More annual reports from NRW Holdings Limited:
2023 ReportPeers and competitors of NRW Holdings Limited:
Dow2016
ANNUAL REPORT
CORPORATE REGISTRY
DIRECTORS
Michael Arnett
Chairman and Non-Executive Director
Julian Pemberton
Chief Executive Officer and Managing Director
Jeff Dowling
Non-Executive Director
Peter Johnston
Non-Executive Director
Dr Ian Burston
Non-Executive Director
COMPANY SECRETARY
Kim Hyman
REGISTERED OFFICE
181 Great Eastern Highway,
Belmont WA 6104
Telephone: +61 8 9232 4200
Facsimile: +61 8 9232 4232
info@nrw.com.au
Email:
AUDITOR
Deloitte Touche Tohmatsu
Tower 2
Brookfield Place
Level 9
123 St Georges Terrace
Perth WA 6000
SHARE REGISTRY
Link Market Services Limited
Level 4 Central Park
152 St Georges Terrace
Perth WA 6000
Telephone: +61 1300 554 474
Facsimile: +61 2 8287 0303
ASX CODE
NWH – NRW Holdings Limited
Fully Paid Ordinary Shares
www.nrw.com.au
NRW BOARD OF DIRECTORS’
Michael Arnett
Chairman Non-Executive Director
Mr Arnett was appointed as a Director on 27 July 2007 and appointed
Chairman on 9 March 2016.
Mr Arnett is a former consultant to, partner of and member of the Board of
Directors and national head of the Natural Resources Business Unit of the
law firm Norton Rose (formally Deacons). He 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 three
years immediately before the end of the financial year:
• Chairman, New Guinea Energy Ltd (finished July 2015)
Julian Pemberton
Chief Executive Officer and Managing Director
Mr Pemberton was appointed as a Director on 1 July 2006. Appointed as
Chief Executive Officer and Managing Director 7 July 2010.
Mr Pemberton has been involved in both the resources and infrastructure
sectors over 20 years. He joined NRW in 1996, and prior to his appointment as
Chief Executive Officer and Managing Director he has held a number of senior
management and executive positions at NRW including Chief Operating Officer.
Jeff Dowling
Non-Executive Director
Mr Dowling was appointed as Non-Executive Director in August 2013.
Mr Dowling has 36 years’ experience in professional services with Ernst &
Young. He has held numerous leadership roles within Ernst & Young which
focused on the mining, oil and gas and other industries.
Mr Dowling has a Bachelor of Commerce from University of Western Australia
and is a fellow of the Institute of Chartered Accountants, the Australian Institute
of Company Directors and the Financial Services Institute of Australasia.
Mr Dowling has held the following directorships of listed companies in the three
years immediately before the end of the financial year:
• Chairman of Sirius Resources NL (Resigned 23 September 2015)
• Pura Vida Energy NL (Resigned 16 May 2016)
• Non-Executive Director of Atlas Iron Limited (Resigned 4 May 2016)
• Chairman of S2 Resources Limited (Current)
Peter Johnston
Non-Executive Director
Mr Johnston was appointed as Non-Executive Director in July 2016.
Mr Johnston has served with a number of national and international
companies. Most recently he was appointed Global Head of Nickel Assets
for Glencore in 2013 and completed that role in December 2015. Prior to
that role he was Managing Director and Chief Executive Officer of Minara
Resources Pty Ltd from 2001 to 2013.
Mr Johnston graduated from the University of Western Australia with a
Bachelor of Arts majoring in psychology and industrial relations.
Mr Johnston has held the following directorships of listed companies in the three
years immediately before the end of the financial year:
• Executive Director, Tronox Ltd (NYSE) (current)
• Executive Director, Silver Lake Resources Limited (resigned 30 April 2015)
ANNUAL REPORT
CONTENTS PAGE
Chairman’s Letter
Chief Executive Officer Year in Review
CFO Report
NRW Civil
NRW Mining
Action Drill & Blast
AES Equipment Solutions
Human Resources
Health, Safety, Environment & Training
10
11
15
18
19
21
24
25
28
NRW ANNUAL REPORT 2016 |
10
CHAIRMAN’S
MESSAGE
As Chairman of NRW Holdings, and on behalf of
my fellow Directors, I am pleased to present the
NRW Holdings Annual Report for 2016. In the last
12 months, NRW has delivered on our commitment
to shareholders to return the Company to
profitability and has continued its diversification
strategy into the infrastructure market.
Returning to profitability
The group’s Net Profit After Tax (NPAT) recovered
to $21.5 million in FY16, on a revenue of $288
million. The reduction in revenue from FY15 ($775.9
million) is attributed to the completion of a number
of large civil projects throughout the year.
We have successfully achieved a 40% decrease
in overhead costs for FY16, and a reduction of
$48.3 million in net debt during the year, to $59.3
million at 30 June 2016. By remaining focused on
reducing our cost base, our Company has been
repositioned to respond strategically to changing
market conditions.
The Board is focused on the continued stabilisation
of the business, and building a solid foundation
for future growth prospects. With this in mind,
the Board has elected that a dividend will not be
declared for the year ending 30 June 2016.
Looking forward
With a healthy forward order book and a strong
reputation for project excellence, NRW is well
positioned to capitalise on the positive growth
outlook for government infrastructure projects and
the expected stabilisation of the resources sector
in Australia. The award of the iconic Forrestfield-
Airport Link project with our Joint Venture partner
will provide NRW with greater financial strength and
stability over the next four years.
The award of several civil and mining contracts
throughout the year has enabled our Company
to offer re-employment opportunities to many
ex-employees. This is a pleasing result as the
mobilisation of experienced and skilled personnel
further strengthens our reputation for the
successful delivery of our Clients’ projects.
Board and governance
A number of changes were made to the Board
during the year. On 23 November 2015
Non-Executive Director, Mr. John Cooper resigned
from the Board and in June 2016 Dr. Ian Burston
retired from the Board. Ian was Chairman of the
Board from the Company’s ASX listing in 2007
through to earlier this year when he stepped
down to take a Non-Executive Director role. Both
Directors provided invaluable insight and counsel to
our Company, and we wish them both all the very
best.
Joining the Board as a Non-Executive Director
from the beginning of FY17 is Mr. Peter Johnston,
who brings a wealth of knowledge and experience,
having served on the Boards of several national
and international companies.
Our people
The return to profitability of our Company would
not have been possible without the commitment of
our people. I would like to extend my appreciation
to employees and management for their strong
work ethic and dedication over the past year.
The Board and the management team remain
confident about the future outlook for our
Company. The group enters the new financial year
with a work-in-hand position of approximately $1
billion, which will provide a stable revenue base to
enable future growth of our Company.
I look forward to strengthening our Company’s
financial position in the year ahead while
maintaining our solid reputation for project
excellence.
Michael Arnett
Chairman
NRW Holdings Limited
NRW ANNUAL REPORT 2016 |
Chairman’s Message
10
CEO YEAR
IN REVIEW
I am pleased to report a recovery in the
underlying financial performance of the
business, achieved against continuing
challenges in the sector. During the year we
returned to profitability, significantly reduced
our debt profile, and also capitalised on key
diversification strategies.
Highlights
• Revenue of $288 million
• EBITDA of $47.4 million; EBITDA margin
16.4%
• Net Profit after Tax of $21.5 million, and
Earnings per share of 7.7 cents
• New work secured in the year of $577
million increasing the order book to circa
$1 billion
• Significant reduction in Net Debt to $59.3
million from $107.6 million at June 2015
•
Improved gearing ratio of 39.6%
compared to 83.8% at June 2015
• Cash holdings increased to $37.2 million
• Debt rescheduling agreement finalised
with NRW’s banking group
• Asset utilisation currently at 81%
• Overhead costs reduced by around 40%,
compared to same period last year
NRW reported revenues of $288.0 million,
which were lower than last year ($775.9
million) due to the completion of a number
of major Civil projects in FY15. Net Earnings
recovered to $21.5 million after the loss
booked in FY15 of $229.8 million, (which
included a major contract loss and asset
impairment charges). The recovery in
performance was due to improved project
performance, and significant reductions to the
overhead cost base. The result includes a tax
credit primarily due to the return to profitability.
Operational Performance
The Group’s Civil and Mining business
generated earnings before tax in the reporting
period of $18.1 million, compared to a
loss of $253.1 million in FY15, which was
attributed to a major contract loss and asset
impairment charges. Revenues in the Civil
and Mining business of $203.6 million were
down on last year ($694.1 million) mainly due
to the completion of major civil projects and
the shortage of new project opportunities
during the year. To bring the magnitude of
the slowdown in civil work into context, we
delivered revenues during the year of circa
$30 million, whereas at our peak, we delivered
around $30 million in revenue per fortnight.
The low level of civil activity during the 2016
financial year has not been experienced by
the Company since the early 2000’s.
The Civil Division did, however, secure several
important contracts during the second half of
the year. Most significantly, we were awarded
a landmark government infrastructure project
for the Public Transport Authority of Western
Australia (PTA) in the $1.2 billion Forrestfield-
Airport Link project, in a joint venture with
Salini Impregilo. This four-year project
provides NRW a significant opportunity to
upskill its capabilities and reputation within
the urban infrastructure space. Other new
work secured through the year included Yandi
Oxbow and Nammuldi Waste Fines Storage
for Rio Tinto Iron Ore (RTIO). The Civil team
also re-entered the Queensland market
through the award of a contract by a new
client, Rio Tinto Coal.
11
NRW ANNUAL REPORT 2016 | CEO Year in Review
NRW ANNUAL REPORT 2016 |
NRW ANNUAL REPORT 2016 |
12
During FY16 the Civil Division completed
work on the Roy Hill Concrete Project,
further development work for RTIO on the
Nammuldi Iron Ore site and completed the
Ravensthorpe Heavy Haulage route for
Main Roads Western Australia (MRWA). The
division also safely completed the Solomon
Trinity Overpass for Fortescue Metals Group.
The Mining Division performed well during
the year, with the highlight being the award
of the Nammuldi contract to mine, crush and
haul up to 10 million tonnes of ore per annum
for long-standing client RTIO. The two-year
contract has a value of approximately $140.0
million and demonstrates the strength of our
relationship with Rio Tinto and our proven
track record of delivery.
The Mining team continued to support the
Middlemount Coal Mine for Middlemount
Coal Pty Ltd (MCPL) during the year, and
completed the Iron Bridge Magnetite project
for Ironbridge Operations; a Fortescue Metals
Group led group venture which includes
Taiwan’s Formosa Group and China’s
Baosteel Group.
New work secured across the Civil and
Mining business during FY16 totalled $441.0
million.
The Drill and Blast business reported revenue
of $81.9 million at year-end, slightly below last
year ($85.9 million). The division experienced
a challenging first half however improved its
margin through the commencement of new
projects during the second half. Improved
project delivery and cost savings resulted in
earnings before tax of $2.3 million, compared
to $1.0 million in FY15.
The business secured $122.0 million in
long-term contracts during the year including
St. Ives Gold Mine for Gold Fields, Isaac
Plains Coal Mine for Golding Contractors and
a three-year contract extension for drilling
services at the Middlemount Coal Mine for
MCPL.
The AES business operated on a cash neutral
basis during the financial year, following a
further 12 months of low demand for service
vehicles and water trucks. Revenue in the
division reduced to $13.6 million at 30 June
2016, compared to $15.3 million in the prior
comparative period. The business sustained
a $1.4 million loss, which was slightly better
than the FY15 loss of $2.0 million (pre-
impairment expenses). The market is showing
some signs of improvement for workshop
services.The management team will remain
focused on driving cost reduction initiatives
and efficiency improvements in the division
during FY17.
People and Safety
NRW is committed to building and retaining
a high-performing workforce. At the end of
FY16 our workforce levels have remained
fairly consistent with 832 personnel retained
as at 30 June 2016 (FY15 – 846).
The Health and Safety of our employees
remains our primary business objective. The
importance of every employee having ‘A safe
day. Every day.’ cannot be overstated. During
the year our Lost Time Injury Frequency Rate
NRW ANNUAL REPORT 2016 | CEO Year in Review
NRW ANNUAL REPORT 2016 |
CEO Year in Review
12
NRW ANNUAL REPORT 2016 |
14
CEO YEAR
IN REVIEW CONTINUED
has risen slightly to 0.60 injuries per million
hours worked (FY15: 0.19).
As our clients continue to seek outcomes that
deliver lower unit costs, we remain focussed
on improving systems within the business
to ensure we are operating as efficiently as
possible. The business has achieved significant
gains in this space across the Mobilisation,
Safety, and Training areas.
Outlook
The two key markets in which NRW operates,
resources and infrastructure, are starting to
show some signs of stability, leading to an
increase in tender opportunities, particularly
over the past few months.
Despite an improving sentiment, our clients
continue to strive for lower operating costs
and improved productivity, while they continue
to minimise capital expenditure on expansion
works. Against this challenging backdrop,
it is pleasing to have secured a number of
civil contracts in the resources sector. Our
Mining business has ongoing contracts with
Middlemount Coal Pty Ltd and Rio Tinto which
extend beyond the end of the new financial
year and several opportunities particularly in
coal, gold, and the emerging lithium market
to secure additional work. The Drill and Blast
business has won several key long-term
projects in gold and coal during the year
and has a number of identified opportunities
together with the capacity to grow revenues in
FY17.
In infrastructure, we secured the four-year $1.2
billion Forrestfield-Airport Link contract for the
Public Transport Authority of Western Australia
in joint venture with Salini Impregilo (SI).
The SI-NRW joint venture has recently been
shortlisted to bid for the Northlink WA Stage
3 works for Main Roads Western Australia
(MRWA). While both of these projects are
in WA, there are other major infrastructure
projects nationally which NRW intends to target
through similar partnership models.
NRW’s forward order book totals circa $1
billion of which $325 million is secured revenue
for delivery during FY17 and a further $261
million secured for delivery in FY18, which
provides NRW a stable revenue base that
positions the company for growth over the next
two to three years.
Bid activity is robust, however, the tendering
landscape remains highly competitive. The
tender pipeline is currently assessed at $2.7
billion.
I would like to extend my thanks to each and
every member of the NRW Holdings family for
your tremendous dedication to the Company in
the last 12 months.
I would also like to express my appreciation to
the Board and my senior management team
for their support.
Jules Pemberton
CEO and Managing Director
NRW Holdings Limited
NRW ANNUAL REPORT 2016 |
CEO Year in Review
14
Capital expenditure at $9.1 million was
focused on major component replacement
for the mining and drilling fleets.
The company brought to account
additional deferred tax assets in the year,
resulting in a $7.3 million income tax
benefit. Deferred tax assets relating to
losses totalled $29.0 million. A further
$31.7 million of tax losses are recognised
as contingent assets.
Debt Rescheduling
During the year, the Company successfully
negotiated a debt rescheduling agreement
with its banking group. The agreement
reschedules $102.8 million of debt as at
April 2016 over 33 monthly instalments.
Under the agreement all debt will be repaid
by the end of the 2018 calendar year.
Debt profile to maturity
CFO REPORT
Financial Overview
NRW reported Net Earnings of $21.5
million and Earnings before Interest Tax,
Depreciation and Amortisation (EBITDA)
of $47.4 million in the year. The result
compares to a loss of $229.8 million in the
previous financial year, (which included a
major contract loss and asset impairment
charges). The recovery in performance
was due to improved project delivery and
significant reductions to the overhead cost
base. Net Earnings include a tax credit,
due to further recognition of tax assets not
previously brought to account.
Cash holdings at year end improved to
$37.2 million (FY15 $34.6 million). The
Group repaid $45.8 million of borrowings,
reducing debt to $96.5 million at 30 June
2016. Net debt improved by $48.3 million
to $59.3 million (FY15 $107.6 million).
Improved cash generation and the positive
earnings result improved the gearing ratio
to 39.6%, compared to 83.8% at June
2015.
Net assets increased to $149.8 million,
($128.4 million FY15) representing net
assets of 53 cents per share. There were
no major changes in the level of working
capital in the year, consequently cashflow
matched EBITDA, less expenditure on
capital equipment.
Major cash movements in the year
included the settlement payment from
Samsung on the Roy Hill Rail project,
which was used to meet final project plant
hire costs and accrued staff entitlements.
15
NRW ANNUAL REPORT 2016 | CFO Report
NRW ANNUAL REPORT 2016 |
Net profit
after tax
$21.5M
Cash holdings
increased to
$37.2M
Significant net
debt reduction to
$59.3M
Revenue of
$288M
NRW ANNUAL REPORT 2016 | CFO Report
NRW ANNUAL REPORT 2016 |
18
NRW CIVIL
Overview
In the 2016 financial year, the Civil Division
successfully secured work in a highly
competitive market through the award of
a major project in the urban infrastructure
space, as well as new contracts with global
resource companies.
Operations
Notable operational highlights for the Civil
business during the past year included
further development work for Rio Tinto on
the Nammuldi site, the completion of the
Roy Hill Concrete project, and construction
of the Solomon Trinity Overpass for
Fortescue Metals Group. At the end of
2015, the Civil team joined the Minister
for Transport for the official opening of the
Ravensthorpe Heavy Haulage Route for
Main Roads Western Australia (MRWA).
Following a five-month tender phase,
the Civil team succeeded in securing the
Forrestfield-Airport Link project for the
Public Transport Authority of Western
Australia (PTA), despite robust market
competition. The four-year, $1.2 billion
contract was awarded to a joint venture
comprising NRW (20%) and Salini Impregilo
of Italy (80%). The scope of works for this
design and construct project includes
an 8.5km extension of the existing PTA
urban rail network and maintenance of the
infrastructure for 10 years. The project
will see the joint venture build two twin
rail tunnels below the Swan River and
Perth Airport, and construct three new rail
stations – Belmont, Airport Central, and
Forrestfield. The award of the Company’s
first metro rail project strongly aligns with
the division’s diversification strategy into
the urban infrastructure space, building on
previous work undertaken for MRWA.
The business demonstrated its strong
reputation with major resource clients with
the announcement of two projects awards
for Rio Tinto in the latter half of the year,
with a collective value of $41.0 million.
