NRW Holdings Limited
Annual Report 2009

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WWW.NRW.COM.AU ANNUAL REPORT CORPORATE REGISTRY SHARE REGISTRY Link Market Services Limited Level 2 178 St Georges Terrace PERTH WA 6000 Telephone: +61 8 9211 6652 Facsimile: +61 8 9211 6660 ASX CODE NWH – NRW Holdings Limited Fully Paid Ordinary Shares WEB PAGE www.nrw.com.au DIRECTORS Ian F Burston Non-executive Chairman Jeffery McGlinn Chief Executive Officer Julian Pemberton Executive Director and Chief Operating Officer Michael Arnett Non-executive Director COMPANY SECRETARY Kim Hyman REGISTERED OFFICE 73-75 Dowd Street WELSHPOOL WA 6106 Telephone: +61 8 9358 5510 Facsimile: +61 8 9311 7336 Email: info@nrw.com.au AUDITOR Deloitte Touche Tohmatsu Level 14 Woodside Plaza 240 St Georges Terrace PERTH WA 6000 Document designed by Chameleon Creative NRW | ANNUAL REPORT 09 CORPORATE REGISTRY NRW | ANNUAL REPORT 09 85 CONTENTS A LETTER FROM THE CHAIRMAN YEAR IN REVIEW CORPORATE GOVERNANCE DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION DIRECTORS’ DECLARATION INCOME STATEMENT BALANCE SHEET STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION INDEPENDENT AUDITOR’S REPORT CORPORATE REGISTRY 2 4 14 26 35 36 37 38 39 41 42 81 83 85 CONTENTS NRW | ANNUAL REPORT 09 1 A LETTER FROM THE CHAIRMAN NRW Holdings Ltd ACN 118 300 217 73-75 Dowd St Welshpool WA 6106 T: +61 8 9358 5510 F: +61 8 9358 5515 W: www.nrw.com.au ASX Code: NWH Dear Shareholders I am pleased to present the Company’s third Annual Financial Report since initially listing on the Australian Securities Exchange on 5th September 2007. In a turbulent year for mining and resources industries and the global economy generally NRW Holdings Ltd performed exceedingly well. The Groups net profit after tax was $37.1 million, a 13% increase from 2008 of $32.8 million. The result was derived from revenues of $509.6 million representing an increase of 8% over 2008. The events culminating in the global financial crisis and the resulting pressure on commodities prices have created a more competitive tendering environment in the resources industry. Although difficult trading conditions exist, NRW remains optimistic for 2010 with a view to increasing revenue in excess of 2009. As indicated in our 2008 Annual General Meeting, management has conserved cash and reduced net debt from $94.8 million in 2008 to current levels at 30 June 2009 of $40.2 million, a reduction of 58%. It is expected that debt levels will continue to decrease while reducing working capital, carefully managing the Groups operating cash flows while undertaking strategic capital acquisitions. The Board reviews the Company’s dividend policy on a regular basis and in doing so we are pleased to announce a final dividend for 2009 of 1.0 cent, resulting in a full year dividend of 2.00 cents per share. I take this opportunity to acknowledge and thank the Board, executives and all staff for their dedication and hard work culminating in the excellent result for 2009. The Board has great confidence that 2010 will be another important, challenging but highly successful year ahead. Ian F Burston CHAIRMAN 2 NRW | ANNUAL REPORT 09 A LETTER FROM THE CHAIRMAN A LETTER FROM THE CHAIRMAN NRW | ANNUAL REPORT 09 3 YEAR IN REVIEW NRW HOLDINGS LTD DELIVERS STRONG RESULTS FOR FY09 Highlights • • • • • • • • 8% increase in revenue to $509.6 million. 13% increase in net profit to $37.1 million. 10% increase in earnings per share. Decrease in net debt by 58% to $40.2 million. Profit margins improved. Strong Balance Sheet for future growth. Mining division revenue up 77% Dividend declared 1.00 cent, resulting in 2.00 cents for the year Revenue guidance for FY10 increase by 20% from FY09. • It is with great pleasure that we present to our shareholders and stakeholders alike the results of NRW Holdings Ltd for the financial year ended 30 June 2009. The 2009 financial year was marked by global turmoil of collapsing commodity prices, tightening credit environment and curtailment of economic growth. In spite of these events, NRW Holdings Ltd achieved record sales revenue, an increase in net profit after tax and reduction of net borrowings. NRW has successfully grown the business through a difficult operating year and diversified the Group’s clientele. Credit is given to our diligent and hard working staff and to our management team that have delivered this years’ outstanding result. “ NRW HAS SUCCESSFULLY GROWN THE BUSINESS THROUGH A DIFFICULT OPERATING YEAR AND DIVERSIFIED THE GROUP’S CLIENTELE.” 4 NRW | ANNUAL REPORT 09 YEAR IN REVIEW YEAR IN REVIEW NRW | ANNUAL REPORT 09 5 FINANCIAL OVERVIEW NRW grew strongly in the 2009 financial year, reflecting the performance of several substantial civil and mining contracts. $ millions Revenue EBITDA EBIT Profit before tax Net profit after tax Return on Revenue Earnings per share 2009 509.6 81.2 60.1 52.0 37.1 7.3% 15.0 cents 2008 471.2 71.8 53.8 47.3 32.8 7.0% 13.6 cents 8% 13% 12% 10% 13% 4% 10% NRW’s financial performance is summarised in the table above. We have successfully increased revenue by 8% to $509.6 million and increased net profit after tax to $37.1 million. Financial Position Equity attributable to shareholders, increased by 21%, compared to 2008 and valued at $142.3 million. With the aim of de-gearing the balance sheet, NRW’s net borrowings have declined by 58% to $40.2 million from a high of $94.8 million in 2008, achieved without the need to raise equity and dilute shareholder earnings. Cash Cash provided by operating activities for the financial year was $88.1 million compared to $14.8 million in 2008 as a result of efficient working capital management and a clear focus on cash conservation. Dividends On the 25 August 2009, the Board of NRW Holdings Limited declared a final dividend for the Financial Year ending June 30, 2009. The final dividend payable is 1.00 cent per share and brings the full year dividend to 2.00 cents per share. Capital Expenditure NRW continued to make strategic investments in new and replacement equipment, in order to meet the expected requirements of existing and new projects. Capital expenditure incurred in 2009 was $25.9 million (2008: $59.0 million). Outlook The outlook for NRW remains cautiously optimistic as clients realign their corporate strategy to take account of the fall out from the global financial crisis. However with government sponsored infrastructure programs beginning to find traction, it is anticipated that demand for NRW’s services will continue to be robust. NRW expects to capitalise on its push into Queensland, with opportunities in coal mining and civil construction. NRW continues to seek out significant additional opportunities throughout the African continent to compliment the Guinea operations as well as other global opportunities. Civil and mining tender activity is gaining momentum in a competitive environment. NRW expects revenue growth for FY2010 to be approximately 20%. 6 NRW | ANNUAL REPORT 09 YEAR IN REVIEW CIVIL CONTRACTING NRW civil contracting projects have included construction of access roads, rail formations (greenfield’s and duplication), rail sidings, seawalls, airstrips, water systems, camp villages, green field mine development, power station foundations, bridges, run- of-mine pads and iron ore storage facilities. Revenue for the civil contracting division was $294.1 million (2008: $336.8 million) in the 2009 financial year. The Division’s FY10 anticipated growth is expected to be driven by the Pilbara Iron Ore producers’ need for new or enhanced infrastructure to meet expanding demand for their ore. Operations Contracts and contract extensions won during the period were: • • • • • • • Brockman 4 Rail, Road and Plant Bulk Earthworks for Rio Tinto Christmas Creek Rail Extension for Fortescue Metals Group Cape Preston Bulk Earthworks and Breakwater in JV with VDM for Citic Pacific Mining Port Haven Camp Earthworks for BHPBIO RGP5 Rail South Project in JV with John Holland and Laing O’Rourke for BHPBIO Dampier Gas Turbine Foundation for Rio Tinto Queensland Bridges – Queensland Main Roads (Mackay) Significant achievements during the year included: • Successful completion of Brockman 4: the largest earthworks resource project ever undertaken in WA. The project staffing reached a peak in excess of 550 personnel on site. First project in Queensland as part of diversification strategy. Strategic relationships with key industry partners to enhance our capability to pursue larger projects (John Holland, Laing O’Rourke, VDM and Ostojic Group in NT). Memorandum of Understanding with NYFL, an indigenous owned company, to pursue appropriate projects in the eastern Pilbara region. Expansion of site based project staff to support planned growth. Recruitment of key staff to enhance our strategic expansion into concrete works. Prequalification for Main Roads WA and Queensland construction work. • • • • • • Outlook 2010 is expected to be a year of further growth given the projects in hand as well as the inevitable future demand upon recovery of the global economy. It is expected that demand for commodities and the infrastructure required to meet that demand will secure future growth. YEAR IN REVIEW NRW | ANNUAL REPORT 09 7 MINING SERVICES Contracts and contract extensions during the period were: • Pilbara Iron: Tom Price Mining (WA) – Load and haul of ore and waste, stockpile rehandle. Fortescue Metals Group - Waste and Ore mining at Fortescue’s Cloudbreak and Christmas Creek mines. Rio Tinto – Mining services at the Hope Downs mine. Rio Tinto Expansion Projects: Yandi Continuous Miner Trials (WA) – Load and haul of ore and waste. Simfer SA (Rio Tinto Guinea): Simandou Pre Development (Guinea, West Africa) – Exploration access, infrastructure development and trial mining. OM Holdings Ltd – Bootu Creek manganese mine - waste and ore mining services including drill and blast. • • • • • Outlook The outlook for further growth in the Mining sector is positive. The mining division is focused on retaining all current projects in 2010 whilst achieving growth from new opportunities. Continued focus on NRW’s indigenous involvement program will assist with resourcing any growth potential as well as expanding operations on the East Coast of Australia. NRW’s mining services division provides contract mining services to mining resource companies and has extensive experience in developing mines in remote locations. Significant work has been undertaken in the iron ore, gold, manganese and mineral sand sectors. Services include earth moving, waste and ore mining, drill and blast, ore haulage and related ancillary services. Revenue for the Mining Services Division was $189.4 million (2008:$107.2 million) in the 2009 financial year. The Divisions revenue from operations increased almost 77% due to commencement of new and continuation of existing projects undertaken for Rio Tinto, Fortescue Metals Group and OM Holdings. The division made significant progress during the year in establishing long term relationships with a number of key clients. In particular the business was able to extend works at Tom Price and Simandou as well as winning a three year contract with OM Holdings at their Bootu Creek Manganese mine in the Northern Territory. Our ongoing relationship with FMG also enabled additional work to be won at their Christmas Creek mine. The division is establishing a reputation for reliable delivery of services and additional opportunities are being pursued in Iron Ore, Coal and Gold sectors as well as opportunities overseas to build on the experience gained in Guinea. 8 NRW | ANNUAL REPORT 09 YEAR IN REVIEW PROMAC The Promac entity was restructured in March 2009 to focus solely on sales of new earthmoving equipment, off-road tyres, lighting plant and generators. Previously the division provided rental services predominantly to NRW’s civil contracting and mining services division. Promac rental plant has been absorbed into the NRW contracting fleet. Revenue for Promac was $31.8 million (2008:$21.2 million) in the 2009 financial year. Despite the difficult market conditions, Promac delivered strong sales of service trucks and water trucks, selling 44 units during the 2009 financial year - an increase of 37% compared with the previous financial year. Outlook The outlook for further growth of equipment and tyre sales in the mining and civil construction sectors is vulnerable to current economic conditions. In order to generate sales growth Promac is in the process of expanding its client base domestically and internationally particularly since it recently acquired international distribution rights for a number of its products. The Promac business has developed relationships with machinery manufacturers and importers, enabling it to introduce new machines into the various key markets. Promac is the authorised distributor for Patronsaint and Amberstone OTR tyres, Nugen generators, ProLite lighting towers, AMS water trucks and service trucks. YEAR IN REVIEW NRW | ANNUAL REPORT 09 9 ACTION MINING SERVICES Through its subsidiary, Actionblast Pty Ltd t/as Action Mining Services, NRW provides earthmoving and mining equipment repairs to all brands of equipment at its facilities in Hazelmere. A comprehensive mechanical repair and rebuild facility, sand blasting, painting, boiler making repair and fabrication services are offered to our clients. Due to the changing environmental requirements, Action Mining provides a fully accredited AQUIS approved quarantine cleaning facility, one of the largest in Perth. The quarantine cleaning station allows Action Mining to provide a one stop shop where machinery can be receipted from the wharf, cleaned and either repaired or set up for any additional requirements prior to leaving the premises. Action Mining Services operates a 24 hour operation when required to meet the demand of its civil and mining client base. A separate fabrication and assembly shop is also on the premises where 6x4 and 8x4 service truck and water tanker fabrication is undertaken. These products are fully mine site compliant and are marketed to both mining resources and mining services companies. Revenue for the Services Division was $25.6 million (2008: $26.2 million). Growth remained static due to a general decline in the resources sector however the company is well placed to satisfy future growth. Significant resources have been allocated to facilities, resulting in the upgrade of tooling and technical support to meet the highest quality standards. Other initiatives have been investment in processes, training and safety including provision of a dedicated safety officer and Occupational Health nurse, operating systems and software. Outlook The outlook for continuing growth within the services division is influenced by the resources sector. Action Mining is well placed to take advantage of any growth in the sector. In addition, fabricated products, comprising service modules and water tankers have been successfully designed and developed by Actionblast Pty Ltd. These products are highly regarded throughout industry; it is expected that the future will provide strong demand from customers both in the Civil and Mining industry. New products within this field are currently being developed to widen the client base and sales locations within Australia. “ IT IS EXPECTED THAT THE FUTURE WILL PROVIDE STRONG DEMAND FROM CUSTOMERS BOTH IN THE CIVIL AND MINING INDUSTRY.” 10 NRW | ANNUAL REPORT 09 YEAR IN REVIEW YEAR IN REVIEW NRW | ANNUAL REPORT 09 11 HEALTH, SAFETY AND ENVIRONMENT COMMUNITY NRW supports the communities in which it operates by sponsoring a range of charities, community events and sporting clubs both domestically and internationally. During 2009 NRW in conjunction with the Chiropractic Faculty at Murdoch University has continued field visits to Pilbara and Kimberley Regional centres as part of a proactive approach to management of spinal and related health issues. TRAINING AND ASSESSMENT During 2009 NRW continued its nationally accredited Certificate II in the Metaliferous Competencies for all operators employed by the Company. During the reporting period 382 employees have successfully completed the ‘Five Core Unit’ workshops and have received a nationally accredited qualification for the plant which they operate. This programme has proven very popular with NRW employees with many having attended the courses in their own time and has proven commercially valuable as clients continue to focus on the training and certification of operators. The introduction of the Certificate II in the Metaliferous Competencies has achieved considerable attention from BHPBIO in particular with recognition of the independent nature of the assessment assisting in the fast tracking of the Verification of Competency (VOC) process at project start up. NRW introduced the Diploma of Management for all Managers and Supervisors and to date approximately 90% of our management teams have been through the first of four modules. This Diploma has been specifically tailored to train our management team in the management of our business. There have been many positive outcomes displayed by participants in the Diploma course with obvious attitudinal and behavioural changes following completion of the course material. HUMAN RESOURCES NRW’s current and future success’ is directly linked to that of our people. We are driven to provide our people with a workplace that provides excellent reward, combined with development opportunities and most importantly, attention to safety that is second to none. As a company operating in an environment where skilled labour is in short supply, NRW remains focussed on the attraction and retention of quality employees. NRW provides its people with development opportunities at all levels by identifying employees with potential and allowing access to high quality training and development. The last 12 months has seen an excellent up take of training opportunities with strong participation and progress by our work-force towards formal qualifications in the form of the Certificate II in Metaliferous Mining as well as the Diploma of Management and Advanced Diploma of Management. These qualifications are encouraged by our Health Safety, Training and Environment department and are open to all site based operational employees. Rapid response to mobilisation needs in conjunction with client requirements remains a strong focus for the Human Resources department and NRW boasts a dedicated recruitment and mobilisation team who understand that delays in sourcing the right candidates equates to real economic cost to both NRW and our clients. As at 30 June 2009, the NRW Group had a total of approximately 830 employees. Our workforce includes 82 indigenous employees and 14 apprentices, reflecting the strong commitment to indigenous employment and training. In addition NRW continues to employ a large number of subcontractors through strategic alliances with indigenous organisation. NRW has implemented several indigenous training programs including “Power Up” in conjunction with the Department of Education, Employment and Workplace Relations. The “Power Up” program provides training and employment opportunities for long term unemployed. NRW also conducts its Cultural Awareness Program for all employees and sub contractors with PEEDAC Pty Ltd (an indigenous training organisation). 