MMA Offshore Ltd
Annual Report 2019

Plain-text annual report

2019ANNUAL REPORT TOGETHER, WE MAKE IT HAPPEN 30+ MODERN HIGH-QUALITY VESSELS 880+ EMPLOYEES ACROSS THE GLOBE VESSEL SOLUTIONS AND MARINE EXPERTISE FOR THE OFFSHORE OIL AND GAS INDUSTRY TOGETHER, WE MAKE IT HAPPEN 0.53 TRCF PER MILLION HOURS WORKED MIDDLE EAST 2 ONSHORE FACILITIES EAST & WEST AFRICA KEY OFFICE ONSHORE FACILITY CONTENTS OVERVIEW About MMA Our Key Values Our Services 2019 Year in Review Chairman’s Report Managing Director’s Report Chief Executive Officer’s Report Financial Report Health, Safety, Environment & Quality Our People Our Community Risks 2 3 4 6 8 10 14 18 20 22 24 26 Dubai SOUTH EAST ASIA Malaysia Singapore Batam Dampier Fremantle AUSTRALIA GOVERNANCE Board of Directors Corporate Governance Directors’ Report Auditor’s Independence Declaration Audit Report Directors’ Declaration FINANCIAL REPORT 2019 28 30 34 50 51 56 57 SHAREHOLDER INFORMATION Additional Securities Exchange Information 93 MMA Offshore Limited 1 ABOUT MMA MMA is one of the largest marine service providers in the Asia Pacific region with operations in Australia, South East Asia, the Middle East and Africa. We specialise in providing marine solutions and expertise to the offshore oil and gas industry, underpinned by our operational excellence and strong safety culture. Our modern high-quality fleet of offshore vessels supports a range of offshore and subsea activities across exploration, production, construction and maintenance. We pride ourselves on partnering with our clients to deliver innovative solutions to solve their complex marine problems. Our quality vessels, technical marine expertise and operational excellence sets us apart from other vessel operators in the industry as does our track record of delivering exceptional service where the cost of failure is high. AN INNOVATIVE APPROACH OUR KEY VALUES PEOPLE We provide a workplace built on trust, cooperation and mutual respect where our people care about their safety and the safety of those around them. CUSTOMER RELATIONSHIPS We understand our customers’ requirements by building long- term collaborative relationships. We will provide safe and proactive solutions that deliver beyond expectations. TEAM WORK We share knowledge, resources and services across our business. We will work together as one team to achieve our common goals. OUR STRENGTHS SAFETY LEADERSHIP EXPERIENCED, INNOVATIVE PEOPLE MODERN RELIABLE ASSETS PROVEN TRACK RECORD 2 Annual Report 2019 MMA Offshore Limited 3 INNOVATIVE SERVICES THAT FOCUS ON EXCEEDING EXPECTATIONS Walk to Work Services Offshore Services Project Logistics SERVICES Subsea Services Marine Expertise Onshore Services Strong Services capability with proven track record in delivering complex projects TRACK RECORD OF OPERATIONAL EXCELLENCE 30+ VESSELS VESSEL FLEET 4 12 8 6 AHT 9 years average age AHTS 8.5 years average age PSV 6 years average age MPSV / IMR 4.5 years average age 4 Annual Report 2019 MMA Offshore Limited 5 2019 YEAR IN REVIEW Revenue $239.3m Operating Cashflow $22.2m 50% INCREASE IN EBITDA EBITDA $27.8m EBIT $(7.5)m Normalised NPAT $(27.0)m LVR (Net Debt to Fixed Assets) 42% Cash at Bank $70.2m NTA per Share $0.35 6 Annual Report 2019 MMA Offshore Limited 7 AN UNWAVERING COMMITMENT The acquisition of Neptune Marine Services is a key part of our subsea expansion strategy enabling us to package additional services with our vessels, capturing additional margin as we move up the value chain. The acquisition is expected to deliver improved returns on our assets through an expanded service offering, increased asset utilisation and synergies. With the acquisition undertaken at a low point in the cycle, the combined business is also expected to benefit from a recovery in offshore and subsea investment. We have also positioned ourselves to grow our project logistics business with the creation of “MMA Global Projects”, a dedicated division that is focusing on project managing large marine spreads for major LNG and renewables projects globally. With a large number of construction projects in the pipeline, MMA Global Projects is well placed to gain a share of this market. Our ability to innovate and design specialised marine solutions for our clients is a core competency that differentiates us from our competitors and is a key platform in our overall strategy. During the year we secured a number of important new contracts on the back of our solutions focused approach. Our Walk to Work project for Woodside was the first of its kind for platform maintenance operations in Australia, delivering a significant improvement in productivity to our client and potentially changing the way personnel transfers for platform shutdown operations will be conducted in the Australian oil and gas sector in the future. MMA was awarded an “Innovation Award” by the Australian Chamber of Commerce in Singapore for the project. Walk to Work is becoming an increasingly important service offering for MMA with four separate projects completed during FY2019. A number of MMA’s long-term contracts which currently underpin our earnings have been won on the basis of MMA providing a more innovative or technically sophisticated solution to the client. We will continue to seek win-win solutions where we can deliver a better, safer or more cost-efficient service to our clients, whilst optimising our return on assets. Our balance sheet continues to be an ongoing focus. The Company’s key debt metric (Net Debt / EBITDA), whilst improving, remains above our target range due to the impact of the downturn on earnings. Our Loan to Valuation ratio (Net Debt / Property Plant and Equipment) is well within acceptable limits at 42%. Our strategy to improve earnings will in turn improve our debt metrics. The relationship with our banking group is positive with our current debt facilities due for refinancing by September 2021. We will continue to proactively manage our debt position with our current banks as well as engage with the wider debt markets on the range of alternatives available to the Company. I would like to conclude by thanking my fellow Board members for their valuable contribution to the business over the past 12 months. I would also like to thank the senior management team and all the staff at MMA for their dedication and commitment to the business through good times and bad. As the market improves, we look forward to growing the business and delivering improved returns for you our shareholders. I thank you for your ongoing support of the Company. Andrew Edwards Chairman During the year we announced some key changes to the Executive Management team at MMA. Jeff Weber our long- standing Managing Director will step down at the Company’s Annual General Meeting on 21st November 2019. I would like to pay tribute to Jeff for his strong leadership and unwavering commitment to the Company over the past 17 years. Jeff has been responsible for growing MMA from a fledgling vessel operator with a fleet worth $23 million and revenue of $35 million to an internationally renowned marine services company with vessel assets approaching $500 million and revenue of over $230 million. Whilst the unprecedented downturn over the past 5 years has impacted the Company’s performance, under Jeff’s leadership we successfully executed a strategy to rationalise our assets and strengthen our balance sheet and we are now well positioned for growth as the market returns. Jeff has also been instrumental in driving a positive culture throughout the organisation which has made MMA an employer of choice and a Company that our customers want to do business with. We have been fortunate to have had Jeff at the helm of MMA for so long and wish him all the best in his future endeavours. I would like to congratulate David Ross, who assumed the role of Chief Executive Officer on 1 July 2019. David joined MMA in 2005 and has held a number of roles at the Company over that time including General Manager of Operations, Chief Operating Officer and more recently relocating to Singapore initially as Deputy Chief Executive Officer, to drive the Company’s international growth. David has an ideal blend of skills and experience in operational, strategic and commercial roles to lead MMA through its next phase of growth and I very much look forward to working with him. Having successfully repositioned the business over the past two years, we are now firmly focused on earnings growth. Our strategy to grow returns for shareholders focuses around maximising the returns from our core vessel business combined with growing our subsea and project logistics divisions. CHAIRMAN’S REPORT I am pleased to report that MMA delivered improved earnings in FY2019 with EBITDA increasing by 50% on the prior year. The returns on our assets, whilst still well below our historical average, are gradually improving and all of our key financial metrics are trending in the right direction. We also maintained our world class safety performance during the year and continue to strive for ongoing improvements in this area. Notwithstanding global geopolitical uncertainty which is impacting market sentiment and commodity prices, the fundamentals for a recovery in oil and gas spending remain sound and there is a broad consensus that the vessel market is in the early stages of recovery. We are seeing a large number of oil and gas projects being sanctioned globally, with this trend expected to continue. This will increase global vessel utilisation and should in turn translate into higher rates over time. Importantly, there is a high level of new project activity expected in our key regions of operation which should impact positively on demand for our vessels. Global vessel utilisation has bottomed out and is now increasing and rate improvements are being seen in the more specialised vessel segments. The view is that the OSV market is tighter than it appears with long term laid up vessels facing significant reactivation costs and lower demand due to their age and condition. As a business with a high fixed cost base, any improvement in utilisation or rates will have a significant impact on our profitability. 8 Annual Report 2019 MMA Offshore Limited 9 While we continue to see geopolitical issues impacting confidence in global markets and commodity prices, the fundamentals for increased oil and gas spending are sound. Oil companies have been generating record cash flows at the current oil prices and the number of oil and gas projects being sanctioned for development has increased significantly during the year. This trend is forecast to continue over the coming years in an effort to replace depleting reserves, following a lack of investment during the downturn. A number of significant projects are flagged for final investment decisions in MMA’s regions of operation which we expect will lead to increased demand for our services. Global OSV utilisation has improved gradually since bottoming at 48% in 2017 to approximately 55% today, with vessels younger than 10 years showing a much stronger recovery profile. Adjusting for laid up vessels which are of an age that are unlikely to return to service in the oil and gas industry, the market is significantly tighter than it appears. Rates have increased in some of the more specialised segments of the market where there has been a periodic lack of available vessels to meet demand. At this stage, we are not seeing rate increases at a broader level but as supply tightens over time, we expect rate increases to follow. With our modern, high quality fleet, we are well positioned to benefit from a market upturn. Operational Highlights MMA reported a 19.4% increase in revenue to $239.3 million and a 50.3% increase in EBITDA to $27.8 million. Excluding the impact of asset revaluations, normalised NPAT improved from a loss of $36.3 million in FY18 to a loss of $27.0 million in FY19. After the impact of asset revaluations, MMA reported a Net Loss After Tax of $37.4 million. Our Australian operations contributed revenue of $159.3 million, up 12% on FY2018. Revenue from international operations was $80.0 million, up 37% on FY2018. Average utilisation for the year was 72% up from 68% in FY2018. Our first half utilisation was stronger at 74% with the third quarter impacted by the South East Asian monsoon period.. As at 30 June 2019, MMA had 24 of its 30 core vessels under short and long-term contracts with the remaining vessels available for work in the spot market. As at 30 June 2019, 27% of available vessel days for FY2020 were contracted, increasing to 43% with highly probable contract awards and potential extension periods. On a revenue basis, 47% of our budgeted revenue is already under contract for FY2020 (62% including highly probable). This is consistent with our strategy of maintaining a balance of contracted and spot revenue in the portfolio in order to preserve the operating leverage of the business as rates increase. MMA maintained its world class safety performance during FY2019 with a Total Recordable Case Frequency (“TRCF”) of 0.53 per million hours worked, well below the industry average of 1.7 as measured by the International Maritime Contractors Association (“IMCA”). In July 2019, we announced an agreement to acquire Neptune Marine Services Limited, a leading provider of topside and subsea inspection, maintenance and repair solutions to the oil and gas, marine and renewable energy industries. Australia / New Zealand Australian utilisation was strong at 81% with a number of projects contributing to activity during the year. Utilisation in the first half was stronger at 86%, reducing to 77% in the second half as a number of multi-vessel project scopes completed. During the first half, MMA completed a project logistics scope for Subsea 7, managing a spread of owned and subcontracted tugs and barges to transport project materials and equipment for Woodside’s Greater Western Flank 2 Subsea Installation Project. We utilised our onshore facility at Batam, Indonesia for the barge mobilisations, providing an integrated service to the client. The project was completed in September 2018. We also completed a multi-vessel project, supporting ConocoPhillips’ shutdown and drilling operations at their Bayu Undan gas project in the Timor Sea. Two PSVs, the MMA Leeuwin and MMA Responder were engaged to provide supply support services for the duration of the drilling campaign. An additional three vessels were engaged to support shut down, rig moves and supply services. The project completed successfully in December 2018. FY19 HIGHLIGHTS Broad consensus that the OSV market is in the early stages of a recovery 50% Increase in EBITDA 72% Utilisation increasing with higher weighting to larger vessels Rates increasing in the more specialised vessel segments Strong safety performance, well above industry average 47% FY20 revenue underpinned by firm contracts Continued our track record of securing new contracts ROA and debt metrics improving and remain our key priority Neptune acquisition to deliver subsea expansion strategy Growing position in Walk to Work market Executing our growth strategy to deliver improved returns for shareholders MANAGING DIRECTOR’S REPORT REVIEW OF OPERATIONS During the year, we have seen a continued improvement in MMA’s financial performance, reflecting increased utilisation and a strong uptake of our established services offering. Our earnings and cashflow are underpinned by a number of long-term contracts and our success in securing new contracts reflects both the quality of our fleet and our track record of supporting complex projects and delivering quality services to our customers. We continue to demonstrate our competence in delivering innovative and technically complex marine solutions to our clients including a first of its kind for platform maintenance in Australia. MMA’s solution, developed in conjunction with our client, utilised one of our vessels, the MMA Pinnacle as a “Walk to Work” and accommodation vessel. This resulted in a safer and more efficient method of transferring personnel to the platform during the shutdown and paves the way for future projects in the Australian Oil and Gas Sector. Our high quality, modern fleet of vessels, positions MMA to benefit from an increase in activity as does our investment in building our services offering. The acquisition of Neptune Marine Services will accelerate the development of our subsea services offering and we are well placed to continue to grow our project logistics business and our “Walk to Work” offer. Market Conditions There is now a broad market consensus that the offshore vessel market is improving. Global utilisation has bottomed out, rates in the more specialised sectors have begun to increase and the oversupply of vessels is considered to be overstated given the age and condition of the global fleet currently in layup and the prohibitive costs to reactivate vessels. 10 Annual Report 2019 MMA Offshore Limited 11 The outlook for activity in Australia is relatively strong with drilling activity picking up again and a number of significant projects currently under evaluation. South East Asia Activity in South East Asia is picking up, although the reduction in activity during the monsoon period between December and March was more pronounced in FY2019 than in prior years. Utilisation for the year averaged 62% but reduced to 56% during the monsoon period. We are starting to see some periodic upward pressure on rates in some of the more specialised sectors, but the more commoditised vessels remain highly competitive. The MMA Prestige and MMA Pinnacle continued to operate in the subsea market during the year, supporting a number of project scopes in South East Asia including saturation diving, well intervention, umbilical installation and inspection, maintenance and repair. In line with our strategy to increase our subsea service offering, we also took a lead contractor role on an air dive project in Bangladesh with the MMA Prestige completing a subsea repair scope and a series of anchor tensioning tasks. During the year MMA also supported a number of accommodation support and walk to work projects with the MMA Pride and MWV Falcon (a chartered vessel) fitted with Ampelmann gangways to support projects for Brunei Shell Petroleum and BG Shell in India. The Majestic and Sea Hawk 1, MMA’s large AHTS vessels were predominantly active in Malaysia during the year achieving solid utilisation aside from the monsoon period. The MMA Vigilant was active, undertaking inspection, maintenance and repair work across the region. The remainder of the South East Asian fleet continued to operate in the short- term market predominantly across Malaysia, Thailand, Myanmar and Brunei, where we are seeing increased tendering activity. Middle East MMA’s Middle Eastern operations performed below expectations during the year with technical issues impacting vessel performance and utilisation. Utilisation for the year averaged 58%. Results for the region were impacted by a one-off provision for doubtful debts amounting to $5.3 million. MMA currently has four vessels in the Middle East, three operating in Saudi Arabia - MMA Chieftain, MMA Centurion and MMA Cavalier, and the fourth, the MMA Concordia available in the spot market across the Middle East. The market in the Middle East is currently oversupplied but is poised for a significant increase in activity with Saudi Aramco releasing a number of multiple vessel tenders which should soak up a high proportion of the available vessels in the market. We are focused on strengthening our local alliances in Saudi Arabia to position the business to benefit from increased activity in the region. Africa The MMA Privilege continues on its long-term accommodation and walk to work scope in West Africa, achieving full utilisation for the year. The contract was recently extended to December 2019 with options to extend further to March 2020. Activity in Africa is also increasing, with a number of tenders being released and a shortage of available active vessels. MMA’s strategy is to move vessels into the region on the back of long-term contracts but does not maintain a spot fleet there at present. Cost control Cost control remains an ongoing key focus for MMA whilst ensuring we never compromise on the quality or safety of our operations. We have active programmes in place to monitor the operating costs on our vessels, with vessels continuing to be down-manned or laid up between contracts to minimise costs. In February 2019, MMA was awarded a contract by Santos to support its 2019 jack-up drilling campaign. The contract was for the provision of three vessels to support the drilling campaign, including two anchor handling tug supply vessels, the MMA Vision and MMA Coral, and a platform supply vessel, the MMA Leeuwin. The scope of services includes rig tows to and from the field, infield rig moves and platform supply duties in support of the Noble Tom Prosser rig. The contract is ongoing and is expected to continue until September 2019. In April 2019, we were awarded a contract by Woodside to provide accommodation and walk-to-work vessel services to support platform maintenance operations over two scopes. The MMA Pinnacle was fitted with a bespoke motion-compensated gangway system to enable the safe and efficient transfer of personnel between the Woodside platforms and their accommodation facilities on the vessel. The first scope of work was completed successfully in May 2019 and the second scope is due to commence in September 2019. In the period between the two Woodside work scopes, the MMA Pinnacle was engaged on a number of inspection, maintenance and repair projects in the North West of Australia. Once the second Woodside scope is completed, the MMA Pinnacle will complete the remainder of its three- year contract with i-Tech 7, the life of field business unit of Subsea 7, which will provide full utilisation for the vessel through to December 2021. In December 2018, the MMA Responder, a PSV that MMA has bareboat chartered into the fleet, was contracted to a client in the Bass Strait in support of production and drilling operations on a short-term basis. The vessel currently remains on contract and will extend into December 2019. The MMA Valour is currently mobilised with a spread of geotechnical equipment for Benthic and completed a number of scopes in Australia during the year before being transferred to South East Asia and more recently East Africa, for further Benthic work. MMA’s long-term production support contracts with Woodside, INPEX, BHP/ Santos and ConocoPhillips continued through FY2019 providing full utilisation for 6 of our vessels during the year. The Woodside contracts were recently extended by 6 months through to December 2019. We continue to seek efficiencies in procurement to reduce our operating spend. Operating and corporate overheads are strictly monitored in all areas of the business with increased levels of authorisations in place for key discretionary spend categories. Balance Sheet MMA’s Cash at Bank as at 30 June 2019 was $70.2 million and Net Debt (Interest Bearing Liabilities less Cash at Bank) was $200 million. MMA’s leverage (Net debt to property plant and equipment) was 41.6% making MMA one of the lowest geared OSV companies in the world. MMA also has substantial cash reserves providing stability to our customers, shareholders, financiers and employees. MMA reviewed the carrying value of its fleet as at 30 June 2019, in line with Australian accounting standards, which resulted in an impairment reversal of $2.7m. This followed an impairment charge of $13.1 million at the half year for a total of $10.4m for the financial year, representing approximately 2% of the book value of vessel assets. This compares to a reversal of previous impairment charges of $8.4m during the year ended 30 June 2018. The valuation of the fleet is expected to continue to fluctuate, reflecting prevailing market conditions and the current valuation methodology of fair value less costs to sell. As outlined previously, MMA has already disposed of the majority of its non-core vessels and expects to retain the majority of its fleet for the medium term. Health & Safety We maintained our world class safety performance during FY2019. While our Total Recordable Case Frequency (“TRCF”) for FY2019 increased slightly to 0.53 per million hours worked, this remains a significant achievement and well below the industry average of 1.7 as measured by the International Maritime Contractors Association (“IMCA”). Our internally developed Target 365 Strategy is fully embedded across the organisation and continues to foster a sustained culture of safety consciousness, which drives world class safety performance. I would like to thank you our Shareholders for your support over the years. I would also like to thank the Board Members I have worked with over the time I have been with the Company. MMA has been fortunate to attract exceptional Board Members over the years and this has been critical to our underlying strength as an organisation. I would finally like to thank the team at MMA. I have thoroughly enjoyed the support, commitment and enterprise of the people at MMA and firmly believe it is what sets us apart from our peers. It is a people game. I intend to remain a major shareholder of the Company and I am confident David Ross has the right skills and personnel to be a success as Chief Executive Officer and subsequently Managing Director of the Company. MMA has a solid platform to build upon as the market recovery continues. Jeff Weber Managing Director In December 2018, we were awarded the IMCA Global Safety Award for 2018 for our “Target 365: A perfect day every day” safety programme which focuses on each person in the organisation coming to work each day with the aim of having a “Perfect Day”, a day without any material incident or recordable injury. This approach makes Target 365 unique, as the initiative not only measures lagging indicators, but also focuses on positive reinforcement by measuring “Perfect Days”. We are an active contributor to global HSEQ forums. In May 2019, MMA was elected as Chair of the IMCA Global HSSE Committee and is a leadership member of “Safer Together” a key oil and gas safety forum in Australia. Our People At MMA we value our people and understand that our success as a Company depends on good people making good decisions. I am very proud of the highly experienced, capable and dedicated team we have at MMA. I would like to thank all our valued team members for their hard work and commitment through the past year to help achieve these results and position MMA for the future. Thank you As announced to the ASX, I will be stepping down as Managing Director of MMA at the upcoming Annual General Meeting on 21 November 2019 and as such this will be my last Managing Director’s report. After 17 years with MMA, I reflect back with great pride in what we have achieved over the years. The last five years have been challenging but we have executed a clear strategy which I believe makes MMA one of the best placed OSV Companies in the world to benefit from the market recovery which we are beginning to see. UNIQUE SOLUTIONS TO SOLVE COMPLEX MARINE CHALLENGES 12 Annual Report 2019 MMA Offshore Limited 13 REPOSITIONED FOR GROWTH 1 RATIONALISE AND STABILISE • Non-core assets sold • Reduced exposure to commoditised market • Restructed debt • Strengthened Balance Sheet • Reduced costs 2 EXPAND OUR CORE CAPABILITY • Operational excellence • Safety leadership • Asset reliability • Tailored marine solutions • Expertise and innovation GROWTH 3 • Focus on higher margin segments • Differentiation through technically advanced assets • Expand service offering in Subsea, Walk to Work, Project logistics • Third party vessels • Strategic M&A Our safety performance is world class and significantly better than the industry average, an area of vital importance to our employees and serves as our “licence to operate” with our clients. We have strong systems and processes in place to ensure that we are fully compliant in all aspects of the business. We also practise sound commercial management and cost discipline within the business. Last but not least is our reputation as a quality service provider. We pride ourselves on building long term collaborative relationships with our clients and having the in-house technical expertise to solve the most challenging marine problems. 