The contract wins were the Nammuldi
Waste Storage Facility and Yandi Oxbow,
the latter being a part of a programme of
work to sustain production at the Yandi
mine. The Civil Division also re-entered the
Queensland market, securing the Kestrel
Mine Ventilation Shaft Access Road project
for a new client, Rio Tinto Coal.
Outlook
The Division remains focussed on realising
opportunities in both the resource and
government infrastructure sectors. The
business will continue to pursue iron ore
based projects with traditional clients such
as Rio Tinto, Fortescue Metals Group, and
BHP Billiton Iron Ore, and actively expand
their commodity base. The business has
been invited to provide proposals for clients
involved in the bauxite, gold and lithium
sectors.
The Division is building on its relationship
with Salini Impregilo to pursue large
government infrastructure projects.
The joint venture has been successfully
shortlisted to bid by MRWA to provide
a design and construct proposal for the
NorthLink Western Australia Stage 3
project, which is expected to commence
early 2017. The Business will continue
this diversification strategy by focusing on
appropriate rural and urban infrastructure
projects throughout Australia.
NRW ANNUAL REPORT 2016 |
Civil
18
Towards the end of the financial year, the
division completed works on the North
Star Bulk Earthworks project for Ironbridge
Operations, a Fortescue Metals Group
led joint venture. The NRW project team
boasted an impressive safety record with
no recordable injuries for the life of the
project. One million tonnes of ore passed
through the processing plant during the
project, while the NRW team won the
Project of the Quarter safety award five
times.
Outlook
Despite the lead time remaining long for
project developments, the resource sector
has commenced a flow of mine expansion
announcements and new projects that
NRW is competitively pricing, and will look
to convert these to new contracts.
The Mining Division continues to target
new commodities including lithium,
graphite, and phosphate; all of which
are currently receiving significant market
attention.
NRW MINING
Overview
The resource sector experienced
another year of challenging conditions
during FY16, with few new mines being
developed, and many new projects
postponed or abandoned as mine
development funding became harder to
obtain. Operational mines focussed on
cost reduction activities and contract
retendering to reduce production costs,
resulting in intense competition for mining
contract work. Despite these competitive
market conditions, the Mining Division
achieved an increase in turnover from
previous years and continued to work on
projects for major resource clients.
Operations
During the year the Mining Division
continued to support Middlemount
Coal Pty Ltd in providing the mining
fleet and full maintenance services to
the Middlemount mine. The contract,
extended in February 2015 by a further
three years, has a completion date of
June 2020 and provides financial stability
to the revenue base of the division. The
project team continues to deliver a high
standard of work at Middlemount, with all
targets achieved.
At the Nammuldi Incremental Tonnes
project for Rio Tinto Iron Ore, the scope
includes all mining activities including
drill and blast, mining, road haulage and
crushing at a rate up to 10 million tonnes
of high-grade iron ore per annum.
19
NRW ANNUAL REPORT 2016 | Mining
NRW ANNUAL REPORT 2016 |
NRW ANNUAL REPORT 2016 | Mining
• Continuation of employee recognition
program; In 2015 ADB’s founding
personnel achieved five years’ service,
to date over 50 employees have
reached this milestone
• High participation of the Employee
Reward and Recognition program,
You Rock!; ensuring the team remains
focussed on ADB’s values of Safety,
Integrity, Teamwork and Innovation
Outlook
During FY16 there has been an
improvement in the tender pipeline for the
drill and blast business, to over $650.0
million as at 30 June 2016. Tender
opportunities include projects in ADB’s
core focus areas including coal, gold, iron
ore and lithium.
The drill and blast business will continue
to be responsive and opportunistic
towards market conditions. The company
remains focused on developing existing
markets further, retaining their experienced
employee base and delivering service
excellence to their clients.
Overview
Action Drill & Blast (ADB) provides
integrated drilling and blasting services to
mining and civil projects across Australia.
In FY16, the drill and blast business
secured two new long-term contracts
at St Ives Gold Mine, Isaac Plains Coal
Mine, and a three-year contract extension
for drilling services at Middlemount Coal
Mine.
In the current market, resource companies
remain focussed on reducing costs
while increasing productivity. Action Drill
& Blast has demonstrated its strength
and stability as the leading specialist
drill and blast contractor in Australia by
delivering production efficiencies and cost
savings to their clients while maintaining
a consistently high level of safety
performance; as evidenced by remaining
lost time injury free, company-wide, for
over four years.
During 2016, Action Drill & Blast achieved:
• Contract awards totalling more than
$122.0 million, including long-term
contracts at St Ives Gold Mine, Issac
Plains Coal Mine, and Middlemount
Coal Mine
• 2,000 days LTI free at Middlemount
Coal Mine
•
Indigenous employee rate of 8% -
exceeding client and business targets
• Recertification of safety (OHSAS
18001, AS4801) and quality (ISO9001)
systems
21
NRW ANNUAL REPORT 2016 |
NRW ANNUAL REPORT 2016 | Action, Drill & Blast
NRW ANNUAL REPORT 2016 | Action, Drill & Blast
NRW ANNUAL REPORT 2016 |
24
Overview
AES Equipment Solutions (AES) provides
maintenance services to the mining
and resources sectors, including the
fabrication of water and service trucks.
Outlook
Pleasingly, the AES client base has
increased, as the division became the
preferred service provider for two major
companies.
The management team remains focused
on driving cost reduction initiatives to
increase profitability and improvement
efficiency in the business.
Although revenue was down in FY16
from FY15 and cash levels sit roughly
at breakeven point, AES sustained a
smaller loss in FY16. This result is due to a
restructure that took place to better align
overhead costs with revenue streams.
In FY16 the demand for service and
water trucks continued to be subdued
due to the downturn in the mining
and civil industries. Many companies
are consolidating, leaving less capital
to spend on equipment replacement,
thereby increasing the continued use of
old equipment. This trend of businesses
holding onto older equipment for longer
has led to some growth for AES workshop
services.
NRW ANNUAL REPORT 2016 |
AES Equipment Solutions
24
HUMAN RESOURCES
During the year there has been a review
of mobilisation processes and systems to
ensure ongoing improvement in service,
as well as the speed of response to
recruitment needs. As a result, the Group
has realised efficiency improvements
in the mobilisation of personnel to site,
allowing the business to accomplish rapid
mobilisation schedules from our clients.
INDIGENOUS ENGAGEMENT
NRW attained a peak Indigenous
employment level of 6.93% across the
group during FY16. The business has
achieved greater than 80% retention rates
of our Indigenous employees.
The award of the Forrestfield-Airport Link
project has led to the establishment of
a meaningful relationship between NRW
and the Nyoongar Chamber of Commerce
and Industry (NCCI). Over the four-year
term of the project, NRW will work in
close collaboration with the NCCI and the
traditional owners of the land in Perth, the
Whadjuk and Nyoongar people, to provide
procurement and direct employment
opportunities to Indigenous businesses.
Overview
NRW’s employees are critical to its
success. During the past year, the
Company continued to maintain a strong
focus on strengthening the effective and
consultative relationship it has historically
enjoyed with its workforce. This positive
rapport is evidenced by our excellent
industrial record during the year, with no
lost time experienced due to industrial
disputation.
New work secured by the Group during
FY16 has afforded many re-employment
opportunities for past employees. NRW
has worked hard to ensure that these
valued past members of the organisation
are provided with an opportunity to work
with the Group once again. We look
forward to re-engaging even more former
employees as our forward order book
grows in FY17, and we begin to mobilise to
new projects.
NRW’s labour agreements have provided
the flexibility to remain competitive in the
current environment while still maintaining
rates of remuneration that are competitive
in the marketplace.
HR SYSTEMS
The backbone of NRW’s people systems
‘Our People And Logistics’ (OPAL) has
continued to be an invaluable product to
identify candidates for work as well as
driving the foundation of the Payroll and
Human Resources reporting system. The
OPAL system remains capable of catering
to both small-scale and large-scale
mobilisation and people management.
25
NRW ANNUAL REPORT 2016 |
NRW ANNUAL REPORT 2016 | Human Resources
NRW ANNUAL REPORT 2016 | Human Resources
NRW ANNUAL REPORT 2016 |
28
HEALTH, SAFETY
ENVIRONMENT & TRAINING
HEALTH & SAFETY
NRW is committed to eliminating injuries
and incidents from the workplace, and our
efforts are continuing to have a genuine
impact on both our Total Recordable
Injury Frequency Rate (TRIFR) and our
Lost Time Injury Frequency Rate (LTIFR),
which remained low during FY16. The
TRIFR at 30 June 2016 was 7.19, which
is higher than FY15 but consistent with
industry rates. The LTIFR for the year was
0.60 injuries per million hours worked,
compared to the FY15 result of 0.19.
With a leader-led approach to safety, we
remain focused on achieving A safe day.
Every day.
The Group continues to pursue an
industry-leading safety record driven
by robust systems and processes and
transparent reporting metrics.
To help our employees work more safely in
FY16, our key strategies are:
• Continuous improvement of processes
that assist with identification and
control of hazards that contribute to
hand and ankle injuries
•
Introducing technology and improved
work methods to remove personnel
from the line-of-fire
•
Increasing functional demand
assessments to identify areas where
mechanical aids can be introduced to
alleviate manual handling risks
• Continued focus on work, health and
safety behaviours to strengthen and
improve our safety culture
Innovative approaches to reducing risk
During the last financial year, the Group
implemented innovative programs to
reduce exposure to high-risk activities.
Our maintenance team at the Nammuldi
mine site have introduced cameras for use
in testing and commissioning activities
on fixed assets. This initiative allows
commissioning and testing activities
to occur without having someone in
the footprint providing feedback to the
operator and removes that person from
potential harm. This initiative is undergoing
an assessment for implementation
company-wide.
The Plant Department have been
assessing how our employees can
work more safely at heights. The
department has been working with project
maintenance personnel to build lightweight
edge protection rails to reduce impact and
apply the hierarchy of controls.
These rails can be easily installed to
protect maintenance workers performing
everyday tasks.
NRW ANNUAL REPORT 2016 |
Health, Safety, Environment & Training
28
HEALTH, SAFETY, ENVIRONMENT
& TRAINING CONTINUED
training records. The second system is
a Learning Management System which
is used to deliver inductions and other
training requirements online.
Post-implementation reviews of both
systems have indicated improved
efficiency, user experience, and accuracy
of records. Both systems have provided
cost savings to the business including
a reduction in licence fees, automated
data transfer and the ability to create and
modify training materials in-house.
ENVIRONMENT
At NRW our operations provide a broad
range of environmental responsibilities,
which the Company is committed to
ensuring are managed and mitigated.
We manage these environmental
responsibilities through our ISO
14001:2004 accredited environmental
management system. These systems are
supported by a multi-tiered environmental
governance structure, which incorporates:
• Subject matter experts in individual
projects when required
• Corporate personnel responsible
for providing specialist input and
coordinating resources nationally
TRAINING
The NRW Training Department remained
focused during the year on creating value
for our clients by delivering best-for-project
outcomes. Following a review of current
training materials and their modes of
delivery during the year, two new systems
were implemented to improve efficiencies
in key operational areas.
The first being a mobile platform which
can be used in the field by trainers to
assess and verify competencies of
employees. The platform has replaced
the need for paper-based forms, and
considerably increases the accuracy of
29
NRW ANNUAL REPORT 2016 |
NRW ANNUAL REPORT 2016 | Health, Safety, Environment & Training
NRW ANNUAL REPORT 2016 | Health, Safety, Environment & Training
FINANCIAL REPORT
CONTENTS PAGE
Directors’ Report
Corporate Governance Statements
Auditor’s Independence Declaration
Directors’ Declaration
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
1.
2.
3.
4.
5.
6.
7.
General Notes
Business Performance
Balance Sheet
Capital Structure
Financing
Taxation
Other Notes
Shareholder Information
Independent Auditor’s Report
Appendix 4E
03
16
22
23
25
26
27
28
29
29
31
36
46
55
59
63
72
73
75
DIRECTORS’
REPORT
The Directors present their report together with the financial statements 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 2016.
DIRECTORS
The following persons held office as Directors of NRW Holdings Limited during the financial year and up to the
date of this report:
Michael Arnett
Chariman Non-Executive Director
Mr Arnett was appointed as a Director on 27 July 2007 and appointed Chairman on 9 March 2016.
Mr Arnett is a former consultant to, partner of and member of the Board of Directors and national head of
the Natural Resources Business Unit of the law firm Norton Rose (formally Deacons). He 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 three years immediately before the
end of the financial year:
• Chairman, New Guinea Energy Ltd (finished July 2015)
Jeff Dowling
Non-Executive Director
Mr Dowling was appointed as Non-Executive Director in August 2013.
Mr Dowling has 36 years’ experience in professional services with Ernst & Young. He has held numerous
leadership roles within Ernst & Young which focused on the mining, oil and gas and other industries.
Mr Dowling has a Bachelor of Commerce from University of Western Australia and is a fellow of the Institute
of Chartered Accountants, the Australian Institute of Company Directors and the Financial Services Institute of
Australasia.
Mr Dowling has held the following directorships of listed companies in the three years immediately before the
end of the financial year:
• Chairman of Sirius Resources NL (Resigned 23 September 2015)
• Pura Vida Energy NL (Resigned 16 May 2016)
• Non-Executive Director of Atlas Iron Limited (Resigned 4 May 2016)
• Chairman of S2 Resources Limited (Current)
Julian Pemberton
Chief Executive Officer and Managing Director
Mr Julian (Jules) Pemberton was appointed as a Director on 1 July 2006. Appointed as Chief Executive
Officer and Managing Director 7 July 2010.
Mr Pemberton has more than 20 years’ experience in both the resources and infrastructure sectors. He joined
NRW in 1996, and prior to his appointment as Chief Executive Officer and Managing Director he has held a
number of senior management and executive positions at NRW including Chief Operating Officer.
3
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
Peter Johnston
Non-Executive Director
Mr Johnston was appointed as Non-Executive Director in July 2016.
Mr Johnston has served with a number of national and international companies. Most recently he was
appointed Global Head of Nickel Assets for Glencore in 2013 and completed that role in December 2015.
Prior to that role he was Managing Director and Chief Executive Officer of Minara Resources Pty Ltd from
2001 to 2013.
Mr Johnston graduated from the University of Western Australia with a Bachelor of Arts majoring in
psychology and industrial relations.
Peter has held the following directorships of listed companies in the three years immediately before the end of
the financial year:
•
•
Executive Director, Tronox Ltd (NYSE) (current)
Executive Director, Silver Lake Resources Limited (resigned 30 April 2015)
Dr Ian Burston
Independent Non-Executive Director
Dr Ian Burston resigned as Chairman on 9 March 2016 and resigned from the board on 30 June 2016.
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.
Dr 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.
Dr Burston has held the following directorships of listed companies in the three years immediately before the
end of the financial year:
• Non-Executive Director, Mincor Resources NL (Resigned June 2016)
• Chairman and Non-Executive Director, Kogi Iron (formerly Energio Limited) (Current)
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 co-ordination 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
Directors’ Meetings Attended
Directors’ Meetings Held
Michael Arnett
Jeff Dowling
Julian Pemberton
Ian Burston
John Cooper
10
11
11
10
6
11
11
11
11
11
Remuneration and Nomination Committee
The Members of the Nomination & Remuneration Committee are Michael Arnett (Chairman), Ian Burston and
John Cooper. During the 2016 financial year two meetings of the Committee were held. Certain responsibilities
of the Committee were also considered at Board Meetings as required.
4
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
Audit and Risk Committee
The Committee Members are Jeff Dowling (Chairman), Michael Arnett and John Cooper. During the 2016
financial year three meetings of the Audit & Risk Committee were held and all members attended all meetings.
In addition some Audit and Risk matters were considered in the course of regular Board Meetings.
Principal Activities
NRW Holdings Limited provides diversified services to Australia’s resource and infrastructure sectors through
three business divisions, NRW Civil & Mining, Action Drill & Blast (ADB) and AES Equipment Solutions (AES).
Further detail on the operation of each of these business divisions and the group is provided below.
RESULTS FOR THE FULL YEAR AND REVIEW OF OPERATIONS
FINANCIAL PERFORMANCE
NRW reported revenues of $288.0 million, which were lower than last year ($775.9 million) due to the
completion of a number of major Civil projects in FY15. Net Earnings recovered to $21.5 million after the loss
booked in FY15 of $229.8 million, (which included a major contract loss and asset impairment charges). The
recovery in performance was due to improved project performance and significant reductions to the overhead
cost base. The result includes a tax credit primarily due to the return to profitability.
Cash holdings at year end improved to $37.2 million (FY15 $34.6 million) whilst debt reduced by $45.8 million
in the year to $96.5 million at 30th June 2016. Consequently the gearing ratio improved to 39.6% (June 15 –
83.8%).
BUSINESS SEGMENTS
NRW is a leading contractor in the mining and civil construction industries. NRW is comprised of three
businesses, NRW Civil and Mining, Action Drill & Blast (ADB) and AES Equipment Solutions (AES).
FY16
FY15
Revenue
Earnings
Revenue
Earnings
NRW Civil and Mining
Action Drill & Blast
AES Equipment Solutions
Eliminations
Corporate costs unallocated
$M
203.6
81.9
13.6
(11.1)
Interest costs in segment result
-
288.0
Total Statutory Revenue/
Earnings before Tax
and Interest
Share of loss in associates
Net finance costs
Income tax benefit
Profit / (loss) for the year
$M
18.1
2.3
(1.4)
(4.4)
9.3
23.9
(0.8)
(8.9)
7.3
21.5
$M
694.1
85.9
15.3
(19.4)
-
775.9
$M
(253.1)
1.0
(23.3)
(15.7)
12.7
(278.3)
(0.5)
(11.5)
60.5
(229.8)
5
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
NRW Civil and Mining
The Civil and Mining business specialises in the
delivery of private and public civil infrastructure
projects, mine development and contract mining,
waste stripping and ore haulage supported by a fully
mobile work force and an extensive fleet of plant and
equipment. Civil construction projects completed
have included bulk earthworks, rail formation,
concrete installation, and construction of roads.
Mining projects include work in iron ore, coal
and gold.
Activity in the year on Civil projects included the
completion of work on the Roy Hill Concrete
Project, further development work for Rio Tinto
on the Nammuldi Iron Ore site and completion of
the Ravensthorpe Heavy haulage route project for
Main Roads. Civil activity was low through the year
however a number of new projects were secured
which will increment activity in following years.
