For personal use only 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
nrw.com.au
ASX Code
NWH
Dividend
2.0 cps
Workforce
2,000
1
NRW HOLDINGS ANNUAL REPORT 2018 | ContentsNRW HOLDINGS ANNUAL REPORT 2018 | ContentsNRW HOLDINGS ANNUAL REPORT 2018 | Corporate RegistryFor personal use only CONTENTS PAGE
04
05
14
Chairman’s Message
Business Unit Performance
Civil
Golding
CEO Review of Operations
08
08
09
09
10
10
11
12
People & Safety
Drill & Blast
Mining
Outlook
Pilbara Capability Milestones
CFO Financial Report
14
15
Financial Performance
Balance Sheet, Operating Cash Flow & Capital Expenditure
2
NRW HOLDINGS ANNUAL REPORT 2018 | ContentsNRW HOLDINGS ANNUAL REPORT 2018 | ContentsFor personal use only
“I would like to thank our employees
and leadership team for the
quality of work produced and the
high standards that were achieved
this year, together with welcoming
Golding into the NRW Group”
3
NRW HOLDINGS ANNUAL REPORT 2018 | Chairman’s MessageNRW HOLDINGS ANNUAL REPORT 2018 | Chairman’s MessageNRW HOLDINGS ANNUAL REPORT 2018 | Chairman’s MessageFor personal use only CHAIRMAN’S MESSAGE
It is with great pleasure we present NRW Holdings
annual financial results. Building on our focus to
capitalise on improving activity levels in the resources
and infrastructure sectors, NRW was successful in
achieving an outstanding result during the year ending
30 June 2018.
NRW delivered $754.3 million in revenue, which is
double that of the previous year, and grew the order
book to a record $2.2 billion at July 2018. Net profit
after tax increased by 48% from the previous year to
$42.2 million.
The acquisition of Golding was successfully
completed in September 2017. Since then Golding
has secured a number of key new contracts and
contract extensions on the east coast of Australia
including the $420 million Baralaba North Coal
contract with Wonbindi Coal. In Western Australia,
NRW was awarded the $324 million Dalgaranga
Mining contract for Gascoyne Resources and the
$176 million South Flank Civil contract for BHP
Iron Ore. Golding’s achievements together with the
contract awards in Western Australia underpin a
platform for significant growth for the years ahead.
Our team’s safety has always been and will always
remain our number one priority. The Company
reported a small change in our Total Recordable
Injury Frequency Rate, from 6.22 in June 2017 to
6.54 in June 2018 during a period where man hours
grew by 140%. We will continue with our unwavering
commitment to improving safety across all divisions in
the coming year.
I would like to thank our employees and leadership
team for the quality of work produced and the high
standards that were achieved this year, together
with welcoming Golding into the NRW Group.
The commitment to improving outcomes across
the Company has been critical to delivering these
outstanding results. Thank you to my fellow directors
for their wise counsel.
I would also like to thank our shareholders for their
ongoing support this year and for the continued
confidence placed in NRW. The Board has agreed to
reinstate the payment of dividends by approving the
payment of a fully franked final dividend for FY18. The
Directors have determined the dividend based on the
Company’s liquidity profile over the next financial year
and expect to be in a position to announce further
dividends for the new financial year.
NRW is well placed for further growth in the next
financial year due to our record order book and a
strong tender pipeline of circa $6 billion. We remain
confident in increased activity levels in the resources
and infrastructure sectors for the next five years.
I look forward to reporting on our team’s further
success in the 2019 financial year.
Michael Arnett
Chairman, NRW Holdings
4
NRW HOLDINGS ANNUAL REPORT 2018 | Chairman’s MessageNRW HOLDINGS ANNUAL REPORT 2018 | Chairman’s MessageFor personal use only
T I O N 1
P
O
Revenue
CEO REVIEW
OF OPERATIONS
It is with great pleasure that I present the results of our Company for the
financial year ending 30 June 2018. I’ve listed the highlights below which
includes the acquisition of Golding which I’ll go into more detail about in
this commentary.
Highlights
REVENUE
754.3M
• Revenue(1) : $754.3 million double the same period last year
•
EBITDA
EBITDA(2) : $93.5 million compared to $58.9 million in the prior
comparative period
• Net Profit after Tax: $42.2 million up 48% on last year
• Order book(3): $2.2 billion as at July 2018
370.3M
288M
○ New work secured across the group circa $1.7 billion;
• Golding acquisition completed September 2017
○ Net Acquisition cost $74.3 million;
REVENUE
EBITDA
ORDER BOOK
754.3M
93.5M
2.2B
Revenue
370.3M
288M
58.8M
47.2M
1.4B*
1B
2016
2017
EBITDA
2018
2016
2017
2018
ORDER BOOK
2016
2017
2018
*Includes Golding
93.5M
2.2B
EBITDA
58.8M
47.2M
• Net Debt at June 2018 $34.4 million
REVENUE
2016
2017
EBITDA
2018
2016
•
Strong commitment to debt repayments - $31.3 million repaid in FY18
754.3M
2017
2018
ORDER BOOK
• Gearing ratio low at 12.6%
Order Book
• Cash holdings of $58.8 million
•
Final dividend declared of 2 cents fully franked
370.3M
58.8M
47.2M
288M
Notes
(1) Statutory Revenue of $685.4 million plus revenue from associates $68.9 million.
(2) EBITDA is earnings before interest, tax, depreciation, amortisation and transaction costs.
(3) Order Book and Order Intake include South Flank.
93.5M
2.2B
Order Book
1.4B*
1B
2016
2017
2018
2016
2017
2018
2016
2017
2018
*Includes Golding
5
1.4B*
1B
2016
2017
2018
*Includes Golding
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only Revenue
$754.3M
EBITDA
$93.5M
Record Order Book of
$2.2B
Golding Acquisition
Succesfully completed
Sept 2017
6
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only “The Company’s major
transformation came
through the recent
acquisition of Golding”
CEO REVIEW OF
OPERATIONS CONTINUED
7
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only CEO REVIEW OF
OPERATIONS CONTINUED
The 2018 financial year has been a year full of
outstanding achievements both strategic and contract
successes. With our organic growth through the
year continuing to build and primarily thanks to the
highly successful acquisition of Golding the business
has delivered a step change in capability, scale and
diversity giving us a strong, national footprint across the
infrastructure and resources sectors.
Golding
As mentioned the Golding was a business we knew
well, in fact we were the under bidder to Champ 11
years ago when it was first being sold by its 89 year old
founder Cyril Golding. Golding has 75 years of proud
history of delivery and it was an ideal fit for NRW in
terms of culture, delivery model and capability.
The highly successful transaction completed last
August, doubled the size of our business and has
brought considerable strategic benefit to the group.
Golding operates three divisions, Civil, Mining and
Urban and delivering projects throughout Queensland
and Northern New South Wales.
Golding’s Civil business whilst originally focused on
resources clients managed through the downturn to
develop a highly capable public infrastructure projects
business delivering for clients across Queensland
Roads, Queensland Rail and various other government
departments. Further to this over the last 15 months the
business has also been delivering successfully on the
Pacific Highway RMS project in New South Wales.
The Golding Civil infrastructure business is a strong
platform for us to grow our exposure across the
eastern states of Australia over the coming years due
to the growing pipeline of projects. Some of the larger
opportunities currently being considered or tendered will
likely be delivered through joint ventures already formed
or currently being developed.
The Golding Mining business operates five projects
and has experienced considerable recent successes
with around $730 million of new projects or extensions
awarded over the last four months of the financial year.
We secured a $430 million contract at Baralaba
followed by a three year extension at Curragh and
most recently we secured an extension with Stanmore
Coal. The Golding mining business is relatively capital
light and despite securing a large value in new projects
the only major item of new equipment required by the
business was a 600 tonne Liebherr excavator to support
the Curragh extension.
The projects’ individual operating models do vary but
the business has generally operated with a mix of
owned equipment, client equipment which we then
operate and maintain, or hired equipment thus keeping
our capital requirement low.
NRW’s combined Mining business now operates eight
projects with a revenue run rate of around $560 million
per annum across Gold, Lithium and Coal.
The third Golding business unit is Urban. Over the past
few years the Urban division has largely been active
delivering projects across south east Queensland for
Tier 1 developers. The goal over the next few years is to
broaden our delivery and further grow into other areas
such as Ipswich, Logan and the Moreton Bay. The SE
Queensland property market has been very strong and
second only in activity levels to Victoria.
Business Unit Performance
Following the successful acquisition of Golding,
NRW has structured its business reporting into three
segments, Civil, Mining and Drill & Blast.
Read about the business units on the following page.
8
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only CEO REVIEW OF
OPERATIONS CONTINUED
Civil
Mining
The Mining business specialises in mine
management, contract mining, load and haul, dragline
operations, coal handling prep plants, maintenance
services and the fabrication of water and
service vehicles.
The Mining business like the Civil business reported
growth in revenue to $347.3 million and earnings of
$38.4 million again due to the Golding acquisition and
as a result of new work secured for clients across a
broad range of commodities.
The business had a number of successes in the year
which included contract extensions for Stanmore Coal
at Isaac Plains, a three year extension for Coronado
Curragh Pty at Curragh, and the award of new
contracts at Baralaba North for Wonbindi Coal, and
for Gascoyne Resources at their flagship Dalgaranga
gold project.
The Baralaba contract is of particular note as the
business provides mining services utilising only
client supplied or hired plant and equipment. Activity
in the year included contract mining at Kogan
Creek, Curragh, Isaac Plains, Baralaba, Broadlea,
Pilgangoora and Dalgaranga and mining support
at Middlemount.
The Civil business specialises in the delivery of
private and public civil infrastructure projects, mine
development, bulk earthworks and commercial and
residential subdivisions. Civil construction projects
include roads, bridges, tailings storage facilities, rail
formation, ports, water infrastructure and
concrete installations.
The Civil business reported growth in revenue to
$311.3 million compared to $103.9 million last year
as a consequence of both an increase in project
activity and the acquisition of Golding. Earnings also
improved to $17.8 million.
Activity in the Civil business in the year included
mine sustaining work for Rio Tinto at Yandicoogina,
a tailings dam lift for FMG at Solomon, continuation
of the construction of the Forrestfield Airport Link
(FAL) for the PTA in joint venture with Salini Impregilo,
in excess of 50 sub division stages for a range of
clients over 13 different project sites in South East
Queensland, a dam upgrade for the Gladstone Area
Water Board, upgrades to the Pacific Highway for
RMS and the design and construction of eight rail
bridges for the Coomera to Helensville
rail duplication.
The business secured new work for Rio Tinto at
Marandoo, agreed an early contract involvement
for OZ Minerals at the Carrapateena project and
announced on 18 July 2018 a major contract for
BHP at the South Flank precinct. In May, Rio Tinto
awarded the business an Early Contract Involvement
(ECI) contract for the provision of project development
services. The award positions the business through
the provision of construction services to the client for
their sustaining capital program of works.
As noted above results for the Civil business include
activity on the FAL contract where NRW is a 20%
shareholder in the Salini Impregilo NRW Joint Venture
delivering the project. Revenues on the project
included in the segment revenue above but excluded
from Statutory revenue were $68.9 million. Earnings
recognised in the year which are shown in share of
profits from associates total $1.8 million and reflect
progress made to date on the project.
9
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only Drill and Blast
People & Safety / Occupational Health & Safety
Action Drill & Blast (ADB) is a market leader in the
provision of integrated, end to end production drill and
blast services to the mining and civil construction sectors
across Australia.
NRW is committed to achieving the highest possible
performance in occupational health, safety and
environment management.
Revenues increased to $117.0 million compared to
$88.1 million in the prior comparative period mostly due
to the acquisition of the east coast business of Hughes
Drilling in December 2016.
Earnings before interest, tax, depreciation and
amortisation (EBITDA) however reduced to $8.3 million
compared to $10.0 million in the same period last year
mostly due to drill availability.
It became clear during the first half of the financial year
that work to improve reliability on drills acquired from
Hughes, identified through the due diligence process,
had been underestimated. Over the last six months the
business has developed a more structured drill reliability
programme to progressively fix availability. Drills which
have been through this process and delivered back to
operations have demonstrated significant improvements
in reliability and availability. Both operation costs and
capital expenditure have increased as a result of the
reliability programme, further impacting earnings.
The Drill & Blast business secured a number of new
contracts and contract extensions in the year including
work for the Mining business at Dalgaranga, Isaac Plains
and Broadlea, and drilling services contracts at Boggabri,
Muswellbrook, Byerwen and Collinsville.
The Drill & Blast business is currently the largest
production drilling services contractor on the east coast
with ten coal projects in Queensland and three projects
in New South Wales. We operate 64 drills around the
country on 17 projects.
Our vision is for every employee to arrive home safely
after each shift or swing. We focus on completing our daily
tasks in a safe manner, looking out for our workmates and
ultimately delivering projects to our clients that we are
proud of.
Our Occupational Health and Safety Management
Systems are accredited to AS4801:2001/ISO18001:2007,
the applicable Australian and International Standards and
are subject to continuous auditing by an external
third party.
We stringently manage risk through a planned and
careful approach focused around hazard identification,
minimisation, monitoring and control procedures, and by
reviewing safety performance.
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 as a result of the addition of the Golding business
and increased activity on new projects. Headcount at
June 2018 totalled circa 2000 (June 2017 – 1,000).
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
Total Recordable Injury Frequency Rate (TRIFR) in the
year was 6.39 compared to 6.22 at June 2017.
10
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only CEO REVIEW OF
OPERATIONS CONTINUED
Outlook
The past twelve months have seen a significant
improvement in the overall results of the Company
as measured by a range of data including revenue,
earnings, cash generation, order book and return
on investment. These improvements reflect our
increased diversity and an improving confidence in
both the Resources and Infrastructure sectors. In
the near term we have opportunities to support the
new capital investment programmes currently being
committed by major Iron Ore clients in Australia
whilst also positioning the Company to address
infrastructure projects in our home states of Western
Australia and Queensland and also further into the
Eastern States.
Last year four areas of focus were identified in our
outlook commentary. These included supporting
the iron ore sector as plans for sustaining current
production volumes are developed; growing our
presence in Queensland; project delivery and
reviewing opportunities to expand our service offering.
I am pleased to report that we have made good
progress on all four key objectives, (more detail on
specific progress actions is provided in the
directors’ report).
The business has secured a number of new contracts
and contract extensions as detailed in the business
segment commentary. In addition, the Civil business
secured a major earthworks package on the first iron
ore sustaining tonnes project for BHP at South Flank.
Following this award, the order book totals circa $2.2
billion of which around $1.025 billion is scheduled for
delivery in the financial year ending 30 June 2019.
This is the best position the business has been in for
a number of years.
The tender pipeline at around $6 billion remains
strong. We remain confident of improving activity
levels in resources and infrastructure for the next
five years.
We have ended the financial year more diversified by
client, commodity and service capability than at any
time in our history.
In closing, I would like to take this opportunity to
thank my senior management team and all of our
employees across the businesses for their incredible
dedication and hard work this year. I would also like to
thank my fellow directors and also our shareholders
and stakeholders for your continuing strong support of
the business.
Jules Pemberton
CEO and Managing Direction, NRW Holdings
11
PILBARA CAPABILITY MILESTONES
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only
55
Major Bulk Earthworks
Packages (120 million m3)
900km
Rail Formation
5 million m3
Tailings Dams
5
Airstrips
PILBARA CAPABILITY MILESTONES
100km
Conveyor Line
180,000m3
Concrete
4
Major Port
Developments
500km
Permanent Roads
Pilbara Capability Milestones
12
NRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsNRW HOLDINGS ANNUAL REPORT 2018 | CEO Review of OperationsFor personal use only Net Profit after Tax
$42.2M
Net Assets
$272.6M
Gearing Ratio
12.6%
Cash Holdings of
$58.8M
13
NRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportNRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportNRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportFor personal use only CFO FINANCIAL REPORT
Financial Performance
NRW reported revenues including revenue generated
by associates of $754.3 million, (statutory revenue
of $685.4 million). Revenues were close to double
that of the prior year mostly due to the acquisition
of Golding and increased activity in both the Perth
based Civil business and in Drill and Blast.