12 NRW | ANNUAL REPORT 09 YEAR IN REVIEW HEALTH AND SAFETY NRW is committed to achieving the highest possible performance in occupational health and safety across all business operations. Performance over the second half of the year showed a marked improvement and appears to be back on track to achieve reductions in the 2009 performance indicators. NRW’s Occupational Health and Safety Management Systems are accredited to AS4801:2001, the applicable Australian Standard and subject to continuous audit. The company manages risk through hazard identification, minimisation, monitoring and control procedures, and by reviewing safety performance. NRW ensures that all employees, including subcontractors’ employees, are fully instructed, trained and assessed in the tasks each will be required to perform, and in the operation of plant and equipment. This year also saw the implementation of the Bodysmart initiative, designed to increase awareness across all sites of measures to prevent back and related injuries. This program is managed by NRW’s dedicated Occupational Health Nurse (OHN). The health programme also has been extended to include personal dust monitoring and noise surveys which are also conducted by the OHN. ENVIRONMENT NRW maintained accreditation to AS/NZS ISO 14001: 2004 Certified Environmental Management which covers environmental Management systems in the civil engineering and mining industries. This accreditation reinforces NRW’s commitment to maintaining strict environmental protocols on all projects undertaken. This accreditation is also subject to continuing audit by external agencies. QUALITY ASSURANCE In May 2009 NRW achieved accreditation to ISO standard 9001: 2008 and AS/NZS 4801 for its quality management system. JEFFERY W McGLINN MANAGING DIRECTOR YEAR IN REVIEW NRW | ANNUAL REPORT 09 13 CORPORATE GOVERNANCE STATEMENT ASX GOVERNANCE PRINCIPLES AND ASX RECOMMENDATIONS The ASX Corporate Governance Council sets out best practice recommendations, including corporate governance practices and suggested disclosures. ASX Listing Rule 4.10.3 requires companies to disclose the extent to which they have complied with the best practice recommendations and to give reasons for not following them. Unless otherwise indicated the best practice recommendations of the ASX Corporate Governance Council, including corporate governance practices and suggested disclosures, have been adopted by the Company for the full year ended 30 June 2009. In addition, the Company has a Corporate Governance section on its website: www.nrw.com.au which includes the relevant documentation suggested by the ASX Recommendations. The extent to which NRW has complied with the ASX Recommendations during the year ended 30 June 2009, and the main corporate governance practices in place are set out below. PRINCIPLE 1: LAY SOLID FOUNDATION FOR MANAGEMENT AND OVERSIGHT ASX Principles: Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions The Board has implemented a Board Charter that details its functions and responsibilities together with those of the Chairman, individual Directors, chief executive officer and Company secretary. • • establishing investment criteria including acquisitions and divestments, approving investments, and implementing ongoing evaluations of investments against such criteria; approving and monitoring the progress of major capital expenditure, capital management and major acquisitions and divestitures; • providing oversight of the Company, including its control and accountability systems; • • • • considering and approving the Group’s budgets; establishing written policies on compliance, risk oversight and management;; reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal compliance and ensuring they are operating effectively; appointing and removing the chief executive officer, monitoring performance and approving remuneration of the chief executive officer and the remuneration policy and succession plans for the chief executive officer; • ratifying the appointment and the removal of senior executives; • monitoring senior management’s performance and implementation of strategy and ensuring appropriate resources are available; • ensuring that business risks facing the Group are, where possible, identified and that appropriate monitoring and reporting internal controls are in place to manage such risks; • approving and monitoring financial and other reporting; Key responsibilities of the Board include: • determining the dividend policy of the Company • approving the strategic objectives of the Group and establishing goals to promote their achievement; • • monitoring the operational and financial position and performance of the Group; • ensuring the directors inform themselves of the Group’s business and financial status; and declaring dividends; ensuring the Company complies with its responsibilities under the Corporations Act, the ASX Listing Rules, the Company’s Constitution and other relevant laws; and 14 NRW | ANNUAL REPORT 09 CORPORATE GOVERNANCE STATEMENT • exercising due care and diligence and sound business judgment in the performance of those functions and responsibilities. The Board has formally delegated power to the Managing Director in accordance with a Statement of Delegated Authority approved by the Board. Key responsibilities delegated to the chief executive officer include: • being responsible for the ongoing management of the Company in accordance with the strategy, policies and programs approved by the Board; • developing with the Board, the Group’s vision and direction; • constructing, with the Company’s management team, programs to implement this vision; • negotiating the terms and conditions of appointment of senior executives; • • appointing the senior management team; endorsing the terms and conditions of appointment of all other staff members; • providing strong leadership to, and effective management of, the Company in order to: o encourage co-operation and teamwork; o build and maintain staff morale at a high level; and o build and maintain a strong sense of staff identity with, and a sense of allegiance to, the Company; ensuring a safe workplace for all personnel; ensuring a culture of compliance generally, and specifically in relation to environmental matters; carrying out the day-to-day management of the Company; forming other committees and working parties from time to time to assist in the orderly conduct and operation of the Group; keeping the Board informed, at an appropriate level, of all the activities of the Group; and ensuring that all personnel act with the highest degree of ethics and probity. • • • • • • The Company secretary is generally responsible for carrying out the administrative and legislative requirements of the Board and to be responsible to the Board for all corporate governance matters. The secretary holds primary responsibility for ensuring that the Board processes and procedures run efficiently and effectively. ASX Principles: Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives. The Board will undertake an annual performance evaluation that reviews the performance of senior executives. ASX Principles: Recommendation 1.3: Companies should provide the information indicated in the Guide to reporting on Principle 1. This information is set out above. PRINCIPLE 2: STRUCTURE OF THE BOARD TO ADD VALUE Companies should have a Board of an effective composition, size and commitment to adequately discharge its responsibilities and duties. BOARD COMPOSITION Details of the Directors in office at the date of this report, including their qualifications, experience, date of appointment and their status as non-executive, independent or executive Directors are set out in the Directors Report. ASX Principles: Recommendation 2.1: A majority of the board should be independent Directors. ASX Principles: Recommendation 2.2: The Chairman should be an independent Director. ASX Principles: Recommendation 2.3: The roles of the Chair and Chief Executive Officer should not be exercised by the same individual. CORPORATE GOVERNANCE STATEMENT NRW | ANNUAL REPORT 09 15 CORPORATE GOVERNANCE STATEMENT The Board Charter (a copy of which has been published on the Company’s website) currently provides that at least one third of its Directors will be independent non- executive directors and that the Chairman must also be an independent non-executive director. The Board currently has four Directors, two of whom are non-executive. The two non-executive Directors, including the Chairman, are considered to be independent. The Company acknowledges non compliance with Recommendation 2.1 in that there is not a majority of independent Directors on the Board. The Board considers that given the current status of the Company, and that it believes conflicts of interest are adequately managed, the appointment of an additional non- executive director would not be of overall benefit to the Company. The roles of the Chair and chief executive officer are exercised by different individuals. INDEPENDENT DECISION-MAKING The Board agrees that all Directors should bring an independent judgement to bear in decision-making. Accordingly, the Board: • has adopted a procedure for Directors to take independent professional advice if necessary at the Company’s expense (with the prior approval of the Chairman, which will not be unreasonably withheld); • as much as is reasonably practicable within the constraints of its current Board size and structure, the Board sets aside sessions at its scheduled meetings to confer without management present; and • has described in the Board Charter the considerations it takes into account when determining independence. DIRECTOR INDEPENDENCE The Board’s Charter lists relationships it takes into account when determining the independent status of Directors. Criteria that the Board takes into account when determining Director independence include: • is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with a substantial shareholder of the Company; • has not, within the last 3 years, been employed in an executive capacity by a member of the Group, or been a director after ceasing to hold any such employment; • has not, within the last 3 years, been a principal of a material professional adviser or a material consultant to the Group, or an employee materially associated with the service provided; • is not a material supplier or customer of the Group, or an officer of or otherwise associated, directly or indirectly, with a material supplier or customer; • has no material contractual relationship with the Group other than as a director of the Company; • has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company; and • is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the Company. The Board considers materiality of matters which may effect the independence of Directors from time to time and discloses these in this Corporate Governance Statement. The Board has reviewed the independence status of its Directors and has determined the following Directors to be “independent’ (in accordance with the criteria listed above): • Dr Ian Burston (Chairman); and • Mr Michael Arnett. 16 NRW | ANNUAL REPORT 09 CORPORATE GOVERNANCE STATEMENT Mr Arnett is a former partner, and remains a consultant to, the law firm Deacons, who advise the Company on various matters from time to time. Mr Arnett has not been involved in providing any legal advice to the Company and the Board does not consider the materiality of his current relationship with Deacons to impact on his independence as a Director. The period of office held by each director in office is as follows: Director Date Appointed Period in office Due for Re-election Dr. Ian Burston 27 July 2007 2 years Mr. Jeff McGlinn 10 February 2006 3 years - - Nomination responsibilities: The role of the Nomination Committee includes: • • • • identifying nominees for directorships and other key executive appointments; the composition of the Board; ensuring that effective induction and education procedures exist for new Board appointees and key executives; and ensuring that appropriate procedures exist to assess and review the performance of the Chair, executive and non-executive directors, senior management, Board committees and the Board as a whole. Mr. Michael Arnett 27 July 2007 2 years 2009 AGM Composition of the Committee The Committee Charter states that the composition should include: a minimum of two non-executive members, the • majority of whom must be independent, and • a Chairman who is a non-executive Director. Committee membership is disclosed in the Directors Report included as part of the Annual Report along with details of meetings attended. Membership is consistent with the composition requirements of the Charter and the ASX Recommendations and members are required to have an appropriate level of understanding of principles of corporate governance, the Company’s businesses and organisation structure, the functions of the Board and various roles and responsibilities of directors and other key executive positions and senior management. Mr. Julian Pemberton 1 July 2006 3 years 2009 AGM More details of the skills, experience and expertise of each director which are relevant to the position of a director are listed in the Directors report of this Annual Report. CONFLICTS OF INTEREST A Director’s obligations to avoid a conflict of interest are set out in the Board Charter and reinforced in the Code of Conduct for Directors and Key Officers. Directors and employees of the Company are expected to act at all times in the Company’s best interests and to exercise sound judgment unclouded by personal interests or divided loyalties. They must avoid the appearance of, as well as actual, conflicts of interest in both in their performance of duties for the Company and in their outside activities. The Charter states that Directors must comply strictly with Corporations Act requirements and the Board Charter for the avoidance of conflicts. NOMINATION COMMITTEE ASX Principles: Recommendation 2.4: The Board should establish a Nomination Committee. The Board has established a Nomination Committee and adopted a Charter that sets out the committee’s role and responsibilities, composition and membership requirements. CORPORATE GOVERNANCE STATEMENT NRW | ANNUAL REPORT 09 17 CORPORATE GOVERNANCE STATEMENT The Committee’s principal function is reviewing and making recommendations to the board of directors of the Company (Board) with respect to: identifying nominees for directorships and other key executive appointments; the composition of the Board; ensuring that effective induction and education procedures exist for new Board appointees and key executives; and All Directors are expected to maintain the skills required to discharge their obligations to the Company. Directors are encouraged to undertake continuing professional education and where this involves industry seminars and approved education courses, to be paid for by the Company where appropriate. The skills, experience and expertise relevant to the position of director held by each director in office at the date of the Annual Report is set out in the Directors Report included in the Annual Report. ensuring that appropriate procedures exist to assess and review the performance of the Chair, executive and non-executive directors, senior management, Board committees and the Board as a whole. ASX Principles: Recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board, its committees and individual directors. • • • • During the 2009 financial year two meetings of the Nomination Committee were held. Certain responsibilities of the Nomination Committee were also considered at Board meetings by the full Board as required. The Board will undertake an annual performance evaluation that reviews: • performance of the Board against the requirements of the Board Charter; SELECTION, APPOINTMENT, INDUCTION AND CONTINUING DEVELOPMENT PROCESSES Directors must retire at the third AGM following their election or most recent re-election. At least one third of Directors must stand for election at each AGM. Any Director appointed to fill a casual vacancy since the date of the previous AGM must submit themselves to shareholders for election at the next AGM. Re-appointment of Directors by rotation is not automatic (the above retirement and re-election provisions do not apply to the chief executive officer). All notices of meeting at which a Director is standing for election or re-election are accompanied by information to enable shareholders to make an informed decision. As part of the induction process, meetings will be arranged with other Board members and key executives prior to the Director’s appointment. • performance of Board Committees against the requirements of their respective Charters; • • individual performances of the Chair, Directors, and chief executive officer and The Board Charter, the Committee Charters and the procedures of the Board with a view to continuous improvement. The Board commenced the performance evaluation in June 2009 in accordance with this process. The evaluation of Directors other than the chief executive officer was concluded in July 2009. The annual performance evaluation for the chief executive officer was conducted in August 2009. COMPANY SECRETARY The Company Secretary plays an important role in supporting the effectiveness of the Board by monitoring that Board policy and procedures are followed, and co-ordinating the timely completion and despatch of Board agenda and briefing material. The responsibilities of the Company Secretary are stated in the Board Charter. All Directors have access to the Company Secretary. 18 NRW | ANNUAL REPORT 09 CORPORATE GOVERNANCE STATEMENT The appointment and removal of the Company Secretary is a matter for decision by the Board. ASX Principles: Recommendation 2.6: Companies should provide the information indicated in Guide to reporting on Principle 2 This information is set out above. PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING COMPANIES SHOULD ACTIVELY PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING. ASX Principles: Recommendation 3.1: Companies should establish and disclose a Code of Conduct or a summary of the Code as to certain specified matters. CODES OF CONDUCT NRW has adopted Codes of Conduct that apply to its Directors, management and employees and which seek to establish the minimum standards the Board believes are necessary to maintain the highest level of confidence for all stakeholders in the integrity of the NRW group. These Codes are published on the Company’s website. ASX Principles: Recommendation 3.2: Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy. SECURITIES TRADING POLICY The Board has adopted a Securities Trading Policy that is binding on Directors and specified senior executives of NRW. The Policy is intended to assist in maintaining market confidence in the integrity of dealings in the Company’s securities and is available on the Company’s website. This Policy is provided to all new executives to whom the Policy will apply to at induction. The Company provides periodic reminders to the management team of the requirement for their compliance with this Policy. The Company’s Security Dealing Policy prevents short- term trading and dealing in the Company’s securities while directors and executives are in possession of non-public and relevant information. The Company reinforces these measures by setting out in the Security Trading Policy that executives and directors can only transact with the Company’s securities with the prior approval of the Chairman or Managing Director or in their absence the Company Secretary. The Policy only extends to Directors and senior executives who occupy positions in which they may have access to inside information from time to time as the Board does not currently consider it necessary for the Policy to extend to employees if they do not have access to non-public material price sensitive information. All trading in the Company’s shares by Directors and senior executives are monitored by the Company Secretary. ASX Principles: Recommendation 3.3: Companies should provide the information indicated in Guide to reporting on Principle 3 This information is set out above. PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING Companies should have a structure to independently verify and safeguard the integrity of the Company’s financial reporting. This structure is required to be one of review and authorisation designed to ensure the truthful and factual presentation of the Company’s financial position. It is expected to include: • • the review and consideration of the financial statements by the Audit Committee; and a process to ensure the independence and competence of the Company’s external auditors. CORPORATE GOVERNANCE STATEMENT NRW | ANNUAL REPORT 09 19 CORPORATE GOVERNANCE STATEMENT AUDIT COMMITTEE ASX Principles: Recommendation 4.1: The Board should establish an Audit Committee. ASX Principles: Recommendation 4.2: recommends the appropriate Committee structure. ASX Principles: Recommendation 4.3: The Committee should have a formal Charter. The Charter is published on the Company’s website. The website and Charter also contains information on the procedures for the selection and appointment of the external auditor and for the rotation of external audit partners. ASX Principles: Recommendation 4.4: Companies should provide the information indicated in Guide to reporting on Principle 4. The Board has established an Audit and Risk Management Committee to assist the Board in discharging its oversight responsibilities and has adopted a formal Charter that sets out the Committee’s role and responsibilities, composition and membership requirements. The role of the Audit and Risk Management Committee includes: • • • reviewing the integrity of management’s presentation of the Company’s financial position; reviewing the effectiveness of internal financial controls, and ensuring the independence and competence of the Company’s internal and external auditors. COMPOSITION OF THE COMMITTEE The Board has determined that the Audit Committee should comprise: • • a minimum of two non-executive Directors; a majority of independent non-executive directors; and • a non-executive Chair. In addition, the Audit Committee should include members who are financially literate. Committee membership is disclosed in the Directors Report included as part of the Annual Report along with details of meetings attended. Membership is consistent with the composition requirements of the Charter. This information is set out above. PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE Companies should promote timely and balanced disclosure of all material matters concerning the Company. The Company is committed to ensuring that: all investors have equal and timely access to • material information concerning the Company - including its financial situation, performance, ownership and governance; and • Company announcements are factual and presented in a clear and balanced way. ASX Principles: Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies. The Board has adopted a Continuous Disclosure Policy with the Company Secretary responsible for external communications. The Policy is available on the Company’s website. ASX Principles: Recommendation 5.2: Companies should provide the information indicated in Guide to reporting on Principle 5. This information is set out above. 