The most significant of these project awards was
the Forrestfield–Airport Link project for the Public
Transport Authority (PTA) of Western Australia. The
contract valued at $1,176 million was awarded to
a joint venture comprising NRW (20%) and Salini
Impregilo (SI) of Italy (80%). Other projects secured
in the year include the Yandi Oxbow contract for
Rio Tinto which is part of a programme of work
to sustain production at the Yandi mine valued at
approximately $30 million.
The Mining business continued to support
Middlemount Coal and provide a range of mining
services to the North Star Magnetite project. The
business secured a project for Rio Tinto to provide
contract mining and ore haulage at the Nammuldi
mine. The contract has a value of circa $140 million
over a 24 month term.
Revenues in the Civil and Mining business of $203.6
million were down on last year ($694.1 million) due
to the completion of a number of major civil projects
in FY15. The business generated earnings before tax
of $18.1 million compared to loss of $253.1 million
in FY15.
Action Drill & Blast
Action Drill & Blast (ADB) provides contract drill and
blast services to mining (including iron ore, gold, coal
and lithium) and civil projects throughout Australia.
The business secured two new long term contracts
at St. Ives for Goldfields and Isaac Plains for
Goldings Contactors and a three year contract
extension for drilling services at Middlemount.
Revenues at $81.9 million were only slightly below
last year ($85.9 million). Improved margin delivery
and cost savings resulted in improved earnings
before tax of $2.3 million compared to $1.0 million in
FY15, despite lower activity.
AES Equipment Solutions
AES Equipment Solutions (AES) provides maintenance
services to the mining and resources sectors including
the fabrication of water and service trucks.
Revenues in the business reduced to $13.6 million
compared to $15.3 million in the prior comparative
period reflecting a continued downturn in market
activity particularly for service vehicles and water
trucks. Whilst AES continues to operate at around
break even cash levels the business sustained a $1.4
million loss, compared to a loss of $2.0 million in FY15
before impairment. Cost reduction initiatives remain a
focus for the management team however improved
profitability remains dependant on activity increases to
improve utilisation of relatively fixed infrastructure.
BALANCE SHEET, OPERATING CASH FLOW
AND CAPITAL EXPENDITURE
Net assets increased to $149.8 million, ($128.4 million
FY15) representing net assets of 53 cents per share.
There were no major changes in the level of working
capital in the year consequently cashflow matched
EBITDA less expenditure on Capital equipment.
Major cash movements in the year included the final
settlement payment from Samsung on the Roy Hill
Rail project which was mostly used to meet final
plant hire costs and accrued staff entitlements. Net
debt improved by $48.3 million to $59.3 million (FY15
$107.6 million). Capital expenditure at $9.1 million
mostly related to major component replacement for the
mining and drilling fleets.
The company has brought to account additional
deferred tax assets in the year and consequently a
$7.3 million income tax benefit has been recognised.
Deferred tax assets mostly relating to prior year losses
total $33.3 million. A further $31.7 million of tax assets
are recognised as contingent assets.
During the year the company successfully negotiated
a debt rescheduling agreement with its banking group.
The agreement reschedules $102.8 million of debt as
at April 2016 over 33 monthly instalments.
The company is in full compliance with its banking
covenants as at 30 June 2016.
The reduction in net debt and improved net asset
position resulted in an improved gearing ratio of 39.6%
compared to 83.8% at June 2015.
PEOPLE AND SAFETY
NRW aims to recruit and retain a skilled workforce and
endorses a safe environment free from harassment
and unlawful discrimination. NRW’s current workforce
levels have remained stable through the year at 832
(30 June 2015 - 846) but are expected to increase as
work ramps up on recently awarded civil projects.
6
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
NRW is focused on improving the sustainable
development of local communities and traditional
owners of the areas in which it works. The company
operates a number of projects in joint venture
with various Indigenous organisations to provide
sustainable business opportunities to these groups
and the communities they represent.
Safety is paramount across all NRW Projects. NRW’s
Lost Time Injury Frequency Rate (LTIFR) for the year
is 0.60 compared to 0.19 at June 2015.
Whilst both of these projects are in WA there are
other major infrastructure projects nationally which
we intend to target through similar partnership
models.
NRW’s forward order book totals circa $1 billion of
which $325 million is secured revenue for delivery
during FY17 and a further $261 million secured
for delivery in FY18, which provides NRW a stable
revenue base that positions the company for growth
over the next two to three years.
Bid activity is robust, however the tendering
landscape remains highly competitive. The tender
pipeline is currently assessed at $2.7 billion.
DIVIDEND
The directors have determined that no dividend
will be paid out of retained profits at 30 June 2016
(2015 – nil).
SIGNIFICANT EVENTS AFTER PERIOD END
No matter or circumstance has arisen since the
end of the financial year and the date of this report
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
periods.
DIRECTORS’ INTERESTS
As at the date of this report, the relevant interest
of each Director in the ordinary share capital of the
company was:
Director
Michael Arnett
Jeff Dowling
Peter Johnston
Julian Pemberton
Ian Burston
Ordinary Shares (NWH)
994,474
250,000
50, 000
3,014,404
329,492
Transactions between entities within the group and
Director-related entities are set out in Note 7.4 to the
financial statements.
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.
RISK MANAGEMENT
NRW has risk management policies and procedures
in place to provide early identification of business
risks and to monitor the mitigation of those risks
across all aspects of the business. These include risk
assessment in the tender and contracting phase,
management of specifically identified project risks,
treasury management and credit risks. For further
information in relation to NRW’s risk management
approach refer to principle seven in the corporate
governance statement.
OUTLOOK
The two key markets in which NRW operates,
resources and infrastructure are starting to show
some signs of stability and we are now experiencing
an increase in tender opportunities, particularly over
the past few months.
Despite an improving sentiment our clients continue
to strive for lower operating costs and improved
productivity whilst they continue to minimise capital
expenditure on expansion works. Against this
challenging backdrop it is pleasing to have secured
a number of civil contracts in the resources sector.
Our Mining business has ongoing contracts with
Middlemount Coal and Rio Tinto which extend
beyond the end of the new financial year and have
several opportunities particularly in coal, gold and the
emerging lithium market to secure additional work.
The drill and blast business has won several key long
term projects in gold and coal during the year and
has a number of identified opportunities together
with the capacity to grow further revenues in FY17.
In infrastructure we secured the four year $1.2 billion
Forrestfield Airport link contract for the PTA in joint
venture with Salini Impregilo (SI) and the SI–NRW
joint venture has recently been shortlisted to bid for
the NorthLink Stage 3 works for Main Roads.
7
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
OPTIONS OVER UNISSUED SHARE OR
INTERESTS
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.
PERFORMANCE RIGHTS OVER UNISSUED
SHARES OR INTERESTS
As at the date of this report, there are 2,613,750
Performance Rights outstanding (2015: 831,005).
Details of Performance Rights granted to executives
as part of their remuneration are set out in the
Remuneration Report on pages 10 to 15.
AUDITOR
The company’s auditor is Deloitte Touche Tohmatsu who
was appointed at the AGM held on 28 November, 2007.
During the financial year there were no officers of the
company who were former partners or directors of
Deloitte Touche Tohmatsu.
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 22 of this report.
Details of amounts paid or payable to the auditor
for non-audit services provided during the year are
outlined in Note 7.5 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 7.5 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:
• 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 2001. 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 2001. The deed also requires the company to
maintain insurance cover for these executives.
The total amount of insurance premiums paid during
the financial year was $354,411 (2015: $280,104).
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.
8
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
REMUNERATION REPORT (AUDITED)
The information provided in this report has been prepared based on the requirements of the Corporations
Act 2001 and the applicable accounting standards. The report has been audited. The report outlines the
remuneration arrangements for the company for the period to 30 June 2016 for the following individuals,
who are the Key Management Personnel (KMP) of the company:
Name
Position Held
Appointed/Resigned
NON-EXECUTIVE DIRECTORS
Mr M Arnett
Mr J Dowling
Chairman and Non-Executive Director
Appointed 27 July 2007 and as Chairman, 9 March 2016
Non-Executive Director
Appointed 21 August 2013
Dr I Burston
Non-Executive Director
Mr J Cooper
Non-Executive Director
EXECUTIVE DIRECTOR
Appointed 27 July 2007
Resigned 30 June 2016
Appointed 29 March 2011
Resigned 23 November 2015
Mr J Pemberton
Chief Executive Officer and Managing Director
Appointed as a Director of the company 1 July 2006
and as Chief Executive Officer 7 July 2010.
EXECUTIVES
Mr A Walsh
Mr W Fair
Chief Financial Officer
Appointed 6 January 2014
General Manager –
Action Drill & Blast Pty Limited
Appointed 1 March 2012
Mr K Hyman
Company Secretary, Risk Management & Legal
Appointed 10 July 2007
Mr D Donjerkovich
General Manager – Civil
Appointed 9 December 2015
Mr M Gloyne
General Manager – Mining
Appointed 1 September 2014
Mr G Dunn
Chief Operating Officer
Appointed 1 July 2015
Resigned 9 December 2015
The report refers to both Non-Executive Directors and Executive KMP. Unless noted Executive Directors are
included in the discussion of Executive KMP.
The Remuneration Report is divided into the following sections:
Section
Remuneration Governance
Five Year Snapshot
Executive KMP Remuneration Arrangements
Executive KMP Remuneration Outcomes
Executive Director and Executive KMP Remuneration
Additional Statutory Disclosures
9
Page
10
10
11
12
13
15
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
1. REMUNERATION GOVERNANCE
NRW has established a Nomination and Remuneration Committee (N&RC) consisting of Michael Arnett
(Chairman), Ian Burston and John Cooper. The N&RC is responsible for making recommendations to the
Board on the remuneration arrangements for Non-Executive Directors and Executive KMP as set out in the
N&RC Charter. The N&RC provides advice, recommendation and assistance to the Board with respect to:
• The remuneration of Non-Executive Directors, including the Chair of the Board;
• The remuneration policies which are designed to attract and retain Executives with the expertise to
enhance the competitive advantage, performance and growth of NRW;
• Ensuring that the level and composition of Executive remuneration packages are fair, reasonable and
adequate, and that the remuneration received by Executive KMP displays a clear relationship between the
performance of the individual and performance of NRW;
• Termination and redundancy policies and the payments made to outgoing Executives;
• Disclosures to be included in the corporate governance section of NRW’s annual report which relate to
NRW’s remuneration policies and procedures.
The N&RC is mandated to engage external and independent remuneration advisors who do not have a
relationship with or advise NRW management. During the reporting period the N&RC did not engage any
such advisors.
2. FIVE YEAR SNAPSHOT
Measure
2016
2015
2014
2013
2012
Market Capitalisation
(30 June)
Share Price at
end of year
$ 58.6 million
$ 50.2 million
$ 256.6 million
$ 253.8 million
$842.2 million
$0.21
$0.18
$0.92
$0.91
$3.02
Total Revenue
$288.0 million
$775.9 million
$1,134.5 million
$1,374.4 million
$1,360.8 million
EBITDA
EPS
$47.4 million*
$(77.2) million*
$123.0 million*
$168.3 million
$195.5 million
7.7 cents
(82.4) cents
15.9 cents
26.6 cents
34.8 cents
EPS Growth
n/a
n/a
n/a
(23.3%)
116%
Net Profit / (Loss)
After Tax
Interim Dividend paid
Final Dividend declared
in respect of the year
Annual Total
Shareholder Return (%)
$21.5 million
$(229.8) million
$44.2 million
$ 74.1 million
$97.1 million
$0.00
$0.00
17%
$0.00
$0.00
(80%)
$0.04
$0.05
11%
$0.08
$0.05
(67%)
$0.08
$0.10
15%
*Impairment charge also added back/excluded from EBITDA.
10
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
3. EXECUTIVE KMP
REMUNERATION FRAMEWORK
3.1 Executive (KMP) Remuneration Overview
The board has adopted the following over-arching
principles which recognise the importance of fair,
effective and appropriate remuneration outcomes:
• Alignment: the structure of the remuneration
package is intended to align the interests of
Executives and the company’s shareholders;
• Attract and Retain: Remuneration packages are
established and reviewed to ensure NRW is able to
attract the right people and to retain those people;
• Motivate: remuneration plans are structured to
provide strong motivation to achieve both short
and long term business objectives. Consequently,
remuneration packages include a high proportion
of variable remuneration;
• Appropriate: remuneration packages are
established and reviewed recognising current
market trends in sectors relevant to the operations
of NRW and those sectors which would be
recognised as providing a bench mark to NRW
employees.
3.2 Structure of Executive KMP Remuneration
The NRW remuneration program and consequently
the remuneration components for each Executive KMP
member comprise:
Fixed remuneration: comprising salary and
superannuation capped at the relevant concessional
contribution limit. The opportunity to salary sacrifice
benefits on a tax compliant basis is available on
request. Fixed remuneration is set with reference
to role, market and relevant experience, which is
reviewed annually and upon promotion.
Incentive plan: A revised incentive plan has been
developed to simplify the overall remuneration
structure. The CEO and CFO can earn a cash based
incentive by achieving specific objectives set by the
N&RC and through the award of Performance Rights
(Rights) based on achieving significant growth in Total
Shareholder Return (TSR). The award of Rights is
governed by the “NRW Holdings Limited Performance
Rights Plan’ approved by shareholders in 2011.
The remuneration structure which is reviewed annually
was modified in the current financial year to recognise
the specific challenges facing the business identified in
last year’s Directors Report namely a subdued market,
outstanding resolution of the Roy Hill rail contract
dispute with Samsung, a need to grow the order book,
address debt repayment obligations and lower the
business cost base.
One of the main changes implemented in the year
was a $550,000 reduction to the base salary of the
11
CEO and a revised incentive scheme structure. The
CEO’s base salary was revised to $800,000 (FY15
$1,350,000).
3.3 Award Levels Relative to Fixed Remuneration
The CEO can achieve a cash based incentive up to
50% of Base Salary (2015: up to 80%) and the award
of Rights up to 75% of base salary (2015: up to
150%). The CFO can achieve a cash based incentive
up to 44% of base salary (2015: up to 80%) and the
award of Rights up to 66% of base salary (2015: up
to 100%). The award of Rights to the CEO remains
subject to shareholder approval which is to be sought
at the 2016 Annual General Meeting.
3.4 Other Considerations Applicable to
LTI Awards
If a KMP’s employment with NRW ceases for
reasons other than death or permanent disability, any
unvested Performance Rights will lapse and expire
unless the Board of NRW considers it appropriate
in the circumstances to consider the vesting of any
unvested shares. Where a KMP has died or becomes
permanently disabled, the Board may determine
that the Performance Rights will not lapse and will
be tested against the Vesting Conditions on the
applicable vesting dates.
Upon change of control occurring in respect of NRW,
the number of Performance Rights that can vest will
be reduced to reflect the period of time elapsed. For
example if a takeover of NRW becomes unconditional
two years after a grant of Performance Rights was
made and that award was eligible for vesting at the
third anniversary of it being granted, then two-thirds of
the Performance Rights that were eligible to vest under
that grant would be assessed against the Vesting
Conditions up to the date of the takeover becoming
effective.
The N&RC reserves the right to convert cash based
bonus payments to Performance Rights using a
conversion rate which recognises the share price in
the two months prior to any Rights issue and share
price movements within that period
3.5 Executive Service Agreements
The Executive Service Agreements in place in respect
of NRW’s KMP 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 up to six
months after termination;
All Executive KMP as listed in the remuneration table,
are employed on standard letters of appointment
that provide for annual reviews of base salary and up
to six months’ notice of termination by either party.
The appointments are not for any fixed term and
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
carry no termination payments other than statutory
entitlements.
Remuneration for all KMP listed is determined by
the N&RC under the guidelines contained in this
remuneration report.
4. EXECUTIVE KMP
REMUNERATION OUTCOMES
4.1 Executive KMP Total Earnings and
Performance
The following tables provide information on the
remuneration of the Executive KMP for the year
ending 30 June 2016 and comparable information for
the previous year. Information is provided detailing:
fixed remuneration, and cash based and share based
incentives. As a result of a number of personnel
changes in the direct reports to the CEO the 2016
incentive scheme participants were the CEO and
CFO. It is likely that in the next financial year the
incentive plan will be broadened.
The N&RC established, for the cash based
component, Net Earnings and Liquidity as the
critical performance objectives. Earnings for the
year were above the target set by the N&RC. The
liquidity objective required agreement of the debt
rescheduling package which was also achieved.
Other objectives related to cash based incentives set
by the N&RC were not achieved in the financial year
consequently the proportion of cash based incentives
forfeited in the year was 25%. The CEO earned a
cash based incentive of $300,000 and the CFO
earned a cash based incentive of $222,750.
Share based objectives were granted in two
Tranches. Tranche 1 rights were dependant on
increasing TSR by more than 200% of the one month
VWAP ending 21st December 2015 (10 cents). The
Tranche is subject to a retest in October 2017 at a
higher TSR objective if the June 16 target is not met
(see Tranche 2 Rights below). The quantum of Rights
granted based on a share price of 30 cents per share
to the CEO were 1,000,000 and to the CFO 742,500.
The target was not met and will therefore be subject
to a retest in October 17. A consequence of the
failure to meet the June target is that the number of
Rights subject to the retest is reduced. Consequently
the CEO forfeited 250,000 Rights and the CFO
forfeited 185,625 Rights.
Given the low value of the shares when granted the
valuation formula determined that the shares had no
value, (the basis shown on the remuneration tables
below). If the Rights vest at 40 cents per share they
would be valued at $300,000 (CEO) and $222,750
(CFO).
Tranche 2 Rights remain subject to achieving further
growth in TSR by October 2017. The quantum of
Rights granted based on a share price of 40 cents
per share to the CEO were 750,000 and to the CFO
556,875. These Rights were also assessed at nil
value using normal valuation methodology. If the
Rights vest at 40 cents per share they would be
valued at $300,000 (CEO) and $222,750 (CFO). The
vesting date for Tranche 2 rights is the 31 November
2017.