Net earnings increased to $42.2 million compared
to $28.5 million reported in the previous year. The
increase in earnings was mostly due to higher
business activity. Earnings included an amortisation
charge relating to the Golding acquisition of
$9.6 million which mostly relates to customer
contracts acquired through the Golding transaction.
Costs incurred on business acquisitions (Golding
in FY18 and Hughes in FY17) and debt refinancing
are shown separately in the table below as are
transaction costs. The Company reported a tax credit
as a result of prior year tax assets not previously
included in the balance sheet.
The table below summarises performance for the
current financial year with comparisons to the prior
comparative period:
FY18
FY17
Revenue
Earnings
Revenue
Earnings
Total Revenue including Associates
EBITDA (1)
Depreciation and Amortisation (2)
Total Revenue /Total EBIT (3)
Revenue from Associates
Amortisation (4)
Transaction costs (5)
Sub Total
Interest
Tax credit
Total (6)
Net earnings before amortisation, transaction
costs and at normalised tax rate (7)
$M
754.3
754.3
(68.9)
685.4
$M
93.5
(38.6)
54.9
(9.6)
(2.8)
42.5
(6.4)
6.1
42.2
34.0
$M
370.3
370.3
(25.7)
344.6
$M
58.9
(27.3)
31.6
-
(2.6)
28.9
(5.4)
5.0
28.5
18.3
(1) EBITDA is earnings before interest, tax, depreciation, amortisation and transaction costs. EBITDA includes share of profits from
associates of $1.4 million (FY17 $0.6 million loss)
(2) Excludes Golding amortisation of acquisition intangibles.
(3) Revenue including associates. Earnings before interest, tax, amortisation and transaction costs.
(4) Amortisation of Golding acquisition intangibles.
(5) Transaction costs include legal costs associated with the acquisition of Golding (FY18) and costs associated with the Corporate
note issue, early termination costs of bank debt and costs related to the acquisition of the Hughes business, (FY17).
(6) Total is Statutory Revenue and Total Comprehensive Income.
(7) The tax rate assumed is 30% applied to EBIT less interest costs.
14
NRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportNRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportFor personal use only
CFO FINANCIAL
REPORT CONTINUED
Cash holdings improved in the year due to strong
earnings growth and continued attention to minimising
working capital growth. Debt increased due to the
Golding acquisition and equipment financing (circa
$8 million) offset by debt repayments on the four year
corporate notes and the three year Golding transaction
finance. At the end of the year gearing increased to
12.6% compared to 10.5% at June 2017.
Capital expenditure totalled $46.0 million compared to
$15.9 million in the previous financial year. Expenditure
included incremental component replacements, spend
on upgrading drills in the Drill and Blast business and
on equipment to support the Dalgaranga contract
announced at the time of award at $8 million. The
Dalgaranga equipment included a number of light
weight truck bodies which were acquired to improve
cost efficiency in our bid submission. Component
replacement costs increased due to the inclusion of
Golding and equipment maintenance cycles.
The Group was in full compliance with its debt
covenants as at 30 June 2018.
The results include a $6.1 million tax credit (FY17 $5.0
million tax credit) due to the recognition of additional
tax benefits not currently included in the balance sheet.
Looking ahead, NRW will continue to maintain a strong
financial position with a focus on improving earnings as
activity levels in the resources and infrastructure
sectors increase.
Andrew Walsh
CFO, NRW Holdings
The Company ended the financial year with cash
balances of $58.8 million compared to $42.3 million at
the start of the year. Debt increased to $93.2 million
mostly to finance the Golding acquisition. Gearing
at 13% was only marginally higher than the prior
comparative period (10%) as debt reduction has been
a critical focus of the business. The Company has
strong relationships with its banking partner and is in
compliance with all financing covenants.
Balance Sheet, Operating Cash Flow &
Capital Expenditure
A summary of the balance sheet at the end of the
current financial year and the previous financial year is
provided below with the opening balance sheet entries
for Golding.
30 June 18 30 June 17 Golding (1)
$M
$M
$M
Cash
Debt
Net Debt
PPE
Working Capital
Investments in Associates
Tax Assets
Tangible Assets
58.8
(93.2)
(34.4)
209.5
(5.5)
4.8
38.3
212.7
Intangibles and Goodwill
59.9
Net Assets
Gearing (2)
272.6
12.6%
(1) Golding acquisition - opening balance sheet
(2) Gearing is Net Debt / Total Equity
42.3
(63.1)
(20.8)
174.1
4.9
3.4
35.8
197.3
1.8
199.0
10.5%
13.1
(2.4)
10.7
28.2
(18.3)
-
(4.9)
15.8
69.2
85.0
Net assets increased to $272.6 million, ($199.0 million
FY17) representing net assets of 73 cents per share.
The acquisition of Golding in the first quarter of the
financial year contributed to a number of changes to
the balance sheet. The acquisition was completed at
a price of $85.0 million funded through a combination
of debt ($48.0 million) and a capital raising of $25.0
million (pre costs) through a placement to qualified
institutional and sophisticated investors and a $5.0
million (pre costs) share purchase plan. Acquisition
finance of $48.0 million was provided by NRW’s
banking partner. Internal cash resources were used to
meet the balance of funds required.
15
NRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportNRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportNRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportFor personal use only
16
NRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportNRW HOLDINGS ANNUAL REPORT 2018 | CFO Financial ReportFor personal use only FINANCIAL REPORT
CONTENTS PAGE
02
20
22
23
25
26
27
28
29
Directors’ Report
Corporate Governance & Risk Management
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
29
31
36
45
54
59
63
1.
2.
3.
4.
5.
6.
7.
General Notes
Business Performance
Balance Sheet
Capital Structure
Financing
Taxation
Other Notes
75
77
82
Shareholder Information
Independent Auditor’s Report
Appendix 4E
For personal use only
For personal use only 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 2018.
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
Chairman Non-Executive Director
Mr Arnett was appointed as a Non-Executive 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 Fulbright (formally Deacons). He has been
involved in significant corporate and commercial legal work for the resource industry for over 20 years.
JEFF DOWLING
Non-Executive Director
Mr Dowling was appointed as a 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 the 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)
• Non-Executive Director, Fleetwood (Appointed 1 July 2017)
• Chairman, Battery Minerals (Appointed 25 January 2018)
PETER JOHNSTON
Non-Executive Director
Mr Johnston was appointed as a 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.
Mr Johnston has held the following directorships of listed companies in the three years immediately before the
end of the financial year:
• Non-Executive Director, Tronox Ltd (NYSE) (Appointed 1 August 2012)
• Chairman, Jervois Mining Ltd (Appointed 19 June 2018)
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DIRECTORS’ (CONTINUED)
JULIAN PEMBERTON
Chief Executive Officer and Managing Director
Mr Julian (Jules) Pemberton was appointed as a Director on 1 July 2006 and appointed as Chief Executive
Officer and Managing Director on 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.
KIM HYMAN
Company Secretary
Mr 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 insurance 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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NOMINATION & REMUNERATION COMMITTEE
The members of the Nomination & Remuneration Committee (“N&RC”) are Michael Arnett (Chairman), Jeff
Dowling and Peter Johnston. During the 2018 financial year two meetings of the Committee were 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 Peter Johnston.
During the 2018 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.
OPERATING AND FINANCIAL REVIEW
ABOUT NRW (PRINCIPAL ACTIVITIES)
NRW Holdings Limited provides diversified services to the resources, energy, civil infrastructure and urban
development sectors.
Further detail on the operation of each of these business divisions and the Group is provided below.
SIGNIFICANT CHANGES IN BUSINESS ACTIVITIES
The Company acquired Golding Group Pty Ltd (“Golding”) on 31 August 2017, the results of which have been
incorporated into this report from 1 September 2017.
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GROUP RESULTS
FINANCIAL PERFORMANCE
NRW reported revenues including revenue generated by associates of $754.3 million, (statutory revenue of
$685.4 million). Revenues were close to double that of the prior year mostly due to the acquisition of Golding
and increased activity in both the Perth based Civil business and in Drill and Blast.
Net earnings increased to $42.2 million compared to $28.5 million reported in the previous year. The increase
in earnings was due to higher revenues partly offset by amortisation charges relating to the Golding acquisition
of $9.6 million. The valuation of intangibles mostly relates to customer contracts acquired through the Golding
transaction. Costs incurred on business acquisitions (Golding in FY18 and Hughes in FY17) and debt
refinancing are shown separately in the table below as transaction costs. The Company reported a tax credit
as a result of prior year tax assets not previously included in the balance sheet.
The table below summarises performance for the current financial year with comparisons to the prior
comparative period:
FY18
FY17
Total Revenue including Associates
EBITDA (1)
Depreciation and Amortisation (2)
Total Revenue/Total EBIT (3)
Revenue from Associates
Amortisation (4)
Transaction Costs (5)
Sub Total
Interest
Tax
Total (6)
Net Earnings before Amortisation, Transaction
Costs and at Normalised Tax Rate (7)
Revenue
$M
754.3
754.3
(68.9)
685.4
Earnings Revenue Earnings
$M
$M
$M
370.3
370.3
(25.7)
344.6
58.9
(27.3)
31.6
-
(2.6)
28.9
(5.4)
5.0
28.5
18.3
93.5
(38.6)
54.9
(9.6)
(2.8)
42.5
(6.4)
6.1
42.2
34.0
(1) EBITDA is earnings before interest, tax, depreciation, amortisation and transaction costs. EBITDA includes share of profits from
associates of $1.4 million (FY17 $0.6 million loss)
(2) Excludes Golding amortisation of acquisition intangibles.
(3) Revenue including associates. Earnings before interest, tax, amortisation and transaction costs.
(4) Amortisation of Golding acquisition intangibles.
(5) Transaction costs include legal costs associated with the acquisition of Golding (FY18) and costs associated with the Corporate note
issue, early termination costs of bank debt and costs related to the acquisition of the Hughes business, (FY17).
(6) Total is Statutory Revenue and Total Comprehensive Income.
(7) The tax rate assumed is 30% applied to EBIT less interest costs.
The Company ended the financial year with cash balances of $58.8 million compared to $42.3 million at the
start of the year. Debt increased to $93.2 million mostly to finance the Golding acquisition. Gearing at 13% was
only marginally higher than the prior comparative period (10%) as debt reduction has been a critical focus of
the business. The Company has strong relationships with its banking partner and is in compliance with all
financing covenants.
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OPERATING SEGMENTS
Following the successful acquisition of Golding, NRW has structured its business reporting into three
segments, Civil, Mining and Drill & Blast.
• Civil: comprises the Civil business of NRW together with the Golding Civil and Urban businesses.
• Mining: consolidates the Mining businesses of NRW and Golding together with NRW’s Mining
support business AES Equipment Solutions.
• Drill and Blast: Action Drill & Blast.
The performance of the three businesses is outlined below:
Civil
The Civil business specialises in the delivery of private and public civil infrastructure projects, mine
development, bulk earthworks and commercial and residential subdivisions. Civil construction projects include
roads, bridges, tailings storage facilities, rail formation, ports, water infrastructure and concrete installations.
The Civil business reported growth in revenue and earnings as a consequence of both an increase in project
activity and the acquisition of Golding.
Revenue
$M
EBIT
$M
%
EBITDA
$M
%
311.3
17.8
5.7%
20.3
6.5%
103.9
1.0
1.0%
2.0
1.9%
FY18
FY17
Activity in the Civil business in the year included mine sustaining work for Rio Tinto at Yandicoogina, a tailings
dam lift for FMG at Solomon, continuation of the construction of the Forrestfield Airport Link (“FAL”) for the PTA
in joint venture with Salini Impregilo, in excess of 50 sub division stages for a range of clients over 13 different
project sites in South East Queensland, a dam upgrade for the Gladstone Area Water Board, upgrades to the
Pacific Highway for RMS and the design and construction of eight rail bridges for the Coomera to Helensville
rail duplication.
The business secured new work for Rio Tinto at Marandoo, agreed an early contract involvement for OZ
Minerals at the Carrapateena project and announced on 18 July 2018 a major contract for BHP at the South
Flank precinct. In May, Rio Tinto awarded the business an Early Contract Involvement (ECI) contract for the
provision of project development services. The award positions the business through the provision of
construction services to the client for their sustaining capital program of works.
As noted above results for the Civil business include activity on the FAL contract where NRW is a 20%
shareholder in the Salini Impregilo NRW Joint Venture delivering the project. Revenues on the project included
in the segment revenue above but excluded from Statutory revenue were $68.9 million. Earnings recognised in
the year which are shown in share of profits from associates total $1.8 million and reflect progress made to date
on the project.
Mining
The Mining business specialises in mine management, contract mining, load and haul, dragline operations, coal
handling prep plants, maintenance services and the fabrication of water and service vehicles.
The Mining business like the Civil business reported growth in revenue and earnings again due to the Golding
acquisition and as a result of new work secured for clients across a broad range of commodities.
Revenue
$M
347.3
185.0
EBIT
$M
%
EBITDA
%
$M
38.4
11.0%
66.5
19.1%
25.5
13.8%
44.5
24.1%
FY18
FY17
The business had a number of successes in the year which included contract extensions for Stanmore Coal at
Isaac Plains, a three year extension for Coronado Curragh Pty at Curragh, and the award of new contracts at
Baralaba North for Wonbindi Coal, and for Gascoyne Resources at their flagship Dalgaranga gold project.
The Baralaba contract is of particular note as the business provides broad mining services utilising only client
supplied or hired plant and equipment.
Activity in the year included contract mining at Kogan Creek, Curragh, Isaac Plains, Baralaba, Broadlea,
Pilgangoora and Dalgaranga and mining support at Middlemount.
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OPERATING SEGMENTS (CONTINUED)
Margin changes reflect a different mix of activity as a result of the Golding acquisition and receipt of contract
incentives, (based on improvements in the market price for coal) in the previous financial year recovered from
prior periods on the Middlemount contract.
Drill and Blast
Action Drill & Blast (“ADB”) is a market leader in the provision of integrated, end to end production drill and blast
services to the mining and civil construction sectors across Australia.
Revenues increased to $117.0 million compared to $88.1 million in the prior comparative period mostly due to
the acquisition of the east coast business of Hughes Drilling in December 2016.
Revenue
EBIT
%
EBITDA
%
$M
117.0
88.1
$M
1.7
4.2
$M
8.3
7.1%
1.4%
4.8%
10.0
11.3%
FY18
FY17
Earnings before interest, tax, depreciation and amortisation (EBITDA) however reduced to $8.3 million
compared to $10.0 million in the same period last year mostly due to drill availability.
It became clear during the first half of the financial year that work to improve reliability on drills acquired from
Hughes, identified through the due diligence process, had been underestimated. Drill availability was well below
expectations requiring additional resources to be deployed to projects in order to maintain production with
consequent impact on cost and project margins. Over the last six months the business has developed a more
structured drill reliability programme to progressively fix availability. Drills which have been through this process
and delivered back to operations have demonstrated significant improvements in reliability and availability. Both
operation costs and capital expenditure have increased as a result of the reliability programme, further impacting
earnings.
The Drill & Blast business secured a number of new contracts and contract extensions in the year including
work for the Mining business at Dalgaranga, Isaac Plains and Broadlea, and drilling services contracts at
Boggabri, Muswellbrook, Byerwen and Collinsville.
In Drill and Blast our focus will be to ensure the drill reliability programmes are followed through to recover
productivity levels across all sites to expected levels. The business has been successful in extending contracts.
It is a market leader given the drilling resources within the business. Progressively improving profitability through
the next 12 months is recognised as critical by the management team within that business.
BALANCE SHEET, OPERATING CASH FLOW AND CAPITAL EXPENDITURE
A summary of the balance sheets at the end of the current financial year and the previous financial year is
provided below with the opening balance sheet entries for Golding.
Cash
Debt
Net Debt
PPE
Working Capital
Investments in Associates
Tax Assets
Tangible Assets
Intangibles and Goodwill
Net Assets
Gearing (2)
30 June 18
30 June 17
Golding (1)
$M
58.8
(93.2)
(34.4)
209.5
(5.5)
4.8
38.3
212.7
59.9
272.6
12.6%
$M
42.3
(63.1)
(20.8)
174.1
4.9
3.4
35.8
197.3
1.8
199.0
10.5%
$M
13.1
(2.4)
10.7
28.2
(18.3)
-
(4.9)
15.8
69.2
85.0
(1) Golding acquisition - opening balance sheet
(2) Gearing is Net Debt / Total Equity
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BALANCE SHEET, OPERATING CASH FLOW AND CAPITAL EXPENDITURE
(CONTINUED)
Net assets increased to $272.6 million, ($199.0 million FY17) representing net assets of 73 cents per share.