2. Operational Leverage The second platform of our strategy is to drive the returns on our assets by releasing the operating leverage of the asset base as the market recovers. As a high fixed cost business, any increase in utilisation or rates has a large impact on our profitability. We actively manage the balance of contracted and spot revenue in our forward order book to ensure that we sensibly time the release of the capacity into a recovering market. We are also focused on chartering in additional vessels, where it makes commercial sense, to supplement our owned fleet, further enhancing our return on assets. Offshore Services MMA has a well-established position in the offshore services market with a strong track record in delivering complex projects. Our strategy is focused on expanding further into service focused contracts where we can add value to our clients through innovation or through our technical expertise. Some of the growth areas we see for the OSV business include offshore accommodation and motion compensation gangway personnel transfer (Walk to Work), cost efficient rig movements and innovative vessel modifications and contracting arrangements to deliver true cost efficiencies to clients. By adding real value to our clients, we can differentiate ourselves from our competitors and generate higher returns on our assets. Project Logistics MMA also has a strong project logistics capability having delivered a number of major logistics projects for offshore construction in Australia. With a projected increase in LNG and renewables construction on the horizon globally, MMA is focused on growing its project logistics business. We have established a new project logistics division “MMA Global Projects” and have put in place an experienced management team to drive our growth in this area. The project logistics business will use predominantly third-party assets which will enhance our overall return on assets. Subsea Services 3. Expanding our Service Offering The third platform in our growth strategy focuses on expanding our service offering. MMA has been operating in the subsea and inspection maintenance and repair market in recent years, predominantly as a vessel provider. In July 2019, we announced a binding agreement to acquire the business of Neptune Marine Services, a leading provider of inspection, maintenance and repair solutions to the oil and gas, marine and renewable energy industries. The acquisition will enable us to deliver an expanded range of subsea services to our clients enabling us to capture a greater proportion of the value chain, increasing our returns on assets. We expect the acquisition to deliver substantial revenue synergies through improved asset utilisation, cross selling of services and incremental margin on our vessels. We also anticipate cost synergies as we integrate the Neptune business into the MMA Offshore group. With the acquisition at a low point in the cycle, the combined business is expected to benefit from a recovery in offshore and subsea investment. 4. Balance Sheet Management The last platform in our growth strategy is the proactive management of our Balance Sheet. As a result of the challenging market conditions over the past 4 years, our key debt metric as measured by Net Debt to EBITDA remains above our targeted level. Our focus on improving the returns on assets through the strategies outlined above, will in turn improve our debt metrics. CHIEF EXECUTIVE OFFICER’S REPORT STRATEGY & OUTLOOK Having been appointed as Chief Executive Officer of MMA on 1 July 2019, I am very pleased to present my first report to Shareholders with a focus on the Company’s strategy going forward. Firstly, I would like to thank Jeff Weber, who has led the Company over the past 17 years and has left MMA in a strong position to benefit from the expected recovery in the offshore oil and gas services market. I wish Jeff every success in his future endeavours. Growth Strategy MMA has executed a focused strategy during the prolonged market downturn over the past four years. Having rationalised the fleet and invested in our services capability, we have built a strong platform for growth. Our growth strategy is focused on delivering increased returns for our shareholders through four key platforms: 1. Operational Excellence The first platform of MMA’s strategy which underpins our business and our reputation in the market is our focus on operational excellence. Our vessel fleet is high quality with an average age of only 7 years and has been well maintained through the downturn. This is a competitive advantage given that much of the excess tonnage in the market has been cold stacked and will require significant time and cost to reactivate. This will position MMA to benefit earlier in a demand led market recovery. 14 Annual Report 2019 MMA Offshore Limited 15 Well Positioned for Growth Outlook for FY2020 MMA’s growth strategy as outlined above positions the Company well to benefit from an ongoing recovery in market demand. Our earnings are underpinned by a number of long-term production support contracts and our high quality, well maintained fleet positions us well to secure higher rates and utilisation as demand increases. There is significant operating leverage in the current fleet with any increase in utilisation or rates significantly improving our profitability. We have a proven track record in operational excellence with an industry leading safety record, a strong service capability and reputation for delivering complex projects to our blue-chip client base. Our experienced leadership team has a deep marine industry knowledge and is highly capable of delivering the growth strategy and driving increased returns for you our shareholders. There is now a general market consensus that the offshore vessels sector is in recovery. The fundamentals for increased activity are strong, with a large number of projects sanctioned or due for financial investment decisions over the coming two years. Activity is increasing, and vessel availability has tightened in some sectors of the market, resulting in rate increases for high quality specialised vessels. Global fleet utilisation will need to increase further before we see broad rate rises across the market. The oversupply of offshore vessels in the market is still seen as an issue although a large proportion of the global fleet which is currently laid up, will likely never return to service. We expect utilisation to continue to increase over the course of FY2020 with some modest improvement in day rates on our more specialised vessels this financial year. Cost management remains a strong focus and we will continue to look for opportunities across our core business to reduce costs. The Neptune acquisition is expected to generate cost and revenue synergies although these are only likely to be realised in the latter part of the financial year. We remain positive on the outlook for a recovery in the offshore sector and in our key markets. MMA’s high quality, well maintained fleet, expanded service offering and operational excellence positions us well to benefit from increased demand and higher rates. We expect to see a continuing improvement in EBITDA during FY2020 as the market continues its recovery. David Ross Chief Executive Officer INCREASING OUR RETURN ON ASSETS CORE BUSINESS IMPROVEMENT Increasing ROA is MMA’s primary focus which will also improve the Company’s debt metrics. EBITDA RETURN ON ASSETS 1,061 19.7% 938 17.3% 17.5% 15.0% 14.5% 9.5% 582 566 540 450 398 277 314 231 2.0% 3.1% 3.3% 5.2% 10 11 12 13 14 15 16 17 18 19 VESSEL SEGMENT ASSETS EBITDA ROA NOTES 1 EBITDA figures are Vessel Segment EBITDA less unallocated corporate overhead adjusting for major one-off projects in 2014 and 2015 2 FY14 asset base and EBITDA is based on pre Jaya acquisition numbers (Jaya transaction completed on 4 June 2014) Utilisation Rates Costs Third Party Vessels EXPANDED SERVICE OFFERING Subsea Services Project Logistics Walk To Work OUTLOOK Fundamentals for increased activity are strong, with a large number of projects sanctioned or due for FID Expect utilisation to continue to increase during FY2020 with some modest improvement in day rates on our more specialised vessels this financial year. Expect to see a continuing improvement in EBITDA during FY2020 as the market continues its recovery. A FOCUS ON RELATIONSHIPS 16 Annual Report 2019 MMA Offshore Limited 17 FINANCIAL REPORT NET PROFIT/(LOSS) AFTER TAX1 $(27.0)m EBITDA $27.8m 39.9 193.1 57.5 18.0 18.5 27.8 15 16 17 18 19 (16.4) (27.0) (36.3) (66.8) Reported a net loss after tax of $(27.0)m which is a 26% improvement year on year. This result excludes a non-cash impairment charge of $10.4m million against the carrying value of the Company’s vessels. 1 Excluding impairment, historical comparatives are for continuing operations only INTEREST BEARING LIABILITIES $270.6m CASH AT BANK $70.2m 448.5 398.7 324.2 269.0 270.6 124.5 69.6 70.2 49.7 28.8 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 EBITDA was $27.8 million for FY19 representing an increase of 50% year on year. Gross debt prior to any unamortised fees was $270.6 million. Net debt (offsetting cash at bank) at 30 June 2019 was $200.4 million. The company made debt repayments of $7.3m during the year, however the US dollar denominated debt increased by $8.9m when translated into Australian dollars due to the weakening exchange rate. At 30 June 2019 the Company had cash reserves totalling $70.2 million. OPERATING CASHFLOW $22.2m CAPEX $10.2m 185.4 247.2 120.2 159.3 22.2 (6.1) (2.3) 31.9 9.2 10.4 NTA PER SHARE $0.35 2.10 1.70 0.69 0.38 0.35 LVR (NET DEBT / PROPERTY PLANT & EQUIPMENT) 41.6% 55.3 41.6 39.4 36.5 31.0 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Cash flow from operations was positive $22.2m after meeting cash interest costs on MMA’s debt facility of $(16.9) million. A working capital release of $11.7m also occurred in FY19, positively impacting cashflow. Sustaining capital expenditure for the year was $10.2m and represented sustaining or maintenance capital expenditure. The $10.2m excludes the finalisation of a delayed payment for a crane of $7.3 million which was purchased in a prior year. As at 30 June 2019, assets exceeded liabilities by $303.2m and the Company had 858m shares on issue. Property, Plant and Equipment have been independently valued and an en-bloc discount applied. As at 30 June 2019, Net Debt to Property Plant and Equipment was 41.6% which is one of the lowest in the offshore vessel industry. MMA is trading within its debt covenants and continues to have the support of its banking group. 18 Annual Report 2019 MMA Offshore Limited 19 At MMA we continue to strive for ‘A Perfect Day Every Day’ with a perfect day being a day free of recordable injuries or material incidents. Perfect days are the core principle of our “Target 365” programme with the focus on a positive target of 365 perfect days across the year. In FY2019, MMA achieved 317 Perfect Days at a whole organisation level, with a number of individual business units and vessels achieving the target of 365 perfect days for the year. As part of our drive for continuous improvement, we successfully implemented several initiatives during the year, including: • Simplified our incident reporting framework to further improve and encourage an open reporting culture across the business; • Completed a comprehensive internal assurance programme targeted at verifying that sufficient controls are in place to prevent incidents and maintaining our licence to operate; • Completed the reinvigoration of our Target 365 Critical Controls which were updated to reflect current high- risk activities and controls; • Completed numerous reviews and updates to processes and procedures to ensure we meet and exceed industry expectations; and • Implemented a Senior Management Engagement Programme whereby senior managers engage directly with vessel crews to gather feedback on how to improve health, safety and environmental outcomes across our business. MMA continues to be active in industry HSEQ forums sharing insights and best practice to improve health and safety culture across the industry. In May 2019, MMA’s Executive General Manager of People and Safety, Darren Thomas was appointed Chairperson of the International Marine Contractors Association (“IMCA”) Global Core HSSE Committee. MMA also takes an active leadership role on Safer Together WA/NT, a key oil and gas industry safety forum in Australia. Environment MMA remains committed to achieving the highest standard of environmental performance across all of its business activities. MMA maintained environmental certification and all licences required during FY2019. We also, reduced the use of single use plastics across our operations by implementing new potable water systems on our vessels and providing multi-use drink containers across the fleet. We will continue to focus on finding ways to reduce our environmental impact. Quality MMA maintains global accreditation to the revised ISO 9001:2015 Standard and internationally maintains ISO 14001:2015 and OSHAS 18001:2007 accreditations. MMA’s management systems have been developed to ensure our processes meet or exceed our customers’ expectations, promote continuous improvement and provide for a safe and productive workplace. TOTAL RECORDABLE CASE FREQUENCY (PER MILLION HOURS) 1.2 0.95 0.53 0.36 0.28 15 16 17 18 19 MMA TRFC IMCA AVERAGE MMA WINS IMCA GLOBAL SAFETY AWARD In November 2018, MMA was awarded the 2018 IMCA Global Safety Award for our internally developed “Target 365” safety programme. “Target 365: A perfect day every day” focuses on each person in the organisation coming to work each day with the aim of having a “Perfect Day”, a day without any material incident or recordable injury. This approach makes Target 365 unique, as the initiative not only measures lagging indicators, but also focuses on positive reinforcement by measuring “Perfect Days”. MMA received positive feedback from the IMCA judges that Target 365 was led by the workforce, visible throughout the organisation, continually developing and had resulted in improved safety performance. MMA’s Managing Director Mr. Jeff Weber said “Our Target 365 strategy has created a sustained culture of safety consciousness at MMA, a culture that drives world class safety performance. We are very pleased to receive this award from IMCA and I congratulate all MMA’s crew and employees for their dedication and commitment in making Target 365 a fundamental part of the way we work.” The award attracted submissions from a high calibre field including Boskalis, Fugro, Heerema, HMC, KBA Training Centre, McDermott, Saipem, SBM Offshore and Subsea 7 and was presented at IMCA’s Annual Seminar at The Hague, The Netherlands HEALTH, SAFETY, ENVIRONMENT & QUALITY In 2019 MMA maintained and was recognised for a world class HSEQ performance At MMA Offshore, the health and safety of our people and the protection of the environments in which we operate are fundamental to the way we do business. All of our decisions and operations are underpinned by our Target 365 culture, which is fully embedded across the organisation and continues to cultivate a sustained culture of safety consciousness. During FY2019, MMA maintained our world class safety performance. Our Total Recordable Case Frequency (“TRCF”) for the year was 0.53 per million hours worked. Although a slight increase year on year, we continue to sustain our performance with an 84% improvement over the past 5-years. This is a leading safety performance by industry standards and well below the International Marine Contractors Association (“IMCA”) average for the 2018 calendar year of 1.7. 20 Annual Report 2019 MMA Offshore Limited 21 Industrially, MMA continued its operations without recording any interruption from workplace disputes. The current Enterprise Agreements covering Australian marine personnel will continue in place until at least May 2021. Diversity and Inclusion continues to be a priority for the company as we believe that this will enable our people to contribute to their full potential. The share of women in management positions increased to 32.7% from 26.8% in 2018, with the overall percentage of women employees (onshore) increasing from 39.4% (2018) to 41.3%. MMA introduced a key tool to assist in the implementation of an inclusive workplace with the launch of the iHub portal during the year. iHub has enabled all employees, no matter what role they play in the business, to be able to have their say about innovative ideas and to suggest improvements in how we operate. KPI’s are in place so that all iHub suggestions are responded to by the appropriate Senior Manager. Focusing on training and competency is one of the key pillars of our strategic HR plan. MMA continues to provide training opportunities to four Officer Cadets, two indigenous trainees (Rating and HSEQ) and seven Timor Leste nationals in Able Seaman roles. 1,167 unique employees accessed training during the past twelve months, completing over 10,600 individual training outcomes. 362 AUSTRALIA 246 INDIA TOP TEN EMPLOYEE NATIONALITIES TIMOR LESTE 11 MYANMAR 15 NEW ZEALAND 21 UKRAINE 29 SINGAPORE 53 MALAYSIA 122 PHILIPPINES 147 INDONESIA 172 % OF WOMEN EMPLOYED 41.3 39.4 32.7 26.8 16.7 16.7 16.7 16.7 18 19 18 19 18 19 18 19 Total Organisation Board of Directors Executive Management Senior Management INNOVATION AWARD In June 2019, MMA was awarded the AustCham Singapore Innovation Award for 2019 for our MMA Pinnacle Walk to Work Project. MMA designed a solution in collaboration with long term client Woodside which involved fitting the MMA Pinnacle with a bespoke motion compensated gangway and pedestal system which enabled the vessel to be used as an accommodation facility during the platform shutdown. This resulted in a safer and more efficient method of transferring maintenance personnel to the platform, reducing the need for helicopter transfers and facilitating more maintenance personnel on site. Particularly challenging for this project was the significant height of the gas platform (up to 30 metres) and the variable ocean conditions requiring a highly engineered solution. This Innovation Award is testament to MMA’s innovative approach. The project has paved the way for an innovative, safer and more efficient approach to offshore platform maintenance logistics in the North West Shelf Region of Australia. OUR PEOPLE MMA has a strong company culture which supports our ability to attract and retain the best people At MMA we are committed to individual and operational excellence. We offer a diverse and inclusive workplace, built on trust, competence and safety. MMA has a strong company culture that supports our ability to attract and retain the best people, providing opportunities for individual growth while contributing to the overall success of the company. In 2018/19 we have implemented major reviews of our Performance Management processes, introducing new appraisals tools for use by all employees throughout every part of the business. The introduction of the new processes has seen a rapid increase in appraisal compliance as well as significant improvement in the quality of performance targets achieved by employees. A FOCUS ON EXCELLENCE 22 Annual Report 2019 MMA Offshore Limited 23 OUR COMMUNITY To support its community engagement goals MMA is committed to: Procurement Employment Investing in local community projects that have a positive and sustainable benefit Seeking business opportunities with local suppliers and subcontractors Striving to be good corporate citizens, conducting business in an ethical manner Developing long term relationships with local indigenous communities in order to increase indigenous participation in our workforce and promote opportunities for training and development Creating and maintain cross cultural awareness throughout the business MMA strives to enhance community participation through the procurement of local goods and services as well as through the promotion of opportunities for training and development. A FOCUS ON RELATIONSHIPS Supporting local contractors and vendors (including indigenous businesses) is an ongoing priority for MMA. In FY2019 MMA continued to engage with Aboriginal and Torres Strait Islander (“ATSI”) enterprises to support its operations offshore Australia. The range of products and services supplied by ATSI businesses includes waste management services, office supplies, personal protective equipment, lifting and rigging equipment and consumables, victualling supplies, facilities maintenance, graphic design, and payroll and recruitment services. Whilst the downturn has had a significant impact on the spend of the business, MMA is committed to ensuring we maintain our operating excellence and continue to provide the best service to our customers. To achieve this, MMA works with reliable and reputable suppliers to deliver solutions. Uptime on our vessels is critical to overall operating and financial performance so sourcing the right rather than the cheapest suppliers is critical to success. In the past twelve months, MMA has continued its focus on hiring from and supporting the communities within which we operate. Our employees come from 24 countries and many of whom speak languages other than English. MMA has in place four major employee development programs, each focussing on a specific region and/or demographic group. Traineeship programs are in place for Timor Leste and Indigenous Australians, providing opportunities both within our Australian and International operations for nine seafaring and one HSEQ trainees. Our officer cadet program continues to be successful, with one cadet graduating the program in August 2019. The technical competence of our crew has been enhanced over the past twelve months with the introduction of an industry sponsored development program that has seen over one hundred crew benefit from targeted development activities. All of these activities contribute to MMA’s capability to offer our clients a skilled and knowledgeable workforce. MMA TIMORESE CADET WINS AWARD MMA was delighted that Cristovao Lopes Mendonca, one of our Timorese cadets, was awarded the prize for “Best Academic for Engine Ratings” at the Malaysian Maritime Academy (ALAM). The award was presented for academic excellence together with other attributes of a well-rounded personality. Cristovao was recruited by MMA as part of its commitment to providing a marine career pathway to Timorese nationals in conjunction with ConocoPhillips’ operated Bayu Undan project. MMA is very proud to be associated with Cristovao and we are sure he has a bright career ahead in the maritime industry. 