Total LTI awards and expected vesting
Maximum
potential no. of
Performance
Rights
No. Rights
forfeited
No. Rights
expected to
vest on 31 Oct
2017
Mr J Pemberton
2,246,739
746,739
1,500,000
Mr A Walsh
1,299,375
185,625
1,113,750
Mr W Fair
39,143
39,143
-
TOTAL
3,585,257
971,507
2,613,750
All prior year Rights have lapsed and no Rights
vested in the year consequently no details are
provided in this report on those grants. As some of
the Rights awarded in prior years, which have now
lapsed, included market based objectives a small
share based payment cost was recognised valued at
$27,928 for the CEO and a further $1,091 for other
KMP’s. Details of the basis for the cost were provided
in the previous financial years report.
4.2 Valuation Assumptions
The estimation of the fair value of share-based
payment awards requires judgement with respect to
the appropriate valuation methodology. The choice of
valuation methodology is determined by the structure
of the awards, particularly the Vesting Conditions.
The valuation methodology for TSR growth was a
Monte-Carlo simulation. The valuation methodology
used was chosen from those available to incorporate
an appropriate amount of flexibility with respect to
the particular performance and vesting conditions of
the award.
The variables in the valuation model were the share
price at the date of the award (5 cents), the duration
of the award, the risk free interest rate (1.75%), share
price volatility (60%), and Dividend Yield (nil).
12
NRW ANNUAL REPORT 2016 | Directors’ Report
DIRECTORS’
REPORT CONTINUED
5. EXECUTIVE DIRECTORS’ AND EXECUTIVE KMP REMUNERATION
(COMPANY AND GROUP)
The table below sets out the remuneration outcomes for each of NRW’s Executive KMP for the financial year
ending 30 June 2016 and 30 June 2015.
IN AUD $
Short Term Benefits
Post Employment
Benefits
Other Long
Term Benefits
Share
Based
Payments
Total
Key Mangagement
Personnel
Year
Annual Base
Salary (1)
Salary
& fees
STI bonus Leave (2)
Annual
Leave (3)
Superannuation
Other (4)
Equity
EXECUTIVE
DIRECTORS
Mr J Pemberton (5)
EXECUTIVES
Mr A Walsh
Mr W Fair
Mr K Hyman
Mr D Donjerkovich (6)
Mr M Gloyne (7)
Mr G Dunn (8)
Mr W Rooney (9)
Total Compensated
(Consolidated) –
2016
Total Compensated
(Consolidated) –
2015
2016
800,000
1,004,647 300,000 514,278 (348,788)
19,308
(72,195)
27,928
1,445,178
2015 1,350,000 1,310,776
-
2016
675,000
655,693
222,750
2015
675,000
600,729
2016
435,770
416,463
2015
435,770
391,325
2016
358,600
339,293
2015
358,600
322,865
2016
392,400
200,896
2015
-
-
2016
500,000
258,835
2015
-
-
2016
600,000
290,346
2015
2016
-
-
-
-
2015
945,000
742,720
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
102,499
18,783
21,295
36,678
1,490,031
5,020
19,308
50,403
18,783
(11,285)
19,308
32,004
18,783
(1,435)
19,308
26,339
18,783
6,839
10,397
-
-
3,265
10,397
-
-
(17,905)
9,654
-
-
-
-
34,929
18,783
-
-
-
-
5,321
5,439
-
-
-
-
-
-
-
-
-
-
902,771
669,915
1,091
425,577
2,159
444,271
-
-
-
-
-
-
-
-
-
362,487
373,426
218,132
-
272,496
-
282,095
-
-
12,016
808,448
2016
3,166,173 522,750 514,278 (364,290)
107,679
(66,875)
29,019
3,908,735
2015
3,665,331
-
-
270,478
93,915
26,734
50,853
3,786,091
1. This column shows the current annual base salary including Superannuation - any changes in base salary in the current or prior financial
year are noted below.
2. Leave entitlements paid as part of remuneration adjustment.
3. Represents the movement in accrued annual leave.
4. Represents the movement in accrued long service leave.
5. Mr J Pemberton – base salary amended to $800,000 per annum from 18th January 2016.
6. Mr D Donjerkovich appointed General Manager – Civil effective 9th December 2015.
7. Mr M Gloyne appointed General Manager – Mining to report directly to the CEO effective 9th December 2015.
8. Mr G Dunn appointed as Chief Operating Officer effective 1st July 2015, resigned 9th December 2015.
9. Mr W Rooney resigned his employment as Managing Director NRW Civil & Mining effective 30th June 2015.
13
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Non-Executive Directors received a fixed fee for Board and Committee duties and are not entitled to any
performance related remuneration. The NRW constitution provides that Non-Executive Directors’ remuneration
must not exceed the maximum aggregate sum determined by the company in a general meeting. At present, the
maximum sum is fixed at $750,000, in aggregate, per annum. This maximum sum cannot be increased without
member’s approval by ordinary resolution at a general meeting.
Non-Executive Director Fees (excluding superannuation and non-cash benefits) to be paid by the company
to the Chairman is $125,000 and to Non-Executive Directors is $100,000. The fees are unchanged from the
previous financial year. Non-Executive Directors are also entitled to receive reimbursement for travelling and other
expenses that they properly incur in attending Board meetings, attending any general meetings of the company
or in connection with the company’s business.
The table below sets out the remuneration outcomes for each of NRW’s Non-Executive Directors:
IN AUD $
Short Term Benefits
Post Employment Benefits
Total
NON-EXECUTIVE DIRECTORS
Salary & fees Non cash benefit
Superannuation
Mr M Arnett (1)
Mr J Dowling
Dr I Burston (2)
Mr J Cooper (3)
FY16
FY15
FY16
FY15
FY16
FY15
FY16
FY15
106,250
100,000
100,000
100,001
121,731
122,116
42,692
100,001
NON-EXECUTIVE DIRECTORS’ TOTAL
FY16
370,673
2,078
-
232
5,192
1,588
5,495
4,702
4,454
6,290
FY15
422,118
15,141
10,625
9,500
9,500
9,500
11,564
11,601
4,056
9,500
35,745
40,10
116,875
109,500
109,500
114,693
134,883
139,212
51,450
113,955
412,708
477,360
1. Mr M Arnett appointed Chairman effective 9 March 2016.
2. Dr I Burston stepped down as Chairman effective 9 March 2016 and resigned from the Board effective 30 June 2016.
3. Mr J Cooper resigned from the Board effective 23 November 2015.
14
NRW ANNUAL REPORT 2016 | Directors’ Report DIRECTORS’
REPORT CONTINUED
Key Person
Held at 1 July 2014 Movements Held at 1 July 2015
Purchases(1)
Other Movements Held at 30 June 2016
Mr M Arnett
Mr J Dowling
Dr I Burston
Mr J Cooper
344,474
90,000
329,492
55,000
Mr J Pemberton
3,014,404
Mr A Walsh
Mr W Fair
Mr D Donjerkovich
Mr M Gloyne
Mr G Dunn
-
35,775
-
-
-
TOTAL
3,869,145
-
-
-
-
-
-
-
-
-
-
-
344,474
90,000
329,492
55,000
3,014,404
-
35,775
-
-
-
650,000
160,000
-
-
-
-
-
-
-
-
3,869,145
810,000
-
-
-
-
-
-
-
-
-
-
-
994,474
250,000
329,492
55,000
3,014,404
-
35,775
-
-
-
4,679,145
(1) All purchases were made via purchases of shares on-market.
6. ADDITIONAL STATUTORY DISCLOSURES
This section sets out the additional disclosures required under the Corporations Act 2001.
Performance Rights Fair Value
For all awards, the volatility assumption is representative of the level of uncertainty expected in the
movements of the company’s share price over the life of the award. The assessment of volatility includes the
historic volatility of the market price of the company’s share and the mean reversion tendency of volatilities.
The expected volatility of each company in the peer group is determined based on the historic volatility of the
companies’ share prices. In making this assumption, two years of historic volatility was used where available.
End of Remuneration Report (Audited)
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.
Julian Pemberton
Chief Executive Officer and Managing Director
Michael Arnett
Chairman and Non-Executive Director
15
NRW ANNUAL REPORT 2016 | Directors’ Report CORPORATE GOVERNANCE
STATEMENTS
• 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; and
• ensuring the company complies with its
responsibilities under the Corporations Act, the
ASX Listing Rules, the company’s Constitution
and other relevant laws and regulations.
Principle 2: Structure of the Board to Add Value
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
Director’s Report.
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, three of
whom are Non-Executive. The three Non-Executive
Directors, including the Chairman, are considered to
be independent.
The roles of the Chair and Managing Director 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, sets aside sessions at its scheduled
meetings to confer without management present;
• has described in the Board Charter the
considerations it takes into account when
determining independence.
ASX GOVERNANCE PRINCIPLES AND ASX
RECOMMENDATIONS
The Australian Securities Exchange 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 ASX
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 2016.
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
2016, and the main corporate governance practices
in place are set out below.
Principle 1: Lay Solid Foundation for
Management and Oversight
The Board has implemented a Board Charter that
details its functions and responsibilities together with
those of the Chairman and individual Directors.
Key responsibilities of the Board include:
• 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;
• establishing investment criteria including
acquisitions and divestments, approving
investments, and implementing ongoing
evaluations of investments against such criteria;
• providing oversight of the company, including its
control and accountability systems;
• exercising due care and diligence and sound
business judgment in the performance of those
functions and responsibilities;
• considering and approving the group’s budgets;
•
reviewing and ratifying systems of risk
management and internal compliance and
control, codes of conduct and legal compliance;
• monitoring senior management’s performance
and implementation of strategy and ensuring
appropriate resources are available;
Corporate Governance Statements
16
NRW ANNUAL REPORT 2016 | Directors’ Report CORPORATE GOVERNANCE
STATEMENTS CONTINUED
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 that
the Director:
•
is not a substantial shareholder of the company
or an officer of, or otherwise associated directly
with a substantial shareholder of the company (as
defined in section nine of the Corporations Act
2001);
• has not, within the last three 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 three 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 has reviewed the independence status
of its Directors and has determined the following
Directors to be “independent” (in accordance with the
criteria listed above):
• Mr Michael Arnett (Chairman)
• Mr Jeff Dowling
• Dr Ian Burston
• Mr Peter Johnston
The period of office held by each Director in office
is as follows:
Director
Date Appointed Period in office
Mr Michael Arnett
27 July 2007
Mr Jeff Dowling
21 August 2013
Mr Julian Pemberton
1 July 2006
Dr Ian Burston (1)
27 July 2007
Mr Peter Johnston
1 July 2016
Mr John Cooper (2)
29 March 2011
9 years
3 years
9 years
8 years
0 years
5 years
Due for
Re-election
2017 AGM
2016 AGM
Not Applicable
Not Applicable
2016 AGM
Not Applicable
(1) Dr Ian Burston retired from the Board on 30 June 2016.
(2) Mr John Cooper retired from the Board on 23 November 2015.
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 – The Company’s Obligations to
Stakeholders.
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 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 AND REMUNERATION COMMITTEE
The Board has established a Nomination and
Remuneration Committee and adopted a Charter
that sets out the committee’s role and responsibilities,
composition and membership requirements.
Nomination Responsibilities
The role of the Nomination and Remuneration
Committee when carrying out its nomination
responsibilities 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.
The responsibilities of this Committee with respect to
remuneration are set out under Principle 8.
Composition of the Committee
The Committee Charter states that the composition
should include:
• a minimum of three members, the majority of
whom must be independent; and
• a Chairman who is an Independent 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 recommendations of the
ASXCGC Principles.
During the 2016 financial year two meetings of the
Nomination & Remuneration Committee were held.
Certain responsibilities of the Nomination and
17
NRW ANNUAL REPORT 2016 | Corporate Governance Statements
NRW ANNUAL REPORT 2016 | Directors’ Report CORPORATE GOVERNANCE
STATEMENTS CONTINUED
Remuneration Committee were also considered at
Board meetings by the full Board as required.
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 Managing Director).
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.
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.
The Board will undertake an annual performance
evaluation that reviews:
• performance of the Board against the requirements
of the Board Charter;
•
• performance of Board Committees against the
requirements of their respective Charters;
individual performances of the Chair, Managing
Director, Directors, and Chief Executive
Officer; and
the Board Charter, the Committee Charters and the
procedures of the Board with a view to continuous
improvement.
•
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.
The appointment and removal of the Company
Secretary is a matter for decision by the Board.
Principle 3: Promote Ethical and Responsible
Decision Making
CODE OF BUSINESS ETHICS AND CONDUCT
NRW has adopted a Code of Business Ethics and
Conduct that applies to its Directors, management and
employees and which seeks 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. This Code is published
on the company’s website.
DIVERSITY POLICY
(a) NRW’s Diversity Policy incorporates measurable
objectives as set by the Board and is assessed on
an annual basis;
(b) NRW’s Diversity Policy can be found on the
company’s website www.nrw.com.au;
(c) The measurable objectives include;
•
•
the proportion of women employees in the
whole organisation; the proportion of women
employees in senior executive roles; and
the number of women on the Board.
The Board had set an objective of women employed
by the NRW Holdings group of 14.0%. For the year
ended 30 June 2016, the actual percentage of women
employed was 14.17%. It should be noted that
within the NRW Civil and Mining business (the largest
employment entity) the actual number was 18.04%.
NRW is committed to dedicating 20% of places
available to new entrants to the civil and mining
industry, through our Powerup program, to women.
There are no women executives or members of the
Board however the company remains committed to
identifying suitable candidates for appointment.
NRW is a relevant employer under the Workplace
Gender Equality Act and the company’s most recent
Gender Equality Indicators report is published on the
website.
SECURITIES DEALING POLICY
The Board has adopted a Securities Dealing Policy
that is binding on all Directors, employees, contractors,
consultants and advisers to NRW. The Policy is
intended to assist in maintaining market confidence in
the integrity of dealings in the company’s securities.
This Policy is provided to all new employees at
induction. The company will obtain a periodic
acknowledgement from members of the management
team of their compliance with
this Policy.
Corporate Governance Statements
18
NRW ANNUAL REPORT 2016 | Directors’ Report
CORPORATE GOVERNANCE
STATEMENTS CONTINUED
Principle 4: Safeguard Integrity in Financial
Reporting
• company announcements are factual and
presented in a clear and balanced way.
AUDIT AND RISK MANAGEMENT COMMITTEE
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 integrity of management reporting
on company performance in all other key
operational compliance areas subject to external
audit; and
• ensuring the independence and competence of
the company’s external auditors.
COMPOSITION OF THE COMMITTEE
The Board has determined that the Audit and Risk
Management Committee should comprise:
• at least three members;
• a majority of independent Non-Executive
Directors; and
• an independent chair who is not the Chair of
the Board.
In addition, the Audit and Risk Management
Committee should include:
• members who are financially literate;
• at least one member with relevant qualifications
and experience; and
• at least one member with an understanding of the
industry in which the entity operates.
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 Principles.
The Charter is published on the company’s website.
The website also contains information on the
procedures for the selection and appointment of
the external auditor and for the rotation of external
audit partner.
Principle 5: Make Timely and Balanced
Disclosure
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
The Board has adopted a Continuous Disclosure
Policy that complies with ASX and other statutory
obligations with the Company Secretary responsible
for external communications.
Principle 6: Respect the Rights of Shareholders
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.
ELECTRONIC COMMUNICATIONS
The company maintains 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.
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.
Principle 7: Recognise and Manage Risk
RISK MANAGEMENT POLICY
The company has adopted a 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.
Oversight of Risk Management is undertaken by the
amalgamated Audit and Risk Management Committee.
This Committee assists the Board in its oversight role by:
•
the implementation and review of risk
management and related internal compliance and
control systems;
19
NRW ANNUAL REPORT 2016 | Corporate Governance Statements
NRW ANNUAL REPORT 2016 | Directors’ Report CORPORATE GOVERNANCE
STATEMENTS CONTINUED
• monitoring the company’s policies, programs and
procedures to ensure compliance with relevant
laws, the company’s Code of Conduct; and
the establishment and ongoing review of the
company’s corporate governance policies,
procedures and practices.
•
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.
The Managing Director is required to report to
the Board on the progress of, and on all matters
associated with, risk management. The Managing
Director is to report to the Board as to the
effectiveness of the company’s 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.
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.
Principle 8: Remunerate Fairly and Responsibly
NOMINATION AND REMUNERATION COMMITTEE
The Board has established a Nomination and
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 Nomination and Remuneration
Committee when carrying out its Remuneration
responsibilities 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; and
• clearly sets out the relationship between the
individual’s performance and remuneration.
• 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 and
with ASXCGC Principles.
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.
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.
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.
Corporate Governance Statements
20
NRW ANNUAL REPORT 2016 | Directors’ Report CORPORATE GOVERNANCE
STATEMENTS CONTINUED
The company meets 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;
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.
21
NRW ANNUAL REPORT 2016 | Corporate Governance Statements
NRW ANNUAL REPORT 2016 | Directors’ Report AUDITOR’S INDEPENDENCE
DECLARATION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2
Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 (0) 9365 7001
www.deloitte.com.au
17 August 2016
The Board of Directors
NRW Holdings Limited
181 Great Eastern Highway
Belmont WA 6104
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 2016, 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
AT Richards
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
Auditor’s Independance Declaration
22
22
NRW ANNUAL REPORT 2016 | Directors’ Report
DIRECTORS’
DECLARATION
The Directors declare that:
(a) in the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable;
(b) in the Directors’ opinion, the attached financial statements are in compliance with International Financial
Reporting Standards, as stated in Note 1.2 to the financial statements;
(c) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of
the financial position and performance of the consolidated entity; and
(d) the Directors have been given the declarations required by 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 Note 7.1 to the financial statements will, as a group, be
able to meet any obligations or liabilities to which they are, or may become, subject by 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
Julian Pemberton
Chief Executive Officer and Managing Director
Michael Arnett
Chairman and Non-Executive Director
Perth, 17 August 2016
23
NRW ANNUAL REPORT 2016 | Directors’ Declaration
NRW ANNUAL REPORT 2016 | Directors’ Report CONTENTS
PAGE
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
1.
2.
3.
4.
5.
6.
7.