The acquisition of Golding in the first quarter of the financial year contributed to a number of changes to the
balance sheet. The acquisition was completed at a price of $85.0 million funded through a combination of debt
($48.0 million) and a capital raising of $25.0 million (pre costs) through a placement to qualified institutional and
sophisticated investors and a $5.0 million (pre costs) share purchase plan. Acquisition finance of $48.0 million
was provided by NRW’s banking partner. Internal cash resources were used to meet the balance of funds
required.
Cash holdings improved in the year due to strong earnings growth and continued attention to minimising working
capital growth. Debt increased due to the Golding acquisition and equipment financing (circa $8 million) offset
by debt repayments on the four year corporate notes and the three year Golding transaction finance. At the end
of the year gearing increased to 12.6% compared to 10.5% at June 2017.
Capital expenditure totalled $46.0 million compared to $15.9 million in the previous financial year. Expenditure
included incremental component replacements, spend on upgrading drills in the Drill and Blast business and on
equipment to support the Dalgaranga contract announced at the time of award at $8 million. The Dalgaranga
equipment included a number of light weight truck bodies which were acquired to improve cost efficiency in our
bid submission. Component replacement costs increased due to the inclusion of Golding and equipment
maintenance cycles.
The Group was in full compliance with its debt covenants as at 30 June 2018.
The results include a $6.1 million tax credit (FY17 $5.0 million tax credit) due to the recognition of additional tax
benefits not currently included in the balance sheet.
PEOPLE AND SAFETY / OCCUPATIONAL HEALTH AND SAFETY
NRW is committed to achieving the highest possible performance in occupational health, safety and
environment management.
Our vision is for every employee to arrive home safely after each shift or swing. We focus on completing our
daily tasks in a safe manner, looking out for our workmates and ultimately delivering projects to our clients that
we are proud of.
Our Occupational Health and Safety Management Systems are accredited to AS4801:2001/ISO18001:2007,
the applicable Australian and International Standards and are subject to continuous auditing by an external
third party.
We stringently manage risk through a planned and careful approach focused around hazard identification,
minimisation, monitoring and control procedures, and by reviewing safety performance.
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 as a result of the addition of the
Golding business and increased activity on new projects. Headcount at June 2018 totalled circa 2,000
(June 2017 – 1,000).
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 Total Recordable Injury Frequency Rate (TRIFR) in the
year was 6.39 compared to 6.22 at June 2017.
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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.
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. We also identify and track appropriate mitigation actions for identified risks. Further commentary on
material risks is provided in the Corporate Governance and Risk Management section of this report.
OUTLOOK
The past twelve months have seen a significant improvement in the overall results of the Company as measured
by a range of data including revenue, earnings, cash generation, order book and return on investment. These
improvements reflect our increased diversity and an improving confidence in both the Resources and
Infrastructure sectors. In the near term we have opportunities to support the new capital investment programmes
currently being committed by major Iron Ore clients in Australia whilst also positioning the Company to address
infrastructure projects in our home states of Western Australia and Queensland and also further into the
Eastern States.
Last year four areas of focus were identified in our outlook commentary. The table below summarises how the
business has progressed against these key areas of focus.
Key Focus Areas
Progress
Supporting the iron ore sector as plans for sustaining
current production volumes are developed.
Secured and delivering a number of Rio Tinto sustaining
capital projects including Marandoo and Yandicoogina.
Secured South Flank contract for BHP ($176 million).
ECI by Rio Tinto for the provision of construction support for
sustaining capital program of works.
Growing our presence in Queensland and New South
Wales on the back of the recent Golding acquisition.
Won the Baralaba North mining project for Wonbindi coal.
Extended contracts at both Curragh and Isaac Plains.
Won work for new clients for sub divisions in Urban.
Project delivery across all contracts including the
Forrestfield-Airport Link (FAL) 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.
Quality of project completions at locations like Yandicoogina
have been recognised by the client.
FAL project progressing well, both tunnel boring machines
have completed tunnelling to airport central station and have
now transitioned through.
Delivery of Carrapateena project progressing well for a new
client in a new geography – South Australia.
The Dalgaranga project was the first Gold mining project
secured by NRW since listing.
Rio Tinto recently awarded the mining business a remediation
contract for the Argyle diamond mine.
The business has secured a number of new contracts and contract extensions detailed in the business segment
commentary. In addition, the Civil business secured a major earthworks package on the first iron ore sustaining
tonnes project for BHP at South Flank. Following this award, the order book totals circa $2.2 billion of which
around $950 million is scheduled for delivery in the financial year ending 30 June 2019. This is the best position
the business has been in for a number of years.
The tender pipeline at around $6 billion remains strong. We remain confident of improving activity levels in
resources and infrastructure for the next five years.
As these buoyant conditions continue across our key delivery sectors, access to resources, both equipment
and people, will become more challenging. Our strategy to minimise any impact is already in place partially
through our ability to recruit and mobilise through our national footprint and also through senior appointments
across our business in operations and equipment technology who will focus on retention and training of our
workforce.
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SIGNIFICANT EVENTS AFTER PERIOD END
No matter or circumstance has arisen since the end of the financial year and the date of this report that has
significantly affected, or may significantly affect, the Group’s operations, the results of those operations, or its
state of affairs in future financial periods.
DIVIDEND
The Directors have declared a dividend for the current financial year of two cents per share. This will be the first
dividend paid since October 2014. The Directors have determined the dividend payable based on the
Company’s liquidity profile over the next financial year and expect to be in a position to announce further
dividends for the new financial year. The dividend which will be fully franked will be paid on the 6
November 2018.
DIRECTORS’ INTERESTS
The relevant interest of each Director in the ordinary share capital are set out in note 4.8 of Executive KMP
Remuneration Outcomes. Transactions between entities within the Group and Director-related entities are set
out in note 7.3 to the financial statements.
PERFORMANCE RIGHTS OVER UNISSUED SHARES OR INTERESTS
As at the date of this report, there are 13,291,881 Performance Rights outstanding (2017: 6,208,486
Performance Rights outstanding).
Details of Performance Rights granted to executives as part of their remuneration are set out in the
Remuneration Report on pages 10 to 18.
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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 Key Management
Personnel (“KMP”) as set out in the N&RC Charter. The N&RC provides advice, recommendation and
assistance to the Board with respect to the following:
•
•
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 relates
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
2018
2017
2016
2015
2014
Market Capitalisation
(30 June)
Share Price at
End of Year
$ 630.1 million
$ 205.9 million
$ 58.6 million
$ 50.2 million
$ 256.6 million
$1.70
$0.64
$0.21
$0.18
$0.92
Total Revenue
$685.4
$344.6 million
$288.0 million
$775.9 million
$1,134.5 million
EPS
11.6 cents
9.1 cents
7.7 cents
(82.4) cents
15.9 cents
EPS Growth
27.5%
18.2%
n/a
n/a
n/a
Net Profit / (Loss)
After Tax
$42.2 million
$28.5 million
$21.5 million
$(229.8) million
$44.2 million
Interim Dividend Paid
$0.00
Final Dividend Declared
in Respect of the Year
Annual Total
Shareholder Return (%)
$0.02
194%
$0.00
$0.00
216%
$0.00
$0.00
$0.00
$0.00
$0.04
$0.05
17%
(80%)
11%
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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 can 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
benchmark 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:
Total Fixed Remuneration (TFR)
• Comprising salary and superannuation capped at the relevant concessional contribution limit.
• The opportunity to salary sacrifice benefits on a tax compliant basis is available upon request.
• Fixed remuneration is set with reference to role, market and relevant experience, which is reviewed
annually and upon promotion.
Short Term Incentive Plan
• Executives can earn a cash based incentive by achieving specific objectives set by the N&RC.
• The maximum amount of these awards is based on a percentage of the executives TFR (which is set out
in the table 3.3).
• Specific objectives are set for each executive based on their management responsibilities.
• Awards up to the maximum amount payable can be achieved based on tiered objectives at the discretion
of the N&RC.
• Normally an earnings metric (e.g. EBIT or EBITDA) is used as the performance measure to ensure
alignment with group and shareholder objectives.
• Awards can be moderated downwards if safety performance does not meet expectations.
• Awards are reviewed and agreed by the N&RC which also consider the executives overall performance in
the year against specific business objectives.
• Up to 25% of an award can be deferred for up to 12 months at the discretion of the N&RC if the committee
determines that additional time is required to provide more certainty on specific business related outcomes.
Long Term Incentive Plan
• Executives can earn an equity based incentive through the award of Performance Rights (Rights).
• The maximum amount of these awards is based on a percentage of the executives TFR which are set out
in table 3.3. The value of the award is converted to rights at the prevailing share price at the time the award
is approved by the N&RC.
• Awards are generally made annually and may be split into Tranches which have specific objectives within
a specified timeframe.
• Rights convert to shares which vest with the executive on specific dates or within a vesting period provided
targets generally aligned to absolute growth in total shareholder return are achieved within the
performance period and the executive is a current employee on the vesting date.
• The normal performance period is three years, however, a number of performance rights have been
granted with periods of less than three years which recognises the following:
1. Specific short term company recovery objectives set in the financial year 2015/16 (FY16) and
2.
3.
4.
2016/17 (FY17) for the CEO and CFO.
The progressive implementation of a three year long term incentive plan for key executives.
That it was appropriate to implement a retention scheme for key executives who joined NRW
through the Golding acquisition.
The implementation of a broader equity participation scheme across NRW to deliver business
results over a two year time frame aligned with the Golding retention scheme.
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3.2
STRUCTURE OF EXECUTIVE KMP REMUNERATION (CONTINUED)
• Awards granted to the CEO which align to the structure as described above in notes 1 & 2 above were
specifically approved by shareholders at the 2016 and 2017 AGM’s.
• The award of rights is governed by the ‘NRW Holdings Limited Performance Rights Plan’ approved by
shareholders in 2015.
3.3
AWARD LEVELS RELATIVE TO FIXED REMUNERATION
The table below provides information on the remuneration packages of KMP’s as at 30 June 2018.
KMP
Mr J Pemberton
Mr A Walsh
Mr G Caton
Mr E Buratto
Mr J Whiteman (2)
Mr K Hyman
TFR (1)
$950,000
$700,000
$650,000
$600,000
$400,000
$358,600
STIP
50%
40%
30%
30%
Nil
Nil
(1) Annual Total Fixed Remuneration (TFR) as at 30 June 2018
(2) Mr J Whiteman works under a service contract
LTIP
180%
80%
30%
30%
Nil
Nil
Notice Period
6 months
6 months
6 months
6 months
See note 2
6 months
Comparable TFR for the previous period, (as at 30 June 2017) are provided for Messer’s Pemberton and Walsh
below as the other KMP’s were either not employed by NRW (Messer’s Caton, Buratto and Whiteman) or their
remuneration has not changed (Mr Hyman).
• Mr J Pemberton: TFR $800,000; STIP 50%; LTIP 100%
• Mr A Walsh: TFR $675,000; STIP 44%; LTIP 66%
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 a change of control occurring in respect of NRW, the following rules will apply to determine how
Performance Rights should vest or lapse.
• Performance Rights that have met the vesting hurdle will vest on a date to be determined before the
change of control date.
• Performance Rights which have met the vesting hurdle as a consequence of the change of control (for
example a share price increment) will vest on a date to be determined before the change of control date.
• Performance Rights which have not yet met the vesting hurdle: The N&RC may (in its absolute discretion)
determine that all or a portion of these performance rights will vest, not withstanding that time restrictions
or performance conditions applicable to the performance rights have not been satisfied.
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 up to six months after termination.
All Executive KMP as listed in the remuneration table other than Mr Whiteman who is working under a service
contract, 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.
The N&RC determines remuneration
remuneration report.
for all KMP
listed under
the guidelines contained
in
this
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4. EXECUTIVE KMP REMUNERATION OUTCOMES
4.1
EXECUTIVE PERFORMANCE: STIP
The following table provides information on the outcome of the STIP for each of the KMP for the year ending
30 June 2018. The value of the award is outlined in the remuneration table in section 4.6 with comparable
information for the previous year.
KMP
Mr J Pemberton
Mr A Walsh
Mr G Caton
Mr E Buratto
2018
2017
STIP Earned
STIP Forfeited
STIP Earned
STIP Forfeited
0%
0%
100%
0%
100%
100%
0%
100%
100%
100%
N/A
N/A
0%
0%
N/A
N/A
Commentary on the 2018 performance
•
•
•
Challenging earnings targets were set by the N&RC following the acquisition of Golding in 2017.
Despite achieving growth in earnings before interest, tax, depreciation and amortisation (EBITDA) of
53% this was below the agreed target and consequently, no short term incentive was awarded to the
CEO or CFO.
The Golding business acquired in September 2017 made a significant contribution to the overall
performance of the business meeting it’s agreed business plan objectives. Consequently, the
Executive General Manager of that business Mr G Caton achieved 100% of the STIP target.
The Perth based Civil and Mining businesses missed earnings targets set for the businesses. The
earnings target assumed award of new mining contracts which were expected to contribute to planned
earnings early in the financial year. The shortfall in earnings was to some extent mitigated following
the award of the Dalgaranga contract but this contract was not awarded early enough in the year to
recover to the earnings target. As a consequence, the Executive General Manager of the Civil and
Mining businesses did not earn an incentive payment.
4.2
EXECUTIVE PERFORMANCE: LTIP
The structure of the long term incentive plan is set out in section 3.2 above. Commentary is provided below on
the achievement against objectives set for each of the current long term incentive plans and the status of awards
made from 2016 to 2018. Valuation data is provided in note 4.5. The quantum of rights applicable to each award
is detailed in the table under note 4.7 in the notes to the financial statements.
2016 Incentive Plan
As disclosed in last year’s remuneration report, rights granted in 2016 were determined to have passed the
performance test and vested in November 2017. Key points to note with respect to 2016 plan are outlined below:
•
Rights were awarded in two equal tranches with a performance hurdle set for June 2016 of 30 cents
and October 2017 of 40 cents.
• Whilst these hurdles appear low in the context of the share price at 30 June 2018 ($1.69) it is worth
noting that the share price, on award of these rights, was below 20 cents.
The initial performance hurdle for the first tranche was not met (30 cents).
•
•
The scheme provided for a retest of the first tranche of rights up to October 2017 which was met along
with achievement of the second tranche at the same performance hurdle.
Rights subject to a retest required 25% of the Rights to be forfeited.
The value of rights awarded in 2016 was assessed at nil cost (as disclosed in the 2016 accounts) given the low
value of the shares when granted.
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4.2
EXECUTIVE PERFORMANCE: LTIP (CONTINUED)
2017 Incentive Plan
Key points to note with respect to the 2017 plan are outlined below:
• Rights were awarded in two equal tranches with a performance hurdle to be met in the periods to June
2017 of 50 cents and October 2018 of 70 cents.
•
• Again, it is worth noting that the share price at the beginning of the 2017 financial year was 22 cents
and therefore the hurdles required increasing TSR in the performance period by more than 100%.
The performance hurdle for Tranche 1 rights was met as disclosed in last year’s remuneration report
and rights vested in November 2017.
The performance hurdle for Tranche 2 rights was met in the current financial year and the shares will
vest in November 2018.
•
The value of rights awarded in 2017 have been measured in accordance with the valuation data provided in
table 4.5. 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 30 June 2018.
2018 Incentive Plan
The 2018 scheme is structured in three distinct plans which reflect the LTIP structure as disclosed in section
3.2 above; Senior Executive plan, Golding integration plan, and Executive plan. Key aspects of each of these
plans is outlined below:
Senior Executive plan & Golding integration plan
•
•
The plan participants are the CEO and CFO.
The structure of the plan and the quantum of rights awarded in these plans to the CEO were approved
by shareholders at the 2017 AGM.
• Rights awarded under these plans were valued based on the 60 day VWAP up to and including the
day the FY17 results were announced (being 80 cents).
Senior Executive plan
• Rights were awarded in three equal tranches with increasing performance hurdles set for each year.
