1
Equipment Hire Purchase Facilities2
Lease liability3
2023
$
11,117,160
6,096,284
1,791,467
19,004,911
2022
$
15,193,876
6,243,284
693,362
22,130,522
6,801,222
4,315,938
–
11,117,160
8,914,696
6,233,931
45,249
15,193,876
2023
$
2022
$
3,200,000
11,345,770
597,383
1,817,843
–
16,960,996
1,333,329
12,871,314
1,119,258
15,323,901
3,200,000
12,735,958
260,930
441,321
1,899,612
18,537,821
4,533,333
22,453,116
1,755,865
28,742,314
1
This relates to a $16m debt facility (Corporate Market Loan) with National Australia Bank (NAB), secured by the Group in December 2019
to fund the acquisition of Deepcore with latest terms being the following:
• Minimum annual repayments totalling $3.2m, due monthly in arrears, expiring on 30 November 2024; and
• The facility is subject to pricing periods of between 1–3 months, with each pricing period reflecting a weighted average interest rate,
including interest being based on BBSY plus 2.7% per annum.
2 The Group finances certain items of equipment under hire purchase agreements with an average term of 3.3 years (2022: 3.0 years) with
these obligations secured by the lessor’s title to goods under the contract. During the year ended 30 June 2022, a significant number of new
arrangements were entered into, mainly being the financing of all but one of the newly acquired LF160 surface drill rigs and related assets
in line with the Group’s organic growth strategy. New facilities entered into during the year ended 30 June 2023 were not significant by
comparison with the previous year and related mainly to the final LF160 under the growth strategy, support trucks for rigs and a number of
motor vehicles.
The Group’s exposure to interest rate risk has been mitigated in that each individual agreement, within the wider facility, has interest rates
fixed for the duration of the finance period. Effective interest rates payable under finance leases are between 3.34% and 7.22% (2022: 3.34%
and 6.79%). The fair value of the finance lease liabilities is approximately equal to the carrying amount.
3 Lease liability relating to the recognition of right-of-use assets as discussed in Note 8.
4 Contingent consideration liability relates to the acquisition of Deepcore during the year ended 30 June 2020. Refer to Note 20(d) for details
of fair value measurement with respect to this liability.
53
Mitchell Services LtdAnnual Report 2023
10(a) Reconciliation of movement in other financial liabilities
This reconciliation excludes movement in the Group’s contingent consideration liability which is scheduled
per note 20(d).
YEAR ENDED
30 JUNE 2023
Borrowings
Equipment Hire Purchase
Facilities
Lease liability
Insurance premium and
vehicle registration funding
Total
AT
1 JULY
2022
$
7,733,333
35,189,074
2,016,795
441,321
45,380,523
CASH
PROCEEDS
$
–
–
–
–
–
NON-CASH
FUNDING
RECEIVED
$
–
1,058,992
RIGHT-OF-
USE LEASE
LIABILITY
ADJUSTMENT
$
–
–
CASH
REPAYMENTS
$
AT
30 JUNE
2023
$
(3,200,004)
4,533,329
(12,030,982)
24,217,084
–
218,052
(518,206)
1,716,641
3,362,523
4,421,515
–
(1,986,001)
1,817,843
218,052
(17,735,193)
32,284,897
YEAR ENDED
30 JUNE 2022
Borrowings
Equipment Hire Purchase
Facilities
Lease liability
Insurance premium and
vehicle registration funding
AT
1 JULY
2021
$
CASH
PROCEEDS
$
NON-CASH
FUNDING
RECEIVED
$
10,932,007
–
–
18,677,164
1,545,065
24,257,059
RIGHT-OF-
USE LEASE
LIABILITY
ADJUSTMENT
$
–
–
CASH
REPAYMENTS
$
AT
30 JUNE
2022
$
(3,198,674)
7,733,333
(9,290,214)
35,189,074
2,899,121
786,534
–
–
–
(403,964)
(478,362)
2,016,795
1,288,771
–
(1,633,984)
441,321
Total
33,294,826
1,545,065
25,545,830
(403,964)
(14,601,234)
45,380,523
10(b) Equipment hire purchase facilities
Minimum future lease payments
Not later than 1 year
Later than 1 year and not later than 5 years
Minimum future lease payments
Less future finance charges
2023
$
2022
$
12,317,445
13,412,642
25,730,087
(1,513,003)
24,217,084
14,022,166
23,999,789
38,021,955
(2,832,881)
35,189,074
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023
10(c) Lease liabilities
A summary of borrowing arrangements applicable to all loans is included in Note 20(a). Security pledged under these
borrowing arrangements is detailed in Note 13.
Minimum future lease liability payments
Later than 1 year and not later than 5 years
Minimum future lease payments
Less future finance charges
Not later than 1 year
2023
$
689,345
1,130,144
1,819,489
(102,848)
1,716,641
2022
$
587,333
1,706,423
2,293,756
(276,961)
2,016,795
10(d) Loans
A summary of borrowing arrangements applicable to all loans is included in Note 10(i) through to 10(iv). Security pledged
under these borrowing arrangements is detailed in Note 13.
10(e) Credit standby arrangements with banks
The major facilities at year end are summarised below:
NAB business overdraft facility*
NAB hire purchase facility
TOTAL
$
USED
$
UNUSED
$
15,000,000
–
15,000,000
30,000,000
21,608,151
8,391,849
* During the year ended 30 June 2023, the available overdraft facility was increased to $15,000,000 from the previous available amount of
$10,000,000.
11. PROVISIONS
Current
Employee benefit provisions
Non-current
Employee benefit provisions
2023
$
11,487,929
11,487,929
1,265,864
1,265,864
2022
$
10,337,298
10,337,298
1,001,899
1,001,899
55
Mitchell Services LtdAnnual Report 2023 12. PROPERTY, PLANT AND EQUIPMENT
LEASEHOLD
IMPROVEMENTS
$
PLANT AND
EQUIPMENT
$
MOTOR
VEHICLES
$
FURNITURE
AND
FITTINGS
$
CAPITAL
WIP
$
TOTAL
$
At 1 July 2022
Cost or fair value
299,267
150,878,144
19,651,821
1,351,757
2,668,720
174,849,709
Accumulated depreciation
(163,173)
(73,316,213)
(14,868,193)
(1,077,996)
–
(89,425,575)
Net book amount
136,094
77,561,931
4,783,628
273,761
2,668,720
85,424,134
Year ended 30 June 2023
Opening net book amount
136,094
77,561,931
4,783,628
273,761
2,668,720
85,424,134
Additions
Transfers
Disposals
Depreciation
–
4,916,077
369,846
4,952,682
1,431,059
1,627,946
–
6,229,210
12,576,346
167,713
(7,118,187)
–
–
(436,482)
(55,701)
(926)
(68,695)
(25,092,859)
(1,569,745)
(169,905)
–
–
(493,109)
(26,901,204)
Closing net book amount
437,245
61,901,349
6,217,187
270,643
1,779,743
70,606,167
At 30 June 2023
Cost or fair value
669,113
158,356,415
21,975,892
1,507,761
1,779,743
184,288,924
Accumulated depreciation
(231,868)
(96,455,066)
(15,758,705)
(1,237,118)
–
(113,682,757)
Net book amount
437,245
61,901,349
6,217,187
270,643
1,779,743
70,606,167
At 1 July 2021
Cost or fair value
210,982
104,198,653
18,095,994
1,266,777
9,304,260
133,076,666
Accumulated depreciation
(121,519)
(49,418,798)
(12,925,935)
(871,958)
–
(63,338,210)
Net book amount
89,463
54,779,855
5,170,059
394,819
9,304,260
69,738,456
Year ended 30 June 2022
Opening net book amount
89,463
54,779,855
5,170,059
394,819
9,304,260
69,738,456
Additions
Transfers
Disposals
Depreciation
–
29,979,107
1,590,356
20,880
12,407,349
43,997,692
88,285
18,605,063
250,405
99,136
(19,042,889)
–
–
(1,012,463)
(181,068)
(1,381)
(41,654)
(24,789,631)
(2,046,124)
(239,693)
–
–
(1,194,912)
(27,117,102)
Closing net book amount
136,094
77,561,931
4,783,628
273,761
2,668,720
85,424,134
At 30 June 2022
Cost or fair value
299,267
150,878,144
19,651,821
1,351,757
2,668,720
174,849,709
Accumulated depreciation
(163,173)
(73,316,213)
(14,868,193)
(1,077,996)
–
(89,425,575)
Net book amount
136,094
77,561,931
4,783,628
273,761
2,668,720
85,424,134
Depreciation expense recognised of $26,901,204 and $27,117,012 during the years ended 30 June 2023 and 30 June
2022 respectively, excludes depreciation of $529,464 and $527,398 on right-of-use assets recognised during those
corresponding years (refer Note 8).