20 NRW | ANNUAL REPORT 09 CORPORATE GOVERNANCE STATEMENT PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS Companies should respect the rights of shareholders and facilitate the effective exercise of those rights. ASX Principles: Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy. The Company is committed to effective communications with its shareholders, providing them with understandable and accessible information about the Company and facilitating shareholder participation at general meetings. The Board has established a Shareholder Communications Policy, its purpose being to set out in conjunction with the Continuous Disclosure obligations: • Company strategy; • strategy implementation; and • financial results flowing from the implementation of Company strategy. The full Shareholder Communications Policy is published on the Company website. COMMUNICATIONS POLICY The Company communicates with its shareholders publicly by maintaining an up-to-date website on which all ASX and media announcements are posted. Prior to the AGM shareholders are also invited to submit questions to the Company through the office of the Company Secretary. The Annual Report and is also available in electronic format from the Company’s website. EXTERNAL AUDITOR’S AGM ATTENDANCE The external auditor is required to attend the Company’s AGM and to respond to questions from shareholders about the conduct of the audit and the preparation and content of the auditor’s report. ASX Principles: Recommendation 6.2: Companies should provide the information indicated in Guide to reporting on Principle 6. This information is set out above. PRINCIPLE 7: RECOGNISE AND MANAGE RISK Companies should establish a sound system of risk oversight and management and internal control. RISK MANAGEMENT POLICY ASX Principles: Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. The Company has adopted an Audit and Risk Management Policy, the primary objective of which is to ensure that the Company maintains an up-to-date understanding of areas where the Company may be exposed to risk and compliance issues and implement effective management of those issues. This Policy is published on the Company’s website under the Charter of Audit and Risk Management. ASX Principles: Recommendation 7.2: The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks. Oversight of Risk Management is undertaken by the amalgamated Audit and Risk Management Committee. The Board require management to report to it, directly, or through the Audit and Risk Management Committee, as to the effectiveness of the Company’s management of its material business risks. CORPORATE GOVERNANCE STATEMENT NRW | ANNUAL REPORT 09 21 CORPORATE GOVERNANCE STATEMENT The chief executive officer is required to report to the Board on the progress of, and on all matters associated with, risk management.. The chief executive officer is to report to the Board as to the effectiveness of the Company’s management of its material business risks at least annually. NRW has established a risk management foundation that will be developed and enhanced over time to meet best practice standards including the recent appointment of an internal auditor. ASX Principles: Recommendation 7.3: The Board should disclose whether it has received assurance from the chief executive officer and the chief financial officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material aspects in relation to financial reporting risks. The Board has received an assurance from the Managing Director and Chief Financial Officer that there is a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to the financial reporting risks. ASX Principles: Recommendation 7.4: Companies should provide the information indicated in Guide to reporting on Principle 7. This information is set out above. PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear.. REMUNERATION COMMITTEE ASX Principles: Recommendation 8.1: The Board should establish a Remuneration Committee. The Board has established a Remuneration Committee and adopted a Charter that sets out the committee’s role and responsibilities, composition and membership requirements. Remuneration responsibilities: The role of the Remuneration Committee includes responsibility for providing the Board with advice and recommendations regarding the ongoing development of an executive remuneration policy that: • • • is designed to attract, maintain and motivate directors and senior management with the aim of enhancing the performance and long-term growth of the Company; clearly sets out the relationship between the individual’s performance and remuneration; and complies with the reporting requirements relating to the remuneration of directors and key executives as required by ASX Listing Rules, Accounting Standards and the Corporations Act. The Committee must review the remuneration policy and other relevant policies on an ongoing basis and recommend any necessary changes to the Board. The composition requirements for and membership of this Committee is consistent with the Charter. Committee membership is disclosed in the Directors Report included as part of the Annual Report along with details of meetings attended. A copy of this Committee’s Charter is on the Company’s website. ASX Principles: Recommendation 8.2: Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. EXECUTIVE REMUNERATION The Board periodically reviews executive remuneration practices with a view to ensuring there is an appropriate balance between fixed and incentive pay, and that the balance reflects short and long term performance objectives appropriate to the Company’s circumstances and goals. 22 NRW | ANNUAL REPORT 09 CORPORATE GOVERNANCE STATEMENT • taking into account the outcome of the non-binding shareholder vote when determining future remuneration policy; and • providing a response to shareholder questions on policy where appropriate. The restrictions in the Company’s Securities Trading Policy apply to Directors and specified executives in relation to transactions in products associated with the Company’s securities which limit the economic risk of holding shares in the Company in the same manner as they are restricted from dealing in the Company’s securities. However, as the Company has not issued any equity incentives to employees since its initial public offering, it has not formulated any specific policy in relation to the hedging of unvested entitlements under any equity based remuneration scheme. ASX Principles: Recommendation 8.3: Companies should provide the information indicated in Guide to reporting on Principle 8. This information is set out above. Executive remuneration will be published in the Remuneration Report in the Company’s Annual Report each year (including the Remuneration Report contained in this Annual Report). NON-EXECUTIVE DIRECTOR REMUNERATION ASX guidelines for appropriate practice in non-executive director remuneration are that non-executive directors should: • normally be remunerated by way of fees (in the form of cash, non-cash benefits, superannuation contributions or salary sacrifice into equity); • not normally participate in schemes designed for the remuneration of executives; • not receive options or bonus payments; and • not be provided with retirement benefits other than superannuation. The Company’s current practice for remunerating non- executive directors is consistent with these guidelines. The details of Directors’ remuneration are set out in the Remuneration Report contained in the Annual Report. REMUNERATION POLICY DISCLOSURES Disclosure of the Company’s remuneration policies is best served through a transparent and readily understandable framework for executive remuneration that details the costs and benefits. The Company intends to meet its transparency obligations in the following manner: • publishing a detailed Remuneration Report in the Annual Report each year; continuous disclosure of employment agreements • with key executives where those agreements, or obligations falling due under those agreements, may trigger a continuous disclosure obligation under ASX Listing Rule 3.1; • presentation of the Remuneration Report to shareholders for their consideration and non-binding vote at the Company’s AGM; CORPORATE GOVERNANCE STATEMENT NRW | ANNUAL REPORT 09 23 24 NRW | ANNUAL REPORT 09 FINANCIAL REPORT CONTENTS DIRECTORS’ REPORT Directors Company Secretary Directors’ Meetings Principal Activities State of Affairs Review of Operations and Results Significant Events After Year End Likely Developments Directors’ Interests Dividends Options Over Unissued Shares and Interests Auditor Auditors Independence and Non Audit Services Indemnification and Insurance of Officers and Auditors Environmental Regulations Remuneration Report (Audited) Rounding of Amounts AUDITOR’S INDEPENDENCE DECLARATION DIRECTORS’ DECLARATION INCOME STATEMENT BALANCE SHEET STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS 1 Reporting Entity 2 Basis of Preparation 3 Adoption of new and revised Accounting Standards 4 Significant accounting policies 5 Segment reporting 6 Acquisitions of subsidiaries 7 Revenue 8 Other income 9 Profit for the year 26 26 27 27 27 27 27 27 27 27 27 27 27 28 28 28 29 34 35 36 37 38 39 41 42 42 42 43 45 52 54 54 55 55 10 Finance Income and Expense 11 Auditors’ remuneration 12 Income tax expense 13 Property, plant and equipment 14 Goodwill 15 Issued Capital 16 Reserves 17 Retained earnings 18 Earnings per share 19 Dividends 20 Controlled entities 21 Cash and cash equivalents 22 Reconciliation of cash flows from operating activities 23 Trade and other receivables 24 Inventories 25 Financial assets 26 Other assets 27 Trade and other payables 28 Current tax liabilities 29 Deferred tax assets and liabilities 30 Borrowings 31 Jointly controlled operations 32 Financial instruments 33 Finance leases 34 Operating leases 35 Capital and other commitments 36 Contingencies 37 Share based payments 38 Provisions 39 Subsequent events 40 Related parties SHAREHOLDER INFORMATION INDEPENDENT AUDIT REPORT 56 56 56 58 58 59 59 60 60 61 62 63 64 65 66 66 67 67 67 68 68 69 70 73 74 74 74 75 75 76 76 81 83 FINANCIAL REPORT NRW | ANNUAL REPORT 09 25 DIRECTORS’ REPORT The Directors present their report together with the financial report of NRW Holdings Limited (“the Company”) and of the Consolidated Group (also referred to as “the Group”), comprising the Company and its subsidiaries, for the financial year ended 30 June 2009 and the Auditor’s report thereon. DIRECTORs The following persons held office as Directors of NRW Holdings Limited during the financial year and up to the date of this report are: Name Status Qualifications, special responsibilities and other Directorships Ian Burston Chairman Independent Non-Executive Director Dr Ian F Burston was appointed as a Director and Chairman on 27 July 2007. His career includes former positions as Managing Director of Portman Limited, Managing Director and Chief Executive Officer of Aurora Gold Ltd, Chief Executive Officer of Kalgoorlie Consolidated Gold Mines Pty Ltd, Vice President – WA Business Development of CRA Ltd and Managing Director of Hamersley Iron Pty Ltd. He was a non-executive Director of the Esperance Port Authority for ten years and executive Chairman of Cape Lambert Iron Ore Ltd, and is currently a non-executive Chairman of Broome Port Authority and Imdex Ltd and a non-executive Director of Mincor Resources NL and Fortescue Metals Group. Dr I F Burston has a Bachelor of Engineering (Mech) degree from Melbourne University and a Diploma in Aeronautical Engineering from Royal Melbourne Institute of Technology. He has completed the Insead Management Course in Paris and the Harvard Advanced Management Program in Boston. He was awarded the Western Australian Citizen of the Year (category of Industry and Commerce) in 1992, the Order of Australia (General Division) in 1993 and an Honorary Doctor of Science (Curtin) in 1995. Dr I F Burston has held the following directorships of listed companies in the 3 years immediately before the end of the financial year: • Non Executive Chairman, Imdex Limited • Non Executive Director, Mincor Resources NL • Non Executive Director, Kansai Mining Corporation • Non Executive Chairman, Cape Lambert Iron Ore Limited • Non Executive Director, Fortescue Metals Group Mr McGlinn was appointed a Director on 10 February 2006. Mr McGlinn is the founding Managing Director of NRW. He has over 30 years of experience in civil contracting, mining and marketing. His major responsibilities within NRW are in the areas of Group management and finance including strategy, acquisitions and overall business development. Mr Pemberton was appointed as a Director on 1 July 2006. He has over 20 years of experience in business, sales and management in both Australia and the United Kingdom. Mr Pemberton joined NRW in 1997 and initially worked on site before progressing into the sales and hire area. He has held roles as Operations Manager and General Manager for NRW prior to his current role. Jeffery McGlinn Managing Director Julian Pemberton Chief Operating Officer and Executive Director Michael Arnett Non-executive Director Mr Arnett was appointed as a Director on 27 July 2007. Michael Arnett is a consultant to and former partner of and member of the Board of Directors and national head of the Natural Resources Business Unit of the law firm Deacons. Michael has been involved in significant corporate and commercial legal work for the resource industry for over 20 years. Mr Arnett has held the following directorships of listed companies in the 3 years immediately before the end of the 2009 financial year. • • • • • • • • • • Non Executive Director, Anzon Australia Limited (resigned 2008) Non Executive Director, Anzon Energy Limited (resigned 2008) Non Executive Director, Archipelago Resources PLC Non Executive Chairman, Aztec Resources Limited (resigned 2006) Non Executive Director, Kids Campus Limited (resigned 2006) Non Executive Director, Axiom Mining Limited (resigned 2008) Chairman, New Guinea Energy Limited Non Executive Director, Cloncurry Metals Limited Non Executive Director, NRW Holdings Limited Non Executive Director, Nexus Energy Limited 26 NRW | ANNUAL REPORT 09 DIRECTORs’ REPORT COmPANy sECRETARy Mr Kim Hyman was appointed to the position of company secretary on 10 July 2007. Mr Hyman has responsibility for company secretarial services and coordination of general legal services, as well as the risk management portfolio. DIRECTORs’ mEETINgs The number of Directors’ meetings and number of meetings attended by each of the Directors of the Company during the financial year are: Director Ian Burston Michael Arnett Jeffery McGlinn Julian Pemberton Directors’ Meetings Attended 5 Directors’ Meetings Held 5 5 5 5 5 5 5 The Remuneration Committee met once during this period. The Nomination Committee was not required to meet during this period. The Audit and Risk Management Committee met in conjunction with each Board Meeting held. PRINCIPAL ACTIvITIEs The principal continuing activities of the Group, comprising the Company and the entities that it controlled during the financial year, were: civil contracting services mining services equipment rental and sales fabrication, quarantine and repair services • • • • sTATE OF AFFAIRs There were no significant changes in the state of affairs of the Company or the Group during the financial year. REvIEw OF OPERATIONs AND REsuLTs A review of the operations and results for the Group for the financial year to 30 June 2009, as well as information on the financial position of the Group, is set out in the Year in Review on pages 4 to 13 in this Annual Financial Report. sIgNIFICANT EvENTs AFTER yEAR END No matter or circumstance has arisen since the end of the financial year that has significantly affected, or may significantly affect, the Group’s operations, the results of those operations, or its state of affairs in future financial years. LIkELy DEvELOPmENTs Likely developments in the Group’s operations in future financial years and the expected results of those operations are reported, as appropriate, in the Year in Review on pages 4 to 13 in this Annual Financial Report. Further information about likely developments in the Group’s operations in future financial years, the expected results of those operations and the Group’s business strategy and prospects for future financial years has not been included in this report because disclosure of such information would be likely to result in unreasonable prejudice to the Company and the Group. DIRECTORs’ INTEREsTs At the date of this report the relevant interest of each Director in the ordinary share capital of the Company was: Director Ordinary Shares (NWH) Jeffery McGlinn Julian Pemberton (1) Ian Burston Michael Arnett 26,195,641 2,534,540 324,992 275,000 (1) Includes shares held pursuant to the Employee Share Plan. Transactions between entities within the Group and Director-related entities are set out in Note 40 to the financial statements DIvIDENDs A fully franked interim dividend of $0.01 per ordinary share was paid during the financial year ended 30 June 2009. The Directors have declared a fully franked final dividend of $0.01 cent per share, in relation to 30 June 2009, payable on 31 October 2009. OPTIONs OvER uNIssuED shAREs OR INTEREsTs Other than those mentioned in the remuneration policy, there were no options for ordinary shares on issue during the financial year, and none had been granted or were on issue as at the date of this report. AuDITOR The Company’s auditor is Deloitte Touche Tohmatsu who was appointed at the AGM held on November 28, 2007. During the financial year there were no officers of the Company who were former partners or directors of Deloitte. DIRECTORs’ REPORT NRW | ANNUAL REPORT 09 27 DIRECTORS’ REPORT (continued) AuDITOR’s INDEPENDENCE AND NON AuDIT sERvICEs The Directors received the Auditor’s Independence Declaration from the auditor of the Company, which is included on page 35 of this report. Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 11 (page 56) to the financial statements. The directors are satisfied that the provision of non- audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 11 (page 56) to the financial statements do not compromise the external auditors independence, based on advice received from the Audit and Risk Management Committee, for the following reasons: executives. The total amount of insurance premiums paid during the financial year was $150,020. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. ENvIRONmENTAL REguLATIONs The Group holds various licenses and is subject to various environmental regulations. No known environmental breaches have occurred in relation to the Group’s operations. • • All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. INDEmNIFICATION AND INsuRANCE OF OFFICERs AND AuDITORs The Company has executed a deed of access, indemnity and insurance in favour of each Director. The indemnity requires the Company to indemnify each Director for liability incurred by the Director as an officer of the Company subject to the restrictions prescribed in the Corporations Act. The deed also gives each Director a right of access to Board papers and requires the Company to maintain insurance cover for the Directors. The Company has also executed an indemnity and insurance deed in favour of certain executives of the Company. The deed requires the Company to indemnify each of these executives for liability incurred by them as executives of NRW subject to the restrictions prescribed in the Corporations Act. The deed also requires the Company to maintain insurance cover for these 28 NRW | ANNUAL REPORT 09 DIRECTORs’ REPORT DIRECTORS’ REPORT (continued) REmuNERATION REPORT (AuDITED) The following were key management personnel of the Group at any time during the period and unless otherwise indicated were key management personnel for the entire period: Name Non-Executive Directors Dr I F Burston Mr M Arnett Executive Directors Positions held Resigned / Appointed Chairman and Non Executive Director Appointed as Non-executive Director, 27th July 2007 Non Executive Director Appointed as Non-executive Director, 27th July 2007 Mr J W McGlinn Director & Chief Executive Officer Appointed as a Director, 10th February 2006. Mr J A Pemberton Director & Chief Operating Officer Appointed as Director of the Company 1st July 2006 Executives Mr M Wallace Mr G Chiarelli Chief Financial Officer Chief Financial Officer Mr N J Silverthorne Managing Director – Civil & Mining Appointed 8th December 2008 Appointed 15th July 1997 resigned as Chief Financial Officer – 24th December 2008 Appointed 27th July 2007 Mr K Bounsell Mr W Rooney Mr M Stewart General Manager – NRW Maintenance and Action Mining Managing Director _ Civil and Mining Engineering General Manager – Civil Engineering Appointed 2nd July 2007 Appointed 1st October 2008 Appointed 1st July 2008 Mr R J Morrow General Manager – Mining Services Appointed 6th April 2006 resigned 11th August 2008 Mr K Hyman Mr P McBain Company Secretary Appointed 10th July 2007 General Manager – Civil Engineering Appointed 3rd April 2006 resigned 30th April 2008 Remuneration committee The remuneration committee’s principal function is reviewing and making recommendations to the Board on remuneration packages and policies applicable to Directors and senior executives to ensure that those packages and policies are consistent with the Company’s strategic goals and objectives. The role and responsibilities, composition, structure and membership requirements of the remuneration committee are set out in detail in a Remuneration Committee Charter approved by the Board. The composition of the Remuneration Committee is as follows: • • Michael Arnett (non-executive Director) Ian Burston (non-executive Director) Principles of compensation Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and the Group, including directors of the Company and other executives. Key management personnel compensation is competitively set to attract and retain appropriately qualified and experienced directors and executives, reward the achievement of strategic objectives, and achieve the broader outcome of creating shareholder value. The compensation structures take into account: • • • capability and experience of the individuals individual’s ability to manage and control the relevant performance criteria the overall Group performance considering Group earnings, share price and returns on shareholder’s wealth. DIRECTORs’ REPORT NRW | ANNUAL REPORT 09 29 In-substance options Limited recourse loans were issued to key management personnel whereby loans were to be repaid by 15th March 2009 and accrue interest at a rate of 7.5% per annum, payable half-yearly. The loans were issued in order for selected key management persons to acquire shares in the Company at market rates prior to the listing of NRW on the ASX. The loans were to mature on 31st March 2009 under the original loan agreement, and have since been rolled into a new loan agreement covering any principal and interest balance. As a result these loans will be continuing as at 30 June 2009 as listed above with repayment by 30th September 2009. The employees’ obligation for repayment of the loans was limited to the dividends declared and the capital returns by the Company, and in the event that the employee ceases employment, the market price achieved on the sale of the shares held as security by the Company for the loans. The employee has no exposure to unfavourable changes in market price below the price at which the shares were issued. The shares issued under the limited recourse loan arrangements are accordingly accounted for as in-substance options (equity-settled share-based payments). To date 4,999,128 ordinary shares have been issued under this arrangement as detailed below: Name Mr G Chiarelli Mr J Kenny Mr J Pemberton Mr R Morrow Mr P McBain Mr P San Miguel Shares Value of limited recourse loan at 30 June 09 (1) 642,222 937,337 624,890 937,337 937,337 937,337 624,890 428,147 642,222 - - - Total 4,999,128 1,712,592 (1) Loan balance at 30 June 2009. Any nil balances have been repaid. The Board does not impose any restrictions in relation to a person limiting his or her exposure to the risk in relation to the options issued by the Company. DIRECTORS’ REPORT (continued) Past Year Performance(2): Measure 2009 2008 Market Capitalisation $238.7 million $489.9 million Market Capitalisation at IPO $502.5 million $502.5 million Share Price at end of year Share Price at beginning of year Net Profit After Tax Interim Dividend paid $0.95 $1.95 $1.95 $2.00(1) $37.1 million $32.8 million Final Dividend declared in respect of the year 1.00 Cent 1.00 Cent 4.00 Cents 4.23 Cents (1) PO date list price; (2) Note the past year performance table above is limited to performance since IPO listing. No meaningful comparison prior to this date. There was no profit or dividends paid or declared prior to listing. Compensation consists of a mix of fixed and variable compensation and short and long term performance based incentives. Fixed compensation Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes the cost of non-cash benefits provided to key management personnel), as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the remuneration committee through a process that considers individual, segment and overall Group performance. In addition, external consultants provide analysis and advice to ensure the directors’ and senior executives’ compensation is competitive in the market place. A senior executive’s compensation is also reviewed on promotion. Performance linked compensation Performance linked compensation includes both long term and short term incentives and is designed to reward key management personnel for meeting or exceeding their financial and personal objectives. The short term incentive is a bonus provided in the form of cash plus statutory employer superannuation contributions. The long term incentive comprises options over the ordinary shares of the Company under the Senior Management and Director Option Plan (SMDOP). No options have yet been issued under the Senior Management and Director Option Plan (SMDOP). 