•
The performance hurdles for the three years are: increase in TSR of 79% by June 18 ($1.33); increase
in TSR by June 2019 of 111% ($1.52) and increase in TSR by June 2020 of 140% ($1.71).
•
The performance hurdle for Tranche 1 has been met and the rights will vest in November 2018.
•
The performance hurdle for Tranche 2 has been met and the rights will vest in November 2019.
• Performance against Tranche 3 will be reviewed in the remaining performance period. The tranche is
subject to a retest if the hurdle is met within an additional 12 month period with a forfeit of 25% of the
quantum of rights in that tranche.
Golding integration plan
• Rights were awarded in two equal tranches with assessment dates of June 2018 and June 2019.
• Rights vest subject to the delivery of key integration objectives and the Golding business meeting
agreed financial performance targets, as assessed by the NRW Board.
The performance hurdle for Tranche 1 has been met and the rights will vest in August 2018.
•
Executive plan
The plan participants are the key executives within the business.
•
• Rights were awarded in a single tranche.
•
The performance objective is aligned with the senior executive plan (as above) being an increase in
TSR by June 2019 of 111% ($1.52).
• Performance against the objective will be formally assessed in FY19 but is expected to be achieved.
The quantum and value of rights awarded under the 2018 LTI plans are detailed below. In summary 10.9 million
rights were awarded (of which 7.6 million were specifically approved by shareholders at the 2017 AGM) with an
assessed average cost of 46 cents per share (using Monte Carlo simulation methodology).
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4.3
QUESTIONS ARISING FROM THE LONG TERM INCENTIVE
PLAN STRUCTURE
NRW Holdings Share Price History
Volume
Share Price
A$/sh
2.00
1.60
1.20
0.80
0.40
0.00
1-Jul-15
1-Jul-16
1-Jul-17
60,000
50,000
40,000
30,000
20,000
10,000
0
1-Jul-18
Why are there so many different schemes and different participants in each scheme?
Over the last three years, NRW has seen significant changes in its structure, business activity and outlook. The
acquisition of Golding completed in September 2017 and other initiatives can be seen to have had a major
positive effect on the value of the Company, (supported by the movement in the share price over the last three
financial years, as shown in the chart above). Revenue has grown in the three years from $288 million to $754
million. The management team which was restructured through the resource’s downturn has been strengthened
to ensure the Company has the right skills to meet the demands of a growing business which is expected to
further increase revenues in FY19 to circa $1.1 billion.
The CEO and CFO have been consistent members of the KMP throughout this period. Their incentive plans
developed as both cash and equity based have been structured to address both relatively short term business
imperatives and to deliver long term growth in shareholder value. Their long term incentive plans now extend to
a three year horizon, (where none existed previously) and in future any further LTIP awards would have a
minimum three year performance horizon.
NRW shareholders have approved the structure of each of these plans.
The other KMP have either recently joined the Company or joined as part of the Golding acquisition. A key
objective recognised as part of the Golding acquisition plan was to ensure the Company retained the talent
within the business. Consequently, the Executive plan (which was implemented at the same time to the existing
NRW businesses) was developed. This plan has a 29 month performance period which was determined to be
appropriate particularly to engage senior managers within the newly acquired Golding business.
Why can participants receive rights within less than three years?
The N&RC have been progressively implementing an equity based incentive plan to meet both short and long
term objectives. When the initial FY16 plan was implemented the Company faced liquidity challenges
consequently share based rather than cash based incentive payments were considered to be more
appropriate. In recognition that a proportion of the equity based awards related to short term objectives the
plan was based on 17 month and 29 month performance periods.
At the last AGM and following the Golding acquisition it was agreed to extend the senior executive plan to add
a 41 month performance period (three years plus a five month assessment period).
The Executive plan was initially implemented with a 29 month performance period as explained above. Further
awards of rights expected to be made in FY19 will extend participation to a rolling three year time frame.
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4.3
QUESTIONS ARISING FROM THE LONG TERM INCENTIVE
PLAN STRUCTURE (CONTINUED)
How were the performance hurdles determined and why is TSR used as the only key metric for
measuring success?
The N&RC has at all times sought to structure the incentive plans to encourage a ‘step change’ to the overall
value of the business. Targets have generally been set with regard to both the share price at the beginning of
the financial year and the prevailing share price. Given the relatively low starting point where the business was
valued at circa $55 million (beginning of FY16 financial year), growth in total shareholder returns was determined
to be a key objective and consequently targets were set at extremely challenging increments generally requiring
at least 100% growth on the base position.
The N&RC was clear that growth needed to reflect the capability and value within the business and did not want
to complicate the scheme through the introduction of tiered performance hurdles.
Total shareholder return from the beginning of 1 July 2016 to 30 June 2018 is in excess of $500 million.
Does the Company have plans to change the structure for future years?
The goal of the N&RC is to implement a common scheme for all KMP and senior managers within the business
which provides a rolling three year equity based performance scheme. Performance hurdles will be reviewed
as part of any future plan. Over recent years, since the downturn experienced by the sector in the period 2015
to 2017, TSR has been a single and clear objective for the executive managers and has delivered significant
increases in shareholder returns. The N&RC will consider other structures and implement those structures if
they are determined to provide appropriate incentives and alignment with shareholder objectives.
4.4
LTI AWARDS AND VESTING STATUS
Name
Allocation
Date
Vesting
Date
Balance of
Unvested
Equity
Awards as
at 1 July
2017
Granted
Vested in
FY 18
Balance of
Unvested
Equity
Awards as
at 30 June
Fair
Value
Per
Security
Fair Value
at Grant
Date
Share
Based
Payments
Expense
FY 18
Number
Number
Number
Number
Cents
$
$
Mr J Pemberton
Mr A Walsh
1/02/2016
to 4/12/17
1/02/2016
to 4/12/27
30/11/2017
3,808,943
7,663,500
(2,833,333)
8,639,110
30/11/2017
2,399,543
2,662,500
(1,856,250)
3,205,793
Mr E Buratto
4/12/2017
30/11/2019
Mr G Caton
4/12/2017
30/11/2019
Mr D Donjerkovich
4/12/2017
30/11/2019
Mr M Gloyne
4/12/2017
30/11/2019
-
-
-
-
288,000
357,798
144,272
146,789
-
-
-
-
288,000
357,798
144,272
146,789
Nil to 37.9
cents
Nil to 37.9
cents
37.9
37.9
37.9
37.9
2,877,500
1,396,063
1,047,893
503,311
109,152
59,328
135,606
68,037
54,679
27,434
55,633
27,912
Details in relation to the KMP long term incentive awards are set out in note 4.7 to the financial statements.
4.5
VALUATION ASSUMPTIONS
The estimation of the fair value of share-based payment awards requires judgement concerning 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.
Further details on the valuation assumptions and individual scheme awards are provided in note 4.7 of the
financial statements.
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4.6
EXECUTIVE DIRECTORS’ AND EXECUTIVE KMP REMUNERATION
The table below sets out the remuneration outcomes for each of NRW’s Executive KMP for the financial year
ended 30 June 2018 and 30 June 2017.
IN AUD $
Remuneration
Post
Employment
Benefits
Other Long
Term Benefits
Share Based
Payments
Total
Key Management
Personnel
Year
Salary &
fees
Cash
based
incentive
Annual
Leave (1)
Super
Other (2)
Equity
EXECUTIVE DIRECTORS
Mr J Pemberton
EXECUTIVES
Mr A Walsh
Mr G Caton (3)
Mr E Buratto(4)
Mr D Donjerkovich (5)
Mr M Gloyne (5)
Mr J Whiteman (6)
Mr W Fair (7)
Mr K Hyman
Total Compensated
(Consolidated) – 2018
Total Compensated
(Consolidated) – 2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
929,951
-
86,730
810,399
300,000
52,613
679,951
-
6,425
680,912
222,750
17,056
520,833
195,000
(3,948)
20,049
19,616
20,049
33,987
20,833
-
-
363,923
-
123,408
-
-
-
-
-
27,675
15,037
-
-
(12,035)
8,557
387,443
60,000
9,705
19,616
158,998
498,211
121,500
-
360,133
432,160
353,999
386,272
-
-
-
-
-
-
-
-
(2,329)
9,425
(513)
29,136
-
-
62,804
28,772
14,347
-
-
20,049
19,616
20,049
(13,360)
19,616
19,080
1,396,063
2,451,873
13,357
182,741
1,378,726
-
-
503,311
1,209,736
101,764
1,056,469
10,194
68,037
810,949
-
-
-
2,057
6,459
-
-
-
-
(49,915)
-
5,634
6,439
-
-
59,328
465,962
-
-
27,434
149,421
-
483,223
27,912
194,007
-
-
-
-
-
-
-
526,834
121,500
-
393,072
480,548
394,028
398,967
2018
3,612,697
195,000
179,669
134,048
(12,950)
2,082,085
6,190,549
2017
3,195,397
582,750
94,273
141,587
26,255
284,505
4,324,767
(1) Represents the movement in accrued annual leave.
(2) Represents the movement in accrued long service leave.
(3) Mr G Caton joined the business as part of the Golding acquisition. Mr Caton is Chief executive of Golding. His remuneration details are for the period 1 September 2017
to 30 June.
(4) Mr E Buratto joined on the 30 October 2017 as Executive General Manger for the Perth based Civil and Mining businesses.
(5) Following the appointment of Mr Buratto as EGM Civil and Mining both Mr D Donjerkovich and Mr M Gloyne are no longer considered KMP’s for the purpose of this
report. Both Mr Donjerkovich and Mr Gloyne retained their roles as General Managers for the Civil and Mining businesses respectively reporting to Mr Buratto.
(6) Mr J Whiteman was appointed General Manager of the Drill and Blast business on the 16 April 2018 following the resignation of Mr W Fair. Remuneration paid to Mr
Whiteman from the date of his appointment through his service contract is shown in the table above.
(7) Mr W Fair resigned on the 11 May 2018.
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4.7
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.
The table below sets out the remuneration outcomes for each of NRW’s Non-Executive Directors:
NON-EXECUTIVE DIRECTORS
Mr M Arnett
Mr J Dowling
Mr P Johnston
Dr I Burston (1)
NON-EXECUTIVE
DIRECTORS’ TOTAL
Remuneration
Post-
Employment
Benefits
Total
Salary &
fees
150,000
132,500
125,000
103,846
100,000
100,000
-
3,462
375,000
339,808
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
Non cash
benefit
Superannuation
-
-
-
-
-
-
-
-
-
-
14,250
13,300
11,875
9,865
9,500
9,500
-
-
35,625
32,665
164,250
145,800
136,875
113,711
109,500
109,500
-
3,462
410,625
372,473
(1) Dr I Burston – final payment made in FY17 following Dr I Burston’s resignation on 30 June 2016
Non-Executive Director fees (excluding superannuation and non-cash benefits) to be paid by the Company to
the Chairman is $150,000 (2017; $150,000) and to Non-Executive Directors is $100,000 (2017; $100,000). In
addition, the chair of the Audit and Risk committee receives an additional fee of $25,000 (2017; $25,000).
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.
4.8
SHARE OWNERSHIP
The table below sets out the current shareholding and movement for the last two financial years for each of the
KMP who hold shares in the Company.
Director / KMP
Held at 1
July 16
Purchases
Shares in
lieu of cash
STI
Held at 30
June 17
Purchases
Rights
vested to
Shares
Mr M Arnett
994,474
-
Mr J Dowling
250,000
100,000
Mr P Johnston
-
100,000
-
-
-
994,474
350,000
100,000
Mr J Pemberton
3,014,404
-
-
-
612,245
3,626,649
454,592
454,592
4,258,878
200,000
1,066,837
5,525,715
Mr A Walsh
TOTAL
14,705
14,705
9,416
10,405
14,705
63,936
End of Remuneration Report (Audited)
18
Held at 30
June 18
1,009,179
364,705
109,416
-
-
-
2,833,333
6,470,387
1,856,250
2,325,547
4,689,583
10,279,234
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DIRECTORS’
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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
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CORPORATE GOVERNANCE &
RISK MANAGEMENT
CORPORATE GOVERNANCE & RISK MANAGEMENT
Good corporate governance and risk management is fundamental to all aspects of NRW’s activities. Set out
below are the Company’s response to the corporate governance principles followed by a review of the key risks.
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 2018.
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.
RISK MANAGEMENT
Risk is an inherent part of the NRW’s business and management of those risks is therefore critical to the
Company’s performance and financial strength.
Material risks that could adversely affect the Company have been identified below along with commentary on
the risk and mitigating actions. The risks are not listed in order of significance nor are they all encompassing,
rather they reflect the most significant risks identified at a whole-of-entity or consolidated level.
Market Risk
• NRW’s financial performance is influenced by the level of activity in the resources and mining industry,
which is impacted by a number of factors outside the control of NRW. These factors include, demand
for mining production, which may be influenced by factors including (but not limited to) prices of
commodities, exchange rates, the competitiveness of Australian mining operations and government
policy on infrastructure spend. The policies of mine owners including their decisions to undertake their
own mining operations or to outsource these functions; and the availability and cost of key resources
including people, earth moving equipment, and critical consumables. Further NRW operates in a
competitive markets and it is difficult to predict whether new contracts will be awarded due to multiple
factors influencing how clients evaluate potential service providers.
• Mitigation actions include: The development of a diversified service offering with contractual
counterparties in infrastructure and across a range of commodities in the resources sector.
Loss of Contracts / Reduction in Contract Scope
• NRW’s revenues are subject to underlying contracts with varying terms. There is a risk that NRW’s
contracts may be cancelled or may not be renewed if NRW’s clients decide to reduce their levels of
spending, potentially reducing their revenue. Contract operations are vulnerable to the risk of
interruption as a result of a variety of factors, which may be beyond NRW’s control, including prolonged
heavy rainfall or cyclones, geological instability, accidents or unsafe conditions, equipment breakdowns,
industrial relations issues, and scarcity of materials and equipment. Interruptions to existing operations
or delays in commencing operations experienced by NRW’s clients may result in lost revenue and, in
some circumstances, result in NRW incurring additional costs, which may have a material adverse effect
on NRW’s business, results of operations and financial condition.
• Mitigation actions include: NRW continues to work closely with its clients to ensure we understand
issues faced by our clients and to identify options where we can assist in ensuring the impact of the
types of issues identified above are minimised.
Delivery Performance
• NRW’s execution and delivery of projects involves judgement regarding the planning, development
and management of complex operating facilities and equipment. As a result, NRW’s operations, cash
flows and liquidity could be affected if the resources or time needed to complete a project are
miscalculated, if it fails to meet contractual obligations, or if it encounters delays or unspecified
conditions. NRW is also exposed to input costs through its operations, such as the cost of fuel and
energy sources, equipment and personnel. To the extent that these costs cannot be passed on to
customers in a timely manner, or at all, NRW’s financial performance could be adversely affected. If
NRW materially underestimates the cost of providing services, equipment or plant, there is a risk of a
negative impact on NRW’s financial performance.
• Mitigation actions include: the development of robust tender and contract review processes which have
been structured to identify risk and develop specific mitigation plans to address issues as they arise.
A number of contracts include a rise and fall clause which mitigate changes in input costs to NRW.
20
NRW HOLDINGS ANNUAL REPORT 2018 | Corporate Governance & Risk Management
20
NRW HOLDINGS ANNUAL REPORT 2018 | Corporate Governance StatementsFor personal use only
CORPORATE GOVERNANCE &
RISK MANAGEMENT CONTINUED
RISK MANAGEMENT (CONTINUED)
Access to Resources
• NRW’s growth and profitability may be limited by loss of key management or operational personnel or
due to being unable to recruit and retain skilled and experienced staff. Further NRW is reliant on third
party equipment to perform contract obligations which may not be available or may be subject to pricing
premiums in order to secure appropriate equipment.
• Mitigation actions include: NRW maintains a database of staff who have worked for the Company on
all of its projects and pricing of contracts includes estimates of the likely costs required to attract the
right people to perform the contract. NRW has developed strong working relationships with a number
of equipment suppliers in order to ensure equipment requirements are understood ahead of time in
order to minimise any potential risk around availability.
