2017
ANNUAL REPORT
CORPORATE
REGISTRY
DIRECTORS
Michael Arnett
Chairman and Non-Executive Director
Jeff Dowling
Non-Executive Director
Julian Pemberton
Chief Executive Officer and Managing Director
Peter Johnston
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
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NRW ANNUAL REPORT 2017 | Contents
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NRW ANNUAL REPORT 2017 | Corporate Registry ANNUAL REPORT
CONTENTS
Chairman’s Message
CEO Review of Operations
Highlights
NRW Civil and Mining
Action Drill & Blast
AES Equipment Solutions
Health, Safety, Environment and Training
People
Outlook
CFO Performance at a Glance
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NRW ANNUAL REPORT 2017 | Contents
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NRW ANNUAL REPORT 2017 | Chairman’s Message
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DEAR FELLOW
SHAREHOLDERS
NRW achieved a solid result for FY17, as our Company
continued to focus on diversifying in commodities,
geographical location and widening our client base.
NRW delivered a better than 20% year-over-year increase in
revenue to $370.2 million during the financial year. Net profit
after tax increased by 25% from the previous year to $28.5
million, driven by higher earnings and lower financial costs.
All divisions of the NRW Holdings group recorded improved
figures on the FY16 results.
Over the past 12 months, the business continued to focus
on growing our operations throughout Australia. In August
2017 NRW Holdings acquired Golding, one of Queensland’s
largest civil infrastructure, urban development and mining
contractors. With an exceptional reputation and a solid
client base, Golding is a strong fit for NRW’s growth
strategy.
In December of 2016 we announced the successful
acquisition of the East Coast Division of Hughes Drilling,
allowing the expansion of drill and blast activities.
This acquisition supports our strategy to strengthen the
Company’s presence in the East Coast of Australia, at
a time of improving market sentiment. The acquisition
has now been fully integrated into the Action Drill &
Blast business.
During the year the business successfully restructured
its debt through an innovative corporate note issue. The
corporate note issue has now restructured debt payments
over the life of the assets while being utilised and will
improve liquidity in the business. As at 30 June 2017
debt levels sit at $20.8M, a significant reduction from
FY16 of $59.3M.
While the Board recognises the Company’s improved
performance during the year, it has determined that a
dividend will not be declared for the year ending 30 June
2017. The Board remains committed to reintroducing
returns to shareholders in the near future, however its
focus at this time remains on reducing debt further and
strengthening the Company’s balance sheet.
Our People
Our Company’s success relies heavily on the skill and
dedication of our employees across the organisation, and
their safety remains our highest priority. This year we have
worked hard to reduce our total recordable injury frequency
rate by 13%, down to 6.22. We will continue to put a
strong focus on improving safety across the Company in
the coming year.
I would like to thank our leadership team and employees
for their efforts over the past few years in a difficult
operating environment. As our contract awards increase,
we have had the opportunity to reemploy ex-employees,
ensuring our Clients are working with a knowledgeable,
experienced NRW workforce, as we continue to
strengthen our reputation for excellence in project delivery.
Looking forward
In a sector that remains highly competitive, NRW has
achieved a solid work in hand position of $1.4 billion.
This result, together with our strong focus on client
relationships and project delivery, positions our Company for
further growth, particularly in the eastern states of Australia.
As our Company continues to focus on opportunities in
improving market conditions, the tender pipeline sits at a
healthy $6.0 billion placing NRW in a position to deliver
strong returns to our shareholders in the coming years.
Finally, I would also like to acknowledge and thank our
shareholders for their ongoing support this year. Our
Company has a proven track record under a variety of
market conditions, and I thank you for the confidence
you place in NRW.
Michael Arnett
Chairman, NRW Holdings
NRW ANNUAL REPORT 2017 | Chairman’s Message
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CEO REVIEW OF OPERATIONS
It is with great pleasure that I present the results of our
Company’s performance for the 2017 financial year.
NRW’s diverse capability and leading market reputation
have enabled strong growth in both revenue and earnings.
Highlights
• Revenue of $370.3 million (28.6% increase
from FY16)
•
EBITDA of $58.8 million (24.6% increase from FY16)
• Net profit after tax of $28.5 million (up 33.0%), and
earnings per share of 9.1 cents
• New work secured circa $254.5 million; order book
$0.9 billion
• Balance sheet restructured
- Successful issue of $70.0 million NRW Corporate
Notes used to repay $75.0 million of bank debt;
changes term from two-year to four-year
- Raised $19.7 million through equity placement in
September 2016
- Significant reduction in net debt to $20.8 million
from $59.3 million at June 2016
- Improved gearing ratio of 10.5% compared to
39.6% at June 2016
• Cash holdings of $42.3 million
• Successful acquisition and integration of the Hughes
Drilling east coast drill and blast business
In August 2017 our Company completed the successful
acquisition of leading Queensland-based civil, mining and
urban infrastructure business, Golding. This acquisition
increased our order book by a further $500.0 million to
$1.4 billion. Through Golding’s current tier one client
base, and top level accreditations within government
infrastructure, NRW now have a strong platform for
growth in the infrastructure and urban markets on the
east coast of Australia.
NRW Civil and Mining
In the reporting period the NRW Civil and Mining business
generated earnings before tax of $27.2 million compared
to $18.1 million in FY16, an increase of 33%. Revenues
for the division increased to $272.6 million (FY16 $203.6
million).
The Civil division continued to focus on widening its client
base and diversifying in both commodity and location,
securing contracts for new clients Pilbara Minerals, Rio
Tinto Coal Australia (RTCA) and Rio Tinto Alcan (RTA)
in the lithium, coal and aluminum sectors. The division
also secured contracts for both Rio Tinto Iron Ore at the
Yandicoogina Mine Site, and Fortescue Metals Group at
their Solomon mine.
The business continued work for the Public Transport
Authority through the Forrestfield-Airport Link, a $1.176
billion joint venture comprising of NRW (20%) and Italian
firm Salini Impregilo (80%). The project is progressing well,
with work at the Perth Airport, Belmont and Bayswater
sites underway. The first tunnel boring machine (TBM)
has commenced tunnelling, and the second TBM has
been lowered into the dive structure and is undergoing
commissioning tests. First trains are due to begin
operation on the railway line in 2020.
Market conditions in the civil sector continue to improve
with several major projects in the pipeline for key clients.
A significant amount of these opportunities relate to
NRW’s core business, with tender awards due in the
second half of FY18.
The Mining division secured a $110.0 million contract for
drill, blast, load and haul mining during the second half
of FY17, for new client Altura Mining at their Pilgangoora
Lithium Project. The project is scheduled to run until
2022 and represents the division’s first contract in this
commodity.
Operations continue in Queensland at the Middlemount
Coal Mine, where NRW provide a large fleet of fully
serviced and maintained mining equipment for joint
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NRW ANNUAL REPORT 2017 | CEO Review of Operations
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CEO REVIEW OF
OPERATIONS CONTINUED...
venture partners Peabody Energy Australia and Yancoal
Australia Ltd. The NRW team at Middlemount have
achieved an exceptional safety record for the life of
the project and remain focussed on the continuous
improvement of their maintenance strategies.
Action Drill & Blast
Action Drill & Blast (ADB) expanded and diversified
their drill and blast capabilities in FY17 through the
acquisition of Hughes Drilling East Coast operations.
The acquisition, which has been fully integrated into
the business, has increased the number of projects to
18, with a drill fleet of 65 blast hole rigs. The acquisition
aligns with our strategic focus to grow ADB’s existing
presence in Queensland and expands its geographical
service offering into New South Wales at a time of
improving market sentiment.
During the year the ADB business focused on the
key commodities of coal, gold, lithium and iron ore.
Contract awards for FY17 included a five-year contract
for Macmahon Holdings Limited at Newcrest’s Telfer
gold mine, a two-year contract extension by Talison
Lithium for services at the Greenbushes mine, and drill
and blast services as part of the Altura Mining contract
award at the Pilgangoora Lithium Project. The business
was also awarded a 12-month contract extension by
Gold Fields, for the St Ives Gold Mine.
Activity levels in the business increased during the
financial year, generating revenues of $88.1 million,
compared to $81.9 million in FY16. Earnings also
improved, resulting in EBITDA of $10.0 million
compared to $8.1 million in FY16.
The significant growth of ADB’s fleet has increased their
capacity to provide solutions for virtually any blasting
project requirement. ADB are well positioned in key
market segments and are focused on converting their
growing tender pipeline as they enter the 2018
financial year.
AES Equipment Solutions
Revenues in the business increased to $16.3 million
compared to $13.6 million in the prior comparative
period reflecting a slight increase in market activity but
still well down on prior years’ volumes. The business
generated a $0.1 million loss at EBITDA level compared
to a loss of $0.6 million in FY16. AES continues to
operate at around break even cash levels.
The outlook for growth in the service and water trucks
industry is positive, with prospects emerging through
government maintenance agreements. There is also
an increasing volume of rebuild opportunities in the
resources sector, on which AES will continue to focus.
Health, Safety, Environment and Training
Through a continued focus on improving safety, NRW’s
LTIFR has fallen 39%, and the TRIFR has dropped 13%
since 30 June 2016.
These positive results are attributed to the strong safety
culture of our employees and the implementation of
several safety initiatives including:
• NRW Golden Rules refresh - improved the
consistency of safety behaviour across the
business allowing enhanced management of
critical risks
• A Safe Day. Every Day. key performance indicators
update - challenged our project teams to aim
higher in relation to our lead safety indicators and
proactive safety activities
•
Increased frequency of theory assessments -
improved the consistency of work methods
To further improve our Company’s safety in the
coming financial year, our key strategies include
continuing to advance our safety systems, using
technology to improve leadership effectiveness in the
field and focusing on training to improve our
employee’s knowledge.
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NRW ANNUAL REPORT 2017 | CEO Review of Operations
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NRW ANNUAL REPORT 2017 | CEO Review of Operations NRW applies the A Safe Day. Every Day. mantra not
only to our people but also to the environments in
which we operate. We take extensive measures to
mitigate environmental harm for every project, which is
why our clients trust us to deliver projects in sensitive
environmental conditions.
People
NRW recognises that our success is the result of our
dedicated workforce. A workforce that constantly
returns to NRW as more projects are secured, and
positions become available. We re-employ previous
NRW employees as first preference wherever possible,
and transfer people from completed projects to new
projects to ensure we have the most knowledgeable
people on the job. When we look for employees in
the wider market, we attract new highly qualified
candidates, even for short term contracts, confirming
that NRW is an employer of choice. 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 increased through
the year due to the Hughes acquisition and increasing
workload particularly in the civil business. Headcount at
June 2017 totalled 1,000 (June 2016 - 832).
During FY17 NRW reinvigorated the apprenticeship
program, leading to the appointment of four new
apprentices into trades programs within our Company.
An additional four employees have signed on to
complete trade skill upgrades to become dual trade
qualified technicians.
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.
Outlook
In August the Civil business secured OZ Mineral’s
Carrapateena Project in South Australia, and is currently
finalising contract negotiations valued at approximately
$111.0 million. This contract represents NRW’s
entry into a new geographical location, and provides
exposure to a new client.
The recent acquisition of Golding represents a
transformational milestone, which delivers a step
change in scale for NRW, unlocking opportunities in
the growing east coast civil, urban and infrastructure
sectors. Golding has already delivered early results
through the recent award of a new mining services
contract for Broadlea Coal Management and growth in
their urban infrastructure division.
Following the acquisition of Golding, NRW’s forward
order book totals $1.4 billion, of which $625.0 million
is secured revenue for delivery during FY18. We have
seen continued recovery and improving sentiment
in NRW’s core markets, together with high levels of
tendering activity and better visibility of future
prospects. The tender pipeline is currently assessed at
$6.0 billion, providing opportunities across the mining,
civil, resources, infrastructure, urban and drill and
blast sectors.