24 Annual Report 2019 MMA Offshore Limited 25 MMA seeks to manage this risk by having a clear strategic plan including an ongoing review of its asset mix and capability to meet market demand. To this end, MMA has disposed of a number of non-core vessels from the fleet which are commoditised in nature to focus on more technically sophisticated vessels where MMA can utilise its marine expertise to extract the most value out of both its own assets and those assets bareboat chartered from third party owners. MMA also has an active lay-up programme to minimise holding costs for vessels between contracts. These laid-up vessels are either cold or warm stacked predominantly at MMA’s land- based facilities in Batam and Singapore to minimise costs. MMA’s strategic plan to manage this risk also focuses on regional strategies to position itself in the most advantageous areas to operate (both in terms of demand and clients). MMA’s strategy is to differentiate itself from its competitors through operational excellence, proactive and innovative solutions, long-term customer relationships and responsive account management - whilst remaining competitive on price. MMA’s strategy to manage this risk also includes expanding its subsea services business through the proposed acquisition of the Neptune Marine business – with the combined service offering likely to result in increased asset utilisation, an enhanced return on assets and additional revenue and cost synergies. Operational risks The Company’s operations are subject to various risks inherent in servicing the offshore oil and gas industry. Our international operations broaden our risk exposure in terms of both opportunities and threats. Operational risks include (but are not limited to): • Health and safety incidents; • • Loss of key customers/contracts; Failure by customers to pay for services contracted and/or performed; • Redeployment costs of assets that are unable to be used in their current geography for a period of time; • Equipment damage, technical failures or human error; • Industrial unrest; • Capsizing, sinking, grounding, collisions, fires and explosions, piracy, vessel seizures or arrests and acts of terrorism; • Environmental pollution/ contamination and other related accidents; • Regulatory and legislative non- compliance; • Kidnap and ransom; • • • Fraud and theft; Increases in input costs; Loss of key personnel; and • Contractual assumptions of risk. Potential consequences associated with these risks include the loss of human life or serious injury, pollution, environmental damage, significant damage to or loss of assets and equipment, business disruption, client dissatisfaction, loss of contracts, damage to our reputation and legal and regulatory action, including fines. This could expose MMA to significant liabilities, a loss of utilisation, revenue and/or the incurrence of additional costs and therefore may have a materially adverse impact on the Company’s financial position and profitability. We employ a number of well executed controls to manage these risks, including, but not limited to, appropriate insurance coverage, hazard and risk management processes, quality audits, planned maintenance programmes, compliance programmes, tender and contract management processes, access to in-house and external legal expertise, industrial relations strategies, emergency preparedness and contingency plans, preferred supplier and subcontractor processes, counterparty risk assessments and a host of engineering and operational controls. Geopolitical, government and regulatory factors Our international operations are subject to more challenging geopolitical risks to varying degrees. Changes in the geopolitical climate in our market areas, such as the outbreak or resolution of war, nationalisation of a customer’s oil and gas projects and changes to industry related legislation, protectionist measures and economic sanctions, may open up more advantageous areas to operate or could require us to discontinue operating in that area, leading to corresponding impacts on vessel and service utilisation. MMA may face restrictions on its ability to win work in certain countries due to changing cabotage regulations and/or may be required to form joint ventures in some countries in order to access the local offshore oil and gas markets. Joint ventures may introduce a higher level of operational, financial and counterparty risk. The prevalence of bribery and/or corruption in some foreign jurisdictions also limits MMA’s ability to operate in these areas. MMA’s strategic plan considers such risks and operationally we risk assess market areas and clients regularly to limit negative and optimise positive impacts. A comprehensive Anti-bribery and Corruption (ABC) Policy and ABC framework has also been implemented and is continually monitored to combat these risks. Industry news, experienced personnel and industry relationships are leveraged to ensure we base our decisions on up to date geopolitical and market information. Contingency plans for fast emerging geopolitical risks are used to limit business disruption. Foreign exchange The majority of MMA’s revenues are paid in either Australian or US Dollars and the Company’s operating costs are primarily denominated in a combination of Australian, Singaporean and US Dollars, providing a natural hedge for our activities. MMA also has a combination of Australian Dollar and US Dollar debt. Adverse movements in these currencies may result in a negative impact on MMA’s earnings. MMA’s treasury policy and contract management processes further mitigate this risk. The Board also considers from time to time whether to manage currency fluctuation risk through appropriate hedging. RISKS MMA recognises that risk is an inherent part of its business. Effectively identifying and managing risk is critical to MMA’s success. MMA operates an enterprise risk management framework aligned to ISO 31000 (2018), the international standard for risk management. This section describes (in no order of significance) the material risks that have been identified and are being managed in order for the Company to deliver on its objectives. It is not intended to be all encompassing, nor is any of the information intended to be taken as a statement of fact. These risks can be affected by a variety of factors which can, in turn, impact the Company’s performance. Dependence on level of activity in the offshore oil and gas industry The Company is dependent on the level of activity in the offshore oil and gas industry, particularly in the areas where the Company currently operates (including Australia, South East Asia, the Middle East and Africa). The level of activity in the offshore oil and gas industry may vary and be affected by, amongst other things, prevailing or predicted future oil and gas prices. A number of other factors also affect the offshore oil and gas industry, including economic growth, energy demand, the cost and availability of other energy sources and changes in energy technology and regulation. There can be no assurance that the current levels of offshore oil and gas activity will be maintained or increased in the future or that oil and gas companies will not further reduce their offshore activities and capital expenditure. Any prolonged period of low offshore oil and gas activity will have an adverse effect on MMA’s business. The Company aims to mitigate the impact of lower oil and gas prices and lower offshore oil and gas activity by differentiating itself though innovation and operational excellence, by diversifying its contract portfolio across exploration, construction, production and maintenance/repair phases, by diversifying its geographic footprint across a number of key regional areas and by expanding its subsea services business through the proposed acquisition of the Neptune Marine business. Further decreases in industry activity or a lack of recovery in industry activity may also increase the risk of the Company failing to comply with the covenants associated with its Banking Facilities. In addition to the controls listed above, MMA seeks to manage this risk through proactively engaging with its lenders and through ongoing monitoring and review of the Company’s Balance Sheet strategy. Competition, vessel oversupply and fleet composition misalignment with market demand Demand for MMA’s vessels is also affected by the number of vessels available in the market and the competitive landscape. In the current market, there is an oversupply of vessels and a corresponding misalignment with demand. This has led to an increase in competition which adversely impacts vessel utilisation, rates and contract terms, thereby impacting MMA’s earnings and profitability and increasing its risk exposure. 26 Annual Report 2019 MMA Offshore Limited 27 BOARD OF DIRECTORS Mr Hugh Andrew Jon (Andrew) Edwards Mr Jeffrey Andrew Weber Ms Eva Alexandra (Eve) Howell Mr Chiang Gnee Heng Mr Peter Kennan Chairman – Appointed 27 October 2017 Managing Director – Appointed 31 December 2002 Non-Executive Director – Appointed 27 February 2012 Non-Executive Director – Appointed 5 July 2012 Non-Executive Director – Appointed 22 September 2017 Andrew was appointed as a Director of the Company on 18 December 2009 and as Chairman of the Company on 27 October 2017. Andrew currently serves as Non-Executive Chairman of MACA Limited. He previously served as a Non-Executive Director of Nido Petroleum (delisted 26 June 2017) resigning in December 2018. Andrew is a former Managing Partner of PriceWaterhouseCoopers’ Perth Office (PwC), a former National Vice President of the Securities Institute of Australia (now the Financial Services Institute of Australasia) and a former President of the Western Australian division of that Institute. He is a Fellow of the Australian Institute of Company Directors, a Fellow of the Chartered Accountants Australia and New Zealand and has served as a State Councillor of that organisation. Andrew graduated from the University of Western Australia with a Bachelor of Commerce degree. Andrew is a member of both the Company’s Audit and Risk Committee and the Company’s Nomination and Remuneration Committee. Jeff began his career as a Marine Engineer with BHP Transport. He went on to complete a degree in this field in 1993 and in 1994 graduated with a Master’s in Engineering and Technology Management from the University of Queensland. During his 19 years with BHP, Jeff gained comprehensive project management experience and helped develop new business for BHP Transport in Australia and South East Asia. He also managed a major initiative with BHP’s steel division, reviewing its logistics arrangements and developing processes to improve services and reduce costs. In 1998, Jeff joined Riverside Marine in Queensland and helped expand its operations Australia wide. This included forming a joint venture company with Wijsmuller International Towage BV, RiverWijs and negotiating with Woodside Petroleum to take over that company’s harbour towage operation in Dampier, Western Australia. Jeff is also a Non- Executive Director of Maritime Super Pty Ltd, a superannuation fund dedicated to employees in the maritime industry. As Managing Director of MMA, Jeff is responsible for the financial and operational performance of all of the Company’s business lines. Eve has over 40 years of experience in the Australian and international oil and gas industry in a number of technical and managerial roles. Eve is currently a Non-Executive Director of Buru Energy Ltd. She is also a Senior Adviser to African Geopolitics, a socio-political advisory group helping enterprises work successfully in Africa. Eve was an Executive Vice President for Woodside Energy Ltd for over five years, initially as the executive in charge of the North West Shelf Project (Australia’s largest petroleum resource project). In addition to her Woodside role, she was also CEO of the North West Shelf Venture (BP, BHP, Chevron, Shell, Woodside and Mitsubishi/Mitsui) from 2006 to 2010. In her final eighteen months with Woodside, she served as the Executive Vice President for Health, Safety & Security for all Woodside’s activities worldwide. Prior to Woodside, she held the position of Managing Director at Apache Energy Ltd. Eve has previously served on a number of Boards, including Downer EDI Ltd, Tangiers Petroleum Ltd, the Fremantle Port Authority, the Australian Petroleum Production & Exploration Association and was a Board member and President of the Australian Mines and Metals Association. Eve holds a Bachelor of Science (with Honours in Geology and Mathematics) from the University of London and an MBA from Edinburgh Business School and is a graduate of the Australian Institute of Company Directors. Eve is Chair of the Company’s Audit and Risk Committee and a member of the Company’s Nomination and Remuneration Committee. Chiang Gnee graduated as a Marine Engineer in July 1977 from the University of Newcastle Upon Tyne (UK) and spent almost 30 years working in Singapore government linked companies and in various industries including shipyards, ordnance equipment manufacturing, aircraft engine component manufacturing, amusement and lifestyle businesses and environment management. In June 1989, Chiang Gnee attended the Sloan School of Management at MIT (USA) and graduated with a Masters in Management in July 1990. He was formerly the CEO of Sembawang Shipyard for 10 years and CEO of Sembcorp Environment Management Pte Ltd for two years until August 2007. Chiang Gnee was also formerly the Executive Director of the Singapore Maritime Institute (SMI) which focuses on the development of the Singapore maritime industry through research. Chiang Gnee was engaged in workplace health and safety management until 31 March 2018 and in vocational technical education in Singapore. He was Chairman of the Singapore Workplace Safety and Health Council and Deputy Chairman of the Institute of Technical Education (ITE) Board of Governors until 30 June 2018. Chiang Gnee is also a Director of MMA Offshore Asia Pte Ltd (Singapore) and all of its subsidiaries/related companies in Singapore, Malaysia and Indonesia. In addition, Chiang Gnee is Chair of the Company’s Nomination and Remuneration Committee. Peter is currently Managing Partner and CIO of Black Crane Capital. He has 23 years of corporate finance experience across a diverse range of sectors and transactions with Black Crane and previously with UBS Asia and Australia. The Black Crane Asia Pacific Opportunities Fund, managed by Black Crane Capital, is a major shareholder of MMA. Peter established Black Crane in 2009. Prior to that, he was the Head of Asian Industrials Group for UBS Asia, a corporate finance sector team covering energy, infrastructure, resources, consumer/retail and general industrial companies. Peter was also the Head of Telecoms and Media sector team for UBS Australia specialising in M&A, advising on many large, complex transactions. Prior to UBS, Peter spent seven years with BP in a variety of engineering and commercial roles. Peter graduated from Monash University with a Bachelor of Engineering (Honours). He also has completed a Graduate Diploma in Applied Corporate Finance with the Securities Institute of Australia. Peter is a member of both the Company’s Audit and Risk Committee and the Company’s Nomination and Remuneration Committee. 28 Annual Report 2019 MMA Offshore Limited 29 CORPORATE GOVERNANCE 3rd Edition ASX Corporate Governance Principles and Recommendations Comply 1.6 A listed entity should: Corporate Governance The Board of Directors (“Board”) of MMA Offshore Limited (“Company” or “MMA”) is responsible for the corporate governance of the consolidated entity. The Board is a strong advocate of good corporate governance. Compliance with Australian Corporate Governance Standards The Board believes that the Company follows the 3rd Edition of the Corporate Governance Principles and Recommendations (“3rd Edition ASX Principles”) set by the ASX Corporate Governance Council, or where it does not, has sound reasons for not doing so as explained in the Company’s Corporate Governance Statement. Access to Corporate Governance Statement The Company’s Corporate Governance Statement which outlines the Company’s corporate governance policies and practices for the year ended 30 June 2019, can be found on the Company’s website at www.mmaoffshore.com/investor-centre/corporate- governance. The Company’s Corporate Governance Statement is current as at 19 September 2019 and has been approved by the Board. ASX Corporate Governance Council Recommendations Checklist ASX Listing Rule 4.10.3 requires companies to disclose the extent to which they have complied with the 3rd Edition ASX Principles and the reason for any departure from the 3rd Edition ASX Principles. The table below lists each of the 3rd Edition ASX Principles and the Company’s assessment of its compliance with these for the year ended 30 June 2019. The Company’s Corporate Governance Statement and Annual Report set out in greater detail the Company’s assessment of its compliance with the 3rd Edition ASX Principles. 3rd Edition ASX Corporate Governance Principles and Recommendations Comply Principle 1: Lay solid foundations for management and oversight 1.1 A listed entity should disclose: (a) the respective roles and responsibilities of its board and management; and (b) those matters expressly reserved to the board and those delegated to management. 1.2 A listed entity should: (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election as a director; and (b) provide security holders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. 1.3 A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment. Yes Yes Yes Yes Yes 1.4 The company secretary of a listed entity should be accountable directly to the board, through the Yes chair, on all matters to do with the proper functioning of the board. 1.5 A listed entity should: (a) have a diversity policy which includes requirements for the board or a relevant committee of Yes the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; (b) disclose that policy or a summary of it; and (c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them, and either: Yes Yes (1) the respective proportions of men and women on the board, in senior executive positions Yes and across the whole organisation (including how the entity has defined “senior executive” for these purposes); or (2) if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined in and published under that Act. Yes (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. 1.7 A listed entity should: (a) have and disclose a process for periodically evaluating the performance of its senior executives; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process. Principle 2: Structure the Board to add value 2.1 The board of a listed entity should: (a) have a nomination committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and. (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes (b) if it does not have a nomination committee, disclose that fact and the processes it employs N/A to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively. 2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills and Yes diversity that the board currently has or is looking to achieve in its membership. 2.3 A listed entity should disclose: (a) the names of the directors considered by the board to be independent directors; (b) if a director has an interest, position, association or relationship of the type described in Box 2.3 (Factors relevant to assessing the independence of a director) but the board is of the opinion that it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and. (c) the length of service of each director. 2.4 2.5 A majority of the board of a listed entity should be independent directors. The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity. 2.6 A listed entity should have a programme for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively. Yes Yes Yes Yes Yes Yes 30 Annual Report 2019 MMA Offshore Limited 31 3rd Edition ASX Corporate Governance Principles and Recommendations Comply 3rd Edition ASX Corporate Governance Principles and Recommendations Comply Principle 3: Act Ethically and Responsibly 3.1 A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it. Principle 4: Safeguard Integrity in Corporate Reporting 4.1 The board of a listed entity should: (a) have an audit committee which: (1) has a least three members, all of whom are non-executive directors and a majority of whom are independent directors; and (2) is chaired by an independent director who is not the chair of the board, and disclose: (3) the charter of the committee; (4) the relevant qualifications and experience of the members of committee; and (5) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. 4.2 The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. 4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit. Principle 5: Make timely and balanced disclosure 5.1 A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it. Principle 6: Respect the rights of shareholders 6.1 6.2 6.3 6.4 A listed entity should provide information about itself and its governance to investors via its website. A listed entity should design and implement an investor relations programme to facilitate effective two-way communications with investors. A listed entity should disclose the policies and procedures it has in place to facilitate and encourage participation at meetings of security holders. A listed entity should give security holders the option to receive communication from and send communications to, the entity and its security registry electronically. Yes Yes Yes Yes Yes Yes Yes Yes N/A Yes Yes Yes Yes Yes Yes Yes Yes Principle 7: Recognise and manage risk 7.1 The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: (1) has at least three members, a majority of whom are independent directors; and; (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and; (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or Yes Yes Yes Yes Yes Yes (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact N/A and the processes it employs for overseeing the entity’s risk management framework. 7.2 The board or a committee of the board should: (a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and (b) disclose, in relation to each reporting period, whether such a review has taken place. 7.3 A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluating and continually improving the effectiveness of its risk management and internal control processes. 