NRW HOLDINGS ANNUAL REPORT 2018 | Corporate Governance & Risk Management
NRW HOLDINGS ANNUAL REPORT 2018 | Corporate Governance & Risk Management
21
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NRW HOLDINGS ANNUAL REPORT 2018 | Corporate Governance StatementsFor personal use only
AUDITOR’S INDEPENDENCE
DECLARATION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Brookfield Place, Tower 2
123 St Georges Terrace
Perth, WA, 6000
Australia
Phone: +61 8 9365 7000
www.deloitte.com.au
22 August 2018
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 2018, 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
22
NRW HOLDINGS ANNUAL REPORT 2018 | Auditor’s Independence Declaration
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
28
NRW HOLDINGS ANNUAL REPORT 2018 | Corporate Governance For personal use only
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, 22 August 2018
NRW HOLDINGS ANNUAL REPORT 2018 | Auditor’s Independence Declaration
Directors’ Declaration
23
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NRW HOLDINGS ANNUAL REPORT 2018 | Directors’ ReportFor personal use only
CONTENTS
PAGE
CONTENTS
Consolidated Statement Of Profit Or Loss And Other Comprehensive Income ............................................... 25
Consolidated Statement Of Financial Position ................................................................................................. 26
Consolidated Statement Of Changes In Equity ................................................................................................ 27
Consolidated Statement Of Cash Flows .......................................................................................................... 28
Notes To The Financial Statements ................................................................................................................. 29
1.
General Notes ..................................................................................................................................... 29
2.
Business Performance ........................................................................................................................ 31
3.
Balance Sheet ..................................................................................................................................... 36
4.
Capital Structure ................................................................................................................................. 45
5.
Financing ............................................................................................................................................ 54
6.
Taxation .............................................................................................................................................. 59
7.
Other Notes ......................................................................................................................................... 63
Shareholder Information ................................................................................................................................... 75
Independent Auditor’s Report .......................................................................................................................... 77
Appendix 4E ..................................................................................................................................................... 82
24
Contents
24
NRW HOLDINGS ANNUAL REPORT 2018 | Directors’ ReportFor personal use only CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the Year Ended 30 June 2018
REVENUE
Finance income
Finance costs
Share of profit / (loss) from associates
Materials and consumables used
Employee benefits expense
Subcontractor costs
Depreciation and amortisation expenses
Plant and equipment costs
Other expenses
Profit before income tax
Income tax benefit
Profit for the year
Consolidated
Notes
2018
$’000
2017
$’000
2.2
685,431
344,560
2.3
2.3
3.3
493
(6,869)
1,382
303
(5,733)
(644)
(116,374)
(48,112)
2.4
(196,826)
(116,094)
2.4
2.4
6.1
(176,235)
(48,205)
(99,870)
(6,852)
36,075
6,091
42,166
(60,809)
(27,287)
(59,686)
(2,971)
23,527
5,000
28,527
OTHER COMPREHENSIVE INCOME
Exchange differences arising on translation of foreign operations
Other comprehensive income / (expense) for the year, net of tax
-
-
-
-
TOTAL COMPREHENSIVE INCOME
42,166
28,527
Profit Attributable to:
Equity holders of the Company
Total Comprehensive Income Attributable to:
42,166
28,527
Equity holders of the Company
42,166
28,527
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
4.6
Cents
Cents
11.6
11.4
9.1
9.0
The consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.
NRW HOLDINGS ANNUAL REPORT 2018 | Consolidated Statement of Profit or Loss and Other Comprehensive Income
25
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NRW HOLDINGS ANNUAL REPORT 2018 | Insert HeadingNRW HOLDINGS ANNUAL REPORT 2018 | Directors’ ReportFor personal use only
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
As at 30 June 2018
Consolidated
ASSETS
Current assets
Cash and cash equivalents
Receivables
Inventories
Other current assets
Total current assets
Non-current assets
Investments in associates
Property, plant and equipment
Intangibles
Goodwill
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
Total equity
Notes
3.1
3.2
3.3
3.4
3.5
3.6
6.3
3.7
5.3
6.3
3.8
5.3
3.8
4.2
4.3
4.4
2018
$’000
58,846
120,699
22,477
4,591
206,613
4,736
209,503
19,785
40,103
39,447
313,574
520,187
127,730
36,921
1,218
20,166
186,035
56,291
5,218
61,509
247,544
272,643
2017
$’000
42,264
53,034
16,288
4,511
116,098
3,354
174,081
1,763
-
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
206,126
176,901
5,341
61,176
3,162
19,010
272,643
199,073
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
26
NRW HOLDINGS ANNUAL REPORT 2018 | Consolidated Statement of Financial Position
26
NRW HOLDINGS ANNUAL REPORT 2018 | Directors’ ReportFor personal use only
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the Year Ended 30 June 2018
Note
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 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
4.2
4.2
4.2
-
-
20,497
(784)
235
Issue of shares to Executives
4.2
523
Share-based payments
Issue of treasury shares to
employees
4.3
4.2
-
21
Acquisition of treasury
shares - on market
4.2
(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
BALANCE AT 1 JULY 2017
176,901
(208)
3,370
3,162
19,010
199,073
Profit for the year
4.4
Total comprehensive
income for the year
-
-
Issue of ord. shares under
institutional share placement
4.2
25,024
Issue of ord. shares under
share purchase plan
Share issue costs
Income tax related to share
issue costs
Share-based payments
4.2
4.2
4.2
4.3
5,000
(1,142)
343
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,179
2,179
42,166
42,166
42,166
42,166
-
-
-
-
-
25,024
5,000
(1,142)
343
2,179
BALANCE AT 30 JUNE 2018
206,126
(208)
5,549
5,341
61,176
272,643
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
NRW HOLDINGS ANNUAL REPORT 2018 | Consolidated Statement of Changes in Equity
27
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NRW HOLDINGS ANNUAL REPORT 2018 | Insert HeadingNRW HOLDINGS ANNUAL REPORT 2018 | Directors’ ReportFor personal use only
CONSOLIDATED STATEMENT OF
CASH FLOWS
CONSOLIDATED STATEMENT OF
CASH FLOWS
For the Year Ended 30 June 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest paid
Interest received
Income tax paid
Consolidated
Note
2018
$’000
2017
$’000
742,732
368,498
(660,690)
(316,008)
(6,869)
(5,733)
493
(907)
303
-
2.3
2.3
Net cash flow from operating activities
5.1
74,759
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 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
Repayment of borrowings and finance/hire purchase liabilities
Payment for shares acquired by NRW Employee Share Trust
3,566
(504)
(45,971)
(71,904)
(114,813)
30,024
(1,142)
-
-
62,631
(34,877)
-
3.4
7.5
4.2
4.2
5.3
5.3
5.3
4.2
895
(169)
(15,909)
(11,000)
(26,182)
20,497
(784)
70,000
(2,100)
3,634
(107,020)
(23)
Net cash from / (used in) financing activities
56,636
(15,796)
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
16,582
42,264
58,846
5,082
37,182
42,264
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
28
NRW HOLDINGS ANNUAL REPORT 2018 | Consolidated Statement of Cash Flows
28
NRW HOLDINGS ANNUAL REPORT 2018 | Directors’ ReportFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS
NOTES TO THE
FINANCIAL STATEMENTS
1. GENERAL NOTES
1.1
GENERAL INFORMATION
NRW Holdings Limited 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
2018 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, urban development 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:
•
•
•
•
•
•
•
financial report are rounded off
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
thousand Australian dollars, unless
the
otherwise indicated;
presents reclassified comparative information where appropriate to enhance comparability with the
current period presentation. This includes a restatement of note 2.1 relating to the Segment reporting
of the Consolidated Group where comparatives have been restated to reflect the determination of
Reporting Segments following the acquisition of Golding Group;
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 2017;
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 nearest
to
The financial statements were authorised for issue by the Directors on 22 August 2018.
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.
29
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Directors’ ReportFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
1.3
BASIS OF CONSOLIDATION (CONTINUED)
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.
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
Carrying amount of non-current assets (Action Drill & Blast)
Deferred tax
Acquisition accounting
Note
3.6
6.3
7.5
Page
42
60
69
30
30
NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2. BUSINESS PERFORMANCE
2.1
SEGMENT REPORTING
NRW is comprised of three businesses, constituting three reportable segments, Civil, Mining and Drill & Blast.
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 management organisational structure and the level of segment information presented to
the Board of Directors.
The Directors of the Company have chosen to organise the Group around the following reportable segments:
• Civil: comprises the Civil activities of NRW together with the Golding Civil and Urban businesses.
• Mining: consolidates the Mining businesses of NRW and Golding together with NRW’s Mining support
business AES Equipment Solutions.
• Drill and Blast: Action Drill & Blast.
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.
Reportable Segment Revenues and Results
2018
2017
Revenue
Earnings
EBITDA(1)
Revenue
Earnings
EBITDA(1)
$’000
$’000
$’000
$’000
311,275
17,806
20,345
103,943
$’000
1,000
$’000
2,000
347,287
38,372
66,455
185,014
25,526
44,518
Civil
Mining
Drill & Blast
117,022
1,682
8,325
88,120
4,242
9,999
Inter-segment eliminations
(21,251)
-
-
(6,780)
-
-
Unallocated costs
Interest costs in segment
results above
Total Revenue / EBIT /
EBITDA (2)
Share of revenue from equity
accounted associates
Amortisation (3)
Transaction costs (4)
Earnings before interest
and tax
Net finance costs
Income tax benefit
-
-
(6,832)
(5,508)
3,830
3,830
-
-
(4,602)
(3,064)
5,430
5,430
754,333
54,858
93,447
370,297
31,596
58,883
(68,902)
-
(25,737)
(9,615)
(2,790)
42,453
(6,378)
6,091
-
-
(2,639)
28,957
(5,430)
5,000
Total (5)
685,431
42,166
344,560
28,527
(1) EBITDA is earnings before interest, tax, depreciation, amortisation and transaction costs. EBITDA includes share of profits from associates of $1.4 million
(FY17 $0.6 million loss)
(2) Revenue including associates. Earnings before interest, tax, amortisation of acquisition intangibles and transaction costs.
(3) Amortisation of Golding acquisition intangibles.
(4) Transaction costs include legal costs associated with the acquisition of Golding (FY18) and costs associated with the Corporate note
issue, early termination costs of bank debt and costs related to the acquisition of the Hughes business, (FY17).
(5) Total is Statutory Revenue and Total Comprehensive Income.
31
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2.1
SEGMENT REPORTING (CONTINUED)
Segment Assets and Liabilities
Segment Assets
Segment Liabilities
2018
$’000
93,224
302,435
75,427
49,101
2017
$’000
54,813
161,352
67,491
47,910
2018
$’000
88,031
125,223
29,692
4,598
2017
$’000
37,006
70,580
22,493
2,414
Civil
Mining
Drill & Blast
Unallocated assets
Consolidated
520,187
331,566
247,544
132,493
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 2018:
Major customer 1
Major customer 2
Total for continuing operations
Civil
$’000
-
-
-
Mining
Drill & Blast
$’000
106,942
96,696
203,638
$’000
8,535
-
8,535
These are summarised by segment below for the comparative year end 30 June 2017:
Civil
$’000
-
31,742
31,742
Mining
Drill & Blast
$’000
116,189
55,858
172,047
$’000
8,387
-
8,387
Total
$’000
115,477
96,696
212,173
Total
$’000
124,576
87,600
212,176
Major customer 1
Major customer 2
Total for continuing operations
Other Segment Information
Civil
Mining
Action Drill & Blast
Other
Total for continuing operations
32
Depreciation and Amortisation
Additions to non-current assets
2018
$’000
2,539
28,083
6,643
10,940
48,205
2017
$’000
1,000
18,992
5,757
1,538
2018
$’000
1,684
88,448
12,340
805
2017
$’000
412
11,988
15,786
-
27,287
103,277
28,186
32
NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2.2
REVENUE
Consolidated
2018
$’000
754,333
(68,902)
685,431
2017
$’000
370,297
(25,737)
344,560
Revenue - group and equity accounted joint ventures
Equity accounted joint ventures
Revenue
Revenue Recognition
Civil Construction Contracts
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.
Mining and Drill & Blast Services
Revenue from the rendering of a service is recognised upon the delivery of the service to customers.
Sale of Goods
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.
Refer to note 7.8 for application of AASB 15.
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
2.3
NET FINANCE EXPENSE
Interest income
Total finance income
Interest expense
Total finance expenses
NET FINANCE EXPENSE
Interest Income
Consolidated
2017
$’000
303
303
(5,733)
(5,733)
(5,430)
2018
$’000
493
493
(6,869)
(6,869)
(6,376)
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.
34
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
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 (note 4.7)
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
Rental hire payments
Owned plant maintenance and operating costs
Subtotal
2018
$’000
(181,111)
(13,536)
(2,179)
(196,826)
1,938
1,938
(37,090)
(11,115)
(48,205)
(16,639)
(27,117)
(56,114)
(99,870)
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)
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
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
Accrued revenue from services contracts
Amounts accrued under long term construction contracts
Total trade and other receivables
2018
$’000
34,782
2,614
439
743
38,578
64,579
17,542
120,699
2017
$’000
28,323
530
77
239
29,169
20,377
3,488
53,034
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 trade receivables ranges from 30 to 75 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 2018, 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
2017
$’000
52
9
61
2018
$’000
323
175
498
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.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.1
TRADE AND OTHER RECEIVABLES (CONTINUED)
Amounts Due From (to) Customers Under Construction Contracts
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
Subtotal
Consolidated
2017
$’000
311,070
(307,582)
3,488
3,488
3,488
2018
$’000
271,217
(253,675)
17,542
17,542
17,542
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. Refer to note 7.8 for application of AASB 15.
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
Work in progress
Total inventories
Consolidated
2018
$’000
21,351
1,126
22,477
2017
$’000
13,965
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.
3.3
INVESTMENT IN ASSOCIATES
Salini Impregilo NRW Joint Venture (SI-NRW JV)
NewGen Drilling Pty Ltd
Total investment in associates
Consolidated
2018
$’000
1,773
2,963
4,736
2017
$’000
-
3,354
3,354
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.3
INVESTMENT IN ASSOCIATES (CONTINUED)
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, 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)
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
$1.2 billion to be delivered over four years. The Group’s share of the joint venture is 20%.
As at 30 June 2018, NRW’s share of revenue is $68.9 million (2017: $25.7 million) and share of profit is $1.8
million (2017: $ nil).
NewGen Drilling Pty Ltd
The Group invested in a 20% share purchase in NewGen Drilling Pty Ltd “NewGen”. CalEnergy Resources
Limited, a subsidiary of Berkshire Hathaway Energy, holds the balance of the shares. The acquisition took place
24 November 2014. NewGen owns a drill rig to service the oil and gas market. Prior to the current financial
year, continued weakness in that market has proved challenging for the business. In the financial year ending
30 June 2018 NewGen secured work for the drill in PNG. Costs associated with updates to the rig in order to
perform that work were expensed in the year.
NewGen Drilling Pty Ltd
Revenue
Loss for the period after tax
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
38
2018
$’000
3,839
(1,955)
1,892
16,878
(3,955)
-
14,815
2017
$’000
94
(3,222)
446
18,197
(1,872)
-
16,771
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.3
INVESTMENT IN ASSOCIATES (CONTINUED)
Reconciliation and movement in the Group’s carrying value of its investment in NewGen Drilling Pty Ltd:
Opening Cost of the investment in associate
Share of loss for the period
CLOSING COST OF INVESTMENT IN ASSOCIATE
2018
$’000
3,354
(391)
2,963
2017
$’000
3,999
(644)
3,354
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 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
Acquisitions through business combinations
(note 7.5)
Additions
Disposals
-
-
-
-
218
-
325
-
(76)
27,844
28,169
45,753
45,971
(21,475)
(21,551)
Balance as at 30 June 2018
3,218
6,732
1,680
555,096
566,726
DEPRECIATION & IMPAIRMENT
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
Depreciation and amortisation expense
Disposals
-
-
284
-
122
(66)
36,684
37,090
(19,857)
(19,923)
Balance as at 30 June 2018
1,000
5,253
1,487
349,483
357,223
CARRYING VALUES
At 30 June 2017
At 30 June 2018
2,218
2,218
1,545
1,479
-
193
170,318
174,081
205,613
209,503
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.4
PROPERTY, PLANT AND EQUIPMENT (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 normal 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
4 to 40 years
2 to 7 years
5 to 10 years (normally based on machine hours)
1.5 to 10 years
2 to 8 years
2 to 5 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).