Plant and equipment and motor vehicles comprise mainly of drilling rigs and associated vehicles and equipment.
Directors and management continually monitor both domestic and overseas markets on new and used drill rig pricing
and availability and as a result are of the opinion that the net written down book value of the Group’s property, plant
and equipment is less than its recoverable amount.
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 13. ASSETS PLEDGED AS SECURITY
The following has been pledged as security in relation to the Group’s bank overdraft and other financial liabilities.
Corporate Market Loan – National Australia Bank
This facility was obtained to fund the acquisition of Deepcore drilling with advances secured by way of a first ranking
general security agreement over all present and after acquired property of all companies within the Group.
Bank overdraft – National Australia Bank
The advances made under this $15m facility are secured by a first ranking general security interest over all present and
after acquired property of each of the subsidiaries within the Group.
Equipment hire purchase facilities – National Australia Bank
As at 30 June 2023, the Group had entered into various individual equipment hire purchase arrangements with National
Australia Bank (NAB). Any outstanding principal balances that exist in relation to hire purchase arrangements provided
by NAB, are secured over the assets to which the equipment finance facility relates and a first ranking general security
charge over the interest over all present and after acquired property of each of the subsidiaries within the Group.
Equipment hire purchase facilities – other lenders
The Group has also entered into minor equipment hire purchase facilities with other lenders. Under the terms of these
facilities, security is limited to the assets to which the facility relates.
14. INCOME TAX
Income tax expense/(benefit) recognised in profit/(loss)
Income tax expense comprises
Current tax on profit/(loss) for the year
Deferred tax expense/(benefit)
Adjustments recognised in current year in relation to tax of prior years
Other
Income tax expense/(benefit)
The income tax expense/(benefit) for the year can be reconciled
to the accounting profit/(loss) as follows
Profit/(loss) before tax from continuing operations
Income tax expense/(benefit) calculated at 30%
Tax effect of fair value decrease to contingent consideration liability
Tax effect of other expenses that are not deductible in determining
taxable profit
Adjustments recognised in current year in relation to tax of prior years
Other
Income tax expense/(benefit)
2023
$
2022
$
5,444,280
(2,721,800)
(50,333)
–
2,672,147
10,280,762
3,084,228
(495,671)
133,923
(50,333)
–
2,672,147
(12,583,915)
11,845,458
172,768
(12,050)
(577,739)
(562,182)
(168,655)
(724,145)
154,343
172,768
(12,050)
(577,739)
The tax rate used for 2023 and 2022 reconciliations above is the corporate tax rate of 30% payable by Australian
corporate entities on taxable profits under Australian tax law.
57
Mitchell Services LtdAnnual Report 2023 14(a) Deferred tax balances
Deferred income tax assets and liabilities are attributable to the following tax losses and temporary differences:
DEFERRED TAX ASSETS
Accrued expenses
Employee benefit and other provisions
Impairment loss on trade receivables
Right-of-use lease liabilities
Other
Deferred tax assets on temporary differences
Deferred tax asset on tax losses
Total deferred tax assets
DEFERRED TAX LIABILITIES
Intangible assets – Customer contracts
Right of-use lease assets
Property, plant and equipment
Consumable inventories
Prepayments
Other
Total deferred tax liabilities
Set-off of deferred tax assets pursuant to set-off provisions
Net deferred tax liabilities
2023
$
428,671
3,826,138
602,335
515,226
173,817
5,546,187
8,179,875
13,726,062
2023
$
–
(438,294)
(15,681,027)
(884,585)
(176,115)
(6,793)
(17,186,814)
13,726,062
(3,460,752)
2022
$
636,769
3,161,387
–
605,272
235,671
4,639,099
13,573,822
18,212,921
2022
$
(330,147)
(531,717)
(17,338,120)
(649,594)
(148,431)
(3,517)
(19,001,526)
18,212,921
(788,605)
Movements in deferred tax assets on temporary differences and tax losses are as follows:
TEMPORARY DIFFERENCES
Balance at 30 June 2021
Credited/(charged) to current tax
ACCRUED
EXPENSES
$
586,072
153,823
PROVISIONS
$
IMPAIRMENT
LOSS TRADE
RECEIVABLES
$
RIGHT-OF-
USE LEASE
LIABILITY
$
OTHER
$
TOTAL
$
2,516,133
1,987,470
869,502
96,919
6,056,096
–
–
234
21,593
175,650
Credited/(charged) to profit or loss
(103,126)
645,254
(1,987,470)
(143,175)
(99,345)
(1,687,862)
Recognised directly in other
comprehensive income
Reduction in carrying value of
lease liability
–
–
–
–
Balance at 30 June 2022
636,769
3,161,387
Credited/(charged) to current tax
–
–
–
–
–
–
–
216,504
216,504
(121,289)
–
(121,289)
605,272
235,671
4,639,099
–
–
–
Credited/(charged) to profit or loss
(208,098)
664,751
602,335
(155,462)
(61,854)
841,672
Increase in carrying value of
lease liability
–
–
–
65,416
–
65,416
Balance at 30 June 2023
428,671
3,826,138
602,335
515,226
173,817
5,546,187
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 TAX LOSSES
30 June 2023
30 June 2022
OPENING
BALANCE
$
RELATED TO
PRIOR YEARS
$
UTILISED IN
FY2023
$
RECOGNISED
ON FY2022
TAX LOSS
$
CLOSING
BALANCE
$
13,573,822
1,119,519
50,333
(5,444,280)
–
8,179,875
(129,612)
–
12,583,915
13,573,822
As at 30 June 2023, the Group has recognised deferred tax assets of $8,179,875, being available tax losses per the
lodged tax return for the year ended 30 June 2023, representing an opening deferred tax asset of $13,595,462,
partially reversed by the utilisation of a portion of those assets based on estimated taxable income for the year
ended 30 June 2023.
