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Monadelphous Group LimitedANNUAL
REPORT
2018
TOGETHER WE DELIVER
OUR PURPOSE
TO BUILD, MAINTAIN AND IMPROVE OUR
CUSTOMERS’ OPERATIONS THROUGH THE
RELIABLE DELIVERY OF SAFE, COST EFFECTIVE
AND CUSTOMER-FOCUSSED SOLUTIONS.
OUR VISION
OUR VALUES
ABOUT THIS REPORT
Monadelphous will achieve long-
term sustainable growth by being
recognised as a leader in our chosen
markets and a truly great company to
work for, to work with and invest in.
We are committed to the safety,
wellbeing and development of our
people, the delivery of outstanding
service to our customers and the
provision of superior returns to our
shareholders.
OUR COMPETITIVE
ADVANTAGE
We deliver what we promise.
The purpose of this Annual Report is to
provide Monadelphous’ stakeholders,
including shareholders, customers,
employees, suppliers and the wider
community, with information about the
Company’s performance during the
2018 financial year.
References in this Report to ‘the year’,
‘the reporting period’ and ‘the period’
relate to the financial year 1 July 2017
to 30 June 2018, unless otherwise
stated. All dollar figures are expressed
in Australian currency, unless
otherwise stated.
Monadelphous Group Limited (ABN 28
008 988 547) is the parent company of
the Monadelphous group of companies.
In this Report, unless otherwise stated,
references to ‘Monadelphous’, ‘the
Company’, ‘the division’, ‘we’, ‘its’, ‘us’
and ‘our’ refer to Monadelphous Group
Limited and its subsidiaries.
Safety and Wellbeing
We show concern and actively
care for others. We always think
and act safely.
Integrity
We are open and honest in what
we say and what we do. We take
responsibility for our work and
our actions.
Achievement
We are passionate about achieving
success for our customers, our partners
and each other. We seek solutions,
learn and continually improve.
Teamwork
We work as a team in a cooperative,
supportive and friendly environment.
We are open-minded and share our
knowledge and achievements.
Loyalty
We develop long-term relationships,
earning the respect, trust and support
of our customers, partners and each
other. We are dependable, take
ownership and work for the Company
as our own.
COVER IMAGES
Top Tie-in conveyors at BHP’s Mining Area
C mine, Pilbara region, Western Australia.
Left Middle A Monadelphous employee
assisting with the shutdown of Dragline
102 at Yancoal’s Mount Thorley
Warkworth open cut mines, Mount
Thorley, New South Wales.
Right Middle 270MW Sapphire
Wind Farm, New England region,
New South Wales.
Left Bottom A Monadelphous employee
inspecting the polymer dosing skid, part
of the biosolids treatment system, at the
Bondi Waste Water Treatment Plant,
Sydney, New South Wales.
Right Bottom Monadelphous employees
at BHP’s Olympic Dam mine near Roxby
Downs in South Australia.
CONTENTS
OVERVIEW
Our Vision, Competitive Advantage and Values
About this Report
About Monadelphous
Our Services and Locations
OPERATING AND FINANCIAL REVIEW
2017/18 Highlights
Performance at a Glance
Markets and Growth Strategy
Chairman’s Report
Managing Director’s Report
Company Performance
Board of Directors
Engineering Construction
Maintenance and Industrial Services
Sustainability
FINANCIAL REPORT
Directors’ Report
Remuneration Report
Independent Audit Report
Directors’ Declaration
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Investor Information
2
2
4
6
8
10
12
13
14
16
17
18
22
26
33
37
49
54
55
60
95
ANNUAL GENERAL MEETING Shareholders are advised that the
Monadelphous Group Limited 2018 Annual General Meeting (AGM) will
be held at The University Club, University of Western Australia, Crawley,
Western Australia, on Tuesday, 20 November 2018 at 10am (AWST).
IMAGE Monadelphous’ 400 tonne crane jib.
ABOUT
MONADELPHOUS
5
Monadelphous is an Australian engineering group
headquartered in Perth, Western Australia, providing
construction, maintenance and industrial services to
the resources, energy and infrastructure sectors.
The Company builds, maintains and
improves its customers’ operations through
safe, reliable, innovative and cost effective
service solutions. It aims to be recognised
as a leader in its chosen markets and a
truly great company to work for, work with
and invest in.
OUR HISTORY
Monadelphous emerged from a business
which started in 1972 in Kalgoorlie, Western
Australia, providing general mechanical
contracting services to the mining industry.
The name Monadelphous was adopted in
1978 and by the mid-1980s the Company
had expanded into a number of markets,
both interstate and overseas, and its shares
were traded on the second board of the
Australian Stock Exchange.
In the late 1980s, a major restructure of
the Company took place with the business
refocussing on maintenance and construction
services in the resources industry.
Monadelphous’ shares were relisted on the
main board of the stock exchange during
the 1990 financial year and the Company
established the foundation for sustained
growth with a new management team.
The Company has continued to diversify
and extend its reputation as a supplier of
multidisciplinary construction, maintenance
and industrial services to many of the largest
companies in the resources, energy and
infrastructure sectors.
Monadelphous’ shares are included in the
S&P/ASX 200 index.
OUR OPERATIONS
Monadelphous has two operating divisions
working predominately in Australia, with
overseas operations in New Zealand, China,
Papua New Guinea, Mongolia and the
United States.
Engineering Construction
The Engineering Construction division
provides large-scale multidisciplinary
project management and construction
services. These include fabrication,
modularisation, offsite pre-assembly,
procurement and installation of structural
steel, tankage, mechanical and process
equipment, piping, plant commissioning,
demolition, water and wastewater asset
construction and maintenance, irrigation
services, heavy lift and specialist transport,
remediation works, electrical and
instrumentation services, and engineering,
procurement and construction services.
Maintenance and Industrial Services
The Maintenance and Industrial Services
division specialises in the planning,
management and execution of mechanical
and electrical maintenance services,
shutdowns, fixed plant maintenance
services, access solutions, specialist
coatings and sustaining capital works.
The division provides an important source
of recurring revenue through its long-term
contracts with major customers.
IMAGES
Left Monadelphous employees accessing Cape
Lambert A Wharf, Pilbara region, Western Australia.
Right Top A 42 tonne water tank, pre-fabricated
by SinoStruct, being transported for installation at
BHP’s Mining Area C, Newman, Western Australia.
Right Bottom Monadelphous employees
assisting with the shutdown of Dragline 102 at
Yancoal’s Mount Thorley Warkworth open cut
mines, Mount Thorley, New South Wales.
MONADELPHOUS ANNUAL REPORT 2018 OVE RVIE W
MONADELPHOUS ANNUAL REPORT 2018
7
OUR SERVICES
AND LOCATIONS
UNITED STATES
9
13
HOUSTON
Monadelphous operates predominantly in Australia,
with overseas operations in New Zealand, China,
Papua New Guinea, Mongolia and the United States.
ENGINEERING CONSTRUCTION
Market Sector
MAINTENANCE AND INDUSTRIAL SERVICES
Market Sector
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Amuri Irrigation Scheme - Supply, installation and
commissioning of 130km water pipeline network
Australia Pacific LNG - Wellhead Separator Skids - Supply,
fabrication and assembly of wellhead separator skids and
pressure vessels
BHP - Various structural, mechanical, piping, electrical
and instrumentation integrated packages
BHP Iron Ore - Mining Area C Water Treatment
Plant upgrade
CWP Asset Management - Crudine Ridge Wind Farm -
Design and construction of civil and electrical balance of
plant, transport and erection
CWP Asset Management - Sapphire Wind Farm - Civil and
electrical balance of plant
Fortescue Solomon, a wholly owned subsidiary of
Fortescue Metals Group - Fixed plant maintenance crane
services and shutdown crane services
Goldwind Australia - Moorabool North Wind Farm -
Balance of plant works
Jacobs Engineering - Supply structural steel, fabricated
spooling and pre-assembled modular pipe racks
JKC Australia LNG (JKC) - Ichthys Project Onshore LNG
Facilities - Mechanical Works - Utility and offsite
JKC - Ichthys Project Onshore LNG Facilities - SMPE&I for
completion of gas turbine generators and associated steam
piping of combined cycle power plant
Kawasaki Heavy Industries - Ichthys Project Onshore LNG
Facilities - SMPE&I on the cryogenic tanks
Kiewit Corporation - Structural steel and
miscellaneous steel
Lal Lal Wind Farms - Engineering, procurement,
construction and commissioning of balance of plant works
Structural, mechanical and piping works
Oyu Tolgoi LLC - Oyu Tolgoi Underground Project -
Mechanical decommissioning, demolition, civil, structural,
mechanical, piping and electrical and instrumentation works
Pukaki Irrigation Company Limited - Design, supply,
installation and commissioning of gravity pressurised
irrigation scheme
Santos Ltd - Roma West Phase 2B Project - Structural,
mechanical and piping works
Santos Ltd - Supply, fabrication, assembly and delivery of
wellhead separator skids
Selwyn District Council - Upgrade to wastewater
treatment plant
Sydney Water Corporation - Network delivery management,
delivery contractor panel for facilities and networks
Talison Lithium - Design, construction and commissioning
of new feed system to chemical grade plant
Tilt Renewables - Salt Creek Wind Farm - Engineering,
procurement, construction and commissioning
Townsville City Council - Civil, structural, mechanical
and electrical works to upgrade the Cleveland Bay
Purification Plant
25 Unitywater - Design and construction of major upgrade to
Kawana Sewage Treatment Plant
Water
Fabrication
Services
Iron Ore
Water
Renewable
Energy
Renewable
Energy
Iron Ore
Renewable
Energy
Fabrication
Services
Oil and Gas
Oil and Gas
Oil and Gas
Fabrication
Services
Renewable
Energy
Lead
Copper, Gold
Water
Oil and Gas
Fabrication
Services
Water
Water
Lithium
Renewable
Energy
Water
Water
AngloGold Ashanti - Maintenance works
BHP Coal - Maintenance works
BHP Iron Ore - Shutdowns and turnarounds and sustaining
capital works
BHP Mitsubishi Alliance (BMA) Blackwater Mine -
Dragline shutdowns
BHP Nickel West - Maintenance and turnarounds
BHP Olympic Dam - Maintenance and turnarounds
Chevron Australia - Gorgon Project – LNG Facilities
maintenance
Chevron Australia - Wheatstone Project – LNG Facilities
maintenance
CITIC Pacific Mining - Sino Iron Project - Projects
and turnarounds
Incitec Pivot Limited - General Mechanical Contractor
Services
Gold
Coal
Iron Ore
Coal
Nickel
Copper, Uranium,
Gold
Oil and Gas
Oil and Gas
Iron Ore
Ammonia
INPEX Operations Australia - Offshore maintenance services
Oil and Gas
1
2
3
4
5
6
7
8
9
10
11
12
Lihir Gold - Maintenance works
13 Oil Search Limited - Field construction services / engineering,
procurement and construction services
14
The Shell operated QGC project on Curtis Island
15 Queensland Alumina Limited - Maintenance
and turnarounds
16 Rio Tinto Iron Ore - Maintenance and turnarounds
17
18
19
20
21
22
Shell Australia - Maintenance and turnaround services on
Prelude FLNG facility
South 32 - Worsley Alumina Refinery
Synergy - Operation and maintenance of Collie Basin Coal
Plant Infrastructure
TechnipFMC - Piping modification and fabrication on hook-
up and commissioning of Prelude FLNG facility
The Pilbara Infrastructure, a wholly owned subsidiary of
Fortescue Metals Group - Abrasive, cleaning and relining
carbon steel ore wagons
Tronox KMK - Cogeneration Plant operation and
maintenance
23 Woodside - Karratha Gas Plant Karratha Life Extension
program
24 Woodside - Maintenance, turnarounds and offshore
brownfields implementation
25
Yancoal - Maintenance and turnarounds
Gold
Oil and Gas
Oil and Gas
Alumina
Iron Ore
Oil and Gas
Alumina
Power
Oil and Gas
Iron Ore
Power
Oil and Gas
Oil and Gas
Coal
ULAANBAATAR
BEIJING
MONGOLIA
16
CHINA
2
9
13
19
PHILIPPINES
MANILA
12
13
PAPUA NEW GUINEA
24
10
4
2
18
19
14 15
25
MACKAY
GLADSTONE
6
BRISBANE
2
25
5
21
GUNNEDAH
MUSWELLBROOK
NEWCASTLE
MT THORLEY
SYDNEY
14
8
23
AUCKLAND
NEW
ZEALAND
17
1
20
CHRISTCHURCH
PORT HEDLAND
PILBARA COASTAL AND
NORTH-WEST REGION
3
3
7
8
9
16
21
23
24
KARRATHA
TOM PRICE
NEWMAN
7
4
KALGOORLIE
PERTH
HEAD OFFICE
BUNBURY
5
1
22
22
18 19
DARWIN
11
17
20
10 11 12
AUSTRALIA
6
15
ROXBY DOWNS
LOCATIONS
ENGINEERING CONSTRUCTION
MAINTENANCE & INDUSTRIAL SERVICES
OP E R ATIN G AND FINA NC IA L RE V I E W
MONADELPHOUS ANNUAL REPORT 2018
9
2017/18
HIGHLIGHTS
Monadelphous made good progress on its markets and growth strategy, maximising returns from core markets,
securing further business in infrastructure and continuing to deliver core services to overseas markets.
The Company saw a significant improvement in its safety performance and continued to focus on improving
operational productivity through the development and implementation of technological solutions and innovative
work practices.
SECURED NEW CONTRACTS
AND ADDITIONAL WORK
VALUED AT APPROXIMATELY
$600 MILLION.
Ichthys Project Onshore LNG Facilities
Monadelphous substantially completed work
on the Ichthys Project Onshore LNG Facilities
in Darwin, Northern Territory. An outstanding
safety record and strong overall performance
resulted in a significant amount of additional
work being awarded throughout the duration
of the project.
Strengthened
Maintenance
Services Position
A significant increase
in demand for
maintenance and
sustaining capital works
services across the
resources and energy
sectors positioned
the Company as a
leading maintenance
services provider.
Strong Growth
in Zenviron
Zenviron substantially
completed the Sapphire
Wind Farm Project
in New South Wales
and secured four new
wind farm contracts,
including the Salt
Creek, Lal Lal, Crudine
Ridge and Moorabool
North wind farms.
New Maintenance Services Embedded
Services added in prior years, including
corrosion management, protective coatings,
marine maintenance and rope access, were
successfully embedded into operations.
Offshore Oil and Gas Maintenance
Contracts Ramped Up
Maintenance activity on the Company’s
offshore oil and gas contracts with Woodside,
INPEX Operations Australia and Shell
Australia ramped up substantially.
Increased Water and
Irrigation Activity
The Company continued to
deliver water and irrigation
projects in Australia and New
Zealand, and was awarded a
contract with Pukaki Irrigation
Company Limited for the
construction of a gravity
pressurised irrigation scheme
in New Zealand.
Mondium Secured
First EPC Contracts
Mondium secured
its first two EPC
contracts at Talison
Lithium’s Greenbushes
Operations and Galaxy
Lithium Australia’s Mt
Cattlin project, both in
Western Australia.
Significant Improvement in
Safety Performance
Achieved a 23 per cent improvement
in the 12-month total case injury
frequency rate (TCIFR) by focussing
on critical risk controls and enhancing
behavioural safety.
Geographical Expansion
The Company expanded geographically
with the acquisition of Newcastle-based
maintenance services business, RIG
Installations, and the establishment of
workshop facilities in Newman.
Commenced Work on
Oyu Tolgoi in Mongolia
Secured and commenced work on the
Company’s first two packages of work
on the Oyu Tolgoi Underground Project
in Mongolia.
Improving Operational
Productivity
Enhanced productivity and
competitiveness through the
application of new technology
and innovative solutions.
Copyright © 2018 Rio Tinto
PERFORMANCE
AT A GLANCE
11
SUMMARY OF 2018 PERFORMANCE
Sales revenue for the year was $1.784 billion*, up 41 per cent on the previous period, as a result of strong demand for the
Company’s services in its core markets in Australia, as well as growth from diversification into overseas and infrastructure markets.
The Company’s strong performance was impacted by a surge in oil and gas construction activity and strengthened demand for
maintenance services across both the resources and energy sectors.
Financial
SALES REVENUE* [ $ M ]
NET CASH AT 30 JUNE [ $ M ]
• Sales revenue of $1.784 billion*, up 41 per cent
• NPAT of $71.5 million, up 24 per cent
• EPS of 76.1 cents, DPS of 62 cents fully franked
Operations
• Oil and gas construction revenues strong
• Maintenance and Industrial Services achieved record result
• Growth in water and renewables
Safety and Wellbeing
• Significant improvement in safety performance
• Focus on critical risk controls and behavioural safety
• Maturing operations in new markets and environments
Markets and Growth
• Embedded new maintenance services and
expanded geographically
• Mondium successfully delivered its first EPC contract and
secured further work
• Zenviron awarded four new wind farm contracts
• Commenced work on two packages on the Oyu Tolgoi
Underground Project in Mongolia
People and Culture
• 5,828 people at year-end
• Continued focus on developing and retaining people
• Retention to remain a focus as employment market tightens
Productivity and Innovation
• New technologies implemented to improve
operational productivity
• Focussed on creation of innovative solutions for customers
• Offshore support services centre in Manila continued to provide
cost effective, project related services
2018
2017
2016
2015
2014
1,784.0
1,264.7
1,364.7
1,865.0
2,329.6
2018
2017
2016
2015
2014
187.8
228.1
186.0
186.6
180.8
EBITDA^
[ $ M ]
EARNINGS PER SHARE# [ C ]
2018
2017
2016
2015
2014
119.0
98.2
113.6
168.0
221.2
2018
2017
2016
2015
2014
76.1
61.4
71.8
113.9
159.1
NET PROFIT AFTER TAX# [ $ M ]
DIVIDENDS PER SHARE [ C ]
2018
2017
2016
2015
2014
71.5
57.6
67.0
105.8
146.5
2018
2017
2016
2015
2014
62.0
54.0
60.0
92.0
123.0
OPERATING CASH FLOW [ $ M ]
EMPLOYEE NUMBERS [ # ]
2018
2017
2016
2015
2014
51.6
111.2
78.0
117.8
117.6
2018
2017
2016
2015
2014
5,828
6,164
4,438
4,536
5,321
GEOGRAPHY
END CUSTOMER
WA
NT
QLD
Overseas
NSW
SA
VIC
34.5%
33.4%
10.4%
9.2%
8.3%
4.0%
0.2%
Oil and Gas
58.5%
Other Minerals
13.5%
Iron Ore
Infrastructure
Coal
12.2%
11.4%
4.4%
IMAGE A Monadelphous employee prepares for paint and blast work at BHP’s Olympic Dam mine near Roxby Downs in South Australia.
* Includes Monadelphous’ share of joint venture revenue – refer to reconciliation on page 16.
^Refer to page 16 for reconciliation of EBITDA.
# Attributable to equity holders of Monadelphous Group Limited.
The financial information contained in this section should be read in conjunction with the Financial Statements and accompanying notes. Financial Statements are prepared in
accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards Board and other relevant standards, as outlined on page 60.
MONADELPHOUS ANNUAL REPORT 2018 MARKETS AND
GROWTH STRATEGY
Monadelphous will grow earnings by maximising returns
from its core markets, building its infrastructure business
and delivering core services to overseas markets.
IMAGES
Left The Woodside-operated Goodwyn A gas
platform, part of the North West Shelf Project,
Western Australia.
Middle Monadelphous employees reviewing
biosolids at the Bondi Waste Water Treatment
Plant, Sydney, New South Wales.
Right The overland conveyor and coarse ore
stockpile at Rio Tinto’s Oyu Tolgoi project,
Mongolia.
Image courtesy of Woodside Energy Ltd.
Copyright © 2018 Rio Tinto
DELIVER CORE
SERVICES TO
OVERSEAS MARKETS
PROGRESS
Secured initial packages of work on
Oyu Tolgoi in Mongolia
PRIORITIES
Successfully deliver Oyu Tolgoi work
and secure further packages
Explore other overseas opportunities
BUILD AN
INFRASTRUCTURE
BUSINESS
PROGRESS
Strong growth in renewable
energy market
Water and irrigation business
awarded new work in Australia
and New Zealand
PRIORITIES
Continue to grow water and
irrigation business in Australia
and New Zealand
Successfully deliver renewable
energy projects
Progress options to enter other
Australian infrastructure markets
MAXIMISE
RETURNS FROM
CORE MARKETS
PROGRESS
Awarded significant additional oil
and gas construction work due
to performance and strong
customer relationships
Strengthened market position in
maintenance, with work ramping
up across a number of oil and
gas contracts
Mondium secured and executed first
EPC contracts
PRIORITIES
Capitalise on major
construction prospects
Continue to improve competitiveness
in core markets
Secure further EPC projects
through Mondium
Deliver broader range of services
to customers
13
focussed on the delivery of the large number
of water and irrigation contracts awarded in
the prior year.