7.4 A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks, and if it does, how it manages or intends to manage those risks. Principle 8: Remunerate fairly and responsibly 8.1 The board of a listed entity should: (a) have a remuneration committee which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and; (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or Yes Yes Yes N/A Yes Yes Yes Yes Yes Yes Yes (b) if it does not have a remuneration committee, disclose that fact and the processes it employs N/A for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive. 8.2 A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives. Yes 8.3 A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether Yes through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it. Yes 32 Annual Report 2019 MMA Offshore Limited 33 DIRECTORS’ REPORT Company Secretary The Directors of MMA Offshore Limited (“Company” or “MMA”) present their Directors’ Report (including the Remuneration Report) together with the Financial Statements of the consolidated entity, being the Company and its controlled entities, for the financial year ended 30 June 2019. Directors The names and particulars of the Company’s Directors in office during or since the end of the financial year are set out on pages 28 to 29 (including their qualifications, experience and special responsibilities). The Directors of the Company held office during the whole of the financial year and since the end of the financial year. Directorships of Other Listed Companies Directorships of other listed companies held by the Directors in the three years immediately before and since the end of the financial year are as follows: Dylan Darbyshire-Roberts, solicitor, held the position of Company Secretary of the Company at the end of the financial year. Dylan joined the Company in May 2007 in the role of Commercial Manager and was appointed as Company Secretary of MMA Offshore Limited on 19 August 2008. In addition, Dylan currently holds the role of Executive General Manager Legal. Previously, he was a Senior Associate with the law firm DLA Piper where he practised in the areas of insurance, corporate and marine law. After obtaining a Bachelor of Commerce degree (1995) and a LLB degree (1997) at the University of Natal (PMB), Dylan qualified as a Solicitor in South Africa, New South Wales and Western Australia. Dylan has worked in a legal capacity in all of these jurisdictions as well as the UK over the past 21 years. He holds a Graduate Diploma of Applied Corporate Governance and is a Fellow of the Institute of Chartered Secretaries and Administrators and a Fellow of The Governance Institute of Australia. Principal Activities The principal activities and operations of the consolidated entity during the financial year were the provision of marine logistics and marine services to the offshore oil and gas industry. Other than as previously referred to in this annual report, there were no other significant changes in the nature of the activities of the consolidated entity during the financial year. Name Company Period of Directorship Review of Operations Mr A Edwards Nido Petroleum Limited (delisted 26 June 2017) December 2009 - December 2018 Ms E Howell Downer EDI Limited January 2012 – November 2017 MACA Limited Since October 2010 A review of the operations of the consolidated entity during the financial year and the results of those operations are set out in the Chairman’s Address and the Managing Director’s Report on pages 8-13. Buru Energy Limited Since July 2014 Changes in State of Affairs Directors’ Shareholdings The following table sets out each current Director’s relevant interest in the securities of the Company as at the date of this report: Name Mr A Edwards Mr J Weber Ms E Howell Mr C G Heng Mr P Kennan Fully paid ordinary shares direct Fully paid ordinary shares indirect - - - 200,000 - 331,360 3,815,916 372,058 - 77,419,000 Performance rights direct - 2,581,441 - - - The Directors do not have any interests in shares, options or rights of any related body corporate of the Company as at the date of this report. The Chairman’s Address and the Managing Director’s Report (on pages 8-13) sets out a number of matters which have had a significant effect on the state of affairs of the consolidated entity. Other than those matters, there was no significant change in the state of affairs of the consolidated entity. Subsequent Events Other than the matter set out below, there has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. As announced by the Company on 24 July 2019, MMA has entered into a contract for the acquisition of the business of Neptune Marine Services Limited’s (“NMS”) key operating subsidiaries, for an expected total consideration of $18.5 million, comprising $5 million in cash plus approximately $13.5 million in MMA shares. Completion of the acquisition is subject to a number of conditions precedent, including (without limitation) NMS shareholder approval. If the acquisition does not proceed, the $5 million cash deposit paid is refundable to the Company. Remuneration of Key Management Personnel Future Developments Information about the remuneration of key management personnel is set out in the Remuneration Report section of this Directors’ Report on pages 38 to 49. The term ‘key management personnel’ refers to those persons having authority and responsibility for planning, directing and controlling the activities of the consolidated entity (i.e. the MMA group), directly or indirectly, including any director (whether executive or otherwise) of the consolidated entity. Rights Granted to Directors and Senior Management During and since the end of the financial year, an aggregate of 6,698,770 performance rights were granted to the following Director and to the five highest remunerated officers of the Company as part of their remuneration: Name Mr J Weber Mr D Ross Mr D Cavanagh Mr D Roberts Mr D Thomas Mr R Furlong 34 Annual Report 2019 Number of rights granted 2,581,441 1,600,260 1,074,831 504,178 476,809 461,251 Issuing entity MMA Offshore Limited MMA Offshore Limited MMA Offshore Limited MMA Offshore Limited MMA Offshore Limited MMA Offshore Limited Number of ordinary shares under rights 2,581,441 1,600,260 1,074,831 504,178 476,809 461,251 In general terms, the Chairman’s Address and the Managing Director’s Report (on pages 8-13) gives an indication of likely developments and the expected results of those operations. Environmental Regulations The Company continues to conduct its operations within the parameters of all applicable environmental requirements. There were no known breaches of any applicable environmental laws for the year ended 30 June 2019. Dividends In respect of the financial year ended 30 June 2018, as detailed in the Directors’ Report for that financial year, the Directors suspended the payment of dividends (both interim and final) in order to retain cash to support business operations until market conditions improve. This position remains the same in respect of the financial year ended 30 June 2019. Accordingly, no interim or final dividend has been recommended, declared or paid for the 2019 financial year. MMA Offshore Limited 35 Unissued Shares under Rights Directors’ Meetings Details of unissued shares under rights as at the date of this report are: Issuing entity MMA Offshore Limited MMA Offshore Limited Number of unissued shares under rights 10,625,634 2,581,441 Class of shares Ordinary Ordinary Exercise price of rights $ 0.00 0.00 Vesting date of rights 1 Jul 2021 (a) 1 Jul 2021 (a) (a) These performance rights vest on 1 July 2021 subject to the performance criteria as detailed in note 5.2 and have a two year exercise period to 1 July 2023. The holders of these rights do not have the right, by virtue of the issue of the right, to participate in any share issue of the Company. Shares Issued on Vesting of Rights No shares were issued during or since the end of the financial year as a result of the vesting of rights. Insurance and Indemnification of Directors and Officers During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and all Executive Officers of the Company and of any related body corporate against a liability incurred in acting in their capacity as a Director, Company Secretary or Executive Officer of the Company to the extent permitted by the Corporations Act 2001 (Cth). The relevant contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company’s Constitution requires the Company, so far as permitted under applicable law and to the extent the person is not otherwise indemnified, to indemnify each officer of the Company and its wholly owned subsidiaries, and may indemnify its auditors, against a liability incurred as such by an officer or auditor to any person (other than the Company or a related body corporate) including a liability incurred as a result of appointment or nomination by the Company or subsidiary as trustee or as an officer of another corporation, unless the liability arises out of conduct involving a lack of good faith. The Company has entered into Deeds of Indemnity, Insurance and Access with each of the Directors of the Company and its wholly owned subsidiaries in terms of the indemnity provided under the Company’s Constitution. 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 or of any related body corporate against any liability incurred in acting in their capacity as such an officer of the Company. No indemnity payment has been made under any of the documents referred to above during or since the end of the financial year. Indemnification of Auditors The Company’s auditor is Deloitte. The Company has agreed with Deloitte, as part of its terms of engagement, to indemnify Deloitte against certain liabilities to third parties arising from the audit engagement. The indemnity does not extend to any liability resulting from the wilful misconduct or fraudulent act or omission by Deloitte. During the financial year: • The Company has not paid, or agreed to pay, any premium in relation to any insurance for Deloitte or a body corporate related to Deloitte; • No indemnity payment has been made under any of the documents referred to above during or since the end of the financial year; and • There were no officers of the Company who were former partners or directors of Deloitte, whilst Deloitte conducted audits of the Company. 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, 8 Board meetings, 4 Audit and Risk Committee meetings and 3 Nomination and Remuneration Committee meetings were held. Name Mr A Edwards Mr J Weber Ms E Howell Mr CG Heng Mr P Kennan Board of Directors Audit and Risk Committee Nomination and Remuneration Committee Held Attended Held Attended Held Attended 8 8 8 8 8 8 8 8 8 8 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 Proceedings on Behalf of the Company No proceedings have been brought on behalf of the Company, nor has any application been made in respect of the Company, under section 237 of the Corporations Act 2001 (Cth). Non-Audit Services Details of the amounts paid or payable to the external auditor for non-audit services provided during the year are outlined in note 5.5 to the Financial Statements. During the year, the Company paid Deloitte the sum of $80,341 for the provision of non-audit services (being the provision of tax compliance services and potential transaction advice) and the sum of $478,431 for the provision of audit services. The Directors are satisfied that the provision of non-audit services during the year by the external auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). The Directors are of the opinion that the services as disclosed in note 5.5 to the Financial Statements do not compromise the external auditor’s independence, based on advice received from the Audit and Risk Committee, for the following reasons: • All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • None of the services undermine the general principles relating to auditor independence as set out in APES 110 ‘Code of Ethics for Professional Accountants’ issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing economic risks and rewards. Auditor’s Independence Declaration The Auditor’s Independence Declaration is included on page 50 of this Annual Report. Rounding Off of Amounts The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument, amounts in the Directors’ Report and the Financial Statements are rounded off to the nearest thousand dollars, unless otherwise indicated. 36 Annual Report 2019 MMA Offshore Limited 37 Remuneration Report Key Remuneration Outcomes This Remuneration Report, which forms part of the Directors’ Report, outlines the remuneration of the Company’s key management personnel for the financial year ended 30 June 2019. The Company’s ‘key management personnel’ are those persons who have authority and responsibility for planning, directing and controlling the activities of the consolidated entity, either directly or indirectly, including any Director (whether executive or otherwise) of the consolidated entity. The prescribed details for each person covered by this Remuneration Report are detailed below under the following headings: • Key Management Personnel; • Remuneration Policy; • Relationship between the Remuneration Policy and Company Performance; • Remuneration of Key Management Personnel; and • Key Terms of Employment Contracts. Key Management Personnel Having regard to the overall performance of the Company during the 2019 financial year and current market conditions, the key remuneration outcomes for the Company’s key management personnel in 2019 were as follows: Fixed Annual Remuneration (FAR) • The Managing Director, Chief Executive Officer and Chief Financial Officer did not receive an increase in FAR for the 2019 financial year. • The other Senior Management of the Company did receive a general increase in FAR of 2.9% for the 2019 financial year - with some additional realignment for those key management personnel whose roles changed. Short-term Incentive (STI) • The Board exercised its discretion to suspend the STI component in relation to the Managing Director and other key management personnel for the 2019 financial year. Long-term Incentive (LTI) • The Board exercised its discretion to reinstate the LTI component in relation to the Managing Director and other key management personnel for the 2019 financial year. Further details of the new 2019 LTI Plan are set out on pages 44 to 45 of this report. The Directors and other key management personnel of the consolidated entity during and since the end of the financial year were: Remuneration Report 2018 Executive Director Mr J Weber (Managing Director)(1) Other Key Management Personnel Mr D Ross (Chief Executive Officer)(2) Mr D Cavanagh (Chief Financial Officer) Non-Executive Directors Mr A Edwards (Chairman) Ms E Howell Mr CG Heng Mr P Kennan Mr D Roberts (Executive General Manager Legal/Company Secretary) Ms L Buckey (Executive General Manager Corporate Development) Mr D Thomas (Executive General Manager People and Safety) Mr R Furlong (Executive General Manager Operations)(3) Mr S Edgar (Executive General Manager Project Logistics)(4) (1) Ceased as Chief Executive Officer on 1 July 2019 (2) Appointed as Chief Executive Officer on 1 July 2019 (3) Appointed to the position of Executive General Manager Operations on 1 January 2019 (4) Appointed to the position of Executive General Manager Project Logistics on 1 January 2019 Apart from Mr J Weber, Mr D Ross, Mr R Furlong and Mr S Edgar (who only held their respective positions for part of the financial year), the above named persons held their current position for the whole of the financial year and since the end of the financial year. Remuneration Policy The Nomination and Remuneration Committee is delegated responsibility by the Board for reviewing the remuneration packages of all Directors and key management personnel on an annual basis and making recommendations to the Board in this regard. The specific responsibilities of the Nomination and Remuneration Committee are set out in the Committee’s Charter, which can be found on the Corporate Governance page of our website at www.mmaoffshore.com/investor-centre/corporate-governance. Remuneration packages are typically reviewed and determined with due regard to current market rates and are benchmarked against comparable industry salaries and are adjusted to reflect changes in the performance of the Company. Given current financial constraints, the Nomination and Remuneration Committee carried out an internal review of the remuneration packages of the Managing Director and non-director key management personnel for the 2019 financial year, without engaging the services of an independent remuneration consultant. The Board is satisfied that the remuneration recommendations made by the Nomination and Remuneration Committee were free from undue influence by any member of the key management personnel to whom the recommendations relate. MMA Offshore Limited’s Remuneration Report for the 2018 financial year was adopted at the Annual General Meeting on 21 November 2018 with a clear majority of 441,947,720 votes in favour of the motion (representing 85% of the votes received). Non-Executive Directors’ Remuneration Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool which is periodically recommended for approval by shareholders. The maximum fees payable to Non-Executive Directors are currently $950,000 per annum in aggregate (as approved by shareholders at the Company’s AGM on 22 November 2012). Non-Executive Directors are paid fixed fees for their services in accordance with the Company’s Constitution. Fees paid to Non- Executive Directors are set at levels which reflect both the responsibilities of, and time commitments required from each Non- Executive Director to discharge their duties. Non-Executive Directors’ fees are reviewed annually by the Board to ensure they are appropriate for the duties performed, including Board committee duties, and are in line with the market. Non-Executive Directors do not receive performance-based remuneration. Other than statutory superannuation, Directors are not entitled to retirement allowances. For the 2019 financial year, there was no increase in Non-Executive Directors’ fees. In addition, following a review by the Nomination and Remuneration Committee, there has been no increase in Non-Executive Directors’ fees for the 2020 financial year. Other Key Management Personnel Remuneration of the Managing Director and other executive key management personnel generally comprises both a fixed component and an incentive or “at-risk” component, which is designed to remunerate key management personnel for increasing shareholder value and for achieving financial targets and business strategies set by the Board. The remuneration of the Managing Director and other key management personnel has the following three components: 38 Annual Report 2019 MMA Offshore Limited 39 No. 1 Remuneration Component Details Fixed Annual Remuneration (FAR) • Comprising base salary and superannuation. Allocation of Executive Remuneration between Fixed and Variable Remuneration The allocation of total executive remuneration between fixed and variable remuneration for the 2019 financial year is as follows: MANAGING DIRECTOR OTHER EXECUTIVES (MAXIMUM) 9% 9% 91% 91% FAR LTI FAR LTI Relationship between the Remuneration Policy and Company Performance The table below summarises information about the Company’s earnings for the 2019 financial year and the Company’s earnings and movements in shareholder wealth for the five years to 30 June 2019, which is a key factor in the Board’s decision to suspend the STI remuneration component for both the 2019 and 2020 financial years. Revenue Net profit/(loss) before tax Net profit/(loss) after tax Share price at start of the year Share price at end of the year Interim dividend(1) Final dividend(1) Basic earnings per share Diluted earnings per share 30 June 2019 $’000 30 June 2018 $’000 30 June 2017 $’000 30 June 2016 $’000 30 June 2015 $’000 239,259 200,444 256,396 481,123 (35,879)(3) (27,376)(3) (379,791)(3) (155,262)(3) (37,373) (27,909) (378,032) (143,962) $0.25 $0.18 0cps 0cps $0.15 $0.25 0cps 0cps $0.31 $0.15 0cps 0cps $0.54 $0.31 0cps 0cps 796,666 (48,219) (51,291) $2.06 $0.54 4.0cps 1.5cps (4.36cps) (4.11cps) (93.86cps)(4) (38.64 cps) (13.91 cps) (4.36cps) (4.11cps) (93.86cps)(4) (38.64 cps) (13.91 cps) 3 year compound annual TSR(2) (16%) (21%) (49%) (46%) (32%) (1) Franked to 100% at 30% corporate income tax rate. (2) TSR comprises share price growth and dividends. (3) This includes a non-cash impairment charge of $10.4 million against the carrying value of the Company’s assets as at 30 June 2019 [2018: $8.4 million impairment reversal and 2017: $312 million impairment charge]. (4) The calculations of the 30 June 2017 basic and diluted earnings per share have been retrospectively adjusted to reflect the impact of the capital raising during this reporting period. • In setting FAR, consideration is given to current market rates and industry benchmarking against appropriate comparator groups (including the median market rates within the sector and industry peers), current market conditions, Company performance and individual performance. • As previously reported, the Managing Director, Chief Executive Officer and Chief Financial Officer did not receive any increase in FAR for the 2019 financial year. The other Senior Management of the Company did, however, receive a general increase in FAR of 2.9% - with some additional realignment for those key management personnel whose roles changed. • Given the performance of the Company and current market conditions, the Board has determined that for the 2020 financial year: (a) The Managing Director, Chief Executive Officer and Chief Financial Officer will not receive any increase in FAR; and (b) The other key management personnel will not receive any increase in FAR. 2 Short-term Incentive (STI) • An annual “at-risk” cash component designed to reward performance against the achievement of key performance indicators (KPIs) set by the Board. • The invitation to participate in the STI is at the absolute discretion of the Board and is subject to such conditions which the Board may prescribe from time to time. • As previously reported, given the performance of the Company and market conditions, the Board exercised its discretion to suspend the STI component for the 2019 financial year. • Once again, the Board has exercised its discretion to suspend the STI component for the 2020 financial year (subject always to the Board’s discretion to reinstate the STI component if the Company’s performance or market conditions change). 3 Long-term Incentive (LTI) • The Company grants rights over its ordinary shares under the LTI. • The vesting of these rights is based on the achievement of stipulated performance criteria targets over a 3 year period. • The LTI also aims to align executives’ long-term interests with those of shareholders and to retain executives. • The Board exercised its discretion to reinstate the LTI component for the 2019 financial year. The 2019 LTI Plan – which has a 3 year performance period (expiring 1 July 2021) – includes performance hurdles relating to Relative TSR (50% weighting), Net Debt to EBITDA ratio (25% weighting) and Debt Refinancing (25% weighting) targets. The 2019 LTI Plan for the Managing Director, Chief Executive Officer and Chief Financial Officer also includes a Stretch Relative TSR tranche equating to 10% of the relevant parties fixed annual remuneration for the year - which tranche will only vest in the event that the Company’s TSR percentile ranking over the Performance Period relative to the selected Peer Group is above the 90th Percentile. The 2019 LTI Plan for the Managing Director was approved by shareholders at the Company’s 2018 AGM on 21 November 2018. The Board considers that the reinstatement of the 2019 LTI Plan and the selection of these performance hurdles is appropriate in the current circumstances to achieve its business turnaround strategy, to retain key management personnel within the Company and to achieve the strategic objectives of the Company. • The Board has once again exercised its discretion to reinstate the LTI component for 2020 Financial year. The new 2020 LTI Plan has a 3 year performance period (expiring 1 July 2022) and includes performance hurdles relating to Relative TSR (50% weighting) and EBITDA Return on Assets (50% weighting). The Board considers that the 2020 LTI Plan and the selected performance hurdles are appropriate to retain key management personnel within the Company and to achieve the strategic objectives of the Company. 40 Annual Report 2019 MMA Offshore Limited 41 Remuneration of Key Management Personnel In this Annual Report, remuneration outcomes are presented based on the requirements of accounting standards (which has the benefit of being readily comparable with other companies) rather than the actual “take-home” pay received by executive key management personnel (being cash, other benefits and the value of equity vesting during the relevant financial year). An example of this includes LTI awards which are recognised and accounted for over the performance period (3 years) based on their assessed value when originally granted to the executive. This may be significantly different to their value, if and when the incentive vests to that executive. The following tables disclose: (A) The actual remuneration of the Directors and other key management personnel of the Company for the 2019 financial year (i.e. the actual “take-home” pay received by key management personnel for the 2019 financial year); and (B) The statutory presentation of the remuneration of the Directors and other key management personnel of the Company for the 2019 financial year and for the previous financial year based on the requirements of accounting standards. (A) Key Management Personnel Remuneration (Actual) Short-term employee benefits Post-employment benefits 2019 Salary & fees $ Cash Bonus $ Non- monetary(2) Superannuation Termination $ $ $ Directors Mr A Edwards Mr J Weber Mr P Kennan Ms E Howell Mr CG Heng Senior Management Mr D Ross Mr D Cavanagh Mr D Roberts Ms L Buckey(4) Mr D Thomas Mr R Furlong(1) Mr S Edgar(1) Total 164,384 852,371 100,127 100,440 112,910 548,819 335,172 329,469 189,994 310,469 314,110 263,628 3,621,893 - - - - - - - - - - - - - 1,150 - - - 105,284 - 22,159 - - - - 128,593 15,616 25,000 - 9,541 6,926 - 24,828 20,531 18,338 20,531 20,531 20,531 182,373 (B) Key Management Personnel Remuneration (Statutory Presentation) - - - - - - - - - - - - - Short-term employee benefits Post-employment benefits 2019 Salary & fees $ Cash Bonus $ Non- monetary(2) Superannuation Termination $ $ $ Directors Mr A Edwards Mr J Weber Mr P Kennan Ms E Howell Mr CG Heng Senior Management Mr D Ross Mr D Cavanagh Mr D Roberts Ms L Buckey(4) Mr D Thomas Mr R Furlong(1) Mr S Edgar(1) Total 164,384 852,371 100,127 100,440 112,910 548,819 335,172 329,469 189,994 310,469 314,110 263,628 3,621,893 - - - - - - - - - - - - - 1,150 - - - 105,284 - 22,159 - - - - 128,593 15,616 25,000 - 9,541 6,926 - 24,828 20,531 18,338 20,531 20,531 20,531 182,373 - - - - - - - - - - - - - Share based payments Long Service Leave $ Rights(3) $ Total $ 180,000 878,521 100,127 109,981 119,836 654,103 360,000 372,159 208,332 331,000 334,641 284,159 3,932,859 Total $ 180,000 976,769 100,127 109,981 119,836 - - - - - - - - - - - - - Share based payments Rights(3) $ - 83,625 - - - 53,103 35,667 19,697 11,708 18,627 18,020 14,624 716,139 395,667 397,690 223,512 362,744 358,239 303,519 255,071 4,244,223 - - - - - - - - - - - - - Long Service Leave $ - 14,623 - - - 8,933 5,834 3,472 13,117 5,578 4,736 56,293 Short-term employee benefits Post-employment benefits Salary & fees $ Cash Bonus $ Non- monetary(2) Superannuation $ $ Termination $ 2018 Directors Mr A Howarth(1) Mr A Edwards Mr J Weber Mr P Kennan(1) Ms E Howell Mr CG Heng Senior Management Mr D Ross Mr P Raynor(1) Mr D Cavanagh(1) Mr D Roberts Mr M Gillett(1) Ms L Buckey(4) Mr D Thomas 70,271 143,116 847,747 71,399 100,569 99,457 504,999 238,828 192,083 310,633 247,359 201,379 296,892 Total 3,324,732 - - - - - - - - - - - - - - 19 - 1,237 - - - 48,925 2,608 - 3,929 120 - - 6,676 13,596 25,000 - 9,554 5,648 17,308 12,212 12,067 20,049 14,651 19,131 20,049 - - - - - - - - - - 216,011 - - 56,838 175,941 216,011 Share based payments Total Long Service Leave $ Rights(3) $ $ - - - - 76,966 156,712 14,546 18,647 907,177 - - - 8,705 4,137 - 5,512 3,972 11,867 15,848 64,587 - - - 71,399 110,123 105,105 8,775 4,183 588,712 261,968 - 204,150 1,477 1,073 1,274 1,423 341,600 483,186 233,651 334,212 36,852 3,874,961 (1) These salaries & fees are only for part of the financial year as Mr R Furlong was appointed to the position of Executive General Manager Operations on 1 January 2019; Mr S Edgar was appointed to the position of Executive General Manager Project Logistics on 1 January 2019; Mr A Howarth retired from the Company on 30 November 2017; Mr P Kennan was appointed as a director of the Company on 22 September 2017; Mr D Cavanagh commenced employment with the Company on 4 December 2017; Mr P Raynor ceased employment with the Company on 21 December 2017 and Mr M Gillett ceased employment with the Company on 22 March 2018. (2) These non-monetary benefits comprise the provision of housing, relocation costs, forgiveness of employee loans, fuel, travel and other benefits, as applicable. (3) The value of the rights granted to key management personnel as part of their remuneration is calculated as at the grant date using the binomial pricing model. The amounts disclosed as part of remuneration for the financial year have been determined by allocating the grant date value on a straight-line basis over the period from the grant date to the vesting date (i.e. 3 years). (4) Ms L Buckey is employed on a part-time basis. The table below sets out the relative proportions of the elements of statutory remuneration of key management personnel that are linked to performance: Fixed Remuneration Remuneration linked to Performance Non-Executive Directors Mr A Edwards Ms E Howell Mr CG Heng Mr P Kennan Executive Directors Mr J Weber Senior Management Mr D Ross Mr D Cavanagh Mr D Roberts Ms L Buckey Mr D Thomas Mr R Furlong(1) Mr S Edgar(2) (1) Appointed on 1 January 2019. (2) Appointed on 1 January 2019. 