I would like to extend my thanks to all employees,
shareholders and stakeholders who continue to be vital
to NRW’s achievements, and welcome the Golding
team to our Group. With over 40 projects Australia-
wide supported by an experienced workforce of over
2000 people, our Company is positioned for significant
growth as we continue our expansion into new
locations and commodities.
Jules Pemberton
CEO and Managing Director, NRW Holdings
NRW ANNUAL REPORT 2017 | CEO Review of Operations
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CFO PERFORMANCE
AT A GLANCE
Financial Performance
NRW reported revenues including revenue generated by
associates of $370.3 million (statutory revenue of $344.6
million), which was 29% higher than last year ($288.0
million). New civil projects and the Hughes business
acquisition were the main contributors to the increase
in revenues. Net Earnings increased by 33% to $28.5
million compared to $21.5 million reported in the previous
year. The increase in Earnings was mostly due to higher
revenues and lower finance costs.
Cash holdings at year end improved to $42.3 million
(FY16: $37.2 million) whilst loan repayments made in the
year reduced debt by $38.5 million to $63.1 million at 30
June 2017. Net debt improved to $20.8 million mostly
reflecting earnings in the year less expenditure on capital
improvements to the mining and drill and blast fleets.
Net assets increased to $199.1 million ($149.8 million
FY16), representing net assets of 62 cents per share. The
increase was due to the reported profit and a placement
which raised $19.7 million. The capital raising was in the
form of a 15% placement to qualified institutional and
sophisticated investors. The funds raised were used to
reduce debt and to provide additional liquidity.
During the year the business successfully restructured
its debt through an innovative corporate note issue
which raised $70.0 million. The debt rescheduling was
concluded in December 2016 providing funds to repay
bank debt. The Corporate notes issued to Australian
based investors have a four-year term with a coupon rate
of 7.5% which was similar to the interest costs on the
now repaid bank debt.
As previously noted NRW acquired the Hughes business
in December 2016 for a total consideration of $11.0
million. The acquisition was fully backed by assets, details
of which are provided in the notes to these accounts.
normalise banking arrangements which now include
both contract guarantee and overdraft facilities.
Capital expenditure was directed at fleet component
replacement and totalled $15.9 million. The run rate
was higher than last year reflecting the cyclical nature
of fleet requirements.
Gearing improved to 10.5% compared to 39.6% at
June 2016.
The results include a $5.0 million tax credit due to the
recognition of additional tax benefits not currently included
in the balance sheet. At 30 June 2016 unrecognised
deferred tax assets totalled $31.7 million which reduced
to $21.9 million at 30 June 2017.
Significant Events After 30 June 2017
On 14 August 2017, the Company announced the
execution of an agreement to acquire 100% of
Golding Group Pty Ltd (Golding) for total consideration
of $85 million.
The acquisition was funded via a combination of a new
$48 million acquisition debt facility, a $25 million equity
placement and existing cash reserves. The acquisition
debt facility is repayable in equal quarterly instalments
over 3 years and is in addition to those banking
arrangements disclosed at note 5.3.
The $25 million equity placement involved the issue of
36.8 million new shares at a price of 68 cents per share.
As part of the acquisition and placement NRW also
raised $5 million through a share purchase plan to
eligible NRW shareholders.
Both the placement and note issue significantly improved
liquidity which in turn allowed our banking partner to
Andrew Walsh
CFO, NRW Holdings
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NRW ANNUAL REPORT 2017 | CFO Performance at a Glance
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NRW ANNUAL REPORT 2017 | CFO Performance at a Glance NRW ANNUAL REPORT 2017 | CFO Performance at a Glance
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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
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25
26
28
29
30
31
32
32
34
40
50
59
63
67
77
79
84
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NRW ANNUAL REPORT 2017 | CEO Review of Operations
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DIRECTORS’
REPORT
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 2017.
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 on 21 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, Sirius Resources NL (Resigned 23 September 2015)
Chairman, Pura Vida Energy NL (Resigned 16 May 2016)
Non-Executive Director, Atlas Iron Limited (Resigned 4 May 2016)
Chairman, 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.
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NRW ANNUAL REPORT 2017 | Directors’ Report DIRECTORS’
REPORT CONTINUED
Peter Johnston
Non-Executive Director
Mr Johnston was appointed as Non-Executive Director on 1 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)
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
Michael Arnett
Jeff Dowling
Peter Johnston
Julian Pemberton
Directors’ Meetings
Held
Directors’ Meetings
Attended
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12
12
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Nomination & Remuneration Committee
The Members of the Nomination & Remuneration Committee (N&RC) are Michael Arnett (Chairman), Jeff
Dowling and Peter Johnston. During the 2017 financial year one meeting of the Committee was held. Certain
responsibilities of the Committee were also considered at Board Meetings as required.
Audit & Risk Committee
The Members of the Audit & Risk Committee are Jeff Dowling (Chairman), Michael Arnett and Julian
Pemberton. During the 2017 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 and 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.
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REPORT CONTINUED
RESULTS FOR THE FULL YEAR AND REVIEW OF OPERATIONS
FINANCIAL PERFORMANCE
NRW reported revenues including revenue generated by associates of $370.3 million, (statutory revenue of
$344.6 million) which was 20% higher than last year ($288.0 million). New civil projects and the Hughes
business acquisition were the main contributors to the increase in revenues. Net Earnings increased by 33%
to $28.5 million compared to $21.5 million reported in the previous year. The increase in Earnings was mostly
due to higher revenues and lower finance costs.
Cash holdings at year end improved to $42.3 million (FY16: $37.2 million) whilst loan repayments made in the
year reduced debt by $38.5 million to $63.1 million at 30 June 2017. Net debt improved to $20.8 million mostly
reflecting earnings in the year less expenditure on capital improvements to the mining and drill and blast
fleets. Other key movements in net debt include the proceeds from a share placement in September 2016
($19.7 million) and the payment for the acquisition of the east coast Hughes drilling business ($11.0 million).
The gearing ratio further improved in the year to 10.5% (FY16: 39.6%).
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).
FY17
FY16
Revenue
Earnings
EBITDA(1)
Revenue
Earnings
EBITDA(1)
$M
272.6
88.1
16.3
(6.8)
-
-
$M
27.2
4.2
(0.7)
-
(4.6)
5.4
$M
46.6
10.0
(0.1)
-
(3.1)
5.4
$M
203.6
81.9
13.6
(11.1)
-
$M
18.1
2.3
(1.4)
(5.2)
9.3
$M
33.2
8.1
(0.6)
-
(2.8)
9.3
370.3
31.5
58.8
288.0
23.1
47.2
NRW Civil and Mining
Action Drill & Blast
AES Equipment Solutions
Eliminations
Corporate costs unallocated
Interest costs in segment result
Group revenue inc. Associates /
Normalised EBIT (2) / EBITDA (1)
Share of revenue from equity accounted
joint ventures
(25.7)
-
Note Issue and Hughes acquisition costs
Earnings before interest and tax
Net finance costs
Income tax benefit
Total statutory revenue /
Net profit after tax
-
-
-
-
(2.6)
28.9
(5.4)
5.0
-
-
-
-
-
-
-
23.1
(8.9)
7.3
344.6
28.5
288.0
21.5
(1) EBITDA is earnings before interest tax depreciation and amortisation and excluding legal costs associated with the note issue, early termination costs of the
existing bank debt and costs related to the acquisition of the Hughes business, (“transaction costs”).
(2) Normalised EBIT is earnings before interest and tax and transaction costs.
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DIRECTORS’
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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.
During FY17 the Civil business secured new work for Rio Tinto Iron Ore, and Fortescue Metals Group. It was
also successful in widening its client base and increasing diversification in both commodity and location, by
winning contracts in the lithium, coal and aluminium sectors for new clients Pilbara Minerals, Rio Tinto Coal
Australia (RTCA) and Rio Tinto Alcan (RTA).
The business continued their work for the Public Transport Authority through the Forrestfield-Airport Link Joint
Venture during the year. The contract valued at $1,176 million was awarded to a joint venture comprising
NRW (20%) and Salini Impregilo (SI) of Italy (80%). The project is progressing well, with work at the Perth
Airport, Belmont and Bayswater sites underway. The first tunnel boring machine (TBM) has now commenced
tunnelling with the second currently being integrated at the dive structure.
The Mining business was awarded a $110 million contract for mining and drill & blast by Altura Mining Ltd at
their Pilgangoora Lithium Project. The project is scheduled to run until 2022. Operations continue at
Queensland’s Middlemount Coal Mine, where NRW provide a large fleet of fully serviced and maintained
mining equipment. The NRW team at Middlemount have maintained an exceptional safety record by
continuously improving their maintenance strategies.
Revenues in the Civil and Mining business of $272.6 million including revenue generated by associates
reflected the increased order awards and the start of work on the Forrestfield-Airport Link, (last year $203.6
million). The business generated earnings before interest tax and depreciation (EBITDA) of $46.6 million
compared to $33.2 million in FY16 again mostly due to the higher activity levels.
Action Drill & Blast
Action Drill & Blast (ADB) provides contract drill and blast services to the mining sector (including iron ore,
coal, gold and lithium) and to civil projects throughout Australia.
The acquisition of the Hughes east coast business, (“Hughes”) completed in December 2016 strengthens the
business aligning with the strategic intent to build on the ADB’s existing presence in Queensland and
expanding its geographical service offering into New South Wales at a time of improving market sentiment.
The business is fully integrated within ADB.
During the year the ADB business focused on the key commodities of coal, gold, lithium and iron ore. Notable
operational highlights include a five-year contract award by Macmahon at Newcrest’s Telfer gold mine, a two-
year contract extension by Talison Lithium for services at the Greenbushes mine, and drill and blast services
as part of the Altura Mining contract award at the Pilgangoora Lithium project.
Activity levels in the business increased generating revenues of $88.1 million compared to $81.9 million in
FY16. The increase was due to the acquisition of the Hughes business partly offset by the effect of weather
delays, mostly due to cyclone Debbie, and lower volumes on the Middlemount contract where the client
insourced explosives supply as part of the contract extension agreements negotiated mid-2016. Earnings also
improved resulting in EBITDA of $10.0 million compared to $8.1 million in FY16 due to the higher revenues.
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 increased to $16.3 million compared to $13.6 million in the prior comparative period
reflecting a slight increase in market activity but still well down on prior years’ volumes. The business
generated a $0.1 million loss at EBITDA level compared to a loss of $0.6 million in FY16. AES continues to
operate at around break even cash levels.
The outlook for growth in the service and water trucks industry is positive, with prospects emerging through
government maintenance agreements. There is also an increasing volume of rebuild opportunities in the
resources sector, on which AES will continue to focus.
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BALANCE SHEET, OPERATING CASH FLOW AND CAPITAL EXPENDITURE
Net assets increased to $199.1 million, ($149.8 million FY16) representing net assets of 62 cents per share.
The increase was due to the reported profit and a placement which raised $19.7 million. The capital raising
was in the form of a 15% placement to qualified institutional and sophisticated investors. The funds raised
were used to reduce debt and to provide additional liquidity.
During the year the business successfully restructured its debt through an innovative corporate note issue
which raised $70.0 million. The debt rescheduling was concluded in December 2016 providing funds to repay
bank debt. The Corporate notes issued to Australian based investors have a four-year term with a coupon rate
of 7.5% which was similar to the interest costs on the now repaid bank debt.
As previously noted NRW acquired the Hughes business in December 2016 for a total consideration of $11.0
million. The acquisition was fully backed by assets, details of which are provided in the notes to these
accounts.
Both the placement and note issue significantly improved liquidity which in turn allowed our banking partner to
normalise banking arrangements which now include both contract guarantee and overdraft facilities.