General Notes
Business Performance
Balance Sheet
Capital Structure
Financing
Taxation
Other Notes
Shareholder Information
Independent Auditor’s Report
25
26
27
28
29
29
31
36
46
55
59
63
72
73
Contents
24
NRW ANNUAL REPORT 2016 | Directors’ Report
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2016
Consolidated
REVENUE
Finance income
Finance costs
Share of loss from associates
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expenses
Impairment expense
Plant and equipment costs
Other expenses
Profit / (Loss) before income tax
Income tax benefit
Profit / (Loss) for the year
OTHER COMPREHENSIVE INCOME / (EXPENSE)
Exchange differences arising on translation of foreign operations
Other comprehensive income / (expense) for the year, net of tax
Notes
2.2
2.3
2.3
5.1
2.4
2.4
3.6
2.4
6.1
2016
$’000
287,973
320
(9,227)
(813)
(43,579)
(97,382)
(44,422)
(24,184)
(172)
(51,048)
(3,315)
14,150
7,300
21,450
(24)
(24)
2015
$’000
775,934
1,439
(12,951)
(500)
(132,386)
(320,142)
(242,170)
(44,345)
(157,271)
(151,984)
(5,948)
(290,324)
60,502
(229,822)
31
31
TOTAL COMPREHENSIVE INCOME / (LOSS)
21,426
(229,791)
Profit / (Loss) Attributable to:
Equity holders of the company
Total Comprehensive Income / (Loss) Attributable to:
Equity holders of the company
EARNINGS / (LOSS) PER SHARE
Basic earnings/(loss) per share
Diluted earnings per share
21,450
(229,791)
21,426
(229,791)
4.6
Cents
7.7
7.7
Cents
(82.4)
N/A
The consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.
| Directors’ Declaration
25
NRW ANNUAL REPORT 2016 | Consolidated Statement of Profit or Loss and Other Comprehensive Income
NRW ANNUAL REPORT 2016 | Directors’ Report CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 30 June 2016
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Current tax assets
Other current assets
Total current assets
Non-current assets
Investments in associates
Intangibles
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Notes
3.1
3.2
6.3
3.3
3.5
3.4
6.3
3.7
5.3
3.8
5.3
3.8
4.2
4.3
4.4
2016
$’000
37,182
36,437
16,538
-
2,937
93,095
4,069
2,858
172,675
27,726
207,326
300,421
44,405
37,414
7,835
89,654
59,072
1,904
60,976
150,630
149,791
156,432
2,878
(9,519)
149,791
Consolidated
2015
$’000
34,631
73,812
28,417
6,125
3,720
146,705
4,812
4,581
190,266
22,825
222,484
369,189
86,083
142,255
9,134
237,472
-
3,353
3,353
240,825
128,364
156,432
2,901
(30,969)
128,364
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
26
NRW ANNUAL REPORT 2016 | Directors’ Report CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2016
Notes
Contributed
equity
Foreign currency
translation reserve
Share based
payment reserve
Total
Reserves
Retained
earnings/
(Accumulated
losses)
Total
Equity
$’000
156,432
$’000
(215)
$’000
2,987
$’000
$’000
$’000
2,772
212,798
372,002
BALANCE AT 1 JULY 2014
Loss for the year
Exchange differences arising on
translation of foreign operations
Total comprehensive income /
(loss) for the year
Payment of dividends
Share based payments
4.4
4.3
4.5
4.3
-
-
-
-
-
-
31
31
-
-
BALANCE AT 30 JUNE 2015
156,432
(184)
-
-
-
-
98
3,085
-
31
31
-
98
(229,823)
(229,823)
-
31
(229,823)
(229,792)
(13,944)
(13,944)
-
98
2,901
(30,969)
128,364
BALANCE AT 1 JULY 2015
156,432
(184)
3,085
2,901
(30,969)
128,364
Profit for the year
Exchange differences arising on
translation of foreign operations
Total comprehensive income /
(loss) for the year
4.4
4.3
-
-
-
-
(24)
(24)
-
-
-
-
21,450
21,450
(24)
-
(24)
(24)
21,450
21,427
BALANCE AT 30 JUNE 2016
156,432
(208)
3,085
2,878
(9,519)
149,791
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
27
NRW ANNUAL REPORT 2016 | Consolidated Statement of Changes in Equity
NRW ANNUAL REPORT 2016 | Directors’ Report CONSOLIDATED STATEMENT OF
CASH FLOWS
For the year ended 30 June 2016
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest paid
Interest received
Income tax refunded / (paid)
Net cash flow from / (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment
Payment for investment in associate
Acquisition of property, plant and equipment
Net cash from / (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings and finance/hire purchase liabilities
Payment of dividends to shareholders
Net cash used in financing activities
NET INCREASE / (DESCREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at the end of the year
Note
2.3
2.3
5.1
3.3
4.5
2016
$’000
360,995
(313,011)
(9,227)
320
8,524
47,600
9,815
(70)
(9,025)
720
4,086
(49,855)
-
(45,769)
2,551
34,631
37,182
2015
$’000
965,806
(997,912)
(12,951)
1,439
(3,610)
(47,228)
2,495
(6,424)
(8,517)
(12,446)
9,355
(56,580)
(13,944)
(61,169)
(120,843)
155,474
34,631
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
28
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS
1. GENERAL NOTES
1.1 General Information
NRW Holdings Limited (the ‘company’) is a public
company listed on the Australian Securities Exchange
which is incorporated and domiciled in Australia. The
address of the company’s registered office is 181
Great Eastern Highway, Belmont, Western Australia.
The consolidated financial statements of the company
for the year ended 30 June 2016 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 and repairs to
plant and the provision of drilling and blasting services.
1.2 Basis of Preparation
This section sets out the basis of preparation and
the Group accounting policies that relate to the
consolidated financial statements as a whole.
Significant and other accounting policies that
summarise the measurement basis used and
are relevant to an understanding of the financial
statements are provided throughout the notes to the
financial statements to which it relates.
The financial report is a general purpose financial
report which:
•
•
•
•
•
has been prepared in accordance with
Australian Accounting Standards (AASBs),
including Australian Accounting Interpretations
adopted by the Australian Accounting
Standards Board, and the Corporations Act
2001. The Financial Report of the Group also
complies with International Financial Reporting
Standards (IFRSs) and Interpretations as issued
by the International Accounting Standards
Board (IASB);
has been prepared on the basis of historical
cost except for the revaluation of financial
instruments. Historical cost is based on the fair
values of the consideration given in exchange
for goods and services;
is a Company of the kind referred to in ASIC
Class Order 98/100, dated 10 July 1998, and
in accordance with that Class Order amounts
in the financial report are rounded off to the
nearest thousand Australian dollars, unless
otherwise indicated;
presents reclassified comparative information
where appropriate to enhance comparability
with the current period presentation;
adopts all new and amended Accounting
Standards and Interpretations issued by the
AASB that are relevant to the operations of
the Group and effective for reporting periods
beginning on or after 1 July 2015;
does not early adopt any Accounting Standards
and Interpretations that have been issued or
amended but are not yet effective. Refer to note
7.7 for further details; and
has applied the Group accounting policies
consistently to all periods presented.
•
•
The financial statements were authorised for issue by
the directors on 17 August 2016.
1.3 Basis of Consolidation
The consolidated financial statements incorporate
the financial statements of the company and entities
(including structured entities) controlled by the
company and its subsidiaries. Control is achieved
when the company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns
from its involvement with the investee; and
has the ability to use its power to affect its
returns.
The company reassesses whether or not it controls
an investee if facts and circumstances indicate
that there are changes to one or more of the three
elements of control listed above.
When the company has less than a majority of the
voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give
it the practical ability to direct the relevant activities
of the investee unilaterally. The company considers
all relevant facts and circumstances in assessing
whether or not the company’s voting rights in an
investee are sufficient to give it power, including:
•
•
•
•
the size of the company’s holding of voting
rights relative to the size and dispersion of
holdings of the other vote holders;
potential voting rights held by the company,
other vote holders or other parties;
rights arising from other contractual
arrangements; and
any additional facts and circumstances that
indicate that the company has, or does not
have, the current ability to direct the relevant
activities at the time that decisions need to be
made, including voting patterns at previous
shareholders’ meetings.
Consolidation of a subsidiary begins when the
company obtains control over the subsidiary and
ceases when the company loses control of the
subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year
| Consolidated Statement of Cash Flows
29
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Critical Judgements in Applying
Accounting Policies
Preparation of the Financial Report requires
management to make judgements, estimates and
assumptions about future events. Information on
material estimates and judgements considered
when applying the accounting policies can be
found in the following notes:
Key accounting judgements and estimates
Note
Page
Revenue recognition
Construction contracts
Property, plant and equipment
Provision for warranties and onerous leases
Employee entitlements
Share based payments
Income tax
Deferred tax
2.2
3.1
3.4
3.8
3.8
4.3
6.2
6.3
33
37
41
46
46
52
61
63
are included in the consolidated statement of profit or
loss and other comprehensive income from the date
the company gains control until the date when the
company ceases to control the subsidiary.
Profit or loss and each component of other
comprehensive income are attributed to the owners
of the company and to the non-controlling interests.
Total comprehensive income of subsidiaries is
attributed to the owners of the company and to the
non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
The financial statements of subsidiaries where
appropriate are consistent within the group’s
accounting policies.
All intragroup assets and liabilities, equity, income,
expenses and cash flows relating to transactions
between members of the group are eliminated in full
on consolidation.
1.4 Accounting Judgments and Estimates
In the application of the group’s accounting policies,
the Directors are required to make judgements,
estimates and assumptions about the carrying
amounts of assets and liabilities. The estimates and
associated assumptions are based on historical
experience and other factors that are considered
to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in
which the estimate is revised:
•
•
if the revision affects only that period; or
in the period of the revision and future periods
if the revision affects both current and future
periods.
Notes to the Financial Statements
30
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2. BUSINESS PERFORMANCE
2.1 Segment Reporting
NRW is comprised of three businesses, NRW Civil and Mining, Action Drill & Blast and AES Equipment
Solutions.
An operating segment is a component of the Group that engages in business activities from which it
may earn revenues and incur expenses (including revenues and expenses relating to transactions with
other components of the Group), whose operating results are regularly reviewed by the Group’s Chief
Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its
performance and for which discrete financial information is available. Management will also consider other
factors in determining operating segments such as the existence of a division manager and the level of
segment information presented to the Board of Directors.
The directors of the Company have chosen to organise the Group around differences in services. No
operating segments have been aggregated in arriving at the reportable segments of the Group.
Segment results include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Unallocated items comprise predominantly corporate expenses. Inter-segment pricing is
determined on an arm’s length basis.
The following are the reportable segments:
• NRW Civil and Mining (C&M). The Civil and Mining business specialises in the delivery of private and
public civil infrastructure projects, mine development and contract mining, waste stripping and ore
haulage supported by a fully mobile work force and an extensive fleet of plant and equipment.
• Action Drill & Blast (ADB). The Action Drill & Blast provides contract drill and blast services to mining
(including iron ore, gold and coal) and civil projects throughout Australia.
• AES Equipment Solutions (AES). The AES Equipment Solutions provides maintenance services to the
mining and resources sectors including the fabrication of water and service trucks.
Reportable segment revenues and results
2016
2015
NRW Civil and Mining
Action Drill & Blast
AES Equipment Solutions
Inter-segment eliminations
Unallocated costs
Interest costs in segment
results above
Revenue
$’000
203,635
81,915
13,556
(11,133)
-
-
Total for continuing operations
287,973
Share of loss in associates
Net finance costs
Income tax
Profit / (loss) for the year
Earnings
$’000
18,054
2,266
(1,364)
-
(4,363)
9,278
23,871
(813)
(8,908)
7,300
21,450
Revenue
$’000
694,103
85,927
15,298
(19,393)
-
-
775,935
Earnings
$’000
(253,085)
986
(23,275)
-
(15,691)
12,749
278,316
(500)
(11,513)
60,502
(229,823)
2015 includes an impairment expense made up of $126.6 million for NRW Civil & Mining, $1.1 million for ADB
Drill & Blast, $21.3 million for AES Equipment Solutions and $8.3 million is unallocated. Refer to note 3.6.
| Notes to the Financial Statements
31
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Segment assets and liabilities
Segment Assets
Segment Liabilities
NRW Civil and Mining
Action Drill & Blast
AES Equipment Solutions
Unallocated assets
Consolidated
2016
$’000
186,924
61,173
8,580
43,743
300,421
2015
$’000
264,193
52,776
8,935
43,284
369,189
2016
$’000
(119,288)
(28,520)
(2,777)
(45)
(150,630)
2015
$’000
(205,621)
(31,201)
(4,003)
-
(240,825)
Information about major customers
Included in the revenues arising from sales of the reporting segments are approximate revenues to arise from
the sales to the group’s largest customers. These are summarised by segment below for the year end
30 June 2016:
Major customer 1
Major customer 2
Major customer 3
Total for continuing operations
NRW Civil & Mining
Action Drill & Blast
AES Equipment Solutions
$’000
105,637
50,030
18,125
173,792
$’000
26,326
-
15,963
42,289
$’000
-
3,431
-
3,431
These are summarised by segment below for the comparative year end 30 June 2015:
Major customer 1
Major customer 2
Major customer 3
Total for continuing operations
Other segment information
NRW Civil and Mining
Action Drill & Blast
AES Equipment Solutions
Other
Total for continuing operations
NRW Civil & Mining
Action Drill & Blast
AES Equipment Solutions
$’000
451,875
108,235
103,072
663,182
$’000
-
23,906
-
23,906
$’000
-
-
3,231
3,231
Depreciation and Amortisation
Additions to non-current assets
2016
$’000
15,185
5,860
774
2,365
24,184
2015
$’000
32,198
5,766
814
5,568
44,346
2016
$’000
7,294
1,674
57
70
9,095
2015
$’000
6,982
754
609
6,596
14,941
Notes to the Financial Statements
32
Total
$’000
131,963
53,461
34,088
219,512
Total
$’000
451,875
132,141
106,303
690,319
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2.2 Revenue
Revenue from all sources
Total Revenue
Consolidated
2016
$’000
287,973
287,973
2015
$’000
775,934
775,934
Revenue Recognition
Revenue on long term construction contracts is recognised by reference to the stage of completion at the end
of the reporting period, measured based on the proportion of contract costs incurred for work performed to
date relative to the estimated total contract costs, except where this would not be representative of the stage
of completion. Variations in contract work, claims and incentive payments are included to the extent that the
amount can be measured reliably and its receipt is considered probable.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to
the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as
expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is
recognised as an expense immediately.
When contract costs incurred to date plus recognised profits less recognised losses exceed progress billings,
the surplus is shown as amounts due from customers for contract work or construction work in progress.
For contracts where progress billings exceed contract costs incurred to date plus recognised profits less
recognised losses, the surplus is shown as the amounts due to customers for contract work.
Amounts received before the related work is performed are included in the consolidated statement of financial
position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the
customer are included in the consolidated statement of financial position under trade and other receivables.
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.
Revenue from the sale of goods is recognised when the goods are delivered and titles have passed, at which
time all the following conditions are satisfied:
•
•
•
•
•
the group has transferred to the buyer the significant risks and rewards of ownership of the goods;
the group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the group; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Key Accounting Judgments and Estimates
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.
33
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2.3 Net Finance Expense
Interest income
Total finance income
Interest on obligations under finance leases
Interest on bank overdrafts and loans
Total finance expenses
NET FINANCE EXPENSE
Consolidated
2015
$’000
1,439
1,439
(12,950)
(1)
(12,951)
(11,512)
2016
$’000
320
320
(9,227)
-
(9,227)
(8,908)
Interest Income
Interest income is accrued on a time basis, by reference to the principal amount outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset of that asset’s net carrying amount.
Interest Expense
Interest expense is 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, to the net carrying amount on
initial recognition.
Notes to the Financial Statements
34
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2.4 Other Expenses
Profit for the year from continuing operations has been arrived at after charging:
Consolidated
EMPLOYEE BENEFITS EXPENSE
Wages and salaries
Superannuation contributions
Share based payments
Subtotal
OTHER GAINS & LOSSES
Profit on sale of property, plant and equipment
Subtotal
DEPRECIATION & AMORTISATION
Depreciation of non-current assets
Amortisation
Subtotal
PLANT & EQUIPMENT COSTS
Operating lease payments (refer to note 5.5)
Rental hire payments
Owned plant and other related costs
Subtotal
2016
$’000
(90,848)
(6,534)
-
(97,382)
137
137
(22,460)
(1,724)
(24,184)
(3,910)
(11,690)
(35,448)
(51,048)
2015
$’000
(301,170)
(18,874)
(98)
(320,142)
593
593
(40,483)
(3,862)
(44,345)
(4,968)
(107,418)
(39,598)
(151,984)
35
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3. BALANCE SHEET
3.1 Trade and Other Receivables
CURRENT RECEIVABLES
Trade receivables
Other receivables
Retentions
Subtotal
Other accrued revenue
Amounts accrued under long term construction contracts
TOTAL TRADE AND OTHER RECEIVABLES
Consolidated
2015
$’000
35,042
194
833
36,069
11,765
25,978
73,812
2016
$’000
20,488
20
41
20,549
16,549
(661)
36,437
The average credit period on sales ranges from 30 to 60 days in most cases. Allowances for doubtful debts
are recognised against trade receivables where review of carrying values determines amounts are
non-collectable.
In determining the recoverability of a trade receivable, the group considers any change in the credit quality of
the trade receivable from the date credit was initially granted up to the end of the reporting period. No further
allowance is deemed to be required in excess of the allowance for doubtful debts.
As at 30 June 2016, the company has not impaired any trade receivables and expects to collect amounts
past due in full.
Age of receivables that are past due but not Impaired
60-90 days
90-120 days
120+ days
Total
Consolidated
2015
$’000
137
13
9
159
2016
$’000
10
20
-
30
These relate to a number of trade receivable balances where for various reasons the payment terms have not
been met. These receivables have been assessed to be fully recoverable.