Movements in deferred tax liabilities are as follows:
TEMPORARY
DIFFERENCES
CUSTOMER
CONTRACTS
$
PROPERTY,
PLANT, AND
EQUIPMENT
$
CONSUMABLE
INVENTORIES
$
RIGHT-OF-
USE LEASE
ASSETS
$
PRE-
PAYMENTS
$
OTHER
$
TOTAL
$
Balance at 30 June 2021
(1,277,360)
(5,783,509)
(672,327)
(811,126)
(138,388)
(82,314)
(8,765,024)
Credited/(charged) to
current tax
Credited/(charged) to
profit or loss
Reduction in carrying value
of right-of-use lease asset
–
(288,619)
(5,568)
–
–
75,381
(218,806)
947,213
(11,265,992)
28,301
158,120
(10,043)
3,416
(10,138,985)
–
–
–
121,289
–
–
121,289
Balance at 30 June 2022
(330,147)
(17,338,120)
(649,594)
(531,717)
(148,431)
(3,517)
(19,001,526)
Credited/(charged) to
current tax
Credited/(charged) to
profit or loss
Increase in carrying value
of right-of-use lease asset
Balance at 30 June 2023
–
–
–
–
–
–
–
330,147
1,657,093
(234,991)
158,839
(27,684)
(3,276)
1,880,128
–
–
–
–
(65,416)
–
–
(65,416)
(15,681,027)
(884,585)
(438,294)
(176,115)
(6,793)
(17,186,814)
59
Mitchell Services LtdAnnual Report 2023 14(b) Unrecognised amounts
Unused tax losses
Franking account balance
2023
$
–
2022
$
–
1,069,022
1,069,022
15. ISSUED CAPITAL
The tables below reconcile movement in the number of shares and payments for shares bought back during the years
ended 30 June 2022 and 30 June 2023 respectively.
Fully paid ordinary shares
Balance at 1 July 2021*
Shares issued pursuant to Executive Share and option plan
“Entitlement Offer” during year (i)
Balance at 30 June 2022*
Shares bought back on-market and cancelled, including transaction costs (ii)
Balance at 30 June 2023*
* Balance is gross of share issue costs (refer Note 16).
NUMBER OF SHARES
$
199,238,740
1,168,414
24,994,615
225,401,769
(6,762,066)
218,639,703
72,995,137
–
10,497,738
83,492,875
(2,469,472)
81,023,403
(i) Equity raise during year ended 30 June 2022
To support the funding of the Group’s organic growth strategy which included the purchase of up to 12 LF160 drill
rigs, the Group undertook a fully underwritten accelerated non-renounceable entitlement offer to raise approximately
$10,500,000. Under the offer, eligible shareholders could subscribe for 1 fully paid ordinary share for every 8 Mitchell
Services Ltd shares that they held on 18 August 2021 at the issue price of $0.42 per New Share.
The offer was made to both institutional and eligible retail shareholders with the institutional and retail components
successfully completing on 18 August and 9 September respectively. This resulted in 24,994,615 new shares being
issued, equivalent to approximately 11.1% of the Company’s total shares outstanding at 30 June 2021, raising $10,497,738,
excluding share issue costs.
(ii) On-market share buy back
On 14 July 2022, the Group commenced an on-market share buy-back on the following key terms:
• the price paid for shares purchased under the buy-back will be no more than 5% above the volume weighted
average price of the Company’s shares over the five days of trading prior to the purchase; and
• the number of shares purchased under the buy-back will not exceed 10% of the Company’s fully paid ordinary shares
(approximately 24 million shares).
At 30 June 2023, the Group had bought back 6,762,066 shares for a combined consideration of $2,465,404 net of
transaction costs.
Subsequent to 30 June 2023, the Group has bought back an additional 3,848,043 shares for a combined consideration
of $1,557,343 meaning, to date, the number of shares bought back total 10,610,109 shares for a combined consideration
of $4,022,747 net of transaction costs.
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 16. SHARE ISSUE COSTS
Balance at the beginning of the year
Share issue costs1
Recognition of deferred tax asset
Balance at end of the year
2023
$
2022
$
(3,251,109)
(2,745,932)
–
–
(3,251,109)
(721,682)
216,505
(3,251,109)
1
During the year ended 30 June 2022, the Group incurred pre-tax transaction costs of $721,682 being mainly management fees, underwriting
fees and legal expenses associated with the capital raise (refer Note 15). These were adjusted for tax with a deferred tax asset of $216,505
being recognised on these amounts which is deductible for income tax.
17. SHARE BASED PAYMENT TRANSACTIONS
Equity-settled share-based payment transactions
Executive share and option plan
Total expense recognised for equity-settled share-based payment
2023
$
214,608
214,608
2022
$
127,691
127,691
EXECUTIVE SHARE AND OPTION PLAN
Mitchell Services Limited operates an Executive Share and Option Plan (ESOP) for executives and senior employees
of the Group. In accordance with the provisions of the plan, as approved by shareholders at a previous annual
general meeting, the Board may designate a Director or employee of the Company as an eligible participant of the
ESOP (Eligible Participant). The Board may offer rights, options or shares to an Eligible Participant under the ESOP.
A participant is not required to pay for the grant of any rights or options or for the issue of shares.
The objectives of the ESOP are to:
• Attract and retain a high standard of managerial and technical personnel for the benefit of the Group;
• Establish a method by which Eligible Participants can participate in future growth and profitability of the Group; and
• Provide an incentive and reward for Eligible Participants for their contributions to the Group.
Equity instruments issued under the ESOP are subject to satisfaction of certain vesting conditions (tested two years
after the offer date).
The Group accounts for instruments that are still in their vesting period issued under the ESOP by recognising the fair
value of the relevant equity instruments as an expense over the vesting period. The fair value of the equity instruments
is calculated at each reporting period and vesting conditions are taken into account by adjusting the number of equity
instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for
goods or services received as consideration for the equity instruments granted is based on the number of equity
instruments that eventually vest.
61
Mitchell Services LtdAnnual Report 2023 (i) Measurement of fair values – Employee Option Plan
Set out below are summaries of options granted under ESOP:
YEAR ENDED 30 JUNE 2023
YEAR ENDED 30 JUNE 2022
AVERAGE EXERCISE PRICE
PER SHARE OPTION
NUMBER OF
OPTIONS
AVERAGE EXERCISE PRICE
PER SHARE OPTION
NUMBER OF
OPTIONS
As at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
As at 30 June
Vested and exercisable
at 30 June
0.668
0.620
–
0.688
0.656
8,079,729
1,606,007
–
(1,030,550)
8,655,186
0.682
0.630
–
0.910
0.668
6,471,713
1,720,360
–
(112,344)
8,079,729
0.674
5,499,391
0.674
5,028,561
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
GRANT DATE
23 May 2016
4 August 2017
14 June 2018
14 June 2019
1 June 2020
31 May 2021
23 June 2022
31 May 2023
Total
EXPIRY DATE
EXERCISE PRICE
OPTIONS AT
30 JUNE 2023
OPTIONS AT
30 JUNE 2022
23 May 2025
4 August 2026
14 June 2027
14 June 2028
1 June 2029
31 May 2030
23 June 2031
31 May 2032
0.395
0.539
0.703
1.100
0.910
0.690
0.630
0.620
1,367,898
841,360
811,312
617,489
812,462
1,048,870
1,549,788
1,606,007
8,655,186
1,526,614
933,983
905,557
705,621
956,789
1,330,805
1,720,360
–
8,079,729
Weighted average remaining contractual life of options
outstanding at end of year
5.82 years
6.13 years
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Fair value of shares and options not yet vested at 30 June 2023
Options
The calculated fair value at 30 June 2023 of the options provisionally granted during the years ended 30 June 2022
and 30 June 2023 was $98,683 and $104,431 respectively and has been determined using the Black-Scholes option
pricing model. Due to the deferral of the grant date until the number of options that are vested are determined,
the grant date fair value has been provisionally estimated at the year-end date. Expected volatility is estimated by
considering historical volatility of comparable company share prices. The inputs in the measurement of the fair value
at 30 June 2023 of the equity-settled share-based payment plans granted during the years ended 30 June 2022 and
30 June 2023 were as follows:
Share price (at 30 June 2023)
Exercise price
Expected volatility
Time to maturity
Risk-free interest rate
Dividend yield
Fair value per option
Number of options
Total fair value of options
PROVISIONALLY GRANTED1
DURING YEAR ENDED
30 JUNE 2022
PROVISIONALLY GRANTED1
DURING YEAR ENDED
30 JUNE 2023
$0.3850
$0.63
47%
3.5 years
4.01%
3.24%
$0.0708
1,549,788
$98,683
$0.3850
$0.62
47%
3.5 years
4.01%
3.24%
$0.0723
1,606,007
$104,431
1
The options have been provisionally granted. These will only be granted post vesting and as such, the grant date is deferred until such time.