2019 100% 100% 100% 100% 91% 93% 91% 95% 95% 95% 95% 95% 2018 100% 100% 100% 100% 98% 98% 100% 99% 100% 100% N/A N/A 2019 2018 0% 0% 0% 0% 9% 7% 9% 5% 5% 5% 5% 5% 0% 0% 0% 0% 2% 2% 0% 1% 0% 0% N/A N/A No key management personnel appointed during the period received a payment as part of his or her consideration for agreeing to hold the position. 42 Annual Report 2019 MMA Offshore Limited 43 Bonus and Share-based payments granted as compensation for the current financial year STI (Cash Bonuses) As noted above, having regard to the overall performance of the Company and current market conditions, the Board has, in relation to the Managing Director and other key management personnel, exercised its discretion to: • Suspend the STI component for the 2019 financial year; and • Once again, suspend the STI component for the 2020 financial year (subject to the Board’s discretion to reinstate the STI component if the Company’s performance or market conditions change). LTI (Performance Rights/Share Based Payments) During the financial year: • No performance rights granted to either the Managing Director or the other key management personnel as part of their compensation in previous financial years vested; • No share-based payments were granted as compensation to either the Managing Director or the other key management personnel; and • The Company reinstated the LTI remuneration component (being a performance rights plan) for the Managing Director, Senior Management and other selected employees (2019 LTI Plan). Each right under the 2019 LTI Plan converts into one ordinary share of MMA Offshore Limited on vesting. No amounts are paid or payable by the recipient upon grant of the rights under the 2019 LTI Plan. The rights carry neither rights to dividends nor voting rights. Please refer to the tables below for details of the performance criteria for the rights granted during the 2019 financial year under the 2019 LTI Plan. (A) The table below sets out the relevant performance criteria for the performance rights granted to the Managing Director, Chief Executive Officer and Chief Financial Officer during the 2019 financial year: Performance Criteria Net Debt to EBITDA Ratio Debt Refinancing Performance Period Beginning 1 July 2018 and ending 30 June 2021 Beginning 1 July 2018 and ending 30 June 2021 Company’s Total Shareholder Return (TSR)(2) percentile ranking over the Performance Period relative to a selected Peer Group(3) Stretch Relative TSR Beginning 1 July 2018 and ending 30 June 2021 Beginning 1 July 2018 and ending 30 June 2021 Percentage of LTI subject to Performance Criteria Performance Criteria Targets Percentage of Performance Rights which vest if Target met 100% 100% 25% Multiple ≤ 2.5 times 25% The Company securing refinancing of its existing Debt Facilities(1), or alternate financing in lieu of the existing Debt Facilities, and such terms being acceptable to the Board in its absolute discretion having regard to, among other factors, prevailing market conditions and the Company's financial position at that time 50% Below the 50th percentile Nil Between the 50th and the 75th percentile 50% to 100% (on a straight-line basis) Above the 75th percentile 10% Above the 90th percentile 100% 100% (B) The table below sets out the relevant performance criteria for the performance rights granted to other key management personnel (ie. excluding the Managing Director, Chief Executive Officer and Chief Financial Officer) during the financial year: Performance Criteria Net Debt to EBITDA Ratio Debt Refinancing Performance Period Beginning 1 July 2018 and ending 30 June 2021 Beginning 1 July 2018 and ending 30 June 2021 Percentage of LTI subject to Performance Criteria Performance Criteria Targets Percentage of Performance Rights which vest if Target met 100% 100% 25% Multiple ≤ 2.5 times 25% The Company securing refinancing of its existing Debt Facilities(1), or alternate financing in lieu of the existing Debt Facilities, and such terms being acceptable to the Board in its absolute discretion having regard to, among other factors, prevailing market conditions and the Company’s financial position at that time Beginning 1 July 2018 and ending 30 June 2021 Company’s Total Shareholder Return (TSR)(2) percentile ranking over the Performance Period relative to a selected Peer Group(3) 50% Below the 50th percentile Nil Between the 50th and the 75th percentile 50% to 100% (on a straight-line basis) Above the 75th percentile 100% (1) Debt Facilities means those debt facilities referred to in the Company’s ASX announcement ‘Equity Raising Presentation’ dated 16 November 2017. (2) Total Shareholder Return (TSR) means, broadly, the increase in the share price plus dividends paid (calculated in Australian dollars), excluding franking credits and taxation, over the Performance Period, to be determined in a manner decided by the Board in its absolute discretion. (3) Peer Group means the peer group (the composition of which may be changed by the Board in its absolute discretion) comprising of the constituents of the ASX 200 – Industrials Index being the following ASX listed companies: ALS Limited (ASX:ALQ), Atlas Arteria Limited (ASX:ALX), Aurizon Holdings Limited (ASX:AZJ), Brambles Limited ASX:BXB), CIMIC Group Limited (ASX:CIM), Cleanaway Waste Management Limited (ASX:CWY), Downer EDI Limited (ASX:DOW), GWA Group Limited (ASX:GWA), IPH Limited (ASX:IPH), McMillan Shakespeare Limited (ASX:MMS), Monadelphous Group Limited (ASX:MND), Qantas Airways Limited (ASX:QAN), Qube Holdings Limited (ASX:QUB), Reliance Worldwide Corporation Limited (ASX:RWC), SEEK Limited (ASX:SEK), Seven Group Holdings Limited (ASX:SVW), Smartgroup Corporation Ltd (ASX:SIQ), Sydney Airport Limited (ASX:SYD), Transurban Group (ASX:TCL). During the financial year, the following rights schemes were in existence: Series Number issued Grant date Expiry date (1) 10 Feb 2016 (a) 2,001,432 18 Nov 2015 1 Jul 2020 (2) 10 Feb 2016 (a) 8,037,836 7 Dec 2015 1 Jul 2020 (3) 7 Jun 2016 (a) 220,284 18 Apr 2016 1 Jul 2020 (4) 19 Oct 2018 (b) 10,625,634 16 Nov 2018 1 Jul 2023 (5) 27 Nov 2018 (b) 2,581,441 28 Nov 2018 1 Jul 2023 Exercise price $ Fair value at grant date $ 0.00 0.00 0.00 0.00 0.00 0.02 0.02 0.02 0.11 0.10 Vesting date 1 Jul 2018 1 Jul 2018 1 Jul 2018 1 Jul 2021 1 Jul 2021 (a) In accordance with the terms of the MMA Offshore Limited Performance Rights Plan – 2015 (issued by the Board on 7 December 2015 and 18 April 2016) and the MMA Offshore Limited Managing Director’s Performance Rights Plan – 2015 (as approved by the shareholders at the Company’s Annual General Meeting on 18 November 2015) the number of performance rights which vested on 1 July 2018 depended on the Company achieving the specified share price target(s) for MMA Offshore Limited and the total shareholder return of the Company relative to a selected peer group of companies as set out in note 5.2 of the Financial Statements. These performance hurdles have not been met. As such, all of these performance rights have lapsed in accordance with the terms of the relevant plan rules. (b) In accordance with the terms of the MMA Offshore Limited Performance Rights Plan – 2018 (issued by the Board on 19 October 2018) and the MMA Offshore Limited Managing Director’s Performance Rights Plan – 2018 (as approved by the shareholders at the Company’s Annual General Meeting on 21 November 2018) the number of performance rights which vest on 1 July 2021 will depend on the Company achieving the specified Debt Refinancing (25% weighting) targets, the specified Net Debt to EBITDA ratio (25% weighting) and the Total Shareholder Return (50% weighting) of the Company relative to a selected peer group of companies as set out in note 5.2 of the Financial Statements. Subject to the performance rights vesting on 1 July 2021, the vested performance rights must be exercised within a two year period from the vesting date (ie by 1 July 2023) or such other time as determined by the Board in its sole and absolute discretion. There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant date. 44 Annual Report 2019 MMA Offshore Limited 45 The following share-based payments were granted as compensation to the Managing Director and executive key management personnel during the current financial year: Key Management Personnel Equity Holdings Details of the fully paid ordinary shares of the Company held by key management personnel are as follows: Balance at 1 July 2018 Granted as compensation Received on vesting of Performance Rights Net other change Balance at 30 June 2019 Balance held nominally Name Mr J Weber Mr D Ross Performance rights issued 27 Nov 2018 19 Oct 2018 Mr D Cavanagh 19 Oct 2018 Mr D Roberts Mr D Thomas Ms L Buckey Mr R Furlong Mr S Edgar 19 Oct 2018 19 Oct 2018 19 Oct 2018 19 Oct 2018 19 Oct 2018 Number granted 2,581,441 1,600,260 1,074,831 504,178 476,809 299,688 461,251 374,332 Number vested % of grant vested % of grant forfeited – – – – – – – – – – – – – – – – – – – – – – – – % of compensation for the year consisting of share based payment 9% 7% 9% 5% 5% 5% 5% 5% During the financial year, no performance rights vested in favour of the Managing Director or other key management personnel. The following table summarises the value of performance rights to key management personnel which were granted or vested during the financial year as part of their remuneration: Name Mr J Weber Mr D Ross Mr D Cavanagh Mr D Roberts Mr D Thomas Ms L Buckey Mr R Furlong Mr S Edgar Value of rights granted at grant date $ Value of rights at vesting date $ 250,875 159,309 107,002 55,581 52,563 33,038 50,848 41,266 – – – – – – – – The following table summarises the number of performance rights that lapsed during the financial year, in relation to performance rights granted to key management personnel as part of their remuneration: Name Mr J Weber Mr D Ross Mr D Roberts Ms L Buckey Mr D Thomas Mr R Furlong Mr S Edgar Financial year in which rights were granted No. of rights lapsed during the current year 2015 2015 2015 2015 2015 2015 2015 2,001,432 941,850 252,126 217,350 242,828 178,794 96,644 Balance at 1 July 2017 Granted as compensation Received on vesting of Performance Rights Net other change Balance at 30 June 2018 Balance held nominally - - - - - - - - - - - - - - - - - - - - - - - - 100,000 331,360 3,815,916 - - - - 125,000 - - - - - - - - 77,419,000 77,419,000 372,058 200,000 1,531,570 21,000 - 1,475 - 1,578 24,706 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 115,680 231,360 1,907,958 3,815,916 - - 38,709,500 77,419,000 77,419,000 123,529 100,000 765,785 247,058 200,000 1,531,570 - - - - - 12,353 21,000 - 1,475 - 1,578 24,706 - - - - - - - - - Mr P Kennan 77,419,000 2019 Mr A Edwards Mr J Weber Ms E Howell Mr CG Heng Mr D Ross Mr D Cavanagh Mr D Roberts Ms L Buckey Mr D Thomas Mr R Furlong(1) Mr S Edgar(2) 2018 Mr A Edwards Mr J Weber 231,360 3,815,916 247,058 200,000 1,531,570 21,000 - 1,475 - 1,578 24,706 115,680 1,907,958 Mr P Kennan(3) 38,709,500 Ms E Howell Mr CG Heng Mr D Ross Mr D Cavanagh(4) Mr D Roberts Ms L Buckey Mr D Thomas Mr R Furlong(1) Mr S Edgar(2) 123,529 100,000 765,785 21,000 - 1,475 - 1,578 12,353 (1) Appointed 1 January 2019. (2) Appointed 1 January 2019. (3) Appointed on 22 September 2017. (4) Appointed on 4 December 2017. 46 Annual Report 2019 MMA Offshore Limited 47 Details of the performance rights held by executive key management personnel are as follows: Share Trading Restrictions Balance at 1 July 2018 Granted as compensation Vested Net other change (lapsed) Balance at 30 June 2019 Vested but not exercisable Rights vested during year 2019 Executives Mr J Weber Mr D Ross Mr D Roberts Ms L Buckey Mr D Thomas Mr R Furlong(2) Mr S Edgar(3) 2018 Executives Mr J Weber Mr D Ross Mr D Cavanagh(1) Mr D Roberts Ms L Buckey Mr D Thomas Mr R Furlong(2) Mr S Edgar(3) Mr D Cavanagh(1) - 1,074,831 2,001,432 2,581,441 941,850 1,600,260 252,126 217,350 242,828 178,794 96,644 504,178 299,688 476,809 461,251 374,332 (2,001,432) 2,581,441 (941,850) 1,600,260 - 1,074,831 504,178 299,688 476,809 461,251 374,332 - - - - - - - - (252,126) (217,350) (242,828) (178,794) (96,644) Net other change (lapsed) - - - - - - - - - - - - - - - - Balance at 1 July 2017 Granted as compensation Vested Balance at 30 June 2018 Vested but not exercisable Rights vested during year 2,431,507 1,144,238 - 307,602 265,175 296,259 205,029 117,909 - - - - - - - - - - - - - - (430,075) 2,001,432 (202,388) 941,850 - (55,476) (47,825) (53,431) (26,235) (21,265) - 252,126 217,350 242,828 178,794 96,644 - - - - - - - - - - - - - - (1) Appointed on 4 December 2017. (2) Appointed 1 January 2019. (3) Appointed 1 January 2019. All performance rights issued to key management personnel during the financial year were made in accordance with the terms of the respective rights plans. Further details of the share based payment arrangements during the 2019 and 2018 financial years are contained in note 5.2 of the Financial Statements. Loans to Key Management Personnel During the financial year, the Company forgave a portion of a short-term loan that it had provided to a member of its key management personnel. This outstanding portion of the short-term loan was forgiven on the basis of an agreement reached with the relevant key management personnel as part of their remuneration arrangements. The Company’s Share Trading Policy requires key management personnel proposing to enter into arrangements that limit the economic risk of a vested holding in the Company’s securities to first obtain approval from the Chairman of the Board (for directors), approval of the Chairman of the Audit and Risk Committee (for the Chairman of the Board), and approval from the Managing Director (for other executives), and subsequently provide details of the dealing within five business days of the dealing taking place. Any breach of the Share Trading Policy is taken very seriously by the Company and is subject to disciplinary action, including possible termination of a person’s employment or appointment. A copy of the Company’s Share Trading Policy can be found on the Corporate Governance page of our website at www.mmaoffshore.com/investor-centre/corporate-governance. Key Terms of Employment Contracts As at the date of this report, the Managing Director and other executive key management personnel are all employed by the Company under an employment contract, none of which are of fixed-term duration. These employment contracts may be terminated by either party giving the required notice and subject to termination payments as detailed in the table below: Name Mr J Weber Mr D Ross Mr D Cavanagh Mr D Roberts Ms L Buckey Mr D Thomas Mr R Furlong Mr S Edgar Termination notice period Termination benefits payable 6 months 6 months 12 weeks 12 weeks 12 weeks 12 weeks 12 weeks 12 weeks Yes(1) Yes(2) Yes(3) No No No No No (1) If the employee is made redundant as a result of a material diminution in the nature and level of responsibilities or functions of the employee’s position including, without limitation, through a change in control of the Company, the employee will be entitled to a payment being the lesser of either: • 1.5 times the Fixed Annual Remuneration in the relevant year (excluding any short-term incentives or long-term incentives); or • The maximum amount that may be paid to the employee under the Corporations Act and ASX Listing Rules without prior shareholder approval. (2) If the employee is made redundant as a result of a material diminution in the nature and level of responsibilities or functions of the employee’s position including, without limitation, through a change in control of the Company, the employee will be entitled to an aggregate payment equivalent to the maximum amount that may be paid to the employee under the Corporations Act and ASX Listing Rules without prior shareholder approval. (3) If the employee is made redundant as a result of a material diminution in the nature and level of responsibilities or functions of the employee’s position including, without limitation, through a change in control of the Company, the employee will be entitled to a payment equal to 0.5 times the Fixed Annual Remuneration in the relevant year (excluding any short-term incentives or long-term incentives). Under these employment contracts, the remuneration package for: • The Managing Director and Chief Executive Officer consists of an annual base salary and a short-term incentive component and a long-term incentive component at the discretion of the Nomination and Remuneration Committee and the Board; and • Other executive key management personnel consists of an annual base salary and statutory superannuation contributions. Participation in the Company’s incentive schemes is at the discretion of the Board. This Directors’ Report is signed in accordance with a resolution of Directors made pursuant to section 298(2) of the Corporations Act 2001 (Cth). On behalf of the Directors, Andrew Edwards Chairman Fremantle, 19 September 2019 48 Annual Report 2019 MMA Offshore Limited 49 AUDITOR’S INDEPENDENCE DECLARATION Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2 Brookfield Place 123 St Georges Terrace Deloitte Touche Tohmatsu Perth WA 6000 ABN 74 490 121 060 GPO Box A46 Perth WA 6837 Australia Tower 2 Brookfield Place Tel: +61 8 9365 7000 123 St Georges Terrace Fax: +61 8 9365 7001 Perth WA 6000 www.deloitte.com.au GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au The Board of Directors MMA Offshore Limited 1 Mews Road Fremantle WA 6160 The Board of Directors MMA Offshore Limited 19 September 2019 1 Mews Road Fremantle WA 6160 19 September 2019 Dear Board Members Auditor’s Independence Declaration to MMA Offshore Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following Dear Board Members declaration of independence to the directors of MMA Offshore Limited. Auditor’s Independence Declaration to MMA Offshore Limited As lead audit partner for the audit of the financial report of MMA Offshore Limited for the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following contraventions of: declaration of independence to the directors of MMA Offshore Limited. the auditor independence requirements of the Corporations Act 2001 in relation to the audit As lead audit partner for the audit of the financial report of MMA Offshore Limited for the year • ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: • any applicable code of professional conduct in relation to the audit. Yours faithfully • the auditor independence requirements of the Corporations Act 2001 in relation to the audit • any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU DELOITTE TOUCHE TOHMATSU John Sibenaler Partner Chartered Accountants John Sibenaler Partner Chartered Accountants INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report to the members of MMA Offshore Limited Independent Auditor’s Report to the members of MMA Offshore Limited Report on the Audit of the Financial Report Opinion Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2 Brookfield Place 123 St Georges Terrace Perth WA 6000 Deloitte Touche Tohmatsu GPO Box A46 ABN 74 490 121 060 Perth WA 6837 Australia Tower 2 Tel: +61 8 9365 7000 Brookfield Place Fax: +61 8 9365 7001 123 St Georges Terrace www.deloitte.com.au Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au We have audited the financial report of MMA Offshore Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2019, the Report on the Audit of the Financial Report consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes Opinion to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. We have audited the financial report of MMA Offshore Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2019, the In our opinion, the accompanying financial report of the Group is in accordance with the Corporations consolidated statement of profit or loss and other comprehensive income, the consolidated statement Act 2001, including: of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial (i) explanatory information, and the directors’ declaration. performance for the year then ended; and In our opinion, the accompanying financial report of the Group is in accordance with the Corporations (ii) Act 2001, including: complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion (i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial (ii) Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Basis for Opinion Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under fulfilled our other ethical responsibilities in accordance with the Code. 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 auditor We confirm that the independence declaration required by the Corporations Act 2001, which has been independence requirements of the Corporations Act 2001 and the ethical requirements of the given to the directors of the Company, would be in the same terms if given to the directors as at the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional time of this auditor’s report. Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 50 Annual Report 2019 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. MMA Offshore Limited 51 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter Carrying value of the Vessel Cash Generating Unit As disclosed in Note 3.6, the assessment of the the Vessels Cash recoverable amount of Generating Unit requires management to exercise judgement and has been based on a Fair Value Less Cost of Disposal (“FVLCOD”) approach. (“Vessel CGU”)  The Group appointed external valuers perform a valuation of the Vessel CGU. to  Key assumptions used in assessing recoverable amount include current and forecast economic conditions including potential movements in the market as a consequence of commodity prices and the application of an ‘en bloc’ discount to the vessel fleet.    How the scope of our audit responded to the Key Audit Matter Our procedures included, but were not limited to:  Understanding the process management undertakes to evaluate the recoverability of the Vessel CGU; Assessing management’s determination of the Vessel CGU based on our understanding of the nature of the Group’s business and the economic environment in which the segments operate; Assessing the objectivity and competence of the external valuers; Evaluating the external valuations obtained by the Group by assessing the valuation methodology adopted and the assumptions used; Comparing actual sales prices, including ‘en bloc’ discounts, of vessels during and post the reporting period to evaluate the reasonableness of the valuation; and Assessing the appropriateness of the disclosures in Note 3.6 to the financial statements. Recoverability of trade receivables Our procedures included, but were not limited to: As disclosed in Note 3.2, the carrying value of trade receivables is $52.1 million, net of an allowance for expected credit loss of $9.2 million Significant judgment is required in assessing the recoverability of trade receivables. This includes assessing the credit risk of trade receivables which have been outstanding for a period longer than average payment terms.  Understanding the process management undertakes to evaluate the recoverability of trade receivables; Assessing the recoverability of a sample of trade receivables by reviewing cash received subsequent to year end; Reviewing other evidence including customer correspondence and holding discussions with management to challenge their knowledge of future conditions that may impact expected customer receipts; and Assessing the appropriateness of the disclosures in Note 3.2 to the financial statements.    