30 NRW | ANNUAL REPORT 09 DIRECTORs’ REPORT DIRECTORS’ REPORT (continued) Short term incentive bonus Each year the remuneration committee sets the measures of performance for the key management personnel. The measures are determined in order to align the individual’s reward with the strategy, objectives and performance of the Group. The financial performance objectives are ‘profit after tax’ compared to budgeted amounts. The non-financial measures vary with position and responsibility and include such aspects as achieving strategic outcomes, safety, customer relationship management and staff development. At the end of the financial year the remuneration committee assesses the actual performance of the Group and the individual against the measures determined at the beginning of the period. A percentage of the pre-determined maximum amount may be awarded depending on the extent to which the individual exceeded the performance measures. No bonus is awarded where performance falls below the minimum expectations. The remuneration committee recommends the cash incentive to be paid to the individuals for approval by the board, where applicable. No short term incentive bonus was paid during this financial year (2008: $0). Long term incentive Options may be issued under the Senior Management and Director Option Plan (SMDOP), in accordance with the thresholds set in the terms of the SMDOP. The objective of the SMDOP is to recognise the ability and efforts of senior executives who contribute to the Group’s success provide an incentive to achieve individual long term performance objectives and assist in the recruitment and retention of quality senior executives. The board has the discretion to determine the terms and conditions applying to each offer of options under the SMDOP including conditions attaching to the exercise of options, restrictions on transfer and disposal, exercise price of options and amount payable for a grant of options. As at the date of issue of this report the board had not resolved to issue any options under the SMDOP. It is expected that the board will attach conditions to the issue of options under the SMDOP where the right to exercise the options is conditional on the Group achieving certain performance hurdles as determined by the remuneration committee. To date, no options have been issued under the SMDOP. Other benefits Key management personnel can receive additional benefits in the form of non-cash benefits, as part of the terms and conditions of their appointment. Non- cash benefits typically include the provision of motor vehicles, motor vehicle running costs and other personal expense payments, and the applicable Fringe Benefits Tax on these amounts. Service contracts NRW has entered into executive service agreements with each of Jeffery McGlinn as Chief Executive Officer, John Silverthorne as Managing Director – NRW Civil and Mining, and Julian Pemberton as Chief Operating Officer. The executive service agreements: • • • • • are not fixed term agreements and continue on an ongoing basis until terminated; contain non-compete provisions restraining the executives from operating or being associated with an entity that competes with the business of NRW in Western Australia for 12 months after termination; provide for annual base salaries of $1,510,000 for Mr J McGlinn, $1,000,000 for Mr J Silverthorne and $800,000 (salary package) for Mr J Pemberton. In addition, Messrs McGlinn and Silverthorne receive statutory superannuation contributions, annual leave and long service leave, motor vehicle allowance and other fringe benefits exclusive of their base salary; provide for remuneration to be reviewed by NRW annually; and may be terminated by either the executive or the Company giving six months’ notice of termination (or in lieu), or in the case of Mr Pemberton’s agreement, three months’ notice (or in lieu). No other termination payments are due. DIRECTORs’ REPORT NRW | ANNUAL REPORT 09 31 DIRECTORS’ REPORT (continued) Directors’ and executive officers’ remuneration (Company and Group) The details of the nature and amount of each major element of remuneration of each director of the Company, and relevant Company and Group executives and key management personnel, who receive the highest remuneration, are outlined in the following tables. 2009 Short Term Benefits Post Employment Benefits Other Long Term Benefits Share Based Payments Total KEY MANAGEMENT PERSONNEL Salary & fees $ STI cash bonus $ Non cash benefit(1) Annual Leave(5) Super- annuation Other(3) Equity $ $ $ $ $ In substance options(6) $ Perform- ance related % Total $ $ Value of options % $ 645,421 100,000 80,000 DIRECTORS Mr J W McGlinn 1,510,000 Mr J A Pemberton NON-EXECUTIVE DIRECTORS Dr I F Burston Mr M Arnett EXECUTIVES Mr G Chiarelli(2) Mr K Hyman Mr M Wallace(4) Mr M Stewart Mr W Rooney Mr P J McBain(2) Mr R J Morrow(2) Mr J N Silverthorne Mr K Bounsell Total compensation (Consolidated) Total compensation (Company) 620,353 238,144 148,200 636,153 510,796 - 55,713 1,000,000 400,000 5,944,780 - - - - - - - - - - - - - - - - 197,555 149,277 147,639 58,048 109,714 82,301 13,745 79,982 2,846 - 14,543 61,428 5,566 15,245 7,598 1,565 2,545 - - - 24,755 5,960 28,609 25,422 - - 140,443 103,308 76,711 2,992 9,000 7,200 26,830 21,433 13,338 57,254 45,972 - 3,144 90,000 36,000 - - - 11,711 - - - - - 17,247 6,899 662,356 396,027 471,555 173,887 - - - - - - - - - - - - - - - - - - - - 2,062,519 110,218 1,041,381 - - 111,846 87,200 87,846 - - - - - - 749,572 357,471 173,064 737,261 589,788 1,565 61,402 - - 1,324,401 549,199 198,064 7,846,669 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Note: the pay period upon which the salary and fees are based is from 21 June 2008 to 19 June 2009: (1) - The non cash benefits comprise fringe benefits including motor vehicle allowances and related expenses offered to key management personnel. (2) - The key management personnel have terminated their employment. (3) - Represents the movement in accrued long service leave calculated from the opening balance 1 July 2008 to 30 June 2009. (4) - Mr Mark Wallace appointed as Chief Financial Officer on 8th December 2008 (5) - Represents the movement in accrued annual leave calculated from the opening balance 1 July 2008 to 30 June 2009. (6) - In-substance options (issued in 2007) relates to the revaluation of loan agreements of key personal staff due the Boards decision to extend terms to 30 September 2009. 32 NRW | ANNUAL REPORT 09 DIRECTORs’ REPORT DIRECTORS’ REPORT (continued) 2008 Short Term Benefits Post Employment Benefits Other Long Term Benefits Share Based Payments Total KEY MANAGEMENT PERSONNEL Salary & fees $ STI cash bonus $ Non cash benefit(1) Annual Leave Super- annuation Other Equity $ $ $ $ $ In substance options $ Perform- ance related % Total $ $ Value of options % $ 996,153 100,000 80,000 400,000 400,000 67,307 DIRECTORS Mr J W McGlinn 1,556,639 Mr J N Silverthorne Mr J A Pemberton Mr K Bounsell Mr L N Piper NON-EXECUTIVE DIRECTORS Dr I F Burston Mr M Arnett EXECUTIVES Mr G Chiarelli Mr K Hyman Mr J A Kenny Mr R J Morrow Mr P J McBain Mr S P Lucas Total Compensated (Consolidated) Total compensation (Company) 435,446 200,000 299,999 275,229 242,746 173,076 5,226,595 - - - - - - - - - - - - - - - - 229,842 29,068 140,098 109,022 147,453 76,820 89,654 58,598 107,877 139,932 75,994 3,162 1,623 - - - - - 14,521 23,972 13,690 27,450 27,450 12,856 - 6,196 4,678 15,936 - 10,875 36,000 36,000 4,327 9,000 7,200 39,190 18,000 27,000 24,771 21,246 12,877 6,666 6,667 - - - - 3,333 - - - - 821,037 148,358 465,363 184,286 - - - - - - - - - - - - - - - - - - - - 2,064,669 - 1,368,678 - 553,705 - 584,222 - 147,628 - 109,000 87,200 - - 489,157 - 251,501 - 345,367 - 343,386 - 291,442 - 209,684 - 6,845,639 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (1) - The non cash benefits comprised mostly of the motor vehicle allowances offered to key management personnel. DIRECTORs’ REPORT NRW | ANNUAL REPORT 09 33 DIRECTORS’ REPORT (continued) Non-executive directors Non-executive directors do not receive performance related compensation. The Company’s Constitution provides that non- executive Directors’ remuneration must not exceed the maximum aggregate sum determined by the Company in general meeting. At present, the nominated sum is fixed at a maximum of $350,000, in aggregate, per annum. This maximum sum cannot be increased without members’ approval by ordinary resolution at a general meeting. Non-executive Directors’ fees (excluding superannuation) to be paid by the Company are as follows: Director Dr I F Burston Mr M Arnett Fee per annum in AUD 100,000 80,000 Non-executive directors are also entitled to receive reimbursement for travelling and other expenses that they properly incur in attending Directors’ meetings, attending any general meetings of the Company or in connection with the Company’s business. ROuNDINg OF AmOuNTs The amounts contained in this report and the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies. This report has been made in accordance with a resolution of the Directors of the Company. JEFFERY W McGLINN Chief Executive Officer IAN F BURSTON Chairman 34 NRW | ANNUAL REPORT 09 DIRECTORs’ REPORT AUDITOR’S INDEPENDENCE DECLARATION Deloitte Touche Tohmatsu A.C.N. 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au The Board of Directors NRW Holdings Limited 73 – 75 Dowd Street Welshpool WA 6106 24 September 2009 Dear Board Members NRW Holdings Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of NRW Holdings Limited. As lead audit partner for the audit of the financial statements of NRW Holdings Limited for the financial year ended 30 June 2009, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU A T Richards Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. AuDITOR’s INDEPENDENCE DECLARATION NRW | ANNUAL REPORT 09 35 DIRECTORS’ DECLARATION The directors of the company declare that: (a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with the accounting standards and giving a true and fair view of the financial position and performance of the Company and the consolidated entity; and (c) The directors have been given the declarations required by s.295A of the Corporations Act 2001. At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee. In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order applies, as detailed in the Directors Report will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject to virtue of the deed of cross guarantee. Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors JEFFERY W McGLINN Chief Executive Officer IAN F BURSTON Chairman Perth, 24th August 2009 36 NRW | ANNUAL REPORT 09 DIRECTORs’ DECLARATION Income Statement For the financial year ended 30 June 2009 Revenue Other income Financial income Financial expenses Materials and consumables used Employee benefits expense Subcontractor costs Depreciation and amortisation expenses Impairment expense Plant and equipment costs Travel and accommodation Other expenses Profit before income tax Income tax expense Profit for the year Attributable to: Equity holders of the Company Earnings per share (cents per share) Basic earnings per share Diluted earnings per share Note 7 8 10 10 12 18 18 18 18 Consolidated Company 2009 $’000 2008 $’000 509,603 471,183 9,427 207 (8,341) (90,372) (125,754) (89,233) (21,102) - (98,731) (18,729) (14,997) 51,978 (14,886) 37,092 7,105 920 (7,321) (75,426) (100,687) (109,129) (17,554) (495) (80,812) (14,064) (26,375) 47,345 (14,584) 32,761 2009 $’000 - 47,987 58 (35) - - (361) - - - - - 47,649 (14,295) 33,354 2008 $’000 - 54,756 186 (234) - (866) (5) - - - - (10,906) 42,931 (13,057) 29,874 37,092 32,761 33,354 29,874 15.0 cents 14.9 cents 13.6 cents 13.4 cents - - - - Notes to the financial statements are included on pages 42 to 80. INCOmE sTATEmENT NRW | ANNUAL REPORT 09 37 Balance Sheet As at 30 June 2009 Note Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 1,205 87,773 - - 147 102,093 - - 102,240 88,978 - - - 34,089 2,987 37,076 139,316 483 - 3,809 1,124 5,416 - - - - 5,416 133,900 80,560 1,551 51,789 133,900 - - - 34,086 3,940 38,026 127,004 86 - 13,217 1,124 14,427 - - - - 14,427 112,577 79,528 1,475 31,574 112,577 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Trade and other receivables Property, plant and equipment Goodwill Financial assets Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Current tax liabilities Provisions Total current liabilities Non-current liabilities Trade and other payables Borrowings Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity 21 23 24 26 23 13 14 25 29 27 30 28 38 27 30 38 16 16 17 20,603 118,293 13,181 3,046 155,123 - 125,922 27,127 - 3,608 156,657 311,780 98,108 34,722 4,019 5,979 3,273 132,666 10,328 3,148 149,415 8,495 123,356 27,127 - 3,267 162,245 311,660 68,008 53,155 15,001 4,452 142,828 140,616 - 26,096 602 26,698 169,526 142,254 80,560 1,527 60,167 142,254 8,495 44,923 410 53,828 194,444 117,216 79,528 1,475 36,213 117,216 Notes to the financial statements are included on pages 42 to 80. 38 NRW | ANNUAL REPORT 09 BALANCE shEET Statement of Changes in Equity For the financial year ended 30 June 2009 Fully paid ordinary shares $’000 30,723 - Foreign currency translation reserve $’000 - - Option reserve $’000 1,290 264 Retained earnings $’000 13,501 - Consolidated Balance at 1 July 2007 Interest on ‘ESP’ loans Exchange differences arising on translation of foreign operations Related income tax Net income recognised directly in equity Profit for the year Total recognised income and expense Payment of dividends Share issue – IPO Share issue – deferred consideration for AMS Share issue – ‘EGO’ Share issue costs Repayment of limited recourse loan as part of the ‘ESP’ Balance at 30 June 2008 Balance at 1 July 2008 Interest on ‘ESP’ loans Exchange differences arising on translation of foreign operations Related income tax Net income recognised directly in equity Profit for the year Total recognised income and expense Payment of dividends Repayment of limited recourse loan as part of the ‘ESP’ Balance at 30 June 2009 - - - - - - 46,580 2,500 866 (1,760) 619 79,528 79,528 - - - - - - - 1,032 80,560 Total $’000 45,514 264 - (79) 185 32,761 32,946 (10,049) 46,580 2,500 866 (1,760) 619 - - - 32,761 32,761 (10,049) - - - - - (79) 185 - 185 - - - - - - 1,475 36,213 117,216 1,475 36,213 117,216 108 - (32) 76 - 76 - - - - - - 108 (24) (32) 52 37,092 37,092 37,092 37,144 (13,138) (13,138) - 1,032 - - - - - - - - - - - - - - (24) - (24) - (24) - - (24) 1,551 60,167 142,254 Notes to the financial statements are included on pages 42 to 80. sTATEmENT OF ChANgEs IN EquITy NRW | ANNUAL REPORT 09 39 Statement of Changes in Equity (Continued) For the financial year ended 30 June 2009 Company Balance at 1 July 2007 Interest on ‘ESP’ loans Related income tax Net income recognised directly in equity Profit for the year Total recognised income and expense Payment of dividends Share issue – IPO Share issue – deferred consideration for AMS Share issue – ‘EGO’ Share issue costs Repayment of limited recourse loan as part of the ‘ESP’ Balance at 30 June 2008 Balance at 1 July 2008 Interest on ‘ESP’ loans Related income tax Net income recognised directly in equity Profit for the year Total recognised income and expense Payment of dividends Repayment of limited recourse loan as part of the ‘ESP’ Balance at 30 June 2009 Notes to the financial statements are included on pages 42 to 80. Fully paid ordinary shares Option reserve Retained earnings Total $’000 30,723 - - - - - - 46,580 2,500 866 (1,760) 619 79,528 79,528 - - - - - - 1,032 80,560 $’000 1,290 264 (79) 185 - 185 - - - - - - 1,475 1,475 108 (32) 76 - 76 - - $’000 11,749 - $’000 43,762 264 - (79) - 29,874 29.874 (10,049) - - - - - 185 29,874 30,059 (10,049) 46,580 2,500 866 (1,760) 619 31,574 112,577 31,574 - 112,577 108 - (32) - 33,354 33,354 (13,139) 76 33,354 33,430 (13,139) - 1,032 1,551 51,789 133,900 40 NRW | ANNUAL REPORT 09 sTATEmENT OF ChANgEs IN EquITy Statement of Cash Flows For the financial year ended 30 June 2009 Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Interest paid Interest received Income tax paid Consolidated Company Note 2009 $’000 2008 $’000 2009 $’000 2008 $’000 544,468 402,688 (422,048) (372,000) (8,341) (6,272) 280 1,184 20 - (35) 131 - (384) (230) 450 (26,242) (10,838) (22,782) (8,260) Net cash provided by/(used in) operating activities 22 88,117 14,762 (22,666) (8,424) Cash flows from investing activities Acquisition of subsidiaries net of cash acquired 6 Proceeds from the sale of property, plant and equipment Acquisition of property, plant and equipment Net cash - used in investing activities Cash flows from financing activities Proceeds from the issue of share capital Proceeds from borrowings Repayment of borrowings and finance/hire purchase liabilities - 2,119 (7,254) (5,135) (881) 1,681 (4,773) (3,973) - 15,145 46,580 36,191 (54,182) (95,577) - - - - - - - (781) - - (781) 46,580 - (24,000) Proceeds from repayment of Employee Share Plan loans (see note 37) 1,032 619 1,032 619 Payment of dividends to shareholders Payment of costs relating to initial public offering Repayment of director related party loans Loans received from subsidiaries (13,139) (10,049) (13,139) (10,049) - - - (12,910) (3,429) - - (12,910) - - 33,716 10,169 Net cash (used in)/provided by financing activities (51,144) (38,576) 21,609 10,409 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year 31,838 (27,786) (1,057) 1,204 (11,235) 16,551 1,205 1 Cash and cash equivalents at the end of the year 21 20,603 (11,235) 147 1,205 Notes to the financial statements are included on pages 42 to 80. sTATEmENT OF CAsh FLOws NRW | ANNUAL REPORT 09 41 Notes to the Financial Statements For the financial year ended 30 June 2009 1. REPORTINg ENTITy NRW Holdings Limited (the ‘Company’) is a public company listed on the Australian Stock Exchange and incorporated in Australia. The address of the Company’s registered office is 73-75 Dowd Street, Welshpool, Western Australia. The consolidated financial statements of the Company for the year ended 30 June 2009 comprises the Company and its subsidiaries (together referred to as ‘Consolidated’, the ‘Consolidated Group’ or the ‘Group’). The Group is primarily involved in civil and mining contracting, the fabrication of components and repairs to plant and equipment and rental and sales of earthmoving equipment. 