Monadelphous’ strategy to deliver core
services to overseas markets was bolstered
by the award of two packages of work on the
Oyu Tolgoi Underground Project in Mongolia
and, in support of this project and to assist in
upskilling and developing the local workforce,
Monadelphous established a registered
training organisation in Ulaanbaatar.
A strong balance sheet provides the
capacity to invest in the right opportunities,
and enables the Company to continue to
progress its markets and growth strategy.
Productivity improvements will maintain
priority as competition levels remain high
and customers continue to focus on cost
competitive solutions.
On behalf of the Board, I would like to take
this opportunity to thank our shareholders,
customers and employees for their ongoing
loyalty and support.
John Rubino
Chairman
CHAIRMAN’S
REPORT
Monadelphous continued to progress its markets and
growth strategy throughout the year, substantially
growing revenues in its core markets, expanding its
geographical reach, embedding new services and
strengthening its position in the infrastructure market.
Sales revenue for the year was $1.784
billion*, an increase of 41.1 per cent on the
previous year, as a result of a strong demand
for the Company’s services in its core
resources and energy markets in Australia,
and growth from diversification into overseas
and infrastructure markets. Construction
revenues were particularly strong on the
back of a surge in activity on the Company’s
oil and gas projects, while demand for
maintenance services strengthened across
both the resources and energy sectors.
Net profit after tax attributable to equity
holders of the parent was $71.5 million,
an increase of 24.2 per cent on the previous
year, with the Company experiencing
moderating margins resulting from
continued high levels of competition.
Earnings per share was 76.1 cents.
The Board of Directors announced a final
dividend of 32 cents per share, taking the
full year dividend to 62 cents per share fully
franked, giving a payout ratio of 82 per cent
of net profit after tax. The Monadelphous
Group Limited Dividend Reinvestment Plan
will apply to the final dividend.
The Company ended the year with a
healthy cash balance of $208.8 million
and a cash flow from operations of $51.6
million. Increased activity levels and working
capital requirements resulted in a cash flow
conversion rate for the period of 69.4 per cent.
The total workforce at year end was 5,828,
a slight decrease on 12 months earlier due
to declining Engineering Construction activity
towards the end of the year as a number of
large contracts approached completion. This
was largely offset by an increase in activity
on the Company’s offshore oil and gas
maintenance contracts and an overall general
increase in maintenance services. Throughout
the period, the Company maintained its focus
on employee development and key talent
retention, and will continue to do so as market
conditions improve and the employment
market tightens.
Safety continued to be a focus across the
business, and we achieved a significant
improvement in safety performance.
Monadelphous secured new contracts and
additional work valued at approximately $600
million over the course of the year, including
several contracts in the infrastructure market
and in overseas locations.
In line with the Company’s markets and
growth strategy, work was substantially
completed on the Company’s largest ever
construction project, the Ichthys Project
Onshore LNG Facilities in Darwin, Northern
Territory, and maintenance services
added in prior years were embedded into
operations to support core activities. The
Company also expanded geographically
with the acquisition of RIG Installations,
a Newcastle-based maintenance services
business, and the establishment of
workshop facilities in Newman.
Mondium, which was established in
conjunction with Lycopodium, continued
to pursue opportunities in the mining and
mineral processing market and secured its
first two contracts during the year.
The Company’s push into the infrastructure
sector continued with increasing levels of
activity in both the renewable energy and
water and irrigation markets. Zenviron, the
Company’s renewable energy business,
secured a number of new wind farm
contracts during the period and substantially
completed work on the Sapphire Wind Farm.
The Company also secured a contract for the
Pukaki Irrigation Project in New Zealand and
*Includes Monadelphous’ share of joint venture revenue – refer to page 16 for reconciliation.
OPERATING AND FINANCIAL REVIEWMONADELPHOUS ANNUAL REPORT 2018 15
MAINTENANCE AND
INDUSTRIAL SERVICES
The Maintenance and Industrial Services
division continued to strengthen its position
as a leading maintenance services provider,
securing a number of new contracts and
contract extensions, and reporting record
sales revenue of $841.1 million, up 28.9
per cent on the previous year.
Activity increased significantly on the division’s
three offshore oil and gas maintenance
contracts, coupled with a growing presence in
the Pilbara, which was largely attributed to a
high demand for its core services and services
added in prior years, including corrosion
management, specialist coatings, marine
maintenance and rope access.
The division focussed on maintaining strong
relationships with key, long-term customers
in the resources sector, which contributed
to the award of contracts for fixed plant
maintenance services for BHP and Rio
Tinto’s inland operations, both located in
the Pilbara, WA.
The division’s safety performance remained
on par with the prior year, and the division
successfully managed the risk associated
with a 26 per cent increase in man-hours.
As always, safety remains a priority and the
division continues to invest in a range of safety
initiatives and programs to drive improvement.
Throughout the period, the division
maintained its focus on innovation
and continuous improvement with the
establishment of dedicated innovation
teams, the deployment of a range of
technologies across its operations and the
continued use of the Company’s offshore
services capability in Manila.
OUTLOOK
The outlook for Monadelphous looks good
as conditions in the resources and energy
sectors strengthen.
Project pipeline visibility continues
to improve with several major iron ore
projects having entered the early stages
of development, and an increasing number
of opportunities in the base metals and
lithium markets.
Investment in infrastructure remains
healthy, with good prospects in the water
and irrigation market in Australia and New
Zealand, while the Australian renewables
market is expected to remain buoyant for the
foreseeable future.
In summary, Monadelphous is in good
shape and well positioned to capitalise on
the upcoming market conditions.
Rob Velletri
Managing Director
IMAGES
Maintenance activity is forecast to increase
as production volumes remain high and
essential maintenance works are undertaken.
Oil and gas services revenue is expected to
grow as LNG projects ramp up production
and offshore work volumes increase.
Left Cryogenic tanks at INPEX Operations
Australia’s Ichthys Project Onshore LNG
Facilities, Darwin, Northern Territory.
Below A Monadelphous rope access technician
assisting with a fender chain replacement on
a Cape Lambert Dolphin, Pilbara region,
Western Australia.
MANAGING DIRECTOR’S
REPORT
The Company experienced strong revenue growth with
an increase in oil and gas construction activity, growth
in water and renewables and strengthened demand for
maintenance services across all sectors.
Monadelphous’ greatest asset continues
to be its people. The Company remains
committed to attracting, developing and
retaining high calibre employees who live
its values and actively contribute to its
growth. During the period, Monadelphous’
Graduate Development Program was again
recognised as one of Australia’s top ranking
graduate programs, and the Company’s
commitment to creating a more diverse and
inclusive workplace, with equal opportunity
for all, was bolstered by the launch of its
third Reconciliation Action Plan. Subsequent
to the end of the year, Monadelphous
launched a Senior Leadership Capability
Framework and Gender Diversity and
Inclusion Plan.
ENGINEERING CONSTRUCTION
The Engineering Construction division
reported sales revenue of $949.9 million*,
an increase of 54.4 per cent on the previous
year, reflecting an increase in oil and gas
construction activity and growth in water
and renewables.
A significant focus on behavioural safety and
enhancing partnerships with subcontractors
contributed to an improved safety
performance, with a 51 per cent reduction
in the division’s TCIFR.
The Company’s largest construction contract
to date, the Ichthys Project Onshore LNG
Facilities in Darwin, Northern Territory,
neared completion at year end. The
division achieved an outstanding safety
record on the project and its strong overall
performance resulted in the award of a
significant amount of additional work
throughout the duration of the project.
Zenviron, the Company’s renewable
energy business, secured four new wind
farm contracts in Victoria and New South
Wales during the period, and will continue
to pursue further opportunities in the
renewable energy sector. In addition,
Monadelphous’ water and irrigation
business continued to grow, performing
work for Sydney Water Corporation,
Townsville City Council and Unitywater. In
New Zealand, it continued to execute key
irrigation projects and was awarded a new
contract on the Pukaki Irrigation Project in
the Mackenzie Basin.
The Company expanded its heavy lift
capability and customer base, investing
in its fleet to support current projects and
future opportunities.
Monadelphous experienced a surge in
activity on the Company’s oil and gas
projects, in particular on the Ichthys Onshore
Project LNG Facilities in Darwin, Northern
Territory. Demand for maintenance services
strengthened across both the resources and
energy sectors, and work ramped up on the
Company’s offshore oil and gas contracts
with Woodside, INPEX Operations Australia
and Shell Australia.
The Company achieved strong growth in
infrastructure, particularly renewables and
water and irrigation, securing a further four
wind farm contracts through Zenviron,
and continued to deliver various water and
irrigation projects in both Australia and
New Zealand.
During the year, Monadelphous focussed on
its critical risk controls and the enhancement
of behavioural safety to improve safety
performance across the business. This,
combined with a number of other safety
improvement initiatives, as well as the
growing maturity of operations in the new
markets and environments in which it entered
in previous years, contributed to a 23.2
per cent improvement in its 12-month total
case injury frequency rate (TCIFR) to 3.28
incidents per million man-hours worked. The
lost time injury frequency rate (LTIFR) was
0.19 incidents per million man-hours worked.
Improvements in productivity continued to be
driven by a strong focus on developing and
implementing technological solutions, and
was supported by the ongoing development
of the Company’s Innovation Framework,
designed to enhance collaboration across the
business and with its customers. In addition,
the Company’s offshore support service
centre in Manila continued to play a key role
in driving cost effective business and project
related services.
* Includes Monadelphous’ share of joint venture revenue
OPERATING AND FINANCIAL REVIEWMONADELPHOUS ANNUAL REPORT 2018 COMPANY
PERFORMANCE
BOARD OF
DIRECTORS
17
A review of the Company’s performance over the last five years is as follows:
Statutory revenue
EBITDA
Profit before income tax expense
Income tax expense
Profit after income tax expense attributable to equity
holders of the parent
Basic earnings per share
Interim dividends per share (fully franked)
Final dividends per share (fully franked)
2018
$’000
2017
$’000
2016
$’000
2015
$’000
2014
$’000
1,737,632
1,249,085
1,368,849
1,869,505
2,332,960
119,046
102,845
30,570
71,479
76.11c
30.00c
32.00c
98,184
82,664
24,144
57,563
61.41c
24.00c
30.00c
113,630
95,610
28,702
167,975
147,041
41,216
221,242
205,203
58,693
67,014
105,825
146,510
71.77c
28.00c
32.00c
113.91c
159.05c
46.00c
46.00c
60.00c
63.00c
Net tangible asset backing per share
415.86c
398.23c
390.64c
391.75c
387.22c
Total equity and reserves attributable to equity holders
of the parent
Depreciation
Debt to equity ratio
Return on equity
EBITDA margin
394,481
377,393
368,995
368,098
362,665
17,222
17,892
21,094
22,932
25,656
5.3%
18.1%
6.7%
3.6%
15.3%
7.8%
4.8%
18.2%
8.3%
6.3%
28.7%
9.0%
10.2%
40.4%
9.9%
EBITDA is a non-IFRS earnings measure which does not have any standardised meaning prescribed by IFRS and therefore may not be
comparable to EBITDA presented by other companies. This measure is important to management as an additional way to evaluate the
Company’s performance.
Reconciliation of profit before income tax to EBITDA (unaudited):
Profit before income tax
Interest expense
Interest revenue
Depreciation expense
Amortisation expense
Share of interest, depreciation, amortisation and tax of joint ventures #
EBITDA
Reconciliation of Statutory Sales Revenue:
Total sales revenue including joint ventures
Share of revenue from joint ventures ~
Statutory sales revenue
2018
$’000
102,845
452
(2,573)
17,222
625
475
2017
$’000
82,664
734
(3,848)
17,892
562
180
119,046
98,184
2018
$’000
2017
$’000
1,783,999
1,264,747
(49,118)
(19,564)
1,734,881
1,245,183
#Represents Monadelphous’ proportionate share of the interest, depreciation, amortisation and tax of joint ventures accounted for using the equity method.
~Represents Monadelphous’ proportionate share of the revenue of joint ventures accounted for using the equity method.
JOHN RUBINO
Chairman
ROB VELLETRI
Managing Director
PETER DEMPSEY
Lead Independent
Non-Executive Director
John was appointed to the Board on 18
January 1991. John was the founder of
United Construction which later became
diversified services company UGL. Initially
serving as Managing Director and Chairman
of Monadelphous Group Limited, John
resigned as Managing Director on 30 May
2003 and continued as Chairman. John has
52 years of experience in the construction
and engineering services industry.
Rob was appointed to the Board on
26 August 1992 and commenced as
Managing Director on 30 May 2003. He
joined Monadelphous in 1989 as General
Manager after serving a 10 year career
in engineering and management roles at
Alcoa. Rob is a mechanical engineer with
39 years of experience in the construction
and engineering services industry and is
a Corporate Member of the Institution of
Engineers Australia.
Peter was appointed to the Board on 30
May 2003. During his 30 year career at
Baulderstone, now part of the multinational
group Lendlease, Peter held several
management positions prior to serving as
Managing Director for five years. He is a civil
engineer with 46 years of experience in the
construction and engineering services industry
throughout Australia, Papua New Guinea,
Indonesia and Vietnam. Peter is a Fellow of the
Institution of Engineers Australia and a member
of the Australian Institute of Company Directors.
CHRIS
MICHELMORE
Independent
Non-Executive Director
DIETMAR
VOSS
Independent
Non-Executive Director
HELEN
GILLIES
Independent
Non-Executive Director
Chris was appointed to the Board on 1
October 2007. He was formerly a Director
of Connell Wagner, having served 36
years with the company, which now
trades globally as Aurecon. Chris is a civil
and structural engineer with 46 years
of experience in the construction and
engineering services industry throughout
Australia, South East Asia and the Middle
East. Chris is a Fellow of the Institution of
Engineers Australia.
Dietmar was appointed to the Board on 10
March 2014. During his career, Dietmar
has worked for a number of global mining
and engineering businesses, including BHP,
Bechtel and Hatch throughout Australia, the
United States, Europe, the Middle East and
Africa. He is a chemical engineer with 44
years of experience in the oil and gas, and
mining and minerals industries. Dietmar
holds a Master of Business Administration
in addition to science and law degrees and
is a member of the Australian Institute of
Company Directors.
Helen was appointed to the Board on 5
September 2016 and has previously served
as a Director of global engineering company
Sinclair Knight Merz and the Australian Civil
Aviation Safety Authority. She has a strong
background in risk, law, governance and
finance, as well as extensive experience in
mergers and acquisitions, and has 22 years of
experience in the construction and engineering
services industry. Helen holds a Master of
Business Administration and a Master of
Construction Law, as well as degrees in
commerce and law. She is a Fellow of the
Australian Institute of Company Directors.
OPERATING AND FINANCIAL REVIEWMONADELPHOUS ANNUAL REPORT 2018 ENGINEERING
CONSTRUCTION
19
The Engineering Construction division, which provides
large scale multi-disciplinary project management and
construction services, continued to deliver key contracts
in its core markets, expand its global footprint and
strengthen its position in the infrastructure market.
The division reported sales revenue of
$949.9 million*, up 54.4 per cent on the
prior year, reflecting an increase in oil and
gas construction activity and growth in the
water and renewables sectors. New contracts
to the value of approximately $300 million
were secured during the period.
Safety performance improved significantly
across the division, with a 51 per cent
reduction in the total case injury frequency
rate (TCIFR) compared to the previous
period. This can be attributed to a strong
focus on safety culture and significant
improvements across markets entered in
more recent periods.
Safety cultural initiatives included the
development and implementation of a new
safety leadership coaching program, which
sets clear safety expectations for leaders and
focusses on driving behavioural change, as
well as increased engagement with frontline
employees through an inaugural Engineering
Construction Safety Forum.
The division had, by year end, substantially
completed its work on the Ichthys Project
Onshore LNG Facilities in Darwin, Northern
Territory, achieving an outstanding safety
record. Strong operational performance
resulted in the award of a significant amount
of additional work throughout the duration
of the project.
Highlighting the continuing expansion of
core services overseas, the division secured
its first packages of work on the Oyu Tolgoi
Underground Project in Mongolia and,
through SinoStruct, provided procurement
and logistics support to the project.
The Company’s engineer, procure and
construct (EPC) joint venture with
Lycopodium, Mondium, successfully
delivered its first project during the year. The
project included the design, construction and
commissioning of a new feed system to the
existing chemical grade plant at Talison
Lithium’s Greenbushes Operations, in the
south west of Western Australia (WA).
* Includes Monadelphous’ share of joint venture revenue.
Towards the end of the year, Mondium
secured its second EPC contract with Galaxy
Lithium Australia for the design, engineering,
construction and upgrade of four circuits at
the Mt Cattlin project in Ravensthorpe, WA.
The contract, which includes the design and
construction of concrete, structural,
platework and electrical and instrumentation
works, is expected to be completed towards
the end of the 2018 calendar year.
RESOURCES
IMAGES
During the period, the division secured and
commenced work on two contracts at the Oyu
Tolgoi Underground Project, located in the
South Gobi region of Mongolia. The contracts
include mechanical decommissioning,
demolition, civil, structural, mechanical,
piping, and electrical and instrumentation
works associated with Shaft 1 and 2 Surface
Infrastructure and Facilities.
In support of these contracts, the division is
developing project execution capability
through the secondment of expatriate
management and supervision, the provision
of upskilling and development opportunities
to local skilled employees and the
establishment of relationships with local
suppliers. During the period, the Company
expanded its facilities in Ulaanbataar and
established a registered training
organisation. By the end of the period,
approximately 500 people were employed
on the Company’s work scopes in Mongolia.
ENERGY
Work on Monadelphous’ largest ever
construction contract, the Ichthys Project
Onshore LNG Facilities in Darwin, Northern
Territory, neared completion at year end.
The MEC-2 Project for JKC Australia LNG
commenced in 2014, with strong
performance leading to the award of
additional packages of work in June 2017.
New contracts included electrical and
instrumentation works for the product
loading jetty, a subcontract with Kawasaki
Heavy Industries for structural, mechanical,
Left INPEX Operations Australia’s Ichthys
Project Onshore LNG Facilities, Darwin,
Northern Territory.
Above Monadelphous’ GMK6400 crane.
OUR PROGRESS
Renewables business
secured an additional
four contracts
Overseas presence
continued to grow
with additional
contracts secured
Mondium’s first contract
delivered with second
contract secured
MONADELPHOUS ANNUAL REPORT 2018 21
CASE STUDY
SAPPHIRE WIND FARM
Customer Representative – CWP Asset
Management
Location – New England region, NSW
Sapphire Wind Farm is NSW’s largest
wind farm, with a capacity of 270MW.
Once operational, the wind farm will
power 115,000 homes and displace
approximately 700,000 tonnes of
carbon dioxide.
In December 2016, Zenviron, in
consortium with Vestas, was awarded
a $430 million contract to deliver the
wind farm, with Zenviron delivering
approximately 20 per cent of the works.
By mid-2018, Zenviron had completed
all civil and electrical balance-of-plant
works. Vestas is currently supplying and
installing the wind turbines and is due
to be completed by the end of the 2018
calendar year.
In the North Island of New Zealand, two
critical contracts were completed for the
Hastings District Council, located south
of Auckland.
HEAVY LIFT
The division’s heavy lift business continued
to strengthen its position as a specialist lifting
solutions provider. Throughout the period, it
improved its capability, increased its
customer base and expanded its transport
and crane fleet, acquiring a number of
all-terrain cranes ranging from 25 tonnes to
400 tonnes.
A three-year contract commenced with
Fortescue Metals Group, to deliver fixed plant
maintenance and shutdown crane services at
Solomon Hub in the Pilbara region of WA,
which expanded in scope with an increase in
fixed plant requirements.
In support of its customers’ evolving heavy lift
requirements, the business opened a Heavy
Lift Operations Centre in Port Hedland, WA.
FABRICATION SERVICES
China-based fabrication business,
SinoStruct, continued to supply and
fabricate wellhead skids for upstream coal
seam gas developments in Queensland and
secured a number of contract extensions
from both Santos and APLNG. In addition,
SinoStruct’s procurement and logistics
expertise are being utilised on the Oyu
Tolgoi Underground project in Mongolia.
OUTLOOK
The Engineering Construction division is
experiencing high levels of tendering activity,
with planned major resources construction
projects expected to generate significant
revenue opportunities in the future. Prospects
for the Company are positive as this major
resources construction work comes to market.