Other Information Other Information The directors are responsible for the other information. The other information comprises the The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2019, but does not information included in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial and, in doing so, 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. If, report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. information; we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: judgement and maintain professional scepticism throughout the audit. We also:   Identify and assess the risks of material misstatement of the financial report, whether due to fraud Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud material misstatement resulting from fraud is higher than for one resulting from error, as fraud 52 Annual Report 2019 MMA Offshore Limited 53 may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.  Conclude on the appropriateness of the director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Report on the Remuneration Report Report on the Remuneration Report Opinion on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 38 to 49 of the Director’s Report for the We have audited the Remuneration Report included in pages 38 to 49 of the Director’s Report for the year ended 30 June 2019. year ended 30 June 2019. In our opinion, the Remuneration Report of MMA Offshore Limited, for the year ended 30 June 2019, In our opinion, the Remuneration Report of MMA Offshore Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. complies with section 300A of the Corporations Act 2001. Responsibilities Responsibilities The directors of the Company are responsible for the preparation and presentation of the The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. with Australian Auditing Standards.  Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. DELOITTE TOUCHE TOHMATSU DELOITTE TOUCHE TOHMATSU  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. John Sibenaler John Sibenaler Partner Partner Chartered Accountants Chartered Accountants Perth, 19 September 2019 Perth, 19 September 2019 54 Annual Report 2019 MMA Offshore Limited 55 DIRECTORS’ DECLARATION The Directors declare that: (a) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (b) in the Directors’ opinion, the attached Financial Statements are in compliance with International Financial Reporting Standards, as stated in note 3.1 to the Financial Statements; (c) in the Directors’ opinion, the attached Financial Statements and notes thereto are in accordance with the Corporations Act 2001 (Cth), including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and (d) the Directors have been given the declarations required by section 295A of the Corporations Act 2001 (Cth). At the date of this declaration, the Company is within the class of companies affected by ASIC Corporations (Wholly owned Companies) Instrument 2016/785. The nature of the deed of cross guarantee is such that each company, which is party to the deed, guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee. In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Corporations (Wholly owned Companies) Instrument 2016/785 applies, as detailed in note 21 to the Financial Statements will, as a Group, be able to meet any obligations or liabilities to which they are, or may become, liable for by virtue of the deed of cross guarantee. Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001 (Cth). On behalf of the Directors, Andrew Edwards Chairman Fremantle, 19 September 2019 FINANCIAL REPORT 2019 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements 1. General Notes 1.1 1.2 1.3 1.4 Statement of Compliance Basis of Preparation Basis of Consolidation Critical Accounting Judgements and Key Sources of Estimation Uncertainty 2. Financial Performance 2.1 2.2 2.3 2.4 2.5 Segment Information Other Income and Expenses Income Taxes Earnings per Share Dividends Provided for or Paid 3. Assets and Liabilities 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 Cash Trade and Other Receivables Inventories Assets Classified as Held for Sale Property, Plant and Equipment Impairment of Non-current Assets Trade and Other Payables Borrowings Provisions 3.10 Deferred Tax Balances 4. Capital Structure 4.1 4.2 4.3 Issued Capital Reserves Capital Risk Management 5. Other Notes 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 Commitments for Expenditure Share Based Payments Key Management Personnel Compensation Related Party Transactions Remuneration of Auditors Subsidiaries Parent Company Information Financial Instruments Events After the Reporting Period 5.10 Other Accounting Policies Additional Securities Exchange Information 58 59 60 61 62 62 62 62 63 64 64 66 67 67 67 68 68 69 69 69 70 71 73 74 75 76 78 78 78 79 80 80 81 82 83 83 84 86 86 90 90 93 56 Annual Report 2019 MMA Offshore Limited 57 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 Revenue Investment income Other (losses)/gains Vessel expenses Administration expenses Impairment (charge)/reversal Finance costs Loss before tax Income tax expense Loss for the Year Other Comprehensive Income, net of tax Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Loss on hedge of net investment in a foreign operation Other comprehensive income for the year, net of tax Total Comprehensive Loss for the Year Loss attributable to owners of the Company Total comprehensive loss attributable to owners of the Company Note 2.1 2.2 2.1 2.3 2019 $’000 2018 $’000 239,259 200,444 1,278 (556) 463 87 (238,951) (206,484) (7,402) (10,361) (19,146) (35,879) (1,494) (37,373) 20,742 (8,886) 11,856 (25,517) (37,373) (25,517) (7,092) 8,407 (23,201) (27,376) (533) (27,909) 13,302 (6,087) 7,215 (20,694) (27,909) (20,694) Earnings/(loss) per share Basic Cents Per Share Cents Per Share 2.4 (4.36) (4.11) Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Assets classified as held for sale Total Current Assets Non-Current Assets Property, plant and equipment Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Unearned revenue Borrowings Provisions Current tax liabilities Customer deposits Total Current Liabilities Non-Current Liabilities Trade payables Borrowings Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Note 3.1 3.2 3.3 3.4 3.5 3.7 3.8 3.9 3.8 3.9 4.1 4.2 2019 $’000 70,155 63,275 1,974 1,149 - 2018 $’000 69,648 61,641 1,615 1,062 9,397 136,553 143,363 482,322 482,322 618,875 496,421 496,421 639,784 30,481 831 2,743 11,354 1,806 160 47,375 5,296 262,807 152 268,255 315,630 303,245 32,309 375 1,739 10,665 1,186 - 46,274 5,020 259,933 262 265,215 311,489 328,295 654,735 133,777 654,735 121,454 (485,267) (447,894) 303,245 328,295 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 58 Annual Report 2019 MMA Offshore Limited 59 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 Year Ended 30 June 2019 Balance at 1 July 2018 Loss for the year Other comprehensive income/(loss) for the year Total Comprehensive Income/(Loss) for the Year Recognition of share based payments Balance at 30 June 2019 654,735 Employee Equity Settled Benefits Reserve Issued Capital Foreign Currency Translation Reserve Hedging Reserve Accumulated Losses $’000 $’000 $’000 $’000 $’000 Total $’000 654,735 154 (57,290) 178,590 (447,894) 328,295 - - - 467 621 - - (37,373) (37,373) (8,886) 20,742 - 11,856 (8,886) 20,742 (37,373) (25,517) - - - 467 (66,176) 199,332 (485,267) 303,245 Year Ended 30 June 2018 Balance at 1 July 2017 Loss for the year Other comprehensive income/(loss) for the year Total Comprehensive Income/(Loss) for the Year Issue of shares under institutional placement 22,385 Issue of shares under institutional entitlement offer 15,605 Issue of shares under retail entitlement offer Share issue costs Transfer to share capital Recognition of share based payments 59,010 (4,558) 1,018 (1,018) - 58 Employee Equity Settled Benefits Reserve Issued Capital Foreign Currency Translation Reserve Hedging Reserve Accumulated Losses $’000 $’000 $’000 $’000 $’000 Total $’000 561,275 1,114 (51,203) 165,288 (419,985) 256,489 - - - - - - - - - (27,909) (27,909) (6,087) 13,302 - 7,215 (6,087) 13,302 (27,909) (20,694) - - - - - - - - - - - - - - - - - - 22,385 15,605 59,010 (4,558) - 58 - - - - - - - Cash Flows from Operating Activities Receipts from customers Interest received Payments to suppliers and employees Income tax paid Interest and other costs of finance paid Net Cash Provided by/(Used in) Operating Activities Cash Flows from Investing Activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Deposit for investment in business combination Net Cash Provided by/(Used in) Investing Activities Cash Flows from Financing Activities Proceeds from issue of shares Payment of share issue costs Repayment of borrowings Financing fees on borrowings Net Cash Provided by/(Used in) Financing Activities Note 2019 $’000 2018 $’000 241,305 1,278 205,157 463 (202,578) (189,324) 3.1 3.2 3.8 3.8 (955) (16,895) 22,155 (17,501) 7,491 (5,000) (15,010) - - (7,256) (9) (7,265) (1,754) (16,880) (2,338) (9,194) 25,288 - 16,094 97,000 (4,558) (61,298) (4,003) 27,141 Net increase/(decrease) in cash and cash equivalents (120) 40,897 Cash and cash equivalents at the beginning of the financial year 69,648 28,757 Effects of exchange rate changes on the balance of cash held in foreign currencies 627 (6) Cash and Cash Equivalents at the End of the Financial Year 70,155 69,648 Balance at 30 June 2018 654,735 154 (57,290) 178,590 (447,894) 328,295 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 60 Annual Report 2019 MMA Offshore Limited 61 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. General Notes 1. General Notes (continued) MMA Offshore Limited (MMA or the Company) is a listed public company incorporated in Australia. Its shares are traded on the Australian Securities Exchange. 1.4 Critical Accounting Judgements and Key Sources of Estimation Uncertainty 1.1 Statement of Compliance These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and other authoritative pronouncements issued by the Australian Accounting Standards Board (AASB), and comply with other requirements of the law. The accounting policies are consistent with those disclosed in the 2018 financial statements, except for the impact of all new or amended standards and interpretations as disclosed in note 5.10. The adoption of these standards and interpretations did not result in any significant changes to the Group’s accounting policies. In the application of the Group’s accounting policies, the Directors are required to make judgements, estimates and assumptions about carrying values 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 considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing 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. Critical judgements in applying accounting policies The Group has not elected to early adopt any new or amended standards or interpretations that are issued but not yet effective. The following critical judgement, apart from those involving estimation (which are presented separately below), has been made by the Directors in the process of applying the Group’s accounting policies. The Financial Statements were authorised for issue by the Directors on 19 September 2019. 1.2 Basis of Preparation Significant increase in credit risk – refer note 3.2. Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Calculation of loss allowance – refer note 3.2 Useful lives of property, plant and equipment – refer note 3.5 Impairment of property, plant and equipment – refer note 3.6 The financial statements have been prepared on the basis of historical cost, except for certain assets which have been impaired and financial instruments that are measured at fair values. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. Transactions in foreign currencies are recognised at the rates of exchange prevailing at the dates of the transactions. Monetary items denominated in foreign currencies at reporting date are translated at the exchange rate prevailing at that date. Exchange differences are recognised in profit or loss in the period in which they arise except for certain hedging transactions and translation of foreign operations as described in note 4.2. For the purposes of preparing the financial statements, the Company is a for-profit entity. The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with this Corporations Instrument, amounts in the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. 1.3 Basis of Consolidation The financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Company: • has power over the investee; • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Statement of Profit or Loss and Other Comprehensive Income from the date the Company gains control until the date when the Company ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. 62 Annual Report 2019 MMA Offshore Limited 63 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20192. Financial Performance 2.1 Segment Information An operating segment is a component of a group that engages in business activities from which it may earn revenue and incur expenses and whose operating results are regularly reviewed by the chief operating decision maker (The Board of Directors) for the purposes of resource allocation and assessment of segment performance. For the current reporting period the Group had one reportable segment being its Vessel operations. Information regarding the Vessel operating segment is presented below. The accounting policies of the reportable segment are the same as the Group’s accounting policies. Segment revenues and results The following is an analysis of the Group’s revenue and results by reportable segment: Vessels Revenue from external customers Segment profit/(loss) before impairment Impairment (charge)/reversal Segment profit/(loss) after impairment Investment income Other gains/(losses) Administration costs Finance costs Loss for the year before income tax 2019 $’000 239,259 308 (10,361) (10,053) 1,278 (556) (7,402) (19,146) (35,879) 2018 $’000 200,444 (6,040) 8,407 2,367 463 87 (7,092) (23,201) (27,376) Segment profit/(loss) represents the profit/(loss) earned by the Vessel segment without allocation of investment revenue, other gains and losses, administration costs, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. Disaggregation of revenue The Group derives its revenue from a number of different regions being: Revenue recognition: Revenue Region Australia International Total Segment Assets The following is an analysis of the Group’s assets by reportable segment: Vessel segment assets (i) Unallocated assets Total (i) Vessel segment assets include vessels held for sale (refer note 3.4). 2019 $’000 2018 $’000 159,256 80,003 239,259 142,155 58,289 200,444 2019 $’000 539,763 79,112 618,875 2018 $’000 566,129 73,655 639,784 2. Financial Performance (continued) 2.1 Segment Information (continued) For the purposes of monitoring segment performance and allocating resources to a segment, all assets are allocated to reportable segments other than cash and central administration assets. Other Segment Information Vessel assets Unallocated assets Total Impairment charges/(reversals) Depreciation and amortisation Additions to non-current assets 2019 $’000 2018 $’000 2019 $’000 34,766 31,300 10,341 553 603 44 35,319 31,903 10,385 2018 $’000 9,108 86 9,194 In addition to the depreciation charges reported above, the Group also recognised impairment charges/(reversals) (see note 3.6) in respect of vessels as set out below: Vessels held for continuing operations Vessels held for sale Total Geographical information 2019 $’000 8,254 2,107 10,361 2018 $’000 (8,236) (171) (8,407) The Group is based in two principal geographical areas – Australia (country of domicile) and Singapore, however the fleet is traded around the world as a single fleet and moves between all geographical areas. During the year, the Group operated vessels in a number of countries outside Australia. The Group’s revenue from external customers by location of operations and information about its non-current assets by location of assets are detailed in the following table: Location Australia International Total Revenue from external customers Non-current assets 2019 $’000 2018 $’000 2019 $’000 2018 $’000 159,256 142,155 80,003 58,289 239,259 200,444 176,327 305,995 482,322 183,478 312,943 496,421 Information about major customers for continuing operations Included in revenues arising from vessel services are revenues of approximately $35.0 million (2018: $28.8 million) which arose from sales to the Group’s largest customer, revenues of approximately $31.2 million (2018: $25.9 million) which arose from sales to the Group’s second largest customer and revenues of approximately $29.3 million (2018: $22.1 million) which arose from sales to the Group’s third largest customer. 64 Annual Report 2019 MMA Offshore Limited 65 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 2. Financial Performance (continued) 2. Financial Performance (continued) 2.2 Other Income and Expenses Profit/(loss) for the year has been arrived at after recognising the following specific amounts: Other gains and losses: Net foreign exchange losses Profit/(loss) on disposal of property, plant and equipment Profit/(loss) on disposal of assets held for sale Total Depreciation: Leasehold buildings and improvements Vessels at cost Plant and equipment Total Impairment charges: Impairment charge recognised on trade receivables Impairment charge/(reversal) recognised on vessel cash generating unit Employee benefits: Post-employment benefits: Defined contribution plans Share based payments: Equity settled share based payments Other employee benefits Total 2019 $’000 2018 $’000 (402) 57 (211) (556) 89 34,218 1,012 35,319 6,462 10,361 (272) (160) 519 87 90 30,910 903 31,903 1,251 (8,407) 9,115 7,765 467 97,255 106,837 58 95,502 103,325 Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. 2.3 Income Taxes Income tax recognised in profit or loss Tax expense comprises: 2019 $’000 2018 $’000 Current tax expense in respect of the current year Adjustment recognised in the current year in relation to tax provisions of prior years Total income tax expense The income tax expense for the year can be reconciled to accounting loss as follows: Loss before tax Income tax benefit calculated at 30% Effect of revenue that is exempt from taxation Effect of expenses that are not deductible in determining taxable profit Effect of tax deductible items not included in accounting profit Effect of foreign income taxable in Australia Effect of unused tax losses and temporary differences not recognised as deferred tax assets Effect of different tax rates of subsidiaries operating in other jurisdictions Adjustment recognised in the current year in relation to tax provisions of prior years Total income tax expense 861 633 1,494 (35,879) (10,764) (717) 8,552 (273) 160 2,641 1,262 861 633 1,494 596 (63) 533 (27,376) (8,213) (73) 3,186 (273) - 5,881 88 596 (63) 533 The tax rate used for the 2019 and 2018 reconciliations above is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit as reported in the Consolidated Statement of Profit or Loss and Other Comprehensive Income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. 2.4 Earnings per Share The calculation of basic earnings per share is based on the following data: Loss for the year used in the calculation of basic earnings per share (37,373) (27,909) 2019 $’000 2018 $’000 Weighted average number of ordinary shares used in the calculation of basic earnings per share 2.5 Dividends Provided for or Paid No dividends have been provided for or paid during the current year. Adjusted franking account balance 2019 No.’000 2018 No.’000 858,077 678,468 2019 $’000 47,589 2018 $’000 47,589 66 Annual Report 2019 MMA Offshore Limited 67 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 3. Assets and Liabilities 3.1 Cash Reconciliation of cash and cash equivalents For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and in banks. Cash and cash equivalents Reconciliation of loss for the year to net cash flows from operating activities Loss for the year Depreciation of non-current assets Impairment charge/(reversal) of non-current assets Amortisation of borrowing costs (Gain)/loss on sale of property, plant and equipment (Gain)/loss on sale of assets held for sale Unrealised foreign exchange loss Allowance for bad and doubtful debts Equity settled share based payment Change in net assets and liabilities: Decrease in trade and other receivables (Increase)/decrease in prepayments (Increase)/decrease in inventories Increase/(decrease) in current tax balances Increase/(decrease) in provisions Increase/(decrease) in trade and other payables Increase in unearned revenue Net cash flows Provided by/(Used in) operating activities 2019 $’000 70,155 (37,373) 35,319 10,361 2,258 (57) 211 249 6,454 467 1,513 (60) (341) 539 890 1,268 457 22,155 2018 $’000 69,648 (27,909) 31,903 (8,407) 3,354 160 (519) 263 1,256 58 4,446 199 1,433 (1,221) (72) (7,549) 267 (2,338) 3. Assets and Liabilities (continued) 3.2 Trade and Other Receivables Trade receivables Loss allowance Other receivables (i) Total (i) 2019 $’000 61,257 (9,179) 11,197 63,275 2018 $’000 57,602 (2,624) 6,663 61,641 Other receivables includes an amount of $5 million paid as a deposit for investment in a business combination. Refer to note 5.9 for further details. The credit period for customers is negotiated individually on a case by case basis. An allowance has been made for estimated irrecoverable trade receivable amounts arising from the past rendering of services. The Group writes off a trade receivable when there is information indicating that the debtor is in significant financial difficulty and there is no realistic prospect of recovery. Subsequent recoveries of amounts previously written off are credited against the allowance account. The Group measures the loss allowance for trade receivables at an amount equal to lifetime expected credit losses (“ECL”) in two categories. 1. Where there has been no significant increase in credit risk since initial recognition, ECL’s are collectively estimated using a provision matrix based on the Group’s historical credit loss experience adjusted for factors that are specific to geographic region, general economic conditions and an assessment of current and forecast conditions at reporting date. This has resulted in ECL’s being applied to debtors aged over 60 days in our international business. 2. Where there has been a significant change in credit risk, ECL’s are individually estimated. This assessment is adjusted for factors that are specific to the debtor including their financial capacity to make payment, discussions with the debtor on the status of the receivable and any other information relevant to the assessment of the recoverability. The following table shows the movement in lifetime ECL that has been recognised for trade receivables in accordance with the simplified approach set out in AASB 9: Balance as at 30 June 2018 Transfer to credit-impaired Foreign exchange gains and losses Balance as at 30 June 2019 3.3 Inventories Fuel – at cost Consumables Total Collectively Assessed $’000 Individually Assessed $’000 - 231 - 231 2,624 6,231 93 8,948 2019 $’000 1,834 140 1,974 Total $’000 2,624 6,462 93 9,179 2018 $’000 1,289 326 1,615 Inventories are stated at the lower of cost or net realisable value. 3.4 Assets Classified as Held for Sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount or fair value less costs to sell. An impairment loss is recognised for any initial write-down of the asset to fair value less costs to sell. Information regarding the assets held for sale in the Statement of Financial Position is presented below. At 30 June 2019, the carrying value of the vessel not yet sold was nil (2018: $9.4 million), refer to Note 3.6. 68 Annual Report 2019 MMA Offshore Limited 69 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 3. Assets and Liabilities (continued) 3.5 Property, Plant and Equipment 3. Assets and Liabilities (continued) 3.6 Impairment of non-current assets The Group performs a review of non-current asset values at each reporting period and whenever events occur or changes in circumstances indicate that the carrying amount of an asset group may be impaired. Market conditions are monitored for indications of impairment for all of the Group’s operating assets and where such indications are identified, a formal impairment assessment is performed. 