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.
40
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.5
INTANGIBLE ASSETS
Intangibles held by the Group include:
Software and
System
Development
Licences
Brand Name
Customer
Relationships
$’000
$’000
$’000
$’000
COST
Balance as at 30 June 2016
19,813
Additions
-
Balance as at 30 June 2017
19,813
1,453
-
1,453
Assets recognised on business
combinations (note 7.5)
1,329
-
Balance as at 30 June 2018
21,142
1,453
AMORTISATION & IMPAIRMENT
Balance as at 30 June 2016
Amortisation expense (note 2.4)
Balance as at 30 June 2017
Amortisation expense (note 2.4)
Balance as at 30 June 2018
CARRYING VALUES
At 30 June 2017
At 30 June 2018
Brand Names
16,969
1,090
18,059
1,495
19,554
1,755
1,589
1,440
5
1,445
5
1,450
8
3
-
-
-
8,916
8,916
-
-
-
-
-
-
8,916
Total
$’000
21,267
-
21,267
29,137
-
-
-
18,892
18,892
50,404
-
-
-
9,615
9,615
-
9,277
18,409
1,095
19,504
11,115
30,619
1,763
19,785
Brand names recognised by the Group have an indefinite useful life and are not amortised. Each period, the
useful life of this asset is reviewed to determine whether events and circumstances continue to support an
indefinite useful life assessment for the asset. Such assets are tested for impairment at least annually or more
frequently whenever there is the presence of other indicators of impairment.
Customer Relationships
Customer relationships are initially recognised at their fair value at the acquisition date (which is regarded as
their cost). Customer relationships have a finite life and are carried at cost less any accumulated amortisation
and any impairment losses. They are amortised over their useful life of up to five years.
Software and System Development
Software is recognised at cost of acquisition. Software has a finite life and is carried at cost less any
accumulated amortisation and any impairment losses. Software is amortised over its useful life ranging from
two to five years.
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.6
GOODWILL
Goodwill held by the Group include:
Gross carrying amount
Balance at beginning of the period
Amounts recognised from business combinations occurring during
the period (note 7.5)
Balance at end of the period
2018
$’000
-
40,103
40,103
2017
$’000
-
-
-
Goodwill arising on an acquisition of a business is carried at cost established at the date of the acquisition of
the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is
allocated to each of the Company’s cash-generating units (CGU) that are expected to benefit from the synergies
of the combination that could not otherwise be separately identified.
Goodwill is allocated to the CGUs representing the Company’s operating segments and accordingly has been
allocated to Golding civil, mining and urban. Goodwill is not amortised but is mandatorily tested annually or
more frequently whenever there is the presence of other indicators of impairment.
If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets
of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is
recognised directly in profit or loss in the Consolidated Statement of Profit or Loss and Comprehensive Income.
An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant
cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on
disposal.
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, intangible assets not yet available for use, and goodwill are tested
for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Cash Generating Units (CGU’s)
As at 30 June 2018, the Company performed the relevant impairment testing of its cash-generating units. The
Company was satisfied that the recoverable values were sufficiently in excess of their carrying values at
reporting date. This conclusion was supported having applied a sensitivity analysis on the assumptions used in
determining the recoverable values.
Accordingly, no impairment of the CGU’s was required to be recognised.
The assumptions used in this assessment and sensitivity analysis thereafter are provided on the following page.
42
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.6
GOODWILL (CONTINUED)
Value in Use Assumptions
EBIT and growth
The value in use assessments for all CGU’s were based on Board approved budgets for the year ended 30
June 2019. Growth assumptions thereafter are 3% (2017: 5-10%) per annum for each future year. The terminal
value assumes perpetual growth of 3% (2017: 3%).
Discount rate
A pre-tax discount rate of 13.6% (2017: 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 continue to reflect, what management estimate to be normal
operating levels in order to continue to support the underlying businesses.
Capital expenditure forecasts were based on levels considered appropriate to maintain current operating
activities also considering the opportunity to improve output on currently under-utilised equipment. In the
medium term, capital expenditure assumes replacement of equipment in the later years of the plan and has
been assessed in line with the level of forecast depreciation.
Key Accounting Judgments and Estimates
Sensitivity Analysis
The Company undertook sensitivity analysis with regard to the future years’ growth rates, adjusting to a range
of 1-2% (year-on-year) growth per annum. Terminal value growth rates have been sensitised to 2.0% and the
discount rate increased to 15.0%. Individually, these sensitivities did not result in recoverable values lower than
the carrying value of the CGUs as at 30 June 2018 with the exception of the ADB CGU.
Assuming no changes to the key assumptions used in the underlying cashflow forecasts that underpin the
recoverable value assessment of the ADB CGU, the discount rate would need to increase to 14.5% for the
recoverable value to be lower than the carrying value. Similarly the terminal growth rate could be reduced to
2% perpetual growth per annum before the recoverable amount is lower than the carrying value.
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
2018
$’000
78,894
3,505
4,796
40,535
127,730
2017
$’000
28,505
1,702
1,377
20,442
52,026
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.
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
3.8
PROVISIONS
Balance at 1 July 2017
Add: Provisions in Golding opening balance sheet
Provisions made during the year
Consolidated
Onerous lease
& contracts
Warranty
& other
Employee
benefits
Total
$’000
1,428
9,552
125
$’000
3,440
-
135
$’000
$’000
11,988
16,856
6,846
16,398
19,691
19,951
Provisions applied
(7,164)
(3,352)
(17,305)
(27,821)
Balance at 30 June 2018
Short-term provisions
Long-term provisions
Total balance at 30 June 2018
3,941
3,130
811
3,941
223
185
38
223
21,220
25,384
16,851
20,166
4,369
5,218
21,220
25,384
The provision for onerous lease relates to substantially unoccupied office buildings of the Golding business
located in Gladstone.
The warranty provisions relate to the present value of the estimate of the future outflow of economic benefits
under the Groups obligations for warranties arising from specific construction contracts at reporting date. The
future cash flows have been measured 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.
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 employee entitlements for long service leave. This
determination considers future increases in wages and salaries, future on cost rates, employee departures and
period of service.
44
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
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 2018 as:
Consolidated
Borrowings (note 5.3)
Cash
Net Debt
Total equity
Net Debt to Equity Ratio
2018
$’000
93,212
(58,846)
34,366
272,643
12.6%
2017
$’000
63,099
(42,264)
20,835
199,073
10.5%
4.1
FINANCIAL INSTRUMENTS
Financial Risk Management
The Group’s overall financial risk strategy seeks to ensure appropriate funding levels, approved treasury
directives to meet ongoing project needs and to allow flexibility for growth. The Board has ultimate responsibility
for the Group’s policy of risk management. The risk policies and procedures are reviewed periodically. In
addition, the going concern basis is reviewed throughout the year, ensuring adequate working capital
is available.
The financial instruments in the Group primarily consist of interest bearing debt, cash, trade receivables and
payables. The Group has minimal foreign currency risks, although its presence in Guinea West Africa remains,
including some assets that are strategically held there for new opportunities. No cash is held other than to meet
the day to day running costs.
Capital Risk Management
The capital structure of the Group comprises of debt (borrowings), cash and cash equivalents, and equity. A
significant portion of the debt funding was established through NRW Corporate Notes issued on 19 December
2016 to acquire assets utilised in the operations of Civil, Mining and Action Drill & Blast. A $48 million Golding
Debt Facility was established in August 2017 to partially fund the acquisition of the Golding Group (note 7.5).
The cash position is reviewed regularly and the Group had access to an interchangeable working capital facility
(overdraft) as at 30 June 2018, as disclosed at note 5.3.
Interest Rate Risk Management
Principal and interest payments under the NRW Corporate Notes and Golding Debt Facility are made quarterly.
The term of the NRW Corporate Notes is to expire December 2020 and the Golding Debt Facility in August
2020. The Board continues to review its risk associated with any covenants and borrowing conditions on a
regular basis.
The largest portion of the borrowings is the NRW Corporate Notes, at a fixed interest rate of 7.5% per annum.
Consequently, the exposure to market rate volatility is 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.
45
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.1
FINANCIAL INSTRUMENTS (CONTINUED)
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 2018
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%
58,846
58,846
-
Trade and other receivables
-
120,699
75,040
45,618(1)
Subtotal
179,545
133,886
45,618
-
41
41
FINANCIAL LIABILITIES
Corporate notes
Golding acquisition loan
Asset financing
Other
7.5%
5.2%
8.4%
5.0%
46,256
36,164
10,132
660
-
-
211
223
17,543
28,713
16,164
20,000
2,344
7,577
437
-
-
Trade and other payables
-
127,730
79,511
48,219(2)
Subtotal
220,942
79,945
84,707
56,290
(1) Normal trade receivable terms. See note 3.1.
(2) Normal trade payable terms. See note 3.7.
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
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.
46
46
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.1
FINANCIAL INSTRUMENTS (CONTINUED)
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 2018 (at spot) was $4,752 AUD (2017: $13,767 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 2018 total $4.9 million (2017: $8.4 million) and contract guarantees provided by
the insurance market total $29.8 million (2017: $3.0 million).
Fair Value of Financial Instruments
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual
provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately
in profit or loss.
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.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.1
FINANCIAL INSTRUMENTS (CONTINUED)
Financial assets at FVTPL
Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated
as at FVTPL.
A financial asset is classified as held for trading if:
•
•
•
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Group manages
together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial
recognition if:
•
•
•
such designation eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is
managed and its performance is evaluated on a fair value basis, in accordance with the Group’s
documented risk management or investment strategy, and information about the grouping is provided
internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and AASB 139 ‘Financial
Instruments: Recognition and Measurement’ permits the entire combined contract (asset or liability) to
be designated as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement
recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest
earned on the financial asset and is included in the ‘other gains and losses’ line item in the statement of
comprehensive income.
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.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.1
FINANCIAL INSTRUMENTS (CONTINUED)
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.
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
370,618,080 fully paid ordinary shares
(2017: 321,775,556)
Consolidated
2018
$’000
2017
$’000
206,126
176,901
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
2018
# No. ‘000
2018
$‘000
2017
# No. ‘000
2017
$‘000
FULLY PAID ORDINARY SHARES
Balance at the beginning of the financial year
321,776
176,901
278,877
156,432
Capital raising at $0.49 share
-
-
41,833
20,497
Capital raising at $0.69 share
36,800
25,024
Share issue under share purchase plan at $0.68 share
7,352
5,000
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
-
-
4,689
-
-
(1,142)
343
-
-
-
-
-
-
-
1,066
-
-
-
-
(784)
235
523
21
(23)
Balance at the end of the period
370,618
206,126
321,776
176,901
The Company has on issue a total of 370,628,872 (2017: 321,786,348) ordinary shares, of which 10,792
(2017: 10,792) shares are held by subsidiaries of the Company and eliminated on consolidation.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.3
RESERVES
Share based payment reserve
Foreign currency reserve
Total reserves
Share Based Payment Reserve
Balance at the beginning of the financial year
Share based payments
Balance at the end of the financial year
Consolidated
Consolidated
2017
$’000
3,370
(208)
3,162
2017
$’000
3,085
285
3,370
2018
$’000
5,549
(208)
5,341
2018
$’000
3,370
2,179
5,549
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 and at note 4.7.
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
Consolidated
2018
$’000
19,010
42,166
61,176
2017
$’000
(9,519)
28,527
19,010
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.5
DIVIDENDS
The Directors have declared a dividend for the current financial year of 2 cents per share. The dividend which
will be fully franked will be paid on 6 November 2018.
Franking Account
Franking account balance at 1 July
Australian income tax paid
Franking account balance at 30 June
Franking credits that will attach to the payment of fully franked dividends declared
but not paid as at reporting date
Franking credits that will arise from the payment of income tax payable as at
reporting date
Net franking credits available
Consolidated
2017
$’000
39,007
-
39,007
-
511
39,518
2018
$’000
39,007
907
39,914
(3,177)
1,217
37,954
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
2018
$‘000
42,166
2017
$‘000
28,527
362,271
311,771
Basic earnings per share
11.6 cents per share
9.1 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)
8,228
370,499
5,910
317,681
Diluted earnings per share
11.4 cents per share
9.0 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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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.7
SHARE BASED PAYMENTS
Share based compensation payments are provided to employees in accordance to the NRW Holdings Limited
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.
The variables in the valuation model are the share price on the date of the award, the duration of the award, the
risk free interest rate, share price volatility and dividend yield. The inputs used for each of the current schemes
is provided below.
Scheme ID
Risk Free Interest Rate
Share Price Volatility
Dividend Yield
Value (cents
per share)
A
B
C
D
E
F
G
H
I
J
1.75%
1.75%
1.78%
1.78%
1.71%
1.80%
1.96%
1.71%
1.80%
1.80%
60.0%
60.0%
120.0%
120.0%
78.8%
114.9%
103.2%
68.0%
110.6%
112.8%
0.0%
0.0%
0.0%
0.0%
10.2%
10.2%
10.2%
10.2%
10.2%
10.2%
Nil
Nil
8.50
16.60
33.00
38.50
34.00
17.60
37.90
41.20
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 the 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.
52
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
4.7
SHARE BASED PAYMENTS (CONTINUED)
Details of the awards for each scheme, the status of those awards and share based payment expense for KMP’s
is provided in the table below.
Name / Scheme
Scheme
ID
Allocation
Date
Vesting
Date
Balance of
Unvested
Equity
Awards as
at 1 July
2017
Granted
Vested in
FY 18
Balance of
Unvested
Equity
Awards as
at 30 June
2018
Fair Value
Per
Security
Fair Value
at Grant
Date
Share
Based
Payments
Expense
FY18
Number of
Rights
Number of
Rights
Number of
Rights
Number of
Rights
Cents
$
J Pemberton
2016 Tranche 1
2016 Tranche 2
2017 Tranche 1
2017 Tranche 2
2018 Tranche 1
2018 Tranche 2
2018 Tranche 3
2018 Golding
Tranche 1 Y1
2018 Scheme
Golding Tranche
1 Y2
Total
A Walsh
2016 Tranche 1
2016 Tranche 2
2017 Tranche 1
2017 Tranche 2
2018 Tranche 1
2018 Tranche 2
2018 Tranche 3
2018 Golding
Tranche 1 Y1
2018 Golding
Tranche 1 Y2
Total
E Buratto
2018 Scheme
G Caton
2018 Scheme
D Donjerkovich
2018 Scheme
M Gloyne
2018 Scheme
Non KMP
2018 Scheme
TOTAL
A
B
C
D
E
F
G
H
I
A
B
C
D
E
F
G
H
I
J
J
J
J
J
1/02/2016
30/11/2017
750,000
1/02/2016
30/11/2017
750,000
1/07/2016
30/11/2017
1,333,333
1/07/2016
30/11/2018
975,610
-
-
-
-
4/12/2017
30/11/2018
4/12/2017
30/11/2019
4/12/2017
30/11/2020
4/12/2017
30/08/2018
4/12/2017
30/08/2019
-
-
-
-
-
2,137,500
2,137,500
2,137,500
625,500
625,500
-
-
-
-
-
-
(750,000)
(750,000)
(1,333,333)
-
-
-
Nil
Nil
8.50
16.60
33.00
38.50
34.00
975,610
2,137,500
2,137,500
2,137,500
625,500
17.60
110,088
94,361
625,500
37.90
237,065
109,414
$
Nil
Nil
Nil
Nil
Nil
113,333
161,951
92,544
705,375
529,031
822,938
352,688
726,750
218,025
3,808,943
7,663,500
(2,833,333)
8,639,110
2,877,500
1,396,063
1/02/2016
30/11/2017
556,875
1/02/2016
30/11/2017
556,875
1/07/2016
30/11/2017
742,500
1/07/2016
30/11/2018
543,293
4/12/2017
30/11/2018
4/12/2017
30/11/2019
4/12/2017
30/11/2020
4/12/2017
30/08/2018
4/12/2017
30/08/2019
-
-
-
-
-
-
-
-
-
700,000
700,000
700,000
281,250
281,250
(556,875)
(556,875)
(742,500)
-
-
-
-
-
-
-
-
-
543,293
700,000
700,000
700,000
Nil
Nil
8.50
16.60
33.00
38.50
34.00
Nil
Nil
63,113
Nil
Nil
Nil
90,187
51,535
231,000
173,250
269,500
115,500
238,000
71,400
281,250
17.60
49,500
42,429
281,250
37.90
106,594
49,197
2,399,543
2,662,500
(1,856,250)
3,205,793
1,047,894
503,311
4/12/2017
30/11/2019
4/12/2017
30/11/2019
4/12/2017
30/11/2019
4/12/2017
30/11/2019
4/12/2017
30/11/2019
-
-
-
-
-
288,000
357,798
144,272
146,789
510,119
-
-
-
-
-
288,000
41.20
118,656
59,328
357,798
41.20
147,413
68,037
144,272
41.20
59,440
27,434
146,789
41.20
60,477
27,912
510,119
41.20
210,169
97,001
6,208,486
11,772,978
(4,689,583)
13,291,881
4,521,549
2,179,086
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
5.