In addition, the infrastructure market is
expected to remain buoyant for the
foreseeable future in both Australia and
New Zealand, and Mongolia continues to
represent strategic importance for the
division internationally.
piping and electrical and instrumentation
work on the cryogenic tanks, and a contract
for the completion of the gas turbine
generators and associated steam piping of
the combined cycle power plant.
The large-scale project reached a peak
workforce of close to 2,000 and the Company
received numerous awards from JKC Australia
LNG for its excellent safety performance.
INFRASTRUCTURE
Zenviron continued to strengthen its position
in the renewable energy sector.
In consortium with Vestas Australian Wind
Technology, it substantially completed the
civil and electrical balance-of-plant works on
New South Wales’ (NSW) largest wind farm,
the 270MW Sapphire Wind Farm, and
secured two contracts for the provision of
engineering, procurement, construction and
commissioning services at the Salt Creek and
Lal Lal Wind Farms in regional Victoria.
In addition, Zenviron secured contracts with
Goldwind Australia for the Moorabool North
Wind Farm, located in regional Victoria, and,
in a consortium with GE Renewable Energy,
with CWP Renewables for the Crudine Ridge
Wind Farm, in regional NSW.
Work on Sydney Water Corporation’s Network
and Facilities Renewals Program continued to
gain momentum throughout the year. The
contract includes mechanical, electrical and
civil services for water treatment facilities,
pumping stations, pipelines, reservoirs,
chemical dosing facilities and odour control
facilities. The unique working environment of
these critical packages of work saw the division
adopt an innovative approach to project delivery
and safety, which included the development
and implementation of a modified dumper.
The specially designed dumper operates in a
live sewer to remove silt and debris from the
tunnels, uses 3D computer modelling to create
site plans, enabling proactive community
engagement, and minimises manual handling
risks through the use of vacuum assisted lifting.
The division also continued work on the major
upgrade to Unitywater’s Kawana Sewage
Treatment Plant on the Sunshine Coast,
Queensland, and commenced work on the
upgrade to the Cleveland Bay Purification
Plant for Townsville City Council.
In New Zealand’s South Island, construction
of the Amuri Irrigation Scheme, located north
of Christchurch, was completed and work
commenced with Pukaki Irrigation Company
Limited for the design, supply, installation and
commissioning of a gravity pressurised
irrigation scheme.
IMAGES
Above 270MW Sapphire Wind Farm,
New England region, New South Wales.
Right A Monadelphous employee working at
BHP’s Mining Area C Water Treatment Plant,
Newman, Western Australia.
OPERATING AND FINANCIAL REVIEWMONADELPHOUS ANNUAL REPORT 2018 MAINTENANCE AND
INDUSTRIAL SERVICES
23
The Maintenance and Industrial Services division,
which specialises in the planning, management and
execution of multidisciplinary maintenance services,
sustaining capital works and turnarounds, continued to
strengthen its position as a leading maintenance services
provider, successfully embedding new services into core
operations and expanding geographically.
The division reported a record sales revenue
of $841.1 million, up 28.9 per cent on the
previous year, due to increased levels of
demand for its services in both the resources
and energy sectors. During the period,
approximately $300 million of new contracts
and contract extensions were awarded.
Activity increased significantly on the
division’s three offshore oil and gas
maintenance services contracts, namely the
Woodside-operated gas production facilities
contract, the contract associated with the
INPEX-operated Ichthys LNG Project and
Shell Australia’s Prelude Floating Liquefied
Natural Gas (FLNG) facility.
Services added to the division’s offering
in prior years continued to support core
activities and provide further expansion
opportunities, including growing the division’s
presence in Port Hedland. In addition,
Newcastle-based maintenance services
business, RIG Installations, was acquired,
providing an opportunity to leverage a diverse
range of services to RIG’s customer base.
The division recorded a total case injury
frequency rate (TCIFR) of 3.64 incidents
per million man-hours, successfully
managing the risk associated with a 26 per
cent increase in man-hours. The division
continues to invest in a range of safety
initiatives and programs to drive improvement
in this area, including the development and
launch of a Health, Safety and Environment
Strategic Plan for each business unit to
ensure market and region-specific differences
are effectively managed.
Throughout the period, the division continued
to focus on innovation and continuous
improvement with the establishment of
dedicated innovation teams, at both a
divisional and business unit level and the
piloting of LEAN training, before roll-out
to its workforce. The Company’s offshore
support service centre in Manila continued
to provide a range of cost effective project
related services, including directly supporting
its customers’ operations in the areas of
workforce planning and work packaging.
In addition, the division developed and
implemented technological solutions to
improve productivity, including remote-
operated inspection devices, 3D visualisation
tools, new blast and paint technology, and
the broader use of mobile devices to support
data capture and improve the quality and
timeliness of reporting and decision making.
ENERGY
With commissioning activities at several
major, world-class oil and gas construction
projects nearing completion, including Shell
Australia’s Prelude FLNG facility and the
INPEX-operated Ichthys LNG Project, and a
number of shutdowns completed, the division
saw a significant increase in work associated
with the energy sector during the period.
New contracts included a piping modification
and fabrication contract on the hook-up and
commissioning phase of Shell Australia’s
Prelude FLNG facility by TechnipFMC, and
a 12-month contract extension on the
Woodside-operated Karratha Gas Plant
Karratha Life Extension program through
the division’s joint venture, MGJV, which
included mechanical, electrical, access
solutions, coatings and insulation services.
Significant activity during the period included
a shutdown at Shell operated QGC project on
Curtis Island, Queensland, in May 2018,
totalling more than 66,000 man-hours over
approximately 20-23 days. The shutdown
included internal modifications to the
propane suction drums, a change-out of the
molecular sieve desiccant and socket weld
repairs, HV switching activities and vessel
inspections. The division was also part of the
delivery team on Woodside’s largest offshore
turnaround in 14 years, at the Goodwyn
Alpha Platform, which will extend the life of
field. The scope included access solutions,
and mechanical and electrical services, and
was supported by concurrent train shutdown
activity at Karratha Gas Plant.
IMAGES
Left Monadelphous employees inspecting a
3.3kV three phase motor to be installed at
Alcoa’s Pinjarra Alumina Refinery, Pinjarra,
Western Australia.
Above A Monadelphous employee performing
testing and commissioning of electrical
installations at Alcoa’s Pinjarra Alumina
Refinery, Pinjarra, Western Australia.
OUR PROGRESS
Significant increase
in activity across
energy market
Acquisition of RIG
Installations to expand
geographical presence
Contract extensions and
new contract awards
with core customers
MONADELPHOUS ANNUAL REPORT 2018 New contract wins also included a three-year
contract for the supply of rope access based
mechanical maintenance, inspection and
protective coating services for Dalrymple Bay
Coal Terminal near Mackay, Queensland,
a three-year contract for the operation and
maintenance of the coal handling facility at
the Muja Power Station for Synergy in Collie,
WA, and a three-year contract to provide
shutdown maintenance, breakdown and
repair services, minor projects and ad hoc
services for BHP at Mt Arthur Coal in the
Hunter Valley, New South Wales.
A two-year contract extension was secured
for the supply of mechanical services for
Queensland Alumina Limited in Gladstone,
Queensland.
OUTLOOK
Activity in the maintenance sector is forecast
to remain positive as production ramps
up on newly commissioned LNG projects,
and as levels of maintenance and support
required on aging resources assets continues
to increase.
The division also continued to provide
engineering, procurement and construction
services, through its joint venture with Jacobs
Engineering Group on Oil Search’s oil and
gas production facilities in the Highlands
region of Papua New Guinea.
RESOURCES
The division focussed on maintaining strong
relationships with key, long-term customers
in the resources sector and embedding new
services, including corrosion management,
specialist coatings, marine maintenance and
rope access.
The division continued to provide
maintenance and shutdown support
for BHP’s Olympic Dam operation near
Roxby Downs in South Australia, including
supporting a major shutdown which was
undertaken during the period. In support of
the customer, the division also expanded
its service offering to include concrete
remediation, asset integrity, blast and
paint and electrical and instrumentation.
Monadelphous has provided maintenance
and shutdown services at Olympic Dam
since 1988.
In addition, the division secured a two-year
contract to continue supplying fixed plant
maintenance services with long-term customer,
Rio Tinto, at its coastal and inland operations
in the Pilbara, WA. A more collaborative
contract model delivered improvements in the
areas of people, processes and systems to
support increased levels of activity under the
contract during the period.
IMAGES
Above Shell Australia’s Prelude FLNG facility,
Browse Basin, Western Australia.
Right Monadelphous employees assisting with
the shutdown of Dragline 102 at Yancoal’s
Mount Thorley Warkworth open cut mines,
Mount Thorley, New South Wales.
Left A Monadelphous employee making
structural repairs to Fortescue’s ore car fleet
as part of a maintenance and relining contract
in Port Hedland, Western Australia.
25
CASE STUDY
PRELUDE FLNG
Customer – Shell Australia
Location – Browse Basin, WA
Prelude is a Floating Liquefied
Natural Gas (FLNG) project located
approximately 475km north-north-east
of Broome, WA. The facility, which is
the first deployment of Shell’s FLNG
technology, extracts, liquefies and
stores gas at sea, before it is exported
to customers around the globe.
Monadelphous was awarded a
major long-term maintenance and
modification services contract for
the project in 2015. The contract,
with an initial seven-year term with
a further two two-year extension
options, includes the provision
of maintenance, brownfield
modifications and shutdown
services to the LNG process plant,
support utilities, hull and non-
process infrastructure including
accommodation and control rooms.
With hook-up and commissioning
nearing completion, the division
expects to grow its core maintenance
team when the facility is operational.
OPERATING AND FINANCIAL REVIEWMONADELPHOUS ANNUAL REPORT 2018 SUSTAINABILITY
27
Monadelphous recognises the importance of economic,
environmental and social sustainability in driving long-
term success for both the Company and its stakeholders.
Its goal of zero harm to its people and the environment
is at the forefront of everything it does. It strives to
continually add value to the communities in which
it operates, and recognises the value of working with
a diverse and inclusive group of people.
The Company has a unique, values-based
culture which is evident in the way things
are done and how decisions are made. A
commitment to delivering quality work,
improving productivity and implementing
innovative solutions is underpinned by its
pledge to “deliver what we promise”.
PRODUCTIVITY AND
INNOVATION
Monadelphous is committed to enhancing
its competitiveness and delivering value
to its customers through the application of
technological and innovative solutions.
During the year, the Company focussed
on developing and implementing solutions
that improved operational performance and
productivity levels. A variety of innovations
were implemented which enabled more
efficient work practices, including robotic
welding technologies, remote-operated
inspection devices and 3D visualisation tools,
as well as a number of process automation
and cloud collaboration technologies.
In addition, the Company continued to
enhance its purpose-built capability library
and customer relationship management
database in order to effectively store and
manage data for tender submissions, and
to support existing and future projects.
Monadelphous continued to identify and
embed opportunities to deliver operational
support services within a centralised and
standardised operating model. The Company’s
offshore support service centre in Manila saw
further growth over the course of the year and
continued to provide a range of cost effective
business and project related services, including
directly supporting its customers’ operations.
The Company is currently developing an
Innovation Framework to facilitate enhanced
collaboration across its business, including
with its customers, to further encourage
technologically advanced and innovative
solutions. The Framework is expected to
be launched by the end of the 2018
calendar year.
PEOPLE
Monadelphous recognises its greatest asset
is its people, and remains committed to
attracting, developing and retaining high
calibre employees who live its values and
actively contribute to the Company’s vision
and strategic objectives.
The number of employees at 30 June
2018 was 5,828, a slight decrease on
12 months earlier due to a number of
large Engineering Construction projects
approaching completion. This was largely
offset by an increase in activity on offshore
oil and gas maintenance contracts and an
overall general increase in maintenance
services activity.
Learning & Development
Job satisfaction, retention of key talent and
maintaining the ‘Monadelphous way’ of
delivering services are critical to the Company’s
ongoing success. As a result, the Company
continued to invest in the training and
development of its people, maximising their
capabilities and performance through improved
skills, knowledge and operational readiness.
Our Future Workforce Commitment
Graduate Development Program
As a nationally recognised program, the
Monadelphous Graduate Development
Program was once again identified as one
of Australia’s top ranking programs, placing
eleventh on the Australian Association of
Graduate Employers (AAGE) 2018 Top
Graduates Employers list, as voted by
Graduates across Australia. In conjunction,
its Vacation Program placed seventh on the
AAGE 2018 Top Intern Program list, as voted
by participating interns and vacation students.
The Company’s 2018 Graduate Program
received more than 1,600 applications,
resulting in 40 new recruits. It was
encouraging to see more than 40 per cent
female participation at the Company’s
graduate assessment centres, which were
used to help assess candidates’ cultural
IMAGES
Left A Monadelphous employee with an
employee from one of the Company’s sub-
contractors, Koodaideri Contracting Services,
at Fortescue Metals Group’s Solomon Hub
mine, Mount Sheila, Western Australia.
Above Monadelphous employees at prestart at
Yancoal’s Mount Thorley Warkworth open cut
mines, Mount Thorley, New South Wales.
OUR PROGRESS
Strong focus on key
talent management
and development
Launch of the Managing
Director’s Safety
Innovation Award
Indigenous employment
targets achieved across
the Company
MONADELPHOUS ANNUAL REPORT 2018 29
alignment with the business. The 2019
Program is also set for success with over
1,600 applications received across Perth,
Brisbane, Sydney and New Zealand.
Apprenticeship Program
Over the year, 25 new apprentices and
trainees commenced their careers with
Monadelphous, and nine apprentices
completed their training becoming fully
qualified boilermakers, mechanical fitters,
electricians, heavy duty mechanics and
carpenters. Traineeships covered both
trade and office support roles, including
surface preparation and coating, business
administration and telecommunications.
The Company’s Apprenticeship Program
offers a range of entry pathways, including
school-based, Indigenous, mature aged and
fast-track options.
Ongoing Development
Employee Development Centre
The Company’s Registered Training
Organisation (RTO), based in Bibra Lake,
Western Australia, continued to provide
pre and post-mobilisation training for the
Company’s workforce. With a focus on core
skills and high risk disciplines, the RTO
delivered more than 1,600 local and site-
based courses, and facilitated over 6,200
training interactions across the business
throughout the year.
Certificate IV and Diploma of
Leadership and Management
During the year, Monadelphous successfully
rolled-out the newest Certificate IV and
Diploma of Leadership and Management
courses. These courses aim to inspire
change in behaviours relating to leadership,
encourage creativity to develop and
implement innovative solutions that address
workplace challenges. These programs are
an extension of the Monadelphous Safety
Leadership Program and are available to new
and existing leaders within the business.
Leadership at Monadelphous
Senior Leadership Framework
A newly developed Senior Leadership
Capability Framework (SLCF) is expected to
be launched in late 2018. The Framework
will assist the Company to identify
and manage various senior leadership
capabilities which are required across
the business in order for the Company to
achieve its strategy.
Safety Leadership Program
In recognition of the critical role supervisors
and superintendents play in achieving
health, safety and environmental success,
the Company’s Safety Leadership Program
was developed as a certified program
which addresses core supervisory skills. As
a mandated course across the business,
participants are exposed to communication
and risk management skills, an introduction to
behaviourial based safety and the Company’s
occupational health and safety obligations.
Furthermore, this program is an introduction
to the newly implemented Certificate IV and
Diploma in Leadership and Management.
Emerging Leaders Program
Established in 2011, the Emerging Leaders
Program, which focusses on behavioural
leadership, provides the foundation for the
development of high performing individuals
who are new to, or on the cusp of leadership
roles, to develop their leadership capabilities
to match the business’ requirements. During
the year, 31 emerging leaders participated
in the Program, including a number of
employees who joined as graduates within
the last five years.
involve a range of activities across various
aspects of the business. A copy of the RAP
is available on the Company’s website.
In addition to the commitments outlined in
the RAP, the Company believes its vendors,
suppliers and industry partners are also
accountable to contribute to improving
opportunities for Aboriginal and Torres Strait
Islander peoples, and is committed to ensuring
transparency with its expectations and abilities
to engage Indigenous businesses.
Overall, the Company’s Indigenous
employment targets were achieved with 2.5
per cent of its total workforce identifying as
Aboriginal or Torres Strait Islander. In addition,
the Company worked with Ngalla Maya to
provide an opportunity for 22 Aboriginal
people to participate in a behavioural and
technical assessment for potential deployment
to active contracts. To date, the Company
has had nine successful candidates from
this assessment centre deployed to sites in
the Pilbara, including Newman, Paraburdoo,
Eastern Ridge and Boddington in the South
West of Western Australia.
DIVERSITY
Gender Equality
Monadelphous strives to create a workplace
where people of all backgrounds work
together in an environment where each
unique contribution is equally valued and
recognised. By continuing to improve the
workplace for all, the Company believes its
people will be inspired to contribute their
best efforts towards the goal of achieving
Monadelphous’ vision.
Formalised through its Diversity Policy, the
Company has a longstanding commitment
to workforce diversity with a focus on
Indigenous engagement and gender equality.
Indigenous Engagement
Monadelphous continues to recognise and
respect the traditional owners of the land
upon which it operates, and considers
traditional culture and heritage an important
part of its business. This importance extends
to the provision of fair and reasonable
engagement opportunities for Aboriginal and
Torres Strait Islander people, communities
and businesses.
During the period, the Company launched
its Stretch Reconciliation Action Plan (RAP)
for 2017 to 2020, which was endorsed by
Reconciliation Australia. The Plan formalises
the Company’s commitment to contributing
to a sustainable and accessible future for
Indigenous people. It identifies cultural,
economic and employment targets, which
The Company believes everyone should
have the opportunity to achieve their greatest
potential in workplaces where they feel
included and valued, regardless of gender.
Monadelphous submitted its 2017/18
Workplace Gender Equity Report, which can
be found on the Workplace Gender Equality
Agency and Monadelphous websites.
By the end of the 2018 calendar year, the
Company will have launched its Gender
Diversity and Inclusion (GD&I) Plan which
captures changes the Company is looking to
make over the course of the next three years
for women in its workplace. These actions
include improvements to its Paid Parental
Leave Scheme, diversity and inclusion
training for the Company’s leadership team
and a diversity and inclusion education
program for line managers, recruiters and
those with influence within the business.
Targets around female attrition have been set
at no greater than 10 per cent per annum
with an additional intake target of 20 per
cent or more of female engineers into the
Company’s vacation and graduate programs.
In conjunction with these targets, the
Company is developing a female engineering
cadetship which will aim to offer a minimum
of five cadetships per annum.
IMAGE Monadelphous General Manager -
Business Services, Lorna Rechichi, provides
a strategy update at the Perth head office.
and environments entered in previous years,
contributed to a 12-month total case injury
frequency rate (TCIFR) improvement of 23.2
per cent compared to the previous period,
to 3.28 incidents per million man-hours
worked. The lost time injury frequency rate
(LTIFR) for the year was 0.19 incidents per
million man-hours worked.
SAFETY
Monadelphous executes work underpinned
by the safety policy message The Safe Way is
the Only Way and is committed to zero harm.
During the year, the Company focussed on
critical risk controls and the importance of
enhancing behavioural safety, encouraging
conscious reflection and modifications to
behaviours to improve safety performance.
The Company also undertook a number
of other safety improvement initiatives
identified through a business-wide safety
survey and implemented the inaugural
Managing Director’s Safety Innovation
Award to promote and recognise health
and safety innovations across the business.
These initiatives, combined with the growing
maturity of operations in the new markets
OPERATING AND FINANCIAL REVIEWMONADELPHOUS ANNUAL REPORT 2018 31
IMAGES
Top Monadelphous employees inspecting
a completed cable ladder installation at
Alcoa’s Pinjarra Alumina Refinery, Pinjarra,
Western Australia.
Bottom Some of Monadelphous’ safety team
reviewing safety documents after returning
from site to the Perth head office.
ENVIRONMENT
COMMUNITY
Monadelphous’ commitment and responsibility
to the environments in which it operates are
diligently considered in developing its broader
approach to servicing customer needs and
executing works in a responsible manner.
The Company places a strong emphasis on
respecting the sites and communities in which
it operates and is committed to environmental
sustainability through the identification
and mitigation of risks and impacts to the
environment and community heritage.
The Company’s history of zero serious
environmental incidents continued this year,
in line with its target of zero harm.
The Company acknowledges that the move
towards a low-carbon economy will influence
change in a number of industries within which
it operates. Monadelphous is committed to
the ongoing monitoring of the Company’s
environmental risk profile and developing
innovative climate change solutions in
an effort to reduce emissions and energy
consumption within the Company’s operations
and those of its customers.