Legal costs associated with the note issue, early termination costs of the existing bank debt and costs related
to the acquisition of the Hughes business totalling $2.6 million and are shown separately in the earnings
analysis above.
The business again returned most of the EBITDA as cash resulting in further reduction to net debt ($20.8
million compared to $59.3 million at June 2016 and $80.5 million at June 2015). Capital expenditure which
was mostly directed at fleet component replacement totalled $15.9 million. The run rate was higher than last
year reflecting the cyclical nature of fleet requirements.
Gearing improved to 10.5% compared to 39.6% at June 2016.
The Group was in full compliance with its debt covenants as at 30 June 2017.
The results include a $5.0 million tax credit due to the recognition of additional tax benefits not currently
included in the balance sheet. At 30 June 2016 unrecognised deferred tax assets totalled $31.7 million which
reduced to $21.9 million at 30 June 2017.
PEOPLE AND SAFETY
NRW recognises that our success is the result of our dedicated workforce. A workforce that constantly returns
to NRW as more projects are secured, and positions become available. We re-employ previous NRW
employees as first preference wherever possible, and transfer people from completed projects to new projects
to ensure we have the most knowledgeable people on the job. When we look for employees in the wider
market, we attract new highly qualified candidates, even for short term contracts, confirming that NRW is an
employer of choice. 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 increased through the year due to the Hughes acquisition and
increasing workload particularly in the civil business. Headcount at June 2017 totalled 1,000 (June 2016 -
832).
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) improved in
the year to 0.37 compared to 0.60 at June 2016.
ENVIRONMENTAL REGULATIONS
The Group holds various licences and is subject to various environmental regulations. No known
environmental breaches have occurred in relation to the Group’s operations.
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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
We have seen continued recovery in the core markets in which NRW operates together with high levels of
tendering activity and better visibility of future prospects. In addition, the recent acquisition of Golding
represents a transformational milestone, which delivers a step change in scale for NRW’s business in
Australia and unlocks opportunities to the growing east coast civil, urban and infrastructure markets.
The NRW business is underpinned by Tier 1 clients and the additional capabilities secured via Golding will
assist to further capitalise on our strong market position in a rapidly consolidating sector, especially over the
next 12 months as a number of major projects including sustaining iron ore projects are scheduled to be
committed.
The Civil business has secured significant contract wins for Rio Tinto at Yandi and is well positioned to tender
a growing number of prospects in iron ore and copper and gold. The Mining business has expanded into
lithium following the award by Altura Mining. ADBs increased geographical reach across Australia has
positioned the business to be more accessible to their Client’s projects, and the expansion of their fleet has
significantly increased capacity.
NRW’s forward order book including Golding totals circa $1.4 billion of which around $625 million is secured
for delivery during FY18. The tender pipeline provides opportunities across the mining, civil resources,
infrastructure, urban and drill and blast sectors which is currently valued in excess of $6.0 billion.
Our focus will remain on:
Supporting the iron ore sector as plans for sustaining current production volumes are developed
Growing our presence in Queensland and New South Wales on the back of the recent Golding
acquisition
Project delivery across all contracts including the Forrestfield Airport Link contract where we are
working through a joint venture with Salini Impregilo
Reviewing opportunities to expand our service offering in our core markets and to diversify
where we have relevant expertise.
SIGNIFICANT EVENTS AFTER PERIOD END
On 14 August 2017, the Company announced the execution of an agreement to acquire 100% of Golding
Group Pty Ltd (Golding) for total consideration of $85 million.
The acquisition will be funded via a combination of a new $48 million acquisition debt facility, a $25 million
equity placement and existing cash reserves. The acquisition debt facility is repayable in equal quarterly
instalments over 3 years and is in addition to those banking arrangements disclosed at note 5.3.
The $25 million equity placement involved the issue of 36.8 million new shares at a price of 68 cents per
share. As part of the acquisition and placement NRW announced the intention to undertake a share purchase
plan to eligible NRW shareholders capped at $5 million.
No other 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.
DIVIDEND
In the context of the recent acquisition of Golding announced on 14 August 2017 the directors have decided
not to pay a final dividend for the year ended 30 June 2017 (2016 – nil). At this stage, the directors consider
the most appropriate use of available funds is to retain flexibility for the integration of Golding and ensure an
appropriate level of gearing is maintained. The directors will regularly review the payment of dividends in light
of the earnings, cash flow and franking credits position of the Company.
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DIRECTORS’ INTERESTS
The relevant interest of each Director in the ordinary share capital are set in note 4.3 of Executive KMP
Remuneration Outcomes. Transactions between entities within the Group and Director-related entities are set
out in note 7.4 to the financial statements.
PERFORMANCE RIGHTS OVER UNISSUED SHARES OR INTERESTS
As at the date of this report, there are 6,208,486 Performance Rights outstanding (2016: 2,613,750
Performance Rights outstanding).
Details of Performance Rights granted to executives as part of their remuneration are set out in the
Remuneration Report on pages 9 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 25 of this report.
Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined
in note 7.6 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 7.6 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 $492,795 (2016: $354,411).
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.
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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 2017 for the following individuals, who
are the Directors and 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
Mr P Johnston
Non-Executive Director
Appointed 1 July 2016
EXECUTIVE DIRECTOR
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
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 Framework
Executive KMP Remuneration Outcomes
Executive Director and Executive KMP Remuneration
Page
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1. REMUNERATION GOVERNANCE
NRW has established a Nomination and Remuneration Committee (N&RC) consisting of Michael Arnett
(Chairman), Jeff Dowling and Peter Johnston. 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; and
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
2017
2016
2015
2014
2013
Market Capitalisation (30
June)
Share Price at
end of year
$ 205.9 million
$ 58.6 million
$ 50.2 million
$ 256.6 million
$ 253.8 million
$0.64
$0.21
$0.18
$0.92
$0.91
Total Revenue
$344.6 million
$288.0 million
$775.9 million
$1,134.5 million
$1,374.4 million
EPS
9.1 cents
7.7 cents
(82.4) cents
15.9 cents
26.6 cents
EPS Growth
18.2%
n/a
n/a
n/a
(23.3%)
Net Profit / (Loss)
After Tax
$28.5 million
$21.5 million
$(229.8) million
$44.2 million
$ 74.1 million
Interim Dividend paid
$0.00
Final Dividend declared
in respect of the year
Annual Total
Shareholder Return (%)
$0.00
216%
$0.00
$0.00
17%
$0.00
$0.00
(80%)
$0.04
$0.05
11%
$0.08
$0.05
(67%)
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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; and
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.
Variable remuneration: the CEO and CFO can earn a cash based incentive by achieving specific objectives
set by the N&RC. The CEO and CFO have been awarded Performance Rights (Rights) which vest on
achievement of growth in Total Shareholder Return (TSR) objectives set by the N&RC. The award of Rights is
governed by the ‘NRW Holdings Limited Performance Rights Plan’ approved by shareholders in 2011.
Further commentary on the objectives set by the N&RC in relation to the 2017 incentive scheme is provided
below. Information on awards made to other KMP’s is provided in the remuneration table.
3.3
Award Levels Relative to Fixed Remuneration
The CEO can achieve a cash based incentive up to 50% of his base salary of $800,000 (2016: up to 50%)
and the award of Rights up to 100% of base salary (2016: up to 75%). The CFO can achieve a cash based
incentive up to 44% of his base salary of $675,000 (2016: up to 44%) and the award of Rights up to 66% of
base salary (2016: up to 66%). The award of Rights to the CEO was approved by shareholders 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 incentive payments to rights using a conversion rate
which recognises the share price in the two months prior to the new share issues and share price movements
within that period.
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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 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 2017 and comparable information for the previous year. Information is provided detailing: fixed
remuneration, and cash based and share based incentives.
2017 Incentive Scheme
Cash based incentives - The N&RC established, for the cash based component, Net Earnings and Liquidity as
the critical performance objectives and other business specific objectives.
Earnings for the year were above the target set by the N&RC. The liquidity objective required establishment of
a new banking facility (announced December 2016) and a debt rescheduling objective which was achieved
through the Corporate notes issued in December 2016. Other objectives related to cash based incentives set
by the N&RC were not achieved in the financial year.
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. The GM Civil earned a cash based incentive of $60,000 (2016: $30,000) recognising the continued
improvement in the Civil business.
Share based objectives for 2017 were granted in two Tranches.
•
•
Tranche 1 rights were dependent on increasing TSR in the financial year ending 30 June 2017
by more than 100% of the one month VWAP ending 30 June 2016. Tranche 1 is subject to a
retest in October 2018 at a higher TSR objective if the June 17 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 1,333,333 and to the CFO 742,500.
o The target was met and the rights will vest in November 2017, details of which are provided
in the table below.
Tranche 2 rights are subject to achieving further growth in TSR by October 2018. The quantum
of rights granted based on a share price of 41 cents per share to the CEO were 975,610 and to
the CFO 543,293.
o Performance will be measured in the next financial year.
The value of rights awarded in 2017 have been measured as outlined below. Tranche 1 rights have been
valued in aggregate at $176,446, Tranche 2 rights at $252,138. Share based payment costs have been
allocated over the 24-month performance period ending June 2018.
2016 Incentive Scheme
Rights granted in 2016 in two separate tranches were subject to a performance test during the current
financial year. The performance test required an increase in TSR from the June 2015 baseline in excess of
100% which was achieved in the year. Details of the quantum of rights which vest in November 2017 are
provided in the table below.
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The value of rights awarded in 2016 were assessed at nil cost (as disclosed in the 2016 accounts) 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).
The 2016 remuneration report noted that cash based incentives awarded in the year may be issued as
shares. The N&RC determined that the issue of shares at that time was the most appropriate option. The
quantum of shares issued in lieu of a cash incentive to the CEO was 612,245 and to the CFO was 454,592.
Further details are provided in the KMP table below.
Post completion of the 2016 accounts it was agreed that a bonus of $30,000 should be paid to the General
Manager Civil recognising the work completed to date in restructuring the business.
All rights granted prior to July 2015 have lapsed and no rights vested in the year consequently no details are
provided in this report on those grants. Some of the rights awarded in prior years which have now lapsed
included market based objectives the costs of which are included in the remuneration report.
Total LTI awards and expected vesting
Julian Pemberton
Andrew Walsh
2016 Scheme
2017 Scheme
2016 Scheme
2017 Scheme
Total
All
Rights
movement Vested(1)
Rights
movement Vested(1)
Rights
movement Vested(1)
Rights
movement Vested(1)
Rights
movement Vested(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,333,333
975,610
-
-
-
-
-
-
-
-
-
-
-
-
742,500
556,875
(185,625)
-
-
1,113,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
742,500
543,293
-
-
-
-
-
-
-
-
-
-
1,742,500
1,306,875
(435,625)
-
-
2,613,750
2,075,833
1,518,903
-
-
-
-
-
-
-
-
-
-
-
-
Value
Cents
per
share
Cost $
0.0
0.0
-
-
8.5
176,446
16.6
252,138
(1,500,000) 1,500,000
(1,333,333) 1,333,333
(1,113,750) 1,113,750 (742,500)
742,500
(4,689,583) 4,689,583
-
-
-
-
-
1,500,000
975,610
1,333,333
-
-
-
-
-
-
-
1,113,750
543,293
742,500
1,518,903
4,689,583
428,584
(1) Rights that have met vesting conditions
Year of expense
2016
-
2017
284,505
Future
Years
144,079
13
13
Awarded as at
June 30 2015
-
Rights awarded in
2016 Tranche 1
1,000,000
Rights awarded in
2016 Tranche 2
750,000
Rights forfeited in
2016
(250,000)
-
-
-
1,500,000
-
-
-
Rights vested in
2016
Vested Rights
converted to
shares
Balance as at
30 June 2016
Rights awarded in
2017 Tranche 1
Rights awarded in
2017 Tranche 2
Rights forfeited in
2017
Rights that have
met vesting
conditions and will
vest in November
2017
Vested Rights
converted to
shares
Balance as at
30 June 2017
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DIRECTORS’
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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.