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted
in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised
cost using the effective interest method, less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Notes to the Financial Statements
36
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Amounts due from (to) customers under construction contracts
Consolidated
CONTRACTS IN PROGRESS
Construction costs incurred plus recognised profits less recognised losses to date
Less: progress billings
Subtotal
Recognised and included in the consolidated financial statements as amounts due:
from customers under construction contracts
to customers under construction contracts
Subtotal
2016
$’000
407,197
407,858
(661)
-
(661)
(661)
2015
$’000
1,035,151
1,009,173
25,978
25,978
-
25,978
Key Accounting Judgments and Estimates
The Group accounts for construction contracts in accordance with AASB 111 Construction Contracts.
Accounting for construction contracts involves the continuous use of assessed estimates based on a number
of detailed assumptions consistent with the project scope and schedule, contract and risk management
processes. These contracts may span several accounting periods requiring estimates and assumptions to be
updated on a regular basis.
Details of the estimation procedures followed in accounting for the Group’s construction contracts are detailed
below.
(i) Forecast costs to completion: management regularly update forecast costs at completion in accordance
with agreed upon work scope and variations. Forecast costs are based on rates expected to be applied to the
related activity to be undertaken.
(ii) Revenues: revenues reflect the contract price agreed in the contract and variations where it is probable that
the client will approve those variations or where negotiations are at final stages with the client.
3.2 Inventories
Raw materials and consumables
Provision for net realisable value expense
Work in progress
TOTAL INVENTORIES
Consolidated
2015
$’000
26,487
(1,597)
3,527
28,417
2016
$’000
14,886
(659)
2,311
16,538
Inventories are stated at the lower of cost and net realisable value. Net realisable value represents the
estimated selling price for inventories less all estimated costs of completion and costs necessary to make
the sale.
During the year the directors have reviewed the carrying amount of the group’s inventory. The review identified
a number of items (parts and tyres) that were considered slow moving and or obsolete mostly as a result of
equipment sold in the year. The review resulted in a stock and inventory impairment of $5.7 million.
3.3 Investment in Associates
An associate is an entity over which the group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or joint control over
those policies.
37
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
The results and assets and liabilities of associates are incorporated in these consolidated financial statements
using the equity method of accounting, except when the investment, or a portion thereof, is classified as
held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an
investment in an associate is initially recognised in the consolidated statement of financial position at cost
and adjusted thereafter to recognise the group’s share of the profit or loss and other comprehensive income
of the associate. When the group’s share of losses of an associate exceeds the group’s interest in that
associate or joint venture (which includes any long-term interests that, in substance, form part of the group’s
net investment in the associate), the group discontinues recognising its share of further losses. Additional
losses are recognised only to the extent that the group has incurred legal or constructive obligations or made
payments on behalf of the associate.
An investment in an associate is accounted for using the equity method from the date on which the investee
becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the
investment over the group’s share of the net fair value of the identifiable assets and liabilities of the investee
is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the
group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after
reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.
The requirements of AASB 139 are applied to determine whether it is necessary to recognise any impairment
loss with respect to the group’s investment in an associate. When necessary, the entire carrying amount of
the investment (including goodwill) is tested for impairment in accordance with AASB 136 ‘Impairment of
Assets’ as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs
of disposal) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that
the recoverable amount of the investment subsequently increases.
When a group entity transacts with an associate of the group, profits and losses resulting from the
transactions with the associate are recognised in the group’s consolidated financial statements only to the
extent of interests in the associate that are not related to the group.
NewGen Drilling Pty Ltd
The group invested in a 20% share purchase in NewGen Drilling Pty Ltd. CalEnergy Resources Limited, a
subsidiary of Berkshire Hathaway Energy, holds the balance of the shares. The acquisition took place in the
previous financial year. The continued weakness in the oil and gas market has again proved challenging for
the business which continues to market its services. The loss in the year reflects the group’s share of those
marketing costs.
NewGen Drilling Pty Ltd
Revenue
Loss for the period after tax
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
2016
$’000
-
2015
$’000
-
(4,065)
(2,510)
114
20,688
(694)
-
1,020
24,007
2,307
408
19,994
26,926
Notes to the Financial Statements
38
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Reconciliation and movement in the group’s carrying value of its investment in NewGen Drilling Pty Ltd:
Opening Cost of the investment in associate
Acquisition of investment in associate
Share of (loss) for the period
Shareholder cash contribution
Impairment
CLOSING COST OF INVESTMENT IN ASSOCIATE
2016
$’000
4,812
-
(813)
70
-
4,069
2015
$’000
-
6,424
(500)
-
(1,112)
4,812
NRW recognised an impairment to the carrying value in the previous financial year based on an assessment of
the business environment in which NewGen operates and on an assessment of its future value based on the
assumptions set out in the impairment note (note 3.6).
39
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.4 Property, Plant and Equipment
Property, plant and equipment held by the Consolidated Group include:
Land
$’000
Buildings
Leasehold
improvements
$’000
$’000
Plant and
equipment
$’000
Total
$’000
COST
BALANCE AS AT 30 JUNE 2014
3,218
6,514
1,404
566,023
577,158
Effect of foreign currency
exchange differences
Additions
Disposals
-
-
-
-
-
-
-
27
-
BALANCE AS AT 30 JUNE 2015
3,218
6,514
1,431
Additions
Disposals
-
-
-
-
-
-
BALANCE AS AT 30 JUNE 2016
3,218
6,514
1,431
DEPRECIATION & IMPAIRMENT
BALANCE AS AT 30 JUNE 2014
Depreciation and amortisation expense
Effect of foreign currency
exchange differences
Impairment
Disposals
BALANCE AS AT 30 JUNE 2015
Depreciation and amortisation expense
Reversal of impairment
Disposals
-
-
-
1,000
-
1,000
-
-
-
2,108
832
-
1,319
-
4,259
386
-
-
735
184
-
135
-
1,054
215
-
-
BALANCE AS AT 30 JUNE 2016
1,000
4,645
1,269
CARRYING VALUES
At 30 June 2015
At 30 June 2016
2,218
2,218
2,254
1,869
375
162
13
13
8,319
(13,119)
561,236
9,025
(71,279)
498,982
219,556
39,466
8,345
(13,119)
572,397
9,025
(71,279)
510,144
222,339
40,482
11
11
128,002
(11,218)
375,817
21,860
(5,523)
(61,601)
330,554
185,419
168,428
130,457
(11,218)
382,132
22,461
(5,523)
(61,601)
337,470
190,266
172,675
Notes to the Financial Statements
40
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Key Accounting Judgments and Estimates
During the period to 30 June 2016 the group
reviewed the carrying value of certain categories
of its property, plant and equipment with reference
to current external market factors. In determining
the appropriate recoverable value the group has
considered the fair value less costs of disposal of the
property, plant and equipment and value in use of
the respective cash generating unit (CGU).
The group reviews the estimated useful lives of
property, plant and equipment at the end of each
reporting period. The effective lives are based on
intended utilisation and working conditions. Also
demand for specific plant and equipment will affect
the plant modelling giving rise to a certain degree of
fluctuations and subjectiveness.
Borrowing costs in relation to the acquisition of
property, plant and equipment are recognised in
profit or loss in the period in which they are incurred.
Impairment of Property, Plant and Equipment
An asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated
recoverable amount. Details of any impairment
movements are included in note 3.6.
Recognition and Measurement
The value of property, plant and equipment is
measured as the cost of the asset less accumulated
depreciation and impairment. All property, plant and
equipment, other than freehold land, is depreciated
or amortised at rates appropriate to the estimated
useful life of the assets or in the case of certain
leased plant and equipment, the shorter lease term
or hours (usage) reflecting the effective lives. The
expected useful lives bands are as follows:
Buildings
Leasehold improvements
Major Plant and Equipment
Minor Plant and Equipment
Office Equipment
Furniture and Fittings
Motor Vehicles
20 to 40 years
2 to 5 years
5 to 10 years
(normally based on machine hours)
2 to 10 years
2 to 8 years
5 to 20 years
3 to 7 years
The above bands provide a range of effective lives
regardless of methodology used in the depreciation
process (either machine hours, diminishing balance
or straight line). The machine hours method is a
consumption based method and reflects utilisation
within the business and is supported in the effective
lives of each plant and equipment group, where
applicable.
Depreciation rates and methods are normally
reviewed at least annually. Where depreciation rates
or methods are changed, the net written down value
of the asset is depreciated from the date of the
change in accordance with the new depreciation rate
or method. Depreciation recognised in prior financial
years shall not be changed, that is, the change in
depreciation rate or method shall be accounted for
on a ‘prospective’ basis.
An asset’s carrying amount is written down
immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated
recoverable amount.
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising
on the disposal or retirement of an item of property,
plant and equipment is determined as the difference
between the sales proceeds and the carrying
amount of the asset and is recognised in profit
or loss.
41
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.5 Intangible Assets
Intangibles held by the Group include:
Software and System
Development
COST
BALANCE AS AT 30 JUNE 2014
Additions
BALANCE AS AT 30 JUNE 2015
Additions
BALANCE AS AT 30 JUNE 2016
AMORTISATION & IMPAIRMENT
BALANCE AS AT 30 JUNE 2014
Amortisation expense
Impairment
BALANCE AS AT 30 JUNE 2015
Amortisation expense
Impairment
BALANCE AS AT 30 JUNE 2016
CARRYING VALUES
At 30 June 2015
At 30 June 2016
$’000
19,645
169
19,813
-
19,813
7,301
3,592
4,357
15,250
1,719
-
16,969
4,564
2,844
Licences
$’000
1,453
-
1,453
-
1,453
1,034
270
131
1,436
5
-
1,440
18
13
Total
$’000
21,098
169
21,267
-
21,267
8,335
3,862
4,488
16,686
1,724
-
18,409
4,581
2,858
Intangible Assets Acquired Separately
Intangible assets with finite lives that are acquired separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated
useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible
assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment
losses.
Goodwill
As at the balance sheet date the group has no goodwill. In the previous financial year goodwill carried at the
start of that year of 19.6 million was fully impaired in the year, the details of which were fully disclosed in the
FY15 annual report.
Notes to the Financial Statements
42
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.6 Impairment
At the end of each reporting period, the group
reviews the carrying amounts of its tangible and
intangible assets to determine whether there is
any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in
order to determine the extent of the impairment
loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset, the
group estimates the recoverable amount of the cash
generating unit to which the asset belongs. When
a reasonable and consistent basis of allocation can
be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise
they are allocated to the smallest group of cash-
generating units for which a reasonable and
consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested
for impairment at least annually, and whenever there
is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate
that reflects current market assessments of the time
value of money and the risks specific to the asset for
which the estimates of future cash flows have not
been adjusted.
If the recoverable amount of an asset (or cash-
generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset
is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Consolidated
2016
$’000
2015
$’000
Property, plant and equipment (note 3.4)
(5,523)
130,457
Goodwill
Investments in associates (note 3.3)
Inventory (note 3.2)
Intangibles (note 3.5)
Total Impairment
-
-
5,695
-
172
19,617
1,112
1,597
4,488
157,271
During the year the directors performed a review of
the assumptions for certain classes of equipment
that were previously impaired by the NRW Civil &
Mining cash-generating unit during the comparative
period ended 30 June 2015. After considering
factors such as external market rates and NRW’s
high standards of equipment maintenance, it was
determined that the carrying value of these classes
of equipment be increased by $5,523,000 as at
30 June 2016, partially reversing the impairment
amounts recognised during the previous year.
During the year ended 30 June 2015 it was
determined that an impairment expense for certain
property plant and equipment and intangible assets
was required to bring the carrying values in line with
business plan assessments of the underlying value
of the business unit (the recoverable value), details of
which had been fully reported in FY15 accounts.
Cash Generating Units (CGU’s)
The company has identified indicators of impairment
for each of the three Cash Generating Units (CGUs)
– NRW Civil and Mining, Action Drill & Blast (ADB)
and AES Equipment Solutions (AES) and accordingly
assessed the recoverable value of each of those
CGUs on a value in use basis to determine the
estimated recoverable amount. The estimated
recoverable amount was then compared to the
carrying value of the CGUs post the reversal of
impairment of property, plant and equipment referred
to above.
The recoverable values determined for NRW Civil
and Mining and Action Drill & Blast following the
specific property plant and equipment impairment
noted above were in excess of the carrying values as
at 30 June 2016 and accordingly no impairment of
the CGUs was required. The assumptions used in
this assessment are provided below.
Value in Use Assumptions
EBIT and growth
The value in use assessments for NRW Civil &
Mining and ADB were based on current financial
performance for the year ended 30 June 2016 and
growth assumptions of <1% (2015: 3%) per annum
for future years. The terminal value assumes growth of
3% (2015: 3%).
The value in use assessments for AES Equipment
Solutions were based on Board approved budgets
for the year ended 30 June 2017 and growth
assumptions of <1% (2015: 3%) per annum for future
years. The terminal value assumes growth of 3%
(2015: 3%)
43
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Discount rate
A pre-tax discount rate of 16.4% which includes a risk margin was applied to the cash flows within each of
the CGU’s.
Working capital and capital expenditure
Working capital has been adjusted to return to and reflect what would be considered a normal operating level
to support the underlying business.
Capital expenditure forecasts were based on levels considered appropriate to maintain current operating
activities and considering the opportunity to utilise current unallocated equipment. In the medium term, capital
expenditure has been forecast to return to normal levels to sustain the current levels of activity and assumes
replacement of equipment in the later and terminal years of the plan and has been assessed in line with the
level of forecast depreciation.
Sensitivity Analysis
The company undertook sensitivity analysis with regard to the terminal value growth rate (reducing it to 2.5%)
and the discount rate (increasing to 17.9%). These sensitivities did not result in recoverable values lower than
the carrying value of the CGUs as at 30 June 2016.
The company has considered reasonable changes to the key assumptions and concluded that these would
be unlikely to cause the CGUs carrying value to exceed its recoverable amount.
3.7 Trade and Other Payables
CURRENT PAYABLES
Trade payables
Goods and service tax
Non trade payables
Accruals
TOTAL TRADE AND OTHER PAYABLES
Consolidated
2016
$’000
18,131
1,096
1,415
23,763
44,405
2015
$’000
38,847
497
4,589
42,150
86,083
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid within 45 to 75 days of recognition.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months from
the reporting date.
The group has financial risk management policies in place to ensure that all payables are paid within the pre-
agreed credit terms. All payables are expected to be settled within the next 12 months.
Notes to the Financial Statements
44
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.8 Provisions
CURRENT
Employee benefits
Warranty
Onerous leases
Total current provisions
NON-CURRENT
Employee benefits
Warranty
Onerous leases
Total non-current provisions
TOTAL CURRENT AND NON-CURRENT PROVISIONS
Consolidated
2016
$’000
5,797
1,077
961
7,835
1,053
28
823
1,904
9,739
Onerous lease
Warranty provision
Employee benefits
Consolidated
BALANCE AT 1 JULY 2015
Provisions made during the year
Reductions arising from payments
$’000
3,411
-
-
Reductions resulting from re-measurement
(1,627)
BALANCE AT 30 JUNE 2016
Short-term provisions
Long-term provisions
TOTAL BALANCE AT 30 JUNE 2016
1,784
961
823
1,784
$’000
1,154
-
-
(49)
1,105
1,077
28
1,105
$’000
7,922
9,308
(10,380)
-
6,850
5,797
1,053
6,850
2015
$’000
6,685
1,077
1,372
9,134
1,237
77
2,039
3,353
12,487
Total
$’000
12,487
9,308
(10,380)
(1,676)
9,739
7,835
1,904
9,739
The provision for onerous leases recognises mostly reduced occupancy levels in the company’s main offices
at 181 Great Eastern Highway which are not anticipated to significantly change over the remaining two and a
half years of the current lease.
The warranty provisions relates to the present value of the Directors’ best estimate of the future outflow
of economic benefits that will be required under the groups obligations for warranties arising from specific
construction contracts at reporting date. The future cash flows have been estimated at the best estimate of
the expenditure required to settle the group’s obligation and history of warranty claims.
The provision for employee benefits represents annual leave and long service leave entitlements accrued and
compensation claims made by employees.
45
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Employee Benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long
service leave, and sick leave when it is probable that settlement will be required and they are capable of being
measured reliably.
Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long-term employee benefits are measured as the present value of the
estimated future cash outflows to be made by the group in respect of services provided by employees up to
reporting date.
Payments to defined contribution retirement benefit plans are recognised as an expense when employees
have rendered service entitling them to the contributions.
Key Accounting Judgments and Estimates
Provisions
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past
event, it is probable that the group will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows (where the effect of the time value of money is
material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from
a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received
and the amount of the receivable can be measured reliably.
Employee entitlements
Management judgement is applied in determining the following key assumptions used in the calculation of
long service leave at balance date which includes future increases in wages and salaries, future on cost rates
and employee departures and period of service.
4. CAPITAL STRUCTURE
The Group manages its capital structure to ensure that entities in the Group will be able to continue as a going
concern while maximising returns to shareholders.
Gearing Ratio
The Board meets regularly to determine the level of borrowings and shareholder funding required to
appropriately support business operations. The gearing ratio is influenced directly from the capital structure
including the payment of dividends and any other movement in debt.
The gearing ratio was calculated at 30 June 2016 as:
Borrowings (Note 5.3)
Cash
Net Debt
Total equity
Net Debt to Equity Ratio
Consolidated
2015
$’000
142,255
(34,631)
107,624
128,364
83.8%
2016
$’000
96,486
(37,182)
59,304
149,791
39.6%
Notes to the Financial Statements
46
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.1 Financial Instruments
Financial Risk Management
The group’s overall financial risk strategy seeks to ensure appropriate funding levels, approved treasury
directives to meet ongoing project needs and to allow flexibility for growth. The Board has ultimate
responsibility for the Group’s policy of risk management. The risk policies and procedures are reviewed
periodically. In addition, the going concern basis is reviewed throughout the year, ensuring adequate working
capital is available.
The financial instruments in the group primarily consist of interest bearing debt, cash, trade receivables and
payables. The Group has minimal foreign currency risks, although its presence in Guinea West Africa remains,
including some assets that are strategically held there for new opportunities. No cash is held other than to
meet the day to day running costs.
Capital Risk Management
The capital structure of the group comprises of debt (borrowings) mostly financed through a leasing facility,
cash and cash equivalents, and equity to the relevant stakeholders. The majority of debt funding is required
for the long term purchase of operating assets where it has been deemed appropriate to own those assets.