Relating to the above issues, expenses of $49,341 (2022 issue) and $4,351 (2023 issue) have been recognised on a life
to date basis (issue date through to 30 June 2023) based on a straight-line amortisation of the fair value over the two-
year vesting period. Further, a weighted probability adjustment of 90 per cent has been applied based on the estimated
vesting percentage.
Shares
The calculated fair value of the shares issued during the years ended 30 June 2022 and 30 June 2023 under the ESOP
was $161,309 and $167,162 respectively at 30 June 2023 and has been determined with reference to the closing price of
the Company’s fully paid ordinary shares at the end of the financial year.
Relating to the above issues, expenses of $80,655 (2022 issue) and $6,965 (2023 issue) have been recognised on a
life to date basis (issue date through to 30 June 2023) based on a straight-line amortisation of the fair value over the
two-year vesting period. Further, a weighted probability adjustment of 90 per cent has been applied based on the
estimated vesting percentage.
Fair value of shares and options vested during year ended 30 June 2023
Options
The calculated fair value of the options that vested under the ESOP during the year ended 30 June 2023 (which were
granted under the ESOP in 2021) was $55,538 as at the vesting date of 31 May 2023 and has been determined using the
Black-Scholes option pricing model. Expected volatility is estimated by considering historical volatility of comparable
company share prices.
63
Mitchell Services LtdAnnual Report 2023 The inputs in the measurement of the fair value at vesting date of the options were as follows:
Share price
Exercise price
Expected volatility
Time to maturity
Risk-free interest rate
Dividend yield
Fair value per option
Number of options
Total fair value of options
Shares
$0.3475
$0.69
50%
3.5 years
3.37%
3.60%
$0.0530
1,048,870
$55,538
The calculated fair value of the shares that vested under the ESOP during the year ended 30 June 2023 (which were
issued under the ESOP in 2021) was $122,404 as at the vesting date of 31 May 2023 and has been determined with
reference to the closing price of the Company’s fully paid ordinary shares.
18. RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH FLOWS
FROM OPERATING ACTIVITIES
Profit for the year
Adjustments for:
Depreciation and amortisation
Net gain on disposal of property, plant and equipment
Income tax benefit
Finance costs – unwind of discount on contingent consideration
Fair value (decrease)/increase to contingent consideration liability
Change in trade and other receivables
Change in other assets
Change in inventories
Change in trade payables and accruals
Change in insurance premium funding balance
Change in employee benefit provisions
Recognition of share-based payments
Net income tax receipts/(payments)
Net cash inflow from operating activities
2023
$
7,608,615
28,531,159
(3,213,495)
2,672,147
–
(1,652,235)
1,457,319
(381,485)
(1,607,703)
(2,778,021)
3,362,523
1,414,596
214,608
–
2022
$
15,557
30,801,877
(1,239,728)
(577,739)
139,466
(2,413,817)
(4,474,332)
(262,910)
(1,965,539)
(2,973,140)
1,336,850
2,162,844
127,691
1,538,898
35,628,028
22,215,978
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 19. GROUP STRUCTURE
The ultimate parent entity within the group is Mitchell Services Ltd (the Company). The consolidated financial
statements incorporate the assets, liabilities and results of the Company and the following controlled entities, that
were held in both current and prior year unless otherwise stated. All entities in the table below form part of the tax
consolidated group as disclosed in note 1(i).
ENTITY NAME
Notch Holdings Pty Ltd
Well Drilled Pty Ltd1
Mitchell Operations Pty Ltd1
Notch No. 2 Pty Ltd
Mitchell Services Share Plan Pty Ltd
Radco Technologies Pty Ltd1
Radco Group Australia Pty Ltd
Deepcore Holdings Pty Ltd1
Deepcore Australia Pty Ltd1
Deepcore Drilling Pty Ltd1
ACN
009 271 461
123 980 343
165 456 066
606 170 138
610 901 221
137 688 227
137 688 745
155 701 885
115 967 809
115 935 941
OWNERSHIP INTEREST
HELD BY THE GROUP
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1 A deed of cross guarantee was enacted between the Company and these entities during the year ended 30 June 2020. Under the deed, each
company guarantees to support the liabilities and obligations of the others and, by entering into the deed, relief was obtained from preparing
financial statements for each entity under ASIC Class Order 98/1418. These entities, being parties to the deed of cross guarantee represent
a Closed Group for the purposes of the ASIC Class Order. The consolidated income statement and balance sheet of all entities in the Closed
Group are set out below.