Recognising the growing importance of
renewable energy, Monadelphous’ growth
in the renewables sector, with the award of
a number of wind farm contracts during the
year, is a vital step in the Company’s journey
towards broader environmental, economic and
social sustainability.
Carbon Performance
Monadelphous recognises its obligation to
stakeholders to conduct its operations in an
environmentally responsible manner. Its overall
carbon footprint is deemed small considering
the nature of its operations, however the
Company continues to look for ways to reduce
its emissions. The largest environmental
impacts are those from energy consumption,
gases used in welding processes, fuel used in
vehicles, plant and equipment and electricity
usage across the business. Monadelphous
undertakes greenhouse and energy reporting
under the National Greenhouse and Energy
Reporting Act. The 2017/2018 period
generated reportable scope 1 and 2 carbon
emissions (CO2e) equivalent to 18,905
tonnes, significantly below the legislative
reporting threshold of 50,000 tonnes CO2e.
The Company’s total emissions were 45,922
tonnes CO2e.
Monadelphous routinely collects and
monitors carbon reporting data and
has assessed that its current reporting
is appropriate for all stakeholders in
consideration of the risks, impacts and
costs of reporting, and is consistent with the
principles of the ESG Reporting Guide for
Australian Companies (2015).
Monadelphous has a strong sense of
responsibility to the communities in which
it operates.
Over the year, the Company contributed
significantly to its social investment activities
which focussed on Indigenous outcomes,
secondary and tertiary education, ranging
from financial support for local Indigenous
engagement activities through to philanthropic
contributions and volunteering with local
universities and high schools.
Contributions for the year included the
sponsorship of the Western Australian Under
15s AFL Schoolgirls Team, logistical support
for Roy Hill’s fleet of pink ore cars in aid of
Breast Cancer awareness, supporting the local
community of Roebourne through the City of
Karratha’s NAIDOC Week Concert and a new
partnership with the University of Western
Australia’s Girls in Engineering program.
Other major community activities for the year
included celebrating the Company’s 30 year
anniversary in Roxby Downs, South Australia.
Celebrations included employees from the
Company’s Roxby Downs operations voting on
their top five local community organisations
and Monadelphous contributing $30,000
in support of these groups. Benefitting
community groups included the Royal
Flying Doctors Service, Roxby Junior Sports
Academy, Andamooka Observatory, Roxby
Downs Health Services and the Roxby Downs
District Rotary Club.
With the Company’s increasing diversification
into markets with greater exposure to urban
areas and the general public, systems and
processes continue to be enhanced in order to
manage and enhance stakeholder engagement
and promote positive initiatives within the
community.
GOVERNANCE
The Board of Directors of Monadelphous
Group Limited is responsible for establishing
the Company’s corporate governance
framework having regard to the ASX
Corporate Governance Council Principles
and Recommendations. The Board guides
and monitors the business and affairs of
Monadelphous on behalf of the shareholders,
by whom they are elected and to whom they
are accountable. The Company has in place
charters, policies and procedures which
support the framework to ensure a high
standard of governance is maintained.
Monadelphous’ full Corporate Governance
Statement, Board and Sub-Committee charters
and the Company’s governance policies, are
published on the Company’s website.
Monadelphous has exposure to a number
of material economic, environmental
and social sustainability risks which are
identified and managed within the Group’s
Risk Management Framework. Mitigation
of environmental risks includes the
maintenance and implementation of a certified
environmental management system (AS/
NZS ISO 14001) to ensure sustainable work
practices and monitoring and minimising
environmental impacts as far as practicable.
Monadelphous has been certified to the AS/
NZ 4801 and OHSAS 18001 for occupational
health and safety management systems, and
ISO 9001 quality management systems.
For more detail on the level of the Group’s risk
exposure and management of risks, refer to
the Corporate Governance Statement.
OPERATING AND FINANCIAL REVIEWMONADELPHOUS ANNUAL REPORT 2018 FIN AN CIAL RE POR T
33
FINANCIAL REPORT
CONTENTS
Directors’ Report
Directors’ Declaration
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
33
54
55
56
57
58
59
60
DIRECTORS’ REPORT
Your directors submit their report for the year ended 30 June 2018.
DIRECTORS
The names and details of the directors of the Company in office during the financial year and until the date of this report are as follows.
Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Calogero Giovanni Battista Rubino
Chairman
Appointed 18 January 1991
Resigned as Managing Director on 30 May 2003 and continued as Chairman
52 years experience in the construction and engineering services industry
Robert Velletri
Managing Director
Peter John Dempsey
Lead Independent Non-Executive Director
Appointed 26 August 1992
Mechanical Engineer, Corporate Member of Engineers Australia
Appointed as Managing Director on 30 May 2003
39 years experience in the construction and engineering services industry
Appointed 30 May 2003
Civil Engineer, Fellow of Engineers Australia, Member of the Australian Institute of
Company Directors
46 years experience in the construction and engineering services industry
Also a non-executive director of the following other publicly listed entity, Service Stream
Limited (ASX: SSM) – appointed 1 November 2010
Christopher Percival Michelmore
Independent Non-Executive Director
Appointed 1 October 2007
Civil Engineer, Fellow of Engineers Australia
Dietmar Robert Voss
Independent Non-Executive Director
Helen Jane Gillies
Independent Non-Executive Director
46 years experience in the construction and engineering services industry
Appointed 10 March 2014
Chemical Engineer, Member of the Australian Institute of Company Directors
44 years experience in the oil and gas, and mining and minerals industries
Appointed 5 September 2016
Solicitor, Master of Business Administration and Construction Law, Fellow of the
Australian Institute of Company Directors
22 years experience in the construction and engineering services industry
Also a non-executive director of the following other publicly listed entity, Yancoal
Australia Limited (ASX: YAL) – appointed 30 January 2018
COMPANY SECRETARIES
Philip Trueman
Company Secretary and Chief Financial Officer
Kristy Glasgow
Company Secretary
Appointed 21 December 2007
Chartered Accountant, Member of Chartered Accountants Australia and New Zealand
18 years experience in the construction and engineering services industry
Appointed 8 December 2014
Chartered Accountant, Member of Chartered Accountants Australia and New Zealand
13 years experience in the construction and engineering services industry
IMAGE Monadelphous employees at
the Parker Point Wharf completing an
inspection of marine maintenance works,
Dampier, Western Australia.
MONADELPHOUS ANNUAL REPORT 2018 DIRECTORS’ REPORT
DIRECTORS’ REPORT
INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE
CORPORATE INFORMATION (continued)
As at the date of this report, the interests of the directors in the shares and options of Monadelphous Group Limited were:
Nature of operations and principal activities
Engineering Services
Ordinary
Shares
Options over
Ordinary Shares
Monadelphous is a diversified services company operating in the resources, energy and infrastructure industry sector.
Services provided include:
35
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
EARNINGS PER SHARE
Basic Earnings Per Share
Diluted Earnings Per Share
DIVIDENDS
Final dividends declared
– on ordinary shares
Dividends paid during the year:
Current year interim
– on ordinary shares
Final for 2017
– on ordinary shares
CORPORATE INFORMATION
Corporate structure
Nil
Nil
Nil
Nil
Nil
Nil
1,022,653
2,100,000
78,000
30,000
2,852
4,078
Cents
76.11
76.07
Cents
$’000
32.00
30,115
30.00
28,199
30.00
28,174
• Fabrication, modularisation, offsite pre-assembly, procurement and installation of structural steel, tankage, mechanical and process
equipment, piping, demolition and remediation works
• Multi-disciplined construction services
• Plant commissioning
• Electrical and instrumentation services
• Process and non-process maintenance services
• Front-end scoping, shutdown planning, management and execution
• Water and waste water asset construction and maintenance
•
Irrigation services
• Construction of transmission pipelines and facilities
• Operation and maintenance of power and water assets
• Heavy lift and specialist transport
• Access solutions
• Dewatering services
• Corrosion management services
General
Monadelphous operates from major offices in Perth and Brisbane, with regional offices in Sydney, Newcastle, Houston (USA), Beijing
(China), Auckland and Christchurch (New Zealand), Ulaanbaatar (Mongolia) and Manila (Philippines), and a network of workshop facilities in
Kalgoorlie, Karratha, Port Hedland, Newman, Tom Price, Darwin, Roxby Downs, Gladstone, Hunter Valley, Mackay, Bibra Lake and Bunbury.
The consolidated entity’s revenue is earned predominantly from the resources, energy and infrastructure industry sector.
There have been no significant changes in the nature of those activities during the year.
Employees
The consolidated entity employed 5,828 employees as of 30 June 2018 (2017: 6,164 employees).
OPERATING AND FINANCIAL REVIEW
Review
A review of operations of the consolidated entity during the financial year, the results of those operations, the changes in the state of affairs
and the likely developments in the operations of the consolidated entity are set out in the Operating and Financial Review section of the Annual Report.
Monadelphous Group Limited is a company limited by shares that is incorporated and domiciled in Australia. Monadelphous Group Limited has
prepared a consolidated financial report incorporating the entities that it controlled during the financial year (refer note 19 in the financial report).
Operating results for the year
The registered office of Monadelphous Group Limited is located at:
59 Albany Highway
Victoria Park
Western Australia 6100
Revenue from services
Profit after income tax expense attributable to equity holders of the parent
2018
$’000
2017
$’000
1,734,881
1,245,183
71,479
57,563
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the parent entity or the consolidated entity during the financial year.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
DIRECTORS’ REPORT
DIRECTORS’ REPORT
37
SIGNIFICANT EVENTS AFTER REPORTING PERIOD
Dividends declared
On 20 August 2018, the directors of Monadelphous Group Limited declared a final dividend on ordinary shares in respect of the 2018 financial
year. The total amount of the dividend is $30,114,660 which represents a fully franked final dividend of 32 cents per share. This dividend has
not been provided for in the 30 June 2018 financial statements. The Monadelphous Group Limited Dividend Reinvestment Plan will apply to
the dividend.
Other than the items noted above, no matters or circumstances have arisen since the end of the financial year which 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 subsequent financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Refer to the Operating and Financial Review section of the Annual Report for information regarding the likely developments and future results.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Monadelphous Group Limited is subject to a range of environmental regulations.
During the financial year, Monadelphous Group Limited met all reporting requirements under any relevant legislation. There were no incidents
which required reporting.
The Company strives to continually improve its environmental performance.
SHARE OPTIONS
Unissued shares
As at the date of this report, there were no unissued ordinary shares under options.
Shares issued as a result of the exercise of options
During the financial year, no employees and directors have exercised any options.
No options have been exercised since the end of the financial year.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, the Company has paid premiums in respect of a contract insuring all the directors of Monadelphous Group Limited
against a liability incurred in their role as directors of the Company, except where:
(a) the liability arises out of conduct involving a wilful breach of duty; or
(b) there has been a contravention of Sections 182 or 183 of the Corporations Act 2001.
The total amount of insurance contract premiums paid during the financial year was $432,614 (2017: $351,568).
INDEMNIFICATION OF AUDITORS
The Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against
certain liabilities to third parties arising from the audit to the extent permitted by law. The indemnity does not extend to any liability resulting
from a negligent, wrongful or wilful act or omission by Ernst & Young. No payment has been made to indemnify Ernst & Young during or since
the audit.
INTERESTS IN CONTRACTS OR PROPOSED CONTRACTS WITH THE COMPANY
During or since the end of the financial year, no director has had any interest in a contract or proposed contract with the Company being an
interest the nature of which has been declared by the director in accordance with Section 300(11)(d) of the Corporations Act 2001.
REMUNERATION REPORT (AUDITED)
The Remuneration Report for the year ended 30 June 2018 outlines the Key Management Personnel remuneration arrangements of the Group
in accordance with the requirements of the Corporations Act 2001.
For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having the authority and
responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any
director (whether executive or otherwise) of the parent Company. For the purposes of this report, the term ‘executive’ encompasses the
Managing Director (MD), Chief Financial Officer (CFO) and Executive General Managers (EGM) of the Group.
Details of Key Management Personnel
(i) Directors
C. G. B. Rubino
Chairman
R. Velletri
Managing Director
P. J. Dempsey
Deputy Chair and Lead Independent Non-Executive Director
C. P. Michelmore
Independent Non-Executive Director
D. R. Voss
H. J. Gillies
Independent Non-Executive Director
Independent Non-Executive Director
(ii) Senior executives
D. Foti
Z. Bebic
Executive General Manager, Engineering Construction
Executive General Manager, Maintenance & Industrial Services
P. Trueman
Chief Financial Officer and Company Secretary
Remuneration Philosophy
The performance of the Company depends predominantly and primarily upon the quality of its employees. To prosper, the Company must
attract, motivate and retain highly skilled employees, which includes the directors and executives of the Company.
To this end, the Company embodies the principles of providing competitive rewards to attract and retain high calibre executives, and the linking
of executive rewards to the creation of shareholder value.
Remuneration Committee
The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation
arrangements for the directors and the executive management team.
The Remuneration Committee utilises remuneration survey data compiled by a recognised remuneration research organisation across a range
of industries and geographic regions. The remuneration survey data is updated every 6 months and is used to assess the appropriateness of
the nature and amount of remuneration of directors and the executive management team. This assessment is made with reference to relevant
employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board
and executive team.
In determining the remuneration levels of directors and executives, the Remuneration Committee takes into consideration the performance of the
Group, divisions and business units as well as that of the individual.
Remuneration Structure
In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate
and distinct.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
39
DIRECTORS’ REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
REMUNERATION REPORT (AUDITED) (continued)
Executive remuneration
Objective
Fixed remuneration
Objective
The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the
Company so as to:
• Reward executives for Group, divisional, business unit, and individual performance;
• Align the interests of executives with those of shareholders; and
• Ensure total remuneration is competitive by market standards.
All executives have non-fixed term employment contracts. The Company or executive may terminate the employment contract by providing 3
months written notice. The Company may terminate the contract at any time without notice if serious misconduct has occurred.
Monadelphous has a structured approach aimed at delivering fixed remuneration which is market competitive and rewards performance.
The Company participates in a number of respected remuneration surveys from which it receives quarterly or six-monthly market and forecast
data, and its remuneration system is designed to analyse detailed market and sector information at various levels.
The level of fixed remuneration is set to provide a base level of remuneration which is both appropriate to the position and competitive in the
market, taking into account the individual’s skills, experience and qualifications.
Fixed remuneration levels are considered annually by the Remuneration Committee having reviewed an individual’s performance, alignment
with the Company’s values and comparative remuneration levels in the market.
Structure
Structure
In determining the level and make-up of executive remuneration, the Remuneration Committee receives external survey data from a recognised
remuneration research organisation and considers market levels for comparable executive roles when making its recommendations to the Board.
Executive remuneration consists of a fixed remuneration element and a variable remuneration element. The variable remuneration element can
be provided under the Combined Reward Plan and/or the Employee Option Plan.
Remuneration Element
Individual Components
Purpose
Link to Performance
Fixed remuneration
Comprises base salary,
superannuation and
other benefits.
To provide market competitive
fixed remuneration appropriate
to the position and competitive
in the market, taking into
account the individual’s skills,
experience and qualifications.
Assessed at an individual
level based on performance
of responsibilities and
cultural alignment with the
Company’s values.
Variable remuneration
- Combined Reward Plan
Comprises cash payment,
and performance rights issued
under the Monadelphous
Group Limited Performance
Rights Plan.
To recognise and reward
the senior leaders of the
business who contribute to
the Group’s success, to align
these rewards to the creation
of shareholder wealth over
time and ensure the long term
retention of employees.
Performance assessed against
financial, safety, people,
customer satisfaction and
strategic progress targets set by
the Board on an annual basis.
Vesting of awards is dependent
on continuity of employment.
Variable remuneration
- Employee Option Plan
Comprises options issued under
the Monadelphous Group
Limited Employee Option Plan.
To retain and reward key
employees in a manner
aligned to the creation of
shareholder wealth.
Vesting of awards is dependent
on exceeding EPS growth targets
and continuity of employment.
Historically, the variable component of remuneration for executives has been in the form of short term additional cash payments and long term
share options. As disclosed in the 2016 and 2017 Financial Statements, Monadelphous undertook a review of its historical short term and long
term incentive programs to identify the most appropriate incentive plan for both executives and other employees that is best aligned to delivering
long term sustainable growth for the benefit of shareholders. The review lead to the implementation of the Combined Reward Plan (CR Plan)
which combines the key elements of the previous short and long term incentive plans, while staying true to Monadelphous’ remuneration
philosophy which has proven successful over many years. The CR Plan rewards performance of both the Company and the employee, acts
as a retention mechanism and links rewards to the creation of shareholder value through long term share ownership.
The review also concluded that the Monadelphous Group Limited Employee Option Plan should be retained, as an alternative or additional
incentive scheme for the executive management team, for use as appropriate at the discretion of the Board.
The proportion of fixed remuneration and variable remuneration is established for each member of the executive management team by the
Remuneration Committee. Tables 1 and 2 on pages 43 and 44 of this report detail the proportion of fixed and variable remuneration for each
of the executive directors and the senior executives of the Company.
Executive team members are given the opportunity to receive their fixed remuneration in a variety of forms including base salary,
superannuation and other benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue
cost for the Company.
The fixed remuneration component of the executives of the Company is detailed in Tables 1 and 2 on pages 43 and 44 of this report.
Variable remuneration – Combined Reward Plan (CR Plan)
Objective
The objective of the Combined Reward Plan (the CR Plan) is to recognise and reward the senior leaders of the business who positively
contribute to the Company’s success, to align these rewards to the creation of shareholder wealth over time and to ensure the long term
retention of the Company’s key talent.
The CR Plan includes service vesting conditions to ensure employee retention, and disposal restrictions to enable long term share ownership.
Structure
Under the CR Plan, the Board has the discretion to make awards on an annual basis subject to Company and individual performance. Awards
are delivered in the form of a combination of cash and Performance Rights.
For the year ended 30 June 2018 awards comprised of a 25% cash payment, which was paid shortly after award, with 75% of the award
to be issued in the form of Performance Rights. The number of Performance Rights to be issued is calculated using the arithmetic average of
the ten-day daily volume weighted average market price of the Company’s shares commencing on the second trading day after the record date
in respect of the FY18 Final Dividend. This calculation is the same as that used to determine the undiscounted share price for the dividend
reinvestment plan.
The Performance Rights component vests into shares in equal installments, one, two and three years subsequent to award, subject to the
employee remaining in the employ of the Company at those particular dates. The Performance Rights are exercisable into shares at those dates,
with one share issued for each vested Performance Right. The total number of shares issued are held in escrow until a date three years after the
Performance Rights were originally issued.
Unvested Performance Rights remain subject to Monadelphous’ clawback policy. The Board has the discretion as to the circumstances that
would result in a clawback of unvested Performance Rights. Factors resulting in material financial misstatement or under performance, gross
negligence, material lack of compliance, significant personal under performance or behaviour that is likely to damage the Company’s reputation,
would likely result in a clawback of unvested Performance Rights.
Performance Requirements
At the beginning of each financial year, the Board sets quantified, challenging, performance targets for the key performance areas of the
business, taking into account the prevailing economic conditions for the year ahead, the Company’s strategic objectives and the key risk factors
facing the business at that time. The targets are designed to focus the activities of the business on the key areas of performance that deliver long
term sustainable growth for shareholders.
For the year ended 30 June 2018, the Managing Director had a target opportunity of 40% of fixed remuneration, and a maximum opportunity
of 60%. Executives had a target opportunity of 30% of fixed remuneration, and a maximum opportunity of 45%. The target opportunity is
awarded for achieving the objectives set by the Board at the beginning of each financial year. In order for the maximum opportunity to be
awarded, performance must be a clear margin above the planned targets that were set.
At the end of each financial year, the Board assesses the Group’s net profit before tax performance against the budgeted target prior to any
awards being considered under the CR Plan.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
41
DIRECTORS’ REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Variable remuneration – Combined Reward Plan (CR Plan) (continued)
Performance Requirements (continued)
Once the Board has approved that an award can be made under the CR Plan, executive performance is assessed against the relevant targets
set at the beginning of the financial year at a Group, division, business unit and individual level. This assessment is taken into account when
determining the amount, if any, of the award to be made to each individual under the CR Plan, with annual awards being subject to approval
by the Remuneration Committee and Board. The following key performance areas (KPAs) are considered in the assessment process, covering a
number of financial and non-financial, Group and divisional measures of performance. The table below provides an overview of these KPAs and
the weighting applied when assessing performance.
Earnings Performance
Other
Earnings per Share
Divisional Contribution
Group KPAs
Divisional KPAs
60%
60%
30%
-
-
30%
40%
-
-
-
40%
40%
MD
CFO
EGM
Other Group or divisional KPAs relate to:
• Working capital management
• Safety performance
• People performance
• Customer satisfaction
• Strategic progress
The Board determined, based on the financial performance of the Company for the year ended 30 June 2018, that an award could be made
under the CR Plan. Post 30 June 2018, 89 employees were notified of their eligibility for Performance Rights under the CR Plan.