These are primarily placed under hire purchase borrowing arrangements under an agreement led by the ANZ
Banking Group Ltd.
The cash position is reviewed regularly.
Interest Rate Risk Management
Principal and interest payments under the ANZ Leasing facility are made monthly. The term under the ANZ
Leasing facility is to December 2018 when the current debt will be fully repaid. The Board continues to review
its risk associated with any covenants and borrowing conditions on a regular basis. The long term debt,
specifically relating to capital purchases of plant and machinery, is at a fixed interest rate.
Given the group has most of the financing under fixed rate hire purchase or other similar asset financing
agreements, the exposure to market rate volatility is extremely low. If the group were to consider a movement
of 100 basis points in interest rates or cost of funds, there would be no material impact to the cost of capital
Liquidity Risk Management
The estimated contractual maturity for its financial liabilities and financial assets are set out in the following
tables. The tables show the effective interest rates and average interest rates as relevant to each class.
Consolidated interest and liquidity analysis 2016
Effective interest rate
Total
0 to 30 days
31 days to < 1 year
1 to 5 yrs
$’000
$’000
$’000
$’000
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
Subtotal
FINANCIAL LIABILITIES
Asset financing
Trade and other payables
Subtotal
0.00%
-
6.93%
-
37,182
36,437
73,619
105,268
44,405
149,673
37,182
19,742
56,924
3,735
15,863
19,598
-
16,695
16,695
42,621
28,542
71,163
-
-
-
58,912
-
58,912
> 5yrs
$’000
-
-
-
-
-
-
47
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Consolidated interest and liquidity analysis 2015
Effective interest rate
Total
0 to 30 days
31 days to
< 1 year
1 to 5 yrs
> 5yrs
$’000
$’000
$’000
$’000
$’000
FINANCIAL ASSETS
Cash and cash equivalents
Trade and other receivables
Subtotal
FINANCIAL LIABILITIES
Asset financing
Trade and other payables
Subtotal
0.25%
-
7.63%
-
34,631
73,812
108,443
156,355
86,083
242,438
34,631
41,382
76,013
1,367
40,515
41,882
-
32,430
32,430
74,733
45,568
120,301
-
-
-
80,255
-
80,255
-
-
-
-
-
-
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established
an appropriate liquidity risk management framework for the management of the company’s short, medium
and long-term funding and liquidity management requirements. The company manages liquidity risk by
maintaining appropriate banking facilities, ensuring a suitable credit control program, continuously monitoring
forecast and actual cash flows, and considering the level of capital commitment commensurate with project
demands and other market forces.
Foreign Exchange and Currency Exposure
The group reports its functional currency in Australian dollars. The Board considers that movements in foreign
currency will have virtually no impact on operating profits, given that most projects are agreed and billed
in Australian dollars and cash holdings in other currencies other than AUD are negligible. Should foreign
operations expand then suitable risk measures would be put in place accordingly. Any new developments
which the group considers or bids for are considered as part of the risk management reviews held by the
board. Other than specific transactions or purchases negotiated with the supplier, transactions dealing in
foreign currency are dealt with at spot.
The cash balances held in Guinea at 30 June 2016 (at spot) was $141,100 AUD (2015: $20,523 AUD).
Credit Risk
The primary credit risk faced by the group is the failure of customers to pay their obligations as and when they
fall due. Trade and other receivables payment terms are primarily 30 to 60 days. Cash retentions are low as
clients require bonds and bank guarantees.
The carrying amount of financial assets recorded in the financial statements net of any allowance for losses,
represents the group’s maximum exposure to credit risk without taking into account the value of any collateral.
Bank guarantees at 30 June 2016 total at $4.6 million (2015: $6.1 million) and contract guarantees provided
by the insurance market total $46.6 million (2015: $83.1 million).
Fair Value of Financial Instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Notes to the Financial Statements
48
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Financial Assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through
profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and
receivables’. The classification depends on the nature and purpose for which the investments were acquired.
Management determines the classification of its investments at initial recognition.
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts (including all fees on points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the
debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets
classified as at FVTPL.
Fair value
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is
not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These
include the use of recent arm’s length transactions, reference to other instruments that are substantially the
same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and
relying as little as possible on entity-specific inputs.
Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated
as at FVTPL.
A financial asset is classified as held for trading if:
•
•
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the group manages
together and has a recent actual pattern of short-term profit-taking; or
•
it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial
recognition if:
•
•
•
such designation eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is
managed and its performance is evaluated on a fair value basis, in accordance with the group’s
documented risk management or investment strategy, and information about the grouping is provided
internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and AASB 139 ‘Financial
Instruments: Recognition and Measurement’ permits the entire combined contract (asset or liability) to be
designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement
recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or
interest earned on the financial asset and is included in the ‘other gains and losses’ line item in the statement
of comprehensive income.
49
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Held-to-maturity investments
Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the group
has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-
maturity investments are measured at amortised cost using the effective interest method less any impairment.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted
in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised
cost using the effective interest method, less any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when 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 affected.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be
impaired individually are, in addition, assessed for impairment on a collective basis.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current
market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent
periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
with the exception of trade receivables, where the carrying amount is reduced through the use of an
allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognised in profit or loss.
Financial Liabilities and Equity Instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangement.
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, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The group derecognises financial liabilities when, and only when, the group’s obligations are discharged,
cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and
the consideration paid and payable is recognised in profit or loss.
Notes to the Financial Statements
50
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.2 Issued Capital
Fully Paid Ordinary Shares
ORDINARY SHARES
278,877,219 fully paid ordinary shares
(2015: 278,877,219)
Consolidated
2016
$’000
2015
$’000
156,432
156,432
All issued shares are fully paid and rank equally. Fully paid ordinary shares carry one vote per share and carry
a right to dividends.
FULLY PAID ORDINARY SHARES
Balance at the beginning of the financial year
BALANCE AT THE END OF THE PERIOD
4.3 Reserves
Share based payment reserve
Foreign currency reserve
TOTAL RESERVES
Share Based Payment Reserve
Balance at the beginning of the financial year
Shares issued for vested rights
Share based payments
BALANCE AT THE END OF THE FINANCIAL YEAR
Consolidated
2016
2015
# No. ‘000
# No. ‘000
278,877
278,887
278,877
278,877
2016
$’000
156,432
156,432
2015
$’000
156,432
156,432
Consolidated
Consolidated
2015
$’000
3,085
(184)
2,901
2015
$’000
2,987
-
98
3,085
2016
$’000
3,085
(208)
2,878
2016
$’000
3,085
-
-
3,085
Information relating to the group’s options and performance rights, including details of issued, exercised and
lapsed during the financial year and outstanding at the end of the financial year, is set out on page 12 of the
directors report.
Share based compensation payments are provided to employees in accordance to the company’s Long Term
Incentive Plan (‘LTIP’) detailed in the remuneration report.
Share based compensation payments are measured at the fair value of the equity instruments at the grant
date. The fair value at grant date is independently determined using the valuation methods detailed in the
remuneration report. The fair value of the options granted is adjusted to reflect market Vesting Conditions, but
excludes the impact of any non-market Vesting Conditions.
51
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 company’s estimate of equity instruments that will
eventually vest. At the end of each reporting period, the company revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the
equity-settled employee benefits reserve.
Upon the exercise of options / performance rights, the balance of the share-based payments reserve relating
to those options / performance rights is transferred to issued capital and the proceeds received, net of any
directly attributable transaction costs, are credited to issued capital.
Key Accounting Judgements and Estimates
The group measures the cost of equity settled transactions with key management personnel at the fair value
of the equity instruments at the date at which they are granted. Fair value is determined using valuation
methods detailed in the remuneration report. One of the inputs into the valuation model is volatility of the
underlying share price which is estimated on the two year history of the share price and has been estimated
as disclosed in the remuneration report. The share price used in the valuation model is based on the
company’s share price at grant date of each performance right.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based on the group’s estimate of equity instruments that will
eventually vest, with a corresponding increase in equity. At the end of each reporting period, the group revises
its estimate of the number of equity instruments expected to vest. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to the share based payment reserve.
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
2015
$’000
(215)
31
(184)
2016
$’000
(184)
(24)
(208)
Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency
translation reserve. The reserve is recognised in the income statement when the foreign operation is
disposed of.
4.4 Accumulated Losses
Balance at the beginning of the financial year
Net profit attributable to members of the parent entity
Dividends paid (Note 4.5)
BALANCE AT THE END OF THE FINANCIAL YEAR
Consolidated
2015
$’000
212,798
(229,823)
(13,944)
(30,969)
2016
$’000
(30,969)
21,450
-
(9,519)
Notes to the Financial Statements
52
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.5 Dividends
Dividends Paid
RECOGNISED AMOUNTS PAID:
Fully paid ordinary shares, fully franked
Final dividend to 30 June 2015:
Interim dividend to 31 December 2015:
Final dividend to 30 June 2014
Interim dividend to 31 December 2014
Total
2016
2015
Cents per share
Total
$’000
Cents per share
-
-
Total
$’000
-
-
5.00
-
13,944
-
13,994
Consolidated
No dividend will be declared in respect of the financial year ended 30 June 2016.
Franking Account
Franking account balance at 1 July
Australian income tax (refund)/paid
Franking credits attached to dividends paid:
- as final dividend
- as interim dividend
Franking account balance at 30 June
Franking credits that will arise from the payment /(refund) of
income tax payable as at reporting date
Net franking credits available
2016
$’000
47,524
(8,517)
-
-
39,007
-
39,007
2015
$’000
49,899
3,601
(5,976)
-
47,524
(5,935)
41,589
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at
the discretion of the entity, on or before the end of the financial year but not distributed at balance date.
53
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.6 Earnings Per Share
The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted
earnings per share are as follows:
Profit / (Loss) for the year
Weighted average number of shares for the
purposes of basic earnings per share
Basic earnings per share
Shares deemed to be issued for no consideration in respect of:
– Performance rights
Weighted average number of shares used for the
purposes of diluted earnings per share
2016
$‘000
21,450
278,877
Consolidated
2015
$‘000
(229,823)
278,877
7.7 cents per share
(82.4) cents per share
1,088
278,877
N/A
N/A
-
Diluted earnings per share
7.7 cents per share
Basic Earnings Per Share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued
during the year.
Diluted Earnings Per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
Notes to the Financial Statements
54
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
5. FINANCING
5.1 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. Bank overdrafts are shown within short-term
borrowings in current liabilities on the statement of financial position.
Reconciliation of profit for the period to net cash flows from operating activities
Consolidated
PROFIT / (LOSS) FOR THE PERIOD
Adjustments for:
Gain on sale of property, plant and equipment
Net foreign exchange (gain) / loss
Depreciation and amortisation
Impairment of PP&E (excludes Inventories impairment)
Impairment of goodwill
Inventory write-offs non cash (1)
Share of loss from associates
Share based payment expense
2016
$’000
21,450
(137)
(23)
24,184
(5,523)
-
5,695
813
-
2015
$’000
(229,823)
(593)
31
44,345
136,057
19,617
1,597
500
98
Net cash generated / (used) before movement in working capital
46,460
(28,171)
Change in trade and other receivables
Change in inventories excluding (1)
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
37,510
6,184
783
(41,813)
(2,747)
6,124
(4,900)
47,600
126,729
6,676
2,687
(84,805)
(6,233)
(13,116)
(50,995)
(47,228)
55
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
5.2 Guarantees
Bank guarantees
Insurance bonds
Balance at the end of the financial year
Consolidated
2016
$’000
4,593
46,582
51,175
2015
$’000
6,109
83,124
89,233
The group has bank guarantees and insurance bonds issued in respect of contract performance in the normal
course of business in respect to its construction contracts.
Claims
Certain claims arising out of construction contracts have been made by or against certain controlled entities
in the ordinary course of business, some of which involve litigation or arbitration. It is considered that the
outcome of these claims will not have a materially adverse impact on the financial position of the consolidated
entity.
5.3 Borrowings
The company finalised an agreement in the year with its banking group to reschedule existing debt over a 33
month period commencing April 2016 and completing in December 2018.
As at the date of signing the annual accounts the company is in compliance with its obligations under its
facilities.
The company has access to project guarantee facilities through a number of Surety Providers. The company
has prepared cash forecasts which indicate that the company does not need access to additional working
capital facilities.
Information on the amounts drawn under the company’s finance facilities are provided in the table below.
The company expects to be in compliance with agreed covenants throughout the year ending 30 June 2017.
The group borrowings is comprised of:
Consolidated
SECURED AT AMORTISED COST
Current
Finance lease liability
Insurance funding
Total current borrowings
Non-current
Finance lease liability
Total non-current borrowings
GROUP TOTAL BORROWINGS
2016
$’000
37,414
-
37,414
59,072
59,072
96,486
2015
$’000
141,813
442
142,255
-
-
142,255
In the previous financial year revised covenants were not agreed until after the balance sheet date
consequently all debt was classified as short term in the prior comparative period.
Notes to the Financial Statements
56
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Finance Facilities:
Consolidated finance facilities as at 30 June 2016
Finance Description
Asset financing(1)
Guarantees and other funding
Other
(1) Terms range from 1 to 3 years.
Face Vale (limit)
Carrying Amount (utilised)
Unutilised Amount
$’000
96,486
25,000
-
$’000
96,486
4,593
-
$’000
-
20,407
-
Consolidated finance facilities as at 30 June 2015
Finance Description
Asset financing(1)
Guarantees and other funding
Other
(1) Terms range from 1 to 3 years.
Face Vale (limit)
Carrying Amount (utilised)
Unutilised Amount
$’000
146,877
6,109
442
$’000
141,813
6,109
442
$’000
5,064
-
-
Security
The main finance providers are Australia and New Zealand Banking Group Limited (“ANZ”) which provides
performance guarantee facilities and ANZ Leasing (Vic) Pty Ltd (“ANZ Leasing”) which provides asset finance
to members of the group.The facilities are subject to annual and periodic reviews and include financial and
other covenants usual for facilities of this nature. The facility provided by ANZ is secured by a first ranking
general security interests granted by members of the group in favour of ANZ. The facility provided by ANZ
Leasing is an asset finance facility under which goods purchased using the proceeds of that facility are
leased to members of the group. ANZ and ANZ Leasing also hold security for their respective facilities under
a general security given by members of the group in favour of a security trustee. Future working capital and
performance bond providers may also share this security in the future.
Finance Leases as Lessee
Non-cancellable finance leases are as outlined above and are payable as follows:
Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging
from 5.37% to 7.48% (2015: 5.37% to 7.57%).
No later than 1 year
Later than 1 year and not later than 5 years
Later than five years
Minimum future lease payments
Less future finance charges
Present value of minimum lease payments
Minimum future
lease payments
Present value of minimum
future lease payments
2016
$’000
42,890
62,378
-
105,268
(8,782)
96,486
2015
$’000
76,100
80,255
-
156,355
(14,100)
142,255
2016
$’000
37,414
59,072
-
2015
$’000
66,847
75,408
-
96,486
142,255
-
-
96,486
142,255
57
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Finance Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Where the group is the lessee, assets held under finance leases are initially recognised as assets of the group
at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the statement of financial position as a finance lease
obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised
immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they
are capitalised in accordance with the group’s general policy on borrowing costs. Contingent rentals are
recognised as expenses in the periods in which they are incurred.
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, to the net carrying amount on initial recognition.
5.4 Capital and Other Commitments
There were no capital and other commitments to be reported for the financial year ended 30 June 2016
(2015 – nil).
5.5 Operating Leases
Property lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Total operating leases
Consolidated
2016
$’000
2,936
2,981
-
5,917
2015
$’000
4,194
5,654
-
9,848
The majority of property leases relate to commercial property. The majority of these 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.
Operating Leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except
where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense
in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as
a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line
basis, except where another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed.
Notes to the Financial Statements
58
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
6. TAXATION
6.1 Income Tax Recognised in Profit or Loss
CURRENT TAX EXPENSE
Current year income tax
Adjustments for prior years income tax
Subtotal
DEFERRED TAX EXPENSE
Origination and reversal of temporary differences
Deferred tax assets not brought to account
TOTAL TAX (BENEFIT) / EXPENSE
Consolidated
2015
$’000
(32)
(9,476)
(9,508)
(70,154)
19,160
(60,502)
2016
$’000
1
(2,402)
(2,401)
(17,410)
12,510
(7,300)
59
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
6.2 Reconciliation of Effective Tax Rate
Consolidated
Profit / (Loss) for the period
INCOME TAX USING THE COMPANY’S DOMESTIC TAX RATE OF 30%
Changes in income tax expense due to:
Effect of expenses that are not deductible in determining taxable profit
Impairment losses on goodwill that are not deductible
Impairment losses on non-allowable property, plant & equipment
Impairment losses on investment in associates
2016
$’000
14,150
4,245
166
-
-
-
Adjustments recognised in the current year in relation to the effect of tax consolidation
(23,406)
Adjustments recognised in the current year in relation to the current tax of prior years
(effect of expenses that are not deductible in determining taxable profit)
Adjustments recognised in the current year in relation to the current tax of prior years
(effect of income that is exempt from taxation)
Adjustments recognised in the current year in relation to the current tax of prior years
(effect of research and development concession)
Effect of different income tax rates for subsidiaries operating in a different tax jurisdiction
Deferred tax assets not brought to account
TOTAL INCOME TAX BENEFIT
(821)
-
-
5
12,510
(7,300)
2015
$’000
(290,325)
(87,097)
516
5,885
696
334
-
31
(98)
75
(4)
19,160
(60,502)
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in
the consolidated statement of comprehensive income because of items of income or expense that are taxable
or deductible in other years and items that are never taxable or deductible. The group’s liability for current
tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting
period.
Relevance of Tax Consolidation to the Group
The company and its wholly-owned Australian resident entities have formed a tax-consolidated group under
Australian taxation law with effect from 1 July 2014 and are therefore taxed as a single entity from that date.
The head entity within the tax-consolidated group is NRW Holdings Limited. The members of the tax-
consolidated group are identified in note 7.1.