2. BAsIs OF PREPARATION (a) Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘AIFRS’). Compliance with AIFRS ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (‘IFRS’). The financial statements were authorised for issue by the Board of Directors on 24th August 2009. (b) Basis of measurement The financial report has been prepared on the basis of historical cost modified by the revaluation of certain non-current assets and financial instruments. Cost is based on fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and consequently the amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. (c) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: (i) ConstruCtion Work in Progress Essentially these amounts comprise of revenue earned, but not billed at 30 June 2009, mostly in relation to civil and some mining income claims. These amounts may comprise variations to contract particulars, and changes to scope beyond the original tendered contract. The process requires the client to accept or come to an arrangement with NRW for these types of claims. (ii) goodWill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. In this regard the future cash flows are estimated based on approved budgets relating to the cash-generating units. (iii) emPloyee entitlements Management judgement is applied in determining the following key assumptions used in the calculation of long service leave at balance date: • • • future increases in wages and salaries; future on cost rates; and experience of employee departures and period of service. 42 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 3. ADOPTION OF NEw AND REvIsED ACCOuNTINg sTANDARDs In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. Details of the impact of the adoption of these new accounting standards are set out in the individual accounting policy notes set out below. early adoPtion of aCCounting standards The directors elected in the previous year under s334(5) of the Corporations Act 2001 to apply AASB 8 ‘Operating Segments” and AASB 2007-3 ‘Amendments to Australian Accounting Standards arising from AASB 8’, even though the standards are not required to be applied until annual reporting periods beginning on or after 1 January 2009. AASB 8 is a disclosure standard which has resulted in a redesignation of the Group’s reportable segments (see note 5), but has no impact on the reported results or financial position of the Group. The operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by chief operating decision maker in order to allocate resources to the segment and to assess its performance. standards and interPretations issued not yet effeCtive At the date of authorisation of the financial report, the Standards and Interpretations listed below were in issue but not yet effective. Initial application of the following Standards will not affect any of the amounts recognised in the financial report, but will change the disclosures presently made in relation to the Group and the Company’s financial report: Standard AASB 101 ‘Presentation of Financial Statements’ (revised September 2007), AASB 2007-8‘ Amendments to Australian Accounting Standards arising from AASB 101’, AASB 2007- 10‘ Further Amendments to Australian Accounting Standards arising from AASB 101’ AASB 8 ‘Operating Segments’, AASB 2007-3 ‘Amendments to Australian Accounting Standards arising from AASB 8’ AASB 2009-2 ‘Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments’ Effective for annual reporting periods beginning on or after 1 January 2009 Expected to be initially applied in the financial year ending 30 June 2010 1 January 2009 30 June 2010 1 January 2009 (and that ends on or after 30 April 2009) 30 June 2010 standards and interPretations issued not yet effeCtive standards Initial application of the following standards is not expected to have any material impact on the financial report of the Group and the company: Standard/Interpretation AASB 123 ‘Borrowing Costs’ (revised), AASB 2007-6 ‘Amendments to Australian Accounting Standards arising from AASB 123’ AASB 3 ‘Business Combinations’ (2008), AASB 127 ‘Consolidated and Separate Financial Statements’ and AASB 2008-3 ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127’ AASB 2008-1 ‘Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations’ AASB 2008-2 ‘Amendments to Australian Accounting Standards - Puttable Financial Instruments and Obligations arising on Liquidation’ AASB 2008-5 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ Effective for annual reporting periods beginning on or after 1 January 2009 Expected to be initially applied in the financial year ending 30 June 2010 AASB 3 (business combinations occurring after the beginning of annual reporting periods beginning 1 July 2009), AASB 127 and AASB 2008-3 (1 July 2009) 1 January 2009 30 June 2010 30 June 2010 1 January 2009 30 June 2010 1 January 2009 30 June 2010 NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 43 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 3. ADOPTION OF NEw AND REvIsED ACCOuNTINg sTANDARDs (CONTINuED) AASB 2008-6 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ AASB 2008-7 ‘Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate AASB 2008-8 ‘Amendments to Australian Accounting Standards – Eligible Hedged Items’ AASB 2009-2 Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments Amends AASB 7 Financial Instruments: Disclosures to require enhanced disclosure amendments: • clarify that the existing AASB 7 fair value disclosures must be made separately for each class of financial instrument add disclosure of any change in the method for determining fair value and the reasons for the change establish a three-level hierarchy for making fair value measurements used in the disclosures clarify that the current maturity analysis for non-derivative financial instruments should include issued financial guarantee contracts and disclosure of a maturity analysis for derivative financial liabilities. Comparative information is not required to be provided in the first year the amendments are applied. • • • 1 July 2009 30 June 2010 1 January 2009 30 June 2010 1 July 2009 30 June 2010 1 January 2009 30 June 2010 AASB 2009-4 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Process’ AASB 2009-5 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process’ AASB 2009-6 “Amendments to Australian Accounting Standards” AASB 2009-7 “Amendments to Australian Accounting Standards” AASB 1 ‘First-time Adoption of Australian Accounting Standards’ 1 July 2009 30 June 2010 1 January 2010(1) 30 June 2011 1 January 2009(2) 30 June 2010 1 July 2009 1 July 2009 30 June 2010 30 June 2010 AASB Interpretation 15 ‘Agreements for the Construction of Real Estate’ 1 January 2009 30 June 2010 AASB Interpretation 16 ‘Hedges of a Net Investment in a Foreign Operation’ 1 October 2008 30 June 2010 AASB Interpretation 17 ‘Distribution of Non-cash Assets to Owners, AASB 2008-13 Amendments to Australian Accounting Standards arising from AASB Interpretation 17 ‘Distribution of Non-cash Assets to Owners’ AASB Interpretation 18 ‘Transfers of Assets from Customers’ 1 July 2009 30 June 2010 1 July 2009(3) 30 June 2010 1 Applicable to financial years beginning on or after 1 January 2010, except for the amendments made to the guidance to AASB 118 ‘Revenue’ that have no explicit application date and are taken to be immediately effective. 2 Applicable to financial years beginning on or after 1 January 2009 that end on or after 30 June 2009. 3 AASB Interpretation 18 applies to transfers of assets from customers received on or after 1 July 2009. The initial application of the expected issue of an Australian equivalent accounting Standard/Interpretation to the following Standard/Interpretation is not expected to have a material impact on the financial report of the Group and the Company: Effective for annual reporting periods beginning on or after 1 January 2010 and must be applied retrospectively Expected to be initially applied in the financial year ending 30 June 2010 Standard/Interpretation Group Cash-settled Share-based Payment Transactions – Amendments to IFRS 2 Amends IFRS 2 Share-based Payment to clarify the accounting for group cash-settled share-based payment transactions. An entity that receives goods or services in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash. The amendments to IFRS 2 also incorporate guidance previously included in IFRIC 8 Scope of IFRS 2 and IFRIC 11 IFRS 2 – Group and Treasury Share Transactions. As a result, the IASB has withdrawn IFRIC 8 and IFRIC 11. Note: The AASB made AASB 2009-8 ‘Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions’ in July 2009 to implement equivalent amendments in the Australian context. 44 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 4. sIgNIFICANT ACCOuNTINg POLICIEs The accounting policies described below have been applied consistently by the Group entities: (a) Principles of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. A list of controlled entities is contained in Note 20 to the financial statements. All controlled entities have a 30 June financial year-end with the exception of NRW Sarl who has a 31 December financial year end. Inter-company loans which have no interest or repayment terms are effectively investments in controlled entities and are reflected at cost. All intra-Group balances and transactions between entities in the consolidated Group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those policies applied by the parent entity. Where controlled entities have entered or left the consolidated Group during the year, their operating results have been included from the date control was obtained or until the date control ceased. (b) Income tax Current tax Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). deferred tax Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability, is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company/Group intends to settle its current tax assets and liabilities on a net basis. NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 45 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 4. sIgNIFICANT ACCOuNTINg POLICIEs (CONTINuED) Current and deferred tax for the period Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess. tax Consolidation The company and all its wholly-owned Australian resident entities are not part of a tax consolidated group under Australian taxation law. Management is reviewing this position and may choose to alter the groups tax consolidated position in the future. (c) Inventories Inventories are stated at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventories by the method most appropriate to each particular class of inventory, with all categories being valued on a first in first out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. (d) Construction work in progress Construction work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity. Construction work in progress is presented as part of trade and other receivables in the balance sheet. If payments received from customers exceed the income recognised, then the difference is presented as deferred income in the balance sheet. (e) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. ProPerty Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are carried in the balance sheet at fair value, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Plant and equiPment Plant and equipment and leasehold improvements are stated at cost less accumulated depreciation and impairment. Construction in progress is stated at cost. Cost includes expenditure that is directly attributable to the acquisition or construction of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the sate of acquisition. dePreCiation The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a diminishing value basis over their useful lives to the consolidated Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Depreciation Rate Buildings 2.5% - 7.5% Leasehold improvements 7.5% - 33.3% Plant and equipment 7.5% - 50% Office Equipment 7.5% - 66.67% Furniture and Fittings Motor Vehicles 7.5% - 45% 15% - 25% Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. 46 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 (f) Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, are classified as finance leases, all other leases are classified as operating leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the present value of the minimum lease payments, including any unguaranteed residual values expected to accrue at the end of the lease term. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a diminishing value basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time patterns in which economic benefits from the leased asset are consumed. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term except where another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. (g) Financial Instruments reCognition Financial instruments are initially measured at fair value, net of transaction costs, on trade date, which includes transaction costs, when the related contractual rights or obligations exist for the delivery of the investment within the timeframe established by the market concerned. Subsequent to initial recognition these instruments are measured as set out below. investments in subsidiaries Subsequent to initial recognition investments in subsidiaries are measured at cost in the Company financial statements. finanCial assets at fair value through Profit and loss A financial asset is classified in this category if acquired principally for the purpose of selling in the short term, is part of an identified portfolio of financial instruments that the group manages together and has a recent actual pattern of short term profit making. Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise. loans and reCeivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method, less impairment. held-to-maturity investments These investments have fixed maturities, and it is the Group’s intention and ability to hold these investments to maturity. Any held-to-maturity investments held by the Group are stated at amortised cost using the effective interest rate method, less impairment. available-for-sale finanCial assets Available-for-sale financial assets include any financial assets not included in the above categories. Available- for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity, with the exception of impairment losses. Interest is calculated using the effective interest method and foreign exchange gains and losses on monetary assets are recognised directly in the profit and loss. finanCial liabilities Financial guarantee contract liabilities Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of: • • the amount of the obligation under the contract, as determined under AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’; and the amount initially recognised less, where appropriate, cumulative amortisation in accordance with the revenue recognition policies described in note 4(o). Financial Liabilities Financial liabilities are classified as either financial liabilities at fair value through profit and loss or other financial liabilities. Financial liabilities at fair value through profit and loss Financial liabilities are classified as at fair value through profit and loss where the financial liability is either held for trading or it is designated as at fair value through profit and loss. A financial liability is held for trading if: • • it has been incurred principally for the purpose of repurchasing in the near future; or it is part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit- taking; or NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 47 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 4. sIgNIFICANT ACCOuNTINg POLICIEs (CONTINuED) • it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading is designated as at fair value through profit and loss upon initial recognition if: recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges), or hedges of net investments in foreign operations. • • such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investments strategy, and information about the grouping is provided internally on that basis. Financial liabilities at fair value through profit and loss are stated at fair value, with any resultant gain or loss recognised in profit and loss. The net gain or loss recognised in profit and loss incorporates any interest paid on the financial liability. Other Financial Liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. derivative finanCial instruments The Group enters into occasional derivative financial instruments mainly to manage its exposure to foreign exchange rate risk, including foreign exchange forward contracts. Further details of derivative financial instruments are disclosed in note 32 to the financial statements. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date if considered material. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the The fair value of a hedging derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities. Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss. Hedge accounting The Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged risk. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. The adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date. 48 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other expenses or other income Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a nonfinancial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss. Hedges of net investments in foreign operations Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in the foreign currency translation reserve; the gain or loss relating to the ineffective portion is recognised immediately in profit or loss and included in the ‘other expenses or other income’ line of the income statement. Gains and losses deferred in the foreign currency translation reserve are recognised in profit or loss when the foreign operation is disposed of. share CaPital Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any related income tax benefit. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arms length transactions, reference to similar instruments and option pricing models. Impairment Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. At each reporting date, the Group assess whether there is objective evidence that a financial asset has been impaired, other than those at fair value through profit and loss. In the case of available-for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the income statement. (h) Impairment of Assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell or value in use, is compared to the assets carrying value. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimated future cash flows have not been adjusted. Any excess of the assets carrying value over its recoverable amount is expensed to the income statement. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised directly in profit or loss. NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 49 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 4. sIgNIFICANT ACCOuNTINg POLICIEs (CONTINuED) (i) Intangibles goodWill Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised at the date of the acquisition. Goodwill is subsequently measured at its cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units, or groups of cash-generating units, expected to benefit from the synergies of the business combination. Cash-generating units or groups of cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. If the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of the cash-generating unit (or groups of cash-generating units), the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or groups of cash-generating units) and then to the other assets of the cash generating units pro-rata on the basis of the carrying amount of each asset in the cash- generating unit (or groups of cash-generating units). An impairment loss recognised for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. On disposal of an operation within a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal of the operation. (j) Foreign Currency Transactions and Balances funCtional and Presentation CurrenCy The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. transaCtion and balanCes Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity otherwise the exchange difference is recognised in the income statement. On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s foreign currency translation reserve. Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed. (k) Employee Benefits Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date in respect of wages and salaries, annual leave, long service leave and sick leave. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Obligations for contributions to defined contribution superannuation funds are recognised as an expense in profit or loss when they are due. (l) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. The amount recognised as a provision is the best estimate of the consideration required to settle the 50 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. (m) Share-based payments The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with corresponding adjustments to the equity- settled employee benefits reserve. The Employee Share Plan (‘ESP’) is accounted for as an “in-substance” option plan due to the limited recourse nature of the loan between the employees and the Company to finance the purchase of ordinary shares. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share. Shares in the Group held under the ESP are deducted from equity, and the grant date fair value of the options recognised at reporting date is credited to Options reserve. (n) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet. (o) Revenue Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of the goods can be estimated reliably, and there is no continuing management involvement with the goods. Revenue from the rendering of a service is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed. Construction contract revenue is recognised in profit or loss when the outcome of a construction contract can be measured reliably, in proportion to the stage of completion of the contract. Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably. The stage of completion is assessed by reference to surveys of work performed. When the outcome of a construction contract cannot be measured reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in profit or loss. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Dividend revenue is recognised when the right to receive a dividend has been established. All revenue is stated net of the amount of goods and services tax (GST). (p) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in income in the period in which they are incurred. (q) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 51 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 4. sIgNIFICANT ACCOuNTINg POLICIEs (CONTINuED) (r) Business combinations The purchase method of accounting is used to account for all business combinations within the scope of AASB 3, regardless of whether equity instruments or other assets are acquired. Cost is measured of the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of the exchange plus costs directly attributable to the acquisition. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date, except for non-current assets that are classified as held-for-sale in accordance with AASB5 ‘ Non-current assets held for sale’ and discontinued operations, which are recognised at fair value less costs to sell. The excess of the costs of the acquisition over the fair value of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the Group’s share of fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after reassessment of the identification and measurement of the net assets acquired. (s) Joint venture Arrangements Jointly Controlled oPerations The Group adopts the proportionate distribution method as permitted under AASB 131. As such incorporated in the consolidated groups financial statements are the distribution from the joint venture operations The Group recognises the assets that it jointly controls and the liabilities that it incurs, along with the expenses that it incurs and the Group’s share of the income that it earns from the sale of goods or services by the joint venture. The joint ventures are characterised as jointly controlled operations rather than establishment of a corporation, partnership or other entity. Each venturer uses its own property, plant and equipment and carries its own inventories as applicable. It also incurs its own expenses and liabilities and raises its own finance which represents its own obligations. 5. sEgmENT REPORTINg The segments are presented in line with the Group’s internal management reporting structure. The Group has in the previous year adopted AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 in advance of their effective dates. As such the Group’s reportable segments under AASB 8 remain unchanged. Information regarding these segments is reported below. The accounting policies for the reportable segments are the same as the Group’s accounting policies. Segment results and segment assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise predominantly interest bearing loans, borrowings, and corporate assets and expenses. Inter- segment pricing is determined on an arm’s length basis. Reportable segments and Product Segments The board as in prior years has identified the following reportable segments which have not been aggregated but reflect each reporting division and its products: • • • • The provision of civil This segment continues to Civil Contracting. infrastructure and other construction services including rail formation, bulk earthworks and detailed road and tunnel construction. Mining Services. operate in the Mining contracting services including earth moving, waste stripping, ore haulage and related ancillary services. Equipment Rental and Sales. of new and used, heavy mining and ancillary equipment and the distribution of off-road tyres, loaders, excavators and rollers. Fabrication and Repair Services. The provision of equipment repairs, sandblasting and painting services, service truck and water tanker fabrication and import services, including quarantine cleaning. Rental and sale geograPhiCal information The following table represents a break down of the activity between the two operating geographical segments: Revenue from External Customers 2008 $’000 440,540 30,643 2009 $’000 479,487 30,116 Total Assets 2009 $’000 292,252 19,528 2008 $’000 282,405 29,255 509,603 471,183 311,780 311,660 Australia West Africa - Guinea Total 52 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 The civil and mining contracting segments aim to service worldwide projects, at present servicing two distinct areas being Australia and West Africa – Guinea. The other segments being Equipment Rental and Sales and Fabrication and Repair services operate predominantly in Australia with some business representation overseas for equipment sales. It is expected these overseas destinations will be a source of future projects and sales turnover. Revenues from external customers are attributed to individual countries based on the invoiced address for the goods and services. rePortable segments Civil Contracting Mining Services Equipment Rental and Sales Fabrication and Repair Services Eliminations Consolidated 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $000 2008 2009 2008 $000 $’000 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Total external revenue Inter-segment revenue Total segment revenue 294,142 336,761 189,434 107,167 16,018 10,955 10,009 16,300 - - 509,603 471,183 - 11 - - 15,815 10,269 15,569 9,904 (31,384) (20,184) - - 294,142 336,772 189,434 107,167 31,833 21,224 25,578 26,204 (31,384) (20,184) 509,603 471,183 Segment result 27,737 39,888 31,157 25,551 6,552 3,779 3,138 4,309 - - 68,584 73,527 9.4% 11.8% 16.4% 23.8% 20.6% 17.8% 12.3% 16.4% 13.5% 15.6% Unallocated expenses Results from operating activities Unallocated IPO and employee share expenses (2) Net finance costs Income tax expense Profit for the period (8,471) (8,070) 60,113 65,457 - 60,113 (11,711) 53,746 (8,134) (6,402) (14,886) (14,584) 37,092 32,761 Civil Contracting Mining Services 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Equipment Rental and Sales 2009 2008 $000 $000 Fabrication and Repair Services Consolidated 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Segment assets 144,732 124,213 93,210 104,217 38,854 46,565 12,141 11,001 288,937 285,996 Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation & Impairment(1) 144,732 124,213 93,210 104,217 38,854 46,565 12,141 11,001 22,842 311,780 25,664 311,660 (83,239) (79,894) (53,608) (63,144) (27,250) (38,884) (2,841) (3,738) (166,937) (185,660) (83,239) (79,894) (53,608) (63,144) (27,250) (38,884) (2,841) (3,738) (2,588) (169,526) (8,783) (194,443) 13,785 14,760 8,878 34,439 2,948 8,390 3,385 7,113 14,300 7,580 3,080 3,130 217 337 1,423 25,153 59,013 225 21,102 18,049 (1) Includes the impairment loss recognised to profit and loss of $495,000. (2) The unallocated amounts relate to IPO costs and employee share expenses which do not form part of the segment reporting above. NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 53 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 6. ACquIsITIONs OF suBsIDIARIEs Acquisition of entity – Actionblast Pty Ltd With effect from 30 March 2007, NRW Holdings Ltd, acquired 100% of the issued share capital of Actionblast Pty Ltd (Action Mining Services), a company incorporated in Australia, with the Group provisionally recognising $24,417 (thousand) of Goodwill, being the excess of total purchase consideration over the fair value of net tangible assets acquired. The numbers presented below have been accounted for using the acquisition method of accounting. The transaction was fully settled on 31 March 2008 when the deferred consideration component was paid to the vendor. The fair values of the consideration paid, assets, liabilities and contingent liabilities acquired were only provisionally determined as at 30 June 2007. The treatment on acquisition was finalised in the year ended 30 June 2008 with regard to the following: (i) The $24,000 (thousand) paid to the vendor in cash and cash equivalents, was financed by way of a new bank loan facility which was repaid in September 2007 from the proceeds raised from the initial public offering. (ii) The $2,500 (thousand) deferred consideration due to the vendor upon listing on the Australian Stock Exchange on 5th September 2007 has been settled by way of 1,250 (thousand) issued shares at a fair value (issue price) of $2.00 per share. This has now been finalised and completed in full. (iii) A further purchase price instalment of $1,000 (thousand) was due on 31 March 2008. The final amount paid in cash to the vendor on this date was reduced by $245 (thousand) in purchase price adjustments, as stipulated in the terms of the share purchase agreement. An additional $26 (thousand) in direct transaction costs were incurred during the current financial year with a corresponding uplift in goodwill on acquisition. A further $100 (thousand) in costs was paid in 2008. 7. REvENuE Revenue from the sale of goods Revenue from the rendering of services (i) Other operating revenue Consolidated 2009 $’000 25,708 483,895 - 509,603 2008 $’000 19,396 451,776 11 471,183 Company 2009 $’000 - - - - 2008 $’000 - - - - (i) Included within revenue from the rendering of services are the following amounts recognised from construction contracts during the period: Construction work in progress Less Construction contract advances received Construction revenue – work in progress Consolidated 2009 $’000 25,069 - 25,069 2008 $’000 38,338 - 38,338 Company 2009 $’000 - - - Construction revenue – billed 468,691 405,585 - 2008 $’000 - - - - 54 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 8. OThER INCOmE Trust distribution income Net (loss)/gain on sale of property plant and equipment Fuel rebate revenue Other income 9. PROFIT FOR ThE yEAR Consolidated 2009 $’000 - (103) 5,885 3,645 9,427 2008 $’000 - 362 4,670 2,073 7,105 Company 2009 $’000 47,626 - - 361 47,987 2008 $’000 54,756 - - - 54,756 (a) Gains and losses Profit/(loss) for the year has been arrived at after crediting/(charging) the following gains and losses: Gain/(loss) on disposal of property, plant and equipment Consolidated 2009 $’000 (103) 2008 $’000 362 Company 2009 $’000 - 2008 $’000 - Net foreign exchange gains/(losses) - (2) - - (b) Other expenses Profit for the year includes the following expenses: Cost of sales Consolidated 2009 $’000 (33,001) 2008 $’000 (16,495) Company 2009 $’000 - 2008 $’000 - Reversal of (impairment)/impairment of trade receivables (188) 350 Impairment of non-current assets Depreciation of non-current assets Operating lease and rentals: Minimum lease payments Employee benefits expense: Superannuation contributions Share-based payment – equity-settled 37 Wages and salaries Payroll tax Other(IPO Costs) - (21,100) (21,100) (495) (17,554) (18,049) (87,694) (87,694) (70,153) (70,153) (8,955) - (109,861) (6,937) (125,754) (7,081) (866) (87,267) (5,472) (100,687) - (11,414) - - - - - - - - - - - - - - - - - - - (866) - - (866) (10,845) NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 55 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 10. FINANCE INCOmE AND ExPENsE Interest Income Total Finance Income Interest on bank overdrafts and loans Interest on obligations under finance leases Total Finance expense Consolidated 2009 $’000 207 207 (2,083) (6,258) (8,341) 2008 $’000 920 920 (2,225) (5,095) (7,321) Net Finance Income and Expense (8,134) (6,401) Company 2009 $’000 58 58 (35) - (35) 23 2008 $’000 186 186 (234) - (234) (48) 11. AuDITORs’ REmuNERATION Auditor of the parent entity Deloitte Touche Tohmatsu Audit and review of financial reports Non-audit services (1) Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 133,750 - 133,750 120,000 369,465 406,405 38,787 - 38,787 36,940 369,465 406,405 (1) Non-audit services for the financial year ended 30 June 2008 include the preparation of the Investigating Accountants’ Report included in the prospectus dated 27 July 2007 and services as part of a Vendor Due Diligence engagement. 12. INCOmE TAx ExPENsE Recognised in the income statement Current tax expense Current period Adjustments for prior years Deferred tax expense Origination and reversal of temporary differences Total income tax expense in income statement Consolidated 2009 $’000 15,231 (4) 15,228 (341) 14,887 2008 $’000 18,436 68 18,504 (3,920) 14,584 Company 2009 $’000 13,342 - 13,342 953 14,295 2008 $’000 15,236 68 15,304 (2,247) 13,057 56 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 Numerical reconciliation between tax expense and pre-tax net profit Profit for the period Total income tax expense Profit after income tax Income tax using the Company’s domestic tax rate of 30% Changes in income tax expense due to: Non-allowable expenses Tax concessions Share-based payments Under provision for prior years Effect of different income tax rates for subsidiaries operating in a different tax jurisdiction Effective tax rate Consolidated 2009 $’000 51,978 (14,886) 37,092 2008 $’000 47,345 (14,584) 32,761 Company 2009 $’000 47,649 (14,295) 33,354 2008 $’000 42,931 (13,057) 29,874 15,594 14,204 14,295 12,879 83 (733) - (4) (54) 133 - 110 68 70 - - - - - - - 110 68 - 14,886 28.64% 14,584 30.80% 14,295 30.00% 13,057 30.40% The Company has completed its tax consolidation assessment and a decision was made not to proceed with tax consolidation, on the basis of cost versus benefit. The Company will review this decision periodically in order to ensure this position does not change. Recognised directly in equity Current tax Interest received on ESP loan balances outstanding Deferred tax Share issue costs Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 32 32 - - 79 79 (619) (619) - - - - 2008 $’000 79 79 (619) (619) NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 57 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 13. PROPERTy, PLANT AND EquIPmENT Buildings $’000 Leasehold improvements $’000 Plant and equipment $’000 Cost Balance at 1 July 2007 Other acquisitions Disposals Balance at 1 July 2008 Other acquisitions Disposals Balance at 30 June 2009 Depreciation Balance at 1 July 2007 Depreciation expense Impairment expense Disposals Balance at 1 July 2008 Depreciation expense Impairment expense Disposals Balance at 30 June 2009 Net book value At 30 June 2008 At 30 June 2009 491 360 - 851 6 (390) 467 14 60 - - 14 55 - (46) 83 776 384 Total $’000 116,441 59,013 (4,008) 171,446 25,889 (5,522) 191,813 32,727 17,554 495 (2,689) 32,727 21,102 - (3,301) 65,890 71 1,050 - 1,121 189 - 1,310 4 40 - - 4 118 - - 162 115,879 57,603 (4,008) 169,474 25,694 (5,132) 190,036 32,709 17,454 495 (2,689) 32,709 20,929 - (3,255) 65,645 1,077 1,148 121,504* 124,391 123,356 125,922 Included in the net book value of total plant and equipment was plant and equipment under finance leases comprising of a net book value of $80,257 (2008: $93,988). NRW Holdings Ltd holds no property plant or equipment. It also holds no land or buildings. 14. gOODwILL As part of the Board’s review the Group’s Goodwill has been reviewed and held at carrying amounts as follows: Gross carrying amount Balance at the beginning of financial year Additional amounts recognised from business combinations occurring in prior period (note 6) Balance at the end of financial year Accumulated impairment Balance at the beginning of financial year Impairment loss Balance at the end of financial year Carrying amounts At the beginning of the financial year At end of the financial year Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 27,127 27,101 - 27,127 26 27,127 - - - - - - 27,127 27,127 27,101 27,127 - - - - - - - - - - - - - - - - 58 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 The assumptions made as part of the Board’s review comprise: • • • • • • the separate cash generating units continue to be Actionblast Pty Ltd (fabrication, service and repairs) and secondly Promac Rental and Sales Pty Ltd (equipment rental and sales); Goodwill carrying amounts are retained at $24,417,000 in relation to Actionblast Pty Ltd and $2,710,000 in relation to Promac Rental and Sales Pty Ltd; the calculation of the recoverable amount is based on the value in use, adopting the approved Board budget for full year 30 June 2010. Cash flows beyond one year have been extrapolated using a steady 3% growth rate; the terminal value has been estimated at the end of the 5 year period based on the projected cash flow; a weighted average cost of capital including a risk margin has been set at pre tax discount rate 10.0%); the directors have applied a sensitivity movement of 10% to the value in use analysis. On this basis, there was still no impairment loss. The assumptions above appear adequate and the assumptions are consistent with industry expectations and Group activity. 15. IssuED CAPITAL Ordinary shares 251,223,000 fully paid ordinary shares (2008: 251,223,000) Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 80,560 79,528 80,560 79,528 The Company does not have a limited amount of authorised capital and issued shares do not have a par value due to changes to the corporations’ law abolishing these concepts. Fully paid ordinary shares carry one vote per share and carry the right to dividends. Fully paid ordinary shares Balance at the beginning of the financial year (1) Effect of the share split (2) Share issue – initial public offering Share issue – deferred consideration for acquisition of Actionblast Pty Ltd Share issue – employee gift offer Repayment of limited recourse loan as part of the ‘ESP’ Less cost of the initial public offering (net of tax) Balance at the end of the period Consolidated 2009 No. 251,223,000 - - - - - - 251,223,000 2009 $’000 79,528 - - - - 1,032 - 80,560 Consolidated 2008 No. 2008 $’000 65,974,869 160,275,131 23,290,000 1,250,000 433,000 - - 251,223,000 30,723 - 46,580 2,500 866 619 (1,760) 79,528 (1) The balance of ordinary shares on issue at 1 July 2007 includes 1,457,752 ordinary shares (pre share-split) issued to senior executives under the Employee Share Plan (‘ESP’). (2) The Company undertook a share split at a ratio of 226,250,000 / 65,974,869 shares. 16. REsERvEs Option reserve Balance at the beginning of the financial year Interest received on employee loan balances due under the ‘ESP’ Related income tax Balance at the end of the financial year Consolidated 2009 $’000 1,475 108 (32) 1,551 2008 $’000 1,290 264 (79) 1,475 Company 2009 $’000 1,475 108 (32) 1,551 2008 $’000 1,290 264 (79) 1,475 NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 59 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 The option reserve arose on the grant of ordinary shares to key management personnel financed by way of limited recourse loans with Company creating an in-substance option over the ordinary shares. Foreign currency translation reserve Balance at the beginning of the financial year Exchange differences arising on translation of foreign operations Balance at the end of the financial year Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 - (24) (24) - - - - - - - - - Total Reserves 1,527 1,475 1,551 1,475 17. RETAINED EARNINgs Balance at the beginning of the financial year Net profit attributable to members of the parent entity Dividends paid (note 7) Balance at the end of the financial year Consolidated 2009 $’000 36,213 37,092 (13,139) 60,167 2008 $’000 13,501 32,761 (10,049) 36,213 Company 2009 $’000 31,574 33,354 (13,139) 51,789 2008 $’000 11,749 29,874 (10,049) 31,574 18. EARNINgs PER shARE Earnings per share (cents per share) The income and share data used in the calculation of basic and dilutive earnings per share are as follows: Basic earnings per share Diluted earnings per share Consolidated 2009 15.0 cents 14.9 cents 2008 13.6 cents 13.4 cents Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Profit for the year Weighted average number of ordinary shares for the purpose of basic earnings per share Consolidated 2009 $‘000 37,092 2008 $‘000 32,761 247,986 241,768 60 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 Diluted earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Consolidated 2009 $‘000 2008 $‘000 37,092 32,761 247,986 241,768 920 3,614 248,906 245,382 Profit attributable to ordinary shareholders Weighted average number of ordinary shares for the purpose of basic earnings per share Shares deemed to be issued for no consideration in respect of: Employee in-substance options Weighted average number of ordinary shares for the purpose of diluted earnings per share 19. DIvIDENDs Recognised amounts paid: Fully paid ordinary shares Interim dividend to 31 December 2007: Fully franked at 30% tax rate Final dividend to 30 June 2008: Fully franked at 30% tax rate Interim dividend to 31 December 2008: Fully franked at 30% tax rate Unrecognised amounts: Final dividend to 30 June 2009 Fully Franked at 30% tax rate Franking account balance Franking account balance at 1 July Tax paid Franking credits attached to dividends paid: - as final dividend - as interim dividend Franking account balance at 30 June 2009 Cents per share 2008 Cents per share Total $’000 Total $’000 - - 4.00 10,049 4.23 10,627 1.00 2,512 1.00 2,512 - - - - - - Company 2009 $’000 3,954 22,782 (4,554) (1,077) 21,105 2008 $’000 - 8,260 - (4,306) 3,954 Franking credits that will arise from the payment of income tax payable as at reporting date Franking credits that will arise from the payment of dividends declared before the financial report was authorised for issue but not recognised as a distribution to equity holders during the period. Net franking credits available 3,809 13,217 (1,077) 23,837 (4,554) 12,617 NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 61 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 20. CONTROLLED ENTITIEs Parent entity NRW Holdings Limited Wholly owned subsidiaries NRW Pty Ltd as trustee for NRW Unit Trust Actionblast Pty Ltd NRW Mining Pty Ltd NRW Intermediate Holdings Pty Ltd Promac Rental & Sales Pty Ltd NRW SARL Indigenous Mining & Exploration Company Pty Ltd Country of incorporation Ownership interest Australia Australia Australia Australia Australia Australia Guinea Australia 2009 - 100% 100% 100% 100% 100% 100% 100% 2008 - 100% 100% 100% 100% 100% 100% 100% All of the wholly-owned subsidiaries in Australia have entered into a deed of cross guarantee with NRW Holdings Ltd pursuant to the ASIC Class Order 98/1418 and are relieved from the requirement to prepare and lodge an audited financial report. NRW Sarl is a wholly owned subsidiary of NRW Holdings Limited and is incorporated in the Republique of Guinea (West Africa) and not part of the above deed of cross guarantee arrangements. The consolidated income statements of the entities party to the deed of cross guarantees are: INCOME STATEMENT Revenue Other income Financial income Financial expenses Materials and consumables used Employee benefits expense Subcontractor costs Depreciation and amortisation expenses Impairment expense Plant and equipment costs Travel and accommodation Other expenses Profit before income tax Income tax expense Profit for the year Consolidated 2009 $’000 509,277 9,310 207 (8,341) (90,079) (124,132) (89,233) (21,093) - (96,070) (18,729) (18,053) 53,064 (15,266) 37,798 2008 $’000 468,097 7,105 920 (7,179) (75,180) (100,419) (109,082) (17,305) (495) (80,361) (14,000) (26,153) 45,948 (14,095) 31,853 62 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 The consolidated balance sheets of the entities party to the deed of cross guarantees are: BALANCE SHEET Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Trade and other receivables Property, plant and equipment Goodwill Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Current tax liabilities Provisions Total current liabilities Non-current liabilities Trade and other payables Borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity Consolidated 2009 $’000 20,342 118,245 13,181 3,046 154,813 - 125,860 27,127 3,608 156,598 311,411 97,920 34,722 4,018 5,979 142,638 - 26,096 - 602 26,698 169,336 142,075 80,560 1,550 59,964 142,075 2008 $’000 3,273 132,666 10,328 3,148 149,415 7,098 123,356 27,127 3,267 160,848 310,263 68,008 53,155 14,513 4,452 140,127 8,495 44,923 - 410 53,828 193,955 116,308 79,528 1,475 35,305 116,308 21. CAsh AND CAsh EquIvALENTs (a) For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows: Cash and cash equivalents Bank overdraft Consolidated 2009 $’000 20,603 - 20,603 2008 $’000 3,273 (14,508) (11,235) Company 2009 $’000 147 - 147 2008 $’000 1,205 - 1,205 NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 63 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 21. CAsh AND CAsh EquIvALENTs (CONTINuED) (b) Non-cash investing activities During the year, the Group acquired $18,632,000 (2008: $54,240,000) of equipment under finance lease. These acquisitions will be reflected in the cash flow statement over the term of the finance leases via repayments of finance leases. During the prior year, the Company partially settled the deferred component of the consideration due for the acquisition of Actionblast Pty Ltd by way of issued equity instruments. 