A Monte-Carlo simulation valuation methodology was used to determine the value relative to TSR growth. 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:
•
•
Tranche 1 - the agreed share price basis of rights allocation at the time of award (30 cents), the
duration of the award, the risk free interest rate (1.78%), share price volatility (120%), and
dividend yield (nil).
Tranche 2 - the agreed share price basis of rights allocation at the time of award (41 cents), the
duration of the award, the risk free interest rate (1.78%), share price volatility (120%), and
dividend yield (nil).
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.
4.3
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
ended 30 June 2017 and 30 June 2016.
IN AUD $
Remuneration
Post
Employment
Benefits
Other Long
Term
Benefits
Share
Based
Payments
Total
Key Management
Personnel
Year
Annual
Base
Salary (1)
Salary
& fees
Cash
based
incentive
Leave
(2)
Annual
Leave (3)
Super
Other (4)
Equity
EXECUTIVE
DIRECTORS
Mr J Pemberton (5)
EXECUTIVES
Mr A Walsh
Mr W Fair
Mr K Hyman
2017 800,000
810,399
300,000
-
52,613
19,616
13,357
182,741 1,378,726
2016 800,000 1,004,647 300,000(9) 514,278 (348,788)
19,308
(72,195)
27,928
1,445,178
2017 675,000
680,912
222,750
2016 675,000
655,693 222,750(9)
2017 435,770
432,160
2016 435,770
416,463
2017 358,600
386,272
2016 358,600
339,293
-
-
-
-
Mr D Donjerkovich (6)
2017 392,400
387,443
60,000
2016 392,400
200,896
30,000
Mr M Gloyne (7)
Mr G Dunn (8)
2017 500,000
498,211
2016 500,000
258,835
2017
Nil
-
2016 600,000
290,346
-
-
-
-
Total Compensated
(Consolidated) – 2017
2017
3,195,397
582,750
-
-
-
-
-
-
-
-
-
-
-
-
-
17,056
33,987
5,020
19,308
28,772
19,616
(11,285)
19,308
(13,360)
19,616
(1,435)
19,308
9,705
19,616
6,839
10,397
(513)
29,136
3,265
10,397
-
-
(17,905)
9,654
-
-
-
-
6,439
5,321
6,459
-
-
-
-
-
101,764 1,056,469
-
-
902,771
480,548
1,091
425,577
-
-
-
-
-
-
-
-
398,967
362,487
423,223
248,132
526,834
272,497
-
282,095
94,273
141,587
26,255
284,505 4,264,763
Total Compensated
(Consolidated) – 2016
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.
552,750 514,278 (364,289)
3,166,173
(66,874)
107,680
29,019
2016
3,938,737
14
14
NRW ANNUAL REPORT 2017 | Directors’ Report
DIRECTORS’
REPORT CONTINUED
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.
Following the release of 2016 annual report results, there was a $30,000 discretionary bonus was paid in respect to the FY16 year.
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. 2016 cash based incentives awarded as shares, see note 4.1.
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 $150,000, (2016; $125,000) and to Non-Executive Directors is $100,000, (2016; $100,000).
In addition, the chair of the Audit and Risk committee receives an additional fee of $25,000, (2016; Nil). 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 $
Remuneration
Post-Employment Benefits
Total
NON-EXECUTIVE DIRECTORS
Salary &
fees
Non cash
benefit
Superannuation
Mr M Arnett (1)
Mr J Dowling
Mr P Johnston
Dr I Burston (2)
Mr J Cooper (3)
NON-EXECUTIVE
DIRECTORS’ TOTAL
FY17
132,500
-
FY16
106,250
2,078
FY17
103,846
FY16
100,000
FY17
100,000
FY16
Nil
FY17
3,462
-
232
-
-
-
FY16
121,731
1,588
FY17
Nil
-
FY16
42,692
4,702
FY17
339,808
-
FY16
370,673
8,600
13,300
10,625
9,865
9,500
9,500
-
-
11,564
-
4,056
32,665
35,745
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.
145,800
118,953
113,711
109,732
109,500
Nil
3,462
134,883
Nil
51,450
372,473
415,018
Key Person
Held at 1
July 2015
Purchases
Held at 1
July 2016
Purchases
Share in lieu of
cash STI
Held at 30
June 2017
Mr M Arnett
344,474
650,000
994,474
-
Mr J Dowling
90,000
160,000
250,000
50,000
Mr P Johnston
-
Mr J Pemberton
3,014,404
Mr A Walsh
-
Mr W Fair
35,775
-
-
-
-
-
100,000
3,014,404
-
35,775
-
-
-
-
-
-
994,474
300,000
100,000
612,245
3,626,649
454,592
454,592
-
35,775
TOTAL
3,484,653
810,000
4,294,653
150,000
1,066,837
5,511,490
End of Remuneration Report (Audited)
1515
NRW ANNUAL REPORT 2017 | Directors’ ReportNRW ANNUAL REPORT 2017 | Directors’ Report DIRECTORS’
REPORT CONTINUED
ROUNDING OF AMOUNTS
Is a Company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors Reports)
Instruments, dated 24 March 2016, and in accordance with that Corporations Instruments amounts in the
financial report are rounded off to the nearest thousand Australian dollars, unless otherwise indicated.
This report has been made in accordance with a resolution of the Directors of the Company.
Julian Pemberton
Michael Arnett
Chief Executive Officer and Managing Director
Chairman and Non-Executive Director
16
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NRW ANNUAL REPORT 2017 | Directors’ Report
CORPORATE GOVERNANCE
STATEMENTS
CORPORATE GOVERNANCE
STATEMENTS
CORPORATE GOVERNANCE PRINCIPLES AND 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 year ended 30 June 2017.
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
2017, 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;
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.
17
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NRW ANNUAL REPORT 2017 | Corporate Governance StatementsNRW ANNUAL REPORT 2017 | Directors’ Report CORPORATE GOVERNANCE
STATEMENTS CONTINUED
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 Chairman 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.
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:
•
•
•
•
•
•
•
18
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.
18
NRW ANNUAL REPORT 2017 | Corporate Governance Statements CORPORATE GOVERNANCE
STATEMENTS CONTINUED
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
Mr Peter Johnston
The period of office held by each Director in office is as follows:
Director
Date Appointed
Period in
office
Due for
Re-election
Mr Michael Arnett
27 July 2007
10 years
2017 AGM
Mr Jeff Dowling
21 August 2013
4 years
2018 AGM
Mr Julian Pemberton
1 July 2006
11 years
Not Applicable
Mr Peter Johnston
1 July 2016
1 years
2018 AGM
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
Chairman, 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.
19
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NRW ANNUAL REPORT 2017 | Corporate Governance Statements CORPORATE GOVERNANCE
STATEMENTS CONTINUED
During the 2017 financial year one meeting of the Nomination & Remuneration Committee was held.
Certain responsibilities of the Nomination and 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.
20
20
NRW ANNUAL REPORT 2017 | Corporate Governance Statements CORPORATE GOVERNANCE
STATEMENTS CONTINUED
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 15.0%. For the year
ended 30 June 2017, the actual percentage of women employed was 13.45%. It should be noted that within
the NRW Civil and Mining business (the largest employment entity) the actual number was 19.18%.
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 www.wgea.gov.au.
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.
Principle 4: Safeguard Integrity in Financial Reporting
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.
21
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NRW ANNUAL REPORT 2017 | Corporate Governance Statements CORPORATE GOVERNANCE
STATEMENTS CONTINUED
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
company announcements are factual and presented in a clear and balanced way.
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;
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.
•
•
•
22
22
NRW ANNUAL REPORT 2017 | Corporate Governance Statements CORPORATE GOVERNANCE
STATEMENTS CONTINUED
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.
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.
23
23
NRW ANNUAL REPORT 2017 | Corporate Governance Statements CORPORATE GOVERNANCE
STATEMENTS CONTINUED
REMUNERATION POLICY DISCLOSURES
Disclosure of the Company’s remuneration policies is best served through a transparent and readily
understandable framework for executive remuneration that details the costs and benefits.
The Company 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.
24
24
NRW ANNUAL REPORT 2017 | Corporate Governance Statements AUDITOR’S INDEPENDENCE
DECLARATION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2
Brookfield Place
123 St Georges Terrace
Perth WA 6000
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
16 August 2017
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 2017, 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 Independence Declaration
25
25
NRW ANNUAL REPORT 2017 | Directors’ Report DIRECTORS’
DECLARATION
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, 16 August 2017
26
26
Directors’ Declaration
NRW ANNUAL REPORT 2017 | Directors’ Report CONTENTS
PAGE
CONTENTS
Consolidated Statement of Profit Or Loss And Other Comprehensive Income ................................................ 28
Consolidated Statement of Financial Position .................................................................................................. 29
Consolidated Statement of Changes In Equity ................................................................................................. 30
Consolidated Statement of Cash Flows ........................................................................................................... 31
Notes to the Financial Statements ................................................................................................................... 32
1. General Notes ..................................................................................................................................... 32
2.
Business Performance ........................................................................................................................ 34
3.
Balance Sheet ..................................................................................................................................... 40
4.
Capital Structure ................................................................................................................................. 50
5.
Financing ............................................................................................................................................ 59
6.
Taxation .............................................................................................................................................. 63
7. Other Notes ......................................................................................................................................... 67
Shareholder Information ................................................................................................................................... 77
Independent Auditor’s Report…………………………………………………………………………………............79
Appendix 4E ..................................................................................................................................................... 84
Contents
27
27
NRW ANNUAL REPORT 2017 | Directors’ ReportNRW ANNUAL REPORT 2017 | Directors’ Report
CONSOLIDATED STATEMENT OF PROFIT OR
CONSOLIDATED STATEMENT OF
LOSS AND OTHER COMPREHENSIVE INCOME
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2017
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 before income tax
Income tax benefit
Profit for the year
OTHER COMPREHENSIVE INCOME
Exchange differences arising on translation of foreign operations
Other comprehensive income / (expense) for the year, net of tax
2.4
(116,094)
Notes
2.2
2.3
2.3
3.3
2.4
3.6
2.4
6.1
Consolidated
2017
$’000
2016
$’000
344,560
287,973
303
(5,733)
(644)
(48,112)
(60,809)
(27,287)
-
320
(9,227)
(813)
(43,579)
(97,382)
(44,422)
(24,184)
(172)
(59,686)
(51,048)
(2,971)
23,527
5,000
28,527
-
-
(3,315)
14,150
7,300
21,450
(24)
(24)
TOTAL COMPREHENSIVE INCOME
28,527
21,426
Profit Attributable to:
Equity holders of the Company
Total Comprehensive Income Attributable to:
28,527
21,450
Equity holders of the Company
28,527
21,426
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
4.6
Cents
Cents
9.1
9.0
7.7
7.7
The consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.