2023
$
2022
$
Closed Group – Income Statement
Revenue
Gain/(loss) on sale of assets
Drilling consumables
Employee and contract labour expenses
Fuel and oil
Freight and couriers
Hire of plant and equipment
Insurances
Legal and consultant fees
Rent
Service and repairs
Travel expenses
(Impairment)/reversal of impairment of trade receivables
Fair value decrease to contingent consideration liability
Depreciation expense
Amortisation of intangibles
Finance costs
Other expenses
Profit before tax
Income tax expense
Profit for the year
243,293,960
939,822
(25,841,847)
(127,416,774)
(2,967,394)
(3,322,705)
(11,376,630)
(1,233,779)
(1,139,490)
(455,327)
(14,327,221)
(11,459,890)
(2,007,782)
1,652,235
(14,627,559)
(1,100,491)
(967,019)
(5,441,405)
22,200,704
6,248,631
15,952,073
213,404,208
(43,024)
(24,124,936)
(114,937,855)
(2,192,817)
(3,188,242)
(12,082,459)
(1,053,032)
(1,721,537)
(462,013)
(13,416,907)
(9,349,816)
2,420,445
2,413,817
(15,450,545)
(3,157,377)
(1,148,985)
(4,899,251)
11,009,674
2,932,191
8,077,483
65
Mitchell Services LtdAnnual Report 2023 2023
$
2022
$
9,839,155
34,545,642
1,835,798
8,845,195
50,305,951
105,371,741
15,478,503
1,460,979
20,063,977
5,755,572
8,433,080
–
51,192,111
156,563,852
18,544,588
11,111,744
11,487,929
41,144,261
2,791,104
1,265,864
4,056,968
45,201,229
111,362,623
76,506,433
34,856,190
111,362,623
3,712,702
36,002,961
2,224,676
7,237,492
36,349,736
85,527,567
15,478,503
1,772,390
28,954,739
6,856,062
11,937,893
25,000
65,024,587
150,552,154
19,894,800
12,401,220
11,740,273
44,036,293
7,633,940
1,001,899
8,635,839
52,672,132
97,880,022
78,975,905
18,904,117
97,880,022
CLOSED GROUP – BALANCE SHEET
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventories
Other financial assets
Total current assets
Non-current assets
Investments in controlled entities
Right-of-use assets
Property, plant and equipment
Intangibles at cost
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Provisions
Total current liabilities
Non-current liabilities
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Retained earnings
Total equity
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 PARENT ENTITY
Summarised financial information for the parent entity is as follows:
Loss for the year
Other comprehensive income
2023
$
2022
$
(4,148,217)
(2,942,048)
–
Total comprehensive income for the year
(4,148,217)
(2,942,048)
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Issued capital
Retained earnings
Total equity
731,009
60,348,747
7,901,778
10,011,028
76,506,433
(26,168,714)
50,337,719
3,799,014
68,814,885
7,375,302
12,074,085
78,975,905
(22,235,105)
56,740,800
Parent entity contingent liabilities
There are no contingent liabilities required to be disclosed as at 30 June 2023 (2022: nil).
Parent entity capital commitments
There are no capital commitments as at 30 June 2023 (2022: nil).
Parent entity guarantees in respect of the debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in
respect of certain subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed
are disclosed within this Note.
20. FINANCIAL RISK MANAGEMENT
The Group’s financial instruments mainly consist of deposits with banks, trade receivables and payables and borrowings
and leases from financial institutions. The Board of Directors are responsible for monitoring and managing the financial
risks. They monitor these risks through regular meetings with the Group’s management. The Group does not enter into
derivative financial instruments and does not speculate in any type of financial instrument.
Specific financial risk exposures and management thereof
The main risks the Group is exposed to through its financial instruments are interest rate risk, liquidity risk and credit
risk. There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the
Board’s objectives, policies and processes for managing or measuring the risks from the previous reporting period.
Interest rate risk
20(a)
The Group is exposed to interest rate risk on its Corporate Market Loan facility with the NAB (discussed in Note 10)
which is subject to floating interest rates as specified in Note 10 while all Equipment Hire Purchase facilities are at fixed
rates. With respect to those subject to a floating interest rate, a one percentage point increase/decrease in interest rates
would result in a net profit after tax decrease/increase of $42,931 (2022: $54,133).
67
Mitchell Services LtdAnnual Report 2023 20(b) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. 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, under both normal
and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group manages this risk through the following mechanisms:
• ensuring that there is access to adequate capital;
• preparing forward looking cash flow analyses in relation to its operational, investing and financial activities;
• monitoring undrawn credit facilities;
• obtaining funding from a variety of sources;
• maintaining a reputable credit profile;
• managing credit risk related to financial assets;
• investing surplus cash only with major financial institutions; and
• comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
The table below reflects the gross, undiscounted contractual maturity analysis for financial liabilities.
CARRYING
AMOUNT
WITHIN 1
YEAR
1–2
YEARS
2–3
YEARS
3–5
YEARS
MORE THAN
5 YEARS
CONTRACTUAL CASH FLOWS
2023
Trade payables
Borrowings
Equipment hire purchase
facilities
$
$
19,004,911
19,004,911
$
–
4,533,329
3,407,411
1,356,566
$
–
–
–
–
24,217,084
12,317,445
13,169,994
168,456
74,192
Lease liability
1,716,641
689,345
695,145
343,149
91,850
Insurance premium and
vehicle registration funding
Contingent consideration
liability
1,817,843
1,880,013
–
–
–
–
–
–
–
–
51,289,808
37,299,125
15,221,705
511,605
166,042
TOTAL
$
19,004,911
$
–
–
4,763,977
–
–
25,730,087
1,819,489
–
1,880,013
–
–
–
53,198,477
2022
Trade payables
Borrowings
Equipment hire
purchase facilities
Lease liability
Insurance premium and
vehicle registration funding
Contingent consideration
liability
CARRYING
AMOUNT
WITHIN 1
YEAR
1–2
YEARS
2–3
YEARS
3–5
YEARS
MORE THAN
5 YEARS
CONTRACTUAL CASH FLOWS
$
$
22,130,522
22,130,522
$
–
$
–
7,733,333
3,376,186
3,287,429
1,343,446
–
–
35,189,074
14,186,889
11,495,706
9,842,616
2,496,744
2,016,795
587,333
594,611
611,016
500,796
441,321
458,974
1,899,612
2,053,568
–
–
–
–
–
–
69,410,657
42,793,472
15,377,746
11,797,078
2,997,540
$
–
–
–
–
–
–
–
TOTAL
$
22,130,522
8,007,061
38,021,955
2,293,756
458,974
2,053,568
72,965,836
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 20(c) 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 and other receivables from customers. The Group
has adopted a policy of only dealing with creditworthy counterparties and uses publicly available financial information
and its own trading records to rate its customers. The Group’s exposure and the credit ratings of its counterparties
are continuously monitored to mitigate financial loss. The maximum exposure to credit risk by class of recognised
financial assets at balance date, excluding the value of any collateral or other security held, is equivalent to the carrying
value and classification of those financial assets (net of any provisions) as presented in the Consolidated Statement of
Financial Position.
Details with respect to credit risk of trade and other receivables is provided in Note 4(a).
All trade and other receivables (whether due or past due) are considered to be of high credit quality. Aggregates of
such amounts are detailed at Note 4(a).
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by
international credit-rating agencies.
20(d) Fair Values
Fair value estimation
While the carrying values of financial assets and liabilities as detailed in the Consolidated Statement of Financial Position
and these notes approximate their fair value at reporting date, the Group mandatorily measures and recognises the
following liability at fair value on a recurring basis after initial recognition:
• obligation for contingent consideration arising from a business combination (“contingent consideration liability”).
The Group does not subsequently measure any liabilities at fair value on a non-recurring basis.
(i) Fair value hierarchy
AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy,
which categorises fair value measurements into one of three possible levels based on the lowest level that an input that
is significant to the measurement can be categorised into as follows:
LEVEL 1
LEVEL 2
LEVEL 3
Measurements based on quoted prices
(unadjusted) in active markets for identical
assets or liabilities that the entity can
access at the measurement date.
Measurements based on inputs other
than quoted prices included in Level
1 that are observable for the asset or
liability, either directly or indirectly.
Measurements based on unobservable
inputs for the asset or liability.
(ii) Fair value measurements using significant unobservable inputs (level 3)
The Group’s contingent consideration liability related to the acquisition of Deepcore during the year ended 30 June
2020 and was measured using Level 3. The valuation technique utilised was a discounted cash flow model which
considered the present value of the expected future payments, discounted using a risk-adjusted discount rate.
Refer Note 1(s) for discussion around fair value measurement of the contingent consideration liability during the 2023
financial year.