1,250,000 fully paid ordinary shares in the Company were issued to the Actionblast Pty Ltd vendor with a fair value of $2.00 per share (issue price). This issue is not reflected in the cash flow statement. 22. RECONCILIATION OF CAsh FLOws FROm OPERATINg ACTIvITIEs a) Reconciliation of profit for the period to net cash flows from operating activities: Cash flows from operating activities Profit for the period Adjustments for: Trust distribution income Initial public offer costs Loss/(Gain) on sale of property, plant and equipment Depreciation Impairment of fixed assets Employee gift share offer Interest on ‘ESP’ loans accounted for directly in equity Operating profit before changes in working capital and provisions Change in trade and other receivables Change in provision for doubtful debts Change in inventories Change in other assets Change in trade and other payables Change in provisions and employee benefits Change in provision for income tax Change in deferred tax balances Net cash from operating activities Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 37,092 32,761 33,354 29,874 - - 102 21,100 - - 108 - 10,845 (363) 17,554 495 866 264 (47,626) - - - - - 108 (54,756) 10,845 - - - 866 264 58,402 62,422 (14,164) (12,907) 22,680 188 (2,852) 102 19,235 1,718 (11,015) (341) 88,117 (73,838) - (1,756) (1,254) 22,866 2,573 7,668 (3,920) 14,762 (411) - - - 397 - (9,441) 953 (22,666) - - - - (314) - 7,044 (2,247) (8,424) 64 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 23. TRADE AND OThER RECEIvABLEs Current Receivables Trade Receivables Other Receivable (1) Retentions Other Loan receivable Securities (Property Bonds) Amounts Due from Subsidiaries Allowance for Doubtful Debts (ii) Amounts due From Customers under Construction Contracts Non Current Receivables Other Receivable Amounts Due from Subsidiaries Consolidated 2009 $’000 2008 $’000 83,192 11,474 1,541 - 22 - (188) 96,040 22,252 118,293 - - - 75,940 9,217 151 12 24 - - 85,344 47,322 132,666 8,495 - 8,495 Company 2009 $’000 377 35 - - - 101,682 - 102,093 - 102,093 - - - 2008 $’000 - - - - - 87,773 - 87,773 - 87,773 - 43,189 43,189 Loans to controlled entities are interest free, have no fixed repayment terms and can be called at the Company’s discretion. (1) On 30 May 2008, Promac entered into a Settlement Deed with Pilbara Iron Company (Services) Pty Ltd (“PICS”) in relation to matters arising from a one-off series of transactions in 2006 in which Promac supplied a number of second-hand tyres to PICS. NRW guaranteed certain obligations of Promac under the Settlement Deed. The terms of the Settlement Deed are confidential. Under the terms of a Deed of Indemnity and a Deed of Acknowledgement dated 30th May 2007, as at 30th June 2009 an amount of $10,000,000 (“Indemnification balance”) is receivable within 12 months by Promac from the Indemnifiers (see Related Party note 40 for the full list of the Indemnifiers). The Indemnification balance is for the same amount (receivable at the same times) as the amount payable by Promac to PICS under the Settlement Deed, and has been guaranteed by Jeffery William McGlinn as trustee for the Mystica Trust, Walsec Pty Ltd as trustee for the LN Piper Family Trust, Keith Bounsell as trustee for the Bounsell Family Trust and Nicholas John Ross Silverthorne and Maureen Kaye Silverthorne as trustees for the Silverthorne Trust. As a result of the arrangements described above, NRW and Promac are fully indemnified in respect of matters arising from the supply of second-hand tyres to PICS in 2006. Title to and risk in the second-hand tyres has passed to the Indemnifiers. (ii) Movement in the allowance for doubtful debts: Balance at the beginning of the year Impairment losses recognised on receivables Amounts written off as uncollectable Amounts resolved during the year Balance at end of year Consolidated 2009 $’000 - (188) - - (188) 2008 $’000 (372) - 22 350 - Company 2009 $’000 - - - - - 2008 $’000 - - - - - NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 65 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 23. TRADE AND OThER RECEIvABLEs (CONTINuED) Ageing of impaired trade receivables: 60-90 days 90-120 days 120+ days Consolidated 2009 $’000 - 25 163 188 2008 $’000 - - - - Company 2009 $’000 - - - - 2008 $’000 - - - - In determining the recoverability of a trade receivable, the Group considers any change in the credit quality and other operational issue of the trade receivable, from the date credit was initially granted up to the reporting date. The directors believe that there is no further allowance required in excess of the allowance for doubtful debts. (iii) Ageing of past due but not impaired – accounts receivable: 60-90 days 90-120 days 120+ days (iv) Construction work in progress comprises: Gross cost plus profit recognised to date Less: progress billings received Net construction work in progress 24. INvENTORIEs Raw materials and consumables Work in progress Finished goods 25. FINANCIAL AssETs Non-current Investments carried at cost - investments in subsidiaries (note 17) Consolidated 2009 $’000 702 339 2,153 3,194 2008 $’000 386 807 4,057 5,250 Consolidated 2009 $’000 353,941 (331,689) 22,252 2008 $’000 164,079 (116,757) 47,322 Consolidated 2009 $’000 8,898 1,158 3,125 13,181 2008 $’000 4,556 921 4,851 10,328 Company 2009 $’000 - - - - Company 2009 $’000 - - - Company 2009 $’000 - - - - 2008 $’000 - - - - 2008 $’000 - - - 2008 $’000 - - - - Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 - - - - 34,089 34,089 34,086 34,086 66 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 26. OThER AssETs Current Prepayments Other 27. TRADE AND OThER PAyABLEs Current Payables Trade Payables Goods and Service Tax Other Payables Non Trade Payables and accruals Deferred Income Amounts Due to Subsidiaries Non trade related parties Non Current Payables Other Payables (1) Consolidated 2009 $’000 3,036 9 3,046 Consolidated 2009 $’000 68,050 2,279 10,352 15,263 2,164 - - 98,108 - - 2008 $’000 3,148 - 3,148 2008 $’000 41,329 1,963 9,217 15,499 - - - 68,008 8,495 8,495 Company 2009 $’000 2008 $’000 - - - - - - Company 2009 $’000 2008 $’000 397 - - - - 86 - 483 - - - - - - - 86 - 86 - - (1) Includes an amount payable to Pilbara Iron Company (Services) Pty Ltd (‘PICS’). Refer Trade and other receivables note for detail disclosure of this transaction. 28. CuRRENT TAx LIABILITIEs The current tax liability of the consolidated entity of $4,019,000 (2008: $15,001,000) and for the Company of $3,809,000 (2008: $13,217,000) represents the amount of income taxes payable in respect of the current and prior periods. NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 67 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 29. DEFERRED TAx AssETs AND LIABILITIEs Deferred tax assets and liabilities are attributable to the following: Consolidated Doubtful debts Work in progress Inventories Property, plant and equipment Other assets Costs of the initial public offer Other creditors and accruals Provisions Total tax assets / (liabilities) Net tax assets / (liabilities) Company Other assets Costs of the initial public offer Provisions Total tax assets / (liabilities) Net tax assets / (liabilities) 30. BORROwINgs The Groups borrowings comprised of: Secured at Amortised Cost Current Bank Overdraft Finance lease liability Insurance Funding Trade Finance Liability Total Current Non Current Finance lease liability Insurance Funding Total Non Current Assets Liabilities 2009 $’000 52 - 103 151 342 2,660 2,687 1,974 7,969 3,608 - 2,660 337 2,997 2,987 2008 $’000 - - 183 157 360 3,603 725 1,459 6,487 3,267 - 3,603 337 3,940 3,940 2009 $’000 - (347) (2,293) (1,710) (10) - - - (4,361) - (10) - - (10) - 2008 $’000 - (276) (1,442) (1,501) - - - - (3,220) - - - - - - Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 - 32,887 298 1,537 34,722 26,096 - 26,096 60,818 14,508 33,552 2,465 2,629 53,155 44,744 179 44,923 98,077 - - - - - - - - - - - - - - - - - - 68 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 (ii) Finance Facilities Consolidated finanCe faCilities as at 30 June 2009 FINANCE DESCRIPTION Asset Financing Bank Overdraft Trade Finance Other FACE VALUE (limit) $’000 133,000 40,000 7,000 299 CARRYING AMOUNT (utilised) $’000 58,983 - 1,537 298 Consolidated finanCe faCilities as at 30 June 2008 FINANCE DESCRIPTION Asset Financing Loans Trade Finance Other FACE VALUE (limit) $’000 122,750 4,000 7,500 2,644 CARRYING AMOUNT (utilised) $’000 78,296 14,508 2,629 2,644 UNUTILISED AMOUNT (utilised) $’000 74,017 40,000 5,463 1 UNUTILISED AMOUNT (utilised) $’000 44,454 10,508 4,871 - Security The main finance provider is the ANZ Banking Group which provides overdraft, trade finance, performance guarantees, asset financing etc. Annual and periodic reviews take place as necessary subject to bank covenants and conditions as set in the agreement between the parties. As such the ANZ Banking Group has in place security by way of a fixed and floating charge over all the Groups present and future assets, undertaking (including goodwill) and unpaid/uncalled capital of the Company excluding security attaching to other asset financiers. 31. JOINTLy CONTROLLED OPERATIONs The Group has late in the year ended 30 June 2009 become a party to several jointly controlled operations. These venturers were in the start up phase and at 30 June 2009 are presented as follows: Name of Venture NRWVDM Joint Venture LNJ Consortium Principal Activity Mine Asset Development (earthworks) and Breakwater Construction. Asset Development Projects (camps rail etc). Group Interest 2009 2008 50% 33% - - The Groups interest in assets and liabilities employed in the above jointly controlled operations under their respective asset and liability categories are as follows: Current assets Trade and other receivables Current Liabilities Trade and Other Payables Total Net Assets Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 7,566 7,484 82 - - - - - - - - - NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 69 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 32. FINANCIAL INsTRumENTs Financial Risk Management The financial instruments adopted by the Group primarily lie in the area of credit risk, liquidity risk, and market risk. The Board has ultimate responsibility to manage the Groups exposure to risk and prevention. In particular the board assesses which systems are employed to deliver the most appropriate level of controls including, systems of compliance and adherence to any relevant limits. Furthermore, the risk policies and procedures are reviewed periodically and aim to reflect market conditions, recent activities and other relevant dynamic changes that may occur. The Groups overall financial risk management strategy seeks to ensure appropriate funding levels, approved treasury directives and identification of risks faced by the Group. In addition it is seen as critical that the going concern basis is maintained and capital availability held ready to meet operational and financial objectives. Primarily interest bearing debt, cash and cash deposits, trade receivables and payables are the main focus of financial instruments engaged by the Group. The Group is also exposed to some foreign currency risks although considered minimal. Capital Risk Management The capital structure of the Group comprises of debt (including borrowings), cash and cash equivalents, and equity to the relevant stakeholders. Primarily the board aims to provide a sound capital funding structure that allows market confidence (from all sectors) and which delivers sustained current and future growth. The majority of capital funding is required for the long term purchase of operating assets. These are primarily placed under hire purchase borrowing arrangements. As in prior years the cash position is reviewed regularly and ensures the Group will be able to pay its debts as and when they fall due. Borrowings and operating cash flows are primarily used to cater for general day to day operations and funding of dividend and tax disbursements. Gearing Ratio: The Groups geared ratio target has been formally set at 45% and for the year ended 30 June 2009 as set out below the Group achieved a net Debt to Equity ratio of 28% - well below its target range. The board meets regularly to determine the level of borrowings and funding required. The gearing ratio is influenced directly from the capital structure including the payment of dividends and any other movement in debt such as for expansion. At year end the gearing ratio was: Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 60,818 (20,603) 40,216 98,077 (3,273) 94,805 - (147) - - (1,205) - 142,254 117,216 133,900 112,577 28% 81% - - Borrowing Note 30 Debt (Note 30) Cash (Note 21) Net Debt Equity Net Debt to Equity Ratio Fair Value of Financial Instruments The carrying amount of financial assets and financial liabilities recorded in the financial statement continue to approximate their fair values. There has been no impairment charge or adjustments made to any of the carrying values, as such the fair values are in line with carrying values. The consolidated group and the Company’s remaining contractual maturity for its financial liabilities and financial assets are set out in the following tables. As applicable the table shows the effective interest rates and average interest rates. Interest rate risk management The Group has been highly successful in renegotiating its borrowings with its primary lenders. No material changes have occurred from prior years. The cost of capital and the related borrowings for the Group have decreased slightly and it is not expected that any material fluctuations or volatility will occur in the short term. Any rate rise or change in the near future would not result in any material impact. The Board continues to review its risk associated with any covenants and borrowing conditions. The Group enjoys a mixture of fixed and variable borrowings to manage both cash and long term capital purchases. The long term debt specifically relating to capital purchases of plant and machinery is fixed. 70 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 The Group does not enter into any specific swaps or hedging relative to any interest rate volatility. Predominantly the exposure is on the bank borrowings, which are primarily the bank overdraft and the annual review was completed successfully during the financial year ended 30 June 2009. Other considerations of debt and borrowings lie in funding new developments which forms part of the risk management strategy of the Group. Given the Group has most of the financing under fixed rate hire purchase or other similar asset financing agreements, the exposure to market volatility of interest rate lies mainly in the overdraft facilities. Applying a conservative movement of 150 basis points to the average overdraft would add a cost of $105,000 AUD plus or minus depending on market swings and balances. It is not considered material that such a swing will impact on the business should this arise. INTEREST AND LIQUIDITY ANALYSIS effective interest rate % 2.45% - - 6.54% - 9.33% 2009 CONSOLIDATED Financial Assets Cash and Cash Equivalent Trade and Other Receivables Financial Liabilities Asset Financing Loans Trade Finance Trade and Other Payables Other Borrowings Net Financial Assets/(Liabilities) COMPANY Financial Assets Cash and Cash Equivalent 2.25% Trade and Other Receivables Financial Liabilities Inter Company Loans Payable - - 8.65% 58,983 30,081 26,096 Total 0 to 30 days 1 to 5 yrs > 5 yrs $000s $000s 31 days to < 1 year $000s - 36,263 36,263 - 697 39,907 298 70,983 (34,720) - 102,093 102,093 - - $000s 20,603 82,029 102,632 2,805 - 840 56,037 - 59,682 42,950 147 - 147 - - $000s 20,603 118,293 138,896 - 1,537 95,944 298 156,762 (17,866) 147 102,093 102,240 - - - - - - - - - 26,096 (26,096) - - - - - - - - - - - - - - - - - - - - - - Net Financial Assets/(Liabilities) 102,240 147 102,093 NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 71 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 32. FINANCIAL INsTRumENTs (CONTINuED) INTEREST AND LIQUIDITY ANALYSIS 2008 CONSOLIDATED Financial Assets Cash and Cash Equivalent Trade and Other Receivables Financial Liabilities Asset Financing Loans Trade Finance Trade and Other Payables Other Borrowings Net Financial Assets/Liabilities COMPANY Financial Assets Cash and Cash Equivalent Trade and Other Receivables Financial Liabilities Other Loan - ANZ Inter Company Loans Payable Net Financial Assets/Liabilities effective interest rate % 6.6% - 8.61% 8.16% 9.12% - 9.33% 6.7% Total 0 to 30 days $000s 3,273 132,666 135,939 (78,296) (14,508) (2,629) (68,008) (2,644) (166,085) (30,146) 1,205 87,773 88,978 - (86) (86) 88,892 $000s 3,273 77,443 80,716 (2,342) - (1,227) (43,641) - (47,210) 33,506 - - - - - - - 31 days to < 1 year $000s - 55,223 55,223 (31,210) (14,508) (1,402) (24,367) (2,465) (73,952) (18,729) 1,205 87,773 88,978 - (86) (86) 88,978 1 to 5 yrs > 5 yrs $000s - - - (44,744) - - - (179) (44,923) (44,923) - - - - - - - $000s - - - - - - - - - - - - - - - Foreign Exchange and currency exposure The Group has a reportable and functional currency in Australian dollars. However there are some transactions of an operational and capital nature that may be denominated in a foreign currency. The Board considers that movements in foreign currency (negative or positive) will have minimal impact on operating profits, given that most projects are agreed in Australian dollars. Any new developments which the Group considers or bids for are considered as part of the risk management by the board. During the year ended 30 June 2009 and where applicable this risk strategy incorporates the use of forward exchange contracts. This has generally only been required for specific hedging of short term transactions within the normal operating cycle wether they be receivable or payable. The Group is not in the business of trading such that forward exchange contracts are aimed at placing a fixed and determinable value on the receivable or payable so as to mitigate any unexpected peak or trough in the underlying budgeted outcome. Other than specific transactions or purchases the majority of transactions are dealt with at spot. The Groups operations in West Africa – Guinea have a continued minor exposure to foreign currency movements. The structure has not materially changed from prior years and as such predominantly the exposure is based on the transfer of funds for services rendered in the country of West Africa - Guinea. The Cash balances at 30 June 2009 (at spot) were $247,508 AUD (2008: 14,089 AUD) and $96,833 AUD (2008: 9,037 AUD). At this stage no hedging is entered into for the purposes of the Guinea operations. Cash is converted to USD and then into GNF as required. Volatile market movements is considered as a low risk, given the majority of the cash is utilised quickly. Contract income however is negotiated and invoiced in Australian dollars. In this regard foreign exchange movements are considered minimal and immaterial. 