5.1
FINANCING
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
Depreciation and amortisation
Debt issue cost paid in advance
Share of gain/(loss) from associates
Share based payment expense
Issue of shares to executive management
Tax effect of share issue costs recognised in equity
Net cash generated before movement in working capital
Change in trade and other receivables
Change in inventories
Change in other assets
Change in trade and other payables
Change in provisions and employee benefits
Change in provision for income tax
Change in deferred tax balances
Net cash from operating activities
2018
$’000
42,166
(1,938)
48,204
-
(1,382)
2,179
-
343
89,572
(32,423)
(3,981)
2,078
34,725
(7,869)
(905)
(6,438)
74,759
2017
$’000
28,527
(310)
27,287
2,100
644
285
543
235
59,311
(17,634)
250
(1,574)
7,622
7,117
512
(8,544)
47,060
Note: EBITDA ($93.5 million) is profit for the period ($42.2 million) add back depreciation and amortisation
($48.2 million), net interest ($6.4 million) and transaction costs ($2.8 million) less the tax credit ($6.1 million).
5.2
GUARANTEES
Bank guarantees
Insurance bonds
Balance at the end of the financial year
Consolidated
2017
$’000
8,432
2,971
11,403
2018
$’000
4,919
29,831
34,750
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.
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FINANCIAL STATEMENTS CONTINUED
5.3
BORROWINGS
On 30 August 2017, the Company agreed a $48 million debt facility with its lead banker to be used to finance
the acquisition of Golding. The debt is fully repayable over 3 years on a quarterly basis with interest payable at
a variable rate linked to the prevailing 90-day BBSY rate at the commencement of each quarter. This facility is
secured over the assets of Golding Group.
In the previous financial year, 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 are payable quarterly over 4 years, with the
final payment due December 2020. The notes 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 are 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
assets 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
2019.
Information on the amounts drawn under the Company’s finance facilities is provided in the table below.
The group borrowings are comprised of:
Consolidated
SECURED AT AMORTISED COST
Current
Corporate notes
Golding acquisition loan
Finance lease liability
Other
Total current borrowings
Non-current
Corporate notes
Golding acquisition loan
Finance lease liability
Total non-current borrowings
GROUP TOTAL BORROWINGS
2018
$’000
17,543
16,164
2,554
660
36,921
28,713
20,000
7,578
56,291
93,212
2017
$’000
16,331
-
374
-
16,705
46,153
-
241
46,394
63,099
The Company currently has in place a 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).
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
5.3
BORROWINGS (CONTINUED)
Borrowings Movement Reconciliation
Proceeds from
borrowings
Repayments of
borrowings
Acquired
Golding Debt
Interest Accrued
Finance
Description
Corporate notes
Golding acquisition
Asset financing
Other
Total
Opening
Balance
1 Jul 17
$’000
62,484
-
615
-
$’000
-
48,000
10,188
4,443
$’000
(16,191)
(12,000)
(452)
(6,233)
$’000
-
-
-
2,358
2,358
$’000
(37)
164
(219)
92
-
63,099
62,631
(34,877)
Closing
balance
30 Jun 18
$’000
46,256
36,164
10,132
660
93,212
Finance Facilities
Consolidated finance facilities as at 30 June 2018
Finance Description
Face Vale (limit)
Carrying Amount (uilised)
Unutilised Amount
Corporate notes
Golding acquisition loan
Asset financing(1)
Other
$’000
46,256
36,164
10,132
660
Guarantees and insurance bonds(2)
155,000
(1) Terms range from one to five years.
(2) $10.0 million of the overall limit is interchangeable as an overdraft facility
Consolidated finance facilities as at 30 June 2017
$’000
46,256
36,164
10,132
660
34,750
$’000
-
-
-
-
120,250
Finance Description
Face Vale (limit)
Carrying Amount (utilised)
Unutilised Amount
Corporate notes
Asset financing(1)
Guarantees and insurance bonds(2)
$’000
62,484
615
62,500
$’000
62,484
615
11,403
$’000
-
-
51,097
(1) Terms range from one to three years.
(2) $10.0 million of the overall limit is interchangeable as an overdraft facility
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
5.3
BORROWINGS (CONTINUED)
Finance Leases as Lessee
Non-cancellable finance leases are as outlined above and are payable as follows:
Not later than one year
Later than one year and not later than five 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
2018
$’000
3,180
8,440
-
11,620
(1,488)
10,132
2017
$’000
398
247
-
645
(30)
615
2018
$’000
2,555
7,577
-
10,132
-
10,132
2017
$’000
374
241
-
615
-
615
Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging from
3.91% to 9.5% (2017: 3.94% to 6.25%).
Finance Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
Where the Group is the lessee, assets held under finance leases are initially recognised as assets of the Group
at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the statement of financial position as a finance lease
obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised
immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised
as expenses in the periods in which they are incurred.
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other
financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that 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 2018 the Group has capital and other commitments totalling $13.7 million (2017: $1.3 million).
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FINANCIAL STATEMENTS CONTINUED
5.5
OPERATING LEASES
Non-cancellable operating and property lease rentals are payable as follows:
Consolidated
Less than one year
Between one and five years
More than five years
Total operating and property leases
2018
$’000
15,386
36,813
4,266
56,465
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. Refer to note 7.8 for application of AASB 16.
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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 to account
Total income tax benefit
6.2
RECONCILIATION OF EFFECTIVE TAX RATE
Profit before tax for the period
2018
$’000
-
-
-
13,072
(19,163)
(6,091)
2018
$’000
36,075
Consolidated
INCOME TAX USING THE COMPANY’S DOMESTIC TAX RATE OF 30%
10,823
Changes in income tax expense due to:
Effect of expenses that are not deductible in determining taxable profit
Adjustments recognised in the current year in relation to the effect of tax
consolidation in prior years
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)
Deferred tax assets brought to account
Total income tax benefit
512
1,838
(100)
(19,163)
(6,091)
2017
$’000
-
511
511
4,245
(9,756)
(5,000)
2017
$’000
23,527
7,058
525
(2,777)
(50)
(9,756)
(5,000)
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
6.2
RECONCILIATION OF EFFECTIVE TAX RATE (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.
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
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.
6.3
CURRENT AND DEFERRED TAX BALANCES
Current Tax Liabilities
Income tax payable (1)
Total
Consolidated
2018
$’000
1,218
1,218
2017
$’000
511
511
(1) Current tax liability disclosed on the face of the balance sheet relates to an assumed liability from the Golding acquisition.
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FINANCIAL STATEMENTS CONTINUED
6.3
CURRENT AND DEFERRED TAX BALANCES (CONTINUED)
Deferred Tax Balances
Assets
Liabilities
Net
2018
$’000
341
415
2017
$’000
341
301
2018
$’000
-
-
2017
$’000
-
-
2018
$’000
341
415
2017
$’000
341
301
Share based payments
Costs of equity raising FY17/18
Provisions
6,845
5,452
(8)
(152)
6,837
5,300
Work in progress (construction)
Inventories
Intangible Assets
PP&E
Other creditors and accruals
Other assets
Losses
606
1,125
-
1,906
191
286
606
(12,427)
-
(11,821)
606
-
-
409
849
464
(2,730)
(3,030)
(1,605)
(3,030)
(5,459)
-
(5,459)
-
(19,086)
(8,823)
(17,180)
(8,414)
-
-
(237)
(367)
191
49
849
97
67,679
40,219
-
-
67,679
40,219
Deferred tax assets / (liabilities)
79,394
48,641
(39,947)
(12,372)
39,447
36,270
Movement of Deferred Tax Balances
Consolidated
DEFERRED TAX EXPENSE
Recognised in profit or loss
Recognised directly in equity
Balance acquired through business combinations
Total
2018
$’000
6,095
343
(3,261)
3,177
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.
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.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
6.3
CURRENT AND DEFERRED TAX BALANCES (CONTINUED)
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
2018
$’000
2,750
2017
$’000
21,913
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.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7. OTHER NOTES
7.1
SUBSIDIARIES
Parent entity
Principal
Activities
Country of
incorporation
Ownership interest
2018
2017
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
Action Drill & Blast
Australia
100%
100%
Golding Group Pty Ltd (note 7.5)
Golding Holding
Company
Australia
100%
Golding Finance Pty Ltd
Dormant
Australia
100%
Golding Employee Equity Pty Ltd
Dormant
Australia
100%
Golding Contractors Pty Ltd
Golding Civil,
Mining & Urban
Australia
100%
-
-
-
-
All of
Consolidation Group.
the wholly-owned subsidiaries and Parent entity,
incorporated
in Australia,
form
the Tax
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FINANCIAL STATEMENTS CONTINUED
7.1
SUBSIDIARIES (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 2018:
• Golding Group Pty Ltd
• Golding Finance Pty Ltd
• Golding Employee Equity Pty Ltd
• Golding Contractors 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
Plant and equipment costs
Other expenses
Profit before income tax
Income tax expense
Profit for the year
2018
$’000
685,431
493
(6,869)
1,382
(116,374)
(196,826)
(176,235)
(48,205)
(99,870)
(6,852)
36,075
6,091
42,166
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
OTHER COMPREHENSIVE INCOME
Total comprehensive income for the year
42,166
28,527
Consolidated
2018
$’000
2017
$’000
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.1
SUBSIDIARIES (CONTINUED)
The consolidated statement of financial position of the entities party to the deed of cross guarantees is:
Consolidated
2018
$’000
2017
$’000
STATEMENT OF FINANCIAL POSITION
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
Goodwill
Deferred tax assets
Financial assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings / (Accumulated losses)
Total equity
58,841
120,699
22,477
4,666
206,683
4,736
209,429
19,785
40,103
39,447
-
313,500
520,183
127,764
36,921
1,218
20,166
186,069
56,291
5,218
61,509
247,578
272,605
206,123
5,549
60,933
272,605
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
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.1
SUBSIDIARIES (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 - 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) - 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 - completed
2018
85%
50%
15%
50%
75%
50%
2017
85%
50%
15%
50%
75%
50%
There has been no change in the Group’s ownership or voting interests for the reported years.
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
66
2018
$’000
15,988
(16,586)
1,451
1,461
2017
$’000
14,575
(13,420)
1,440
991
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.2
UNINCORPORATED JOINT OPERATIONS (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
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.
7.4
PARENT ENTITY INFORMATION
As at, and throughout, the financial year ended 30 June 2018 the parent company of the Group was NRW
Holdings Limited.
The accounting policies of the parent entity, which have been applied in determining the financial information
shown below, are the same as those applied in the consolidated financial statements.
67
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.4
PARENT ENTITY INFORMATION (CONTINUED)
Financial Position
Parent
ASSETS
Current assets
Non-current assets
Total assets
LIABILITIES
Current liabilities
Non-current liabilities
Total liabilities
EQUITY
Contributed equity
Retained earnings/(accumulated losses)
RESERVES
Share based payment reserve
Total equity
Financial Performance
Profit for the year
Total comprehensive income
2018
$’000
182,487
94,420
276,907
18,127
28,713
46,840
206,149
18,646
5,272
230,067
2018
$’000
50,098
50,098
Parent
Guarantees Entered into by the Parent in Relation to the Debts of its Subsidiaries
Finance leases
Total
Parent
2018
$’000
10,132
10,132
NRW Holdings Limited has entered into a Deed of Cross Guarantee as disclosed in note 7.1.
68
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
2017
$’000
615
615
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.5
BUSINESS COMBINATIONS
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values
of the assets transferred by the Company, liabilities incurred by the Company to the former owners of the
acquiree and the equity interests issued by the Company in exchange for control of the acquiree. Acquisition-
related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair
value, except that:
•
•
•
deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are
recognised and measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee
Benefits’ respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-
based payment arrangements of the Company entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with AASB 2 ‘Share Based Payment’ at
the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Noncurrent
Assets Held for Sale and Discontinued Operations’ are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the
acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and
liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase gain.
When the consideration transferred by the Company in a business combination includes assets or liabilities
resulting from a contingent consideration arrangement, the contingent consideration is measured at its
acquisition-date fair value and included as part of the consideration transferred in a business combination.
Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are
adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments
are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot
exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as
measurement period adjustments depends on how the contingent consideration is classified. Contingent
consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is
remeasured at subsequent reporting dates in accordance with AASB 139, or AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets’, as appropriate, with the corresponding gain or loss being recognised in profit
or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see above), or additional assets or
liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the
acquisition date that, if known, would have affected the amounts recognised at that date.
On 31 August 2017, the Company concluded the acquisition of Golding Group Pty Ltd (Golding). Total
consideration for Golding was $85.0 million for 100% of the shares.
The principal activities of Golding include:
Civil Construction including bulk earthworks and infrastructure development capability in relation to
roads, rail, bridges and ports.
Urban Solutions including earthworks, drainage, roads, energy and water infrastructure projects.
Mining Services including mine development and operations from construction of mine-site
infrastructure and removal of overburden and topsoil to open cut mining. Services include specialist
mine site rehabilitation works, environmental dam construction, and reclamation earthworks.
Acquisition related costs amounting to $2.8 million have been excluded from the consideration transferred
and have been recognised as an expense in the consolidated statement of profit or loss for the year ended
30 June 2018.
69
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.5
BUSINESS COMBINATIONS (CONTINUED)
a) Assets Acquired and Liabilities Assumed at the Date of Acquisition
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Provisions
Deferred tax liability
Total non-current liabilities
Total liabilities
NET ASSETS ACQUIRED
b) Goodwill Arising on Acquisition
Consideration paid in cash
Less fair value of identifiable net assets acquired
Goodwill arising on acquisition
$000's
13,096
32,719
2,209
723
48,747
28,169
29,137
57,306
106,053
37,527
2,358
1,612
6,978
48,475
9,420
3,261
12,681
61,156
44,897
$000's
85,000
(44,897)
40,103
Goodwill arose on acquisition of Golding as consideration paid for the combination included amounts in relation
to the benefit of expected synergies, future market development, and the assembled workforce of Golding.
These benefits are not recognised separately from goodwill as they do not meet the recognition criteria for
identifiable intangible assets.
70
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.5
BUSINESS COMBINATIONS (CONTINUED)
c) Net Cash Outflow on Acquisition
Consideration paid in cash
Less cash and cash equivalents acquired
Net cash outflow on acquisition
Add debt assumed
Net financing on acquisition
$000's
85,000
(13,096)
71,904
2,358
74,262
d) Impact of Acquisition on the Results of the Group
Had the acquisition of Golding been effected at 1 July 2017, the revenue of NRW from continuing operations
for the period ended 30 June 2018 would have been $751.2 million excluding any adjustment for intercompany
transactions which were at ‘arms length’ in the period NRW did not control Golding. Net Earnings for the same
period would have been $47.4 million excluding any incremental amortisation of Intangible assets which has
not been assessed for the period NRW did not control Golding and based on internal assessments of tax
liabilities by Golding management.
The results for Golding in the ten month period since acquisition are Revenues of $319.6 million. Net Earnings
for the ten months post acquisition have been assessed at $12.7 million which includes amortisation arising on
the transaction, interest costs of the loan relating to the acquisition and an effective tax rate of 30% as Golding
had no carry forward losses on acquisition.