28
NRW ANNUAL REPORT 2017 | Consolidated Statement of Profit or Loss and Other Comprehensive Income
28
NRW ANNUAL REPORT 2017 | Directors’ Report
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 30 June 2017
Notes
Consolidated
2017
$’000
2016
$’000
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
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
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits/(Accumulated losses)
Total equity
3.1
3.2
3.3
3.5
3.4
6.3
3.7
5.3
6.3
3.8
5.3
3.8
4.2
4.3
4.4
42,264
53,034
16,288
4,511
116,098
3,354
1,763
174,081
36,270
215,468
331,566
52,026
16,705
511
13,964
83,206
46,395
2,892
49,287
132,493
199,073
176,901
3,162
19,010
199,073
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
37,182
36,507
16,538
2,937
93,165
3,999
2,858
172,675
27,726
207,256
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
29
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NRW ANNUAL REPORT 2017 | Directors’ ReportNRW ANNUAL REPORT 2017 | Directors’ Report
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2017
Notes
Contributed
equity
Foreign
currency
translation
reserve
Share
based
payment
reserve
Total
Reserves
Retained
earnings/
(Accumulated
losses)
Total
Equity
$’000
$’000
$’000
$’000
$’000
$’000
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
BALANCE AT 1 JULY 2016
156,432
(208)
3,085
2,878
(9,519)
149,791
Profit for the year
4.4
Total comprehensive
income for the year
Issue of ord. shares
under share placement
Share issue costs
Income tax related to
share issue costs
Issue of shares to Executives
Share-based payments
Issue of treasury shares
to employees
Acquisition of treasury
shares - on market
4.2
4.2
4.2
4.2
4.3
4.2
4.2
-
-
20,497
(784)
235
523
-
21
(23)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
285
285
-
-
-
-
28,527
28,527
28,527
28,527
-
-
-
-
-
-
-
20,497
(784)
235
522
285
21
(23)
BALANCE AT 30 JUNE 2017
176,901
(208)
3,370
3,162
19,010
199,073
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
30
NRW ANNUAL REPORT 2017 | Consolidated Statement of Changes in Equity
30
NRW ANNUAL REPORT 2017 | Directors’ Report
CONSOLIDATED STATEMENT OF
CONSOLIDATED STATEMENT OF
CASH FLOWS
CASH FLOWS
For the year ended 30 June 2017
Consolidated
Note
2017
$’000
2016
$’000
368,498
360,995
(316,008)
(313,011)
2.3
2.3
(5,733)
303
-
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest paid
Interest received
Income tax refunded
Net cash flow from operating activities
5.1
47,060
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property, plant and equipment
Advances paid to associate
Acquisition of property, plant and equipment
Payment for subsidiary
Net cash (used in) / from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of equity instruments of the Company
Payment for share issue costs
Proceeds from issue of debt securities
Payment for debt issue costs
Proceeds from borrowings
3.4
7.5
4.2
4.2
5.3
895
(169)
(15,909)
(11,000)
(26,182)
20,497
(784)
70,000
(2,100)
3,634
(9,227)
320
8,524
47,600
9,815
(70)
(9,025)
-
720
-
-
-
-
4,086
Repayment of borrowings and finance/hire purchase liabilities
(107,020)
(49,855)
Payment for shares acquired by NRW Employee Share Trust
4.2
(23)
-
Net cash used in financing activities
(15,796)
(45,769)
NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at the end of the year
5,082
37,182
42,264
2,551
34,631
37,182
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
NRW ANNUAL REPORT 2017 | Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
31
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NRW ANNUAL REPORT 2017 | Directors’ ReportNRW ANNUAL REPORT 2017 | Directors’ Report
NOTES TO THE
NOTES TO THE
FINANCIAL STATEMENTS
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 2017 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 Corporations (Rounding in Financial/Directors
Reports) Instruments, dated 24 March 2016, and in accordance with that Corporations
Instruments 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. This includes a restatement of note 7.1 relating to the financial
information of the entities party to the Deed of Cross Guarantee, to exclude Action Drill & Blast
Pty Ltd from the comparative information, to which it was not party to;
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 2016;
does not early adopt any Accounting Standards and Interpretations that have been issued or
amended but are not yet effective. Refer to note 7.8 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 16 August 2017.
32
32
NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 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.
33
33
NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised:
•
•
if the revision affects only that period; or
in the period of the revision and future periods if the revision affects both current and future
periods.
Critical Judgements in Applying Accounting Policies
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
Deferred tax
Acquisition accounting
Note
6.3
7.5
Page
65
73
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:
•
•
•
34
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 business provides contract drill and blast
services to mining (including iron ore, coal, gold and lithium) and civil projects throughout
Australia.
AES Equipment Solutions (AES). The AES Equipment Solutions business provides maintenance
services to the mining and resources sectors including the fabrication of water and service
trucks.
34
NRW ANNUAL REPORT 2017 | Notes to the Financial Statements Interest costs in segment
results above
Group revenue inc.
Associates / Normalised
EBIT (2) / EBITDA (1)
Legal and break costs related
to debt restructure and
acquisition of the Hughes
business
Revenue and earnings
before interest and tax
Net finance costs
Income tax benefit
Total statutory revenue /
Net profit after tax
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Reportable segment revenues and results
2017
2016
Revenue
Earnings
EBITDA(1)
Revenue
Earnings
EBITDA(1)
$’000
$’000
$’000
$’000
$’000
$’000
NRW Civil and Mining
272,678
27,224
46,612
203,635
18,054
33,239
Action Drill & Blast
88,120
AES Equipment Solutions
16,279
4,242
(698)
Inter-segment eliminations
(6,780)
-
9,999
81,915
2,266
(94)
-
13,556
(1,364)
(11,133)
-
8,126
(590)
-
Unallocated costs
(4,602)
(3,064)
-
5,430
5,430
-
-
(5,176)
(2,811)
9,278
9,278
370,297
31,596
58,883
287,973
23,058
47,242
Share of revenue from equity
accounted associates
(25,737)
-
-
(2,639)
-
-
-
-
344,560
28,957
287,973
23,058
(5,430)
5,000
28,527
(8,908)
7,300
21,450
(1) EBITDA is earnings before interest tax depreciation and amortisation and excluding legal costs associated with the note issue, early termination costs of the
existing bank debt and costs related to the acquisition of the Hughes business, (“transaction costs”).
(2) Normalised EBIT is earnings before interest and tax and transaction costs.
Segment assets and liabilities
Segment Assets
Segment Liabilities
2017
$’000
NRW Civil and Mining
190,818
Action Drill & Blast
AES Equipment Solutions
Unallocated assets
Consolidated
77,942
7,621
55,185
331,566
2016
$’000
186,924
61,173
8,580
43,743
300,421
2017
$’000
(94,866)
(33,199)
(3,068)
(1,360)
2016
$’000
(119,288)
(28,520)
(2,777)
(45)
(132,493)
(150,630)
35
35
NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 2017:
NRW Civil & Mining Action Drill & Blast
AES Equipment
Solutions
Major customer 1
Major customer 2
Total for continuing operations
$’000
116,189
82,639
198,828
$’000
8,387
-
8,387
$’000
-
4,961
4,961
These are summarised by segment below for the comparative year end 30 June 2016:
NRW Civil & Mining Action Drill & Blast
AES Equipment
Solutions
Major customer 1
Major customer 2
Major customer 3
$’000
105,637
50,030
18,125
Total for continuing operations
173,792
Other segment information
$’000
26,326
-
15,963
42,289
$’000
-
3,431
-
3,431
Total
$’000
124,576
87,600
212,176
Total
$’000
131,963
53,461
34,088
219,512
Depreciation and Amortisation
Additions to non-current assets
2017
$’000
2016
$’000
NRW Civil and Mining
19,388
15,185
Action Drill & Blast (1)
AES Equipment Solutions
Other
5,757
604
1,538
5,860
774
2,365
2017
$’000
11,911
15,786
488
-
2016
$’000
7,294
1,674
57
-
Total for continuing operations
27,287
24,184
28,185
9,025
(1) $12.3 million of the Action Drill & Blast additions for the year ended 2017 related to the Hughes Drilling acquisition disclosed at note 7.5.
36
36
NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2.2
Revenue
Consolidated
2017
$’000
370,297
(25,737)
344,560
2016
$’000
287,973
-
287,973
Revenue - group and equity accounted joint venture
Equity accounted joint venture
Revenue
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 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 upon the delivery of the service to customers.
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.
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. Determining the stage of
3737
NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
completion requires an estimate of expenses incurred to date as a percentage of total estimated contract
costs. 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.
2.3
Net Finance Expense
Consolidated
Interest income
Total finance income
Interest on obligations under finance leases
Interest on corporate notes
Total finance expenses
NET FINANCE EXPENSE
Interest Income
2017
$’000
303
303
(2,494)
(3,239)
(5,733)
(5,430)
2016
$’000
320
320
(9,227)
-
(9,227)
(8,908)
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 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 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.
38
38
NRW ANNUAL REPORT 2017 | Notes to the Financial Statements 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 maintenance and operating costs
Subtotal
2017
$’000
(107,435)
(8,374)
(285)
(116,094)
310
310
(26,192)
(1,095)
(27,287)
(3,186)
(11,077)
(45,423)
(59,686)
2016
$’000
(90,848)
(6,534)
-
(97,382)
137
137
(22,460)
(1,724)
(24,184)
(3,910)
(11,690)
(35,448)
(51,048)
39
39
NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3. BALANCE SHEET
3.1
Trade and Other Receivables
Consolidated
CURRENT RECEIVABLES
Trade receivables
Other receivables
Retentions
Loans to associates
Subtotal
Other accrued revenue
Amounts accrued under long term construction contracts
Total trade and other receivables
2017
$’000
28,323
530
77
239
29,169
20,377
3,488
53,034
2016
$’000
20,488
20
41
70
20,619
16,549
(661)
36,507
Trade receivables represent value of work completed and invoiced to the client but not yet paid at the balance
sheet date. Activity that has been assessed to have been completed but has not yet been invoiced at balance
sheet date is recognised as accrued revenue.
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 2017, 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
Total
Consolidated
2016
$’000
10
20
30
2017
$’000
52
9
61
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.
40
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
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
2017
$’000
311,070
307,582
3,488
3,488
-
3,488
2016
$’000
407,197
407,858
(661)
-
(661)
(661)
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
2016
$’000
14,886
(659)
2,311
16,538
2017
$’000
14,295
(330)
2,323
16,288
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 prior year ended 30 June 2016, 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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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.
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.
Salini Impregilo NRW Joint Venture (SI-NRW JV)
During the comparative year the Group formed a Joint Venture company with Salini Impregilo of Italy which
was subsequently awarded the Forrestfield–Airport Link contract for the Public Transport Authority of Western
Australia. The contract is worth $1,176 million to be delivered over four years. The Group’s share of the joint
venture is 20%.
As at 30 June 2017, NRW’s share of revenue is $25.7 million (2016: $nil).
42
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 24
November 2014. 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 marketing
costs, and depreciation of the drill rig, the Company’s principle asset.
NewGen Drilling Pty Ltd
Revenue
Loss for the period after tax
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
2017
$’000
94
(3,222)
446
18,197
(1,872)
-
16,771
2016
$’000
-
(4,065)
114
20,574
(694)
-
19,994
Reconciliation and movement in the Group’s carrying value of its investment in NewGen Drilling Pty Ltd:
Opening Cost of the investment in associate
Share of loss for the period
CLOSING COST OF INVESTMENT IN ASSOCIATE
2017
$’000
3,999
(644)
3,354
2016
$’000
4,812
(813)
3,999
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.4
Property, Plant and Equipment
Property, plant and equipment held by the Consolidated Group include:
Land
Buildings
Leasehold
improvements
Plant and
equipment
Total
$’000
$’000
$’000
$’000
$’000
COST
Balance as at 30 June 2015
3,218
6,514
1,431
561,236
572,397
Additions
Disposals
-
-
-
-
-
-
9,025
9,025
(71,279)
(71,279)
Balance as at 30 June 2016
3,218
6,514
1,431
498,982
510,144
Acquisitions through business combinations
(note 7.5)
Additions
Disposals
-
-
-
-
-
-
-
-
-
12,276
12,276
15,909
15,909
(24,192)
(24,192)
Balance as at 30 June 2017
3,218
6,514
1,431
502,974
514,137
DEPRECIATION & IMPAIRMENT
Balance as at 30 June 2015
1,000
Depreciation and amortisation expense
Reversal of impairment
Disposals
-
-
-
4,259
386
-
-
1,054
215
-
-
375,817
382,132
21,860
22,461
(5,523)
(5,523)
(61,601)
(61,601)
Balance as at 30 June 2016
1,000
4,645
1,269
330,554
337,470
Depreciation and amortisation expense
Disposals
-
-
323
-
162
-
25,707
26,192
(23,607)
(23,607)
Balance as at 30 June 2017
1,000
4,969
1,431
332,656
340,055
CARRYING VALUES
At 30 June 2016
At 30 June 2017
2,218
2,218
1,869
1,545
162
-
168,428
172,675
170,318
174,081
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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.