Group and Divisional performance for the year ended 30 June 2018 was as follows:
Earnings Performance
Other
REMUNERATION REPORT (AUDITED) (continued)
Variable remuneration – Combined Reward Plan (CR Plan) (continued)
Tables 1 and 2 on pages 43 and 44 of this report detail the proportion of fixed and variable remuneration for each of the executive directors
and the senior executives of the Company for the financial year ended 30 June 2018, and includes the cash component of the awards detailed
in the table on the previous page. The deferred Performance Right component of the award to be allocated early in the 2019 financial year will
be amortised over the one to three year service periods. Further details of the Performance Rights to be issued will be provided in the 2019
financial report.
Variable remuneration – Employee Option Plan
Objective
The objective of the Employee Option Plan is to retain and reward key employees in a manner which aligns this element of remuneration
with the creation of shareholder wealth. As previously mentioned, the Company has utilised the CR Plan to reward executives and other
employees for the year ended 30 June 2018, but retains the Employee Option Plan as an alternative or additional scheme for the executive
management team.
Structure
Monadelphous Group Limited Employee Option Plan
Equity-based grants to executives are at the discretion of the Remuneration Committee and Board, and may be delivered in the form of options.
Should any issue of options be considered, the individual performance rating of each executive and the annual cost to the Company, on an
individual basis, is taken into account when determining the amount, if any, of options granted.
In accordance with the rules of the Monadelphous Group Limited Employee Option Plan, options may only be exercised in specified window
periods (or at the discretion of the Board in particular circumstances):
25% 2 years after the options were issued
25% 3 years after the options were issued
50% 4 years after the options were issued
In addition, the ability to exercise options during each applicable window period is subject to the financial performance of the Company during
the option vesting period. The options shall only be capable of exercise during that window period where the prescribed performance hurdle has
been achieved. If, however, this hurdle is not achieved for a particular window period, rather than lapsing, the options will be re-tested during
all later window periods in respect of that issue and may become exercisable at that later date.
There are currently no options on issue under the Monadelphous Group Limited Employee Option Plan.
Divisional
Contribution
Working Capital
Management
Safety
People
Customer
Satisfaction
Strategic
Progress
Hedging of equity awards
Group
Engineering Construction
Maintenance & Industrial Services
Between target and maximum
On target
Between threshold and target
EPS
s
s
l
n
l
s
n
n
n
l
s
n
l
l
l
l
l
l
l
l
l
The following table sets out the awards under the CR Plan for each executive for the financial year ended 30 June 2018:
Executive
R. Velletri
P. Trueman
D. Foti
Z. Bebic
Total Award
Cash Component
$
419,700
183,200
251,700
238,700
$
(25%)
104,925
45,800
62,925
59,675
Performance
Rights Component
$
(75%)
314,775
137,400
188,775
179,025
% of Maximum
Opportunity Earned
68%
77%
70%
74%
The Company prohibits executives from entering into arrangements to protect the value of unvested equity-based awards. The prohibition
includes entering into contracts to hedge their exposure to options awarded as part of their remuneration package.
Non-executive director remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the
highest calibre, whilst incurring a cost which is acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to
time by a general meeting. The most recent determination was at the Annual General Meeting held on 22 November 2016 when shareholders
approved an aggregate remuneration of $750,000 in the ‘not to exceed sum’ paid to non-executive directors.
The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is
reviewed annually. The Board considers the fees paid to non-executive directors of comparable companies when undertaking the annual
review process.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
DIRECTORS’ REPORT
DIRECTORS’ REPORT
43
REMUNERATION REPORT (AUDITED) (continued)
Non-executive director remuneration (continued)
Non-executive director fees consist of base fees and committee chair fees. The Deputy Chair/Lead Independent Non-executive Director also
receives an additional fee. The payment of committee chair fees recognises the additional time commitment required by non-executive directors
to chair the Board committees. Committee members do not receive a separate fee for sitting on a committee.
The table below summarises Board and Committee fees payable to non-executive directors for the financial year ended 30 June 2018
(inclusive of superannuation):
Board Fees
Non-executive Director fee
Board Deputy Chair and Lead Independent Non-executive Director additional fee
Committee Chair Fees
Audit
Remuneration
Nomination
$
110,000
20,000
10,000
10,000
*
* The Nomination Committee is chaired by the Executive Chairman.
Non-executive directors have long been encouraged by the Board to hold shares in the Company (purchased by the director on-market).
It is considered good governance for directors to have a stake in the Company.
Fees for non-executive directors are not linked to the performance of the Company. The non-executive directors do not receive retirement
benefits, nor do they participate in any incentive programs.
The remuneration of non-executive directors for the year ended 30 June 2018 is detailed in Table 1 on page 43 of this report.
Employment contracts
All executives have non-fixed term employment contracts. The Company or executive may terminate the employment contract by providing
3 months written notice. The Company may terminate the contract at any time without notice if serious misconduct has occurred.
Company performance
The profit after income tax expense and basic earnings per share for the Group for the last five years is as follows:
2018
$’000
2017
$’000
2016
$’000
2015
$’000
2014
$’000
Profit after income tax expense attributable to equity
holders of the parent
Basic earnings per share
Share price as at 30 June
71,479
76.11c
$15.06
57,563
61.41c
$13.99
67,014
105,825
146,510
71.77c
113.91c
159.05c
$7.46
$9.37
$15.71
A review of the Company’s performance and returns to shareholders over the last five years has been provided on page 16 of this report.
REMUNERATION REPORT (AUDITED) (continued)
Remuneration of Key Management Personnel
Table 1: Remuneration for the year ended 30 June 2018
Short Term Benefits
Post Employment
Long Term
Benefits
Share-Based
Payments
Salary
& Fees
$
Non
Monetary
$
Cash
STI
$
Super-
annuation
$
Retirement
Benefits
$
Leave
$
Options
LTI
$
Total
Performance
Related
%
Total
$
Total
Options
Related
%
Non-Executive Directors
P. J. Dempsey
127,854
C. P. Michelmore
109,589
D. R. Voss
H. J. Gillies
100,457
100,457
7,753
6,645
6,092
6,092
Subtotal
Non-Executive
Directors
Executive Directors
438,357
26,582
C. G. B. Rubino
433,802
26,306
-
-
-
-
-
-
12,146
10,411
9,543
9,543
41,643
20,049
R. Velletri
914,398
65,671
104,925
20,049
Subtotal
Executive
Directors
1,348,200
91,977
104,925
40,098
Other Key Management Personnel
D. Foti
Z. Bebic
706,478
47,550
62,925
20,049
614,608
46,192
59,675
20,049
P. Trueman
459,440
35,328
45,800
20,049
Subtotal Other
Key Management
Personnel
1,780,526
129,070
168,400
60,147
Total
3,567,083
247,629
273,325
141,888
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,640
30,322
-
-
-
-
-
-
147,753
126,645
116,092
116,092
506,582
488,797
-
-
-
-
-
-
- 1,135,365
9.24
38,962
- 1,624,162
6.46
25,405
36,123
13,669
-
-
-
862,407
776,647
574,286
7.30
7.68
7.98
75,197
- 2,213,340
7.61
114,159
- 4,344,084
6.29
-
-
-
-
-
-
-
-
-
-
-
-
-
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
DIRECTORS’ REPORT
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Remuneration of Key Management Personnel
Table 2: Remuneration for the year ended 30 June 2017
REMUNERATION REPORT (AUDITED) (continued)
Additional disclosures relating to options and shares
Table 5: Option holdings of Key Management Personnel
45
Short Term Benefits
Post Employment
Long Term
Benefits
Share-Based
Payments
Salary
& Fees
$
Non
Monetary
$
Cash
STI
$
Super-
annuation
$
Retirement
Benefits
$
Leave
$
Options
LTI
$
Total
Performance
Related
%
Total
$
Total
Options
Related
%
Non-Executive Directors
P. J. Dempsey
124,201
C. P. Michelmore
103,653
D. R. Voss
H. J. Gillies*
93,607
72,005
6,296
5,255
4,745
3,650
Subtotal
Non-Executive
Directors
Executive Directors
393,466
19,946
C. G. B. Rubino
441,619
22,388
R. Velletri
914,543
53,929
Subtotal
Executive
Directors
1,356,162
76,317
Other Key Management Personnel
D. Foti
Z. Bebic
713,137
42,072
596,600
39,018
P. Trueman
436,603
29,407
Subtotal Other
Key Management
Personnel
1,746,340
110,497
Total
3,495,968
206,760
-
-
-
-
-
-
-
-
-
-
-
-
-
11,799
9,847
8,893
6,840
37,379
19,616
19,616
39,232
19,616
19,616
19,616
58,848
135,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,013
17,377
-
-
-
-
-
-
142,296
118,755
107,245
82,495
450,791
491,636
- 1,005,465
25,390
- 1,497,101
9,305
32,767
10,038
-
-
-
784,130
688,001
495,664
52,110
- 1,967,795
77,500
- 3,915,687
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* H. Gillies was appointed as a Non-Executive Director on 5 September 2016. The balances shown in Table 2 comprise remuneration from the date of
appointment.
Table 3: Compensation options: Granted during the years ended 30 June 2018 and 30 June 2017
During the years ended 30 June 2018 and 30 June 2017, no options were granted as equity compensation benefits to Key
Management Personnel.
Table 4: Shares issued on exercise of compensation options during the year ended 30 June 2018
Options held in
Monadelphous Group Limited
Directors
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
Executives
D. Foti
Z. Bebic
P. Trueman
Total
Shares held in
Monadelphous Group Limited
Directors
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
Executives
D. Foti
Z. Bebic
P. Trueman
Total
Balance at
Beginning of Period
1 July 2017
Granted as
Remuneration
Options Exercised
and Lapsed
Net Change Other
Balance at
End of Period
30 June 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,022,653
2,100,000
78,000
50,000
2,852
-
359,316
-
-
4,612,821
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,000,000)
-
-
(20,000)
-
4,078
(230,000)
129,316
-
-
-
-
(1,245,922)
3,366,899
-
-
-
-
-
-
-
-
-
-
Balance at
End of Period
30 June 2018
1,022,653
2,100,000
78,000
30,000
2,852
4,078
Table 6: Shareholdings of Key Management Personnel
Balance at
Beginning of Period
1 July 2017
Granted as
Remuneration
On Excercise
of Options
Net Change Other
During the year ended 30 June 2018, no shares were issued on exercise of compensation options by Key Management Personnel.
Loans to Key Management Personnel and their related parties
No directors or executives, or their related parties, had any loans during the reporting period.
Other transactions and balances with Key Management Personnel and their related parties
There were no other transactions and balances with Key Management Personnel or their related parties.
END OF REMUNERATION REPORT
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
47
DIRECTORS’ REPORT
DIRECTORS’ REPORT
DIRECTORS’ MEETINGS
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended
by each director are shown in the table below.
Directors’ Meetings
Audit
Remuneration
Nomination
Meetings of Committees
12
11
12
12
11
12
12
7
-
-
7
-
7
7
3
-
-
-
3
3
3
2
2
-
2
2
2
2
Number of meetings held:
Number of meetings attended:
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
COMMITTEE MEMBERSHIP
The directors have received an independence declaration from the auditor of Monadelphous Group Limited, as shown on page 48.
The following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit
services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of
each type of non-audit service provided means that auditor independence was not compromised.
Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:
Tax compliance services
Assurance related
Signed in accordance with a resolution of the directors.
$
30,411
31,000
61,411
As at the date of this report, the Company had an audit committee, a remuneration committee and a nomination committee.
Members acting on the committees of the Board during the year were:
Audit
Remuneration
Nomination
C. G. B. Rubino
Chairman
Perth, 20 August 2018
P. J. Dempsey (c)
C. P. Michelmore (c)
D. R. Voss
H. J. Gillies
D. R. Voss
H. J. Gillies
Note: (c) Designates the chair of the committee.
ROUNDING
C. G. B. Rubino (c)
C. P. Michelmore
P. J. Dempsey
H. J. Gillies
D. R. Voss
The amounts contained in this report and in the financial report have been rounded to the nearest thousand dollars ($’000) (where rounding
is applicable) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191. The Company is an entity to which the legislative instrument applies.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Monadelphous Group Limited
support and have adhered to the principles of Corporate Governance.
The Company’s Corporate Governance Statement is detailed on the Company’s website.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDIT REPORT
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
49
Auditor’s Independence Declaration to the Directors of Monadelphous
Group Limited
As lead auditor for the audit of Monadelphous Group Limited for the financial year ended 30 June 2018, I
declare to the best of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
Ernst & Young
D S Lewsen
Partner
20 August 2018
Independent auditor’s report to the members of Monadelphous Group
Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Monadelphous Group Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2018, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018
and of its consolidated financial performance for the year ended on that date; and
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
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 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 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 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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DL:JT:MND:010
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
DL:JT:MND:009
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
INDEPENDENT AUDIT REPORT
INDEPENDENT AUDIT REPORT
51
Recognition of revenues and profits on long-term contracts
Information other than the financial report and auditor’s report thereon
Why significant
How our audit addressed the key audit matter
The Group’s business involves entering into
contractual relationships with customers to
provide a range of services. A significant
proportion of the Group’s revenues and profits
are derived from long-term contracts.
Revenue recognition involves a significant degree
of judgement, with estimates being made to:
We examined all key contracts and enquired with the
Group for each of these contracts to understand the
specific terms and risks, which in turn allowed us to
assess the recognition of revenue.
We evaluated and tested the relevant IT systems and
assessed the operating effectiveness of controls over
the recording of revenue recognised in the financial
report, including controls relating to:
► Assess the total contract costs
► Assess the stage of completion of the
contract
► Forecast the profit margin after taking into
consideration additional revenue arising from
variations to the original contract
► Appropriately provide for loss making
contracts.
The Group’s accounting policies and disclosures
for revenue are detailed in General Information –
Key Judgements – Revenue, Note 1 Revenue and
Other Income and Note 7 Inventories of the
financial report.
► Contract reviews performed by the Group that
included estimating total costs, stage of completion
of contracts, profit margin and evaluating contract
profitability
► Revenue recording and billing processes
► Contract cost recording processes including the
purchases, payments and payroll processes.
For a sample of contracts with a delivery schedule of
greater than 12 months we performed the following
additional procedures:
► Understood the performance and status of the
contracts through enquiries with the key executives
having oversight over the various contract
portfolios
► Assessed the contract status through the
examination of externally generated evidence, such
as approved variations and customer
correspondence
► Analysed the Group’s estimates for total contract
costs and forecast costs to complete, including
taking into account the historical accuracy of such
estimates
► Assessed the provisions for loss making contracts
and whether these appropriately reflected the
expected contractual positions
► Assessed the Group’s accounting policies and the
adequacy of its related disclosures in the financial
report.
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2018 Annual Report, but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon with the exception of the Remuneration Report and our related
assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information 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, 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.
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 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 financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters relating to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
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 free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a 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 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
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
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
material misstatement resulting from fraud is higher than for one resulting from error, as fraud 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
INDEPENDENT AUDIT REPORT
INDEPENDENT AUDIT REPORT
53
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
Ernst & Young
D S Lewsen
Partner
Perth
20 August 2018
►
►
►
►
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 directors’ 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.
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.
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 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 to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year 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.
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2018.
In our opinion, the Remuneration Report of Monadelphous Group Limited for the year ended 30 June
2018, complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
DIRECTORS’ DECLARATION
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2018
In accordance with a resolution of the Directors of Monadelphous Group Limited, I state that:
1) In the opinion of the directors:
(a) the financial statements, notes and the additional disclosures included in the Directors’ Report designated as audited, of the
consolidated entity are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the year
ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and
payable; and
(c) the financial statements and notes also comply with International Financial Reporting Standards as disclosed on page 60.
Continuing Operations
REVENUE
Cost of services rendered
GROSS PROFIT
Other income
2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the
Business development and tender expenses
Corporations Act 2001 for the year ended 30 June 2018.
3) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the closed
group identified in note 19 will be able to meet any obligations or liabilities to which they are or may become subject to, by virtue of the
Deed of Cross Guarantee.
On behalf of the Board
C. G. B. Rubino
Chairman
Perth, 20 August 2018
Occupancy expenses
Administrative expenses
Finance costs
Unrealised foreign currency gain/(loss)
PROFIT BEFORE INCOME TAX
Income tax expense
PROFIT AFTER INCOME TAX
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
NON-CONTROLLING INTERESTS
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
55
Notes
2018
$’000
2017
$’000
1
1,737,632
1,249,085
(1,590,821)
(1,119,327)
146,811
129,758
5,430
(17,221)
(3,525)
(29,871)
(452)
1,673
6,865
(22,096)
(3,305)
(27,065)
(734)
(759)
102,845
82,664
(30,570)
(24,144)
72,275
58,520
71,479
796
72,275
76.11
76.07
57,563
957
58,520
61.41
61.34
1
2
3
4
4
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
57
NET PROFIT FOR THE YEAR
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Net gain on available-for-sale financial asset
Income tax effect
Foreign currency translation
2018
$’000
2017
$’000
72,275
58,520
905
(271)
634
267
(80)
187
(910)
(134)
OTHER COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR, NET OF TAX
(276)
53
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
71,999
58,573
ATTRIBUTABLE TO:
EQUITY HOLDERS OF THE PARENT
NON-CONTROLLING INTERESTS
71,203
796
71,999
57,616
957
58,573
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets and goodwill
Investment in joint venture
Deferred tax assets
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Non-Controlling Interests
TOTAL EQUITY
Notes
5
6
7
8
9
10
3
11
12
13
3
14
13
14
3
17
18
18
2018
$’000
2017
$’000
208,773
288,371
47,200
544,344
101,983
3,120
1,437
35,304
2,806
241,909
245,826
69,774
557,509
79,052
3,345
1,911
25,980
1,901
144,650
112,189
688,994
669,698
164,008
183,063
7,944
8,522
94,106
6,904
3,603
86,042
274,580
279,612
13,027
5,259
-
6,856
4,972
14
18,286
11,842
292,866
291,454
396,128
378,244
125,703
30,292
238,486
394,481
1,647
396,128
122,965
31,048
223,380
377,393
851
378,244
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
59
Attributable to equity holders
Issued Capital
$’000
Share-Based
Payment Reserve
$’000
Foreign Currency
Translation Reserve
$’000
Retained
Earnings
$’000
Non-controlling
Interests
$’000
Available-for-sale
Reserve
$’000
Total
$’000
378,244
(276)
72,275
187
634
-
634
71,999
-
-
-
(480)
2,738
(56,373)
At 1 July 2017
122,965
30,142
Other comprehensive income
Profit for the period
Total comprehensive
income for the period
Transactions with owners
in their capacity as owners
Share-based payments
Dividend reinvestment plan
Dividends paid
At 30 June 2018
-
-
-
-
2,738
-
-
-
-
(480)
-
-
719
(910)
223,380
-
-
71,479
(910)
71,479
-
-
-
-
-
(56,373)
851
-
796
796
-
-
-
125,703
29,662
(191)
238,486
1,647
821
396,128
Attributable to equity holders
Issued Capital
$’000
Share-Based
Payment Reserve
$’000
Foreign Currency
Translation Reserve
$’000
Retained
Earnings
$’000
Non-controlling
Interests
$’000
Available-for-sale
Reserve
$’000
Total
$’000
At 1 July 2016
120,723
29,102
853
218,317
(106)
-
368,889
Other comprehensive income
Profit for the period
Total comprehensive
income for the period
Transactions with owners
in their capacity as owners
Share-based payments
-
-
-
-
Dividend reinvestment plan
2,242
Dividends paid
-
-
-
-
1,040
-
-
(134)
-
-
57,563
(134)
57,563
-
-
-
-
-
(52,500)
-
957
957
-
-
-
187
-
53
58,520
187
58,573
-
-
-
1,040
2,242
(52,500)
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Borrowing costs
Other income
Income tax paid
Dividends received
Notes
2018
$’000
2017
$’000
1,873,522
1,430,396
(1,793,937)
(1,305,002)
2,573
(493)
2,496
3,395
(705)
2,726
(32,692)
(19,617)
178
-
NET CASH FLOWS FROM OPERATING ACTIVITIES
5
51,647
111,193
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Repayment of loans to joint ventures and associates
Payment of loans to joint ventures and associates
Investment in available-for-sale financial asset
Acquisition of controlled entities
Other
3,442
(25,039)
1,833
(2,449)
-
(1,414)
-
6,866
(12,368)
2,438
(3,753)
(1,634)
(5,433)
54
20
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(23,627)
(13,830)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid
Proceeds from borrowings
Repayment of borrowings
Payment of finance leases
(53,635)
(50,258)
-
(1,500)
(6,400)
2,400
(2,400)
(7,886)
NET CASH FLOWS USED IN FINANCING ACTIVITIES
(61,535)
(58,144)
At 30 June 2017
122,965
30,142
719
223,380
851
187
378,244
NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS
Net foreign exchange differences
Cash and cash equivalents at beginning of period
(33,515)
379
39,219
(825)
241,909
203,515
CASH AND CASH EQUIVALENTS AT END OF PERIOD
5
208,773
241,909
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GENERAL INFORMATION
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GENERAL INFORMATION
FOR THE YEAR ENDED 30 JUNE 2018
61
GENERAL INFORMATION
The consolidated financial report of Monadelphous Group Limited (the Group) and its subsidiaries for the year ended 30 June 2018 was
authorised for issue in accordance with a resolution of directors on 20 August 2018.