69
Mitchell Services LtdAnnual Report 2023 The following tables present changes in the contingent consideration liability:
YEAR ENDED 30 JUNE 2023
Balance at 1 July 2022
Fair value decrease to liability during year ended 30 June 2023
Earn out payment to Deepcore vendors during year ended 30
June 2023
Balance at 30 June 2023
YEAR ENDED 30 JUNE 2022
Balance at 1 July 2021
Increase to present value (recognised in profit or loss)
Earn out payment to Deepcore vendors during year ended 30
June 2022
Transfer from non-current to current during year ended 30 June
2022
Fair value decrease to liability during year ended 30 June 2022
Balance at 30 June 2022
CURRENT
$
NON-CURRENT
$
1,899,612
(1,652,235)
(247,377)
–
–
–
–
–
CURRENT
$
NON-CURRENT
$
3,710,613
83,697
2,587,047
55,769
TOTAL
$
1,899,612
(1,652,235)
(247,377)
–
TOTAL
$
6,297,660
139,466
(2,123,697)
–
(2,123,697)
2,332,911
(2,103,912)
1,899,612
(2,332,911)
(309,905)
–
–
(2,413,817)
1,899,612
(iii) Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the significant unobservable inputs used in level 3
fair value measurement of the Group’s contingent consideration liability:
FAIR VALUE AT
UNOBSERVABLE
INPUTS USED
JUNE 2023
$
JUNE 2022
$
UNOBSERVABLE
INPUTS
FY2023
FY2022
RELATIONSHIP OF UNOBSERVABLE INPUTS
TO FAIR VALUE
–
1,899,612
Risk-adjusted pre-tax
discount rate
Anticipated
annual growth rate in
Deepcore profits
–
–
18.0%
2.0%
A change in the discount rate by
200 bps would have increased/decreased the
comparative FV by approx. $0.1 million.
If estimated annual profit growth rate had
beens 1% higher or lower, the comparative FV
would have increased/decreased by approx.
$0.1 million.
With the three year earn out period being complete, there is nil liability requiring recognition at 30 June 2023 and
therefore no flexing of the fair value at that date with respect to unobservable inputs.
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 21. RELATED PARTY TRANSACTIONS
21(a) Related parties
The Group’s main related parties are as follows.
(i) Entities exercising control over the Group
Note 19 details all subsidiary companies within the Group.
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company,
have been eliminated on consolidation and are not
disclosed in this note.
(ii) Key management personnel (KMP)
Any person(s) having authority and responsibility for
planning, directing and controlling the activities of
the entity, directly or indirectly, including any Director
(whether executive or otherwise) of that entity are
considered KMP. Refer Note 22 for disclosures relating
to KMP.
(iii) Other related parties
Other related parties include entities over which KMP
have control or joint control.
21(b) Transactions with related parties
Transactions between related parties are on normal
commercial terms and conditions no more favourable than
those available to other parties unless otherwise stated.
The following transactions occurred with related parties
during the year.
Manutech Engineering and Maintenance
The Group engages Manutech Engineering and
Maintenance to purchase parts and in some instances
perform repair and maintenance type services. Manutech
Engineering and Maintenance is an entity controlled by
Peter Miller. The amount incurred during the reporting
period in relation to these services was $81,919 including
GST. There were nil amounts payable to this related entity
at the end of the reporting year.
Equipment Hub Pty Ltd
In order to satisfy specific contract requirements, the
Group hired plant and equipment not available in its
fleet from Equipment Hub Pty Ltd (Equipment Hub).
Nathan Mitchell is a significant shareholder of
Equipment Hub. Hire of plant and equipment from
this related entity for the year amounted to $281,191
including GST. In addition, during the year, the Group
also engaged Equipment Hub as a broker to sell a
drilling rig to a third party. Commission of $44,000
was paid to Equipment Hub per this arrangement.
An amount of $70,125 remains owing to this related
entity at the end of the year.
Eastwest Drilling and Mining Supplies Pty Ltd
Deepcore Drilling Pty Ltd operate under an outsourced
procurement model whereby the majority of its
purchasing function is outsourced to Eastwest Drilling
and Mining Supplies Pty Ltd (Eastwest). This arrangement
(which was in place prior to and at the date of the
Deepcore Drilling acquisition) has remained in place post
the completion of the acquisition as part of a broader
integration plan designed to minimise acquisition related
disruption within the Deepcore business and to the
manner in which it operates. On acquisition of Deepcore,
the outsourced procurement arrangements were
reviewed and agreement reached on pricing to ensure
that the arrangement was no less favourable to normal
commercial terms. Eastwest is an entity controlled by
Scott Tumbridge.
During the year, the Group was supplied plant items, parts
and consumables and also hired ancillary equipment
with amounts charged totalling $5,886,798. All amounts
are inclusive of GST and were based on normal market
rates and under normal payment terms. An amount of
$1,060,731 remains owing to this related entity at the end
of the year.
Mitchell Family Investments (QLD) Pty Ltd
Mitchell Family Investments (QLD) Pty Ltd is an entity
controlled by Nathan Mitchell. The Group leases the
majority of the premises located at 112 Bluestone Circuit,
Seventeen Mile Rocks Brisbane, which is owned by
Mitchell Family Investments (QLD) Pty Ltd. The rent
associated with this property for year amounted to
$302,500 including GST. There are also ancillary utilities
charges of $49,562 (including GST) reflected in the year.
Amounts owing to this related entity at the end of the
year is $51,658.
Mitchell Group Pty Ltd
Mitchell Group Pty Ltd is an entity controlled by Nathan
Mitchell. On 30 November 2016, the Group entered into a
licence deed with Mitchell Group for the use by Mitchell
Group of a designated area within 112 Bluestone Circuit,
Seventeen Mile Rocks Brisbane. There are no rental
charges associated with this property and Mitchell Group
used the designated area under the licence deed for the
duration of the year.
The Group and this related entity currently operate under
an arrangement whereby the services of an in-house legal
counsel are shared between the two entities. Net of minor
outgoings recovered by the Group, invoices in relation to
this shared resource totalling $104,447, inclusive of GST,
were issued to the Group by the related entity during the
year with an amount of $10,893 remaining owing at the
end of the year.
71
Mitchell Services LtdAnnual Report 2023 Mitchell Family Superannuation Fund
Mitchell Family Superannuation Fund is an entity controlled by Nathan Mitchell. On 30 November 2016, the Group
entered into a licence deed with Mitchell Family Superannuation Fund for the use by the Group of 119 Thomas Mitchell
Drive, Muswellbrook to facilitate the Group’s expansion into NSW. There are no rental charges associated with this
property and the Group used the designated area under the licence deed for the duration of the reporting period
however, during the period, the related party charged the Group an amount of $8,143 to reimburse for the cost of
council rates. There were nil amounts payable to this related entity at the end of the year.
The above related party transactions were based on normal market rates and under normal payment terms.
22. KEY MANAGEMENT PERSONNEL
Key management personnel compensation
Key management personnel compensation comprised the following:
Short-term employee benefits
Post-employment benefits
Non-monetary benefits
Other long-term benefits
Share-based payments
2023
$
1,691,865
145,863
24,372
21,139
85,828
1,969,067
2022
$
1,783,333
143,333
24,372
26,422
46,688
2,024,148
Compensation of the Group’s key management personnel includes salaries and non-cash benefits, and certain key
management personnel also participate in the Group’s Executive share and option plan (refer Note 17).