During the prior period ended 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.
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 prior year’s impairment movements are
included in note 3.6.
45
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.5
Intangible Assets
Intangibles held by the Group include:
Software and System
Licences
$’000
$’000
COST
Balance as at 30 June 2015
Additions
Balance as at 30 June 2016
Additions
Balance as at 30 June 2017
AMORTISATION & IMPAIRMENT
Balance as at 30 June 2015
Amortisation expense
Balance as at 30 June 2016
Amortisation expense (note 2.4)
Balance as at 30 June 2017
CARRYING VALUES
At 30 June 2016
At 30 June 2017
19,813
-
19,813
-
19,813
15,250
1,719
16,969
1,090
18,059
2,844
1,755
1,453
-
1,453
-
1,453
1,436
5
1,440
5
1,445
13
8
Total
$’000
21,267
-
21,267
-
21,267
16,686
1,724
18,409
1,095
19,504
2,858
1,763
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.
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.
46
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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.
Property, plant and equipment (note 3.4)
Inventory (note 3.2)
Total Impairment
Consolidated
2017
$’000
-
-
-
2016
$’000
(5,523)
5,695
172
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 in prior years.
Cash Generating Units (CGU’s)
The Company has identified no indicators of impairment for the NRW Civil and Mining CGU. However, the
Company has identified indicators of impairment for each of the Action Drill & Blast (ADB) and AES
Equipment Solutions (AES) CGUs, and accordingly has 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.
The recoverable values determined for Action Drill & Blast and AES Equipment Solutions were in excess of
the carrying values as at 30 June 2017 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 Action Drill & Blast and AES Equipment Solutions were based on Board
reviewed business plan for the years ending 30 June 2018 and 30 June 2019. Growth assumptions thereafter
are 5-10% (2016: <1%) per annum for future years. The terminal value assumes growth of 3% (2016: 3%).
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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Sensitivity Analysis
The Company undertook sensitivity analysis with regard to the post Board reviewed business plan growth
rates, adjusting to a range of 1-2% (year-on-year) growth per annum. Terminal value growth rates have been
sensitised to 2.5% and the discount rate increased to 17.9%. Individually, these sensitivities did not result in
recoverable values lower than the carrying value of the CGUs as at 30 June 2017.
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
Consolidated
CURRENT PAYABLES
Trade payables
Goods and service tax
Other payables
Accruals
Total trade and other payables
2017
$’000
28,505
1,702
1,377
20,442
52,026
2016
$’000
18,131
1,096
1,415
23,763
44,405
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 30 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.
48
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.8
Provisions
Consolidated
Onerous
lease &
contracts
Warranty
& other
Employee
benefits
Total
$’000
$’000
$’000
$’000
Balance at 1 July 2016
1,784
1,105
Provisions for acquisition of Hughes Drilling
Provisions made during the year
Reductions arising from payments
Reductions resulting from re-measurement
Balance at 30 June 2017
Short-term provisions
Long-term provisions
-
270
-
(626)
1,428
1,075
353
6,850
3,771
9,739
3,771
-
2,257
9,932
12,459
-
78
(8,565)
(8,565)
-
(548)
3,440
11,988
16,856
3,397
9,492
13,964
43
2,496
2,892
Total balance at 30 June 2017
1,428
3,440
11,988
16,856
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 one and a
half years of the current lease.
The warranty provisions relate 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.
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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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. This includes consideration of future increases in wages and salaries,
future on cost rates, 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 a function of the capital structure, dividends
and movements in debt.
The gearing ratio was calculated at 30 June 2017 as:
Consolidated
2016
$’000
96,486
(37,182)
59,304
149,791
39.6%
2017
$’000
63,099
(42,264)
20,835
199,073
10.5%
Borrowings (note 5.3)
Cash
Net Debt
Total equity
Net Debt to Equity Ratio
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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 NRW Corporate
Notes issued on 19 December 2016, cash and cash equivalents, and equity. The majority of debt funding was
established to acquire the current fleet of assets utilised in the operations of both NRW Civil and Mining and
Action Drill & Blast.
The cash position is reviewed regularly and the Group had access to an interchangeable working capital
facility (overdraft) as at 30 June 2017, as disclosed at note 5.3.
Interest Rate Risk Management
Principal and interest payments under the NRW Corporate Notes issued 19 December 2016 are made
quarterly. The term under the NRW Corporate Notes is to December 2020. The Board continues to review its
risk associated with any covenants and borrowing conditions on a regular basis. The long term debt,
specifically the NRW Corporate Notes, is at a fixed interest rate of 7.5% per annum.
Consequently, 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 2017
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
1.5%
42,264
42,264
-
Trade and other receivables
-
53,034
25,892
27,142
Subtotal
95,298
68,156
27,142
-
-
-
FINANCIAL LIABILITIES
Corporate notes
Asset financing
7.5%
5.7%
66,358
615
-
28
20,418
45,940
346
241
704
Trade and other payables
-
52,026
18,139
33,184
Subtotal
118,999
18,167
53,948
46,885
-
-
-
-
-
-
-
51
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Consolidated interest and liquidity analysis 2016
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
0.00%
37,182
37,182
-
Trade and other receivables
-
36,507
19,742
16,765
Subtotal
73,689
56,924
16,765
-
-
-
FINANCIAL LIABILITIES
Asset financing
6.93%
105,268
3,735
42,621
58,912
Trade and other payables
-
44,405
15,863
28,542
-
Subtotal
149,673
19,598
71,163
58,912
-
-
-
-
-
-
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 (AUD). 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 rates.
The cash balances held in Guinea at 30 June 2017 (at spot) was $13,767 AUD (2016: $141,000 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 2017 total at $8.4 million (2016: $4.6 million) and contract guarantees provided
by the insurance market total $3.0 million (2016: $46.6 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
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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.
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 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
53
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
•
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.
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 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.
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FINANCIAL STATEMENTS CONTINUED
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.
4.2
Issued Capital
Fully Paid Ordinary Shares
ORDINARY SHARES
321,775,556 fully paid ordinary shares
(2016: 278,877,219)
Consolidated
2017
$’000
2016
$’000
176,901
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.
Consolidated
2017
# No. ‘000
2017
$‘000
2016
# No. ‘000
2016
$‘000
FULLY PAID ORDINARY SHARES
Balance at the beginning of the financial year
278,877
156,432
278,877
156,432
Capital raising at $0.49 share
Share issue costs net of tax
Income tax related to share issue costs
Issue of shares to executives
Issue of shares to employees
Acquisition of treasury shares
41,833
-
-
1,066
-
-
20,497
(784)
235
523
21
(23)
-
-
-
-
-
-
-
-
-
-
-
-
Balance at the end of the period
321,776
176,901
278,877
156,432
The Company has on issue a total of 321,786,348 (2016: 278,888,011) ordinary shares, of which 10,792
(2016: 10,792) shares are held by subsidiaries of the Company and eliminated on consolidation.
4.3
Reserves
Share based payment reserve
Foreign currency reserve
Total reserves
Consolidated
2017
$’000
3,370
(208)
3,162
2016
$’000
3,085
(208)
2,878
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Share Based Payment Reserve
Balance at the beginning of the financial year
Share based payments
Balance at the end of the financial year
Consolidated
2017
$’000
3,085
285
3,370
2016
$’000
3,085
-
3,085
Information relating to 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 in the Remuneration Report.
Share based compensation payments are provided to employees in accordance to the Company’s
Performance Rights Plan (‘PRP’) 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 equity instruments granted is adjusted to reflect market Vesting
Conditions, but excludes the impact of any non-market Vesting Conditions.
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 performance rights, the balance of the share‑based payments reserve relating to those
performance rights is transferred to issued capital and the proceeds received, net of any directly attributable
transaction costs, are credited to issued capital.
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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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
2016
$’000
(184)
(24)
(208)
2017
$’000
(208)
-
(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
Retained Earnings / (Accumulated Losses)
Balance at the beginning of the financial year
Net profit attributable to members of the parent entity
Balance at the end of the financial year
4.5
Dividends
Consolidated
2017
$’000
(9,519)
28,527
19,010
2016
$’000
(30,969)
21,450
(9,519)
In the context of the recent acquisition of Golding announced on 14 August 2017 the Directors have decided
not to pay a final dividend for the year ended 30 June 2017 (2016 – nil). At this stage, the Directors consider
the most appropriate use of available funds is to retain flexibility for the integration of Golding and ensure an
appropriate level of gearing is maintained. The Directors will regularly review the payment of dividends in light
of the earnings, cash flow and franking credits position of the Company.
Franking Account
Franking account balance at 1 July
Australian income tax (refund)
Franking account balance at 30 June
Franking credits that will arise from the payment of income tax payable as at
reporting date
Net franking credits available
Consolidated
2016
$’000
47,524
(8,517)
39,007
-
39,007
2017
$’000
39,007
-
39,007
511
39,518
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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 for the year
Weighted average number of shares for the
purposes of basic earnings per share (000’s)
Consolidated
2017
$‘000
28,527
2016
$‘000
21,450
311,771
278,877
Basic earnings per share
9.1 cents per share
7.7 cents per share
Shares deemed to be issued for no consideration in respect of:
– Performance rights (000’s)
Weighted average number of shares used for the
purposes of diluted earnings per share (000’s)
5,910
317,681
1,088
279,965
Diluted earnings per share
9.0 cents 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 on issue during the financial 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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements 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 FOR THE PERIOD
Adjustments for:
Gain on sale of property, plant and equipment
Net foreign exchange gain
Depreciation and amortisation
Impairment of PP&E (excludes Inventories impairment)
Debt issue cost paid in advance (2)
Inventory write-offs non cash (1)
Share of loss from associates
Share based payment expense
Issue of shares to executive management
Tax effect of share issue costs recognised in equity
2017
$’000
28,527
(310)
-
27,287
-
2,100
-
644
285
543
235
2016
$’000
21,450
(137)
(23)
24,184
(5,523)
-
5,695
813
-
-
-
Net cash generated before movement in working capital
59,311
46,460
Change in trade and other receivables
Change in inventories excluding (1)
Change in other assets (2)
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
(1) Changes in inventories excluding Inventory non cash write-offs.
(2) Debt issue cost paid in advance included within change in other assets.
(17,634)
250
(1,574)
7,622
7,117
512
(8,544)
47,060
37,510
6,184
783
(41,813)
(2,747)
6,124
(4,900)
47,600
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements 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
2017
$’000
8,432
2,971
11,403
The Group has contract performance bank guarantees and insurance bonds issued 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
On 19 December 2016, the Group issued 70,000 Corporate Notes with a coupon rate of 7.5% per annum, at
$70.0 million principal value. Fixed repayments of $5.1 million will be payable quarterly over 4 years, with the
final payment due December 2020. These are secured over specific fixed assets of the Group.
Borrowing costs in relation to the issue of secured corporate notes have been capitalised to other current
assets on the statement of financial position. These costs will be amortised equally over the 4-year term of the
bonds.
Various financial institutions provide the Group with fixed interest rate finance leases, secured by the
underlying asset financed.
As at the date of signing the annual accounts the Company is in compliance with its obligations under its
facilities. The Company expects to be in compliance with agreed covenants throughout the year ending 30
June 2018.
Information on the amounts drawn under the Company’s finance facilities are provided in the table below.