Monadelphous Group Limited is a for profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded
on the Australian Securities Exchange. The Group’s registered office is 59 Albany Highway, Victoria Park, Western Australia.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
Basis of preparation
The financial report is a general purpose financial report, which:
• has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board as applicable to a for-profit entity.
• has also been prepared on a historical cost basis except for available-for-sale financial assets held at fair value.
•
is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under the
option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. The Company
is an entity to which the legislative instrument applies.
• adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the Group
and effective for reporting periods beginning on or before 1 July 2017 (refer to note 31).
• does not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2018. Control is
achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Generally, there is a presumption that a majority of voting rights results in control.
A list of controlled entities (subsidiaries) at year end is contained in note 19. Consolidation of the subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control over the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed during the year are included in the consolidated financial statements from the date the Group gains control until the date
the Group ceases to control the subsidiary.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses
resulting from intra-group transactions have been eliminated.
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-
controlling interests, even if this results in the non-controlling interests having a debit balance.
Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be
measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the
liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer. Acquisition-related costs are expensed
as incurred.
Foreign currency translation
Functional and presentation currency
Each entity in the Group determines its own functional currency. Both the functional and presentation currencies of Monadelphous Group
Limited, its Australian subsidiaries and its Papua New Guinea subsidiary (Monadelphous PNG Ltd) are Australian dollars (A$).
The functional currency is United States dollars (US$) for the Hong Kong subsidiary (Moway International Limited), the Singapore subsidiary
(Monadelphous Singapore Pte Ltd) and the US subsidiaries (Monadelphous Inc. and Monadelphous Marcellus LLC). The functional currency
of the Chinese subsidiary (Moway AustAsia Steel Structures Trading (Beijing) Company Limited) is Chinese Renminbi (RMB). The functional
currency of the New Zealand subsidiary (Monadelphous Engineering NZ Pty Ltd) is New Zealand dollars (NZD). The functional currency of the
Mongolian subsidiary (Monadelphous Mongolia LLC) is Mongolian Tugrik (MNT).
GENERAL INFORMATION (continued)
Foreign currency translation (continued)
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rate ruling at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of
the initial transaction.
Translation of Group companies’ functional currency to presentation currency
As at the reporting date the assets and liabilities of the foreign operations are translated into the presentation currency of Monadelphous Group
Limited at the rate of exchange ruling at the reporting date and the income statements are translated at the weighted average exchange rates for
the year. Exchange variations arising from the translation are recognised in the foreign currency translation reserve in equity.
Other accounting policies
Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial
statements are provided throughout the notes to the financial statements or at note 31.
Key judgements and estimates
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts
in the financial statements. Actual results may differ from these estimates under different assumptions and conditions and may materially affect
financial results or the financial position reported in future periods. Management have identified the following critical accounting policies for
which significant judgements, estimates and assumptions are made:
Revenue
Revenue and cost of sales are recognised in the income statement by reference to the stage of completion for construction contracts.
Fundamental to the calculation of the percentage of completion is a reliable estimate of project revenues and project costs. Various factors
contribute to the Group’s ability to reliably determine these estimates including, but not limited to, a thorough review process of all project costs
and revenues, and the experience and knowledge of project management.
In determining revenues and expenses for construction contracts, management make key assumptions regarding estimated revenues and
expenses over the life of the contracts. Key assumptions regarding costs to complete contracts include estimation of labour, technical costs,
impact of delays and productivity. Changes in these estimation methods could have a material impact on the reported results of the Group.
Judgement is used in determining the point at which profit recognition commences. Generally the Group does not commence profit recognition
on contracts in the early stages of completion.
Taxation
Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised in the consolidated statement
of financial position. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are
recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future
taxable profits.
Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. Judgements are also
required about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there
is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax
liabilities recognised in the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In
such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustments, resulting in a
corresponding credit or charge to the income statement.
Impairment
Refer to notes 8 and 9 for details.
Workers Compensation
Refer note 14 for details.
Consolidation of MGJV Pty Ltd
Refer to note 19 for details.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2018
1. REVENUE AND OTHER INCOME
Rendering of services and construction contract revenue
Finance revenue
Dividends received
Revenue
Net gains on disposal of property, plant and equipment
Other income
Other income
Recognition and measurement
2018
$’000
2017
$’000
1,734,881
1,245,183
2,573
178
3,848
54
1,737,632
1,249,085
2,934
2,496
5,430
4,139
2,726
6,865
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also
be met before revenue is recognised:
Rendering of Services
Where the contract outcome can be reliably measured revenue is recognised as services are rendered to the customer for maintenance
contracts. For construction contracts refer to the accounting policy below.
Where the contract outcome cannot be reliably measured contract costs are recognised as an expense as incurred, and where it is
probable that the costs will be recovered, revenue is recognised only to the extent that costs have been incurred. This also applies to
construction contracts.
Construction contracts
When accounting for construction contracts, the contracts are either combined or segmented if this is deemed necessary to reflect the
substance of the agreement. Revenue arising from fixed price contracts is recognised in accordance with the percentage of completion
method. Stage of completion is agreed with the customer on a work certified to date basis, as a percentage of the overall contract.
Revenue from cost plus contracts is recognised by reference to the recoverable costs incurred plus a percentage of fees earned during the
financial year. The percentage of fee earned during the financial year is based on the stage of completion of the contract.
Where a loss is expected to occur from a construction contract the excess of the total expected contract costs over expected contract
revenue is recognised as an expense immediately.
Interest income
Revenue is recognised as interest accrues using the effective interest method.
63
2018
$’000
2017
$’000
14
438
452
17,222
625
17,847
923,451
64,189
987,640
107
627
734
17,892
562
18,454
697,999
43,615
741,614
12,971
14,620
2. EXPENSES
Finance costs
Loans and overdrafts
Finance charges payable under finance leases and hire purchase contracts
Depreciation and amortisation
Depreciation expense
Amortisation of intangible assets
Employee benefits expense
Employee benefits expense
Defined contribution superannuation expense
Lease payments and other expenses
Minimum lease payments – operating lease
Government grants included in the income statement
2,501
6,028
Recognition and measurement
Finance costs
The Group does not currently hold qualifying assets but, if it did, the borrowing costs directly associated with the qualifying assets would
be capitalised. All other finance costs are expensed as incurred.
Depreciation and amortisation
Refer to notes 8 and 9 for details on depreciation and amortisation.
Employee benefits expense
Refer to note 14 for employee benefits expense and note 26 for share-based payments expense.
Contributions to defined contribution superannuation plans are recognised as an expense as they become payable.
Operating leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. The
minimum lease payments of operating leases are recognised as an expense on a straight line basis over the lease term.
Government Grants
The Group recognises the excess of the research and development (R&D) tax offset over the statutory rate (the R&D offset) being an
additional 8.5% deduction as a government grant when there is reasonable assurance it will be received and any attached conditions
will be complied with. As the grant relates to R&D expenditure already incurred it is recognised in the income statement in the period it
became receivable as a reduction to cost of sales.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2018
2018
$’000
2017
$’000
34,791
644
(4,865)
30,570
28,484
(360)
(3,980)
24,144
271
80
102,845
30,854
240
(750)
226
30,570
82,664
24,799
440
(1,808)
713
24,144
3.
INCOME TAX
The major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Adjustments in respect of previous years
Deferred income tax
Temporary differences
Income tax expense reported in the income statement
Statement of Comprehensive Income
Deferred tax related to items recognised in
Statement of Comprehensive income during the year:
Unrealised gain on Available-for-sale financial assets
Tax reconciliation
A reconciliation between tax expense and the product of accounting profit before
income tax multiplied by the Group’s applicable income tax rate is as follows:
Accounting profit before income tax
Income tax rate of 30% (2017: 30%)
- Share based payment expense
- R&D
- Other
Aggregate income tax expense
Recognised deferred tax assets and liabilities
Opening balance
Charged to income
Charged to equity
Other / payments
Closing balance
Amounts recognised on the consolidated
statement of financial position:
Deferred tax asset
Deferred tax liability
2018
$’000
Current Income Tax
2018
$’000
Deferred Income Tax
2017
$’000
Current Income Tax
2017
$’000
Deferred Income Tax
(3,603)
(35,435)
-
30,516
(8,522)
(1,124)
(28,124)
-
25,645
(3,603)
25,966
4,865
(271)
4,744
35,304
35,304
-
35,304
22,066
3,980
(80)
-
25,966
25,980
(14)
25,966
65
2018
$’000
2017
$’000
29,709
1,425
4,875
36,009
(705)
35,304
-
705
705
(705)
-
25,992
-
1,900
27,892
(1,912)
25,980
1,915
11
1,926
(1,912)
14
3.
INCOME TAX (continued)
Deferred income tax at 30 June relates to the following:
Deferred tax assets
Provisions
Depreciation
Other
Gross deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
Accelerated depreciation
Other
Gross deferred tax liabilities
Set-off against deferred tax assets
Net deferred tax liabilities
Unrecognised temporary differences
At 30 June 2018, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries, as the Group
has no liability for additional taxation should unremitted earnings be remitted (2017: $nil).
Tax consolidation
Monadelphous Group Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from
1 July 2003. Members of the tax consolidated group have entered into a tax funding agreement. The head entity, Monadelphous Group
Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The
Group has applied the Group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to
members of the tax consolidated group.
In addition to its own current and deferred tax amounts, Monadelphous Group Limited also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or
payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a
contribution to (or distribution from) wholly-owned tax consolidated entities.
Recognition and measurement
Current taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the
taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that
are enacted or substantively enacted by the reporting date.
Deferred Taxes
Deferred income tax is provided for using the full liability balance sheet approach on all temporary differences at the reporting date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that
future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax
assets and deferred tax liabilities are offset only if a legally enforceable right exists and they relate to the same taxable entity and the same
taxation authority.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
67
4. EARNINGS PER SHARE
The following reflects the income and share data used
in the calculation of basic and diluted earnings per share:
Net profit attributable to ordinary equity holders of the parent
Earnings used in calculation of basic and diluted earnings per share
Number of shares
Weighted average number of ordinary shares on issue
used in the calculation of basic earnings per share
Effect of dilutive securities
Shares issuable associated with Arc West Group Pty Ltd
acquisition (refer to note 20)
Adjusted weighted average number of ordinary shares
used in calculating diluted earnings per share
2018
$’000
2017
$’000
71,479
71,479
57,563
57,563
Number
Number
93,916,738
93,730,313
49,372
119,031
93,966,110
93,849,344
Conversions, calls, subscriptions or issues after 30 June 2018:
Since the end of the financial year, no holders of employee options have exercised the rights of conversion to acquire ordinary shares.
Calculation of earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity
(other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members of the parent, adjusted for:
• costs of servicing equity (other than dividends);
•
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses;
and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary
shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
5. CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, cash and cash equivalents
comprise the following at 30 June:
Cash balances comprise:
Cash at bank
Short term deposits
Reconciliation of net profit after tax to the net cash flows from operating activities
Net profit
Adjustments for
Depreciation of non-current assets
Amortisation and impairment of intangible assets
Net profit on sale of property, plant and equipment
Impairment of other non-current assets
Share-based payment expense/(credit)
Unrealised foreign exchange (gain)/loss
Other
Changes in assets and liabilities
(Increase)/decrease in receivables
(Increase)/decrease in inventories
Increase in deferred tax assets
Decrease in payables
Increase/(decrease) in provisions
Increase in income tax payable
Decrease in deferred tax liabilities
2018
$’000
2017
$’000
183,773
25,000
208,773
156,909
85,000
241,909
72,275
58,520
17,222
625
(2,934)
-
(480)
(1,673)
1,304
(40,086)
22,682
(9,252)
(20,172)
7,231
4,919
(14)
17,892
943
(4,139)
236
1,040
759
2,211
79,482
(16,225)
(3,773)
(27,607)
(418)
2,479
(207)
Net cash flows from operating activities
51,647
111,193
Non-cash financing and investing activities
Hire purchase transactions:
During the year, the consolidated entity acquired plant and equipment by means of hire purchase agreements with an aggregate fair
market value of $15,152,164 (2017: $4,069,735).
Reconciliation of liabilities arising from financing activities
Hire purchase liabilities
Loan
Recognition and measurement
2017
$ ’000
12,219
1,541
13,760
Cash flows
$ ’000
(6,400)
(1,541)
(7,941)
Non-cash changes
New leases
$ ’000
15,152
-
15,152
2018
$ ’000
20,971
-
20,971
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and on hand and short term deposits
with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value, net of outstanding bank overdrafts.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
69
7.
INVENTORIES
Construction work in progress
Cost incurred to date plus profit recognised
Consideration received and receivable as progress billings
Represented by:
Amounts due to customers
Amounts due from customers
Amounts due to customers
Notes
2018
$’000
2017
$’000
1,432,940
1,422,765
(1,451,339)
(1,454,382)
(18,399)
(31,617)
12
65,599
47,200
101,391
69,774
Advances received for construction work not yet commenced or for committed subcontractor work not yet received are recognised as a
current liability in trade and other payables. Refer note 12.
Credit risk of amounts due from customers
Details regarding credit risk of amounts due from customers are disclosed in note 22.
Recognition and measurement
Construction work-in-progress is stated at the aggregate of contract costs incurred to date plus profits recognised to date less recognised
losses and progress billings. Costs include all costs directly related to specific contracts.
6. TRADE AND OTHER RECEIVABLES
CURRENT
Trade receivables
Less allowance for impairment loss
Other debtors
Allowance for impairment loss
Movements in the allowance for impairment loss were as follows:
Balance at the beginning of the year
Expense for the year reflected in administrative expenses in the income statement
Balance at the end of the year
Trade receivables past due not impaired
At 30 June 2018, the ageing of trade receivables, past due but not
considered impaired is as follows:
1-30 Days
31-60 Days
61+ Days
TOTAL
2018
$’000
2017
$’000
217,611
(3,643)
213,968
74,403
288,371
166,660
(2,794)
163,866
81,960
245,826
2,794
849
3,643
2,508
286
2,794
33,706
9,054
19,332
62,092
33,904
9,470
10,160
53,534
The majority of the amounts past due at 30 June 2018 have been collected subsequent to year end. Payment terms on the remaining
amounts have not been re-negotiated however credit has been stopped where the credit limit has been exceeded. In this case, payment
terms will not be extended. Each business unit has been in direct contact with the relevant debtor and is satisfied that payment will
be received.
Receivables not impaired nor past due
Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other
balances will be received when due.
The Group trades with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms
are subject to credit verification procedures. Publicly available credit information from recognised providers is utilised for this purpose
where available. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts
is not significant.
Other debtors
Other debtors include accrued sales which are non-interest bearing and have repayment terms between 30 to 60 days.
Recognition and measurement
Trade receivables, which generally have 30 to 60 days terms, are recognised and carried at original invoice amount less an allowance for
any uncollectable amounts. Bad debts are written off when identified.
Collectability of trade receivables is reviewed on an ongoing basis at a Company and business unit level. An impairment provision is
recognised where there is objective evidence that the Group will not be able to collect the receivables. Financial difficulties of the debtor,
default payments, historical bad debt performance or debts more than 60 days overdue are considered objective evidence of impairment.
The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows,
discounted at the original effective interest rate.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
71
8. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Recognition and measurement
Property, plant and equipment
All classes of property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment
losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred.
Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a
replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in the income statement as incurred.
Depreciation is calculated on a straight line basis on all classes of property, plant and equipment other than freehold land. The estimated
useful life of buildings is 40 years; plant and equipment is between 3 and 20 years.
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
An item of property, plant and equipment is de-recognised upon disposal or when no further future economic benefits are expected from
its use or disposal.
Impairment of non-financial assets other than goodwill
We have performed an impairment assessment based on the policy below. No material impairment was noted.
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of
impairment exists or when annual impairment testing for an asset is required, the Group makes a formal estimate of the recoverable
amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of
assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as
part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable
amount the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use,
the estimated future cash flows are discounted to their present value.
An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is recognised in the income statement.
8. PROPERTY, PLANT AND EQUIPMENT
Reconciliation of carrying amounts at the beginning and end of the period
Property
Plant and Equipment
Freehold Land
$’000
Buildings
$’000
Leasehold
Improvements
$’000
Plant and
Equipment
$’000
Plant and
Equipment Under
Hire Purchase
$’000
Year ended 30 June 2018
Net carrying amount at 1 July 2017
13,411
17,197
Additions
Acquired through business combination
Assets transferred
Disposals
Depreciation charge
Exchange differences
-
-
-
-
-
-
278
11
-
-
(1,061)
-
Net carrying amount at 30 June 2018
13,411
16,425
At 30 June 2018
Gross carrying amount – at cost
13,411
26,499
Accumulated depreciation
-
(10,074)
Net carrying amount
13,411
16,425
-
-
-
-
-
-
-
-
-
-
-
Year ended 30 June 2017
Net carrying amount at 1 July 2016
13,411
16,660
696
Additions
Acquired through business
combination (Note 20)
Assets transferred
Disposals
Depreciation charge
Exchange differences
-
-
-
-
-
-
12
1,041
587
(31)
-
-
(587)
-
-
Net carrying amount at 30 June 2017
13,411
17,197
At 30 June 2017
Gross carrying amount – at cost
13,411
27,380
Accumulated depreciation
-
(10,183)
Net carrying amount
13,411
17,197
Total
$’000
79,052
40,191
683
-
(508)
31,121
24,761
672
4,148
(508)
17,323
15,152
-
(4,148)
-
(13,219)
(2,942)
(17,222)
(213)
-
(213)
46,762
25,385
101,983
173,372
32,170
245,452
(126,610)
(6,785)
(143,469)
46,762
25,385
101,983
27,682
12,356
21,539
4,070
79,988
16,438
2,270
4,487
(2,696)
-
3,311
(4,487)
-
-
(2,727)
(1,072)
(109)
(12,912)
(3,799)
(17,892)
-
-
-
-
-
(66)
-
(66)
31,121
17,323
79,052
150,237
25,275
216,303
(119,116)
(7,952)
(137,251)
31,121
17,323
79,052
Property, plant and equipment pledged as security
Assets under hire purchase are pledged as security for the associated hire purchase liabilities.
Assets pledged as security
2018
$’000
2017
$’000
25,385
17,323
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
Intangible Assets
$’000
Goodwill
$’000
Total
$’000
10. INTEREST IN JOINT VENTURES
Mondium Pty Ltd
9.
INTANGIBLE ASSETS AND GOODWILL
Year ended 30 June 2018
At 1 July 2017
On business combination (Note 20)
Amortisation
At 30 June 2018
Year ended 30 June 2017
At 1 July 2016
On business combination (Note 20)
Amortisation
Impairment
At 30 June 2017
625
-
(625)
-
-
1,187
(562)
-
625
2,720
400
-
3,120
2,947
154
-
(381)
2,720
3,345
400
(625)
3,120
2,947
1,341
(562)
(381)
3,345
Description of the Group’s intangible assets
Intangible assets relate to the fair value of contracts acquired on acquisition of Arc West Group Pty Ltd. Intangible assets have been
assessed as having a finite life and are amortised using the straight line method over a period of 19 months.
Impairment testing of the Group’s intangible assets and goodwill
Goodwill acquired through business combinations has been allocated to cash generating units (“CGU”) for impairment testing purposes.
The CGUs are the entity Monadelphous Electrical & Instrumentation Pty Ltd, the Hunter Valley business unit, the entity Monadelphous
Energy Services Pty Ltd, the entity Arc West Group Pty Ltd and the entity R.I.G. Installations (Newcastle) Pty Ltd. None of these CGUs are
material to the Group. The recoverable amount of each CGU has been determined based on a value in use calculation using cash flow
projections based on financial budgets approved by management covering a five years period and applying a discount rate to the cash
flow projections in the range of 12% to 15%. No reasonably possible changes in key assumptions would result in the carrying amount of
the CGU exceeding its recoverable amount.