72 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 Credit risk The credit risk associated with the Group is primarily if any third party fails to meet its obligations to pay its debt as and when they fall due. Trade and other receivables continue in the 30 to 60 day band with some falling outside this timeframe. Cash retentions are subject to the variety of contracts that the Group is engaged in. The main security is normally by way of bank guarantee or insurance bonds. The retention or guarantee/bond period varies from contract to contract. Where terms are exceeded no interest is charged on late payments, however management follow a strict credit policy as part of day to day cash flow management. The carrying amount of financial assets recorded in the financial statements net of any allowance for losses, represents the Groups maximum exposure to credit risk without taking into account the value of any collateral obtained. The total amount of guarantees/bonds stand at $42,829,000 (2008: $16,982,000) and cash retentions held as accounts receivable stand at $1,541,138 (2008: $151,000). 33. FINANCE LEAsEs Finance leases as lessee Non cancellable finance leases are payable as follows: The types of finance lease the Group mainly enters into are in relation to the acquisition of new capital, primarily plant and equipment. The majority of new plant and equipment purchases are financed utilising these finance leases, under hire purchase or chattel mortgage. They are fixed contracts with a fixed and determinable measure of finance cost for the period. No Later than 1 year Later than 1 year and not later than 5 years Later than five years Minimum future lease payments(1) Less future finance charges Present value of minimum lease payments Minimum future lease payments Consolidated 2009 $’000 36,522 27,560 - 64,082 (5,099) 58,983 2008 $’000 38,986 48,256 - 87,242 (8,945) 78,296 Company 2009 $’000 - - - - - - 2008 $’000 - - - - - - Present value of minimum future lease payments Consolidated 2009 $’000 32,887 26,096 - 58,983 - 58,983 2008 $’000 33,552 44,744 - 78,296 - 78,296 Company 2009 $’000 - - - - - - 2008 $’000 - - - - - - (1) Minimum future lease payments include the aggregate of all the lease payments and any guaranteed residual. Included in the financial statement as: (note 30 ‘Borrowings’) Current borrowings Non-Current borrowings 32,887 26,096 58,983 33,552 44,744 78,296 - - - - - - NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 73 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 34. OPERATINg LEAsEs Operating leases as lessee Non cancellable operating lease rentals (excluding property rentals - see below) are payable are as follows: Less than one year Between one and five years More than five years Property lease rentals are payable as follows: Less than one year Between one and five years More than five years Consolidated 2009 $’000 455 9 - 464 Consolidated 2009 $’000 1,347 3,266 1,920 6,533 2008 $’000 187 16 - 202 2008 $’000 1,210 3,708 2,560 7,477 Company 2009 $’000 - - - - Company 2009 $’000 - - - - 2008 $’000 - - - - 2008 $’000 - - - - The majority of property leases continue to primarily relate to commercial property leases. These leases consist of 5 year terms with options to renew every 5 years until the year commencing 28 February 2022. All commercial property leases contain market or CPI review clauses during the term of the leases. The Group does not have the option to purchase the leased assets at the end of the lease period. 35. CAPITAL AND OThER COmmITmENTs Capital expenditure commitments – Plant and equipment and Other Within one year Between one and five years Later than five years 36. CONTINgENCIEs Contingent Liabilities Bank guarantees Insurance Bonds Consolidated 2009 $’000 2008 $’000 Company 2009 $’000 2008 $’000 2,163 6,490 - 8,563 Consolidated 2009 $’000 29,673 13,156 42,829 2,199 8,793 - 10,992 2008 $’000 16,982 - 16,982 - - - - - - - - Company 2009 $’000 2008 $’000 - - - - - - Bank guarantees and insurance bonds are issued to minimise cash retentions and are a function of operational revenue. The period of each guarantee/bond varies from contract to contract. 74 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 37. shARE BAsED PAymENTs Senior Management and Director Option Plan (“SMDOP”) The SMDOP is a senior management and director share option plan and has been put in place since NRW’s admission to the ASX. No options have been issued under the plan to date. The board has the discretion to determine the terms and conditions applying to each offer of options under the SMDOP including performance conditions attaching to the exercise of options, restrictions on transfer and disposal, exercise price of options and amount payable for a grant of options. The SMDOP will be accounted for as equity settled share-based payments where the fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. Employee Gift Offer (“EGO”) The Employee Gift Offer allowed for eligible employees to receive between 500 and 7,500 shares at no cost to the employee, forming part of the initial public offer on 5th September 2007. A total of 433,000 ordinary shares were issued to eligible employees under the EGO with a fair value of $2.00 per share (issue price under the prospectus). As a result, $866,000 has been charged to the income statement of the Group and the Company during the financial year ended 30 June 2008 as an Employee benefits expense. In-substance options Limited recourse loans were issued to key management personnel whereby loans were to be repaid by 15th March 2009 and accrue interest at a rate of 7.5% per annum, payable half-yearly. The have since been rolled into new loan agreements to be settled on 30th September 2009. As a result these loans have been fair valued and included in the remuneration table set out in the Directors report. 38. PROvIsIONs Current Employee benefits Warranty Total current provisions Non current Employee benefits Total non current provisions Consolidated 2009 $’000 5,939 39 5,978 602 602 2008 $’000 4,418 34 4,452 410 410 Company 2009 $’000 1,124 - 1,124 - - 2008 $’000 1,124 - 1,124 - - Total current and non current provisions 6,580 4,862 1,124 1,124 NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 75 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 38. PROvIsIONs CONTINuED Balance at 1 July 2008 Acquired in a business combination Provisions made during the year Provisions used during the year Provisions reversed during the year Balance at 30 June 2009 Short-term provisions Long-term provisions Total balance at 30 June 2009 Warranty provision $’000 33 - 24 - (18) 39 Consolidated Employee benefits $’000 4,828 - 5,081 (3,368) - 6,541 39 - 39 5,939 602 6,541 Total $’000 4,861 - 5,105 (3,368) (18) 6,580 5,978 602 6,580 Company Employee benefits $’000 1,124 - - - - 1,124 1,124 - 1,124 Total $’000 1,124 - - - - 1,124 1,124 - 1,124 39. suBsEquENT EvENTs There has not arisen in the interval between the end of the financial year and the date of this report any transaction or event of a material nature likely in the opinion of the Directors, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in subsequent financial years. On the 25th August 2009, the Board of NRW Holdings Limited declared a final dividend for the Financial Year ending June 30, 2009. The final dividend payable is 1.0 cent per share and brings the full year dividend to 2.0 cents per share. 40. RELATED PARTIEs Individual directors and executives compensation disclosures Information regarding individual directors and executives’ compensation and some equity instruments disclosures are provided in the Directors’ report page 24. Loans to key management personnel and their related parties Details regarding loans outstanding at reporting date to key management personnel and their related parties are as follows: Mr J A Pemberton Mr G Chiarelli Mr J A Kenny Mr P L Miguel Mr R J Morrow Totals Balance 30 June 2008 $ 619,071 619,071 412,713 412,713 619,071 2,682,639 Balance 30 June 2009 $ 642,222 642,222 428,147 - - 1,712,592 Interest paid during the period $ 23,279 23,279 15,519 29,964 15,931 107,972 Highest balance in the period $ 642,222 642,222 428,147 428,147 619,071 2,759,808 Limited recourse loans were issued by the Company on 15th March 2007 to specific key management personnel as part of the Employee Share Plan described in the directors report. The loans were provided in order to finance the purchase of fully paid ordinary shares in the Company at $2.26 per share. The loans were to mature on 31st March 2009 under the original loan agreement, and have since been rolled into a new loan agreement covering any principal and interest balance. As a result these loans at the Boards discretion are now due and payable on 30 September 2009. 76 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 Throughout the year the Group transacted with various related parties. These related parties are related by director interests and other as listed. The following transactions have occurred and the amounts are all considered to be at arms length and at normal market rates. Key management person and/or related party Transaction Booked in Group Note Transaction value year ended 30 June 2008 $ 2009 $ (ii) Other related party – Revenue Mr J W McGlinn - Mystica Trust Revenue on sale of several items of plant and equipment. 9,748 - Mr J W McGlinn & Mr L N Piper - Fallbrook Pty Ltd Revenue on back-charges and sale of motor vehicle. - 2,619 Mr C Lindsay-Rae Mr J W McGlinn - Springpark Mining Services Pty Ltd Revenue on services income for earthmoving contract works. 5,280,590 33,096,370 Mr J W McGlinn & Mr C Lindsay-Rae - Springpark Australia Pty Ltd Revenue on back charge and sale of motor vehicle/laptops. 105,013 80,530 Mr J W McGlinn & Mr C Lindsay-Rae - Springpark International Ltd Revenue on back charges of travel and other. 1,494 - (iii) Other related party – Expense Mr J W McGlinn - McGlinn Property Trust Mr J N Silverthorne - Silverthorne Trust Mr C Lindsay-Rae Mr J W McGlinn - Springpark Australia Pty Ltd Mr C Lindsay-Rae Mr J W McGlinn - Springpark Australia Pty Ltd Mr J W McGlinn – Newstream Group Mr J W McGlinn – Fallbrook Pty Ltd Mr J W McGlinn - Springpark Accommodation Expense on rent paid. 283,000 282,999 Expense on rent paid. 114,195 111,477 Expense on purchase of tyres and machinery. - 3,196,949 Expense on purchase of subcontractor services and hire. 947,330 7,419,668 Expense on purchasing of Consultancy services. Expense on back charges for travel and charters. Expense on purchase of accommodation at various mine sites. 148,837 110,000 338,577 726,509 - - NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 77 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 40. RELATED PARTIEs (CONTINuED) The inter group transactions are in relation to transactions within the Group between the entities. All transactions are considered at arms length and at fair market rates. The amounts comprise of: Key management person and/ or related party. (iv) Inter Group Transactions NRW Pty Ltd – Purchases from Promac Rental & Sales Pty Ltd NRW Pty Ltd – Purchases from Promac Rental & Sales Pty Ltd NRW Pty Ltd – Purchases from Action Mining Services NRW Pty Ltd – Sales to Action Mining Services NRW Pty Ltd – Sales to Promac Rental & Sales Pty Ltd NRW Pty Ltd - Transfer of grants or government advances from NRW Holdings NRW Pty Ltd - Sales to NRW VDM Joint Venture NRW Pty Ltd - Purchases from NRW Sarl Action Mining Services – Sales to Promac Rental & Sales Pty Ltd Transaction Booked in Group Note Transaction value year ended 30 June 2009 $ 2008 $ Tyres and back charge of repairs and maintenance. 4,033,987 1,119,644 Hire charges for rental of plant and equipment. 11,834,033 9,228,943 Repairs and maintenance plant and module purchases. 4,114,661 2,237,279 Back charges for labour and miscellaneous. 42,109 10,513 Back charges for repairs and maintenance, management fee and miscellaneous. Transfer of grants and government incentives or payments received. Subcontractor Services Management Fee 235,272 388,411 360,682 10,316,885 4,667,794 - - - Water trucks, service trucks, repairs and maintenance. 11,451,651 9,684,579 In addition to the above, as detailed in note 23, Promac entered into a Settlement Deed with Pilbara Iron Company (Services) Pty Ltd (“PICS”) and Deeds of Indemnity and Acknowledgement dated 30th May 2008 with indemnifying parties listed: • • • • • • • • • • Jeffery William McGlinn as trustee for the Mystica Trust; Nicholas John Ross Silverthorne and Maureen Kaye Silverthorne as trustees for the Silverthorne Trust; Walsec Pty Ltd as trustee for the LN Piper Family Trust; Keith Bounsell as trustee for the Bounsell Family Trust; Julian Alexander Pemberton as trustee for the JP Trust; Gino Chiarelli as trustee for the Lamond Family Trust; Andrew Charles Hunt as trustee for the Eden Family Trust; Peter Laurence De San Miguel; Bashbille Pty Ltd as trustee for the Mate Trust; and Bernadine Lindsay-Rae as trustee for the LR Trust. 78 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 Assets and liabilities balances arising from the related party transactions Amounts receivable from or payable to related parties at reporting date were as follows: Account Receivable Balances Inter Group (Subsidiaries) Other Related Party (1) Current receivables/total assets Accounts Payable Balances Inter Group (Subsidiaries) Total related party payables Consolidated 2009 $’000 2008 $’000 - 10,000,000 10,000,000 - 23,022,422 23,022,422 - - - - 4,710,412 4,710,412 Company 2009 $’000 102,093 - 102,093 483 - 483 2008 $’000 87,773 - 87,773 86 - 86 (i) The indemnification related to the PICS Settlement described in Note 23. – Trade and Other Receivables. The amount receivable from the Indemnifiers as at 30 June 2009 was $10,000,000. Options and rights over equity instruments Apart from the in-substance options described in the directors report, no options were issued to or held by key management personnel or their related parties during the reporting period. Key management personnel compensation The key management personnel compensation included in ‘Employee benefits expense’ (see note 9) is as follows: Short term employee benefits Other long term benefits Post employment benefits Termination benefits Share-based payments Consolidated 2009 $’000 7,003,163 173,887 471,555 - 198,064 7,846,669 2008 $’000 6,195,990 184,286 465,363 - - 6,845,639 Company 2009 $’000 - - - - - - 2008 $’000 - - - - - - SHAREHOLDING FOR THE YEAR ENDED 30 JUNE 2009 The movement during the reporting period in the number of ordinary shares in NRW Holdings Ltd held directly, indirectly or beneficially, by each key management person as applicable, including their related parties, is as follows: FOR THE YEAR ENDED 30 JUNE 2009 Key Person Held at 1 July 2008 Purchases(1) Received as compensation Mr J W McGlinn Mr J A Pemberton Dr I F Burston Mr M Arnett Mr G Chiarelli(2) Mr K Hyman Mr P J McBain(2) Mr R J Morrow(2) Mr J N Silverthorne(3) Mr K Bounsell 22,859,402 2,534,540 50,000 175,000 2,215,100 17,000 487,000 937,334 21,418,735 3,381,843 54,075,954 3,336,239 - 274,992 100,000 - - - - 11,020,640 - 14,731,871 - - - - - - - - - - - Received on options exercised - - - - - - - - - - - Sales / transfers Held at 30 June 2009 - - - - (1,100,000) - (227,000) (937,334) (5,933,348) - (8,197,682) 26,195,641 2,534,540 324,992 275,000 1,115,100 17,000 260,000 - 26,506,027 3,381,843 60,610,143 (1) All purchases were made on-market. (2) Sales/transfers of shares during the year consist of ‘ESP’ shares sold by a resigning key employee of NRW. (3) All sales were made on the on-market. NOTEs TO ThE FINANCIAL sTATEmENTs NRW | ANNUAL REPORT 09 79 Notes to the Financial Statements (Continued) For the financial year ended 30 June 2009 40. RELATED PARTIEs (CONTINuED) FOR THE YEAR ENDED 30 JUNE 2008 Held at 1 Key Person July 2007 Purchases(1) Received as compensation Mr L N Piper Mr J W McGlinn Mr J N Silverthorne Mr J A Pemberton Mr K Bounsell Mr G Chiarelli Mr J A Kenny Mr P J McBain Mr R J Morrow Mr S Lucas Mr M Arnett Dr I F Burston 12,491,478 13,331,679 12,491,478 1,204,825 1,972,302 1,018,526 182,219 273,328 273,328 - - - 43,239,163 29,350 - - - - - - - - 25,000 175,000 50,000 279,350 - - - - - - - - - - - - - Received on options exercised - - - - - - - - - - - - - Sales / transfers(2) Other changes(3) Held at 30 June 2008 (37,693,472) (22,859,406) (21,418,742) (1,597,210) (3,381,843) (1,277,768) - (450,334) - - - - (88,678,775) 30,345,998 32,387,129 30,345,998 2,926,925 4,791,384 2,474,342 442,671 664,006 664,006 - - - 105,042,460 5,173,354 22,859,402 21,418,735 2,534,540 3,381,843 2,215,100 624,890 487,000 937,334 25,000 175,000 50,000 59,882,198 (1) All purchases were made via subscriptions in the IPO and purchases of shares on-market. (2) Sales/transfers of shares during the year consist of the portion of shares sold down by the vendor shareholders as part of the IPO and ‘ESP’ shares sold by a resigning key employee of NRW. (3) Other changes reflect the effect of the share split undertaken by the Company in August 2007 as part of the IPO. 80 NRW | ANNUAL REPORT 09 NOTEs TO ThE FINANCIAL sTATEmENTs SHAREHOLDER INFORMATION AS AT 17TH AUGUST 2009 NRW’s issued capital comprises 251,223,000 fully paid ordinary shares. DIsTRIBuTION OF shAREhOLDINgs Distribution schedule of shareholdings 1 – 1,000 Shares 1,001 – 5,000 Shares 5,001 – 10,000 Shares 10,001 – 100,000 Shares 100,001 Shares and over (ii) Total number of holders (iii) Number of holders of less than marketable parcel (iv) Percentage held by the 20 largest holders No. of shareholders 787 1,183 655 864 105 3,594 94 NRw’s 20 LARgEsT shAREhOLDERs As AT 17Th AugusT 2009 Rank Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED JEFFERY WILLIAM MCGLINN THE MYSTICA TRUST & RELATED PARTIES NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ANZ NOMINEES LIMITED WALSEC PTY LTD COGENT NOMINEES PTY LIMITED KEITH BOUNSELL BOUNSELL FAMILY TRUST BOND STREET CUSTODIANS LIMITED JULIAN ALEXANDER PEMBERTON THE J P TRUST MILTON AVENUE PTY LIMITED ANZ NOMINEES LIMITED AMP LIFE LIMITED AUSTRALIAN REWARD INVESTMENT ALLIANCE BASHBILLE PTY LTD MATE TRUST ANDREW CHARLES HUNT THE EDEN FAMILY TRUST ROBERT STEVEN DEMOL & DIANE MARIE DEMOL DEMOL SUPER FUND BELL CO PTY LTD Shares % Total shares 455,117 3,734,452 5,449,208 24,804,149 216,780,074 251,223,000 21,936 Shares held at 17th August 2009 32,598,298 30,772,195 26,195,641 26,049,773 23,946,525 16,069,675 6,920,164 5,173,354 4,351,552 3,381,843 2,989,956 2,534,540 1,450,000 1,409,231 1,408,787 1,358,087 1,277,764 1,277,763 1,250,000 1,250,000 0.18% 1.49% 2.17% 9.87% 86.29% 100.00% 0.01% 76.29% % Total shares 12.98% 12.25% 10.43% 10.37% 9.53% 6.40% 2.75% 2.06% 1.73% 1.35% 1.19% 1.01% 0.58% 0.56% 0.56% 0.54% 0.51% 0.51% 0.50% 0.50% shAREhOLDER INFORmATION NRW | ANNUAL REPORT 09 81 Shareholder Information (Continued) As at the 17th August 2009 suBsTANTIAL shAREhOLDERs As at the 17th August 2009, the names of the substantial holders in the Company who have notified the Company in accordance with Section 671B of the Corporations Act 2001 (requirement to advise the company of movement in shareholdings where the shareholder has a greater than 5% shareholding) are set out below: Name CITICORP NOMINEES PTY LIMITED NICHOLAS JOHN ROSS SILVERTHORNE JEFFERY WILLIAM MCGLINN NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED Shares held at 17th August 2009 30,772,195 26,506,027 26,195,641 26,049,773 23,946,525 16,069,675 % Total shares 12.25% 10.55% 10.43% 10.37% 9.53% 6.40% vOTINg RIghTs On a show of hands, every shareholder present in person or represented by a proxy or representative shall only have one vote for every share held by them. 82 NRW | ANNUAL REPORT 09 shAREhOLDER INFORmATION INDEPENDENT AUDIT REPORT Deloitte Touche Tohmatsu A.C.N. 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au Independent Auditor’s Report to the members of NRW Holdings Limited Report on the Financial Report We have audited the accompanying financial report of NRW Holdings Limited, which comprises the balance sheet as at 30 June 2009, and the income statement, cash flow statement and statement of changes in equity for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 38 to 96. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Liability limited by a scheme approved under Professional Standards Legislation. INDEPENDENT AuDIT REPORT NRW | ANNUAL REPORT 09 83 Independent Audit Report (Continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Auditor’s Independence Declaration In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s Opinion In our opinion: (a) the financial report of NRW Holdings Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2. Report on the Remuneration Report We have audited the Remuneration Report included in pages 30 to 36 of the directors’ report for the year ended 30 June 2009. 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. Auditor’s Opinion In our opinion the Remuneration Report of NRW Holdings Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001. DELOITTE TOUCHE TOHMATSU A T Richards Partner Chartered Accountants Perth, 24 September 2009 84 NRW | ANNUAL REPORT 09 INDEPENDENT AuDIT REPORT CORPORATE REGISTRY SHARE REGISTRY Link Market Services Limited Level 2 178 St Georges Terrace PERTH WA 6000 Telephone: +61 8 9211 6652 Facsimile: +61 8 9211 6660 ASX CODE NWH – NRW Holdings Limited Fully Paid Ordinary Shares WEB PAGE www.nrw.com.au DIRECTORS Ian F Burston Non-executive Chairman Jeffery McGlinn Chief Executive Officer Julian Pemberton Executive Director and Chief Operating Officer Michael Arnett Non-executive Director COMPANY SECRETARY Kim Hyman REGISTERED OFFICE 73-75 Dowd Street WELSHPOOL WA 6106 Telephone: +61 8 9358 5510 Facsimile: +61 8 9311 7336 Email: info@nrw.com.au AUDITOR Deloitte Touche Tohmatsu Level 14 Woodside Plaza 240 St Georges Terrace PERTH WA 6000 Document designed by Chameleon Creative NRW | ANNUAL REPORT 09 CORPORATE REGISTRY NRW | ANNUAL REPORT 09 85 WWW.NRW.COM.AU ANNUAL REPORT

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