Tax expense / income, deferred tax liabilities and deferred tax assets arising from temporary differences
of the members of the tax-consolidated group are recognised in the separate financial statements of the
members of the tax-consolidated group using the ‘stand-alone taxpayer’ approach by reference to the
carrying amounts in the separate financial statements of each entity and the tax values applying under tax
consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax
credits of the members of the tax-consolidated group are recognised by the company (as head entity in the
tax-consolidated group). Due to the existence of a tax funding arrangement between the entities in the tax-
consolidated group, amounts are recognised as payable to or receivable by the company and each member
of the group in relation to the tax contribution amounts paid or payable between the parent entity and the
other members of the tax-consolidated group in accordance with the arrangement.
During the financial year ended 30 June 2016, the group formally notified to the Australian Taxation Office of
its decision to tax consolidate with effect from 1 July 2014.
Notes to the Financial Statements
60
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Nature of Tax Funding Arrangements and Tax Sharing Agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing
agreement with the head entity. Under the terms of the tax funding arrangement, NRW Holdings Limited and
each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the
head entity, based on the current tax liability or current tax asset of the entity. The tax sharing agreement
entered into between members of the tax-consolidated group provides for the determination of the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations
or if an entity should leave the tax consolidated group. The effect of the tax sharing agreement is that each
member’s liability for tax payable by the tax-consolidated group is limited to the amount payable to the head
entity under the tax funding arrangement.
Research and Development Tax Offset
Whilst there exist several registrations for the tax offset surrounding research and development in the Group
no material amounts are expected in the near term. The repair and fabrication segment is in the final stages of
testing and in due course marketing the research and development product currently underway.
Goods and Services
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part
of the cost of acquisition of an asset or as part of an item of expense; or
•
or receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows
arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is
classified within operating cash flows.
Key Accounting Judgments and Estimates
Income taxes are paid in the jurisdictions where the Group operates, predominantly Australia. Significant
judgement is involved in applying the tax rules and regulations relevant in deriving the final provision for income
tax. If in subsequent periods matters arise that causes the final tax outcome to vary to the reported carrying
amounts, such differences will alter the deferred tax balances in the period the change is identified.
6.3 Current and Deferred Tax Assets and Liabilities
CURRENT TAX ASSETS AND LIABILITIES
Income tax receivable
Income tax payable
TOTAL
Consolidated
2015
$’000
6,125
-
6,125
2016
$’000
-
-
-
61
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Deferred Tax Balances
Share based payments
Costs of equity raising FY2011
Provisions
Work in progress (construction)
Inventories
PP&E
Other creditors and accruals
Other assets
Losses
DEFERRED TAX ASSETS / (LIABILITIES)
Assets
Liabilities
Net
2016
$’000
341
-
3,119
-
-
268
351
94
33,264
37,438
2015
$’000
328
-
4,316
-
-
14,957
839
42
10,820
31,303
2016
$’000
-
-
-
-
(4,571)
(4,867)
-
(276)
-
2015
$’000
-
-
(2)
(1,082)
(4,632)
(2,422)
-
(341)
-
(9,713)
(8,479)
2016
$’000
341
-
3,119
-
(4,571)
(4,598)
351
(182)
33,266
27,726
2015
$’000
328
-
4,314
(1,082)
(4,632)
12,536
839
(299)
10,820
22,824
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that
it is probable that taxable profits will be available against which those deductible temporary differences can
be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
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 difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such
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.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and is adjusted to
recognise the estimated value of future tax liabilities likely to arise based on risk assessed forecasts.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period. 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
end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority
and the group intends to settle its current tax assets and liabilities on a net basis.
Notes to the Financial Statements
62
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Unrecognised Deferred Tax Balances
Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets
have been recognised are attributable to the following:
Tax losses (revenue in nature)
Consolidated
2016
$’000
31,670
2015
$’000
19,160
Key Accounting Judgments and Estimates
Recoverability of Deferred Tax Asset
The recoverability of the Groups deferred tax balances are recognised only when the Group considers it
is probable that future taxable amounts will be derived to utilise those losses and associated deferred tax
benefits. The deferred tax asset recognised in these accounts is based on the same underlying forecasts and
same assumptions used in the CGU value in use assessments.
Tax Consolidation
An incremental deferred tax asset which arose due to formation of the tax consolidation group has been
quantified and included in the tax balances.
7. OTHER NOTES
7.1 Subsidiaries
Parent entity
Principal
Activities
Country of
incorporation
NRW Holdings Limited
Holding company
Australia
WHOLLY OWNED SUBSIDIARIES
NRW Pty Ltd as trustee for NRW Unit Trust
NRW Civil & Mining
Actionblast Pty Ltd
NRW Mining Pty Ltd
NRW Intermediate Holdings Pty Ltd
ACN 107724274 Pty Ltd
NRW Guinea SARL
AES Equipment Solutions
Investment Shell
Intermediary
Plant and Tyre Sales
Contract Services
Indigenous Mining & Exploration Company Pty Ltd
Investment Shell
NRW International Holdings Pty Ltd
Investment Shell
Action Drill and Blast Pty Ltd (formerly NRW Drill &
Blast Pty Ltd )
Action Drill & Blast
Australia
Australia
Australia
Australia
Australia
Guinea
Australia
Australia
Australia
Ownership interest
2016
-
100%
100%
100%
100%
100%
100%
100%
100%
2015
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
63
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Deed of Cross Guarantees
All of the wholly-owned subsidiaries in Australia have entered into a deed of cross guarantee with NRW
Holdings Limited pursuant to the ASIC Class Order 98/1418 and are relieved from the requirement to prepare
and lodge an audited financial report.
All of the wholly-owned subsidiaries and Parent entity, incorporated in Australia, have formed a Tax
Consolidation Group effective 1 July 2014.
NRW Guinea 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 statement of comprehensive income of the entities party to the deed of cross guarantees is
as follows:
Consolidated
STATEMENT OF COMPREHENSIVE INCOME
Revenue
Finance income
Finance costs
Share of loss in associate
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expenses
Impairment expense
Plant and equipment costs
Other expenses
Profit / (Loss) before income tax
Income tax expense
Profit / (Loss) for the year
OTHER COMPREHENSIVE INCOME
Exchange differences arising on translation of foreign operations
Total comprehensive income for the year
2016
$’000
287,973
320
(9,227)
(813)
(43,579)
(97,382)
(44,422)
(24,181)
(172)
(51,048)
(3,303)
14,166
7,403
21,569
2016
$’000
-
21,569
2015
$’000
775,934
1,439
(12,951)
(500)
(129,086)
(320,048)
(243,342)
(44,329)
(157,271)
(151,984)
(5,891)
(288,030)
60,469
(227,562)
2015
$’000
-
(227,652)
Consolidated
Notes to the Financial Statements
64
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
The consolidated statement of financial position of the entities party to the deed of cross guarantees is:
Consolidated
2016
$’000
2015
$’000
STATEMENT OF FINANCIAL POSITION
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other current assets
Total current assets
Non-current assets
Investment in associates
Property, plant and equipment
Intangibles
Goodwill
Deferred tax assets
Financial 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
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings
Total equity
65
37,041
36,437
16,538
-
2,937
92,953
4,069
172,675
2,858
-
27,726
-
207,326
300,279
44,405
37,414
-
7,835
89,654
59,072
1,904
-
60,976
150,629
149,752
156,429
3,085
(9,763)
149,752
34,610
73,812
28,417
6,007
3,706
146,552
4,812
189,834
5,009
-
22,825
3
222,483
369,035
83,907
142,255
-
9,134
235,296
-
3,353
-
3,353
238,649
130,387
156,432
3,086
(29,137)
130,387
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Changes in the Group’s Ownership Interests in Existing Subsidiaries
Changes in the group’s ownership interests in subsidiaries that do not result in the group losing control over
the subsidiaries are accounted for as equity transactions. The carrying amounts of the group’s interests and
the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries.
When the group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated
as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of
any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of
the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive
income in relation to that subsidiary are accounted for as if the group had directly disposed of the related
assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity
as specified/permitted by applicable AASBs). The fair value of any investment retained in the former subsidiary
at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting
under AASB 139, when applicable, the cost on initial recognition of an investment in an associate or a
joint venture.
7.2 Unincorporated Joint Operations
The group has significant interests in the following jointly controlled operations:
Name of Operation
Principal Activity
Group Interest
LJN Consortium
Asset Development Projects (camps rail etc) - completed.
NRW-NYFL Joint Venture
Car Dumper and Bulk Earthworks at Cape Lambert Port B Project.
NRW-Eastern Guruma Joint Venture
Construction of the HME Overpass and the Silvergrass Access
Roads.
NRW-Ocean to Outback Joint Venture
Hope Downs Village construction - completed.
Midwest Rail Joint Venture
Bulk earthworks and rail upgrade of existing 92km rail, from Mullewa
to Tilley Siding, for ore haulage - completed.
City East Alliance
Upgrade of Great Eastern Highway - completed.
NRW, Eastern Guruma and NYFL Joint
Venture
Provision of Early Mining Services – Solomon Phase 1 for Fortescue
Metals Group Limited - completed.
NRW Njamal ICRG Joint Venture
Bulk Earthworks and services for the Iron Bridge (North Star
Magnetite Project) for IB Operations PL (Fortescue Metals Group
Limited).
NRW Rapid JV
ADB Guma JV
Mining Services
Production Blast Hole Drilling Services
2016
33%
50%
50%
50%
50%
15%
50%
50%
50%
75%
2015
33%
50%
50%
50%
50%
15%
50%
50%
50%
-
There has been no change in the group’s ownership or voting interests for the reported years with the
exception of the recently created new joint operations being ADB Guma JV.
Notes to the Financial Statements
66
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
The following amounts are included in the groups consolidated financial statements as a result of the
proportionate consolidation of the above interests in joint operations.
Financial Information
STATEMENT OF FINANCIAL PERFORMANCE
Income
Expenses
STATEMENT OF FINANCIAL POSITION
Current assets
Current liabilities
Consolidated
2016
$’000
16,338
(16,195)
3,662
3,683
2015
$’000
66,571
(63,725)
8,489
6,758
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the
contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control.
When a group entity undertakes its activities under joint operations, the group as a joint operator recognises in
relation to its interest in a joint operation:
•
•
•
•
•
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
The group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation
in accordance with the AASBs applicable to the particular assets, liabilities, revenues and expenses.
When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale
or contribution of assets), the group is considered to be conducting the transaction with the other parties
to the joint operation, and gains and losses resulting from the transactions are recognised in the group’s
consolidated financial statements only to the extent of other parties’ interests in the joint operation.
When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a
purchase of assets), the group does not recognise its share of the gains and losses until it resells those assets
to a third party.
Salini Impregilo NRW Joint Venture (SI-NRW JV)
The group formed a Joint Venture company with Salini Impregilo of Italy which was subsequently awarded
the Forrestfield–Airport Link contract for the PTA. The contract is worth $1.2 billion to be delivered over four
years. The group’s share of the joint venture is 20%. As at 30 June 2016 the project was in start-up phase
consequently no revenue or share of net assets has been recognised.
7.3 Parent Entity Information
As at, and throughout, the financial year ended 30 June 2016 the parent company of the group was
NRW Holdings Limited.
The accounting policies of the parent entity, which have been applied in determining the financial information
shown below, are the same as those applied in the consolidated financial statements.
67
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Financial Position
ASSETS
Current assets
Non-current assets
Total assets
LIABILITIES
Current liabilities
Non-current liabilities
Total liabilities
EQUITY
Contributed equity
Retained earnings
RESERVES
Share based payment reserve
Total equity
Financial Performance
Loss for the year
Total comprehensive income
Parent
2016
$’000
45,703
69,184
114,887
45
-
45
156,456
(44,399)
2,786
114,483
Parent
2016
$’000
(13,352)
(13,352)
Guarantees Entered Into by the Parent in Relation to the Debts of its Subisidiaries:
Parent
2016
$’000
96,486
96,486
Debt borrowings
TOTAL
NRW Holdings Limited has entered into a Deed of Cross Guarantee with:
• NRW Pty Ltd ATF NRW Unit Trust
• Action Drill & Blast Pty Ltd
• Actionblast Pty Ltd
• A.C.N. 107724274 Pty Ltd
• NRW Intermediate Holdings Pty Ltd
2015
$’000
65,645
62,550
128,195
-
-
-
156,456
(31,047)
2,786
128,195
2015
$’000
(131,996)
(131,996)
2015
$’000
142,255
142,255
Notes to the Financial Statements
68
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.4 Related Parties
The ultimate parent entity within the group is NRW Holdings Limited. The interests in subsidiaries are set out in
Note 7.1.
Trading Summary
Sales of goods or services made to related parties were made at arm’s length and under normal commercial
market conditions. They comprise of:
Key management person and/or related party.
Transaction Booked in Group
Mr W Fair – Northwest Quarries Pty Ltd
Purchase of construction materials.
Transaction Value
2016
$
-
2015
$
1,758,908
Related Party Outstanding Balances
There are no amounts receivable from or payable to related parties at reporting date or at the end of the prior
reporting period.
7.5 Auditor’s Remuneration
AUDIT SERVICES
Auditors of the Company
Deloitte Touche Tohmatsu
OTHER SERVICES
Deloitte Touche Tohmatsu
Coal levy audits
Procurement strategy (1)
Total
Consolidated
2016
$
2015
$
225,000
277,500
13,750
-
238,750
14,000
102,500
394,000
(1) Deloitte Touche Tohmatsu were engaged in 2014 to review the procurement strategies of the group. The finalised fees were incurred in
early FY15.
7.6 Events After the Reporting Period
Other than the events noted below 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.
69
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.7 Changes to Accounting Policies
Adoption of New and Revised Accounting Standards and Interpretations
The Group has adopted all new and amended Australian Accounting Standards and Interpretations
mandatory as at 1 July 2015 including:
AASB 2015-3 ‘Amendments to Australian
Accounting Standards arising from the
Withdrawal of AASB 1031 ’ Materiality
This amendment completes the withdrawal of references to AASB 1031 in all Australian Accounting
Standards and Interpretations, allowing that Standard to effectively be withdrawn.
AASB 2015-4 ‘Amendments to Australian
Accounting Standards – Financial Reporting
Requirements for Australian Groups with a
Foreign Parent’
The amendments to AASB 128 align the relief available in AASB 10 and AASB 128 in respect of
the financial reporting requirements for Australian groups with a foreign parent. The amendments
require that the ultimate Australian entity shall apply the equity method in accounting for interests in
associates and joint ventures if either the entity or the group is a reporting entity, or both the entity
and group are reporting entities.
Although the adoption of these standards has resulted in some changes to the accounting policies of the
Group, they have not resulted in any adjustment to the amounts recognised in the financial statements, nor
resulted in any additional disclosures upon adoption.
Standards and Interpretations in Issue Not Yet Adopted
The following new or amended accounting standards issued by the AASB are relevant to current operations
and may impact the Group in the period of initial application. They are available for early adoption but have not
been applied in preparing this Financial Report.
Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards (1)
1 January 2018
30 June 2019
AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to
Australian Accounting Standards arising from AASB 15’
AASB 16 ‘Leases’
AASB 2014-3 ‘Amendments to Australian Accounting Standards – Accounting for Acquisitions
of Interests in Joint Operations’
1 January 2017
30 June 2018
1 January 2019
30 June 2020
1 January 2016
30 June 2017
AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable
Methods of Depreciation and Amortisation’
1 January 2016
30 June 2017
AASB 2014-6 ‘Amendments to Australian Accounting Standards – Agriculture: Bearer Plants’
1 January 2016
30 June 2017
AASB 2014-9 ‘Amendments to Australian Accounting Standards – Equity Method in Separate
Financial Statements’
1 January 2016
30 June 2017
AASB 2014-10 ‘Amendments to Australian Accounting Standards – Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture’
1 January 2016
30 June 2017
AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to
Australian Accounting Standards 2012-2014 Cycle’
1 January 2016
30 June 2017
AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101’
AASB 2015-5 ‘Amendments to Australian Accounting Standards – Investment Entities:
Applying the Consolidation Exception’
1 January 2016
30 June 2017
1 January 2016
30 June 2017
AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax
Assets for Unrealised Losses’
1 January 2017
30 June 2018
AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 107’
1 January 2017
30 June 2018
(1) The AASB has issued the following versions of AASB 9 and the relevant amending standards.
* AASB 9 ‘Financial Instruments’ (December 2009) and the relevant amending standards.
* AASB 9 ‘Financial Instruments’ (December 2010) and the relevant amending standards.
* AASB 2013-9 ‘Amendment to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’, Part C –
Financial Instruments.
* AASB 9 ‘Financial Instruments’ (December 2014) and the relevant amending standards.
Notes to the Financial Statements
70
NRW ANNUAL REPORT 2016 | Directors’ Report NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
All the standards have an effective date of annual reporting periods beginning on or after 1 January 2018. Either AASB 9 (December 2009)
or AASB 9 (December 2010) can be early adopted if the initial application date is before 1 February 2015. After this date only AASB 9
(December 2014) can be early adopted.
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations
were also in issue but not yet effective, although Australian equivalent Standards and Interpretations have not
yet been issued.
Standard/Interpretation
Clarifications to IFRS 15 ‘Revenue from Contracts with
Customers’
Effective for annual reporting periods
beginning on or after
Expected to be initially applied in the
financial year ending
1 January 2018
30 June 2019
71
NRW ANNUAL REPORT 2016 | Notes to the Financial Statements
NRW ANNUAL REPORT 2016 | Directors’ Report SHAREHOLDER
INFORMATION
The shareholder information set out below was applicable as at 19 July 2016.
NRW’s contributed equity comprises 278,888,011 fully paid ordinary shares.
Distribution of Shareholdings:
Range
Fully paid ordinary shares
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable parcels
195,356,677
66,478,211
10,201,085
6,238,891
613,147
278,888,011
938,002
NRW’s 20 Largest Shareholders
Rank
Name
%
70.05
23.84
3.66
2.24
0.22
100.00
0.34
No of Holders
325
2,081
1,249
1,997
1,294
6,946
1,538
%
4.68
29.96
17.98
28.75
18.63
100.00
22.14
1
2
3
4
5
6
7
8
9
10
11
12
13
14
14
15
16
17
17
18
19
19
20
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
ZERO NOMINEES PTY LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
Continue reading text version or see original annual report in PDF format above