Recognition and measurement
Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the consideration over the fair value of
the Group’s identifiable assets acquired and liabilities assumed. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination, is, from the acquisition date,
allocated to each of the Group’s CGUs or groups of CGUs that are expected to benefit from the synergies of the combination, irrespective
of whether other assets or liabilities of the Group are assigned to those units or groups of units.
Impairment is determined by assessing the recoverable amount of the CGU (group of CGUs) to which the goodwill relates. If the
recoverable amount of the CGU (group of CGUs) is less than the carrying amount, an impairment loss is recognised. Impairment losses
recognised for goodwill are not subsequently reversed.
Intangible assets
The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be finite. The intangible assets are amortised over their useful life. Intangible assets
are tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for the intangible assets is reviewed at least each financial year end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the assets are accounted for prospectively by changing the
amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets
is recognised in the income statement in the expense category consistent with the function of the intangible asset.
On 21 October 2016, a joint venture company, Mondium Pty Ltd was formed between Monadelphous and Lycopodium Ltd. The Group
has a 60% interest in the joint venture. The principal activity of Mondium is to deliver engineering, procurement and construction services
in the minerals processing sector.
Zenviron Pty Ltd
On 26 July 2016, a joint venture company, Zenviron Pty Ltd was formed between Monadelphous and ZEM Energy Pty Ltd. The Group
has a 55% interest in the joint venture. The principal activity of Zenviron is to deliver multi-disciplinary construction services in the
renewable energy market in Australia and New Zealand.
At 30 June 2018, the Group’s interests in Mondium Pty Ltd and Zenviron Pty Ltd were not material individually or in aggregate.
Commitments and contingent liabilities relating to Joint Ventures
The Group’s share of insurance bond guarantees issued by Joint Ventures at 30 June 2018 was $9,823,596 (2017: $12,001,408).
Joint ventures had no capital commitments at 30 June 2018 (2017: $nil).
Recognition and measurement
A joint venture is a type of arrangement whereby the parties that have joint control of the arrangement have the rights to the net assets of
the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about
the relevant activities require unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to determine control
over subsidiaries.
The Group’s investments in its joint ventures are accounted for using the equity method. Under the equity method, the investment is
initially recognised at cost. The carrying value of the investment is adjusted to recognise changes in the Group’s share of net assets of the
joint venture since the acquisition date. The income statement reflects the Group’s share of the results of the joint venture.
2018
$’000
2017
$’000
11. OTHER NON-CURRENT ASSETS
Other non-current assets
2,806
1,901
Other non-current assets consist of investments as follows:
Ordinary shares at fair value in Lycopodium Limited (ASX Code: LYL). The investment is classified as available-for-sale securities.
Fair value is calculated using quoted prices in active markets.
12. TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Advances on construction work in progress – Amounts due to customers
Sundry creditors and accruals
2018
$’000
2017
$’000
68,946
65,599
29,463
164,008
54,109
101,391
27,563
183,063
Recognition and measurement
Trade and other payables are carried at amortised cost and are not discounted due to their short term nature. They represent liabilities for
goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged
to make future payments in respect of the purchase of these goods and services. The amounts are unsecured, non-interest bearing and
are usually paid within 30 to 45 days of recognition.
Sundry creditors and accruals are non-interest bearing and have terms of 7 to 45 days.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018
13. INTEREST BEARING LOANS AND BORROWINGS
CURRENT
Hire purchase liability – secured
Loan – unsecured
NON-CURRENT
Hire purchase liability – secured
Terms and conditions
2018
$’000
2017
$’000
7,944
-
7,944
13,027
13,027
5,363
1,541
6,904
6,856
6,856
Hire purchase agreements have an average term of three years. The average discount rate implicit in the hire purchase liability is 4.09%
(2017: 4.15%). The hire purchase liability is secured by a charge over the hire purchase assets.
Defaults and breaches
During the current and prior year, there were no defaults or breaches on any of the loans.
Recognition and measurement
Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised at fair value of the consideration received less directly attributable transaction
costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
twelve months after the reporting date.
Gains or losses are recognised in the income statement when the liabilities are derecognised.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to
reflect the risks and benefits incidental to ownership.
Finance leases
Leases which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item are classified
as finance leases. The financed asset is stated at the lower of its fair value and the present value of the minimum lease payments at inception
of the lease, less accumulated depreciation and impairment losses. An interest bearing liability of equal value is also recognised at inception.
Minimum lease payments are apportioned between the finance charge and the reduction of the lease liability.
The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability. Finance charges are recognised as an expense in the income statement.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.
75
2018
$’000
2017
$’000
67,837
26,269
94,106
59,621
26,421
86,042
5,259
4,972
26,421
8,739
(8,891)
26,269
14. PROVISIONS
CURRENT
Employee benefits
Workers’ compensation
NON-CURRENT
Employee benefits – long service leave
Movements in provisions
Workers compensation
Carrying amount at the beginning of the year
Additional provision
Amounts utilised during the year
Carrying amount at the end of the financial year
Recognition and measurement
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in
the income statement net of any reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure to settle the present obligation at the
reporting date using a discounted cash flow methodology. The risks specific to the provision are factored into the cash flows and as such
a risk-free government bond rate relevant to the expected life of the provision is used as a discount rate. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
Employee benefits
Employee benefits includes liabilities for wages and salaries, rostered days off, vesting sick leave, project incentives and project
redundancies. It is customary within the engineering and construction industry for incentive payments and redundancies to be paid to
employees at the completion of a project. The provision has been created to cover the expected costs associated with these statutory and
project employee benefits.
Liabilities for short term benefits expected to be wholly settled within twelve months of the reporting date are recognised in respect of
employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liability is settled. Expenses
for non-vesting sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
The liability for long term benefits is recognised and measured as the present value of the expected future payments to be made in respect
of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market
yields at the reporting date on high quality corporate bonds, which have terms to maturity approximating the estimated future cash outflows.
Workers’ compensation
It is customary for all entities within the engineering and construction industry to be covered by workers’ compensation insurance.
Payments under these policies are calculated differently depending on which state of Australia the entity is operating in. Premiums are
generally calculated based on actual wages paid and claims experience. Wages are estimated at the beginning of each reporting period.
Final payments are made when each policy is closed out based on the difference between actual wages and the original estimated
amount. The amount of each payment varies depending on the number of incidents recorded during each period and the severity thereof.
The policies are closed out within a five years period through negotiation with the relevant insurance company. The provision has been
created to cover the expected costs associated with closing out each insurance policy and is adjusted accordingly based on the actual
payroll incurred and the severity of incidents that have occurred during each period.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018
15. CAPITAL MANAGEMENT
Capital is managed by the Group’s Chief Financial Officer in conjunction with the Group’s Finance and Accounting department.
Management continually monitor the Group’s net cash/debt position and the gearing levels to ensure efficiency and compliance with the
Group’s banking facility covenants, including the gearing ratio, operating leverage ratio and fixed charge coverage ratio. At 30 June 2018,
the Group is in a net cash position of $187,802,000 (2017: $228,149,000) and has a debt to equity ratio of 5.3% (2017: 3.6%)
which is within the Group’s net cash and debt to equity target levels.
During the year ended 30 June 2018, management paid dividends of $56,373,000. The policy is to payout dividends of 80% to 100%
of annual net profit after tax, subject to the working capital requirements of the business, potential investment opportunities and business
and economic conditions generally.
17. CONTRIBUTED EQUITY
Ordinary shares – Issued and fully paid
Reserved shares
The capital of the Company is considered to be contributed equity.
Ordinary shares
77
2018
$’000
2017
$’000
126,972
(1,269)
125,703
124,234
(1,269)
122,965
16. DIVIDENDS PAID AND PROPOSED
Declared and paid during the year
Current year interim
2018
$’000
2017
$’000
Ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
2018
2017
Number of Shares
$’000
Number of Shares
$’000
Interim franked dividend for 2018 (30 cents per share) (2017: 24 cents per share)
28,199
22,519
Previous year final
Final franked dividend for 2017 (30 cents per share) (2016: 32 cents per share)
28,174
29,981
Beginning of the financial year
Dividend reinvestment plan
93,928,264
124,234
93,703,963
180,047
2,738
224,301
End of the financial year
94,108,311
126,972
93,928,264
121,992
2,242
124,234
Unrecognised amounts
Current year final
Final franked dividend for 2018 (32 cents per share) (2017: 30 cents per share)
30,115
28,174
Franking credit balance
Franking credits available for future reporting years at 30% adjusted for
franking credits that will arise from the payment of income tax payable as
at the end of the financial year
Impact on the franking account of dividends proposed or declared before
the financial report was authorised for issue but not recognised as a distribution
to equity holders during the period
53,356
45,103
(12,906)
40,450
(12,075)
33,028
Tax rates
The tax rate at which paid dividends have been franked is 30% (2017: 30%). Dividends payable will be franked at the rate of 30%
(2017: 30%).
Recognition and measurement
A provision for dividends is not recognised as a liability unless the dividends are declared on or before the reporting date.
During the year ended 30 June 2018, no employees exercised options to acquire fully paid ordinary shares.
Reserved shares
Beginning of the financial year
End of the financial year
Recognition and measurement
Contributed equity
2018
2017
Number of Shares
$’000
Number of Shares
$’000
85,500
85,500
(1,269)
(1,269)
85,500
85,500
(1,269)
(1,269)
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognised directly
in equity as a deduction, net of tax, from the proceeds.
Reserved shares
The Group’s own equity instruments, which are reacquired for later use in employee share-based payment arrangements (reserved
shares), are deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of
the Group’s own equity instruments.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018
79
18. RESERVES AND RETAINED EARNINGS
Foreign currency translation reserve
Share-based payment reserve
Available-for-sale reserve
Retained earnings
Movements in retained earnings
Balance at the beginning of the year
Net profit attributable to equity holders of the parent
Total available for appropriation
Dividends paid
Balance at the end of the year
Movements in reserves
2018
$’000
2017
$’000
(191)
29,662
821
30,292
719
30,142
187
31,048
238,486
223,380
223,380
71,479
294,859
(56,373)
238,486
218,317
57,563
275,880
(52,500)
223,380
Foreign Currency
Translation Reserve
$’000
Share-Based
Payment Reserve
$’000
Available-For-Sale
Reserve
$’000
At 1 July 2016
Foreign currency translation
Share-based payment
Net fair value gain of available-for-sale
financial assets
853
(134)
-
-
29,102
-
1,040
-
At 30 June 2017
719
30,142
Foreign currency translation
Share-based payment
Net fair value gain of available-for-sale
financial assets
(910)
-
-
-
(480)
-
At 30 June 2018
(191)
29,662
-
-
-
187
187
-
-
634
821
Total
$’000
29,955
(134)
1,040
187
31,048
(910)
(480)
634
30,292
Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from translation of the financial statements of
foreign subsidiaries.
Share-based payment reserve
The share-based payment reserve is used to record the value of equity benefits provided to employees and directors as part of their
remuneration. Refer to note 26 for further details of these plans.
Available-for-sale reserve
The available-for-sale reserve is used to record the movement in fair value of available-for-sale financial assets.
19. SUBSIDIARIES
The consolidated financial statements include the financial statements of Monadelphous Group Limited and subsidiaries:
Name
Parent:
Monadelphous Group Limited
Controlled entities of Monadelphous Group Limited:
#Monadelphous Engineering Associates Pty Ltd
#Monadelphous Properties Pty Ltd
#Monadelphous Engineering Pty Ltd
#Genco Pty Ltd
#Monadelphous Workforce Pty Ltd
#Monadelphous Electrical & Instrumentation Pty Ltd
#Monadelphous KT Pty Ltd
#Monadelphous Energy Services Pty Ltd
#M Workforce Pty Ltd
#M Maintenance Services Pty Ltd
M&ISS Pty Ltd
SinoStruct Pty Ltd
Monadelphous Group Limited Employee Share Trust
Monadelphous Holdings Pty Ltd
MGJV Pty Ltd
Evo Access Pty Ltd
Monadelphous Investments Pty Ltd
MWOG Pty Ltd
MOAG Pty Ltd
Monadelphous International Holdings Pty Ltd
Arc West Group Pty Ltd (Refer to Note 20)
R.I.G. Installations (Newcastle) Pty Ltd (Refer Note 20)
RE&M Services Pty Ltd*
Pilbara Rail Services Pty Ltd*
Monadelphous PNG Ltd
Moway International Limited
Moway AustAsia Steel Structures Trading (Beijing)
Company Limited
Monadelphous Singapore Pte Ltd
Monadelphous Mongolia LLC
Monadelphous Inc.
Monadelphous Marcellus LLC
MKT Pipelines Ltd
Monadelphous Engineering NZ Pty Ltd
Monadelphous Sdn Bhd
Country of Incorporation
Percentage Held by
Consolidated Entity
Parent Entity Investment
2018
%
2017
%
2018
$’000
2017
$’000
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Papua New Guinea
Hong Kong
China
Singapore
Mongolia
USA
USA
Canada
New Zealand
Malaysia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
70 ^
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
70 ^
100
100
100
100
100
100
-
-
-
100
100
100
100
100
100
100
100
100
100
26,132
1,941
4,066
342
370
5,343
15,729
4,434
-
-
-
125
-
-
-
-
-
-
-
-
5,440
1,488
-
-
-
443
-
144
-
1,806
-
-
-
-
67,803
26,132
1,941
4,066
342
370
5,343
15,729
4,434
-
-
-
125
-
-
-
-
-
-
-
-
5,440
-
-
-
-
443
-
144
-
1,806
-
-
-
-
66,315
# Controlled entities subject to the Class Order (Refer to note 30)
* Incorporated during the year
^ The Group considers that it controls MGJV Pty Ltd as it has a casting vote at Board Meetings.
Ultimate parent
Monadelphous Group Limited is the ultimate holding company.
Material partly-owned subsidiaries
There were no subsidiaries that have a material non-controlling interest during the year.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018
81
20. BUSINESS COMBINATION
Acquisition of R.I.G. Installations (Newcastle) Pty Ltd
On 14 July 2017, Monadelphous Group Limited acquired 100% of the share capital of R.I.G. Installations (Newcastle) Pty Ltd for total
cash consideration of $1.4 million. The acquisition is not material to the results of the Group.
Acquisition of Arc West Group Pty Ltd
On 23 September 2016, Monadelphous Group Limited acquired 100% of the share capital of Arc West Group Pty Ltd. The acquisition
forms part of Monadelphous’ market growth strategy.
The consideration comprised a cash payment of $5.4 million. The fair values of the identifiable assets and liabilities acquired from Arc
West Group Pty Ltd as of the date of acquisition were:
Cash
Trade and other receivables
Inventory
Property, plant and equipment
Intangible assets
Trade and other payables
Provisions
Fair value of identifiable net assets
Goodwill arising on acquisition
Acquisition-date fair-value of consideration transferred:
Cash paid
Total consideration
The cash outflow on acquisition is as follows:
Net cash acquired with the business
Cash paid
Net consolidated cash outflow
Fair Value at
Acquisition Date
$’000
7
1,325
114
3,311
1,187
5,944
570
88
658
5,286
154
5,440
5,440
5,440
7
(5,440)
(5,433)
Sales revenue and net profit from Arc West Group Pty Ltd for the period were not material.
Key factors contributing to the $154,000 of goodwill are synergies expected to be achieved as a result of combining Arc West Group Pty
Ltd with the rest of the Group.
A deferred component is payable through the issue of Monadelphous ordinary shares up to a value of $2.3 million. The shares are
issuable in six monthly installments over the period to September 2018. The issue of each remaining installment of shares is contingent
on the former owners remaining as employees of Monadelphous. The shares are being treated as a remuneration payment. A share based
payment expense is therefore being recognised over the period to September 2018 (refer to note 26).
21. INTEREST IN JOINT OPERATIONS
Joint operations interests
The Group’s interests in joint operations are as follows:
Joint Arrangement
Principal Activity
Monadelphous Jacobs JV PNG
Engineering, Procurement and Construction
& Maintenance Support Work in PNG
Principal Place
of Business
PNG
Monadelphous Jacobs JV
Engineering, Procurement and
Construction & Maintenance Support Work
Brisbane, QLD
Group Interest
2018
%
65
65
2017
%
-
-
Commitments and contingent liabilities relating to joint operations
There were no capital commitments or contingent liabilities relating to the joint operations at 30 June 2018 (2017: $nil).
Impairment
There were no assets employed in the joint operations during the year ended 30 June 2018 (2017: $nil).
Recognition and Measurement
Joint arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual agreed sharing of
control of the arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing
control. Joint arrangements are classified as either a joint operation or joint venture, based on the rights and obligations arising from the
contractual obligations between the parties to the arrangement.
To the extent the joint arrangement provides the Group with rights to the individual assets and obligations arising from the joint
arrangement, the arrangement is classified as a joint operation and as such, the Group recognises its:
• Assets, including its share of any assets held jointly;
• Liabilities, including its share of any liabilities incurred jointly;
• Revenue from the sale of its share of the output arising from the joint operation; and
• Expenses, including its share of any expenses incurred jointly.
To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the investment is classified as
a joint venture and accounted for using the equity method. Under the equity method, the cost of the investment is adjusted by the post-
acquisition changes in the Group’s share of the net assets of the venture.
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise receivables, payables, loans, finance leases and hire purchase contracts, cash,
short-term deposits and derivatives.
The Group is exposed to financial risks which arise directly from its operations. The Group has policies and measures in place to manage
financial risks encountered by the business.
Primary responsibility for the identification of financial risks rests with the Board. The Board determines policies for the management of
financial risks. It is the responsibility of the Chief Financial Officer and senior management to implement the policies set by the Board and
for the constant day to day management of the Group’s financial risks. The Board reviews these policies on a regular basis to ensure that
they continue to address the risks faced by the Group.
The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.
The Group’s policy to minimise risk from fluctuations in interest rates is to utilise fixed interest rates in its loans, finance leases and hire
purchase contracts. Cash and short term deposits are exposed to floating interest rate risks. The Group manages its foreign currency risk
arising from significant supplier contracts in foreign currencies by holding foreign currency or taking out forward exchange contracts.
Analysis is performed on a customer’s credit rating prior to signing contracts and analysis is performed regularly of credit exposures and
aged debt to manage credit and liquidity risk.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2018
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
83
The policies in place for managing the financial risks encountered by the Group are summarised below.
(a) Risk exposures and responses
Interest rate risk
The Group’s exposure to variable interest rates is as follows:
Financial assets
Cash and cash equivalents
Net exposure
Notes
5
2018
$’000
2017
$’000
208,773
208,773
241,909
241,909
The Group utilises a number of financial institutions to obtain the best interest rate possible and to manage its risk. The Group does not
enter into interest rate hedges.
At 30 June 2018, reasonably possible movements in variable interest rates, based on a review of historical movements and forward rate
curves for forward rates would not have had a material impact on the Group.
Foreign currency risk
As a result of operations in the USA, Papua New Guinea, China, Mongolia and New Zealand the Group’s statement of financial position
can be affected by movements in the US$/A$, PGK/A$, RMB/A$, MNT/A$ and NZ$/A$ exchange rates.
The Group also has transactional currency exposures. Such exposure arises from sales or purchases by an operating entity in currencies
other than the functional currency. Where possible, Monadelphous does not take on foreign exchange risk. At 30 June 2018, the Group
had no forward contracts.
The Group also mitigates its exposure to foreign currency risk by minimising excess foreign currency balances in overseas jurisdictions not
required for working capital.
At 30 June 2018, the Group had the following exposure to foreign currency:
Year ended 30 June 2018
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Net Exposure
Year ended 30 June 2017
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Net Exposure
PGK
AUD $’000
USD
AUD $’000
Euro
AUD $’000
6,041
3,545
(2,017)
7,569
11,562
4,582
(1,292)
14,852
15,290
9,272
(3,784)
20,778
11,537
27,886
(4,003)
35,420
5,176
-
-
5,176
8,392
-
-
8,392
(a) Risk exposures and responses (continued)
Foreign currency risk (continued)
At 30 June 2018, reasonably possible movements in PGK and Euro foreign exchange rates, based on a review of historical movements,
would not have had a material impact on the Group.
At 30 June 2018, if the USD foreign exchange rates had moved, as illustrated in the table below, with all other variables held constant,
post tax profit and equity would have been affected as follows:
Judgements of reasonably possible movements
relating to financial assets and liabilities
denominated in USD:
+5% (2017: +5%)
-5% (2017: -5%)
Post Tax Profit Higher/(Lower)
Other Comprehensive Income
Higher/(Lower)
2018
$’000
(727)
727
2017
$’000
(1,240)
1,240
2018
$’000
-
-
2017
$’000
-
-
The reasonably possible movements have been based on review of historical movements.