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 (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying 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. Key source of estimation uncertainty Determining whether assets are impaired requires an estimate of the recoverable value of the assets. In order to determine the recoverable value of the assets in the current year, a Fair Value less Cost of Disposal (FVLCOD) approach was used (2018: FVLCOD approach). The FVLCOD method requires an estimate of the current market value of the assets and the costs that would be associated with a disposal of the assets. In estimating the current market value of the assets, the Group engaged experienced and qualified valuers to perform valuations. The Group performs its impairment testing annually on 30 June each year. In addition, market conditions are monitored for indications of impairment for all of the Group’s operating assets. Where an indication of impairment is identified, a formal impairment assessment is performed. The Group has identified the following indicators of impairment at 30 June 2019: • the carrying amount of the net assets of the Group is greater than the Company’s market capitalisation; and • market conditions in both Australia and internationally have continued to be challenging as the impact of lower oil prices is felt across the offshore support industry. As a result, the Group assessed the recoverable amounts of the Vessels Cash-Generating Unit (‘CGU’). Impairment testing The Group has evaluated whether the recoverable amount of each CGU exceeds its carrying amount. The recoverable amount is determined to be the higher of its fair value less costs of disposal (“FVLCOD”) or its value in use. In all instances, the FVLCOD method was used for the purpose of impairment testing on 30 June 2019. Gross carrying amount: Balance at 1 July 2017 Additions Disposals Net currency exchange differences Balance at 1 July 2018 Additions Disposals Net currency exchange differences Balance at 30 June 2019 Accumulated depreciation: Balance at 1 July 2017 Disposals Impairment charge Depreciation expense Net currency exchange differences Balance at 1 July 2018 Disposals Impairment reversal Depreciation expense Net currency exchange differences Balance at 30 June 2019 Net book value: As at 30 June 2018 As at 30 June 2019 Leasehold Buildings and Improvements at cost $’000 Vessels at cost $’000 Plant and Equipment at cost $’000 Total $’000 13,946 1,015,760 16,056 1,045,762 109 (46) (13) 8,977 108 9,194 (87,981) (131) (88,158) 16,001 432 16,420 13,996 952,757 16,465 983,218 - 10,341 44 10,385 (32) 799 - 61,406 (392) 874 (424) 63,079 14,763 1,024,504 16,991 1,056,258 (12,521) (522,943) (11,912) (547,376) 44 - 87,981 8,407 (90) (30,910) (186) (3,502) 3 - (903) (265) 88,028 8,407 (31,903) (3,953) (12,753) (460,967) (13,077) (486,797) 28 - - 273 301 (10,361) - (10,361) (89) (34,218) (1,012) (35,319) (762) (40,376) (622) (41,760) (13,576) (545,922) (14,438) (573,936) 1,243 1,187 491,790 478,582 3,388 2,553 496,421 482,322 Leasehold buildings and improvements, vessels and plant and equipment are stated at cost less, where applicable, accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the item. Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives. Leasehold buildings and improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit and loss. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each annual reporting period. Vessels are generally depreciated over 25 years on a straight line basis. Vessel refits and dry docks are depreciated over 5 years. Key source of estimation uncertainty The Group reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. At the end of this reporting period, the Directors have determined that there was no adjustment required to the Group’s property, plant and equipment’s useful lives. 70 Annual Report 2019 MMA Offshore Limited 71 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 3. Assets and Liabilities (continued) 3. Assets and Liabilities (continued) 3.6 Impairment of non-current assets (continued) 3.6 Impairment of non-current assets (continued) The following information relates to impairment charges/(reversals) included in profit or loss: Segment/CGU Class of asset Method Vessels Vessels Total Property, Plant & Equipment FVLCOD Assets classified as held for sale FVLCOD Impairment charge/(reversal) 2019 $’000 8,254 2,107 10,361 2018 $’000 (8,407) - (8,407) The inputs used in deriving the recoverable amount of each CGU is categorised in accordance within the following levels of the fair value hierarchy: CGU Vessels Level 3(i) $’000 482,322 Recoverable Amount $’000 482,322 (i) Level 3 inputs are unobservable inputs used to measure fair value. In our calculations the inputs used are based on both observable and unobservable market data prepared by an independent valuation consultant together with internally determined valuations. Due to the unobservable market data and internal valuation components of the valuations, the inputs are considered Level 3. Vessels The oil and gas services sector continues to be in the early stages of recovery with increasing activity and a tightening in the market for high specification vessels. Sector sentiment has improved around a recovery in the broader oil and gas market with key industry commentators indicating that the market may have now bottomed. We expect the recovery to be volatile and timing is still uncertain. The uncertainty is highlighted by the decline in oil price in November 2018 and again in June 2019. At a time when the price had been slowly trending upwards for the previous 18 months, the decrease was not anticipated. Whilst some of the decrease has since been recovered, it illustrates the variability in the oil market. To date we have not seen the decrease have a significant impact on sentiment around the offshore support vessel market with increasing tendering activity in a number of regions. In addition, a proportion of the global cold stacked vessels are not expected to return to service given the expected downturn, eliminating some of the supply overhang. As disclosed in note 3.4, a group of non-core vessels in the fleet were classified as being held for sale as at 31 December 2016. This classification has resulted in two separate fair value assessments for the fleet, being those core vessels used for continuing operations and those non-core vessels that are held for sale. Continuing Operations The recoverable amount of the core vessels was determined using a market-based approach, reflecting the value which could be expected to be realised through the disposal of the vessels, in an orderly market, on an “as is where is” basis between a willing buyer and willing seller. An independent valuation of the fleet was undertaken by a specialist marine valuation consultancy and shipbroking company. In preparing their valuation report, some of the factors they considered include the current market conditions in which the vessels operate, a review of recent market sales of similar vessels, consideration of the specification and earnings potential of each vessel and the inherent value and replacement cost of each vessel. A key input into the recoverable amount of the CGU was the application of a discount to the independent vessel valuation to reflect the amount which would be achieved if the fleet was disposed of in one single transaction. In the June 2018 impairment assessment, the company used a discount of 17.5%. The Board have continued to apply this discount of 17.5% for the current period to reflect the current recoverable value. The following factors were taken into account in determining this value: • the movement in the oil price during the period • an increase in project and development commitments by the oil and gas majors • increasing tender opportunities in the market • acknowledging the increased activity in the industry is still at an early stage in the market cycle and there is uncertainty about the extent and timing of recovery • acknowledging the impact of the significant vessel tonnage in the industry A 2.5% increase or decrease in the ‘en bloc discount rate would result in a corresponding $14 million increase or decrease in the impairment charge or reversal. Another key input was the estimated costs of disposal. The Company has adopted a selling cost equal to 2% of the sale value of each vessel based on actual selling costs of between 1.5% and 2.5% for previous vessel sales. Inputs in determining the classification level within the fair value hierarchy are reassessed at each reporting period as part of the impairment process. The inputs used within calculations are assessed and discussed internally to determine the extent to which they can be compared to observable market information and classified accordingly. Held for Sale The recoverable amount of the one remaining non-core vessel was determined using a market based approach, reflecting the value which could be expected to be realised through an accelerated sale program. In assessing the fair value of the non-core vessel the Company has taken into consideration the following factors: • actual sales of the non-core vessels that have been completed to date • market sales evidence for similar vessels over the past 6 months • a condition report received for the vessel Given the current condition of the vessel and expected substantial cost to return it to working order it was decided to reduce the expected recoverable value to nil. 3.7 Trade and Other Payables Trade payables Other payables and accruals Goods and services tax payable Total 2019 $’000 8,608 20,563 1,310 30,481 2018 $’000 5,017 26,379 913 32,309 The average credit period on purchases of all goods is 30 days. The Group monitors payments to ensure that all payables are paid within the credit time frame. 72 Annual Report 2019 MMA Offshore Limited 73 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 3. Assets and Liabilities (continued) 3. Assets and Liabilities (continued) 2019 $’000 2018 $’000 3.8 Borrowings (continued) 3.8 Borrowings Secured – at amortised cost Current Hire purchase liability(i) Bank loans(ii) Unamortised loan fees(iii) Total Non-Current Hire purchase liability(i) Bank loans(ii) Unamortised loan fees(iii) Total 4 5,000 (2,261) 2,743 - 265,634 (2,827) 262,807 6 3,992 (2,259) 1,739 4 265,009 (5,080) 259,933 Summary of borrowing arrangements: (i) (ii) The hire purchase liabilities are fixed interest rate debt with repayment periods not exceeding 3 years. The current weighted average interest rate on the hire purchase liabilities is 2.9% (2018: 2.9%). The Group renegotiated the terms of its Syndicated Debt Facility with its existing lenders during the comparative period. The amortisation profile of the facility is: • $5.0 million by 30 June 2020 • $7.5 million by 31 December 2020 • $7.5 million by 30 June 2021 • The balance is to be repaid on maturity at 30 September 2021 The facility is fully secured by fixed and floating charges given by controlled entities within the Group, registered ship mortgages over a number of vessels owned by certain entities and real property mortgages. The current weighted interest rate on the bank loans is 5.99% at 30 June 2019 (2018: 6.08%). (iii) The unamortised loan fees are in relation to the Syndicated Facility Agreement. Other financial liabilities including borrowings are initially measured at fair value, net of transaction costs. The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in the profit and loss. Available borrowing facilities Secured loan facilities with various maturity dates through to 2021 and which may be extended by mutual agreement: Amount used Amount unused Total 2019 $’000 2018 $’000 270,634 269,001 - - 270,634 269,001 Reconciliation of liabilities arising from financing activities: The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non cash changes. 2019 Balance at 1 July 2018 Financing cashflows Non-cash foreign exchange movement Other changes Balance at 30 June 2019 2018 Balance at 1 July 2017 Financing cashflows Non-cash foreign exchange movement Other changes Balance at 30 June 2018 3.9 Provisions Current Employee benefits – annual leave Employee benefits – long service leave Total Non-current Hire purchase liability $’000 10 (6) - - 4 13 (3) - - 10 Bank loans Unamortised loan fees $’000 269,001 (7,252) 8,885 - 270,634 324,209 (61,295) 6,087 - 269,001 $’000 (7,339) (9) - 2,260 (5,088) (9,770) (4,003) - 6,434 (7,339) 2019 $’000 6,852 4,502 11,354 Total $’000 261,672 (7,267) 8,885 2,260 265,550 314,452 (65,301) 6,087 6,434 261,672 2018 $’000 6,352 4,313 10,665 Employee benefits – long service leave 152 262 A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave in the period the related service is performed. Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured at the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. 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 can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where 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. 74 Annual Report 2019 MMA Offshore Limited 75 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 3. Assets and Liabilities (continued) 3.10 Deferred Tax Balances Deferred tax assets/(liabilities) arise from the following: 3. Assets and Liabilities (continued) 3.10 Deferred Tax Balances (continued) Unrecognised deferred tax assets Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognised are attributable to the following: Tax losses (revenue in nature) Tax losses (capital in nature) Deductible temporary differences 2019 $’000 2018 $’000 60,693 19,320 3,784 64,603 19,320 5,668 The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Nature of tax funding arrangements and tax sharing agreements Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, MMA Offshore Ltd and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group. The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if any entity should leave the tax consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax payable by the tax consolidated group is limited to the amount payable to the head entity under the tax funding arrangement. 2019 Gross deferred tax liabilities: Property, plant and equipment Inventory Receivables Other Gross deferred tax assets: Provisions Unused tax losses and credits Other Total 2018 Gross deferred tax liabilities: Property, plant and equipment Inventory Receivables Other Gross deferred tax assets: Provisions Employee share trust Unused tax losses and credits Other Total Opening Balance Recognised in Profit or Loss Recognised in Equity $’000 $’000 $’000 Closing Balance $’000 (13,034) (183) (88) (91) (5,986) (129) (30) 91 (709) (19,729) - - - (312) (118) - (13,396) (6,054) (709) (20,159) 170 13,036 190 13,396 - (130) 5,695 489 6,054 - - 709 - 709 - 40 19,440 679 20,159 - (4,543) (8,371) (120) (13,034) (460) (668) 44 (5,627) 636 301 4,390 300 5,627 - 277 580 (135) (7,649) (466) 21 8,204 (110) 7,649 - - - - (183) (88) (91) (120) (13,396) - (322) 442 - 120 - 170 - 13,036 190 13,396 - Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period(s) in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. 76 Annual Report 2019 MMA Offshore Limited 77 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 4. Capital Structure (continued) 4.3 Capital Risk Management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns, while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2018. The capital structure of the Group consists of net debt (borrowings as detailed in note 3.8 offset by cash at bank balances) and equity of the Group (comprising issued capital and reserves as detailed in notes 4.1 and 4.2 and accumulated losses). The Group is not subject to any externally imposed capital requirements other than normal banking requirements. Based on recommendations of management and the Board, the Group will balance its overall capital structure through new share issues as well as the establishment of new borrowing facilities or repayment of existing facilities. The Group uses its leverage ratio (measured as debt to property plant & equipment) to manage its capital. This has changed from last year where we used a Gearing ratio ( measured as net debt to equity). The change was made as the leverage ratio provides a more accurate representation of the security position for all stakeholders by comparing the net debt position to the value of security assets available. The ratio is monitored on a monthly basis by the Board and management. Leverage Ratio The leverage ratio at the end of the reporting period was as follows: Debt(i) Cash and cash equivalents Net debt Property, plant & equipment(ii) Leverage ratio 2019 $’000 270,634 (70,155) 200,479 482,322 42% 2018 $’000 269,001 (69,648) 199,353 496,421 40% (i) (ii) Debt is defined as gross long and short-term borrowings, as detailed in note 3.8. Property, plant and equipment includes all fixed assets owned by the group, as detailed in note 3.5. 4. Capital Structure 4.1 Issued Capital Fully Paid Ordinary Shares Balance at beginning of financial year Issue of shares under institutional placement Issue of shares under institutional entitlement offer Issue of shares under retail entitlement offer Share issue costs Transfer employee equity settled benefits reserve 2019 No.’000 858,077 2019 $’000 654,735 - - - - - - - - - - 2018 No.’000 373,077 111,923 78,027 295,050 - - 2018 $’000 561,275 22,385 15,605 59,010 (4,558) 1,018 Balance at end of financial year 858,077 654,735 858,077 654,735 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Share Rights As at 30 June 2019, executives and employees held rights over 13,207,075 ordinary shares (2018: 9,555,660) in aggregate (see note 5.2). Share rights granted under the employee share rights plans carry no right to dividends and no voting rights. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. 4.2 Reserves Employee equity settled benefits Hedging Foreign currency translation Balance at end of financial year 2019 $’000 621 (66,176) 199,332 133,777 2018 $’000 154 (57,290) 178,590 121,454 The employee equity settled benefits reserve arises on the grant of share rights to executives and employees under the Company’s share rights plans. Amounts are transferred out of the reserve and into issued capital when the rights vest or expire. The hedging reserve is used to record gains and losses on hedges designated as cash flow hedges including hedges of net investments in a foreign operation. Gains and losses accumulated in the hedge reserve are taken to the profit or loss when the hedged transaction impacts the profit or loss, or is included as an adjustment to the initial carrying amount of the hedged item. For a net investment in a foreign operation any gains and losses are taken to profit or loss on disposal of the foreign operation. The foreign currency translation reserve represents exchange differences relating to the translation from the functional currencies of the Group’s foreign controlled entities into Australian Dollars. The assets and liabilities of the Group’s foreign operations are translated into Australian Dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognised through other comprehensive income and recognised in equity. On the disposal of the foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss. 78 Annual Report 2019 MMA Offshore Limited 79 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20195. Other Notes 5.1 Commitments for Expenditure Capital expenditure commitments Plant and Equipment Vessels Total Operating leases Payments recognised as an expense: Minimum lease payment Non-cancellable operating lease commitments: Not later than 1 year Later than 1 year and not later than 5 years Total non-cancellable operating lease commitments Aggregate operating lease commitments comprise: Office rental commitments(i) Onshore facility rental commitments(ii) Vessel charter fee commitments(iii) Other(iv) Total (i) 2019 $’000 15 2,058 2,073 2019 $’000 2018 $’000 - 749 749 2018 $’000 13,695 6,230 3,268 913 4,181 2019 $’000 1,732 943 761 745 4,181 3,828 3,350 7,178 2018 $’000 3,661 1,476 1,066 975 7,178 Office rental commitments: The Group has a lease on the head office premises at Fremantle, Australia which expires on 4 August 2020, with an option to extend for a further 5-year term. The Group also has a 2-year lease agreement in place for the Singapore office expiring on 31 January 2020. (ii) Onshore facility rental commitments: The Group has a rental commitment for the lease of the Singapore Onshore Facility for a term expiring on 15 April 2021. (iii) Vessel charter commitments: As of 30 June 2019, the Company had 2 vessels (2018: three) under bare boat charter agreement. Vessel charter commitments represent charter fee payments to be made to the owners of these vessels. (iv) Other lease commitments: The Group has leases over a number of residential properties and various items of machinery and equipment. These leases are all on commercial terms for periods up to 5 years. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. 5. Other Notes (continued) 5.2 Share Based Payments Share rights incentive plans The Group has established ownership based compensation plans whereby executives and employees of the Group have been issued rights over ordinary shares of MMA Offshore Limited. Upon exercise, each share right, converts into one ordinary share of MMA Offshore Limited. No amounts are paid or are payable by the recipient on receipt of the rights. The rights carry no entitlement to dividends and no voting rights. Holders of rights do not have the entitlement, by virtue of the right, to participate in any share issue of the Company. The rights may be exercised at any time from their vesting date to the date of their expiry. The rights are not quoted on the ASX. The following share based payment arrangements were in existence during the current reporting period: Series Number issued Grant Date Expiry Date (1) Issued 10 February 2016 2,001,432 18 Nov 2015 1 Jul 2020 (2) Issued 10 February 2016 8,037,836 7 Dec 2015 1 Jul 2020 (3) Issued 7 June 2016 220,284 18 Apr 2015 1 Jul 2020 (4) Issued 16 November 2018 10,625,634 16 Nov 2018 1 July 2023 (5) Issued 2 December 2018 2,581,441 21 Nov 2018 1 July 2023 Exercise price $ Fair Value at Grant date $ 0.00 0.00 0.00 0.00 0.00 0.02 0.02 0.02 0.11 0.10 None of the Performance Criteria for rights issued during the 2016 financial year as part of Series 1, 2 and 3 were met. As such, all the rights have lapsed in accordance with the terms of the Plan rules in July 2018. Performance Rights issued during the 2019 financial year as part of Series 4 and 5 to executives and employees are subject to achievement of a number of vesting targets. 25% of the rights are subject to achieving a net debt to EBITDA ratio, 25% relate to the Company securing refinancing of its existing debt facilities and the remaining 50% are subject to the Company’s Total Shareholder Return percentile ranking relative to a selected Peer Group over the 3-year vesting period. Please refer to the Remuneration Report on pages [39] to [48] for further details of Performance Rights issued to executives and employees. Fair value of share rights granted during the year The share rights issued during the year are detailed in the above table. Equity settled share based payments to employees are measured at fair value of the equity instrument at grant date. The fair value determined at the grant date of the equity settled share based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with corresponding adjustment to the employee equity settled benefits reserve. 80 Annual Report 2019 MMA Offshore Limited 81 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20195. Other Notes (continued) 5.2 Share Based Payments (continued) Movement in share rights during the period The following reconciles the outstanding share rights at the beginning and end of the financial year: 2019 2018 Employee Share Right Plans Weighted average exercise price $ Number of rights Balance at the beginning of the financial year 9,555,660 Issued during the financial year Expired during the financial year Balance at the end of the financial year Exercisable at end of the financial year 13,207,075 (9,555,660) 13,207,075 - 0.00 0.00 0.00 0.00 0.00 Weighted average exercise price $ 0.00 0.00 0.00 0.00 0.00 Number of rights 10,923,881 - (1,368,221) 9,555,660 - Share rights outstanding at the end of the year The following share rights were outstanding at the end of the financial year: Series (4) Issued 16 November 2018 (5) Issued 2 December 2018 Total Number 10,625,634 2,581,441 13,207,075 Exercise price $ 0.00 0.00 0.00 Expiry Date 1 Jul 2023 1 Jul 2023 5.3 Key Management Personnel Compensation Please refer to the Remuneration Report for details of key management personnel. The aggregate compensation made to the Directors and other key management personnel of the Company and the Group is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share based payments Total 2019 $ 2018 $ 3,750,486 3,381,570 182,373 56,293 - 255,071 175,939 64,587 216,011 36,852 4,244,223 3,874,959 5. Other Notes (continued) 5.4 Related Party Transactions The immediate parent and ultimate controlling party of the Group is MMA Offshore Limited. 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. Details of transactions between the Group and other related parties are disclosed below. Trading transactions During the year, the Group entities did not enter into any trading transactions with related parties that are not members of the Group. There were no outstanding balances due from related parties that are not members of the Group (2018: Nil) Loans to related parties The Group provided a member of its key management personnel with a short-term loan during a prior year. The loan was forgiven during the year (2018: $25,602). Other related party transactions Other transactions that occurred during the financial year between entities in the wholly owned Group were the charter of vessels. These are all provided at commercial rates. 5.5 Remuneration of Auditors Auditor of the Parent Entity Audit or review of the financial report Advice relating to potential transactions Advice relating to debt restructure Advice relating to equity raising Total Network firms of the Parent Entity auditor Audit or review of the financial report Taxation compliance services Total 2019 $ 2018 $ 194,250 15,000 - - 209,250 284,181 65,341 349,522 280,750 - 242,920 18,500 542,170 319,508 39,077 358,585 The auditor of MMA Offshore Limited is Deloitte Touche Tohmatsu (“Deloitte”). Following a detailed review by the Audit and Risk Committee of the nature of the non-audit services provided by the external auditor during the year, the Board has determined that the services provided, and the amount paid for those services, are compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth) and that the auditor’s independence has not been compromised. 