23. AUDITOR’S REMUNERATION
During the year, the following fees were paid or payable for services
provided by the auditor or its related practices:
Audit and review of financial statements – KPMG (current auditors)
Audit and review of financial statements – Jessup’s (previous auditors)
2023
$
172,845
–
172,845
2022
$
146,426
68,528
214,954
24. CAPITAL COMMITMENTS
As at 30 June 2023, the Group had capital commitments of $868,840 (2022: $2,008,806), mainly relating to certain
items of drilling equipment and a motor vehicle.
25. EARNINGS PER SHARE
Basic earnings per share
From continuing operations (cents per share)
Diluted earnings per share
From continuing operations (cents per share)
72
2023
$
3.4
3.4
2022
$
0.0
0.0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2023Mitchell Services LtdAnnual Report 2023 Basic earnings per share is calculated using earnings and weighted average number of ordinary shares as follows:
Profit/(loss) for the year attributable to owners
Weighted average number of ordinary shares
2023
$
7,608,615
221,688,800
2022
$
15,557
221,428,148
Diluted earnings per share is calculated using earnings and weighted average number of ordinary shares as follows:
Profit/(loss) for the year attributable to owners
Weighted average number of ordinary shares
2023
$
7,608,615
221,688,800
2022
$
15,557
221,428,148
26. SUPERANNUATION CONTRIBUTIONS
The Group contributes superannuation on behalf of qualifying employees to superannuation funds. The Group is
required to make specified contributions in accordance with contractual employment and statutory obligations.
The total expense recognised in the statement of profit or loss and other comprehensive income of $10,785,296
(2022: $8,651,166) represents the contributions payable by the Group to these plans in accordance with contractual
employment and statutory obligations. As at 30 June 2022, contributions of $963,764 due in respect of the
2023 financial year (2022: $889,326) had not been paid over to the plans. These amounts were paid subsequent to the
end of the 2023 financial year.
27. OPERATING SEGMENTS
27(a) The Group operates primarily within Australia, providing services wholly to a discrete industry segment (provision
of drilling services to the mining industry). These geographic and operating segments are considered based on internal
management reporting and the allocation of resources by the Group’s chief decision makers (Board of Directors).
On this basis, the financial results of the reportable operating and geographic segments are equivalent to the financial
statements of the Group as a whole and no separate segment reporting is disclosed in these financial statements.
27(b) The Group generates revenue from external customers who individually account for greater than 10% of the Groups
total revenue. The below table sets out the applicable revenue percentage generated from each of these customers.
External Customer 1
External Customer 2
External Customer 3
2023
%
28.51%
13.00%
12.25%
2022
%
25.66%
17.57%
13.82%
28. EVENTS AFTER THE REPORTING DATE
On-market share buy back
Refer Note 15 which discusses details of shares bought back subsequent to 30 June 2023.
Dividend declaration
On 23 August 2023 a final partially franked dividend of 2.08 cents per share was declared for the year ended 30
June 2023. The total estimated dividend is $4,477,349 and is payable on 15 September 2023 to Mitchell Services
Limited shareholders on the share register at 30 August 2023.
Other than the matters noted above, there has not been any matters or circumstance occurring subsequent to the end
of the reporting period that have significantly affected, or may significantly affect, the operations of the Group, the
results of those operations, or the state of affairs of the Group in the future.
73
Mitchell Services LtdAnnual Report 2023 DIRECTORS’
DECLARATION
For the year ended 30 June 2023
1.
In the opinion of the directors of Mitchell Services Limited (“the Company”):
a.
the consolidated financial statements and notes, as set out on pages 34 to 73 and the Remuneration report on
pages 16 to 25 in the Directors’ report, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its performance, for
the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. There are reasonable grounds to believe that the Company and the group entities identified in Note 19 will be able
to meet any obligations and liabilities to which they are or may become subject to by virtue of the Deed of Cross
Guarantee between the Company and those group entities pursuant to ASIC Class Order 98/1418.
3.
4.
The Directors have been given the declarations required by s 295A of the Corporations Act 2001 from the
Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2022.
The directors draw attention to Note 1 to the consolidated financial statements which includes a statement of
compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Nathan Andrew Mitchell
Executive Chairman
Dated at Brisbane this 23rd day of August 2023
74
Mitchell Services LtdAnnual Report 2023
75
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Mitchell Services Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Mitchell Services 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 theGroup’s financial position as at 30 June2023 and of its financial performance forthe year ended on that date; and•complying with Australian AccountingStandards and the CorporationsRegulations 2001.The Financial Report comprises: •Consolidated statement of financial position as at30 June 2023;•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; and•Directors’ Declaration.The Group comprises Mitchell Services 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 these requirements. Mitchell Services LtdAnnual Report 2023 76
Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was 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 this matter. Revenue recognition ($243,144,281) Refer to Note 2 to the Financial Report The key audit matter How the matter was addressed in our audit The Group’s revenue is generated from the provision of drilling services to the exploration, mining and energy industries. Revenue from contracts with customers was a key audit matter due to the quantum of the balance, and the significant audit effort we have applied in assessing the Group’s recognition and measurement of revenue throughout the period. This was the result of the: •High volume of service contract revenuetransactions, with varying rates chargedunder each contract.•The Group’s judgement involved inapplying the requirements of AASB 15Revenue from Contracts with Customersin identifying the performance obligationswithin the contracts; and•Manual interface of the Group’s systemswith the general ledger, when incombination with a high volume ofactivity, presents conditions fortransactions to be recorded incorrectly.In assessing this key audit matter, we involved senior audit team members who understand the Group’s business, industry and the economic environment it operates in. Our procedures included: •Obtaining an understanding of the nature ofthe revenue and the related revenuerecording processes, systems and controls.This included the manual interface betweenthe drilling report system and the generalledger.•Evaluating and challenging theappropriateness of the Group’s accountingpolicies for revenue recognition against therequirements of AASB 15 and ourunderstanding of the business.•Assessing a sample of customer contracts tounderstand the key terms of thearrangements and the Group’s determinationof the performance obligations.•Testing a sample of revenue transactions,covering those to be recognised over timeand point in time. This included assessing:•Existence of an underlying arrangementwith the customer to signed customercontracts;•Amounts invoiced to customers assourced from the general ledger againstdaily drilling reports as sourced from thedrilling report system, rates per therespective contract and subsequentreceipt from the customer; and•The timing and completion ofperformance obligations againstunderlying evidence of daily drillingreports and the Group’s revenuerecognition policies.Mitchell Services LtdAnnual Report 2023 77
Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. This matter was 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 this matter. Revenue recognition ($243,144,281) Refer to Note 2 to the Financial Report The key audit matter How the matter was addressed in our audit The Group’s revenue is generated from the provision of drilling services to the exploration, mining and energy industries. Revenue from contracts with customers was a key audit matter due to the quantum of the balance, and the significant audit effort we have applied in assessing the Group’s recognition and measurement of revenue throughout the period. This was the result of the: •High volume of service contract revenuetransactions, with varying rates chargedunder each contract.•The Group’s judgement involved inapplying the requirements of AASB 15Revenue from Contracts with Customersin identifying the performance obligationswithin the contracts; and•Manual interface of the Group’s systemswith the general ledger, when incombination with a high volume ofactivity, presents conditions fortransactions to be recorded incorrectly.In assessing this key audit matter, we involved senior audit team members who understand the Group’s business, industry and the economic environment it operates in. Our procedures included: •Obtaining an understanding of the nature ofthe revenue and the related revenuerecording processes, systems and controls.This included the manual interface betweenthe drilling report system and the generalledger.•Evaluating and challenging theappropriateness of the Group’s accountingpolicies for revenue recognition against therequirements of AASB 15 and ourunderstanding of the business.•Assessing a sample of customer contracts tounderstand the key terms of thearrangements and the Group’s determinationof the performance obligations.•Testing a sample of revenue transactions,covering those to be recognised over timeand point in time. This included assessing:•Existence of an underlying arrangementwith the customer to signed customercontracts;•Amounts invoiced to customers assourced from the general ledger againstdaily drilling reports as sourced from thedrilling report system, rates per therespective contract and subsequentreceipt from the customer; and•The timing and completion ofperformance obligations againstunderlying evidence of daily drillingreports and the Group’s revenuerecognition policies.Key Audit Matters (continued) Revenue recognition ($243,144,281) (continued) •Testing a sample of revenue recognised bythe Group during the period under audit, andone month subsequent to period end, to theunderlying customer signed or acknowledgedinvoices and daily drilling reports to checkrevenue recognition in the correct period;•Evaluating the Group’s disclosures againstour understanding obtained through ourtesting and the requirements of AASB 15.Other Information Other Information is financial and non-financial information in Mitchell Services 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 AustralianAccounting Standards and the Corporations Act 2001;•implementing necessary internal control to enable the preparation of a Financial Report that givesa true and 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 useof the going concern basis of accounting is appropriate. This includes disclosing, as applicable,matters related to going concern and using the going concern basis of accounting unless theyeither intend to liquidate the Group and Company or to cease operations, or have no realisticalternative but to do so.Mitchell Services LtdAnnual Report 2023 78
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 frommaterial misstatement, whether due to fraud or error; and•to issue an Auditor’s Report that includes our opinion.Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of Mitchell Services Limited for the year ended 30 June 2023, 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 16 to 25 of the Directors’ report for the year ended 30 June 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG M J Jeffery Partner Brisbane 23 August 2023 Mitchell Services LtdAnnual Report 2023 ADDITIONAL AUSTRALIAN
STOCK EXCHANGE INFORMATION
Current as at 14 August 2023
MSV QUOTED ORDINARY SHARES
SPREAD OF HOLDINGS
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Greater than 100,000
Total
Holding less than a marketable parcel
NUMBER OF
HOLDERS
114
281
170
608
250
1,423
138
SHARES
44,476
759,948
1,365,718
24,794,593
189,013,315
215,978,050
72,243
% OF TOTAL
CAPITAL ISSUED
0.02%
0.35%
0.63%
11.48%
87.52%
100.00
0.03%
THE TWENTY LARGEST LISTED SECURITY HOLDERS COMPRISE:
RANK
SHAREHOLDER
ORDINARY
SHARES
% OF TOTAL
CAPITAL ISSUED
Mitchell Group Holdings Pty Ltd
Mitchell Family Investments (Qld) Pty Ltd
Dream Challenge Pty Ltd
HSBC Custody Nominees (Australia) Limited
Washington H Soul Pattinson And Company Limited
Skye Alba Pty Ltd
HSBC Custody Nominees (Australia) Limited
Farjoy Pty Ltd
Rudie Pty Ltd
Glengallan Investments Pty Ltd
Australian Executor Trustees Limited
Banjo Superannuation Fund Pty Ltd
Judykaye Investments Pty Ltd
Peter Miller
Oceanwave Asset Pty Ltd
Sonya Miller
Hancroft Pty Ltd
Mr Simon Robert Evans & Mrs Kathryn Margaret Evans
Certane Ct Pty Ltd
Mr Sean Patrick Martin
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
22,374,442
18,033,603
14,354,068
11,062,686
10,000,000
6,459,331
6,399,589
6,312,905
3,987,549
3,000,000
2,842,522
2,438,094
2,105,264
1,981,681
1,830,544
1,761,681
1,747,906
1,650,000
1,648,439
1,356,927
10.36
8.35
6.65
5.12
4.63
2.99
2.96
2.92
1.85
1.39
1.32
1.13
0.97
0.92
0.85
0.82
0.81
0.76
0.76
0.63
125,830,228
56.08
79
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 frommaterial misstatement, whether due to fraud or error; and•to issue an Auditor’s Report that includes our opinion.Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of Mitchell Services Limited for the year ended 30 June 2023, 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 16 to 25 of the Directors’ report for the year ended 30 June 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG M J Jeffery Partner Brisbane 23 August 2023 Mitchell Services LtdAnnual Report 2023 ADDITIONAL AUSTRALIAN
STOCK EXCHANGE INFORMATION
Current as at 14 August 2023
UNQUOTED AND RESTRICTED SECURITIES
The following options granted as part of the Employee Share and Option Plan are on issue. The exercise of these
options is subject to vesting conditions. For more information, refer to the Directors’ Report.
CLASS
Management options
NUMBER OF OPTIONS
8,655,186
SUBSTANTIAL SHAREHOLDERS
The following is a summary of the current substantial shareholders pursuant to notices lodged with the ASX in
accordance with section 671B of the Corporations Act:
NAME
Mitchell Group Holdings Pty Ltd and associates
Dream Challenge Pty Ltd
DATE OF
NOTICE
2 Dec 2019
29 Nov 2019
ORDINARY
SHARES1
41,413,695
14,354,068
% OF TOTAL
CAPITAL ISSUED2
18.84%
7.20%
1 As disclosed in the most recent notice lodged with the ASX by the substantial shareholder
2 The percentage set out in the notice lodged with the ASX is based on the total share capital at the date of interest
VOTING RIGHTS
Ordinary shares
The voting rights attached to ordinary shares is set out below:
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.
No other classes of securities have voting rights.
80
Mitchell Services LtdAnnual Report 2023 CORPORATE
DIRECTORY
BOARD OF DIRECTORS
Executive Chairman
Nathan Andrew Mitchell
Non-Executive Directors
Peter Richard Miller
Robert Barry Douglas
Neal Macrossan O’Connor
Peter Geoffrey Hudson
Scott David Tumbridge
Chief Executive Officer
Andrew Michael Elf
Chief Financial Officer
and Company Secretary
Gregory Michael Switala
REGISTERED OFFICE
Mitchell Services Ltd
ABN 31 149 206 333
112 Bluestone Circuit
Seventeen Mile Rocks Qld 4073
PRINCIPAL PLACE
OF BUSINESS
112 Bluestone Circuit
Seventeen Mile Rocks Qld 4073
PO Box 3250
Darra Qld 4076
P: 07 3722 7222
F: 07 3722 7256
W: mitchellservices.com.au
SHARE REGISTRY
Link Market Services
10 Eagle Street
Brisbane Qld 4000
P: 07 3320 2200
F: 02 9287 0309
W: linkmarketservices.com.au
AUDITORS
KPMG
Riparian Plaza
71 Eagle Street
Brisbane QLD 4000
P: 07 3233 3111
F: 07 3233 3100
W: home.kpmg/au
TAXATION ADVISORS
PricewaterhouseCoopers
480 Queen Street
Brisbane Qld 4000
P: 07 3257 5000
F: 07 3257 5999
W: pwc.com.au
BANKERS
National Australia Bank
255 Queen Street
Brisbane QLD 4000
P: 13 2265
F: 1300 882 536
W: nab.com.au