Credit risk
The Group trades with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms
are subject to credit verification procedures. Publicly available credit information from recognised providers is utilised for this purpose
where available.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is
not significant.
The Group minimises concentrations of credit risk in relation to accounts receivable by undertaking transactions with a number of
customers within the resources, energy and infrastructure industry sector. There are multiple contracts with our significant customers,
across a number of their subsidiaries, divisions within those subsidiaries and locations.
For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit terms
without the specific approval of the Chairman, Managing Director or Chief Financial Officer.
With respect to credit risk arising from the other financial assets of the Group, which comprises cash and cash equivalents, the Group’s
exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these
instruments. The Group minimises its exposure to credit risk for cash and cash equivalents, by investing funds with counter parties rated
A+ or higher by Standard & Poor’s where possible.
The Group’s maximum exposure to credit risk is its cash and trade and other receivables representing $497,144,000 at 30 June 2018
(2017: $487,735,000).
Since the Group trades with recognised third parties, there is no requirement for collateral.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2018
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(a) Risk exposures and responses (continued)
Liquidity risk
Financing facilities available
(a) Risk exposures and responses (continued)
Liquidity risk (continued)
Maturity analysis of financial liabilities:
At balance date the following financing facilities had been negotiated and were available
Total facilities:
- Bank guarantee and performance bonds
- Revolving credit
Facilities used at balance date:
- Bank guarantee and performance bonds
- Revolving credit
Facilities unused at balance date:
- Bank guarantee and performance bonds
- Revolving credit
2018
$’000
2017
$’000
460,000
64,559
524,559
181,759
20,971
202,730
278,241
43,588
321,829
490,000
67,053
557,053
147,704
13,760
161,464
342,296
53,293
395,589
Year ended 30 June 2018
Financial liabilities
Trade and other payables
Hire purchase liability
Net maturity
Year ended 30 June 2017
Financial liabilities
Trade and other payables
Loan
Hire purchase liability
Net maturity
6 months
or less
$’000
6 months
to 1 year
$’000
1 year to
5 years
$’000
Total
Contractual
Cash Flows
$’000
Total
Carrying
Amount
$’000
164,008
3,920
167,928
-
4,705
4,705
-
164,008
164,008
14,269
22,894
20,971
14,269
186,902
184,979
183,063
-
3,189
186,252
-
1,575
2,537
4,112
-
-
7,007
183,063
183,063
1,575
12,733
1,541
12,219
7,007
197,371
196,823
Nature of bank guarantees and performance bonds
The contractual term of the bank guarantees and performance bonds match the underlying obligation to which it relates.
(b) Net fair values of financial assets and liabilities
Nature of revolving credit
The revolving credit includes hire purchase/leasing facilities. Refer to note 13 for terms and conditions.
The Group’s objective is to manage the liquidity of the business by monitoring project cash flows and through the use of financing
facilities. The Group currently utilises financing facilities in the form of hire purchase liabilities. The liquidity of the group is managed by
the Group’s Finance and Accounting department.
The table below reflects all contractually fixed pay-offs, repayments and interest resulting from financial liabilities as of 30 June 2018.
The remaining contractual maturities of the Group’s financial liabilities are:
The carrying amounts and estimated fair values of financial assets and financial liabilities at balance date are materially the same.
Interest bearing liabilities with fixed interest rates: The fair value includes the value of contracted cash flows, discounted at market rates.
Cash and cash equivalent: The carrying amount approximates fair value because of their short-term maturity.
Receivables and payables: The carrying amount approximates fair value due to short term maturity.
Available-for-sale financial assets: The carrying amount is equal to the fair value calculated using quoted prices in active markets.
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1: The fair value is calculated using quoted prices in active markets.
2018
$’000
2017
$’000
Level 2: The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices).
Financial liabilities
6 months or less
6 – 12 months
1 – 5 years
167,928
4,705
14,269
186,902
186,252
4,112
7,007
197,371
Level 3: The fair value is estimated using inputs for the asset or liability that are not based on observable market data.
There were no material financial assets or liabilities measured at fair value at 30 June 2018 or 30 June 2017.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
UNRECOGNISED ITEMS
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
UNRECOGNISED ITEMS
FOR THE YEAR ENDED 30 JUNE 2018
Notes
2018
$’000
2017
$’000
24. SUBSEQUENT EVENTS
Dividends declared
87
23. COMMITMENTS AND CONTINGENCIES
Hire purchase commitments
Payable:
- Within one year
- Later than one year but not later than five years
Minimum lease payments
Less future finance charges
Present value of minimum lease payments
Current liability
Non-current liability
Hire purchase agreements have an average term of three years.
Operating lease commitments
Minimum lease payments
- Within one year
- Later than one year but not later than five years
- Later than five years
Aggregate lease expenditure contracted for at
balance date but not provided for
13
13
2018
Other
$’000
227
111
-
338
2018
Properites
$’000
13,465
33,633
-
47,098
8,625
14,269
22,894
(1,923)
5,726
7,007
12,733
(514)
20,971
12,219
7,944
13,027
20,971
5,363
6,856
12,219
2018
Total
$’000
2017
Total
$’000
13,692
33,744
-
13,677
44,288
700
Other operating leases includes motor vehicles. Properties include the Victoria Park office lease, the Brisbane office lease and other rental
properties. Other operating leases have an average lease term remaining of 24 months. Properties under operating leases have an average
lease term remaining of less than one year.
Capital commitments
The consolidated group has capital commitments of $9,618,122 at 30 June 2018 (2017: $5,185,942).
Guarantees
Guarantees given to various clients for satisfactory contract performance
181,759
147,704
Monadelphous Group Limited and all controlled entities marked # in note 19 have entered into a deed of cross guarantee. Refer to note
30 for details.
Contingent Liabilities
The Group is subject to various actual and pending claims arising in the normal course of business. The Group has regular claims reviews
to assess the need for accounting recognition or disclosure. The Directors are of the opinion that there is no material exposure to the
Group arising from these various actual and pending claims.
On 20 August 2018, the directors of Monadelphous Group Limited declared a final dividend on ordinary shares in respect of the
2018 financial year. The total amount of the dividend is $30,114,660 which represents a fully franked final dividend of 32 cents per
share. This dividend has not been provided for in the 30 June 2018 financial statements. The Monadelphous Group Limited Dividend
Reinvestment Plan will apply to the dividend.
Other than the items noted above, no matters or circumstances have arisen since the end of the financial year which 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 subsequent financial years.
Notes
2018
$’000
2017
$’000
25. PARENT ENTITY INFORMATION
Information relating to Monadelphous Group Limited parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payment reserve
Available-for-sale reserve
Retained earnings
Total equity
185,199
240,478
1,848,312
1,544,283
(1,643,210)
(1,345,267)
(1,656,557)
(1,352,122)
191,755
192,161
125,703
28,675
821
36,556
191,755
122,965
28,943
-
40,253
192,161
52,676
53,310
34,743
34,930
47,436
58,665
Profit after tax
Total comprehensive income of the parent entity
Contingent liabilities
Guarantees
23
181,759
147,704
2018
$’000
2017
$’000
Capital commitments
The parent entity has capital commitments of $nil at 30 June 2018 (2017: $nil).
Guarantees entered into by the Group are via the parent entity. Details are contained in note 23.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018
89
2018
$
2017
$
254,534
209,764
30,411
31,000
27,264
-
315,945
237,028
27. AUDITORS’ REMUNERATION
The auditor of Monadelphous Group Limited is Ernst & Young.
Amounts received or due and receivable by Ernst & Young Australia for:
- An audit or review of the financial report of the entity and any other
entity in the consolidated entity
- Other services in relation to the entity and any other entity in the
consolidated entity
-
tax compliance
- assurance related
Ernst & Young has provided an auditor’s independence declaration to the Directors of Monadelphous Group Limited confirming that the
provision of the other services has not impaired their independence as auditors.
28. RELATED PARTY DISCLOSURES
Compensation of key management personnel
Short term benefits
Post-employment
Long term benefits
Total compensation
Zenviron
2018
$
2017
$
4,088,037
3,702,728
141,888
114,159
135,459
77,500
4,344,084
3,915,687
At 30 June 2018, an amount totalling $nil (2017: $1,833,000) had been loaned to Zenviron Pty Ltd. The loan was repaid during
the year.
The Group had sales to the joint venture during the year totalling $10,213,000 (2017: $2,951,000)
Mondium
At 30 June 2018, an amount totalling $1,864,000 (2017: $511,000) had been loaned to Mondium Pty Ltd. The loan is included in the
statement of financial position within Investment in Joint Venture. Interest is payable on the loan at a rate of 3.71% per annum.
26. SHARE BASED PAYMENT EXPENSE
The Monadelphous Group Limited Employee Option Plan has been established where eligible directors and employees of the consolidated
entity are issued with options over the ordinary shares of Monadelphous Group Limited. The options, issued for nil consideration, are
issued in accordance with the guidelines established by the remuneration committee of Monadelphous Group Limited. The options issued
carry various terms and exercising conditions. There are currently no directors or employees participating in these schemes.
The following table illustrates the number and weighted average exercise prices of and movements in options granted, exercised and
forfeited during the year.
Balance at the beginning of the year
Forfeited during the year
Balance at the end of the year
Exercisable during the next year
2018
2017
Number of Options
30,000
(30,000)
-
-
Weighted Average
Exercise Price
Number of Options
Weighted Average
Exercise Price
17.05
17.05
-
-
365,000
(335,000)
30,000
30,000
19.26
19.46
17.05
17.05
The share-based payment expense relating to the Monadelphous Group Limited Employee Option Plan for the year ended 30 June 2018
was a $nil (2017: $nil) for the consolidated entity.
For the year ended 30 June 2018, the Group has recognised $800,000 of share-based payment expense in the Income Statement
(2017: $1,466,617) relating to shares to be issued as part of the acquisition of Arc West Group Pty Ltd (refer to note 20). $1,280,000
(2017: $426,617) was satisfied as a cash payment during the year.
Recognition and Measurement
The Group provides benefits to employees (including Key Management Personnel) of the Group in the form of share-based payments,
whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). These benefits are provided
through the Monadelphous Group Limited Employee Option Plan.
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the
date on which they are granted. The fair value is determined by an external valuer using a binomial model. In valuing equity-settled
transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Monadelphous
Group Limited (market conditions), if applicable. The cost of equity-settled transactions is recognised, together with a corresponding
increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date
on which the relevant employees become fully entitled to the award (the vesting date).
The cumulative expense recognised for equity settled transactions at each reporting date until vesting date reflects (i) the extent to
which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately
vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market
performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The income
statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of
that period.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally
anticipated to do so. Any award subject to market condition is considered to vest irrespective of whether or not that market condition is
fulfilled, provided that all other conditions are satisfied.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018
29. OPERATING SEGMENTS
Revenue is derived by the consolidated entity from the provision of engineering services to the resources, energy and infrastructure
industry sector. For the year ended 30 June 2018, the Engineering Construction division contributed revenue of $949.9 million (2017:
$615.4 million) and the Maintenance and Industrial Services division contributed revenue of $841.1 million (2017: $652.9 million).
Included in these amounts is $7.0 million (2017: $3.5 million) of inter-entity revenue and $49.1 million (2017: $19.6 million) of
revenue of joint ventures, which is eliminated on consolidation. The operating divisions are exposed to similar risks and rewards from
operations, and are only segmented to facilitate appropriate management structures.
The directors believe that the aggregation of the operating divisions is appropriate for segment reporting purposes as they:
• have similar economic characteristics in that they have similar gross margins;
• perform similar services for the same industry sector;
• have similar operational business processes;
• provide a diversified range of similar engineering services to a large number of common clients;
• utilise a centralised pool of engineering assets and shared services in their service delivery models, and the services provided to
customers allow for the effective migration of employees between divisions; and
• operate predominately in one geographical area, namely Australia.
Accordingly all services divisions have been aggregated to form one segment.
The Group has a number of customers to which it provides services. The largest customer represented 28% of the Group’s revenue. One
other customer individually contributed 11% of the Group’s revenue. There are multiple contracts with these customers, across a number
of their subsidiaries, divisions within those subsidiaries and locations.
Geographical Information
Revenue from external customers
Australia
New Zealand
Other overseas locations
30. DEED OF CROSS GUARANTEE
2018
$’000
2017
$’000
1,607,987
1,160,062
51,473
75,421
52,835
32,286
1,734,881
1,245,183
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, relief has been granted to these controlled entities of
Monadelphous Group Limited from the Corporations Act 2001 requirements for preparation, audit and publication of accounts.
As a condition of the Class Order, Monadelphous Group Limited and the controlled entities subject to the Class Order, entered into a deed
of indemnity on 9 June 2011, 1 June 2012, 9 June 2014 and 8 June 2016. The effect of the deed is that Monadelphous Group Limited
has guaranteed to pay any deficiency in the event of winding up of these controlled entities. The controlled entities have also given a
similar guarantee in the event that Monadelphous Group Limited is wound up.
The consolidated income statement and statement of financial position of the entities that are members of the ‘Deed’ are as follows:
Consolidated Income Statement and Comprehensive Income
Profit before income tax
Income tax expense
Net profit after tax for the period
Reconciliation of Retained Earnings
Retained earnings at the beginning of the period
Dividends paid
Net profit after tax for the period
Retained earnings at the end of the period
2018
$’000
2017
$’000
117,063
(31,422)
85,641
213,927
(56,373)
85,641
243,195
80,298
(20,907)
59,391
207,036
(52,500)
59,391
213,927
30. DEED OF CROSS GUARANTEE (continued)
Consolidated Statement of Financial Position
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Investments in subsidiaries
Property, plant and equipment
Deferred tax assets
Intangible assets and goodwill
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
91
2018
$’000
2017
$’000
173,927
297,046
33,363
504,336
7,639
92,458
32,262
3,120
2,806
138,285
642,621
214,576
251,647
42,291
508,514
6,151
70,164
24,345
2,720
1,901
105,281
613,795
128,526
148,843
7,944
7,092
83,077
5,363
2,046
80,443
226,639
236,695
13,027
4,561
17,588
244,227
398,394
125,703
29,496
243,195
398,394
6,856
4,409
11,265
247,960
365,835
122,965
28,943
213,927
365,835
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018
31. OTHER ACCOUNTING STANDARDS
Other accounting policies
Goods and services tax (GST)
31. OTHER ACCOUNTING STANDARDS (continued)
New accounting standards and interpretations (continued)
Revenues, expenses and assets are recognised net of the amount of GST except:
Reference
Summary
93
Application date
of standard
Application date
for Group
1 January 2018
1 July 2018
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
•
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and
financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Changes in accounting policies
Monadelphous Group Limited and its subsidiaries (‘the Group’) has adopted all new and amended Australian Standards and
Interpretations mandatory for reporting periods beginning on or before 1 July 2017, including:
• 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses [AASB 112]
• 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107
The adoption of these standards and interpretations did not have any material effect on the financial position or performance of the Group.
New accounting standards and interpretations
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective (including those
below) have not been adopted by the Group for the annual reporting period ended 30 June 2018.
The assessment of the impact of the relevant new or amended accounting standards and interpretations is set out below:
Reference
Summary
Application date
of standard
Application date
for Group
AASB 9 Financial
Instruments
AASB 9 contains accounting requirement for financial instruments,
replacing AASB 139. The standard:
1 January 2018
1 July 2018
(a) contains a simpler model for classification and measurement of
financial assets;
(b) a single, forward looking ‘expected loss’ impairment model that
will require more timely recognition of expected credit losses;
(c) a substantially reformed approach to hedge accounting including
changes to hedge effectiveness testing, treatment of hedging costs,
risk components that can be hedged and disclosures.
It is anticipated that the expected credit loss impairment model
may result in earlier recognition of credit losses. The Group is in the
process of finalising its assessment of the impact of the expected
loss impairment model, however it is not expected to have a material
impact on transition.
AASB 2 Classification
and Measurement
of Share-
based Payment
Transactions
This standard amends to AASB 2 Share-based Payment, clarifying how
to account for certain types of share-based payment transactions. The
amendments provide requirements on the accounting for:
• The effects of vesting and non-vesting conditions on the
measurement of cash-settled share-based payments
• Share-based payment transactions with a net settlement feature
for withholding tax obligations
• A modification to the terms and conditions of a share-based
payment that changes the classification of the transaction from
cash-settled to equity-settled.
AASB 16 Leases
The key features of AASB 16 are as follows:
1 January 2019
1 July 2019
Lessee accounting
• Lessees are required to recognise assets and liabilities for all leases
with a term of more than 12 months, unless the underlying asset
is of low value.
• A lessee measures right-of-use assets similarly to other
non-financial assets and lease liabilities similarly to other
financial liabilities.
• Assets and liabilities arising from a lease are initially measured on
a present value basis. The measurement includes non-cancellable
lease payments (including inflation-linked payments), and also
includes payments to be made in optional periods if the lessee is
reasonably certain to exercise an option to extend the lease, or not
to exercise an option to terminate the lease.
• AASB 16 contains disclosure requirements for lessees.
Lessor accounting
• AASB 16 substantially carries forward the lessor accounting
requirements in AASB 117. Accordingly, a lessor continues to
classify its leases as operating leases or finance leases, and to
account for those two types of leases differently.
• AASB 16 also requires enhanced disclosures to be provided by
lessors that will improve information disclosed about a lessor’s risk
exposure, particularly to residual value risk.
As at the reporting date, the Group has non-cancellable operating lease
commitments as set out in note 23. The Group has not quantified the
effect of the new standard, however the impacts will include:
• Total assets and liabilities on the Statement of Financial Position
will increase; and
•
Interest expense will increase due to the unwinding of the effective
interest rate implicit in the lease.
FINANCIAL REPORTMONADELPHOUS ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018
INVESTOR INFORMATION
FOR THE YEAR ENDED 30 JUNE 2018
MONADELPHOUS ANNUAL REPORT 2018
95
31. OTHER ACCOUNTING STANDARDS (continued)
New accounting standards and interpretations (continued)
Reference
Summary
AASB 15 Revenue
from Contracts with
Customers
The core principle of AASB 15 is that an entity recognises revenue to
depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services.
Application date
of standard
Application date
for Group
1 January 2018
1 July 2018
The new revenue standard will supersede all current revenue
recognition requirements under Australian Accounting Standards. In
particular, the standard replaces AASB 118 ‘Revenue’ and AASB 111
‘Construction Contracts’, upon which the Group’s current revenue
recognition policies are based.
Either a full retrospective application or a modified retrospective
application is required for the reporting period beginning on 1 July
2018. Management intend to adopt AASB 15 using the modified
retrospective approach. As a result there may be an adjustment to the
opening balance of the Group’s equity on the date of initial application.
The Group has performed a detailed assessment of its contracts in
2018. Management has identified the following:
(i) Performance Obligations
It is anticipated that the majority of the Group’s construction
contracts will be assessed to have one distinct performance
obligation due to the significant integration and the highly related
promises within each contract, with revenue being recognised over
time. The majority of maintenance contracts are also expected
to be treated as one distinct performance obligation due to the
activities being a series of performance obligations that are
substantially the same and have the same pattern of transfer
to the client.
(ii) Variable consideration and contract modifications
AASB 15 provides new requirements for accounting for variable
consideration as well as requiring claims and variations to be
accounted as contract modifications, both of which impart a higher
threshold for recognition. Variable revenue is recognised under
the new standard when it is highly probable that a significant
reversal of revenue will not occur. These higher recognition criteria
might lead to a currently estimated adjustment reducing equity by
approximately $5 million.
(iii) Presentation and disclosure requirements
In accordance with AASB 15, the Group will present its contract
balances as a contract asset separately from its accounts
receivable or as a contract liability. Contract assets and accounts
receivable are both rights to consideration in exchange for goods or
services that the Group has transferred to a customer, however the
classification depends on whether such right is only conditional on
the passage of time (accounts receivable) or if it is also conditional
on something else (contract assets). Previously contract asset
balances have been disclosed as Other Debtors or Inventories.
A contract liability is the amount received by the Group that
exceeds the right to consideration resulting from the Group’s
performance under a given contract. Currently contract liabilities
have been disclosed within Trade and Other Payables.
Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows.
The information is current at 10 September 2018.
a) Distribution of equity securities
The number of shareholders, by size of holding, in each class of share is:
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Total holders
6,418
4,518
800
624
38
12,398
The number of shareholders holding less than marketable parcels is 351.
6,875 shares are held in voluntary escrow, to be released in October 2018.
b) Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
Rank
Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
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