The Group borrowings are comprised of:
Consolidated
SECURED AT AMORTISED COST
Current
Corporate notes
Finance lease liability
Total current borrowings
Non-current
Corporate notes
Finance lease liability
Total non-current borrowings
GROUP TOTAL BORROWINGS
60
2017
$’000
16,331
374
16,705
46,153
241
46,394
63,099
2016
$’000
-
37,414
37,414
-
59,072
59,072
96,486
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
During the year ended 30 June 2017, the Company agreed a new multi-option general banking facility with a
regional bank in Western Australia. The agreement provides NRW with a facility to be used for contract
guarantees, and a facility which can be used for either contract guarantees or as working capital (an overdraft
facility).
Finance Facilities
Consolidated finance facilities as at 30 June 2017
Finance Description
Corporate notes
Asset financing(1)
Guarantees and insurance bonds(2)
Face Vale (limit)
$’000
Carrying Amount (utilised)
$’000
Unutilised Amount
$’000
62,484
615
62,500
62,484
615
11,403
-
-
51,097
(1) Terms range from 1 to 3 years.
(2) $10.0 million of the overall limit is interchangeable as an overdraft facility
Consolidated finance facilities as at 30 June 2016
Finance Description
Asset financing(1)
Guarantees and other funding
(1) Terms range from 1 to 3 years.
Finance Leases as Lessee
Face Vale (limit)
$’000
Carrying Amount (utilised)
$’000
Unutilised Amount
$’000
96,486
25,000
96,486
4,593
-
20,407
Non-cancellable finance leases are as outlined above and are payable as follows:
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
2017
$’000
398
247
-
645
(30)
615
2016
$’000
42,890
62,378
-
105,268
(8,782)
96,486
2017
$’000
374
241
-
615
-
615
2016
$’000
37,414
59,072
-
96,486
-
96,486
Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging
from 3.94% to 6.25% (2016: 5.37% to 7.48%).
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
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 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
As at 30 June 2017 the Group has capital and other commitments totalling $1.3 million (2016: nil)
5.5
Operating Leases
Non-cancellable operating and property lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
Total operating and property leases
Consolidated
2016
$’000
2,936
2,981
-
5,917
2017
$’000
4,150
4,002
-
8,152
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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
6. TAXATION
6.1
Income Tax Recognised in Profit or Loss
Consolidated
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 (brought)/not brought to account
Total income tax benefit
6.2
Reconciliation of Effective Tax Rate
Profit before tax for the period
INCOME TAX USING THE COMPANY’S DOMESTIC TAX RATE OF 30%
Changes in income tax expense due to:
2017
$’000
-
511
511
4,245
(9,756)
(5,000)
2017
$’000
23,527
7,058
2016
$’000
1
(2,402)
(2,401)
(17,410)
12,510
(7,300)
2016
$’000
14,150
4,245
Consolidated
Effect of expenses that are not deductible in determining taxable profit
525
166
Adjustments recognised in the current year in relation to the effect of tax
consolidation
(2,777)
(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)
Effect of different income tax rates for subsidiaries operating in a different tax
jurisdiction
Deferred tax assets (brought)/not brought to account
Total income tax benefit
(50)
-
(9,756)
(5,000)
(821)
5
12,510
(7,300)
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.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 prior period 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.
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.
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.
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.
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
6.3
Current and Deferred Tax Balances
Current Tax Liabilities
Income tax payable
Total
Deferred Tax Balances
Consolidated
2017
$’000
511
511
2016
$’000
-
-
Assets
Liabilities
Net
Share based payments
Costs of equity raising FY2017
2017
$’000
341
301
2016
$’000
341
-
2017
$’000
-
-
Provisions
5,452
3,119
(152)
2016
$’000
-
-
-
-
2017
$’000
341
301
2016
$’000
341
-
5,300
3,119
606
-
Work in progress (construction)
Inventories
PP&E
Other creditors and accruals
Other assets
Losses
606
-
409
849
464
-
-
268
351
94
-
(3,030)
(4,571)
(3,030)
(4,571)
(8,823)
(4,867)
(8,414)
(4,598)
-
-
(367)
(276)
849
97
351
(182)
40,219
33,264
-
-
40,219
33,266
Deferred tax assets / (liabilities)
48,641
37,438
(12,372)
(9,713)
36,270
27,726
Movement of Deferred Tax Balances
DEFERRED TAX EXPENSE
Recognised in profit or loss
Recognised directly in equity
Balance acquired through business combinations
Total
Consolidated
2016
$’000
4,902
-
-
4,902
2017
$’000
5,512
235
2,797
8,544
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.
65
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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.
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:
Consolidated
2017
$’000
21,913
2016
$’000
31,670
Tax losses (revenue in nature)
Key Accounting Judgments and Estimates
Recoverability of Deferred Tax Asset
The recoverability of the Group’s deferred tax balances is 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
A further incremental deferred tax asset which arose upon formation of the tax consolidation group has been
quantified and relates to a recalculation of the tax cost bases allocated to assets. This has incremented the
unrecognised deferred tax losses above.
66
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7. OTHER NOTES
7.1
Subsidiaries
Parent entity
Principal
Activities
Country of
incorporation
Ownership interest
2017
2016
NRW Holdings Limited
Holding company
Australia
-
-
WHOLLY OWNED SUBSIDIARIES
NRW Pty Ltd as trustee for NRW Unit Trust
NRW Civil & Mining
Australia
100%
100%
Actionblast Pty Ltd
NRW Mining Pty Ltd
AES Equipment
Solutions
Australia
100%
100%
Investment Shell
Australia
100%
100%
NRW Intermediate Holdings Pty Ltd
Intermediary
Australia
100%
100%
ACN 107724274 Pty Ltd
Plant and Tyre
Sales
Australia
100%
100%
NRW Guinea SARL
Contract Services
Guinea
100%
100%
Indigenous Mining & Exploration Company Pty Ltd
Investment Shell
Australia
100%
100%
NRW International Holdings Pty Ltd
Investment Shell
Australia
100%
100%
Action Drill & Blast Pty Ltd (formerly NRW Drill & Blast Pty Ltd)
Action Drill & Blast
Australia
100%
100%
Hughes Drilling 1 Pty Ltd (note 7.5)
Action Drill & Blast
Australia
100%
-
All of the wholly-owned subsidiaries and Parent entity, incorporated in Australia, have formed a Tax
Consolidation Group effective 1 July 2014.
67
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
Deed of Cross Guarantees
Pursuant to ASIC Class Order 98/1418 (as amended) dated 22 June 2011, the wholly-owned subsidiaries
listed in note 7.1 as parties to the Deed of Cross Guarantee are relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of Financial Reports and Directors’ Reports. It should be
noted that by deed of assumption, the following entities joined the existing Deed of Cross Guarantee on 26
June 2017:
•
•
•
Action Drill & Blast Pty Ltd
Hughes Drilling 1 Pty Ltd
NRW International Holdings Pty Ltd
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 before income tax
Income tax expense
Profit for the year
2017
$’000
344,560
303
(5,733)
(644)
(48,112)
(116,094)
(60,809)
(27,287)
-
(59,686)
(2,971)
23,527
5,000
28,527
2016
$’000
206,058
307
(7,737)
(813)
(19,969)
(64,504)
(39,224)
(11,968)
(172)
(41,604)
(1,972)
18,403
6,631
25,034
Consolidated
2017
$’000
2016
$’000
OTHER COMPREHENSIVE INCOME
Total comprehensive income for the year
28,527
25,034
68
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
The consolidated statement of financial position of the entities party to the deed of cross guarantees is:
STATEMENT OF FINANCIAL POSITION
Consolidated
2017
$’000
2016
$’000
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Investment in associates
Property, plant and equipment
Intangibles
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
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings / (Accumulated losses)
Total equity
42,250
53,034
16,288
4,511
116,084
3,354
174,081
1,763
36,270
3
215,471
331,555
52,052
16,705
511
13,964
83,231
46,395
2,892
49,287
132,518
199,037
176,901
3,370
18,766
199,037
29,076
24,641
12,519
2,207
68,443
3,999
149,834
2,752
30,124
-
186,708
255,152
45,567
31,263
-
6,031
82,861
49,012
1,404
50,416
133,277
121,875
156,429
3,085
(37,640)
121,875
69
69
NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements
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
NRW-NYFL Joint Venture
Bulk Earthworks construction to increase the size of Rio’s
Nammuldi Waste Fines Tails Dam wall - completed
NRW-Eastern Guruma Joint Venture
Construction of the HME Overpass and the Silvergrass
Access Roads - completed
City East Alliance
Upgrade of Great Eastern Highway - 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) - completed
ADB Guma ICRG Joint Venture
Production Blast Hole Drilling Services – completed.
NRW Eastern Guruma Wirlu-Murra
Enterprises Joint Venture
Construction of a tailings dam at FMG’s Solomon Mine
2017
85%
50%
15%
50%
75%
50%
2016
85%
50%
15%
50%
75%
-
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 NRW Eastern Guruma Wirlu-Murra Enterprises
Joint Venture.
The following amounts are included in the Group’s consolidated financial statements as a result of the
proportionate consolidation of the above interests in joint operations.
Financial Information
Consolidated
STATEMENT OF FINANCIAL PERFORMANCE
Income
Expenses
STATEMENT OF FINANCIAL POSITION
Current assets
Current liabilities
70
2017
$’000
14,575
(13,420)
1,440
991
2016
$’000
16,338
(16,195)
3,662
3,683
70
NRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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.
7.3
Parent Entity Information
As at, and throughout, the financial year ended 30 June 2017 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.
71
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements 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
Profit / (loss) for the year
Total comprehensive income
Parent
Parent
2016
$’000
45,703
69,184
114,887
45
-
45
156,456
(44,399)
2,786
114,843
2016
$’000
(13,352)
(13,352)
2017
$’000
133,888
78,521
212,409
17,691
46,153
63,844
176,925
(31,453)
3,093
148,565
2017
$’000
12,946
12,946
Guarantees Entered into by the Parent in Relation to the Debts of its Subsidiaries
Finance leases
Total
Parent
2016
$’000
96,486
96,486
2017
$’000
615
615
NRW Holdings Limited has entered into a Deed of Cross Guarantee as disclosed in note 7.1.
72
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NRW ANNUAL REPORT 2017 | Notes to the Financial Statements 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
There are no sales of goods or services to, or purchases from, related parties at reporting date.
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
Business Combinations
On 9 December 2016, 100% of the ordinary shares of Hughes Drilling 1 Pty Ltd (Hughes) were acquired as
part of the Group's continued expansion of drill and blast activities on the east coast of Australia. Total
purchase consideration of $11.0 million was paid in cash at the date of acquisition.
Assets acquired and liabilities assumed at the date of acquisition:
CURRENT ASSETS
Trade and other receivables
Inventories
NON-CURRENT ASSETS
Property, plant and equipment
Goodwill
Deferred tax assets
CURRENT LIABILITIES
Provisions - current
NON-CURRENT LIABILITIES
Provisions - non current
Net assets acquired and liabilities assumed
$000's
4,135
1,114
12,276
-
2,797
(8,109)
(1,214)
11,000
The initial accounting for the acquisition of Hughes Drilling 1 Pty Ltd has only been provisionally determined at
the end of this reporting period. The Directors will continue to assess asset and project performance to ensure
the balance sheet reflects the best estimates of the fair values of the assets and liabilities assumed on
acquisition.
For tax purposes, when joining the NRW Holdings Ltd Tax Consolidated Group, the tax values of Hughes'
assets are required to be reset based on market values of the assets. At the date of finalisation of these
consolidated financial statements, the necessary valuations and other calculations had not been finalised and
they have therefore only been provisionally determined based on best estimates of the likely tax values.