82 Annual Report 2019 MMA Offshore Limited 83 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20195. Other Notes (continued) 5.6 Subsidiaries The Group’s material subsidiaries at the end of the reporting period are as follows: Parent Entity MMA Offshore Limited Subsidiaries MMA Offshore Vessel Operations Pty Ltd MMA Offshore Charters Pty Ltd MMA Offshore Supply Base Pty Ltd MMA Offshore Asia Pte Ltd MMA Offshore Logistics Pty Ltd MMA Offshore Vessel Holdings Pte Ltd MMA Offshore Malaysia Sdn Bhd MMA Offshore Shipyard and Engineering Services Pte Ltd Airia Jaya Marine (S) Pte Ltd MMA Offshore Asia Vessel Operations Pte Ltd JSE Offshore Shipping Pte Ltd JSE Offshore (Labuan) Pte Ltd Concord Offshore (Labuan) Ltd Jaya Offshore Services Pte Ltd PT Jaya Asiatic Shipyard MMA Global Projects Pte Ltd MMA Offshore Services Malaysia Sdn Bhd Note Country of Incorporation (i) Australia Ownership Interest 2019 % Ownership Interest 2018 % (ii) (iii) (ii) (iii) (ii) (iii) (ii) (iii) (ii) (iv) (v) (vi) Australia Australia Australia Singapore Australia Singapore Malaysia Singapore Singapore Singapore Singapore Malaysia Malaysia Singapore Indonesia Singapore Malaysia 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 30 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - - (i) MMA Offshore Limited is the ultimate holding company head entity within the tax consolidated group. (ii) These companies are members of the tax consolidated group at 30 June 2019. (iii) Pursuant to ASIC Class Order 98/1418, relief has been granted to these wholly owned controlled entities from the Corporations Law requirements for preparation, audit and lodgement of the financial report. As a condition of the Class Order, MMA Offshore Limited and the controlled entities entered into a Deed of Cross Guarantee on 15 February 2012. (iv) Jaya Offshore Services Pte Ltd was deregistered 14 December 2018. (v) MMA Global Projects Pte Ltd was incorporated 15 March 2019. (vi) MMA Offshore Services Malaysia Sdn Bhd was incorporated 12 March 2019.The Group owns 30% of the shares in the company. However based on contractual arrangements between the Group and the other investor, the Group has the power to appoint and remove the majority of the board of directors. Therefore the directors of the Group have concluded they have control. The consolidated statements of comprehensive income and financial position of entities which are party to the deed of cross guarantee are as follows: Statement of Comprehensive Income Revenue Investment income Other losses Vessel expenses Administrative expenses Impairment (charge)/reversal Finance costs Profit/(Loss) before income tax expense Income tax expense Profit/(Loss) for the Year Total Comprehensive Income/(Loss) for the year 2019 $’000 161,404 1,306 (8,542) 2018 $’000 142,938 3,715 (5,525) (142,003) (131,804) (7,445) (83,351) (19,137) (97,768) - (97,768) (97,768) (7,091) 87,736 (23,100) 66,869 - 66,869 66,869 5. Other Notes (continued) 5.6 Subsidiaries (continued) Statement of Financial Position Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Total Current Assets Non-Current Assets Other financial assets Property, plant and equipment Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Unearned revenue Borrowings Provisions Total Current Liabilities Non-Current Liabilities Other payables Borrowings Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Retained earnings/(accumulated losses) Accumulated losses at beginning of the financial year Net profit/(loss) Accumulated losses at end of the financial year 2019 $’000 2018 $’000 60,740 46,655 1,041 716 58,469 36,473 611 491 109,152 96,044 334,963 104,371 439,334 548,486 53,041 831 2,742 10,682 67,296 6,770 262,804 152 269,726 337,022 211,464 420,923 109,303 530,226 626,270 39,307 375 1,734 10,064 51,480 5,875 259,928 262 266,065 317,545 308,725 654,748 654,735 621 127 (443,905) (346,137) 211,464 308,725 (346,137) (97,768) (443,905) (413,006) 66,869 (346,137) 84 Annual Report 2019 MMA Offshore Limited 85 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20195. Other Notes (continued) 5.7 Parent Company Information The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the Consolidated Financial Statements. 5. Other Notes (continued) 5.8 Financial Instruments (continued) Market risk Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Accumulated losses Profit reserve - 2016(i) Employee equity settled benefits reserve Total Equity Financial Performance Loss for the year Other comprehensive gain Total comprehensive gain/(loss) Guarantees provided under the deed of cross guarantee 2019 $’000 2018 $’000 59,395 519,736 579,131 5,297 270,589 275,886 303,245 57,706 542,311 600,017 5,018 266,705 271,723 328,294 654,748 654,748 (465,765) (440,716) 114,122 114,122 140 140 303,245 328,294 (25,049) (20,637) - (25,049) 61,136 - (20,637) 45,822 (i) A profit reserve represents an appropriation of amounts from retained earnings for the payment of future dividends. 5.8 Financial Instruments Categories of financial instruments Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Borrowings Financial risk management objectives 2019 $’000 70,155 63,275 35,777 265,550 2018 $’000 69,648 61,641 37,329 261,672 The Group’s treasury function includes the management of the Group’s financial assets and commitments including ensuring adequate procedures and controls are in place to manage financial risks. These risks include market risk (including currency and interest rate risk) credit risk and liquidity risk. A Treasury Policy has been approved by the Board and provides guidelines for conducting treasury activities. Compliance with this Policy is monitored through internal audit procedures and subsequent reporting to the Audit and Risk Committee. The Group seeks to minimise the effects of these risks, by using, where considered appropriate, derivative financial instruments to hedge these risk exposures. The allowable financial derivatives and conditions for their use are documented in the Treasury Policy. The Group does not enter into or trade financial instruments including derivative financial instruments for speculative purposes. The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. Where required, the Group can enter into a range of derivative financial instruments to manage its exposure to these risks. At a Group level, these market risks are managed through sensitivity analysis. There is no change in the manner in which these risks are managed and measured in the current year. Foreign currency risk management The Group undertakes transactions denominated in foreign currencies. Consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts, when it is considered appropriate. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the financial year are as follows: US Dollars Singapore Dollars Euro Other Liabilities Assets 2019 $’000 186,076 7,121 1,344 441 2018 $’000 195,059 3,076 445 561 2019 $’000 49,846 2,588 583 83 2018 $’000 48,652 2,682 12 2,192 Foreign currency sensitivity analysis The Group is mainly exposed to US Dollars (USD), Singapore Dollars (SGD) and Euro (EUR). The following table details the Group’s sensitivity to a 10% increase in the Australian Dollar against the relevant foreign currencies. The 10% sensitivity represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit or equity where the Australian dollar strengthens 10% against the relevant currency. For a 10% weakening of the Australian Dollar against the relevant currency, there would be an equal and opposite impact on the profit or equity. US Dollar Impact Singapore Dollar Impact Euro Impact Profit or Loss Equity(i) 2019 $’000 (960) 7 (5) 2018 $’000 (394) 12 2 2019 $’000 13,344 405 75 2018 $’000 13,703 24 37 (i) The current and comparative year USD impact relates to the translation from the functional currencies of the Group’s foreign entities into Australian Dollars. The Group’s profit and loss sensitivity to foreign currency has increased at the end of the current period due to higher net USD denominated assets. 86 Annual Report 2019 MMA Offshore Limited 87 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20195. Other Notes (continued) 5.8 Financial Instruments (continued) Interest rate risk management 5. Other Notes (continued) 5.8 Financial Instruments (continued) Liquidity risk management The Group is exposed to interest rate risk because it borrows funds primarily at floating interest rates. The risk is managed by the Group by the use of interest rate swap contracts when considered appropriate. Hedging activities are evaluated regularly to align with interest rate views ensuring the most cost-effective hedging strategies are applied, if required. At this point in the interest rate cycle the Group is unhedged. The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. Interest rate sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. At reporting date, if interest rates had been 100 basis points higher / lower and all other variables were held constant, the impact on the net profit of the Group would be as follows: • Net profit would decrease / increase by $2,655,462 (2018: decrease / increase by $2,690,012). This is attributable to the Group’s exposure to interest rates on its variable borrowings. The Group’s sensitivity to interest rates has decreased during the current year due to the decrease in the carrying value of the variable rate debt instruments as a result of the principal repayments made during the year. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The credit worthiness of each customer is assessed to ensure minimal default risk. The Group’s exposures to its counterparties are continuously monitored by management. Where appropriate, the Group obtains guarantees from customers. Cash terms, advance payments or letters of credit are requested from customers of lower credit standing. Trade receivables consist of a large number of customers spread across the offshore oil and gas exploration, development and production industries and across diverse geographical areas. Ongoing credit evaluation is performed on the financial condition of trade receivables. Debtor concentration risk is low with the top 3 customers of the Group making up only 21% of the total debtor balance. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defines counterparties as having similar characteristics if they are related entities. The credit risk on the three largest receivables is managed through regular meetings with the customers, on-going contractual arrangements and regular receipts for the balances outstanding. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The carrying amount of financial assets recognised in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk. The table below details the credit quality of the Group’s financial assets. Trade receivables (i) Note 3.2 12-month or lifetime ECL Gross carrying amount Loss allowance Net carrying amount Lifetime ECL (simplified approach) 61,257 (9,179) 52,078 (i) For trade receivables, the Group has applied the simplified approach in AASB 9 to measure the loss allowance at lifetime ECL (refer to note 3.2). The Group manages liquidity risk by maintaining adequate cash reserves, borrowing facilities, continuously monitoring forecast and actual cash flows and managing credit terms with customers and suppliers. Liquidity and interest risk tables The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are at floating rate, the undiscounted amount is derived from current interest rates at the end of the reporting period. Weighted average effective interest rate % Less than 1 month $’000 1-3 months $’000 3 months to 1 year $’000 1-5 years $’000 Total $’000 30 June 2019 Non-interest bearing Hire purchase liability Variable interest rate instruments Total 30 June 2018 Non-interest bearing Hire purchase liability Variable interest rate instruments Total - 2.90 5.99 27,160 1 1,344 28,505 - 19,886 2.90% 6.08% 1 1,390 21,277 2,700 1 2,707 5,408 1,891 1 2,735 4,627 2,502 3 17,116 19,621 859 5 12,239 13,103 3,415 35,777 - 283,557 286,972 5 304,724 340,506 14,693 37,329 5 310,039 324,737 12 326,403 363,744 The following table details the Group’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. Weighted average effective interest rate % Less than 1 month $’000 1-3 months $’000 3 months to 1 year $’000 1-5 years $’000 Total $’000 30 June 2019 Non-interest bearing Variable interest rate instruments Total 30 June 2018 Non-interest bearing Variable interest rate instruments Total - 1.44 32,469 70,239 13,522 17,284 - - 102,708 13,522 17,284 - 2.20 24,960 69,775 94,735 6,658 17,284 - - 6,658 29,423 - - - 600 - 600 63,275 70,239 133,514 61,641 69,775 131,416 88 Annual Report 2019 MMA Offshore Limited 89 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20195. Other Notes (continued) 5.8 Financial Instruments (continued) Fair value of financial instruments The Directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values. The fair values of financial assets and financial liabilities are determined as follows: • The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices. • The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis. 5.9 Events After the Reporting Period Other than those listed below, there has not been any matter or circumstance that occurred subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. As announced on 24 July 2019, MMA has entered into a contract for the acquisition of the business of Neptune Marine Services Limited (“NMS”) key operating subsidiaries, for an expected total consideration of $18.5 million comprising $5.0 million in cash plus approximately $13.5 million in MMA shares. Completion of the acquisition is subject to a number of conditions including NMS shareholder approval. If the acquisition does not proceed, the $5.0 million cash payment is refundable. 5.10 Other Accounting Policies Adoption of New and Revised Accounting Standards and Interpretations In the current year, the Group has applied the following new and amended AASB’s that are mandatorily effective for an accounting period that begins on or after 1 July 2018: AASB 9 Financial Instruments AASB 15 Revenue from Contracts with Customers AASB 9 introduced new requirements for the classification and measurement of financial assets and liabilities, impairment of financial assets and general hedge account. Details of the new requirements as well as their impact on the Group’s consolidated financial statements are described below. AASB 15 introduced a 5-step approach to revenue recognition. Far more prescriptive guidance has been added in AASB 15 to deal with specific scenarios. Details of the new requirements as well as their impact on the Group’s consolidated financial statements are described below. AASB 9 The Group adopted AASB 9 as of 1 July 2018. AASB 9 introduced three significant areas of change from AASB 139 Financial Instruments: Classification and Measurement: • A new model for classification and measurement of financial assets and liabilities; • A new expected loss impairment model for determining impairment allowances; and • A redesigned approach to hedge accounting. AASB 9 requires an expected credit loss (“ECL”) model for trade receivables as opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires an entity to account for expected credit losses and changes in expected losses to reflect changes in credit risk since initial recognition. It is no longer necessary for a credit event to have occurred before credit losses are recognised. 5. Other Notes (continued) 5.10 Other Accounting Policies (continued) The Group measures the loss allowance for lifetime ECL’s at initial recognition of the trade receivable. The amount of lifetime ECL’s is updated at each reporting date to reflect changes in credit risk since initial recognition. The ECL’s on trade receivables are estimated using a provision matrix based on the Group’s historical credit loss experience and an analysis of the debtor’s current financial position, adjusted for factors that are specific to debtors, geographic region, general economic conditions and an assessment of current and forecast conditions at reporting date. The transitional provisions of the standard allow an entity not to restate comparatives, which the Group has adopted. The directors have reviewed and assessed the Group’s existing financial assets as at 1 July 2018 based on the facts and circumstances that existed at that date and concluded that the application of AASB 9 has not had a significant impact on the Group’s financial performance or position. AASB 15 The Group adopted AASB 15 as of 1 July 2018. AASB 15 established a single comprehensive model to use in accounting for revenue from contracts with customers. The core principal of AASB 15 is that revenue is recognised as the promised goods or services are provided to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. The standards introduced a five-step process for applying this principle which includes guidance in respect of identifying the performance obligations under the contract, allocation of revenue across those performance obligations and recognising revenue as those performance obligations are satisfied. The Group has adopted the new standard using the modified retrospective approach where any adjustment, on initial recognition, is recognised in retained earnings at 1 July 2018, without adjustment to comparatives. Apart from providing more extensive disclosures for the Group’s revenue transactions, the application of AASB 15 has not had a significant impact on the financial position and/or financial performance of the Group. The Group’s new revenue accounting policy is set out below. The Group recognises revenue as the promised goods and services are provided to customers in an amount that reflects the consideration expected to be received in exchange for those goods and services. Revenue from charter of vessels Revenue from the charter of vessels is an integrated service provided to customers and includes the charter of the vessel and crew, mobilisation and demobilisation. Revenue is recognised over the period of time over which the customer utilises the vessel. Where the entity supplies goods, such as fuel, to the customer as part of the contract, revenue is recognised at a point in time when the customer obtains control of the goods. There was no impact to retained earnings or net assets required to be recognised in the financial statements on initial adoption of the standard. In the year ended 30 June 2019, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to the Company and effective for the current annual reporting period. As a result of this review the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company. New and amended Accounting Standards and Interpretations issued but not yet effective AASB 16 Leases (effective from 1 July 2019) AASB 16 provides a new model for the accounting for leases which will require lessees to recognise assets and liabilities for all leases with a lease term of more than 12 months unless the underlying asset is of low value. The right of use asset will be depreciated over the lease term and the lease liability will be adjusted for lease payments and interest charged. The impact on the financial performance of the company will be to reduce administration expenses with a related increase in finance costs. 90 Annual Report 2019 MMA Offshore Limited 91 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20195. Other Notes (continued) 5.10 Other Accounting Policies (continued) Impact on Lessee Accounting AASB 16 will change how the Group accounts for leases previously classified as operating leases under AASB 117 Leases, which were off balance sheet. The Group plans to adopt the modified retrospective approach on transition, where the lease liability is measured at the present value of future lease payments on the initial date of application, being 1 July 2019. The lease asset is measured as an amount equal to the lease liability. Under the transition method, prior period comparative financial statements are not required to be restated. The Group has completed an impact assessment of AASB 16 and estimates the following impact on its consolidated statement of financial position as at 1 July 2019: Estimated Impact on Consolidated Statement of Financial Position: Right-of-use assets Right of use lease liabilities $’000 4,065 4,065 The leases recognised by the Group under AASB 16 predominantly relate to lease of shipyard, office space and equipment. Operating lease expenses will no longer be recognised in the calculation of Profit/(Loss) before tax but will be replaced by depreciation of Right-of-Use assets and lease finance costs. Impact on Lessor Accounting Under AASB 16, the lessor continues to classify leases as either finance leases or operating leases and account for those two types of leases differently. Based on an analysis of the Group’s leases at 30 June 2019 and the facts and circumstances that exist on that date, the Group has assessed all leases as operating leases and no impact on the amounts recognised in the Group’s consolidated financial statements. 92 Annual Report 2019 ADDITIONAL SECURITIES EXCHANGE INFORMATION FOR THE YEAR ENDED 30 JUNE 2019 Ordinary Share Capital (as at 9 September 2019) 858,077,084 fully paid ordinary shares are held by 6,513 individual shareholders. All issued ordinary shares carry one vote per share. Substantial shareholders (as at 9 September 2019) First Samuel Limited Black Crane Asia Opportunities Fund Halom Investments Pte Ltd Thorney Opportunities Ltd / TIGA Trading Pty Ltd(1) Eley Griffiths Group Pty Ltd Tribeca Investment Partners Pty Ltd Forager Funds Management Pty Ltd Total (1) Both of these related parties have filed a Substantial Shareholders Notice. Distribution of Holders of Ordinary Shares (as at 31 August 2019) Size of Holding 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Number of Shares % of Issued Capital 91,287,667 77,418,996 67,481,946 63,301,921 58,937,264 51,523,200 45,142,236 10.64 9.02 7.86 7.38 6.72 6.00 5.26 455,093,230 52.88 Number of ordinary shareholders 1,497 1,722 992 1,960 362 6,533 Twenty Largest Shareholders (as at 9 September 2019) Number of Shares % of Issued Capital 1 2 3 4 5 6 7 J P Morgan Nominees Australia Limited HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited UBS Nominees Pty Ltd National Nominees Limited BNP Paribas Nominees Pty Ltd Evelin Investments Pty Limited 8 Mr Hong Keong Chiu + Ms Yok Kee Khoo 9 Willoughby Capital Pty Ltd 10 BNP Paribas Noms Pty Ltd 11 Zakher Marine Intl Inc 12 HSBC Custody Nominees (Australia) Limited 13 Ms Jennifer Ann Weber + Mr Jeffrey Andrew Weber 14 Vanward Investments Limited 15 BNP Paribas Nominees Pty Ltd 16 Mr Ross Alexander Macpherson 17 Peligan Pty Ltd 18 Warbont Nominees Pty Ltd 19 Mrs Elizabeth Aprieska 20 Mr Wai Foong Lim Total 195,411,305 133,812,408 127,781,617 67,472,093 32,137,975 30,986,346 9,160,000 8,830,149 8,400,000 5,980,904 5,847,378 4,015,241 3,815,916 3,776,856 3,055,571 2,999,000 2,961,000 2,890,521 2,889,106 2,803,398 22.77 15.59 14.89 7.86 3.75 3.61 1.07 1.03 0.98 0.70 0.68 0.47 0.44 0.44 0.36 0.35 0.35 0.34 0.34 0.33 655,026,784 76.34 MMA Offshore Limited 93 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019ADDITIONAL SECURITIES EXCHANGE INFORMATION FOR THE YEAR ENDED 30 JUNE 2019 (CONTINUED) Unmarketable Parcels (as at 31 August 2019) The number of holders holding less than a marketable parcel of the Company’s shares is as follows: Minimum Parcel Size Number of ordinary shareholders Number of shares 2,632 2,340 2,029,600 Voting Rights All ordinary shares carry one vote per share without restriction. Unquoted Options (as at 9 September 2019) 13,207,075 unlisted rights held by 50 individual rights holders. Shareholder Enquiries Shareholders can obtain information about their shareholding by contacting the Company’s share registry: Computershare Investor Services Pty Ltd GPO Box 2975 Melbourne Victoria 3000 Australia Enquiries: (within Australia) (outside Australia) 61 3 9415 4000 Facsimile: 61 3 9473 2500 web.queries@computershare.com.au www.computershare.com.au 1300 850 505 Change of Address Shareholders should notify the share registry immediately if there is a change to their registered address. Securities Exchange Listing Shares in MMA Offshore Limited are listed on the Australian Securities Exchange. Publications The Annual Report is the main source of information for shareholders. This page is intentionally left blank. 94 Annual Report 2019 MMA Offshore Limited 95 TOGETHER, WE MAKE IT HAPPEN CORPORATE DIRECTORY Directors Andrew Edwards Chairman Jeffrey Weber Managing Director Eve Howell Non-Executive Director Chiang Gnee Heng Non-Executive Director Peter Kennan Non-Executive Director Company Secretary Dylan Darbyshire-Roberts Registered Office Endeavour Shed, 1 Mews Road FREMANTLE WA 6160 Telephone: +61 8 9431 7431 Facsimile: +61 8 9431 7432 www.mmaoffshore.com Auditors Deloitte Touche Tohmatsu Chartered Accountants Brookfield Place, Tower 2 123 St Georges Terrace PERTH WA 6000 Telephone: +61 8 9365 7000 Facsimile: +61 8 9365 7001 Solicitors Ashurst Brookfield Place, Tower 2 123 St Georges Terrace PERTH WA 6000 Telephone: +61 8 9366 8000 Facsimile: +61 8 9366 8111 96 Annual Report 2019 MMAOFFSHORE.COM I n s i g h t C o m m u n i c a t i o n & D e s i g n 

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