7.6
AUDITORS REMUNERATION
AUDIT SERVICES
Auditors of the Company
Deloitte Touche Tohmatsu
OTHER SERVICES
Coal levy audits
Accounting services related to Golding acquisition
Total
Consolidated
2018
$
2017
$
396,000
251,000
18,000
32,500
446,500
12,000
60,000
323,000
7.7
EVENTS AFTER THE REPORTING PERIOD
Other than the events noted below, there has not arisen in the interval between the end of the financial year
and the date of this report any transaction or event of a material nature likely in the opinion of the Directors, to
affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs
of the consolidated entity in subsequent years.
The Directors have declared a dividend for the current financial year of two cents per share. This will be the first
dividend paid since October 2014. In assessing the quantum of the dividend to be paid, the Directors have
reviewed the liquidity profile of the Company over the financial year ending 30 June 2019. The dividend which
will be fully franked will be paid on the 4 November 2018.
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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
IAS 7
IAS 12
Amendments to IAS 7 - Disclose Initiative
Amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses
Amendments to IAS 7 Disclosure Initiative
The Group has applied these amendments for the first time in the current year. The amendments require an
entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising
from financing activities, including both cash and non-cash changes. The Group’s liabilities arising from
financing activities consist of borrowings (note 5.3). A reconciliation between the opening and closing balances
of these items is provided in note 5.3. Consistent with the transition provisions of the amendments, the Group
has not disclosed comparative information for the prior period. Apart from the additional disclosure in note 5.3,
the application of these amendments has had no impact on the Group's consolidated financial statements.
Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses
The amendments clarify how an entity should evaluate whether there will be sufficient future taxable profits
against which it can utilise a deductible temporary difference. The application of these amendments has had no
impact on the Group's consolidated financial statements as the Group already assesses the sufficiency of future
taxable profits in a way that is consistent with these amendments.
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 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’
1 January 2019
30 June 2020
Amendments to IFRS 2 ‘Classification and Measurement of Share-based Payment
Transactions’
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
AASB 9 ‘Financial Instruments’
AASB 9 Financial Instruments (revised December 2014) and AASB 2014-7 Amendments to Australian
Accounting Standards arising from AASB 9 (December 2014) This standard replaces AASB 139 Financial
Instruments: Recognition and Measurement.
AASB 9 includes revised guidance on the classification and measurement of financial instruments, including a
new expected credit loss model for calculation of impairment on financial assets, and new general hedge
accounting requirements. It also carries forward guidance on recognition and derecognition of financial
instruments from AASB 139. The Group does not intend to early adopt the standard.
Retrospective application is required with some exceptions. Restatement of comparatives is not required,
however, the comparative period can be restated if it can be done so without the use of hindsight.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.8
CHANGES TO ACCOUNTING POLICIES (CONTINUED)
The Group has undertaken an assessment of the classification, measurement and disclosure impacts and has
determined that the new standard will have no significant or material impacts on the information otherwise
presented in this Annual Report upon application of AASB 9.
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers. AASB 15 will supersede the current revenue recognition guidance including AASB
118 Revenue, AASB 111 Construction Contracts and the related Interpretations when it becomes mandatory
for periods beginning on or after 1 January 2018. The core principle of AASB 15 is that an entity shall recognise
revenue when control of a good or service transfers to a customer. Under AASB 15, revenue is required to be
allocated to each performance obligation and recognised as the performance obligations have been achieved
which can be at a point in time or over time.
The Group has commenced a coordinated review with the different business segments and their project teams
to assess the potential impacts of the new standard on the Group’s results and disclosures. It should be noted
that the majority of Group revenue is comprised of:
•
•
•
construction 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
Current contract accounting for the above requires significant judgments and estimates in determining the
impact of certain events on the recognition and timing of revenue, such as the assessment of the probability of
customer approval of variations and acceptance of claims, estimation of project completion date and assumed
levels of project execution, project risk and productivity.
Construction contracts
Upon detailed review of the current portfolio of construction contracts, NRW management have determined that
the contractual terms and the way in which the Group manages these contracts, indicate that contract price is
predominantly derived from one substantial performance obligation for each contract.
Contracted revenue will continue to be recognised over time as it is now, giving weight to the fact that the
customer controls the output during the course of construction by the Group. Furthermore, NRW considers that
the input method currently used to measure the progress towards complete satisfaction of these performance
obligations will continue to be appropriate under AASB 15.
The new standard also provides new requirements for variable consideration such as incentives, as well as
accounting for claims and variations as contract modifications which all require a higher threshold of probability
for recognition. Revenue is currently recognised when it is probable that work performed will result in revenue
whereas under the new standard, revenue is only recognised when it is highly probable that a significant reversal
of revenue will not occur for these modifications. Current assessments of such variable consideration, claims
and contract modifications would not result in a material change to revenue of the Group due to the higher
degree of probability already assessed.
Mining services and drill and blast services contracts
Revenue from mining services contracts and drill and blast services contracts is predominantly recognised on
the basis of the value of work completed. There are several stages in mine development and production that
are dependent on the contract terms which could represent separate performance obligations. Under AASB 15,
revenue is required to be allocated to each performance obligation and recognised as the performance
obligations have been achieved which can be at a point in time or over time. The services that have been
determined to be one performance obligation are highly inter-related and fulfilled over time therefore revenue
continues to be recognised over time. The Company has assessed that the method currently used to measure
the progress towards complete satisfaction of these performance obligations will continue to be appropriate
under AASB 15.
Tendering costs
Costs incurred during the tender process are currently expensed through profit and loss. No change to this
treatment will be made with the adoption of AASB 15.
Equity-accounted joint ventures
Salini Impregilo NRW Joint Venture (SI-NRW JV) is accounted for as an equity method joint venture. The book
carrying value of the Group’s investment in SI-NRW JV reflects the Group’s share of SI-NRW JV’s net profit,
including SI-NRW JV’s recognition of revenue. SI-NRW JV adopted AASB 15 for the reporting period beginning
1 January 2018. NRW has performed an analysis of the impact due to the adoption of AASB 15. NRW’s share
of profits from SI-NRW JV disclosed at note 3.3 represents NRW management’s best measurement of profit
recognised post adoption of AASB15.
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NOTES TO THE
FINANCIAL STATEMENTS CONTINUED
7.8
CHANGES TO ACCOUNTING POLICIES (CONTINUED)
NRW is only a 20% equity partner in SI-NRW JV, and therefore does not exert the same level of influence over
SI-NRW JV’s implementation project as it does over its own. Therefore, this estimate of the profit recognised is
subject to a higher degree of estimation uncertainty.
Implementation of AASB 15
The Group plans to implement AASB 15 using the cumulative effect method, with the effect of initially applying
this standard recognised at the date of initial application (i.e. 1 July 2018). As a result under AASB 15 there will
be an adjustment to the opening balance of the Group’s equity. Based on the work completed to date, the
Company does not anticipate that the application of AASB 15 will have a significant impact on the amounts
recognised in the Group's consolidated financial statements.
AASB 16 Leases
AASB 16 applies to annual reporting periods beginning on or after 1 January 2019 and replaces AASB 117
Leases and the related interpretations. AASB 16 Leases specifies how to recognise, measure and disclose
leases. The standard provides a single lessee accounting model, requiring lessees to recognise right-of-use
assets and lease liabilities for almost all leases.
Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance
or operating leases. In cases where the Group is a lessor (for both operating and finance leases), the Directors
of the Company do not anticipate that the application of AASB 16 will have a significant impact on the amounts
recognised in the Group's consolidated financial statements. As a consequence EBITDA will increase as
operating lease costs are replaced with incremental interest and depreciation charges.
As at the reporting date, the Group has non-cancellable operating lease commitments of $56.3 million, refer to
note 5.5: Operating Leases. In addition, the Group has certain equipment which will need to be assessed against
the criteria of AASB 16.
As an on-going process the Group manages its owned and leased assets to ensure there is an appropriate
level of equipment to support its current Order Book and tender pipeline within the normal capital constraints of
the Company. The decision as to whether to lease or purchase an asset is dependent on a broad range of
considerations at the time including capital structure, risk management and operational strategies most suitable
to the type and duration of each current and future projects.
Some of the operating leases currently held expire prior to the implementation of the standard and decisions on
future leases will be made on a project-by-project basis.
Consequently, the Group continues to monitor and quantify the effect of the new standard with each change to
the leasing portfolio and any subsequent lease modifications.
The following effects to the Group’s financial statements and disclosures are expected:
• total assets and liabilities on the balance sheet will be grossed-up, due to the recognition of the right-to-
use assets (non-current assets) and the corresponding fair value of lease liabilities. Current liabilities will
also show an increase due to a portion of the lease liability being classified as a current liability;
• straight-line operating lease rental expense will be replaced with a depreciation charge for the
right-of-use assets and interest expense charged at the implicit rates on the lease liabilities;
• compared to the current net earnings profile, interest expense will be greater earlier in a lease’s life due
to the higher principal value, causing profit variability over the course of a lease’s life. This effect may be
partially mitigated due to a mix of different leases held in the Group at different stages of their term; and
• Cash flows from financing activities will increase for repayment of principal portion of all lease liabilities.
Other new accounting standards
The following new or amended standards are not expected to have a significant impact on the Group’s
consolidated financial statements:
• AASB 2014-10 Amendments to Australian Accounting Standards: Sale or Contribution of Assets
Between an Investor and its Associate or Joint Venture;
• AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property,
Annual Improvements 2014-2016 Cycle and Other Amendments;
• AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration; and
• AASB Interpretation 23 Uncertainty Over Income Tax Treatments, AASB 2017-4 Amendments to
Australian Accounting Standards – Uncertainty over Income Tax Treatments.
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NRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
SHAREHOLDER
INFORMATION
SHAREHOLDER
INFORMATION
The shareholder information set out below was applicable as at 24 July 2018.
NRW’s contributed equity comprises 370,628,872 fully paid ordinary shares.
Distribution of Shareholdings
Range
100,001 and Over
Fully paid ordinary
shares
317,580,074
10,001 to 100,000
41,347,987
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
6,654,112
4,473,704
572,995
370,628,872
Unmarketable parcels
26,172
NRW’s 20 Largest Shareholders
%
85.69
11.16
1.80
1.21
0.15
100.00
0.01
No of Holders
224
1,441
878
1,541
1,286
5,370
411
%
4.17
26.83
16.35
28.70
23.95
100.00
7.65
Rank
Name
Shares
% Interest
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
62,243,356
16.79%
J P MORGAN NOMINEES AUSTRALIA LIMITED
58,169,134
15.69%
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
MR KENNETH RUDY KAMON
MR DAVID RONALDSON
JULIAN ALEXANDER PEMBERTON
ZERO NOMINEES PTY LTD
MR STEVEN SCHALIT & MS CANDICE SCHALIT
ANDREW JOHN WALSH
MR PETER HOWELLS
MR MARTIN DUGGAN
MR STEVEN SCHALIT
NATIONAL EXCHANGE PROPRIETARY LTD
BOND STREET CUSTODIANS LIMITED
GABRIELLA NOMINEES PTY LTD
INTECH SOLUTIONS PTY LTD
SCHALIT SUPER PTY LTD
48,537,770
13.10%
25,239,102
6.81%
11,663,168
3.15%
8,572,269
2.31%
7,280,447
1.96%
7,006,227
1.89%
5,985,592
1.61%
3,000,000
0.81%
2,573,288
0.69%
2,325,547
0.63%
2,139,705
0.58%
2,097,000
0.57%
2,012,427
0.54%
2,000,000
0.54%
1,796,243
0.48%
1,671,031
0.45%
1,654,698
0.45%
1,462,068
0.39%
Shareholder Information
75
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NRW HOLDINGS ANNUAL REPORT 2018 | Insert HeadingNRW HOLDINGS ANNUAL REPORT 2018 | Notes to the Financial StatementsFor personal use only
SHAREHOLDER
INFORMATION CONTINUED
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
Wellington Management
Voting Rights
26,965,866
22,488,366
7.28%
6.07%
Every shareholder present in person or represented by a proxy or other representative, shall have one vote for
each share held by them.
76
NRW HOLDINGS ANNUAL REPORT 2018 | Shareholder Information
76
NRW HOLDINGS ANNUAL REPORT 2018 | Insert HeadingFor personal use only
INDEPENDENT AUDITOR’S
REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Brookfield Place, Tower 2
123 St Georges Terrace
Perth, WA, 6000
Australia
Phone: +61 8 9365 7000
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 2018,
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)
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year then ended; and
(ii)
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.
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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
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INDEPENDENT AUDITOR’S
REPORT CONTINUED
Key audit matter
How the scope of our audit responded to
the Key Audit Matter
Acquisition of Golding Group Pty Ltd
(Golding)
As disclosed in Note 7.5 to the financial
statements, the Group completed the
acquisition of Golding on 31st August 2017 for
consideration of $85 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 values,
provisions, customer contract values, brand
value and discount rate applied to future cash
flow forecasts.
Carrying amount of non-current assets -
Action Drill and Blast
As at 30 June 2018 the carrying value of
goodwill, other intangible assets and property,
plant and equipment was $269.3 million as
disclosed in Notes 3.4, 3.5 and 3.6.
Accordingly, property, plant and equipment in
relation to the Action Drill and Blast CGU is
$47.3 million.
The Group prepared a value in use model to
assess the recoverable value of the CGU.
This requires management to exercise
significant judgement, with key assumptions
including discount rate, growth and operating
margins.
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 management’s process for the
identification of the assets and liabilities
acquired;
Evaluating management’s process for the
determination of the fair value of the
assets and liabilities acquired;
In conjunction with our valuation
specialists assessing the competence and
objectivity of management’s expert who
valued the intangible assets; and
Challenging the values attributable to plant
and equipment, provisions, customer
contracts and brand value recognised in
respect of the acquisition.
We also assessed the appropriateness of the
disclosures in Note 7.5 to the financial
statements.
Our procedures included, but were not limited
to:
Understanding the process that
management undertakes to develop the
model;
Comparing the forecasts to Board
approved business plans;
Assessing historical forecasting accuracy
by comparing actual performance to
budgets;
In conjunction with our valuation
specialists, challenging the assumptions as
follows:
o Assessing the discount rate against
that of comparable companies;
o Evaluating operating margins with
reference to past performance and
knowledge of the business;
o Challenging the forecast growth with
consideration of secured work, tenders,
prospects and external industry data
where available.
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INDEPENDENT AUDITOR’S
REPORT CONTINUED
Assessment of deferred tax assets
As disclosed in Note 6.3 the carrying value of
the Group’s net deferred tax asset as at 30
June 2018 was $79.3 million, inclusive of
$67.7 million of carry forward tax losses.
At 30 June 2018 unused tax losses for which
no deferred tax assets have been recognised
equated to $2.7 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.
Sample testing management’s models for
mathematical accuracy; and
Performing sensitivity analysis on the
discount rate and terminal growth
assumptions.
We also assessed the appropriateness of the
disclosures in Note 3.6 to the financial
statements.
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; and
Applying sensitivities to the forecasted
future taxable income.
We also assessed the appropriateness of the
disclosures in Note 6.3 to the financial
statements.
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.
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INDEPENDENT AUDITOR’S
REPORT CONTINUED
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that gives a true and fair view and is free from material misstatement, whether
due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the 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.
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
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
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.
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INDEPENDENT AUDITOR’S
REPORT CONTINUED
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 18 of the Directors’ Report for
the year ended 30 June 2018.
In our opinion, the Remuneration Report of NRW Holdings Limited, for the year ended 30 June 2018,
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
A T Richards
Partner
Chartered Accountants
Perth, 22 August 2018
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4E
APPENDIX
4E
RESULTS FOR ANNOUNCEMENT TO THE MARKET
For the Year Ended 30 June 2018
% Change
up / (down)
Year ended
30 June 2018
Year ended
30 June 2017
Revenues from ordinary activities
98.93%
Profit from ordinary activities after tax attributable to members
47.81%
Total Comprehensive Income
47.81%
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
685,431
42,166
42,166
N/A
N/A
-
-
6 November 2018
18 October 2018
2.0
2.0
$’000
344,560
28,527
28,527
N/A
N/A
-
-
N/A
N/A
-
-
Net tangible asset backing per ordinary security
$0.57
$0.61
Commentary on the Results for the Year
A commentary for the results for the year is contained in the statutory financial report dated 23 August 2018.
Status of Accounts
This statutory financial report is based on audited accounts.
NRW Holdings Limited - ACN 118 300 217
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