Goodwill arising on acquisition:
No goodwill arose as part of the business combination of Hughes Drilling 1 Pty Ltd.
Impact of acquisition on the results of the Group
Additional Revenue generated by the acquisition has been estimated at around $21.0 million which includes
revenue from some existing ADB contracts which were combined post acquisition, as work was being
performed in both businesses for the same client. Profit attributable to the Hughes business has been
assessed including allocation of group costs at circa $1.1 million.
73
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
It is impractical to determine what revenue and profit for the Group would have been had the acquisition
occurred on 1 July 2016.
7.6
Auditor’s Remuneration
AUDIT SERVICES
Auditors of the Company
Deloitte Touche Tohmatsu
OTHER SERVICES
Coal levy audits
Accounting services related to Golding acquisition
Total
Consolidated
2017
$
2016
$
251,000
225,000
12,000
60,000
323,000
13,750
-
238,750
7.7
Events After the Reporting Period
On 14 August 2017, the company announced the execution of an agreement to acquire 100% of Golding
Group Pty Ltd (Golding) for total consideration of $85 million.
The acquisition will be funded via a combination of a new $48 million acquisition debt facility, a $25 million
equity placement and existing cash reserves. The acquisition debt facility is repayable in equal quarterly
instalments over 3 years and is in addition to those banking arrangements disclosed at note 5.3.
The $25 million equity placement involved the issue of 36.8 million new shares at a price of 68 cents per
share. As part of the acquisition and placement NRW announced the intention to undertake a share purchase
plan to eligible NRW shareholders capped at $5 million.
No other 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.
74
74
NRW ANNUAL REPORT 2017 | Notes to the Financial Statements
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.8
Changes to Accounting Policies
Adoption of New and Revised Accounting Standards and Interpretations
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current
financial year.
New and revised Standards and amendments thereof effective for the current financial year that are relevant
to the Group include:
Standard/Interpretation
AASB 2014-4
AASB 2015-1
Amendments to Australian Accounting Standards – Clarifications of Acceptable Methods of Depreciation and
Amortisation
Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards
2012-2014 Cycle
AASB 2015-2
Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101
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’
1 January 2018
30 June 2019
AASB 16 ‘Leases’
Amendments to IFRS 2 ‘Classification and Measurement of Share-based Payment
Transactions’
1 January 2019
30 June 2020
1 January 2018
30 June 2019
Amendments to IFRS 10 and IAS 28 ‘Sale or Contribution of Assets between an Investor and
its Associate or Joint Venture’
Date to be
determined
Date to be
determined
Amendments to IAS 7 ‘Disclosure Initiative’
1 January 2017
30 June 2018
Amendments to IAS 12 ‘Recognition of Deferred Tax Assets for Unrealised Losses’
1 January 2017
30 June 2018
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. Except for AASB 15, the Group has not fully considered the impact
of the new standards on the consolidated financial statements.
75
75
NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
AASB 15 ‘Revenue from Contracts with Customers’
Under AASB 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when
‘control’ of the goods or services underlying the particular performance obligation is transferred to the
customer.
The Group recognises revenue from the following major sources:
•
•
•
•
contracts for delivering private and public sector civil infrastructure projects
contracts for mining services, including mine development, contract mining, waste stripping and
ore haulage
contracts for providing drill and blast services to the mining and civil infrastructure sectors
maintenance services, including the sale of fabricated water and service trucks
The Directors of the Company have preliminarily assessed that no material differences would be measured in
recognising revenue under IFRS 15, when compared to the current standards. This will be continually
monitored with the successful award of each new contract in order to understand and quantify any impacts
leading up to the first applicable date for the Group, 1 July 2018.
76
76
NRW ANNUAL REPORT 2017 | Notes to the Financial Statements SHAREHOLDER
SHAREHOLDER
INFORMATION
INFORMATION
The shareholder information set out below was applicable as at 27 July 2017.
NRW’s contributed equity comprises 321,786,348 fully paid ordinary shares.
Distribution of Shareholdings:
Range
100,001 and Over
Fully paid ordinary
h
249,837,761
10,001 to 100,000
56,861,837
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
8,992,750
5,516,010
577,990
321,786,348
Unmarketable parcels
330,607
NRW’s 20 Largest Shareholders
Rank
Name
CITICORP NOMINEES PTY LIMITED
%
77.64
17.67
2.79
1.71
0.19
100.00
0.10
No of Holders
277
1,825
1,106
1,787
1,252
6,247
990
%
4.43
29.21
17.70
28.61
20.05
100.00
15.85
Shares
% Interest
35,438,190
11.01%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA LIMITED
33,304,491
10.35%
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
30,243,573
9.40%
ZERO NOMINEES PTY LTD
17,250,000
5.36%
BNP PARIBAS NOMINEES PTY LTD
7,337,884
2.28%
NATIONAL NOMINEES LIMITED
PRUDENTIAL NOMINEES PTY LTD
MR DAVID RONALDSON
6,461,081
2.01%
6,000,000
1.86%
4,238,959
1.32%
BRISPOT NOMINEES PTY LTD
3,959,967
1.23%
BNP PARIBAS NOMS PTY LTD
3,390,479
1.05%
JULIAN ALEXANDER PEMBERTON THE J P TRUST
3,152,259
0.98%
MR STEVEN SCHALIT
2,580,722
0.80%
BNP PARIBAS NOMINEES PTY LTD
2,561,355
0.80%
MR STEVEN SCHALIT & MS CANDICE SCHALIT
2,558,583
0.80%
MR MARTIN DUGGAN
2,229,000
0.69%
MR CHRISTOPHER KING
2,177,273
0.68%
MR PETER HOWELLS
NATIONAL EXCHANGE PROPRIETARY LTD
2,125,000
0.66%
2,000,000
0.62%
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
1,797,697
0.56%
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
1,640,054
0.51%
Shareholder Information
77
77
NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Notes to the Financial Statements SHAREHOLDER
INFORMATION CONTINUED
Substantial Shareholders
As at the date of this report, the names of the substantial holders in the Company who have notified the
company in accordance with Section 671B of the Corporations Act 2001 are set out below:
Name
No. of shares
Ownership %
Commonwealth Bank of Australia
Westoz Funds Management Pty Ltd
Dimensional Fund
Voting Rights
17,036,164
16,200,000
16,104,872
5.29%
5.03%
5.005%
Every shareholder present in person or represented by a proxy or other representative, shall have one vote
for each share held by them.
78
NRW ANNUAL REPORT 2017 | Shareholder Information
78
NRW ANNUAL REPORT 2017 | Directors’ Report INDEPENDENT AUDITOR’S
REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2
Brookfield Place
123 St Georges Terrace
Perth WA 6000
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report
to the members of NRW Holdings Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of NRW Holdings Limited (the Company) and its
subsidiaries (the Group), which comprises the consolidated statement of financial position as
at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income,
the consolidated statement of changes in equity and the consolidated statement of cash flows
for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of
its financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Financial Report section of our report. We are independent of the Group in accordance with
the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which
has been given to the directors of the Company, would be in the same terms if given to the
directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
NRW ANNUAL REPORT 2017 | Shareholder Information
Independent Auditor’s Report
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
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NRW ANNUAL REPORT 2017 | Notes to the Financial StatementsNRW ANNUAL REPORT 2017 | Directors’ Report INDEPENDENT AUDITOR’S
REPORT CONTINUED
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report for the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How the scope of our audit responded
to the Key Audit Matter
Assessment of deferred tax assets
As disclosed in note 6.3 to the financial
statements, the carrying value of the
Group’s net deferred tax asset as at 30
June 2017 was $36.3 million, inclusive of
$40.2 million of carry forward tax losses.
At 30 June 2017 unused tax losses for
which no deferred tax assets have been
recognised equated to $21.9 million.
Assessing the recoverability of carry
forward tax losses requires management
to forecast future taxable income and
estimate the extent to which these tax
losses will be utilised.
Judgement was required in assessing
management’s forecasted taxable income
and the expected utilisation of the
recognised tax losses over the forecast
period.
Acquisition of Hughes Drilling’s
operations
As disclosed in note 7.5 to the financial
statements, the Group completed the
acquisition of Hughes Drilling’s operations
in December 2016 for consideration of $11
million.
Management has completed the process to
allocate the purchase price to identifiable
assets, liabilities and separately identifiable
intangible assets as relevant. This process
involved estimation and judgement in
determining the plant and equipment
Our audit procedures included, but were not
limited to:
evaluating the process management has
in place to estimate the recoverable
amount of carry forward tax losses and
confirming the availability of tax losses;
evaluating management’s forecast of
future taxable income through assessing
the key underlying assumptions such as
future taxable income against historic
performance and where appropriate
external industry data;
reviewing management’s forecast of
taxable income for consistency with the
forecasts prepared for the purposes of
assessing the recoverable value of the
Company’s Cash Generating Units
(CGUs);
reconciling the latest Board approved
budget with management’s forecast of
future assessable profits;
applying sensitivities to the forecasted
future taxable income; and
assessing the appropriateness of the
related disclosures in note 6.3.
Our procedures included, but were not
limited to:
reading the relevant agreements to
understand the key terms and
conditions, and confirming our
understanding of the transaction with
management;
evaluating managements process for the
identification of the assets and liabilities
acquired;
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values, provisions and discount rates
applied to future cash flow forecasts.
evaluating management’s process for
the determination of the fair value of the
assets and liabilities acquired,
assessing the competence and
objectivity of management’s expert who
valued the plant and equipment and in
conjunction with our valuation specialists
we challenged the plant and equipment
valuations against external market sales
data available;
challenging in conjunction with our
valuation specialists management’s
conclusion that no intangible assets or
goodwill have been acquired;
challenging the provisions recognised in
respect of the acquisition; and
assessing the appropriateness of the
related disclosures in note 7.5.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Directors’ Responsibilities for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the
Group to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
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Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole
is free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with the Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether
due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in
the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the financial report,
including the disclosures, and whether the financial report represents the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
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From the matters communicated with the directors, we determine those matters that were of
most significance in the audit of the financial report of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits
of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 15 of the directors’ report for
the year ended 30 June 2017.
In our opinion, the Remuneration Report of NRW Holdings Limited, for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Deloitte Touche Tohmatsu
AT Richards
Partner
Chartered Accountants
Perth, 16 August 2017
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NRW ANNUAL REPORT 2017 | Corporate Governance StatementsNRW ANNUAL REPORT 2017 | Directors’ Report APPENDIX
APPENDIX
4E
4E
RESULTS FOR ANNOUNCEMENT TO THE MARKET
For the Year Ended 30 June 2017
% Change
up / (down)
Year ended
30 June 2017
Year ended
30 June 2016
$’000
$’000
Revenues from ordinary activities
19.65%
344,560
287,972
Profit from ordinary activities after tax attributable to members
32.99%
Total Comprehensive Income
32.99%
28,527
28,527
21,450
21,450
INTERIM DIVIDEND
Date dividend is payable
Record date to determine entitlements to dividend
Interim dividend payable per security (cents)
Franked amount of dividend per security (cents)
FINAL DIVIDEND
Date dividend is payable
Record date to determine entitlements to dividend
Final dividend payable per security (cents)
Franked amount of dividend per security (cents)
RATIOS AND OTHER MEASURES
N/A
N/A
-
-
N/A
N/A
-
-
N/A
N/A
-
-
N/A
N/A
-
-
Net tangible asset backing per ordinary security
$0.61
$0.53
Commentary on the Results for the Year
A commentary for the results for the year is contained in the statutory financial report dated 16 August 2017.
Status of Accounts
This statutory financial report is based on audited accounts.
NRW Holdings Limited - ACN 118 300 217
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NRW ANNUAL REPORT 2017 | Directors’ Report NRW HOLDINGS LIMITED
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Belmont, Western Australia 6104
+ 61 8 9332 4200
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